Bester Malaysia Sdn Bhd v 1. ) Tan Tee Kung (BA-22NCvC-211-06/2023)

TAN TEE KUNG

LEAN KOCK KUANG (NO. K/P: 640504-08-5585) (disaman sebagai pengarah dan/atau pemegang saham FORWARD RESOURCES & CONSTRUCTION SDN BHD (NO. SYARIKAT: 199301005363

BUMI NADA SETIA HOLDINGS SDN BHD (NO. SYARIKAT: 199301005363 (260100- W) EFENDAN-DEFENDAN 13/08/2025 12:33:44 BA-22NCvC-211-06/2023 Kand. 59 GROUNDS OF JUDGMENT Introduction 1. In this claim, the Plaintiff sued the 1st Tan for breach of trust, breach of fiduciary duties and/or negligence in relation to 2 business deals that the Plaintiff undertook in which it lost Business Deals . Tan was the at the time.

The Plaintiff also sued Tan, Lean Bumi Nada conspiracy, and against Lean for insolvent trading in relation to the winding up of Forward Resources & Co FRC -8-2022. Lean was at all material times the sole director of FRC.

Bumi Nada did not enter appearance to the suit and default judgment was entered against it in 2023. Lean was adjudicated bankrupt on 14-2-2024. The Plaintiff elected not to seek leave of the insolvency court to proceed and discontinued its claim against Lean before the trial commenced. Background facts 4. The Plaintiff is a subsidiary of a Chinese company. The CCM search identifies the holding company as Bester Telecom International Limited Bester China and 1st pleading and the witness statements refer to a Bester Group Telecom Co Ltd as the holding company.

In any case, the Plaintiff was incorporated on 18-10- 2019 to provide telecommunications technology services in Malaysia. Tan was the sole director of the Plaintiff since 18-10-2019 and its Chief Executive Officer since 7-11-2019. In those capacities, he helmed the Malaysian business and assumed statutory and fiduciary duties to the Plaintiff until he resigned on 12-1-2022.

While he was director and CEO, Tan was the sole signatory of records of the Plaintiff. Through the agency of Tan, the Plaintiff signed 2 purchase orders dated 25-2-2021 and 2-2- POs ostensibly to document the acceptance of its role as a subcontractor to FRC in relation to the Business Deals.

The POs were said to be for 2 projects in which FRC was the Cable Infrastructure Fibre Optic System and related works for Musang respectively. Prior to this, the Plaintiff had undertaken numerous other subcontractor jobs with FRC of a similar nature.

Following the acceptance of the POs, the Plaintiff issued its own purchase orders to Bumi Nada dated 19-2-2021 and 15-3-2021 to procure materials and services in relation to the Business Deals. Bumi Nada was apparently was introduced to the Plaintiff by Lean. It is not in evidence who the directors or principals behind Bumi Nada were.

The total sum of the 2 invoices issued by Bumi Nada was RM3,472,504.40 and was paid by the Plaintiff to Bumi Nada between 10-3-2021 and 19-3-2021. Corresponding delivery orders dated 23-2-2021 and 16-3-2021 DOs delivery of the materials purchased were among the transaction records in relation to the Business Deals.

Towards the end of the relationship between the Plaintiff and FRC, FRC owed some RM8,066,438.72 in unpaid invoices to the Plaintiff. The Plaintiff invoiced FRC the sum RM3,905,076.60 for the Business Deals but only a portion of it had been paid and this formed part of the total debt allegedly owed by FRC to the Plaintiff from all their dealings.

Issues in contention It was not seriously disputed based on oral evidence from a subpoenaed witness from Maxis Broadband Sdn Bhd PW-2 , the entity of Maxis Berhad Maxis to any fiber optics telecommunications infrastructure works involving Maxis, that: The entity referred to as the owner of the Bukit Fraser and Gua Musang projects in the POs i.e. Maxis Telecommunications Bhd, did not exist. The 2 alleged Maxis projects at Bukit Fraser and Gua Musang referred to in the POs did not exist. The POs were falsified as Maxis only had a project in Gua Musang with FRC in 2016 which completed in 2018. It followed from the above that the DOs were also falsified documents and no materials were supplied by Bumi Nada.

