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1 IN THE SESSIONS COURT IN SHAH ALAM IN THE STATE OF SELANGOR DARUL EHSAN GUAMAN N0. BA-B52NCC-202-11/2017 BETWEEN DATO’ KOH BOON THYE …. PLAINTIFF AND PRACTICLEAR SDN BHD … DEFENDANT GROUNDS OF DECISION (Plaintiff’s Application To Strike Out The Defendant’s Counter-Claim) Introduction [1] This is an application by the plaintiff under enclosure 41 to strike out the defendant’s counter-claim. [2] In these proceedings, the plaintiff claimed against the defendant payment of RM 509,585.30, interest and costs. [3] The plaintiff’s claim arose in these circumstances: [3.1] The plaintiff owned 207,994 ordinary shares of RM 1.00 each in a company, Enabling Asia Tech Sdn Bhd. [3.2] The defendant was desirous of purchasing the plaintiff’s said EATSB shares. [3.3] By a Share Sale Agreement dated 8 August 2017 (“the SSA”), the plaintiff agreed to sell and the defendant agreed to purchase the said EATSB shares at the price of RM 1,019,170.60. [3.4] By the terms of the SSA, the sale and purchase consideration are to be paid in two (2) instalments: a) the first instalment to be paid upon the execution of the SSA; 2 b) the second instalment being the balance purchase price was to be paid one (1) month from the date of payment of the first instalment. [4] The defendant did pay the first instalment on the date of execution of the SSA. However, the defendant failed, refused and/or neglected to pay the second instalment in the sum of RM 509,585.30. [5] Thus, the plaintiff commenced this action to recover the balance purchase price of the said EATSB shares. [6] By a notice of application dated 6 December 2017, the plaintiff applied for summary judgment against the defendant in respect of his claim. Affidavits were filed and exchanged with regard to the summary judgment application. So also written submissions. [7] On 12 December 2018, the court granted the plaintiff’s application for summary judgment. [8] Under Order 18 rule 2(2) of the Rules of Court 2012, the defendant is relieved from delivering its defence, if a notice of application under Order 14 rule 1 is served on a defendant before he serves his defence. [9] Nevertheless, the defendant proceeded to file and serve a defence and counter-claim dated 26 December 2017. In its counter-claim the reliefs sought by the defendant are in the following terms: a) Satu Deklarasi bahawa Plaintif telah memungkiri Klausa 4.4 Perjanjian Penjualan Syer bertarikh 8 Ogos 2017; b) Satu Perintah bahawa laporan penilaian dibuat oleh juruaudit bebas untuk menilai nilai Syer Jaulan tersebut dan mencadangkan harga belian yang benar dan berpatutuan, dan segala kos perlantikan juruaudit bebas ini ditanggung oleh Plaintif; c) Pemulangan bayaran oleh Plaintif kepada Defendan bagi perbezaan antara Harga Belian tersebut dengan harga belian yang dicadangkan oleh juruaudit bebas (Pemulangan Bayaran Perbezaan) selepas membuat laporan penilaian ke atas Syer Jualan tersebut; 3 d) Gantirugi am dibayar oleh Plaintif kepada Defendan; e) Pemulangan Bayaran Perbezaan dan Gantirugi yang dinyatakan dalam perenggan (c) dan (d) ditaksirkan oleh Mahkamah Yang Mulia ini, dan dibayar oleh Plaintif kepada Defendan dalam tempoh 7 hari dari tarikh Perintah ini; f) Kos-kos atas dasar klien dan peguamcara dibayar oleh Plaintif kepada Defendan; and g) Relif-relif lain yang Mahkamah Yang Mulia ini anggap sesuai dan patut. [10] By a notice of application dated 29 March 2018 the plaintiff applied to strike out the defendant’s counter-claim under Order 18 Rule 19 (b), [11] Having considered the submissions from both parties, the court decided to allow the plaintiff’s application to strike out the defendant’s counter-claim with costs. [12] Dissatisfied with the decision by the court, the defendant filed an appeal to the High Court. The following are my grounds for allowing the plaintiff’s application with costs. DECISION OF THE COURT Preliminary Objection [13] The preliminary objection taken by the defendant as to the late filing of the plaintiff’s reply and defence to counter-claim is unmeritorious and not helpful to the defendant. [14] The defendant could have but did not file for a judgment in default of defence to counter-claim. It is too late in the day for the defendant to complain. 