Concept Theatre Sdn. Bhd. v Tam Quek Sin (JA-22NCC-7-01/2025)

TAM QUEK SIN

TAN LAY HOCK

LEE BAK TEK

SOH LIP HSIANG

TAN SOON KWANG

TAN AH LEK

ENG SIAH WENG

NG BOON KIANG

TAN GEK KIM (NO K/P: 690521-01-5904) …DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT (Enclosures 15, 17, 19, 22, 26 & 28)

Before this Court are six (6) interlocutory applications filed by the Defendants, either made individually or jointly, to strike out the Plaintiff’s suit under O.18, r.19(1)(a), (b) or (d) of the Rules of Court 2012.

The said applications are given the following enclosure numbers:-

Enclosure 15 (by the 1st Defendant);

Enclosure 17 (by the 3rd Defendant)

Enclosure 19 (by the 5th and 6th Defendants)

Enclosure 22 (by the 7th, 8th and 9th Defendants)

Enclosure 26 (by the 4th Defendant)

Enclosure 28 (by the 2nd Defendant)

After having perused through the cause papers and the affidavits filed, and after having read and heard the submissions by all parties, this court dismissed all the Defendants’ applications with costs.

The following is the single grounds of judgment for the said decision. Salient facts

The Plaintiff’s claim against the Defendants in the present action is predicated on fraudulent trading pursuant to Section 540 of the Companies Act 2016.

The Plaintiff contends that they are a creditor to a company known as Edutainment Dome Sdn Bhd (“EDome”) which has been wound up through an order of the court dated 20.11.2016.

The Defendants were at all material times the directors of EDome.

On or about March 2017, the Defendants commenced the Johor Bahru High Court Suit No. JA-22NCvC-41-03/2017 (“2017 Suit”) against one Chong Voon Cher as 1st Defendant and the Plaintiff as 2nd Defendant.

In response, the Plaintiff filed a Counterclaim against the Defendants in the 2017 Suit which was dismissed after trial by the Johor Bahru High Court on 31.7.2019.

The Defendants in their applications herein contend that the Plaintiff’s claims for fraud, fraudulent trading and conspiracy to defraud in the present suit are a repackaged allegation derived from the same facts and issues ventilated and traversed in the 2017 Suit.

The Plaintiff on the other hand contends the opposite.

The Defendants in their respective striking out applications raise similar issue, which are as follows:-

Whether the Plaintiff is estopped from filing the presents action against the Defendants under the doctrine of Res Judicata

Whether the Plaintiff’s claim herein is time barred under the Limitation Act

Whether the Plaintiff’s claim herein should be strike out for lack of particulars. Analysis and decision

Firstly on res judicata, the Defendants collectively contend that the 2017 Suit contain facts and issues that are similar to the present action. Since the counter claim by the Plaintiff in the 2017 Suit have been already adjudged, the Plaintiff must be estopped from revisiting those facts and issues.

The Defendants however were quick to admit that the Plaintiff in the present action prays for reliefs and pleaded causes of action (fraudulent trading and conspiracy) which were not previously prayed for or pleaded in the 2017 Suit.

Upon perusal of the Plaintiff’s Statement of Defence and Counterclaim dated 11.05.2017 (Plaintiff was the 2nd Defendant then) and the final Judgment after trial by the Johor Bahru High Court dated 31.07.2019 in the 2017 Suit (exhibited as “TQS-1” in the 1st Defendant’s Affidavit of Support), this Court observes that the 2017 Suit primarily concerns with the return of goods belonging to Plaintiff. However, the present suit on the other hand concerns with Plaintiff seeking a declaration that the Defendants have committed fraudulent trading within the meaning of Section 540 CA 2016 and damages resulting from it.

In simple term res judicata means a matter adjudged. Once adjudged, the matter becomes res thus cannot be relitigated. The matter adjudged must be accepted as the truth between the parties. Res judicata creates an estoppel barring the parties from asking the court to re-look onto the evidence that had undergone proper judicial scrutiny. The rational is there must be finality in litigation and no one should be vexed twice with the same cause of action [Asia Commercial Finance (M) Berhad v Kawal Teliti Sdn Bhd [1995] 3 CLJ 783, FC].

