Bluefire Development Sdn Bhd v Tan Mei Li & 2 Lagi (22NCC-93-03/2016 (Kand. 88); 22NCC-9 3-03/2016 (Kand. 1))

1.

TAN HAN KWAN

TAN CHOR ENG (NRIC NO: 330723-01-5129) … DEFENDANTS BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 2 GROUNDS OF JUDGMENT Introduction [1] The Plaintiff filed a writ action against the Defendants seeking for the following reliefs – RM2 million without the authorisation of the Plaintiff and/or acted contrary to the expressed mandate given by the Plaintiff on 23 May 2005. Plaintiff to pay out the sum RM2,000,000.00 (RM2 million). [2] A full trial was conducted and at the end of the trial this court allowed the declaratory reliefs sought by the Plaintiff. Judgment was entered in favour of the Plaintiff on 30 May 2017. The Defendants appealed (Mahkamah Rayuan Rayuan Sivil No. W-02(NCC)(W)-1192- 06/2017). 3 [3] While the trial was progressing with the Plaintiff’s only witness Lee Yen Mei being cross-examined, the Defendants filed an application for leave to make an application for a committal order against the Plaintiff’s sole witness (Enclosure 88). The said application was dismissed and the Defendants appealed (Mahkamah Rayuan Rayuan Sivil No. W-02(IM)(NCC)-439-03/2017). [4] Subsequently after completion of the full trial and decision delivered on 30 May 2017, the Plaintiff filed an application to amend the name of the Plaintiff (Enclosure 146) from Bluefire Development Sdn Bhd to KSCH Property Sdn Bhd. Enclosure 146 was allowed by this court. The Defendants appealed against such decision (Mahkamah Rayuan Rayuan Sivil No. W-02(IM)(NCC)-1789-09/2017). The Defendants however recently filed a Notice of Discontinuance in respect of their appeal relating to Enclosure 146. [5] This judgment will firstly deal with the appeal against the Judgment dated 30 May 2017 followed by the appeal against dismissal of Enclosure 88. 4 A. Appeal against Judgment dated 30 May 2017 (Mahkamah Rayuan Rayuan Sivil No. W-02(NCC)(W)-1192-06/2017) Background [6] Both Plaintiff and Defendants agreed to the following undisputed facts (Agreed Facts marked as Bundle F) – Eng, were the first directors of the Plaintiff, who have since now resigned. September 2005. The 1st Defendant retired as a director of the Plaintiff at the 9th Annual General Meeting of the Plaintiff on 20 June 2014. 5 September 2005. Name Shareholding Tan Mei Li (1st Defendant) 1,480,000 shares Tan Han Kwan (2nd Defendant) 1,200,000 shares Tan Chor Eng (3rd Defendant) 400,000 shares Tan Su Li 920,000 shares

Tan Su Li is the sister of the 1st Defendant and daughter of the 3rd Defendant.

The 3rd Defendant disposed of his entire shareholding in the Plaintiff on 16 September 2005.

The 1st Defendant, 2nd Defendant and Tan Su Li continue to be shareholders in the Plaintiff in the following proportions (as at 29 January 2016) – Name Shareholding Tan Mei Li (1st Defendant) 336,000 shares Tan Han Kwan (2nd Defendant) 240,000 shares Tan Su Li 184,000 shares 6

On 9 May 2005, the Plaintiff had made a payment of RM2 million via RHB Bank Berhad cheque no. 51680 dated 9 May 2005 to the law firm of Messrs. Steven Tai, Wong & Partners the solicitor who represented the Plaintiff in the purchase of the Land as described below.

On 23 May 2005, the directors and members of the Plaintiff had passed resolutions approving the purchase of a piece of freehold land held under grant 24710 Lot No 14 Bandar and District of Kuala Lumpur and State of Wilayah Persekutuan (the Land) from Dazzling Symphony Sdn Bhd at the purchase price of RM5,300,000.00.

on 24 May 2005 the Plaintiff had entered into a sale and purchase agreement with Dazzling Symphony Sdn Bhd (“the SPA”) for the purchase of the Land. The purchase price of the Land as stated in Recital D of the SPA was RM5,300,000.00.

The Plaintiff had made payment of RM530,000.00 being the 10% deposit of the Purchase Price.

On 23 September 2005, following the payment of RM4,770,000.00 by one Ch’ng Kong San (CKS) on behalf 7 of the Plaintiff to Dazzling Symphony Sdn Bhd via Standard Chartered Bank cheque no. 100267, the SPA was completed. [7] Messrs. Steven Tai, Wong & Partners (Messrs. Steven Tai) paid the sum of RM2 million to Messrs. L.H. Chua (Messrs. LHC) on 30 September 2005 the solicitor who represented the Defendant in the purchase of the Land. [8] On 9 May 2005, the Defendants were the shareholders of the Plaintiff. The Plaintiff’s case [9] It is the Plaintiff’s case that – 8 complete the SPA as can be seen from the Reports and Financial Statements of the Plaintiff for the period 19 August 2004 – 31 December 2005 (Common Bundle of Documents A pages 57 – 77). million payment illegally or unlawfully or fraudulently contrary to the expressed mandate given by the Plaintiff. The particulars of fraud as stated in paragraph 26 of the Plaintiff’s Amended Statement of Claim includes – Plaintiff to make the RM2 million payment;

(ii) The Defendants knowingly or without belief in its truth or recklessly or carelessly be it true or false caused the Plaintiff to make the RM2 million payment despite knowing that there is no contractual obligation to make such payment;

(iii) The Defendants used different terminology ie agreed agency fees and/or consultancy fees and/or development expenditure in an attempt to mask the 9 purpose of the RM2 million payment. In doing so the Defendants attempted and/or created a false impression as to the actual nature, intent and purpose of the RM2 million payment;

(iv) The Defendants had fraudulently misrepresented to the Plaintiff as to the actual purpose and/or intent of the RM2 million payment;

(vi) That the Defendants had committed the tort of deceit when the RM2 million payment was made; and

(vii) The Defendants had made the RM2 million payment without any authorisation from the Plaintiff. Defendant and 3rd Defendant were the directors of the Plaintiff. The 2nd Defendant was not a director of the Plaintiff at that time but admitted was aware of the nature of the RM2 million payment and assisted the 1st and 2nd Defendants in disguising and making the RM2 million payment as an “Agreed Agency Fee”. 10 [10] The Plaintiff denies that the RM2,000,000.00 payment which was made on 9 May 2005 was approved by CKS as he only became a director of the Plaintiff on 16 September 2005. The Defendant’s case [11] The Defendants pleaded case is as follows – RM7,300,000.00. The RM2 million was paid as it was a condition imposed by Dazzling Symphony. It was the agreement between the parties that although the purchase price was RM7,300,000.00, Dazzling Symphony had only wanted RM5,300,000.00 to be stated in the SPA. Development Order from the Dewan Bandaraya Kuala Lumpur (DBKL) which allowed the Plaintiff to commence construction of a 5 storey apartment with basement parking lots. The Development Order has since expired. 11 RM2,600,000.00 wherein RM2,000,000.00 was intended to satisfy the Purchase Price. As their loan applications were unsuccessful they had to look for investors to help them to purchase the Land. RM4,700,000.00, stamp duty, legal fees and any associated cost in relation to the development of the Land;

(ii) In consideration thereof the Defendants and Tan Su Li agreed to transfer the shares to enable CKS to obtain 80% shareholding in the Plaintiff although the Defendants and Tan Su Li realised that the amount RM4,700,000.00 would not directly be proportionate to a 80% shareholding in the Plaintiff; 12

(iii) The Defendants and Tan Su Li investment in the Plaintiff for RM2,600,000.00 (35% of the purchase price of the Land) will be preserved and will not be diluted. They will also not be “cash called” ie they will not be required to inject further monies into the Plaintiff. Defendants had filed a civil action against CKS via Suit No 22NCC-200-06/2014 in the Kuala Lumpur High Court (Suit 200). This instant case is brought in bad faith by CKS, who is the controlling will and mind of the Plaintiff after becoming shareholder of the Plaintiff in 2009, to harass the Defendants. 13 purchase of the Land. After the transfer of the shares to CKS, he was in active management and control of the Plaintiff and remains so till this date. Defendant has always acted in a bona fide manner while being the directing minds of the Plaintiff. The fact that there were no resolution passed by the Plaintiff for the payment of RM2 million does not mean that the Defendants who were the directors and members of the Plaintiff at that material time had acted ultra vires without power or authorisation. 14 million not to be recorded in the SPA. Therefore no issue that the RM2 million was made without the authority of the Plaintiff. Trial Plaintiff’s witness [12] The Plaintiff’s sole witness is Lee Yen Mei (PW1) who is a non-executive director of the Plaintiff. PW1 also maintain the accounting records of the Plaintiff. PW1 joined the Plaintiff sometime in 2005 as an Accounts Executive after CKS purchased 80% share of the Plaintiff in late 2005. CKS became the majority shareholder and based on Form 49 dated 18 September 2005, CKS became a director of the Plaintiff with effect from 16 September 2009. PW1 was appointed as director of the Plaintiff on 18 September 2009. PW1 oversees the administrative 15 side of the operations of the Plaintiff including the day to day administration of the Plaintiff and maintaining the accounting records of the Plaintiff. [13] In her Witness Statement, PW1 testified that based on the SPA the purchase consideration of the Land is RM5,300,000.00. A deposit of RM530,000.00 (10% of the purchase consideration) was paid by the Plaintiff on 24 May 2005, that is, prior to the execution of the SPA. The SPA was to be completed on 23 September 2005 which is within 3 months from the date of execution of the SPA plus an extension of 1 month. The balance of the purchase price RM4,770,000.00 was paid on the last day itself, that is, 23 September 2005 via a Standard Chartered Bank cheque number 100267. [14] Under the SPA the Plaintiff was required to pay additional payments but not related to the purchase price of the Land. Plaintiff was also required to reimburse Dazzling Symphony for the development charges levied by DBKL amounting to RM372,000.00 [15] PW1 testified that via letter dated 3 May 2005 the 3rd Defendant, in his capacity as director of the Plaintiff, undertook to pay Dazzling Symphony’s solicitor Messrs L.H. Chua RM2 million being the ‘Agreed 16 Agency Fee’ upon completion of the SPA (page 249 Common Bundle of Documents A). The RM2 million was first deposited with the Plaintiff’s solicitor Messrs Steven Tai, Wong & Partners (Messrs Steven Tai) on 9 May 2005 (page 250 Common Bundle of Documents A) and was subsequently paid out to Messrs. L.H. Chua on 30 September 2005. [16] Based on the representation of the 3rd Defendant, the Plaintiff treated and entered the accounting records for the RM2 million in the Reports and Financial Statements for the period 19 August 2004 to 31 December 2005 as Property Development Costs. The RM2 million formed part of the sum RM2,647,012.00 which was classified as development expenses. [17] However at the trial of Suit 200, the 1st and 2nd Defendants and Tan Su Li claimed the RM2 million was incurred as ‘consultancy services’. Due to the inconsistent position taken by the Defendants, the Plaintiff via its solicitor sought explanation from the Defendants. The Defendants did not respond. Thus a letter of demand dated 15 January 2016 was issued by the Plaintiff to the Defendants demanding a compensation of the RM2 million on the ground that the RM2 million was fraudulently withdrawn from the Plaintiff (pages 390 – 391 Common Bundle of Documents A). Not satisfied with the explanation given by the 17 Defendants the Plaintiff finally commenced this action against the Defendants on the ground that the Defendants had conspired to defraud or commit fraud against the Plaintiff by siphoning the sum RM2 million. [18] PW1 informed the court the only resolution passed in relation to the SPA were the Directors’ Resolution and Members’ Resolution dated 23 May 2005 respectively where mandate was given for the purchase of the Land for RM5,300,000.00. There were no other resolution passed in respect of the purchase of the Land. During cross-examination it was suggested to PW1 that paragraph 2 of the Directors’ Resolutions is the authorisation of the Plaintiff for the directors to pay the RM2 million, to which PW1 disagreed. [19] During re-examination PW1 further emphasised that the Directors’ and Members’ Resolutions were passed on 23 May 2005