4 [15] The necessity for a reply and defence to counter-claim was as a result of the defendant’s clear flouting of Order 18 rule 2(2) of the Rules of Court 2012 which reads as follows: [16] Therefore, it does not lie in the mouth of the defendant to complain as to the time when the plaintiff’s reply and defence to counter-claim was filed. Defendant’s counter-claim [17] The whole basis of the defendant’s counter-claim can be traced to the Auditor’s Note 17. As an adjunct to that, the defendant also relies on the plaintiff’s purported obligation under Clause 4.4 of the Share Sale Agreement (“the SSA”). [18] Based on the matters stated above, the defendant proceeded to construct a counter-claim. [19] In the process, the defendant forgot that the reliefs available to the defendant (as purchaser) under the SSA are circumscribed by the provisions of Clause 5.3 and 6 of the SSA. [20] The plaintiff submitted that the defendant’s reliance on Auditor’s Note 17 is plainly an afterthought and made mala fide. It was used by the defendant in an attempt to thwart the plaintiff’s application for summary judgment. [21] Once these 2 issues are determined by the court against the defendant, the entire sub-stratum of the defendant’s counter-claim collapses. [22] A close reading of the counter-claim reveals that it is essentially based on the matters pleaded in its defence where at paragraph 40 of 5 the counter-claim, the defendant made the plea “Defendan mengulangi perenggan-perenggan 1 hingga 39 di atas”. [23] Thus, it behoves anyone reading the defendant’s counter-claim to have regard to the matters pleaded in the paragraphs preceding the counter-claim. [24] It can safely be said without fear of contradiction that the entire defence and a fortiori the counter-claim is based on Note 17 of the Auditor’s Report of EATSB for the year ending 31 December 2016. [25] Relying solely on Note 17 of the auditor’s report, the defendant attempts to construct a case that the plaintiff is in breach of Clause 4.4 of the SSA. [26] Clause 4.4 of the SSA reads as follows: The Vendor shall promptly disclose in writing to the Purchaser any event or circumstances which arises prior to the Completion Date, which might be material to the Sale Shares” [27] The plaintiff is the vendor and the defendant is the purchaser. The completion date under the SSA is the date when the first instalment is paid, that is on 8 August 2017. [28] On the basis of the evidence adduced by the defendant, the audited accounts of EATSB (including Note 17 contained therein) was received by the defendant and the plaintiff vide an electronic mail on 15 August 2017, a date which is after the completion date. [29] Further, the circumstances in which the defendant utilised Note 17 of the auditor’s report leads to the inference that there is mala fides in the defendant’s reliance on Note 17 Auditor’s Report. [30] The material circumstances are these: [30.1] there is not a single mention of Note 17, auditor’s report in the several email exchanges between the respective solicitors representing the plaintiff and defendant in the SSA, after the defendant’s receipt of the Audited Accounts 6 of EATSB. These email correspondence took place between 17 August 2017 and 21 August 2017. [30.2] the defendant’s solicitors by an email dated 18 September 2017 sought an extension of one (1) month to pay the balance purchase price under the SSA; [30.3] on 18 September 2017, the defendant’s solicitors delivered to the plaintiff’s solicitors a stamped copy of the SSA; [30.4] on 23 October 2017, the defendant proceeded to register the transfer of the EATSB shares into the name of the defendant; [30.5] there was no response by the defendant to the plaintiff’s solicitors’ letter of demand (before action) dated 25 October 2017; [30.6] the first time ever the defendant made mention of Note 17, Auditor’s Report was in the defence and counter-claim dated 26 December 2017 and the defendant’s affidavit affirmed on 26 December 2017 to oppose the plaintiff’s application for summary judgment. [31] In a discussion on the law relating to striking out, the case that is often quoted is Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 where the then Supreme Court laid down the law as follows: The principles upon which the court acts in exercising its power under any of the four limbs of O 18 r 19(1) of the RHC are well settled. It is only the plain and obvious cases that recourse should be had to the summary process under this rule (per Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd), and this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’ (see AG of Duchy of Lancaster v L & NW Rly Co). [32] And in the Court of Appeal judgment of Tuan Haji Ishak bin Ismail v Leong Hup Holdings Berhad [1996] 1 CLJ 393 it was decided that the court may strike out a claim even if it requires a long and elaborate hearing before the court can be satisfied that there is no cause of action. 7 [33] With reference to Clause 5.3 of the SSA, if, as is alleged by the defendant (as purchaser) that the plaintiff (as vendor) is the defaulting party, then under the provisions of Clause 5.3 of the SSA, the defendant is only entitled to damages and not a refund of the purchase price or any part thereof. [34] Thus, the reliefs sought by the defendant at paragraph (c) and (e) of the counter-claim is outside of the said Clause 5.3. [35] Meanwhile, Clause 6 SSA provides as follows: