GA YEE FURNITURE SDN BHD v Encony Development Sdn Bhd (PA-22NCVC-13-01/2017)

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DATO’ SRI CHIN SEAK HUAT …DEFENDAN-DEFENDAN JUDGMENT (CONSPIRACY TO INJURE; TRACING) PRELUSION [1] Persons A and B own and control Companies X, Y and Z. A and B transferred money from Company X to Company Y and Company Z. Company Y and Company Z used the money for their benefit. Company Y used the money to purchase Company Z. Company Z used the money to purchase a piece of land. [2] Company X sues A, B, Company Y and Company Z. Company X sues A and B for conspiracy to injure by unlawful means, for fraud and for breach of fiduciary duty. Company X also seeks the relief of a Declaration that a constructive trust is created over the money transferred and the land that was purchased. Company X asks for the process of tracing to Page 2 of 43 be applied over the money transferred, to trace the money to the value of the land purchased. [3] Should Company X’s claim be allowed? PRELIMINARIES [4] This case took seven days of trial, and several oral submission sessions (concurrent with the filing of written submissions, submissions in reply and further speaking notes). The several oral submission sessions were held at the request of the parties’ counsel. [5] I will refer to the Plaintiff as “P”; the 1st Defendant as “Encony”; the 2nd Defendant as “Eramas”; the 3rd Defendant as “D3/Khor”; and the 4th Defendant as “D4/Chin”. [6] As the same firm of solicitors represents them, I will refer to Encony (1st Defendant), D3/Khor and D4/Chin together as “EnconyD3D4”. Another firm of solicitors represents Eramas (2nd Defendant). [7] P called one witness: PW1—Dato’ Sri K. Navaneethakrishner (DSK). EnconyD3D4 called one witness: DW1—D4/Chin. Eramas called two witnesses: DW2—Valerie Yeo (a solicitor) and DW3—Ching Seak Hooi (a director of Eramas, and the brother of D4/Chin). P’s PLEADED CASE AGAINST THE DEFENDANTS [8] I summarise D3/Khor’s, D4/Chin’s and Encony’s shareholdings in P, in Encony and in Eramas with the following Table— Page 3 of 43 D3/Khor D4/Chin Encony Ga Yee (P) Shareholder Shareholder and Director - Encony Shareholder and Director Director - Eramas Director Director Shareholder [9] As the Table shows, at the material time (which is the two years between February 2014 and January 2016)—

In P—D3/Khor was a shareholder, and D4/Chin was a shareholder and director.

In Encony—D3/Khor was a shareholder and director, and D4/Chin was a director.

In Eramas—D3/Khor and D4/Chin were directors. Encony was the sole shareholder of Eramas i.e. sole owner of Eramas. D3/Khor was a beneficial owner of Eramas, as he was a shareholder of Encony, which wholly owns Eramas. [10] P’s cause of action against D3/Khor and D4/Chin is for conspiracy to injure P by unlawful means. The unlawful means was transferring money out of P to Encony and Eramas. P asserts that D3/Khor and D4/Chin—fraudulently and in breach of their fiduciary duties to P, in the material period of two years: between February 2014 and January 2016, while D3/Khor was P’s shareholder, and D4/Chin was P’s director— caused RM9,397,057.40 (the RM9.397 million or the money) to be Parties Companies Page 4 of 43 transferred from P to Encony and Eramas, for Encony’s and Eramas’ benefit. [11] The RM9.397 million was P’s money, obtained by financing from banks, for which P had to repay, with interest. The money was for P’s business operations. The transfer of the RM9.397 million was without any consideration to P, and provided no benefit to P. [12] D4/Chin, as P’s director, was a trustee of P’s assets. D4/Chin owed a fiduciary duty to P. D4/Chin breached his obligations as a trustee; breached his fiduciary duty to P; acted against P’s interest; and acted in bad faith to procure a profit for himself. [13] D3/Khor and D4/Chin were signatories of P’s cheques. They conspired to transfer the RM9.397 million to Encony and Eramas, to defraud P, causing loss and damage to P. [14] D3/Khor and D4/Chin were constructive trustees of P’s money. Encony and Eramas—the recipients of the money—are liable to account to P for the money. P seeks to trace the money and the asset (the subject property) bought with the money. [15] The subject property is a piece of land in the Mukim of Ulu Kinta known as Lot 516685 (Property). [16] The reliefs and remedies that P seeks include—

(A) Against all Defendants—

the RM9.397 million; Page 5 of 43

interest;

an account of the profits or benefits obtained by D3/Khor and D4/Chin from the act of transferring the money;

an Order for the payment of all moneys found to be due to P from D3/Khor and D4/Chin on the taking of accounts, with interest;

a Declaration that the Property, which Eramas bought using the RM9.397 million or such other amount—is P’s asset, and that Eramas or its successor to title are the constructive trustees of the Property for P, and that P is entitled to trace the Property and any other asset bought using the money;

a Declaration that the transfer of P’s money: the RM9.397 million, is not a related party transaction but a fraudulent transaction, which supports the cause of action for conspiracy to injure by unlawful means;

costs on a solicitor-client basis;

(B) Additionally against D3/Khor and D4/Chin—

general and punitive damages “for the breach of their fiduciary duties” to P. [17] As against D3/Khor and D4/Chin, P verified, in its post-trial submissions, that it seeks damages in the amount of the RM9.397 million, with interest on that sum at 5% per annum from 20.1.2016 (the day after the last transfer of the money on 19.1.2016) until full payment. Page 6 of 43 [18] As against Encony, P also seeks the same amount of RM9.397 million, with the same computation of interest. [19] As against Eramas, P seeks to trace the amount that Eramas is liable for (concerning P’s money that was used to buy the Property), and to obtain payment of that amount from the RM10.5 million placed in the joint stakeholders’ account stated in the terms of the Consent Order (dated 23.1.2020) recorded before the Court Of Appeal. [20] The Consent Order came about from the pre-trial Mareva injunction proceeding. The Court Of Appeal recorded a Mareva injunction to prohibit all the Defendants from disposing of the Property. The injunction nevertheless permitted Eramas to sell the Property on the condition that an amount of RM10.5 million from the sale proceeds be placed in an interest-bearing joint stakeholders account. The RM10.5 million, with accrued interest, is to be released to the winning party after the trial. [21] In other words, if P succeeds after trial, the amount of money that Eramas is adjudged to pay P will be released to P from this RM10.5 million in the joint stakeholders account. If, on the other hand, Eramas succeeds i.e. Eramas is not liable to pay P any amount of money, then the RM10.5 million, with accrued interest, will be released back to Eramas. [22] Eramas sold the Property. And RM10.5 million was placed in the joint stakeholders’ account. ENCONYD3D4’s DEFENCE [23] EnconyD3D4’s joint defence is that the RM9.397 million transfer was an advance (a loan), given as part of “related-party transactions” Page 7 of 43 between the companies (P, Encony and Eramas). This was done because P, Encony and Eramas shared common shareholders and directors at the time (referring, of course, to D3/Khor and D4/Chin). [24] EnconyD3D4 do not dispute that the RM9.397 million transfer was done, and done at Encony’s instructions and for Encony’s benefit. Moreover, P’s board of directors knew about and approved the RM9.397 million transfer. And, P’s Members’ and Shareholders’ Resolutions were passed to ratify the loan. [25] EnconyD3D4 denies any wrongdoing. They deny any conspiracy to defraud, any breach of fiduciary duty, or any fraud. And they deny that there was a constructive trust over the money. [26] EnconyD3D4 also plead that the Financial Due Diligence Report on P and the Legal Due Diligence Report on P—produced as a result of the Deed Of Mutual Settlement made between D4/Chin and PW1/DSK— did not disclose any fraudulent transaction, conspiracy to defraud or breach of fiduciary duty. P’s REPLY TO ENCONYD3D4’s DEFENCE [27] In reply to EnconyD3D4’s Defence, P pleads that—

The changes to the directorships and shareholdings of Encony and Eramas were done only after this suit was filed. The Defendants did it (change the directorships and shareholdings) because they knew P was about to sue them. There is no evidence that the transfers of shares were for valuable consideration. Page 8 of 43

The RM9.397 million was transferred out of P by D3/Khor and D4/Chin, for Eramas to buy the Property. Part of the money was used for incidental expenditures incurred to finance the purchase of the Property. At the time, Encony was the only shareholder in Eramas. Fraud was committed when P’s money was used or released to buy the Property.

Eramas cannot show that it had the money to buy the Property, or that it was able to finance the purchase of the Property, or that its directors or shareholders contributed money to finance the purchase. Instead, Encony and Eramas were insolvent at the time. Their current liabilities exceeded their current assets.

The money to buy the Property was procured by Eramas from Encony, who received the money transferred from P.

At the pertinent time, P’s board of directors consisted of D3/Khor, D4/Chin and Teoh Ah Kim (D4/Chin’s nominee or proxy). D4/Chin and Teoh held 70% of the shares in P. They had control over P’s board of directors. The ratifying resolutions passed by the board of directors were a sham, or a method to commit the conspiracy (through breach of fiduciary duty or fraud). In other words, D3/Khor, D4/Chin and Teoh passed the resolutions to ratify the impugned transfers that D3/Khor and D4/Chin themselves effected.

The two due diligence reports referred to by EnconyD3D4 were merely initial reports. They were not final or forensic reports. The Financial Due Diligence Report dated 30.6.2016 by CH International Advisory Sdn Bhd (CH International) was Page 9 of 43 only a limited review report. And the Legal Due Diligence Report by VM Mohan Fareed & Co. was only related to P’s legal documentation.

P acknowledges that there was a Deed Of Mutual Settlement dated 4.5.2016 entered into between D4/Chin and PW1/DSK (P’s current shareholder and managing director). But P asserts that D4/Chin and P’s then CEO: Richmond Leow did not make full and frank disclosure about the true facts relating to P. That was why the two due diligence reports did not disclose fraud, conspiracy or breach of fiduciary duty by D3/Khor and D4/Chin.

P discovered the conspiracy, breach of fiduciary duty and fraud only after PW1/DSK took over the management of P.

If the RM9.397 million transfers from P to Encony and Eramas were related-party transactions, there were no terms for the repayment of the money, nor did it benefit P in any way. ERAMAS’ DEFENCE [28] Eramas’s defence is that by a Share Sale Agreement dated 2.1.2017, DW3/Ching Seak Hooi (D4/Chin’s brother) and Dato’ Lee Foo San (Lee Foo San) became shareholders i.e. owners of Eramas. They were also appointed Eramas’ directors. [29] They bought 100% of Eramas’ shares for the purchase price of RM6 million. The RM6 million “was deducted from an interest-free friendly loan” given by Lee Foo San to Eramas. Page 10 of 43 [30] Eramas denies receiving “a sum of money amounting to RM9.397 million as claimed”. Eramas avers that the transfers amounting to RM9.397 million were “advances/loans from P”, which were “received by Encony”. [31] Eramas owes no money to P. [32] Eramas avers that a sum of RM8,137,702.00 was lent by Lee Foo San to Eramas to redeem the Property from Malayan Banking Berhad. [33] But then Eramas also avers that the advances/loans i.e. the RM9.397 million “were advanced by P to Encony”. [34] Similar to EnconyD3D4’s defence, Eramas also avers that the advances/loans i.e. the RM9.397 million were related-party transactions, as P and Encony had the same directors and shareholders. [35] Eramas also pleads that the two due diligence reports do not disclose any loans to Eramas, But they disclose that there were loans given by P to Encony, as related-party transactions, which are allowed in law. P’s REPLY TO ERAMAS’ DEFENCE [36] In reply to Eramas’ Defence, P pleads that—

The change in ownership of Eramas (from Encony to Ching Seak Hooi and Lee Foo San) was to conceal the fraud committed by D3/Khor and E4/Chin. Page 11 of 43

The change in ownership was also done after Eramas bought the Property.

D3/Khor and D4/Chin were Eramas’ directors at the pertinent time. They only resigned as directors after P issued a notice of demand to claim the RM9.397 million wrongfully transferred by them from P to Encony and Eramas, which was for Eramas’ benefit, including to enable Eramas to buy the Property.

the Property was bought using the money siphoned or misappropriated from P.

Eramas received the money with knowledge because D3/Khor and D4/Chin were directors of Eramas.