At its highest, the Plaintiff pleaded a case of fraud by Tan. pleaded defence is that he bears no liability for the losses in the Business Deals because: a) was approved by the Chairman of Bester China procedures b) Lean had of choice and Tan therefore played no part in that decision c) Tan resigned on 12-1-2022 and the Plaintiff should have followed up with collection of the account receivable from FRC d) on 24-8-2022 was in the

On the pleaded facts of this case, the questions for this Court to determine are whether:

Tan made any fraudulent misrepresentations to induce falsified the POs and DOs and in so doing, committed an unlawful means conspiracy with Lean and Bumi Nada; or

Tan otherwise breached his fiduciary duties by exercising his powers for an improper purpose and in bad faith and/or without reasonable care, skill and diligence

In submissions, the case for the Defence was that there was no evidence of fraudulent intent or misconduct, misrepresentation or personal gain by Tan to support the pleaded causes of action. The additional legal defence against the case of conspiracy is that it is unsustainable because the Plaintiff discontinued the action against Lean as the joint tortfeasor. Findings and analysis Fraud allegations

The Federal Court in Letchumanan Chettiar Alagappan (As Executor To Sl Alameloo Achi (Deceased)) & Anor v. Secure Plantation Sdn Bhd [2017] 5 CLJ 418 ) famously said: What amounts to 'fraud'? "It is not easy to give a definition of what constitutes fraud in the extensive signification in which the term is understood by civil courts of justice. The courts have always avoided hampering themselves by defining or laying down as a general proposition what shall constitute fraud. Fraud is infinite in variety (Reddaway v. Banham [1896] AC 199, 221). The fertility of man's invention in devising new schemes of fraud is so great, that the courts have always declined to define it, or to define undue influence, which is one of the many varieties, reserving to themselves the liberty to deal with it under whatever form it may present itself (Allcard v. Skinner (1887) 36 Ch D 145, 183). Fraud, in the contemplation of a civil court of justice, may be said to include properly all acts, omissions, and concealments which involve a breach of a legal or equitable duty, trust or confidence, justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another (Story, Eq Jur 187). All surprise, trick, cunning, dissembling and other unfair way that is used to cheat anyone is considered fraud (Finch 439). Fraud in all cases implies a wilful act on the part of anyone, whereby another is sought to be deprived, by illegal or inequitable means, of what he is entitled to (Green v. Nixon (1857) 23 Beav 530, 535) "(Kerr on Fraud and Mistake 7th edn at p. 1). "The concept of fraud is notoriously difficult to define" (Cavell and Anor v. Seaton Insurance Co [2009] EWCA Civ 1363 per Longmore LJ, Mummery and Toulson LJJ in agreement). We would not hazard to define 'fraud'. We would just say that 'fraud' is a generic term which also covers all manner of cheat, deceit and dishonesty. Given its wide meaning, "an action in fraud will usually include a number of distinct causes of action... " and "claims to trace assets in equity or, perhaps, at common law" (Bullen & Leake & Jacobs Precedents of Pleadings 18th edn, vol. 2 at 57-01) [Emphasis added]

If it is determined that Tan made fraudulent misrepresentations, participated in the falsification of documents and/or was otherwise dishonest in relation to the Business Deals, fraud in the sense described in Letchumanan will have been established. Considering the parties, the falsified transaction documents and the fraudulent design, an unlawful means conspiracy between Tan, Lean and Bumi Nada may also be inferred.

was as follows:

he is the first gatekeeper for projects that the Plaintiff Sales Manager under him would be submitted to him for initial review and would only be escalated to Bester China if he found it viable.

The vendor due diligence and inspection would be CEO, and by the CFO, Project Director and Chairman of Bester China.

Once project milestones are achieved, the Project Manager will compile the PO, DO and Settlement Letter for verification by the Accounts Executive and payment disbursement will go through an internal approval system 18.

had brought in the Business Deals with FRC and without acknowledging his own role, he said that the project documents were handed to the internal project and Accounts teams for vendor due diligence;

In relation to Bumi Nada, Tan also attributed the procurement process to the Sales Manager or Business Director without acknowledging his role in the process. Tan similarly made no mention of his own role in the due diligence.

There being prior dealings with FRC, Tan only checked the pricing and profit margin. No evidence was adduced as to the scope or outcome of the due diligence carried out. He relied on the DOs to approve the release of payments and the individuals who supposedly signed off the DOs ostensibly evidencing goods received by the Plaintiff in employees of the Plaintiff.

It is also in evidence that on 16-3-2021, in the midst of the Business Deals - there was a meeting between Tan (identified as in which he fielded questions and concerns from management in Maxis OSP jobs in Malaysia. According to the opening summary: covering the project overview, client strengths, partners, delivery scope, payment terms, strategic significance of the

The full minutes reflected payment, local procurement and the strategic objective of becoming a direct general contractor for Maxis, all of which were also apparently taken up in further discussions directly with Tan. It may therefore be inferred that representations were made by Tan about Maxis as a client and its partners, including FRC, and the viability of the Business Deals.

However, the question mark surrounds his state of mind when he did so, and whether he participated in the falsification of the POs and DOs. The only evidence of wrongdoing against Tan was from the finance manager and current director who took over - ). PW-essentially centred on the assertion that Bester China trusted and relied on representations made by Tan, but no particulars were provided of what false representations Tan allegedly made.

The evidence available to the court for deliberation was scarce as Lean, Poh Chean Leng, Vinoth and Ho Chee Kin were not liability or dishonest intent. Based on the circumstantial evidence before the Court, this Court finds that it did not point to the irresistible inference of bad faith or dishonesty on the part of Tan. Although it is tolerably clear that a fraud has been perpetrated, ty.

Breach of fiduciary duties As a matter of law, the fiduciary duties of directors applicable to Tan are codified in sections 213 to 215 of the Companies Act

It is convenient to set out those provisions: Section 213 Companies Act 2016 A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.

A director of a company shall exercise reasonable care, skill and diligence with-

the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and

any additional knowledge, skill and experience which the director in fact has.

A director who contravenes this section commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding three Section 214 Companies Act 2016 A director who makes a business judgment is deemed to meet the requirements of the duty under subsection 213(2) and the equivalent duties under the common law and in equity if the director-

makes the business judgment for a proper purpose and in good faith;

does not have a material personal interest in the subject matter of the business judgment;

is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and

reasonably believes that the business judgment is in the best interest of the company. means any decision on whether or not to take action in respect Section 215 Companies Act 2016 A director in exercising his duties as a director may rely on information, professional or expert advice, opinions, reports or statements including financial statements and other financial data, prepared, presented or made by-

any officer of the company whom the director believes on reasonable grounds to be reliable and competent on the matters concerned;

as to matters involving skills or expertise, any other person retained by the company in relation to matters that the director believes on reasonable grounds to be within the person's professional or expert competence;

another director in relation to matters within the director's authority; or

any committee to the board of directors on which the director did not serve in relation to matters within the committee's authority.

The director's reliance made under subsection (1) is deemed to be made on reasonable grounds if it was made-

in good faith; and

after making an independent assessment of the information or advice, opinions, reports or statements, including financial statements and other financial data, having regard to the director's knowledge of the company and the complexity of the structure and operation of the company.

In Pioneer Haven Sdn Bhd v. Ho Hup Construction Co Bhd & Anor and Other Appeals [2012] 5 CLJ 169 the Court of Appeal held that section 132(1) of the Companies Act 1965 (now section 213 of the Companies Act 2016) do not alter the law in this area but enhance the common law duty of care and equitable fiduciary duties.: The prior provision of s. 132(1) requires a director to act honestly. The current s. 132(1) of the Act, requires a director to act in good faith in the best interest of the company. It is accepted that for all intents and purposes, the scope of the directors' duties to act honestly under the old s. 132(1) and the new s. 132(1) are the same. Thus the old case laws relating to the duty to act honestly continues to be relevant. (See Cheam Tat Pang v. PP [1996] 1 SLR 541). [229] It is also recognised that the duty to act in the best interest of the company means different things, depending on the factual circumstances. [230] Consequentially, depending on the type of dispute or issue, the directors must place a higher priority on the interest of the persons who are truly affected. [231] In these appeals, who are the persons truly affected by the actions of the directors? In view of Ho Hup's imminent de-listing, it stands to reason that the directors were motivated to rescue Ho Hup from being de-listed. Thus in this scenario, the shareholders are most affected, not so much the company. As such, the directors must act for the best interest of the shareholders. [232] What then, is the test whether there is breach of such duty? Or putting it in another way in order for the decision of the directors to be challenged, what is the test? [233] The test is nicely condensed in Ford's Principles of Corporations Law (para. 8.060), that there will be a breach of duty if the act or decision is shown to be one which no reasonable board could consider to be within the interest of the company. [234] This test is adopted in Charterbridge Corporation Ltd v. Lloyds Bank Ltd [1970] Ch 62 at 74, in that, to challenge a decision of the directors, the test is whether: ... an intelligent and honest man in the position of the director of the company concerned, could in the whole of the existing circumstances have reasonably believed that the transactions were for the benefit of the company. [235] The above principle is often referred to as the [Emphasis Added]

Accordingly, this Court must determine whether an honest and intelligent man in the position of a director of the company concerned could, in the whole of the existing circumstances, have reasonably believed that the Business Deals was for the benefit of the company.

The burden of proof was on the Plaintiff to prove otherwise and based on an analysis of the same set of available facts, that burden was not discharged considering the pre-existing dealings with FRC, the strategic objectives of the local business to participate in Maxis OSP projects and in consultation with Bester China, the collective endorsement of the same.

Reasonable care, skill and diligence Based on the same set of facts, this Court also considered the lesser allegation of neglect in the exercise of reasonable care, skill and diligence. In Re Barings plc and others (No 5), Secretary of State for Trade and Industry v Baker and others (No 5) [1999] 1 BCLC 433 the English Court held:

Directors have, both collectively and individually, a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company's business to enable them properly to discharge their duties as directors.

(ii) Whilst directors are entitled (subject to the articles of association of the company) to delegate particular functions to those below them in the management chain, and to trust their competence and integrity to a reasonable extent, the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of the delegated functions.

(iii) No rule of universal application can be formulated as to the duty referred to in (ii) above. The extent of the duty, and the question whether it has been discharged, must depend on the facts of each particular case, including the director's role in the management of the company.

The exercise of the duty of care owed by each director to the Plaintiff will depend on their role in the company and all the circumstances of each case. Thus, the measure of the standard of care in a general claim of negligence as an alternative to a claim for breach of fiduciary duties must be measured against the same standard.

In this case, desired. It is apparent that as a director and CEO, he did not rely on vendor due diligence conducted by others on reasonable grounds, as he exercised no independent assessment of the information, having regard to his knowledge as a local executive in the local telecommunications industry. He ought to have known that the Maxis entity referred to in the POs did not exist or at the very least he ought to have been put on inquiry.

According to PW-1, no such deliveries were received or could have logistically been received at the stated address for delivery. As the CEO, Tan failed to exercise any supervision in the discharge of the delegated functions. While this Court should be slow to question the decisions made collectively by Tan and higher management to continue with the business with FRC to gain access to Maxis projects in Malaysia despite collection issues, this was not a case of a bad bargain, but a case of fraud.

The internal procedures practiced in the wider organization including oversight by Bester China depended upon Tan exercising reasonable care, skill and diligence in fraud detection. The Plaintiff satisfied the legal and evidential burden of proof by the fact that the fraud was committed under his watch. The onus had shifted to Tan to prove that he had taken steps to avert the fraud. However, no attempt was made to do so. Beyond mere deflection, Tan presented no evidence indicating that he had exercised due care, skill and diligence in this respect at all.

As own evidence revealed, he exercised no independent judgment as the sole director and CEO of the Plaintiff. Accordingly, Tan did not make a business judgment deemed under section 214 of the Companies Act 2016 to meet the standard of reasonable care, skill and diligence because he was not informed about the subject matter of the business judgment to the extent a director would reasonably believe to be appropriate under the circumstances.

Conclusions For the above reasons, the claim against the 1st Defendant for breach of fiduciary duties is allowed and the 1st Defendant is ordered to pay the Plaintiff:

Damages suffered by the Plaintiff assessed at RM2,822,504.40 being the amount paid to Bumi Nada in the sum RM3,472,504.40 less RM650,000.00 as part recovery from FRC under Maxis OSP-Bukit Fraser Invoice 23/2/2021.

Interest on RM2,822,504.40 at 5% p.a. from date of Judgment until full settlement

Costs of the action in the sum of RM40,000.00, subject to allocator.

As no case of conspiracy was made out, this Court did not consider the effect of action and therefore effectively release the alleged joint tortfeasor in that claim. Bertarikh : 11 Ogos 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam bagi pihak Plaintif: Naziha Bte Ahmad Rupaai (with Hing Hong Ing) Hing Chambers Peguam bagi pihak Defendan Pertama: Mok Yanyee (with Vincent Ong Liang Jie) Messrs Tan Norizan & Assoc.