Illustrations on the principles which make up the doctrine of res judicata can be referred to in the judgment of the Federal Court in Orchard Circle Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat & Ors [2021] 1 CLJ 1 where it was held that:- “The thrust of the doctrine is to prevent a party from re-litigating an issue or a defence which has already been determined (known as cause of action estoppel or issue estoppel) or which could have previously been litigated. The latter principle had been established in the case of Henderson v. Henderson 1843 3 Hare 100 (and ensured, as a matter of important public policy, the finality of judgments so as to prevent a party from being vexed twice and a waste of judicial resources. As it is not always easy to identify where one concept begins and another ends, Lord Sumption (in delivering the unanimous judgment of the Supreme Court) in the Virgin Atlantic case gave some clarification to the term with identifying the six principles which make up the doctrine, which are:

a party is prevented from bringing subsequent proceedings to challenge an outcome that has already been decided (cause of action estoppel);

(ii) if a claimant succeeds in the first action and does not appeal the outcome, he may not bring a subsequent action on the same cause of action (ie, to recover further damages);

(iii) the doctrine of merger treats a cause of action as having been extinguished once judgment has been provided and accordingly the claimant's only right is the judgment itself;

(iv) a party may not bring subsequent proceedings on an issue that has already been determined (issue estoppel);

a party may not bring subsequent proceedings which should and could have been dealt with in earlier proceedings (the 'Henderson v. Henderson ' principle);

(vi) There is a general procedural rule against abusive proceedings. It must also be shown that the earlier judgment necessarily and with precision determined the point in issues to constitute res judicata. (See Hoystead v. Taxation Commissioner [1926] AC 155; Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd & Ors [1966] 2 All ER 536 at p. 565; Tong Lee Hwa & Anor v. Lee Yoke San [1978] 1 LNS 218; [1979] 1 MLJ 24;)”

When this Court compares the aforementioned cause papers in the 2017 Suit with the present Writ and Statement of Claim, it is not difficult to say that the cause of action between both actions appear to be different or dissimilar, at least in terms of how both are pleaded.

Probing further, this Court observes that there are facts pleaded by the Plaintiff in the present action relate to events that took place subsequent to 2019. It is apparent on the other hand that the 2017 Suit was limited to events which took place between the period of 2015 and 2016. Thus, it goes without saying that the subsequent events in the present action were not the subject matter or evidence which were tried, raised or dealt with in the 2017 suit.

In other words, the set of facts giving rise to the present suit only arose or materialized subsequent to the 2017 suit. In Government of Malaysia v Lim Kit Siang; United Engineers (M) Bhd v Lim Kit Siang [1988] 2 MLJ 12 the Supreme Court (as it was then) had this to say on the meaning of cause of action:- "What then is the meaning of "a cause of action"? “A cause of action" is a statement of facts alleging that a plaintiff’s right, either at law or by statute, has, in some way or another, been adversely affected or prejudiced by the act of a defendant in an action. Lord Diplock in Letang v. Coopar [1965] 1 QB 232 at page 242 defined "a cause of action" to mean "a factual situation, the existence of which entitles one person to obtain from the court a remedy against another person". In my view the factual situation spoken of by Lord Diplock must consist of a statement alleging that, first, the respondent/plaintiff has a right either at law or by statute and that, secondly, such right has been affected or prejudiced by the appellant/defendant's act."

Section 540 of CA deals with fraudulent trading by a company. Under the said provision, the Court is empowered if circumstances allow to pierce the corporate veil and impose personal liability on any individual who knowingly operated the company’s affairs with intent to defraud creditors or for any fraudulent purposes. Thus, it is obvious here that facts do really matter.

After perusing through the cause papers and affidavits by the parties in relation to the instant striking out applications, this Court finds that the fraudulent practices as contended by the Plaintiff are heavily contended by the Defendants. The contentions are not only on law but also on facts, which this Court finds not suitable to be determined by looking at the affidavits alone.

Accordingly, this is not a plain and straight forward case for this Court to determine with certainty that the doctrine of Res Judicata is applicable and thus bar the Plaintiff from pursuing the present action against the Defendants through a proper hearing where witnesses can be examined and the whole spectrum of issue can be appreciated better by the Court.

Next on the limitation point, it is the contention of all the Defendants that the Plaintiff’s claim is time barred on the basis that any cause of action based on fraudulent trading should have accrued on 30.11.2016 when the said company was wound up. Since the present suit was only commenced on 20.01.2025 limitation has set in, so submit the Defendants.

This Court is of the view that as the subject matter of the present action concerns with matters relating to fraud, the relevant provision where limitation is concerned would be Section 29 of the Limitation Act 1953. It reads:- “(1) 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.

Section 6A shall not apply to any action to which paragraph (1)(b) applies.”

The wordings embodied in s.29 (1)(a) Limitation Act 1953 are clear to this Court that the period of limitation commences only upon the discovery by the Plaintiff of the alleged frauds committed by the Defendants.

In the present action, it is the Plaintiff’s case that they only discovered the purported fraudulent trading committed by the Defendants on 03.08.2021 upon being informed that EDome had insufficient funds to repay debts owing to the Plaintiff. The Plaintiff further alleged that from the information obtained from the police circa 2022, the fraud committed by the Defendants were all the while systemic and with full intent to defraud the Plaintiff being EDome’s creditor. In this regard, the Plaintiff refers this Court to Lai Fee & Anor v Wong Yu Vee & Ors [2023] 3 MLJ 503 where the Federal Court had held as follows: “In the context of carrying on business, the phrase ‘with intent to defraud creditors’ it is in general a proper inference that the company is carrying on business with intent to defraud the creditors of the company if the company continues to carry on business to incur debts at a time when there is to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment of those debts”

Thus, since the investigation by the police only completed in 2022, this Court finds it is against the dictate of justice and reason that the Plaintiff should be barred at this juncture from pursuing with the present action against the Defendant on limitation ground.

Further, it must be readily recognized from the pleadings that although the Defendants were all directors of EDome, the role that they played in the business affairs of EDome particularly with the Plaintiff are not necessarily of the same character. In fraudulent trading claims under s.540 CA, it is not a requirement for there to be a scheme to defraud the company’s creditors; a single act of doing business to defraud a creditor would be sufficient to trigger an action for compensation against an errant person for fraudulent trading [see: JCT Ltd v Muniandy Nadasan & Ors and another appeal (2016) 6 MLJ 635].

In addition, ‘dishonesty’ is an essential ingredient to be proved in order to establish an ‘intent to defraud’ under s.540 CA. Surely, this must be a question of fact which has to be ascertained from a consideration of the entirety of the relevant circumstances. Resorting to depositions of facts purely from affidavits, in this Court’s view would not be sufficed to resolve the intricate nature of the necessary element under s.540 CA.

In PJTV Denson (M) Sdn Bhd & Ors v Roxy (Malaysia) Sdn Bhd [1980] 2 MLJ 136, the Federal Court had affirmed that fraud must be actual in the following way:- “Whether fraud exists is a question of fact, to be decided upon the circumstances of each particular case. Decided cases are only illustrative of fraud. Fraud must mean "actual fraud, i.e. dishonesty of some sort" for which the registered proprietor is a party or privy. "Fraud is the same in all Courts, but such expressions as 'constructive fraud' are...inaccurate." but "'fraud'... implies a wilful act, on the part of one, whereby another is sought to be deprived, by unjustifiable means, of what he is entitled." (per Romilly MR in Green v. Nixon [1857] 23 Beav 530 & 535; 53 ER 208). Thus in Waimih Sawmilling Co. Ltd. v. Waione Timber Co. Ltd. [1926] AC 101 & 106 it was said that "if the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent..."

As such, based on this Court’s evaluation on the pleadings, striking out applications and affidavits of parties, it is the Court’s firm finding that the present action by the Plaintiff is not obviously unsustainable against the Defendants. In this regard, the advice given by the Court of Appeal in Sivarasa Rasiah & Ors v Che Hamzah Che Ismail & Ors [2012] 1 CLJ 75 is instructive where it was held that:- “[14] A striking out application is not a trial on affidavits. It is not an application where the parties have to adduce evidence to establish the merits of their case. The court should not conduct a minute examination of the documents and the facts of the case. So long as the claim on the face of it discloses some cause of action or raises some question fit to be tried it should not be struck out. The mere fact the case is weak and not likely to succeed is no ground for the pleadings to be struck out.”

With that, there is no necessity for the Court to discuss on the issue of lack of particulars in the pleadings as contended by the Defendants as one of the grounds for striking out. In fact, lack of particulars per se would not be a ground for striking out under O.18, r.19(1) of ROC. As long as there is a reasonable cause of action identified and that is so in the present action, or capable of being identified that later amendments to the pleadings may cure the gap, the Plaintiff should be given their days to prove its claim in court.

For the reasons as adumbrated in the above, this Court dismisses Enclosures 15, 17, 19, 22, 26 & 28, all with costs in the cause. Dated: 09.06.2026 …………………………………………. (NOOR HISHAM BIN ISMAIL) Judge High Court, Johor Bahru For the Plaintiffs: Messrs Ong Ban Chai & Co Suites 704-707, 7th Floor Johor Tower, Jalan Gereja 80100, Johor Darul Takzim For the Defendants: Messrs Yeoh Shim Siow & Lay Kuan 13A-3 & 4, Floor 13A Tower 1, Faber Tower Jalan Desa Bahagia Taman Desa 58100, Kuala Lumpur