So, what I mean that is I know the Suit 200 but then the intricate details I don’t know, that’s what I mean, I don’t have detailed knowledge on this Suit 200. Now, Ms Lee, a question was then asked of you concerning Suit 200 and it was, this is where the counsel for the Defendants then put it to you that Ms Tan Su Li did not testify in Suit 200, Ok, and that in your witness statement you made reference to Ms Tan Su Li, Ok. You disagreed with this statement. Now, can you explain why you mentioned Ms Tan Su Li in your witness statement? ... ... Sorry, Ok. Tan Su Li is the Third Plaintiff in Suit 200, Ok, so all the affidavits in Suit 200 were affirmed by Tan Han Kwan and Tan Mei Li were behalf and authorised by all the Plaintiffs. So, despite Tan Su Li didn’t give evidence in Suit 200, Tan Su Li must have taken the same position as other Plaintiffs in Suit 200. 21 ... ... … And then it is impossible for the other two Plaintiffs have taken different position to this Tan Su Li. So, is Tan Su Li doesn’t say that this RM2,000,000 was Consultancy Fees, Tan Su Li must have come to the Court and say so. Otherwise, Tan Su Li is bound to her co-Plaintiffs’ affidavits. Until then and then Tan Su Li must have to be adopted the same position as other Plaintiffs in Suit 200. [26] The Defendants vigorously challenged PW1’s competency to give evidence on behalf of the Plaintiff as the Defendant contends that PW1 has no personal knowledge of the factual circumstances in respect of the RM2 million issue as she was only appointed as director in 2009. In response to this, PW1 clarified as follows – Initially, the RM2,000,000 was paid out by the Plaintiff to the Plaintiff’s solicitors on 09.05.2005, Ok. So, at that material time the Directors of the Plaintiff were First Defendant and the Third Defendant. And then the shareholder for that material time was First Defendant, Second Defendant, Third Defendant and Tan Su Li. None of the current Board of Directors were in the Plaintiff at that time. So, I am in charge of doing the accounting for Plaintiff. When I start handling the Account Department for the Plaintiff, I will handle the account of the Plaintiff together with all the supporting document. So especially when come to this RM2,000,000 paid out, I come across two historical documents which can be find in page 249 and 250 of the Bundle A, Ok. So, in the page 249, there is a letter dated 03.05.2005 signed by the 22 Third Defendant to L.H. Chua and then this L.H. Chua is the solicitor for Dazzling Symphony Sdn Bhd, the Vendor. So here it’s clearly stated in this letter that the Plaintiff will irrevocably undertake to pay RM2,000,000 to L.H. Chua upon completion of the Sales and Purchase Agreement, Ok. On the page 250 is a subsequent letter signed by Third Defendant also on the 09.05.2005 to Steven Tai, Wong & Partners and then this Steven Tai, Wong & Partners is the solicitor for the Plaintiff at that time, Ok. So, in this letter it’s clearly stated that there is an instruction to the Steven Tai, Wong & Partners to release the sum RM2,000,000 to L.H. Chua upon completion of the Sales and Purchase Agreement. And then these two letters are stated that the RM2,000,000 was paid for Agreed Agency Fees and didn’t mention about Consultancy Fees. This is how I derived my knowledge for the RM2,000,000 payment. And then it is impossible for the current Board of Directors to have the knowledge of this RM2,000,000 payment because we were not the Director at that material time. [27] Considering PW1’s position in the Plaintiff company since 2005 when at that point in time she was in charge of handling the Accounts Department of the Plaintiff and subsequently she was appointed as a director in 2009, I fail to see why she is not competent to give evidence on behalf of the Plaintiff. Being in charge of the Accounts Department makes her in charge of the financial records and statement of the Plaintiff including the documents that relate to the transaction in respect of the sale and purchase of the Land and the RM2 million payment. There is no evidence to suggest otherwise. To my mind the fact that 23 she now oversees the administrative part of the Plaintiff and at the same time maintaining the accounting records of the Plaintiff as well as being a member of the current board of director of the Plaintiff makes her competent to testify on behalf of the Plaintiff. After all PW1 was authorised (which was initially challenged by the Defendants) by the current board of directors of the Plaintiff to deal with this matter on behalf of the Plaintiff. [28] The Defendants’ contention is that CKS ought to be called to testify on behalf of the Plaintiff and urge this court to draw an adverse inference (under s. 114(g) of the Evidence Act) against the Plaintiff for failure to call CKS as a witness. Based on the facts, the transactions in relation to the sale and purchase of the Land occurred around early 2005, in particular in May 2005 when the RM2 million was transferred out from the Plaintiff which now becomes a bone of contention between the parties. Based on documentary evidence (page 19 Common Bundle of Document A), CKS became a shareholder and director of the Plaintiff on 16 September 2005 which is after the RM2 million was paid to Dazzling Symphony’s solicitor. It was also after the Defendants had agreed with Dazzling Symphony for the RM2 million purportedly part of the purchase price of the Land but not to be revealed in the SPA. CKS was not a board member and not a shareholder of the Plaintiff company 24 when resolutions was passed by the directors and members on 23 May 2005 authorising the Plaintiff to purchase the Land at RM5,300,000.00. As such I am of the view failure to call CKS as a witness could lead to a presumption of adverse inference against the Plaintiff. [29] PW1 was examined about the alleged loss suffered by the Plaintiff as a result of the RM2 million payment. PW1 said the Plaintiff was left with no money after the RM2 million was paid out which resulted in the failure of the Plaintiff to complete the SPA. PW1 said the audited account of the Plaintiff shows that the Plaintiff was only left with RM4000.00 cash at that material time. If the RM2 million had not been paid out the Plaintiff would still have RM2 million. PW1 agreed with the Defendant’s contention that even if the RM2 million had not been paid out, the Plaintiff would still have to cough up RM3,300,000.00 to pay for the Land. [30] However the Defendant’s suggestion that the Plaintiff did not suffer any loss because the RM2 million was paid by the Defendants and not the Plaintiff was strenuously objected to by PW1 because the RM2 million was paid from the Plaintiff. PW1 clarified during re-examination that the initial capital of the Plaintiff was RM4 million. After paying 10% deposit of the purchase consideration and additional late 25 payment charges as stated in the SPA which is approximately RM600,000.00. Had the RM2 million payment not made out to Messrs Steven Tai, the Plaintiff would have had RM3,400,000.00 in the bank and would only need to top up about RM1,370,000.00 to pay the purchase consideration rather than RM4,770,000.00 which is the balance of the purchase price to be paid under the SPA. [31] PW1 was referred to an email sent on 28 February 2005 to the 2nd Defendant. Attached to the email was the proposed terms for the SPA by the Plaintiff’s solicitor Messrs Steven Tai to the 2nd Defendant (pages 29 - 30 Common Bundle of Documents B). PW1 said she has never seen the documents before. Nevertheless she cannot agree with the Defendant’s contention that the RM2 million payment was made based on the said documents. [32] In re-examination PW1 explained the Plaintiff’s stand –

The SPA was not conditional upon payment of RM2 million. The only upfront payment that is required is the 10% of the purchased consideration. There may be some agency fees to be paid but it cannot be about 38% of the purchase price as in the purchase of the Land. According to PW1 based 26 on her experience the normal agency fees is about 1.5% to 2%. The Plaintiff did not do anything about the RM2 million payment even though aware of the high agency fees because the said payment had already been made. It was after the revelation by the Defendants in Suit 200 that it became clearer that RM2 million was not agency fees.

The RM2 million was paid even before resolutions were passed by the Plaintiff approving the purchase of the Land for RM5,300,000.00.

There were no subsequent resolution passed by the Plaintiff to rectify the payment of the RM2 million.

The RM2 million was also never mentioned in the SPA and any supplemental agreement to the SPA. In any event the Defendant’s had pleaded in their re-amended Defence that the RM2 million was outside the SPA, as such it cannot be a term of the SPA. 27 Defendants’ witnesses DW1 [33] The Defendant’s first witness is Stephen Wong Yee Oh (DW1), an advocate and solicitor from Messrs Steven Tai solicitor who acted for the Plaintiff at the material time in respect of the sale and purchase of the Land. DW1 had forwarded to the Defendant various documents pursuant to an order for discovery dated 21 July 2016 made by this court. All the documents forwarded to the Defendants were initially referred to as Common Bundle of Documents – Volume 2 (Part B & C). The various documents were categorised as Part C on the request of the Plaintiff who has no possession nor sight of the said documents given by DW1 to the Defendants. DW1 had bring along the original of the documents and after having perused the original documents the Plaintiff agreed for the bundle of the said documents to be categorised under Part B. Thus the said bundle is known as Common Bundle of Documents C – Volume 2 (Part B). [34] DW1 testified that he took instructions from the 2nd and 3rd Defendants who were directors of the Plaintiff at the material time. DW1 confirmed pages 29 – 52 of the Common Bundle of Documents A 28 was the SPA for the purchase of the Land. DW1 was referred to an email which he sent to the 2nd Defendant on 28 February 2005 (page 29 – 30 Common Bundle of Documents B). According to DW1 based on the briefing in respect of a proposal for the purchase of a parcel of land, and based on the 2nd Defendant’s instruction DW1 had prepared the proposal at page 30. His role was to prepare the sale and purchase agreement based on RM5,300.000.00. Thus, to his understanding the purchase consideration would be RM5.3 million and that he was also informed that there would be some sort of a fee of RM2 million. [35] As regards to an email that DW1 sent to the 2nd Defendant on 1 March 2005 (pages 33 – 35 Common Bundle of Documents B) DW1 explained pages 34 – 35 contain the proposed terms and conditions of the proposed acquisition of the Land. Essentially what was stated in pages 34 – 35 is substantially similar to what was stated at page 30, that is, the terms and conditions of the SPA. [36] According to DW1 there were no consultancy agreement signed because he was not instructed to prepare one. In cross-examination DW1 clarified that the consultancy agreement which he stated in the proposed terms and conditions attached to his email to the 2nd 29 Defendant was merely a proposal. As it turned out, he was not instructed to prepare a consultancy agreement [37] By letter dated 9 May 2005 (page 8 Common Bundle of Documents C) the 2nd Defendant issued an irrevocable instruction notifying DW1 that a sum of RM2 million was deposited into his stakeholders account and that DW1 was to disbursed the money to Dazzling Symphony’s solicitor upon the completion of the SPA. [38] In so far as DW1 is concerned the purchase price of the Land RM5,300,000.00. DW1 was asked twice to comment on PW1’s testimony that the purchase of the Land would not required a payment of RM2 million – Thank you. Now, Dato’, the Plaintiff’s witness has come to Court and said very clearly that the purchase of the land would not have required a payment of RM2 million. What do you have to say to this? Well, for me as an S&P lawyer, I’ve prepared a Sale and Purchase Agreement for RM5.3 million, and with this instruction letter, which was deposited with us as stakeholders, the instruction is for us for release this money to the seller’s solicitors. So, to me as the conveyancing solicitor, the purchase of this property would be based on RM5.3 million under the S&P. 30 ... ... The RM5.3 and the RM2 million. So my question to you just now is again the same, whether you would have any views on what the Plaintiff have come to Court and said that the sale and purchase is not dependent on the RM2 million. Well, I’ve prepared a Sale and Purchase Agreement for RM5.3 million, that is all recorded down very clearly with the existence of the Sale and Purchase Agreement, and I’ve received instructions, I’ve been notified that the RM2 million has been deposited in my account and that sum is to be forwarded to the seller’s solicitors upon the completion of the sale and purchase transaction. So that is my instructions as the solicitor for this transaction. [39] As instructed by the 2nd Defendant, DW1 released the RM2 million to Messrs L.H. Chua (Dazzling Symphony's solicitor) on 29 September 2005 upon completion of the SPA. [40] When asked about the term ‘agency fee’ and “consultancy fee” DW1 said the term agency fees were used by the Plaintiff when the RM2 million was deposited into DW1’s stakeholder account and the term ‘consultancy fees’ was used few months before signing the SPA and just before the signing of the SPA the term ‘agency fee’ was used. To DW1, the term ‘agency fee’ and ‘consultancy fee’ have similarities and can be used interchangeably depending on the circumstances. 31 [41] In his testimony during cross-examination DW1 said there were no consultancy agreement nor agency agreement signed by the Plaintiff. DW1 informed as a matter of procedure he would obtain the resolutions of the companies in respect of the sale of the Land. He confirmed pages 163 and 164 of Common Bundle of Document C were the resolution of Dazzling Symphony board of directors and its members respectively in respect of the sale of the Land for RM5.3 million to the Plaintiff. DW1 confirmed no where in the resolutions was there stated that the Plaintiff were to pay RM2 million to Dazzling Symphony. The resolutions passed by Dazzling Symphony are reproduced below – Directors’ Resolution DISPOSAL OF ALL THAT PARCEL OF FREEHOLD LAND HELD UNDER GERAN 24710, LOT NO. 14, BANDAR KUALA LUMPUR, DAERAH KUALA LUMPUR, NEGERI WILAYAH PERSEKUTUAN SITUATED AT LOT NO. 14, LORONG ENAU, KUALA LUMPUR (“THE PROPERTY”) RESOLVED THAT, subject to the sanction of the members of the Company, approval be and is hereby given for the Company to dispose off the property measuring approximately 3,372 square meters in area to Bluefire Development Sdn Bhd (Company No. 663455-M) (“the Purchaser”) of Suite No. 8.02, Level 8, North Block, AMPWALK, 218, Jalan Ampang, 50450 Kuala Lumpur for a total consideration of Ringgit Malaysia Five Million and Three Hundred Thousand (RM5,300,000.00) only and upon such other terms and conditions as stipulated in a sale and purchase agreement (“SPA”) to be entered into between this Company and the Purchaser, a copy of which is attached herewith. RESOLVED THAT any TWO of the Directors or any ONE of the Directors and the Secretary of the Company be and are hereby authorised to sign the SPA and any other relevant documents in relation thereto for an on behalf of the Company AND THAT they are also hereby authorised to do all acts and deeds necessary or expedient to carry the above transaction into effect with full power to assent to any 32 conditions, modifications and variations as may be required and in the best interest of the Company. RESOLVED THAT approval be and is hereby given for the affixation of the Company’s Common Seal onto the SPA and any other relevant documents, where necessary, in the aforesaid manner. RESOLVED THAT, subject to the consent of the members, the Secretary of the Company be and is hereby authorised to prepare the Members’ Circular Resolution pursuant to Section 152A of the Companies Act, 1965 in respect of the approval of the members for the ordinary resolution stated above. DIRECTORS APPROVING THE ABOVE:- ….. Petaling Jaya Dated : 30 March 2005 Members’ Resolution We, the undersigned, being all members of the Company who at the date of this resolution, are entitled to attend and vote at general meetings of the Company HEREBY PASS the following resolution as Ordinary Resolution and agree that the said resolution shall, for all purposes be as valid and effective as if the same had been passed by us at an Extraordinary General Meeting of the Company duly convened and held:- DISPOSAL OF ALL THAT PARCEL OF FREEHOLD LAND HELD UNDER GERAN 24710, LOT NO. 14, BANDAR KUALA LUMPUR, DAERAH KUALA LUMPUR, NEGERI WILAYAH PERSEKUTUAN SITUATED AT LOT NO. 14, LORONG ENAU, KUALA LUMPUR (“THE PROPERTY”) RESOLVED THAT approval be and is hereby given for the Company to dispose off the property measuring approximately 3,372 square meters in area to Bluefire Development Sdn Bhd (Company No. 663455-M) (“the Purchaser”) of Suite No.

8.02, Level 8, North Block, AMPWALK, 218, Jalan Ampang, 50450 Kuala Lumpur for a total consideration of Ringgit Malaysia Five Million and Three Hundred Thousand (RM5,300,000.00) only and upon such other terms and conditions as stipulated in a sale and purchase agreement (“SPA”) to be entered into between this Company and the Purchaser, a copy of which is attached herewith. RESOLVED THAT any TWO of the Directors or any ONE of the Directors and the Secretary of the Company be and are hereby authorised to sign the SPA and any other relevant documents in relation thereto for and on behalf of the Company AND THAT they are also hereby authorised to do all acts and deeds necessary or 33 expedient to carry the above transaction into effect with full power to assent to any conditions, modifications and variations as may be required and in the best interest of the Company. MEMBERS APPROVING THE ABOVE:- …. Petaling Jaya Dated : 30 March 2005 [42] Based on the documents in his file (which is the entire Common Bundle of Document C) DW1 confirmed the letter dated 25 October 2005 at page 65 of the said bundle was the only letter he sent to the Plaintiff requesting for payment of RM8,633.65 as quit rent assessment. He also confirmed the letter at page 68 of the same bundle was a letter from the Plaintiff enclosing a cheque of RM8,633.65 for the payment of quit rent assessment. According to DW1, he recalled that CKS had helped the Plaintiff to complete the purchase of the Land. DW2 [43] Defendant’s second witness, Chua Liang Hong, (DW2) from Messrs L.H. Chua, the solicitor who acted for Dazzling Symphony in respect of the sale and purchase of the Land. DW1 confirmed that his firm received a letter dated 3 May 2005 from the Plaintiff informing the 34 Plaintiff’s irrevocable undertaking to pay RM2 million as agreed agency fee upon completion of the SPA. A cheque in the sum of RM2 million was forwarded to DW2’s firm by DW1’s firm via letter dated 29 September 2005. The sum being agreed agency fee is only to be released by Messrs L.H. Chua simultaneously with the release of the balance purchase price to Dazzling Symphony. [44] When asked to explain the circumstances involving payment of RM2 million, DW2 replied that he acted on strict instruction from his client to receive the money from the Plaintiff on behalf of them. DW2 confirmed in cross-examination that he does not know the nature of the RM2 million but that his knowledge in so far as the RM2 million is concerned relates to what was captioned in the title of the particular letter, that is, the sale and purchase of the Land. [45] DW2 informed the court that he was not involved in any negotiations between his client Dazzling Symphony and the Defendants in relation to the sale and purchase of the Land. He prepared the SPA based on the instruction given by his client. [46] According to DW2 the term agreed agency fees came from the Defendants. As far as he is concerned there were no agency 35 agreement or consultancy agreement executed between Dazzling Symphony and Plaintiff. He confirmed the purchase consideration as stated in the SPA was RM5.3 million and that the stamp duty in the amount of RM200, 850.00 (page 159 Common Bundle of Documents C). DW3 [47] The Defendants’ third witness, Tan Keng Heng (DW3), is a chartered surveyor and registered valuer with the Board of Valuers Malaysia since 1989. DW3 is the managing director of Allied Group Property Consultant Sdn Bhd and that the firm was engaged by the 2nd Defendant to conduct a valuation on the Land. Details of DW3’s academic qualification, valuation exercises carried out, court experience as witness is provided in his Witness Statement. In the instant case DW3 was called as an expert witness to testify as to the value of the Land. [48] DW3 testified he personally carried out an inspection on the Land on 12 June 2014 and prepared a valuation report in respect of the same. The valuation report can be seen at page 3 – 23 Common Bundle of Documents B and marked as Exhibit D1. 36 [49] As stated in his report the market value of the Land as at the date of his valuation on 12 June 2014 was RM39,920,000.00 or approximately RM11,840.00 per square metre or RM1,100.00 per square feet. DW3 derived the market value by using the comparison method of valuation. For comparison purposes DW1 adopted four properties with different size, different position and different time of transaction. DW1 then adjusted the differences in all the said factor and derived the average price of the four comparable properties which gives him RM1,083.00 per square foot which was rounded to RM1,100.00. [50] The four comparable properties which were used by DW3 for comparison purposes were the following -

Lot 11128 which was valued at RM1,549.00 per square feet bringing a total consideration of RM65,267,000,00 at the time being sold on 30 November 2012;

Lot 984 which was valued at RM899.00 per square feet bringing a total consideration of RM40,309,000.00 at the time being sold on 15 March 2012;

Lot 258 which was valued at RM2,199.00 per square feet bringing a total consideration of RM294,965,000.00 at the time being sold on 31 December 2013; and 37

Lot 293 which was valued at RM857.00 per square feet bringing a total consideration of RM53,800,000.00 at the time being sold on 22 April 2010. [51] Based on RM1,100.00 per square feet and multiply by the Land area which is about 36,296 square feet, the valuation of the Land was RM39,920,000.00. DW4 [52] The Defendant had also called another expert witness, Long Tian Check (DW4) from Henry Butcher Malaysia Sdn Bhd to testify in respect of the value of the Land. DW4 is one of the founding directors of Henry Butcher. DW4 is a chartered surveyor, registered valuer (V-0241) and a registered estate agent (E-0283) said he was instructed by the Plaintiff to prepare a valuation report in respect of the Land. In his Witness Statement DW4 provide details of the various accreditations he received, his field of practice and the various major valuation and surveying projects he had carried out. As instructed by the Plaintiff, the valuation was conducted for loan financing purposes and DW4 was asked to determine the market value and forced sale value of the Land. 38 [53] DW4 inspected the Land on 4 April 2005 and prepared a report which is in the Common Bundle of Document H – Volume 3 (Part C) from pages 3, 4 and pages 6 – 39. DW4 testified that he had prepared the report but page 5 was not part of his report and it is to be disregarded. DW4’s valuation report dated 6 April 2005 is marked as Exhibit D2. In his report DW4 alluded to the fact that at that point in time there was a Development Order approved by DBKL for the Land to be developed. [54] For purpose of determining the value of the Land, DW1 adopted the comparison method and residual method. DW2 have considered the following condominiums and development land sale transactions –

No. A01, Damai Suria, Jalan U-Thant, which was valued at RM1,300,000.00 (RM551 psf) as 13 September 2004;

No. A1-2, Desa U-Thant, Jalan U-Thant, which was valued at RM1,220,000.00 (RM499 psf) as 13 August 2004;

No. 3-1-9, Villa Aman, Jalan Ritchie, which was valued at RM2,200,000.00 (RM 491 psf) as at 11 February 2004;

No. 294 (Lot 71), Jalan Ampang, which was valued at RM7,474,980.00 (RM190 psf) as at 6 May 2004; 39

Lot 37, Persiaran Hampshire, Off Jalan Ampang, which was valued at RM13,844,347.00 (RM250 psf) as at 3

Lot 206, Lorong Binjai, Off Jalan Ampang, which was valued at RM11,000,000.00 (RM332 psf) as at 26 March 2004. [55] DW4 had determined the market value of the Land as at 4 April 2005 to be RM8 million whereas the forced sale value was RM5.6 million. DW5 [56] The Defendants’ fifth witness is Tan Han Kwan (DW5), the 2nd Defendant. In his examination in chief DW5 essentially relate to the Agreed Facts in respect of the sale and purchase of the Land including the purchase consideration of the Land stated in the SPA to be RM5,300,000,00 that the Plaintiff paid 10% of the purchase consideration in the sum of RM530,000.00 and that the balance RM4,700,000.00 was paid by CKS to complete the SPA. 40 [57] As pleaded in their Defence, DW5 reiterated that even though the purchase consideration as stated in the SPA was RM5,300,000.00 there was an agreement between Plaintiff and Dazzling Symphony for an additional sum of RM2 million to be paid by the Plaintiff. According to DW5, Dazzling Symphony had imposed a condition that the additional RM2 million is to be paid in cash and not to be recorded in the SPA. [58] DW5 referred to the following to support the Defendants defence –

email dated 28 February 2005 from their solicitor Messrs Steven Tai and the proposed terms and conditions attached to the email. DW5 insisted that paragraph B clearly stated that the RM2 million was to be paid as consultancy fee by the Plaintiff to Dazzling Symphony.

Plaintiff’s letters dated 3 May 2005 and 9 May 2005 to Dazzling Symphony’s solicitor Messrs L.H.Chua and Plaintiff’s solicitor Messrs Steven Tai respectively is a clear indication that Dazzling Symphony wanted to secure the RM2 million payment even before the signing of the SPA. 41

Messrs Steven Tai’s letter dated 16 May 2005 to Messrs L.H. Chua notifying Messrs L.H. Chua that the Plaintiff had deposited a sum of RM2 million with Messrs Steven Tai and the sum shall be forwarded to L.H. Chua subject to the successful completion of the SPA (page 10 Common Bundle of Document C).

The Defendants who were the directors and shareholders of the Plaintiff at that point in time had fully consented to and authorised the payment as it was known to the Defendants that the payment of such sum was a material term of the sale and purchase of the Land.

The Plaintiff and Dazzling Symphony had their own solicitors to oversee the SPA transactions. This shows that both parties had acted bona fide.

The RM2 million was ultimately paid to Dazzling Symphony for its benefit and it has issued a receipt (through Messrs L.H. Chua). The Defendants did not get the money. So it does not matter whether the payment is termed as agency fee or consultancy fee. 42 [59] DW5 pointed out that the purchase price of RM5.3 million and additional payment of RM2 million was captured in the Plaintiff’s 2006 financial report as development expenditure. DW5 pointed out that at all material times CKS was in full control and knowledge of the finances of the Plaintiff and he had in fact validated the Plaintiff’s financial report in his capacity as a director and company secretary of the Plaintiff. This is clearly shown in the Plaintiff’s Report and Financial Statement for the year 2006 – 2014 (page 78 – 248 Common Bundle of Document A). [60] Since the Defendants were unable to obtain loan from financial institutions to pay the balance, the Defendants agreed to rope in CKS who was willing to invest in the Land and pay the balance of the purchase consideration. According to DW5 the Defendants provided the necessary information in respect of the SPA transaction including the payment of RM2 million to Dazzling Symphony as consultancy fees. It is DW5’s contention that a verbal agreement was made between CKS and the Defendants in respect of the parties’ position in the Plaintiff. The salient terms were those that is stated in paragraph 11(d) above. CKS was supposed to put the verbal agreement in writing but he failed. CKS breached the terms of the verbal agreement and Defendants commenced Suit 200 against CKS. It is DW5’s contention that this action was brought by CKS against the Defendants as a retaliation 43 against the Defendants for suing CKS in Suit 200 for breach of the verbal agreement. [61] DW5 denied that the RM2 million payment to Dazzling Symphony caused the Plaintiff to be impecunious which caused it to seek investor to complete the SPA. It is DW5’s position that even if the RM2 million had not been paid, the Plaintiff would still need to look for investor because the Plaintiff’s application for loan was not approved. [62] During cross-examination DW5 informed the court that, together with the 3rd Defendant, he attended meeting with the representative of Dazzling Symphony sometime in late 2004 or early 2005 to discuss about the sale and purchase of the Land and the asking price of RM7,300,000.00 out of which RM2 million is to be paid by cash and RM5,300,000.00 could be financed. It was a condition imposed by Dazzling Symphony, so if the Defendants wants the Land they will just have to take in that situation. [63] Based on the advice of his solicitor, DW5 is adamant that paragraph 2 of the Directors’ Resolution authorised the directors of the Plaintiff to pay the RM2 million to Dazzling Symphony. However when questioned about any documents executed by the Plaintiff in relation to 44 the RM2 million, DW5 said he do not know whether there is any such document. Subsequently when he was asked of his position in Suit 200 that the RM2 million paid was for consultancy fees, he confidently said there was no consultancy agreement executed and there was no consultant appointed. [64] DW5 also disagreed that in Suit 200 he gave evidence that the RM2 million was masked as a consultancy fees even though it was pointed out by the Plaintiff’s counsel that the Notes of Proceedings of Suit 200 (which was agreed by both parties in Suit 200) had captured such statement/evidence made by DW5 on 8 December 2015. However DW5 denied he had said that and gave various excuses including saying that he must have not heard of the word ‘masked’ as counsel asking the question was not clear and he has a lot of trouble hearing the counsel (see Notes of Proceedings dated 7 December 2016 page 67 – 68 line 1 – 16). Surprisingly, DW5 said that was the first time it (about RM2 million was masked as a consultancy fees) was highlighted to him and that if he had known he would have disputed it. Learned counsel then pointed out to DW5 that that particular piece of his evidence was related to his solicitor by the Plaintiff’s solicitor via letter dated 6 January 2016 (page 388 – 389 Common Bundle of Documents A). It was also pointed out to him that his solicitor had replied via letter dated 26 45 January 2015 (page 394 – 395 Common Bundle Documents A) to the Plaintiff’s solicitor. The reply letter by Defendants’ solicitor did not take issue with DW5’s testimony (Notes of Proceedings dated 7 December 2016 page 69 line 11 – 36 to page 70 line 1 – 30). [65] It is DW5’s contention that the Plaintiff is statutorily barred from bringing this action as the RM2 million payment was made 11 years ago in 2005. DW6 [66] Defendant’s last witness, Tan Chor Eng (DW6), is the 3rd Defendant who was one of the founders of the Plaintiff company and also one of the initial shareholders of the Plaintiff. DW6 resigned as director of the Plaintiff on 17 September 2005 and that he disposed of his entire shareholding on 16 September 2005. [67] DW6’s Witness Statement in respect of the sale and purchase of the Land, amongst other, the purchase consideration of RM5.3 million as stated in the SPA, the 10% deposit paid under the SPA, the reason behind the additional payment of RM2 million, the inability of the Plaintiff to obtain loan from financial institution to pay up balance of the purchase 46 consideration, that CKS agreed to invest by paying the balance sum of RM4,700,000.00 essentially relate to the Agreed Facts. At this juncture it should be mentioned that quite a substantial number of the answers given by both DW5 and DW6 in their Witness Statement were strikingly identical. This issue will be discussed later. [68] One point which is interesting to note from DW6 testimony is his agreement with the proposition of the Plaintiff’s counsel that no where in the Directors’ Resolution and Members’ Resolutions passed by the Plaintiff’s board of directors and its members which authorised the Plaintiff to pay the RM2 million to Dazzling Symphony. This is in contrast with DW5’s evidence. [69] DW6 was queried in respect of his Witness Statement where he denied that the Plaintiff was impecunious as a result of the RM2 million being paid out of the Plaintiff’s account to Dazzling Symphony. DW6 repeatedly said he do not understand the meaning of the word ‘impecunious’ and that he just signed the Witness Statement. DW6 however say that the Plaintiff has to find outside help after the Defendant’s counsel suggested ‘impecunious’, as stated in the question and answer of DW6’s Witness Statement, is in the sense that the Plaintiff had to seek outside investors. 47 [70] DW6 was also asked about his evidence in Suit 200 where DW6 testified that the RM2 million was for a consultant cost but in his letter dated 3 May 2005 he used the term agency fee. In this respect DW6 confirmed there was no consultant nor agent appointed by the Plaintiff, nevertheless DW6 rejected the Plaintiff’s suggestion that the payment RM2 million was masked as an agreed agency fee in order to justify for such amount to be taken out from the Plaintiff for purpose of paying Dazzling Symphony. Issues [71] Both parties had framed 9 issues (Agreed Issues To Be Tried marked G) for the consideration of this court. Essentially the main issues are as follows -

Whether the Plaintiff’s claims are barred by Limitation Act 1953 or by the doctrine of laches.

Whether the purchase consideration of the Land was RM7,300,000.00 or RM5,300,000.00.

If the purchase consideration is RM5,300,000.00 whether the additional payment of RM2,000,000.00 paid out by the 48 Defendants was properly authorised by the Plaintiff and for a legitimate or lawful purpose?.

Whether the Defendants are in breach of their fiduciary duties as directors of the Plaintiffs and/or have committed fraud when they caused the Plaintiff to make the payment of RM2 million. The issues at paragraph (b), (c) and (d) will be dealt simultaneously below. The law [72] In so far as fraud is concerned reference is made to the case of Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1; [2015] 7 CLJ 584 where the Federal Court ruled the standard of proof in civil cases where fraud is alleged is on balance of probabilities – [49] With respect, we are inclined to agree with learned counsel for the plaintiff that the correct principle to apply is as explained in In re B (Children) (supra). It is this: that at law there are only two standards of proof, namely, beyond reasonable doubt for criminal cases while it is on the balance of probabilities for civil cases. As such even if fraud is the subject in a civil claim the standard of proof is on the balance of probabilities. There is no third standard. And "(N)either the seriousness of the allegation nor the seriousness of the 49 consequences should make any difference to the standard of proof to be applied in determining the facts". [50] Hence, it is therefore up to the presiding judge, after hearing and considering the evidence adduced as being done in any other civil claim to find whether the standard of proof has been attained. "The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies". The criminal aspect of the allegation of fraud and the standard of proof required thereof should be irrelevant in the deliberation. … [52] We therefore reiterate that we agree and accept the rationale in In re B (Children) (supra) that in a civil claim even when fraud is alleged the civil standard of proof, that is, on the balance of probabilities, should apply. And perhaps it is not out of place here to restate the general rule at common law that, "in the absence of a statutory provision to the contrary, proof in civil proceedings of facts amounting to the commission of a crime need only be on a balance of probabilities". (See Boonsom Boonyanit v. Adorna Properties Sdn Bhd [1997] 3 CLJ 17, at p. 32; [1997] 2 MLJ 62, at p. 74). [73] In order to establish fraud Plaintiff must prove the following elements –

a false representation has been made by the Defendant either –

knowingly; or

(ii) without belief in its truth; or

(iii) recklessly without caring whether it be true or false 50

the Defendant gained an advantage or injury, loss or detriment was caused on the Plaintiff. (Ang Hiok Seng @ Ang Yeok Seng v Yim Yut Kiu (personal representative of the estate of Chan Weng Sun, deceased) [1997] 2 MLJ 45, [1997] 1 CLJ 497 FC; Puncak Alam Housing Sdn Bhd (formerly known as Bukit Cerakah Development Sdn Bhd) v Menta Construction Sdn Bhd & Anor [2014] 1 MLJ 287; Victor Cham & Anor v Loh Bee Tuan [2006] 5 MLJ 359; Hock Hua Bank (Sabah) Bhd v Lam Tat Ming & Ors [1995] 1 LNS 81, [1995] 4 MLJ 238; Derry v Peek [1886 – 90] All ER Rep 1). Findings of the court Whether Plaintiff’s claim is barred by limitation or laches [74] The Plaintiff’s cause of action against the Defendants is premised on fraud alleged to have been committed by the Defendants. Under the circumstances, the applicable statutory provision under the Limitation Act 1953 is s. 29 which read as follows – 51 29 Postponement of limitation period in case of fraud or mistake Where, in the case of any action for which a period of limitation is prescribed by this Act, either-

the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or

the right of action is concealed by the fraud of any such person as aforesaid; or

the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it: Provided that nothing in this section shall enable any action to be brought to recover, or enforce any charge against, or set aside any transaction affecting, any property which –

in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know or have reason to believe that any fraud had been committed; or

(ii) in the case of mistake, has been purchased for valuable consideration, subsequently to the transaction in which the mistake was made, by a person who did not know or have reason to believe that the mistake had been made. [75] It is the Plaintiff’s position that this action was filed in 2016 after it was discovered that the Defendants had fraudulently caused RM2 52 million to be paid out of the Plaintiff. Such discovery was made from the pleadings filed by the Defendants in Suit 200 and the testimony of DW5. [76] In Suit 200, the Defendants had pleaded that the RM2 million was consultancy fees. Subsequently in cross-examination DW5 agreed that the RM2 million was masked as consultancy fees. DW5 testimony appears in Plaintiff’s Additional Bundle of Documents I. The said bundle consists of the Notes of Proceedings in respect of Suit 200 on 8 December 2015. The Notes of Proceedings was agreed by the parties. DW5 testimony can be seen at page 66 (lines 24 – 35) – 67 (lines 1 – 28) of the Plaintiff’s Additional Bundle of Documents I. [77] Based on the letters dated 3 May 2005 (page 249 Common Bundle of Documents A) and 9 May 2005 (page 250 Common Bundle of Documents A) issued by DW6 as a director of the Plaintiff, DW5 specifically described the RM2 million as agency fees which is inconsistent with DW5’s evidence in Suit 200. The inconsistencies of the Defendants’ position and the steps taken by the Plaintiff to unravel the matter was explained by PW1 when she was re-examined by the Plaintiff’s counsel in the instant case – 53 Ok. Initially, the RM2,000,000 was always claimed that is an Agreed Agency Fees, Ok, and it’s stated in the letters that’s find in the page 249 and 250 Bundle A, Ok. So, because of that reason, the Plaintiff has entered into the account for this RM2,000,000 as a property development cost, Ok. Subsequent to this, in Suit 200, when the First Defendant, Second Defendant along Tan Su Li, they sued Dato’ Ch'ng and the Plaintiff, Ok. In Suit 200 they categorise this RM2,000,000 as consultancy services, Ok. So, the Board of Directors go through this its solicitors to seek clarifications for this sudden change of the category of this RM2,000,000. So, it refers to the page 388 Bundle A. In fact, in 06.01.2016, there is the Plaintiff’s solicitors, Cheang & Ariff, issued to the Defendants to seek their clarifications on the different categorisation of RM2,000,000 but then there is no reply from the Defendants. That’s why on the 16.01.2016, that is the Plaintiff instruct the solicitors to issue a demand for the repayment of RM2,000,000. This letter can be find in the page 390 of the Bundle A, Ok. So, only upon 26.01.2016, the Defendants through their solicitors, Messrs Chris Lim Su Heng and they confirmed that the RM2,000,000 is for Consultancy Fees for the purchase of the land. And then they also confirmed that the RM2,000,000 was aware by the Director at that material time, Ok. And then they also confirmed that the RM2,000,000 is non, is intentionally not recorded in the Sales and Purchase Agreement and then it’s well known by the shareholders and Directors and they all agreed at that point of time, Ok. So, subsequent to that, on the 02.02.2016, the Plaintiff through their solicitors, Cheang & Ariff, issued another letter to seek further clarifications to the name of the consultants, the nature and scope of the work, basis of the fees, breakdown of the payment and all the relevant invoices because all these documents were never forward to the Plaintiff. 54 [12:00PM] The letter dated 2nd February can find in page 399. So, after that the Defendants is unable to provide any documents to support what they said that the payment is for Consultancy Fees. So, it is clearly that the RM2,000,000 now is neither Agreed Further Agency Fees or Consultancy Fees. So, in the first place, this RM2,000,000 should not been paid out by the Plaintiff. So, it’s clearly that there is a fraud committed by the Defendants. [78] It is my finding of fact that the current directors of the Plaintiff only came to know about the purported fraud committed by the Defendants in Suit 200 when evidence was led by the Defendants in Suit 200 that the payment RM2 million is for consultancy fees and not agency fees as what was presented to the Plaintiff in 2005. Since the alleged fraud was discovered in 2016, limitation period starts to run from 2016 and not 2005. [79] With regards to laches, it is the Defendants position that the time taken by the Plaintiff to file this action is unreasonably long despite it was known at all material time to the Plaintiff through CKS that the RM2 million was paid out in 2005. CKS who was the majority shareholder of the Plaintiff had signed off the Reports and Financial Statements of the Plaintiff for the period 19 August 2004 to 31 December 2005 where the RM2 million payment was booked as development expenses. 55 [80] As regards to the RM2 million the evidence of PW1 as stated in paragraph 16 above explained the RM2 million was booked as development expenses on reliance of DW5’s letter dated 3 May 2005 (page 249 Common Bundle of Documents A) and 9 May 2005 (page 250 Common Bundle of Documents A). PW1 explained why the RM2 million was treated as development expenses – Based on the documents in the Bundle A, page 249 and 250, the RM2 million that stated as an agreed agency fee relates to L H Chua has been treated in the Plaintiff’s account as a development costs BRF ok LEE and then the letters at page 249 and 250 never stated that it is for consultancy fees but it is for agreed agency fees, that is why for this reason the RM2 million was entered into the Plaintiff’s account as the development cost. [81] PW1 further explained the practice of the Plaintiff in regards to property development costs – Property development costs consist all the legitimated expenses for the development project. Ok, can you explain some of these examples? Examples are architect’s fees, consultancy fees, land surveyor fees… as long as it is project related … 56 Is always is the Plaintiff’s practice to capitalise consultancy fees under property development cost. When a consultant for example, architect or engineers is appointed by the Plaintiff to perform a special task for example maybe a prepare architectural drawing or engineer drawing, then the consultants will forward the quotations and Letters of Appointment to the Plaintiff clearly stated the job scope and the amount of the fees involved. If the Board of the Directors or the management or the Plaintiff is satisfied and agreed with the job scope and the amount of the fees involved then the letter appointments of that particular consultant will be accepted and signed by the Managing Director of the Plaintiff. Then subsequent then the consultant will issue invoice to the Plaintiff, Ok, according to the certain percentage of the work complete and then it’s pursuant to the payment term. Then only the Plaintiff will make the payments to the consultant. However, PW1 testified no agent or consultant was appointed in respect of the sale and purchase of the Land. [82] On the point why she agreed with the learned counsel for the Defendant that there was never any problem in 2005 when the RM2 million was termed as agency fees and why only in 2016 it became an issue, PW1 explained - In 2005, that’s why I said in 2005, the RM2,000,000 put into the accounts as agreed agency fees based on the two letters … because all the cost related to the project development we can categorise. Ok. And all the accounting entry must have support by a proper document so this RM2,000,000 was put into the 57 Plaintiff’s account in 2005 was based on the two documents in page 249 and 250 so there is no problem at that time when put in, But of this RM2,000,000 is going to out in as a consultancy fees there is no document to support it. [83] The evidence adduced shows that the RM2 million was booked as development cost as it was considered as agency fees and this is based on DW6’s letters dated 3 May 2005 and 9 May 2005. Based on such representation, the categorisation of the RM2 million (which is agency fees) as development project cost in 2005 back then was not an issue. It was only after Suit 200 was filed that raises questions in respect of the RM2 million. As such the fact that PW1 or CKS knew that the RM2 million is part of development project cost since 2005 does not at that point in time raises a cause of action against the Defendants. As explained by PW1 even though she knew from her experience that agency fees is normally between 1.5% to 2% of the SPA value whereas the RM2 million paid as alleged agency fees was about 38% of the SPA, she could not do anything at that time since the money had already been paid out. It was only during the trial of Suit 200 that the current directors of Plaintiff discovered the ‘actual’ intent and purpose of the RM2 million payment made. 58 [84] As testified by PW1 in her re-examination (see paragraph 77 above) the Plaintiff then took prompt steps to investigate the matter which subsequently led to the filing of this action. [85] Based on the evidence, it is my considered view that the issue of delay, waiver and acquiescence on the part of the Plaintiff does not arise. [86] As pointed out by the learned counsel for the Plaintiff, laches is an equitable defence. The fact that the Defendants had caused the Plaintiff to pay out a hefty sum of RM2 million without a proper and valid resolution by the Plaintiff precluded the Defendants from seeking an equitable defence. In this respect I refer to the following cases which laid out the maxims of equity which bar the Defendants from invoking the defence of laches –

the maxim that one who comes to equity must come with clean hands and the maxim that one who seeks equity must do equity - Natseven TV Sdn Bhd v. Television New Zealand Ltd [2001] 4 CLJ 722; [2001] 4 AMR 4648; and 59

the maxim that no person should take advantage of his or her own wrong – Hock Hua Bank (Sabah) Bhd v. Lam Tat Ming & Ors (supra). Whether the purchase price of the Land was RM7,300,000.00 or RM5,300,000.00 Whether the additional payment of RM2,000,000.00 paid out by the Defendants was properly authorised by the Plaintiff and for a legitimate or lawful purpose Whether the Defendants are in breach of their fiduciary duties as directors of the Plaintiffs and/or have committed fraud when they caused the Plaintiff to make the payment of RM2 million [87] In a transaction of this nature the vital document is obviously the SPA which reflect the intention of the parties in respect of the sale and purchase of the Land and matters relating to it. Besides the SPA, equally important is the resolution passed by the Dazzling Symphony as the vendor and Plaintiff as the purchaser. The SPA was executed by the Plaintiff and Dazzling Symphony on 24 May 2005. The salient terms of the SPA includes the following –

(D) The Vendor has agreed to sell and the Purchaser has agreed to purchase the said Property free from all encumbrances with vacant possession on an “as is where is” basis but subject to all conditions 60 of title whether express or implied affecting the same at the price of Ringgit Malaysia FIVE MILLION THREE HUNDRED THOUSAND (RM5,300,000.00) only (hereinafter called “the Purchase Price”) and upon the terms and conditions hereinafter appearing.

AGREEMENT TO SELL AND PURCHASE In consideration of the sum of Ringgit Malaysia FIVE HUNDRED THIRTY THOUSAND (RM530,000.00) only (hereinafter called “the Deposit”) [Inclusive of sum of Ringgit Malaysia ONE HUNDRED FIFTY NINE THOUSAND (RM159,000.00) only already paid by the Purchaser to the Vendor prior to the execution of this Agreement] now paid by the Purchaser to the Vendor (the receipt whereof the Vendor hereby acknowledges) as deposit and part payment towards the Purchase Price, the Vendor hereby agrees to sell and the Purchaser hereby agrees to purchase the said Property free from all encumbrances with vacant possession on an “as is where is” basis but subject to all conditions of title whether express or implied affecting the same at the Purchase Price and upon the terms and conditions herein contained.

2.

2.1 The Balance of Purchase Price of sum of Ringgit Malaysia FOUR MILLION SEVEN HUNDRED SEVENTY THOUSAND (RM4,770,000.00) only (hereinafter called “Balance Purchase Price”) shall be paid by the Purchaser to the Vendor’s Solicitor as Stakeholder within (3) months from the date of execution of the Agreement (hereinafter called “the Completion Date”).

2.2 In the event that the Purchaser is unable to pay the Balance Purchase Price within the Completion Date, the Vendor shall grant unto the Purchaser an extension of one (1) month from the date of expiry of the Completion Date (hereinafter called “the Extended 61 Completion Date”) to pay the unpaid Balance Purchase Price PROVIDED ALWAYS THAT the Purchaser shall pay to the Vendor interest at the rate of eight per cent (8.00%) per annum on the unpaid Balance Purchase Price on a day to day basis commencing from the expiry of the Completion Date until the actual date of payment of Balance Purchase Price and the accrued interest shall be paid together with the Balance Purchase Price. As can be seen from the above provisions the purchase price agreed by the parties which was stipulated in the SPA was RM5,300,000.00. This fact is not disputed by both parties. [88] A thorough perusal of the SPA shows there were no mention or reference in respect of a payment in the sum of RM2 million from the Plaintiff to Dazzling Symphony. This is confirmed by PW1 and all the Defendants’ witnesses except DW3 and DW4 the expert witnesses who were not involved in the transaction relating to the sale and purchase of the Land. [89] Based on the terms and conditions of the SPA the only other payment that the Plaintiff was required to make thereto was the following –

a deposit of 10% of the purchase prive which comes to RM530,000.00; 62

balance purchase price which amounts to RM4,770,000.00;

quit rent and assessment of the Land which is RM8,633.63;

development charges in relation to the Development Order approved by DBKL which is in the sum RM372,000.00; and

the statutory stamp duty in the sum of RM RM200,850.00. [90] The SPA was executed by the Plaintiff pursuant to a resolution passed by the Plaintiff’s Board of Directors and its members. The respective resolution read as follows: Plaintiff’s Directors’ Resolution (signed by the 1st and 3rd Defendants) BLUEFIRE DEVELOPMENT SDN. BHD. (Company No : 663455 M) (Incorporated in Malaysia) DIRECTORS’ RESOLUTIONS PURSUANT TO THE COMPANY’S ARTICLES OF ASSOCIATION

THAT the purchase of a freehold land under Geran 24710 Lot No. 14 Bandar and District of Kuala Lumpur and State of Wilayah Persekutuan Kuala Lumpur measuring approximately 3,372 square meters situated at Lot No. 14, Lorong Enau, Kuala Lumpur at the purchase price of Ringgit Malaysia Five Million Three Hundred Thousand 63 (RM5,300,000.00) only from DAZZLING SYMPHONY SDN. BHD. (179594-T), be and is hereby approved.

THAT TAN CHOR ENG (NRIC NO. 330723-01-5129/3237619) be and is hereby authorized to execute the Sale and Purchase Agreement and all relevant documents relating to the above transaction for and on behalf of the Company AND THAT he is also hereby authorized to do and sign for and on behalf of the Company all acts and deeds necessary or expedient to carry the above transaction into effect with full power to assent to any conditions, modifications and variations as may be required and in the best interest of the Company.

THAT any TWO of the Directors or any ONE of the Director and the Secretary of the Company be and are hereby authorized to sign the Sale and Purchase Agreement, the Memorandum of Transfer and any other relevant documents in relation thereto for and on behalf of the Company AND THAT he is also hereby authorized to do all acts and deeds necessary or expedient to carry the above transaction into effect with full power the assent to any conditions, modifications and variations as may be required and in the best interest of the Company.

THAT approval be and is hereby given for the affixation of the Company’s Common Seal onto the Sale and Purchase Agreement, the Memorandum of Transfer and any other relevant documents, where necessary, in the aforesaid manner. The undersigned, being all the directors for the time being of BLUEFIRE DEVELOPMENT SDN. BHD., (663455-M), hereby confirm the foregoing resolution pursuant to the Company’s Articles of Association. sgd .......................................... TAN CHOR ENG sgd .......................................... Dated : 23 MAY 2005 Members’ Resolution (signed by all the Defendants) BLUEFIRE DEVELOPMENT SDN. BHD. (Company No : 663455 M) (Incorporated in Malaysia) MEMBERS’ RESOLUTIONS PURSUANT TO

THAT the purchase of a freehold land under Geran 24710 Lot No. 14 Bandar and District of Kuala Lumpur and State of Wilayah Persekutuan Kuala Lumpur measuring approximately 3,372 square meters situated at Lot No. 14, Lorong Enau, Kuala Lumpur at the purchase price of Ringgit Malaysia Five Million Three Hundred Thousand (RM5,300,000.00) only from DAZZLING SYMPHONY SDN. BHD. (179594-T), be and is hereby approved.

THAT TAN CHOR ENG (NRIC NO. 330723-01-5129/3237619) be and is hereby authorized to execute the Sale and Purchase Agreement and all relevant documents relating to the above transaction for and on behalf of the Company AND THAT he is also hereby authorized to do and sign for and on behalf of the Company all acts and deeds necessary or expedient to carry the above transaction into effect with full power to assent to any conditions, modifications and variations as may be required and in the best interest of the Company.

THAT any TWO of the Directors or any ONE of the Director and the Secretary of the Company be and are hereby authorized to sign the Sale and Purchase Agreement, the Memorandum of Transfer and any other relevant documents in relation thereto for and on behalf of the Company AND THAT he is also hereby authorized to do all acts and deeds necessary or expedient to carry the above transaction into effect with full power to assent to any conditions, modifications and variations as may be required and in the best interest of the Company.

THAT approval be and is hereby given for the affixation of the Company’s Common Seal onto the Sale and Purchase Agreement, the Memorandum of Transfer and any other relevant documents, where necessary, in the aforesaid manner. The undersigned, being all the members for the time being of BLUEFIRE DEVELOPMENT SDN. BHD., (663455-M), hereby confirm the foregoing resolution pursuant to the Company’s Articles of Association. sgd .......................................... TAN CHOR ENG sgd .......................................... sgd .......................................... TAN HAN KWAN Dated : 23 MAY 2005 65 [91] The board of directors’ and members’ resolution specifically approved the Plaintiff to purchase the Land for a sum of RM5.3 million only. No where in the resolutions the payment of RM2 million was mentioned. When cross-examined on this particular point, the 2nd and 3rd Defendants took differing position. [92] When asked to show to the court where in the Directors’ Resolution which authorised the payment of RM2 million, DW5 said he was advised by his solicitor that paragraph 2 of the Resolutions which he refers as residual clause authorised the Plaintiff to make such payment. DW5 was evasive when asked about any documents executed by the Plaintiff in relation to the RM2 million payment. Eventually DW5 said he is not aware of any such document. This is DW5’s testimony – Yes, that’s right. There you were not a director. Now very simple question, alright. Look at this resolution and tell me, is there anywhere that suggested that the Plaintiff... that there is a resolution for the Plaintiff to pay Dazzling Symphony the sum of RM2 million? Could you repeat your question please, Mr Foong? Yes. Look at this directors’ resolution. 66 Page 53? Yes and 54. It’s dated 23.05.2005. Correct, yes. Now, can you tell me is there anywhere in this particular resolution that the directors of the Plaintiff at that material time, resolved to pay... resolved to pay Dazzling Symphony Sdn Bhd the sum of RM2 million? There is no specific paragraph, Yang Arif. But I believe it is here. Now, when you say that it is here, right, can you inform the Court where is it that you stated that it is there? Yang Arif, I stated that it is not... there is no specific paragraph for it but if you look at Item 2, I believe my lawyers have informed me that this is known as a residual clause where it says, ‘and that he is also authorised to do and signed for and on behalf of the company, all acts and deeds necessary or expedient to carry out the above transaction into effect with full power to ascend to any conditions, modifications and variations as may be required and in the best interest of the company.’ And I believe that in the process of it which is the purchase of the land which has appreciated to some ridiculous amount at this point in time, everything then was in... to the best interest of the company. Mr Tan, to your knowledge, were there any documents that were executed in relation to the RM2 million? I beg your pardon. 67 To your knowledge Mr Tan... because you say that by virtue of Clause 2, the company have resolved to make that RM2 million payment to Dazzling Symphony. Right? Correct. Right. So my question is, to your knowledge, were there any documents that were executed by the Plaintiff in relation to the RM2 million payment? The RM2 million was paid to our solicitors. No, my question is... were ... are there any documents or at that material... were there any documents that were executed by the Plaintiff in relation to the RM2 million payment? I’m sorry. I don’t follow you, Mr Foong. Alright. Because you see Mr Tan, you said that by virtue of Clause 2 that ‘Mr Tan Chor Eng be and he is hereby authorised to execute the Sale and Purchase Agreement and all relevant documents pertaining to the transaction.’ Right? to the above transaction for and above the company... of the company and that he is also authorised to do and sign for and on behalf of the company all acts and deeds necessary or expedient to carry out the above transaction into effect with full power to ascend to any conditions, modifications and variations as may be required or/and in the best interest of the company.’ Where does it say ‘documents’? After the word ‘relevant’. And I read to you. Can you read Clause 2 out loud to the Court? 68 ‘That Tan Chor Eng NRIC so... be and hereby authorised to execute the Sale and Purchase Agreement and all relevant documents relating to the above transaction for and above the company... of the company and that he is also authorised to do and sign for and on behalf of the company all acts and deeds necessary or expedient to carry out the above transaction into effect with full power to ascend to any conditions, modifications and variations as may be required or/and in the best interest of the company.’ Mr Tan, my question to you is this. To your knowledge, were there any documents that were executed by the Plaintiff in relation to the RM2 million payment? ... I do not know, Your Honour. … Yang Arif, the term ‘consultancy fee’ or ‘agency fee’, which we tended to use interchangeably in those days, denoted... was just a term we used to denote the requested payment of RM2 million to Dazzling Symphony. It’s just a term. There were no services provided. There were no agreements entered into, but we had agreed to pay Dazzling Symphony RM2 million in cash, and this was the term that was used to denote that payment and... and I think... and that term, I might add, was also used by our... the... my our solicitors and Mr Alex Chua who testified yesterday. [93] However in stark contrast to DW5, DW6 (who had signed the letter dated 3 May 2005 on behalf of the Plaintiff notifying Dazzling Symphony’s solicitor of the Plaintiff’s irrevocable undertaking to make 69 the RM2 million payment) confirmed that the Directors’ Resolution did not mention about RM2 million to be paid to Dazzling Symphony. DW6 also readily agreed with the Plaintiff’s counsel that there was no consultancy or agency agreement executed by the Plaintiff. Be that as it may DW6 denied that he masked the RM2 million payment made to the Dazzling Symphony as agreed agency fee. : Bundle A, 53. : Page 54. : Yes? : Have you seen this document prior to today? : Yes, I must have. : 54, is your signature, am I right on the left hand side? : Left hand side, yes. : And it’s date 23.05.2005? : Yes. : Correct? : Yes. 70 : And from page 55 to 56 is a member’s resolution of Bluefire Development Sdn Bhd? : Yes. : Yes. Can I confirm that that is your signature at page 56, Mr Tan? : Yes. : Mr Tan, considering that your signature appears on both resolutions, I’m going to suggest to you that nowhere in either of these resolutions that had authorized Bluefire Development Sdn Bhd to make a payment of RM2 million to Dazzling Symphony Sdn Bhd. do you agree with me? : Yes. ... Before that, did Bluefire Development appoint an agent, sorry, a consultant? No. Did Bluefire Development appoint an agent of which the agent was paid a sum of RM2 million? No. That I can say (01:21:22 inaudible) So Mr Tan in light of your answer, I will suggest to you that the Defendants including yourself have masked... first on the 03.05.2005 to the letter at page 249, had masked the payment of 71 RM2 million as agreed agency fee to or in order for the sum of RM2 million to be paid out from the Plaintiff. I question the word masked. We paid RM2 million as agreed in the sale and purchase. No, my question is the word used by you is for, and this is your wording, ‘We hereby irrevocably undertake to pay you a sum of RM2 million being the agreed agency fee’. Yes, yes. Right. So my question to you, and in light of the fact that you have confirmed that Bluefire Development did not appoint any agent, I’m going to suggest to you that the Defendants and you had masked the payment of RM2 million as agreed agency fee in order for the Plaintiff to make the payment out. YA You agree or you don’t agree? I don’t agree to the word masked. We paid RM2 million. Yang Arif, as far as I know the deal comes like this, you have to pay in this manner, you pay, so we just make sure we pay. How they want to call it, consultant or whatever they want to call it, we just pay. As far as in my mind, it’s a sum of money to be paid to the vendor. You can term it consultant, can term it agent, I don’t know. [94] From the testimony of DW5 and DW6, it is apparent that both of them are not bothered how the RM2 million payment is described, be it agency fee or consultancy fee. What is of concern to them is their 72 agreement with Dazzling Symphony to pay RM2 million (which they considered as part of the purchase price of the Land) and to give effect to such agreement even though there was no lawful purpose to make such payment and there was no authorisation obtained from the Plaintiff to effect such payment. [95] Being directors of the Plaintiff they are obliged to act in good faith and in the best interest of the Plaintiff including ensuring the assets of the Plaintiff is duly and properly utilised. Considering the manner how they conduct themselves and that the Defendants are under the misguided presumption that the Plaintiff and the directors are one and the same entity, I am compelled to agree with the learned counsel for the Plaintiff that the Defendants treated the Plaintiff’s money as their money and to my mind this is the underlying factor which cause the dispute in the instant case. Below is the testimony of DW5 and DW6 – : Yang Arif, I have troubled distinguishing the Plaintiff from us because we, in essence were the Plaintiff. You know at that point in time, the three directors and I think... complete consultation. If we had decided many thing, the Plaintiff decides. There was no other relevant parties. So, yes we – : My question to you is this, Mr. Tan. The Defendants had treated, ok, had treated the Plaintiff’s money, ok, the Plaintiff’s 73 money as if it was the Defendants’ own money. Do you agree with me? : I fail to see the distinction, Yang Arif. : Mr Tan, I am going to suggest it, in light of your evasive answer which you have given, I will suggest to you that the Defendants have treated the Plaintiff money as if it is the Defendants’ or your personal money. Do you agree with me? : Please you said the Plaintiff, I don’t understand who is. You saying me? [96] DW6’s testimony that there was no consultant and agent appointed by the Plaintiff in respect of the sale and purchase of the Land contradict what he had represented (as agreed agency fee) to the Plaintiff through the letter dated 3 May 2005 and his position in Suit 200 where the RM2 million was pleaded as consultancy services. [97] The Defendants’ subpoenaed witnesses DW1 and DW2 who were the solicitors representing Plaintiff and Dazzling Symphony respectively had also confirmed, based on the SPA, the purchase price of the Land was RM5,300,000.00. Both had also testified that they were not instructed to prepare a consultancy or agency agreement by their respectively client. DW1 and DW2 testified there were not involved in the negotiation between the Plaintiff and Dazzling Symphony in 74 respect of the purchase price. As such both of them were not involved at all stages in the purchase of the Land as pleaded by the Defendants. The ‘independent’ evidence from both the former solicitors of Plaintiff and Dazzling Symphony (both DW1 and DW2 are subpoenaed witnesses, both have duly discharged their duties towards their respective client and no evidence to suggest they have interest in the outcome of this matter) to my mind is critical as it goes to show that in the first place, it was never the intention of the Plaintiff and Dazzling Symphony to enter into agency agreement or to appoint an agent at the material time. However the Defendants had falsely represented to the Plaintiff that the RM2 million was meant to be agency fee, when the Defendants knew all along that it was not true. [98] The Defendants insist that the additional RM2 million payment was a condition imposed by Dazzling Symphony for the purchase of the Land and that such amount is not to be stated in the SPA but paid directly to Dazzling Symphony. Both DW5 and DW6 testified that they agreed to the condition imposed as they want to purchase the Land. Based on the evidence adduced, it is obvious the Defendants’ desire to purchase the Land was driven by the potential benefit that may result from the implementation of the Development Order approved by DBKL for the construction of a 5 storey apartment with basement parking lots. 75 Since the Defendants’ pleaded case is that the RM2 million was a condition imposed by Dazzling Symphony and as such it form part of the transaction relating to the sale and purchase of the Land, the burden is on the Defendants to prove the same. However there was no cogent evidence adduced by the Defendants to that effect. Interestingly Dazzling Symphony, the registered proprietor of the Land and the vendor, was not called to testify. [99] A representative from Dazzling Symphony could throw light on the issue as to the RM2 million payment which was alleged by the Defendant to have been imposed by Dazzling Symphony as a condition on the sale and purchase of the Land. It is obvious that being the vendor of the Land and a party to the SPA Dazzling Symphony’s testimony would be valuable to assist this court in determining the issues, in particular the nature of the RM2 million payment. Failure by the Defendants to call representative from Dazzling Symphony to testify despite the invaluable and significance of their evidence compel this court to presume that the evidence of Dazzling Symphony, had they be called to testify, would not be favourable to the Defendants. Under the circumstances adverse inference under s. 114 (g) of the Evidence Act 1950 ought to be drawn against the Defendants. 76 [100] The only witness who may be considered to be closest to Dazzling Symphony is DW2 the solicitor who acted for Dazzling Symphony in relation to the sale and purchase of the Land. However DW2’s testimonial evidence is of no assistance to the Defendants as DW2 testified that he was not involved in the negotiation between the Plaintiff and Dazzling Symphony and that he only acted on the instruction he received from his client. [101] The Defendants rely heavily on an email dated 28 February 2005 (pages 29 - 30 Common Bundle of Documents B) sent by Messrs Steven Tai to the 3rd Defendant to prove that Dazzling Symphony wanted to secure the RM2 million even before signing the agreement. Attached to the email is a document titled ‘Proposed terms and conditions for the acquisition of all that parcel of land held under Lot 14, Seksyen 88, Lorong Enau, Kuala Lumpur (“said Land”) (SUBJECT TO CONTRACT)’. It is the contention of both DW5 and DW6 that paragraph B clearly stated that the RM2 million was to be paid by the Plaintiff to Dazzling Symphony as consultancy fee. 77 [102] DW1 had testified that the proposed terms and conditions which he attached to his email is merely a proposal. And as it turned out no instruction were given to him by the Plaintiff to draft a consultancy agreement. DW2 had also testified he was not instructed by Dazzling Symphony to prepare a consultancy agreement. From the evidence of DW1 and DW2 it can be reasonably inferred that there were no discussion carried out between the Plaintiff and Dazzling Symphony about agency or consultancy agreement to give effect to paragraph B of the proposed terms and conditions. [103] This is simply in contradiction with what is anticipated in paragraph B because the said paragraph clearly anticipated an agreement to be executed for the appointment of a consultant simultaneously with the execution of the SPA. Evidence adduced through out the trial has established there were no consultancy or agency agreement executed by the Plaintiff. My understanding of paragraph B is, even if such agreement were executed, the RM2 million which is the purported consultancy fees, was meant to be paid for consultancy services rendered to the Plaintiff or to Dazzling Symphony but not to Dazzling Symphony. 78 [104] At this juncture it is pertinent to note that even though the Defendants’ pleaded case in Suit 200 was that the RM2 million was paid as consultancy fees, the answers to the Interrogatories filed by Defendants could not provide details in relation to the consultant appointed, the scope of work of the consultant and the detail breakdown of the RM2 million fees (pages 251 – 266 Common Bundle of Document A). [105] Therefore the Defendants contention that paragraph B of the ‘Proposed terms and conditions for the acquisition of all that parcel of land held under Lot 14, Seksyen 88, Lorong Enau, Kuala Lumpur (“said Land”) (SUBJECT TO CONTRACT) is the basis for the payment of consultancy fees to Dazzling Symphony is simply untenable and devoid of merits. [106] Both DW5 and DW6 also argued the Plaintiff’s letter dated 3 May 2005 issued to Dazzling Symphony’s solicitor and letter dated 9 May 2005 to the Plaintiff’s solicitor is a clear indication that Dazzling Symphony wanted to secure the RM2 million payment even before the signing of the SPA. DW6’s letter dated 3 May 2005 clearly shows DW6 had given, on behalf of the Plaintiff, an irrevocable undertaking to pay RM2 million, which he described as agreed agency fee, to Dazzling 79 Symphony’s solicitor that is Messrs L.H. Chua. However perusal of the documents relied upon by both DW5 and DW6 does not support their proposition. [107] It is pertinent to note nothing was mentioned in the said letter that the RM2 million was a result of the understanding/agreement reached between the Plaintiff and Dazzling Symphony for the sale and purchase of the Land. One would have thought that such agreement would be specifically stated in the Plaintiff’s letter to Dazzling Symphony’s solicitor in order to place on record the verbal agreement between the Plaintiff and the vendor/owner of the Land which is Dazzling Symphony. This is especially so when DW5 and DW6 testified they had attended a meeting sometime in late 2004 and early 2005 with the representatives of Dazzling Symphony regarding the Land and that it was at the said meeting that Dazzling Symphony requested for the RM2 million to be paid in cash. [108] Likewise, DW6’s letter dated 9 May 2005 to the Plaintiff’s solicitor made no mention whatsoever that it was Dazzling Symphony which requested for the RM2 million to be paid before the execution of the SPA as alleged by DW5 and DW6. Nothing in the said letter can be possibly construed Dazzling Symphony had requested the same. 80 [109] Contemporaneous documentary evidence shows the RM2 million was paid out of the Plaintiff via RHB Bank cheque dated 9 May 2005. The said payment was made way before the Directors’ Resolutions was passed on 24 May 2005 (signed by the 1st and 3rd Defendants) authorising the Plaintiff to purchase the Land at RM5,300,000.00 million only. [110] If indeed the RM2 million is intended to be agency fee as DW6 had stated in his letter dated 3 May 2005, it is only expected, and reasonably so, for DW6 to push the matter to be brought to the attention of the Plaintiff to be tabled/discussed together with the proposed resolution to purchase the Land. After all it involves a hefty sum of money. More importantly DW6 had given an irrevocable undertaking on behalf of the Plaintiff to pay RM2 million to Messrs L.H. Chua about 2 weeks earlier and he in actual fact caused such payment to be made to the Plaintiff’s solicitor some 3 weeks prior to the passing of the Directors’ Resolution. Under such situation a resolution to rectify the RM2 million payment made out of the Plaintiff ought to be high on the agenda of the board of directors of the Plaintiff. But the said payment was never mentioned at all in the Resolutions passed. No evidence was adduced to indicate that the payment was discussed at the board level. The facts is obvious – the Defendants were not bothered and worried that RM2 81 million had already been paid to the Plaintiff’s solicitor without the appropriate mandate to do so by the Plaintiff. [111] Instead DW5 contends paragraph 2 of the Resolutions authorised the payment of RM2 million to be made out of the Plaintiff as part of the transaction relating to the purchase of the Land. For ease of reference the said paragraph 2 is reproduced below –

THAT TAN CHOR ENG (NRIC NO. 330723-01-5129/3237619) be and is hereby authorized to execute the Sale and Purchase Agreement and all relevant documents relating to the above transaction for and on behalf of the Company AND THAT he is also hereby authorized to do and sign for and on behalf of the Company all acts and deeds necessary or expedient to carry the above transaction into effect with full power to assent to any conditions, modifications and variations as may be required and in the best interest of the Company. [112] Admittedly, the said paragraph authorised DW6 to do the following on behalf of the Plaintiff –

execute the SPA and all relevant documents relating to the sale and purchase transaction; and

to do all acts and sign deeds necessary or expedient to carry the sale and purchase transaction into effect with full power 82 to assent to any conditions, modifications and variations as may be required and in the best interest of the Plaintiff. [113] Having considered the Directors’ Resolutions as a whole I am of the view paragraph 2 does not authorised the Defendants, in particular DW6 to cause the Plaintiff to pay RM2 million to Dazzling Symphony. It must be borne in mind the subject matter or scope of the Directors’ Resolution is the purchase of the Land (at RM5,300,000.00 only by the Plaintiff) and other matters relating thereto. For purpose of implementing the mandate given by the Plaintiff, DW6 who was a director of the Plaintiff at the material time was authorised to do the necessary or expedient acts and deeds in respect of the sale and purchase of the Land. I am of the view the said paragraph cannot be construed to have given authority to DW6 to commit the Plaintiff to a payment of an additional RM2 million when the financial commitment approved by the Plaintiff in respect of the SPA is only the purchase price of RM5,300,000.00 and other related payments that would be reasonably incurred in a sale and purchase transaction a land. To my mind, taking into account the facts, a financial liability of a substantial amount in the sum of RM2 million cannot be possibly and reasonably construed as ‘all acts and deeds necessary or expedient’ to give effect to the transaction in relation to the sale and purchase of the Land. 83 Furthermore it is certainly not in the best interest of the Plaintiff (which is the underlying factor that DW6 must take into account in exercising the authority given in paragraph 2 by the Plaintiff) to concede to pay such a huge amount to a third party without going through the proper procedure. [114] Taking into consideration the evidence adduced, it is my finding that the purchase price of the Land was RM5,300,000.00. It is also my finding of fact that the RM2 million payment made out of the Plaintiff was ultra vires the mandate given by the Plaintiff through the Directors’ Resolution. It defies logic for the Defendants to construe paragraph 2 as authorising them to cause payment of RM2 million to Dazzling Symphony for the simple reason that the RM2 million had already been paid out of the Plaintiff’s account when the Directors’ Resolution was passed by the Board on 23 May 2005. In other words what the Defendants are saying is that paragraph 2 of the said resolution takes effect retrospectively! It is simply beyond comprehension to construe paragraph 2 as having such effect because the matter relating to the RM2 million was never brought to the attention of the Plaintiff in the first place, what more to give the said paragraph a retrospective effect to commit the Plaintiff to pay the RM2 million. This compelled me to 84 conclude Defendants’ reliance on paragraph 2 of the Directors’ Resolution is an afterthought. [115] S. 132 of the Companies Act 1965 impose a statutory obligation on a director of a company to exercise, at all times, his power for a proper purpose and in good faith in the best interest of the company. In my considered opinion the Defendants breached their fiduciary duty towards the Plaintiff when they agreed to accommodate Dazzling Symphony’s request, at the expense of the Plaintiff, for the RM2 million payment without due justification and without it being duly authorised, recorded and accounted for. [116] It is the Defendants pleaded case that as directors and members of the Plaintiff at the material time, the Defendants were the brain and directing mind and will of the Plaintiff and as such no issue that the RM2 million was made without the Plaintiff’s authority. Furthermore, as the Defendants were the directors and members of the Plaintiff, the Plaintiff knew and aware of the nature of the transaction of the RM2 million payment. In other words, the Defendants and the Plaintiff is one entity. This point is discussed at paragraph 95 above. 85 [117] Such contention is fundamentally flawed. It is an elementary principle of company law that a company is a separate and distinct personality from its shareholders (Solomon v A. Solomon & Co Ltd [1897] AC (HL); ATA Management Consultant Sdn Bhd v Makmuran Sdn Bhd [2004] 3 CLJ 53 (CA) ). Therefore a company can own property in its own name but the property of the company is its own and not that of its members and directors. The directors owe a fiduciary duty to the Plaintiff to act in the best interest of the Plaintiff. The Defendants’ silence in respect of the RM2 million which had already been transferred out of the Plaintiff’s coffers by 23 May 2005 when the Directors’ Resolution and Members’ Resolution was passed led to the irresistible conclusion that the failure to bring it to the Plaintiff’s attention for rectification is intentional and meant to deceive the Plaintiff into making the payment in disguise of agency fees and later as consultancy fees. [118] In an attempt to justify the RM2 million paid to Dazzling Symphony the Defendants called DW3 and DW4 to testify as experts in respect of the value of the Land at the material time. Valuation report marked as exhibit D1 and D2 were prepared and tendered by DW3 and DW4 respectively. Both DW3 and DW4 were cross-examined by learned counsel for the Plaintiff on the method adopted by them in determining the market value of the Land. DW3 opined the market 86 value of the Land with the benefit of vacant possession as at 12 June 2014 (date of inspection and valuation) was RM39,920,000.00. Whilst DW4 who was commissioned by the 2nd Defendant to value the Land in 2005 valued the Land at RM8,000,000.00 as at 4 April 2005 (date of inspection and valuation). [119] Learned counsel for the Plaintiff urged this court to disregard the evidence given by DW3 and DW4. The reason cited by the Plaintiff against DW3’s report is as follows –

the report prepared by DW3 is in regards to the value of the

the said report was prepared for litigation purposes;

the four comparables used by DW3 was inaccurate as they differ in size, transacted date and location;

DW3 did not use the ‘Residual Method’ which DW4 said is the normal method of valuing development land; and

The location plan at page 17 of DW3’s report is not complete. [120] While the reasons cited by the Plaintiff to disregard DW4’s evidence – 87

the comparables selected by DW4 were not on the same area/locality, were of different types and of different sizes as compared to the Land and the transacted date were different;

the first three comparables were all high-end completed developments;

the remaining three were incorrectly selected as they were dissimilar to the Land; and

DW4 was unable to demonstrate the calculations he adopted in determining the value of the Land. [121] It is pertinent to note that the evidence adduced by DW3 and DW4 are expert evidence under s. 45 of the Evidence Act 1950. Learned counsel for the Plaintiff did not at any time challenged the competency of both DW3 and DW4 as experts to testify in respect of the value of the Land. What is being challenged was the method of valuation adopted by DW4 and DW5 in arriving at the market value of the Land. The challenge mounted against DW4 and DW5 was done by cross-examining both the witnesses. [122] With respect, I am of the view learned counsel for the Plaintiff is not in a position to do so. Based on authorities, an expert report may 88 be negated by commissioning another expert to prepare a report of such nature as the one tendered by DW3 and DW4 or calling another expert witness who is able to give an opposing opinion on the disputed matter (Jaya bin Asahak v. Munggau ak Lawai & Ors [2010] 1 LNS 886, [2010] 6 MLJ 224; Sun Ho Sdn Bhd v Alliance Bank Malaysia Bhd & Anor [2008] 6 MLJ 457). This the Plaintiff did not do. In the absence of an expert opinion to seriously challenge the reports prepared by DW3 and DW4, the valuation report exhibits D1 and D2 is admissible for this court consideration. [123] In so far as the market value of the Land at the material time is concerned the valuation report by DW4 shows the market value as at 4 April 2005 was RM8 million. This means the difference between the price paid by the Plaintiff to acquire the Land and the market value as determined by DW4 was RM700,000.00. Assuming the RM2 million paid to Dazzling Symphony was part of the purchase price of the Land and looking at it from the perspective of the market value and the price the Plaintiff paid for the Land, it may be said the Plaintiff had a good bargain. [124] However as stated above there is no contemporaneous documentary evidence to show that the RM2 million was part of the 89 purchase price of the Land. There is no cogent oral evidence adduced by the Defendants to substantiate the RM2 million was part and parcel of RM7,300,000.00 being the purchase price of the Land. If indeed the purchase of the Land is an advantageous transaction to the Plaintiff, why was it not brought to the attention of the Plaintiff when the Directors’ Resolution was passed on 23 May 2005 approving the purchase of the Land. Why must it be termed as agency fees and/or consultancy fees when it is intended to be part of the purchase price. These are questions without reasonable explanation and raises serious doubt on the Defendants’ defence. [125] In fact not only the 2nd and 3rd Defendants are not able to provide reasonable explanation, the Witness Statement they have tendered as their evidence in chief are strikingly identical. This can be seen from the comparative table prepared by learned counsel for the Plaintiff at pages 47 – 58 of the Plaintiff’s Written Submission dated 8 February 2017. This court is mindful that both DW5 and DW6 were not examined on this particular issue. However this court could not just ignore the strikingly identical answers, so much so that it can only lead to one conclusion – that there must have been some kind of deliberation or conferment between DW5 and DW6 when preparing the answers. This certainly 90 raises serious doubts as to the truthfulness of their evidence in chief and the weight attached to their testimonies. [126] The Defendants pleads that the Plaintiff has suffered no damages but in fact obtained a substantial gain in that the value of the land now exceeded the purchase price of RM7,300,000.00. The evidence led by DW3 shows the value of the Land as at 12 June 2014 is RM39,920,000.00. In other words the Defendants are saying the value of the Land has increased tremendously by leaps and bounds since 2005 when the purchase made by the Plaintiff was for a mere RM7,300,000.00 in comparison to the value of the Land in 2014 and therefore the Plaintiff’s complain has no basis and unfounded. [127] In this respect I am of the view it is not open to the Defendants to rely on the value of the Land some 11 years after their fraudulent act to absolve them from the liability of such act. This certainly cannot be a case of ‘the end justifies the means’. Although the value of the Land may have increased over the years and it may benefit the Plaintiff now, evidence has been established that at the material time the Plaintiff was not obliged at all to make the RM2 million payment as it was not part and parcel of the purchase price. The RM2 million which, for all intent 91 and purposes, was the assets of the Plaintiff was unlawfully taken out from the Plaintiff’s account without the Plaintiff’s consent and mandate. [128] As a result of that the Plaintiff was deprived of the RM2 million which can be put to good use for the Plaintiff’s interest. This is all the more important as at the material time the Plaintiff was in desperate need of fund to complete the SPA within 3 months from the date of the SPA. When asked in cross-examination to explain the loss suffered by the Plaintiff in respect of the RM2 million paid out of the Plaintiff, PW1 testified – Ok. To Plaintiff, after the two million has been paid out, the Plaintiff has left no money at that material time. And then Plaintiff could not complete the Sales and Purchase Agreement on its own. The proof that Plaintiff got no money can be shown in the audited account where the bank only left about 4,000 over. Let’s say the two million doesn’t pay out from the Plaintiff’s bank account at least have two million over. So this is a loss to the Plaintiff. [129] PW1 rejected the Defendants’ contention that even if the RM2 million was not taken out from the Plaintiff, the Plaintiff would still have to forked out RM3.3 million to complete the SPA. PW1 testimony is as follows – 92 The initial capital of the Plaintiff was 4 million. After deducting the 10% deposit and additional late payment charges as stated in the SPA is approximately to 600,000, ok. Then have this 2 million did not paid out from the Plaintiff, then the Plaintiff will still have 3.4 million in the bank. Ok. So the Plaintiff only need to secure financing of 1.37 million which is only 26% of the SPA price of 5.3 million. So it is significantly easier for the Plaintiff to obtain the 1.37 million than 4.77 million which is 90% of the balance purchase price in the SPA. [130] The Defendants’ contention that they did not gain from the payment of the RM2 million is irrelevant because their fraudulent conduct has caused the Plaintiff to suffer losses as demonstrated by PW1’s evidence. Conclusion [131] Having considered the evidence in totality and based on the aforesaid reasons I am of the considered opinion that the Plaintiff has established, on balance of probabilities, its case and therefore the Plaintiff is entitle to the declaratory relief it sought in paragraph 32 of the Re-Amended Statement of Claim. 93 B. Appeal against dismissal of Enclosure 88 (Mahkamah Rayuan Rayuan Sivil No. W-02(IM)(NCC)-439-03/2017) Background [132] While the trial of this action was in progress the Defendants filed Enclosure 88 for leave be granted to file an ex parte application for a committal order to jail and/or fine against the Plaintiff and/or director of the Plaintiff Lee Yen Mei/PW1. The ex parte application is supported by a statement setting out the name and description of the applicant who is the 2nd Defendant/DW5, the name, description and address of the person to be committed who is Lee Yen Mei/PW1 and the grounds on which the committal is sought. However there is no affidavit filed by the said applicant verifying the facts on which the application is sought. [133] The background leading to the ex parte application may be summarized as follows –

The Defendants filed a discovery application (Discovery Application) against the Plaintiff for the Plaintiff to submit copies of various documents including all records or documents in relation - 94

to the sale and purchase transaction of the Land between Plaintiff and Dazzling Symphony;

(ii) to the Plaintiff’s file in respect of the purchase of the Land and/or issues relating to the Land;

(iii) correspondences between Messrs Steven Tai and Plaintiff, between Plaintiff and/or Messrs Steven Tai and Messrs L.H. Chua; and

(iv) valuation reports in respect of the Land and feasibility study report conducted on the sale and purchase transaction of the Land.

In reply to the Defendants’ Discovery Application, the Plaintiff through PW1 filed an affidavit in reply where PW1 deposed that the Plaintiff’s solicitor has obliged the Defendant’s request and furnished the relevant documents via a letters dated 6 June 2016 and 10 June 2016 issued by its solicitor Messrs. Cheang & Ariff. The documents furnished by the Plaintiff to the Defendants are as follows –

Plaintiff’s letters dated 3 May 2005 to Messrs L.H. Chua and 9 May 2005 to Messrs Steven Tai; and 95

(ii) Form 49 of the Plaintiff of various dates, minutes of the AGM and EGM of the Plaintiff in 2005, the SPA dated 24 May 2005 executed between Plaintiff and Dazzling Symphony, Directors’ Resolution and Members’ Resolution both dated 23 May 2005 and the audited accounts of the Plaintiff for the year 2005 – 2013. Other than the above documents, PW1 deposed the Plaintiff has no knowledge of the documents and/or records sought by the Defendants and in any event, the documents are not in the possession of the Plaintiff.

The Defendants had also filed a discovery application against Messrs Steven Tai, the Plaintiff’s solicitor seeking for similar documents. Messrs Steven Tai through DW1 furnished a documents which was compiled and initially marked as Common Bundle of Document C (Part C). As stated above, the Plaintiff’s solicitor had requested for all the documents in the said bundle to be placed under Part C 96 in view of the fact that the Plaintiff are not aware of the documents and they have yet to sight the documents.

The Common Bundle of Document C (Part C) were tendered through DW1. … these documents in Bundle C are the documents that you had actually forwarded to us pursuant to a discovery order dated 21.07.2016. And we have put all the documents that you have forwarded here into Bundle C. so my first question to you Dato’ is, have you brought your original conveyancing file? Yes I did [134] Learned counsels for both parties clarified the reason for those documents being categorized under Part C – … these documents, alright was not in the Plaintiff’s possession. They actually gotten in pursuant to the discovery application against Steven Wong Tai. These documents were not in our possession. So we would not be considering that they are in Bahagian B but rather they are in Bahagian C. For in terms of purpose of marking, the original documents are here. I suppose the Defendants’ counsel can convert them to B over the course of through their witnesses. 97 …as those documents came from third party and we haven’t had sight of it until of cpurse this particular discovery application and the order so given by this court whereupon the subpoena witness have actually produced them. We have actually intended for this ti be in C rather than B. Now if My Lady were to recall and I think from Ms Lee’s evidence was that those or the conveyancing documents were not in the Plaintiff’s possession. Therefore the Plaintiff actually has not sighted this prior to these particular proceedings and of course after only having been made available by the subpoenaed witness that we have sighted it. So these documents are in Bundle C or in Part C [135] It was then agreed by counsels for the original documents to be handed to the Plaintiff’s counsel for them to have sight of the documents during the break. Subsequently, having sighted the documents in Bundle C, learned counsel for the Plaintiff agreed for the documents in Bundle C be categorized under Part B. [136] In the course of giving evidence, DW1 testified on 31 October 2016 that Messrs. Steven Tai had sent a letter dated 25 October 2005 to the Plaintiff requesting for quit rent and assessment payment in respect of the Land in the amount of RM8,633.63 for their onward transmission to Dazzling Symphony’s solicitor. DW1 confirmed that the Plaintiff had 98 replied via letter dated 6 December 2005, signed by one Julia Chan Secretary to Mr. Ch’ng Kong San, enclosing a cheque for such amount. [137] The two letters were not produced by the Plaintiff despite requested by the Defendants and even after responding to the Defendants’ Discovery Application. It is the Defendants’ position that the two letters were in the possession of the Plaintiff at all material time and were purposely withheld by the Plaintiff. [138] The Defendants alleged that PW1 had given conflicting testimony to her sworn statement in the Plaintiff’s Affidavit in Reply for the Defendants’ Discovery Application whereby she has instead admitted to the fact that there were correspondences between the Plaintiff and the Plaintiff’s former solicitor Messrs Steven Tai. [139] It is the Defendants contention that the Plaintiff’s failure to disclose the two letters which was in the Plaintiff’s possession could only have been intended to conceal the truth, disrespect and not abiding the administrative authority of law by this court, disturb and/or defeat and/or prevent the administrative of justice and confuse and deceive this court. 99 The law [140] Order 52 rule 3 Rules of Court 2012 (RoC 2012) provides –

Application to Court (O. 52 r. 3)

No application to a Court for an order of committal against any person may be made unless leave to make such an application has been granted in accordance with this rule.

An application for such leave must be made ex parte to the Court by a notice of application supported by a statement setting out the name and description of the applicant, the name, description and address of the person sought to be committed and the grounds on which his committal is sought, and by an affidavit, to be filed before the application is made, verifying the facts relied on. [141] It is settled law that for leave to be granted to file committal proceedings, the threshold to be satisfied is the prima facie test (Wee Choo Keong v MBf Holdings Bhd & Anor And Another Appeal [1993] 3 CLJ 201, [1993] 2 MLJ 217; Dato’ Oon Ah Baa & Ors v Eagle & Pagoda Brand Teck Aun Medical Factory Sdn Bhd & Ors [2003] 7 CLJ 81; Foo Khoon Long v Foo Khoon Wong [2009] 1 LNS 850; [2009] 9 MLJ 441). [142] As to what constitute prima facie, the learned Judge in Dewan Perniagaan Melayu, Malaysia, Negeri Johor v Menteri Besar Johor & 100 Ors [2016] 1 CLJ 52 adopted the principles laid out in Tan Kang Ho v. Mao Sheng Marketing (M) Sdn Bhd & Ors [2015] 4 CLJ 113 - [23] … A decidedly more detailed endeavour to define the scope of leave in this context can be found in a recent case of Tan Kang Ho v. Mao Sheng Marketing (M) Sdn Bhd & Ors [2015] 4 CLJ 113, where the High Court, after reviewing the relevant legal position and noting the absence of the meaning of "prima facie " case and on the standard of proof required for leave to commence committal proceedings, stated the following principles concerning the leave requirement:

the purpose of the leave requirement is to ensure that there is no abuse of the committal procedure. The leave requirement acts as a sieve to ensure that there is a prima facie basis for the committal application;

the purpose of the leave requirement is to prevent abuses of the committal procedure. Such a purpose may be fulfilled without the need for such a high standard of proof beyond all reasonable doubt;

a prima facie case of contempt of court is satisfied if:

the statement and verifying affidavit show that the respondent in question has committed a specie of contempt of court, for example, the respondent has breached an injunction or court order; and

(ii) the contents of the verifying affidavit should not be inherently improbable; and

the court should keep an open mind and not make any finding of fact as an application for leave to commence committal proceedings is made on an ex parte basis (without hearing the 101 respondent) and the respondent may still raise a reasonable doubt at the end of the committal proceedings. [143] The significance of the statement under Order 52 rule 3(2) statement (Order 52 Statement) was emphasized in Court of Appeal case Tan Sri G Darshan Singh v Tetuan Azam Lim & Peng [2013] 1 CLJ 1060 – It must also be borne in mind that the application for leave to commence committal proceedings is made ex parte. To enable the court to make a fair and just decision, it must necessarily have all the relevant facts before it. In an ex parte application, it means the applicant must set out the facts fairly, including the facts that are likely to be raised by the proposed alleged contemnor in objecting to the application if it were an inter parte application. If any fact is likely disputed by the other party, the applicant must say so and give his reasons why such dispute is not sustainable, or is irrelevant or immaterial. There is no reason not to be able to do so for after all only the applicant has the opportunity to be heard upon it in the ex parte application. It certainly does not mean the applicant is entitled to merely state the facts favouring his application and the court must rely on that alone. Otherwise the leave procedure would cease to be a safeguard and instead easily become a tool exploited for oppression. (emphasis added) [144] It is abundantly clear from the cases cited above that the Order 52 Statement must not only contain the relevant facts relied by the applicant as the basis for seeking leave for committal but also facts that 102 are likely to be raised by the proposed alleged contemnor in objecting to the application. This is due to the fact that leave application is on ex parte basis which may be subject to abuse. The duty to provide full and frank disclosure on the applicant is also intended to be a procedural safeguard before commencement of a committal proceedings as it involves the fundamental liberty of a person. Findings of the court [145] In the instant case, in paragraph 13 of the Order 52 Statement dated 23 December 2016 (Enclosure 89) the Defendants alleged during cross-examination of PW1, PW1 has given conflicting testimony as opposed to the affidavit deposed by PW1 in reply to the Defendants’ Discovery Application. It would appear that the conflicting testimony refers to the purported admission by PW1 that there were correspondences between the Plaintiff and its former solicitor Messrs Steven Tai as opposed to PW1’s affidavit (in reply to the Defendants’ Discovery Application) where she had deposed that the said documents were not in the Plaintiff’s possession. [146] Paragraph 9 of the Order 52 Statement has identified and reproduced the relevant paragraphs of PW1’s affidavit Enclosure 26. 103 However no where in the Order 52 Statement which relate to PW1’s testimonial evidence during cross-examination which is alleged to be conflicting with PW1’s affidavit Enclosure 26. No information was given at all as to the particulars of PW1’s oral evidence during cross-examination which purportedly contradicts her deposition that the documents requested by the Defendants were not in the possession of the Plaintiff save and except the two letter dated 3 May 2005 and 9 May 2005. [147] Sufficient particularity of all the relevant facts must be made known to the person alleged to be in contempt in order to enable the said person to meet the charge (Sykt M Mohamed v Mahindapal Singh Jaginder Singh & Ors [1991] 1 CLJ 582; [1991] 4 CLJ (Rep) 16; [1991] 2 MLJ 112. Besides that, there were also no indication of facts that is likely to be raised by the proposed alleged contemnor in objecting the leave application as if it were an inter parte application. In the instant case the facts provided by the 2nd Defendant/applicant in the Order 52 Statement solely relate to the facts in favour of his ex parte application. [148] As stated above no affidavit verifying the Order 52 Statement was filed by the Defendants as required under Order 52 rule 3(2) RoC

It is noted together with the ex parte application for leave and the 104 Order 52 Statement, the Defendants had also filed an affidavit, that is, Defendants’ Affidavit in Support affirmed on 23 December 2016 (Enclosure 90) to support the ex parte application for leave. In the said affidavit the Defendants had attached, in paragraph 15, a copy of the relevant parts of the Notes of Proceedings containing the transcript of PW1 on 15 August 2016. Further, in paragraph 22 of the Defendants’ affidavit the Defendants alleged that PW1 has misled this court when PW1 said in cross-examination there was no police report lodged when in fact there was actually a police report lodged by the Plaintiff. The issue about PW1 misleading this court in relation to the existence of a police report lodged by the Plaintiff was never cited in the Order 52 Statement as a basis for the Defendants’ application for leave for committal. [149] The issue here is whether the Defendants’ Affidavit In Support (Enclosure 90) of the ex parte application can be considered as an affidavit verifying the Order 52 Statement (Enclosure 89)?. Taking into account that committal proceedings are criminal in nature as it involves the liberty of the alleged contemnor (Tan Sri Dato’ (Dr) Rozali Ismail & Ors v Lim Pang Cheong & Ors [2012] 2 CLJ 849) and that the law of contempt is primarily aim at safeguarding the due administration of justice, I am of the considered opinion strict compliance with the 105 statutory provisions relating to contempt is mandatory. Failure by the applicant to file an affidavit verifying (as oppose to merely supporting) the statement made in the Order 52 Statement is fatal and incurable. [150] Assuming for a moment the Defendants’ Affidavit In Support (Enclosure 89) of the ex parte application is accepted, the said affidavit is defective as it contains matters and facts which were not particularized in the Order 52 Statement, as stated in paragraph 147 above. In this respect reference is made to Tan Sri Dato’ (Dr) Rozali Ismail & Ors v Lim Pang Cheong & Ors (supra) where it was stated by the Federal Court – We wish to state in clear term that the alleged act of contempt must be adequately described and particularised in detail in the statement itself. The accompanying affidavit is only to verify the facts relied in that statement. It cannot add facts to it. Any deficiency in the statement cannot be supplemented or cured by any further affidavit at a later time. The alleged contemnor must at once be given full knowledge of what charge he is facing so as to enable him to meet the charge. This must be done within the four walls of the statement itself. The same approach was taken by the Supreme Court in Arthur Lee Meng Kwang case, supra. (See also Sykt M Mohamed v. Mahindapal Singh Joginder Singh & Ors [1991] 1 CLJ 582; [1991] 4 CLJ (Rep) 16.) 106 Conclusion [151] Having perused the Order 52 Statement in its entirety and guided by the relevant principles stated above I am of the view the Defendants failed to satisfy the requirement of sufficient particularity. On the facts as stated in the Order 52 Statement, the Defendants have failed to prove a prima facie case of contempt on the part of PW1 and/or the Plaintiff. I accordingly dismissed the Defendants’ ex parte application Enclosure 88 for leave to commence committal proceedings. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 21 FEBRUARY 2018 Counsel: Plaintiff : Brian Foong, Andrew Fernandez and Anson Chee of Messrs Cheang & Ariff Defendant : Chris Lim Su Heng, Nur Khidmah Bt Huzaisham, Ng