Eramas is holding the Property on a constructive trust for P because the Property was bought using P’s money, which was dissipated by D3/Khor and D4/Chin. AGREED ISSUES TO BE TRIED, BUT NOT UTILISED [37] The parties filed a pre-trial document called the Agreed Issues To Be Tried (Agreed ITBT). It sets out the common and agreed issues that they are asking this Court to determine. Parties signed off on five agreed issues to be tried. The parties went to trial with these issues to be tried. [38] I would have thought that parties would endeavour to prove their respective cases in the context of the Agreed ITBT. But to my surprise, in their respective written submissions, none of them utilised the Agreed ITBT. None of them submitted according to the Agreed ITBT. Page 12 of 43 [39] That being the case, I have in mind the issues that I will determine, according to the parties’ pleadings, and according to the evidence. WHAT FACTS DOES THE EVIDENCE PROVE? [40] I proceed to analyse the evidence (documentary and oral). The evidence proves facts that are pertinent to the merits of the parties’ respective cases, including the following facts. D3/Khor and D4/Chin controlled P, Encony and Eramas [41] First—D3/Khor and D4/Chin controlled P, Encony and Eramas. [42] The material time when the money was transferred from P to Encony and Eramas was from February 2014 to January 2016. In that period, D3/Khor was a shareholder of P. D4/Chin was a shareholder and director of P. D4/Chin (by himself and through his nominee: Teoh) owned 70% of the shares in P. [43] In that period, D3/Khor was a shareholder and director of Encony. D3/Khor owned 50% of the shares in Encony. D4/Chin was a director of Encony. [44] In that period, D3/Khor was a director of Eramas. D4/Chin was likewise a director of Eramas. Encony was the sole shareholder of Eramas. Thus, Encony owned Eramas. P, Encony and Eramas were not related companies, and hence the advances cannot be related-party transactions [45] Second—P, Encony and Eramas were not related companies, and hence the alleged advances or loans cannot be related-party transactions. Page 13 of 43 [46] P, Encony and Eramas have no relationship with one another. P had no shareholding in Encony and Eramas. Similarly, neither Encony nor Eramas had shareholdings in P. DW1 (D4/Chin) agreed to these facts in cross-examination. [47] P, Encony and Eramas are in different businesses. P is in the furniture manufacturing business. Encony is in the investment business. Eramas is in the construction business. [48] The Defendants argue that P and Encony are related companies because D3/Khor was a shareholder in both, and D4/Chin was a director in both. Further, D3/Khor was also a director in Encony, and D4/Chin was also a shareholder in P. [49] But, having common shareholders and directors does not make P and Encony related companies. [50] For them to be related companies, P and Encony must have cross-shareholdings i.e. one is the parent and the other the subsidiary. [51] Section 7 of the Companies Act 2016 defines what it means to be related companies. Only where a company is a holding company of another company; or a company is a subsidiary of another company; or a company is a subsidiary of the holding company of another company i.e. both are subsidiaries of the same holding company—is the first-mentioned company deemed to be related to the other company. Page 14 of 43 [52] Thus, P and Encony are not related companies. The alleged loans from P to Encony cannot be related-party transactions. [53] Further, and more glaringly—there is no evidence of any relationship, understanding or arrangement between P on the one part, and Encony or Eramas on the other part—for P to lend the money to Encony and Eramas. Also, there are no terms about the consideration for the loan, or the purpose of the loan, or the repayment terms of the loan. [54] I therefore find that EnconyD3D4’s defence—that the money transfers i.e. the alleged loans made between related companies as legitimate “related company transactions”—is insupportable. These facts put paid to (demolish) the defence of permitted related company loans. There are resolutions about P lending money to Encony, but P’s audited financial statements do not reflect these loans [55] There are resolutions about P lending money to Encony, but P’s audited financial statements do not reflect these loans. [56] There are three sets of resolutions (members’ and directors’ resolutions) that purport to show that P resolved to lend batches of money to Encony. But—

there is no evidence of any consideration given for the alleged loans. There is no indication of the purpose of the loan. There is no evidence of any terms concerning the repayment of the loans, which means that the loans do not have to be repaid, or that the repayment can be deferred indefinitely. DW1 (D4/Chin) admitted to these facts in cross-examination. Page 15 of 43

the alleged loans are not reflected in P’s financial statements. P’s Accounts show that other companies owe P money but not Encony. In P’s Accounts for 31.12.2014, under Note 7 on “trade receivables” and “other receivables”—none of the Debtor Companies include Encony.

D4/Chin signed the Director’s Statutory Declaration dated 2.6.2015, which supports P’s Accounts. He swore that the entries in the Accounts were correct and that P’s financial statements were true. [57] I find that the resolutions signed by D4/Chin and his nominee: Teoh, which are relied on by EnconyD3D4 are not credible. They contain particulars that do not tally with the P’s audited Accounts, prepared by the auditor. EnconyD3D4 produced no evidence to support the believability of the resolutions. [58] The resolutions do not help EnconyD3D4’s defence. On the contrary, it reveals D4/Chin’s conduct, which supports P’s cause for conspiracy against him. Eramas purchased the Property, and Encony purchased Eramas’ shares, thus owning the Property [59] Eramas purchased the Property, and Encony purchased Eramas’ shares, thus owning the Property. [60] The Sale And Purchase Agreement (SPA) dated 12.4.2013 between Eramas and BIOD Leisure & Recreation Sdn Bhd (BIOD) Page 16 of 43 discloses that Eramas purchased the Property for the purchase price of RM10,325,898.00 (RM10.325 million) [61] The Share Sale Agreement (SSA) dated 30.12.2013 (8 months later) between Encony and the then-shareholders of Eramas—to buy Eramas’ shares—discloses that Encony purchased Eramas’ shares for the purchase price of RM20,174,588.48 (RM20.174 million) [62] Recital 4 of the SSA refers to the SPA i.e. it refers to Eramas purchasing the Property. Recital 4A of the SSA states that concerning Eramas’ purchase of the Property, Eramas still had to pay the balance of RM5,162,949.00 (RM5.162 million) to BIOD: the vendor of the Property. In other words, Eramas owed BIOD this RM5.162 million balance purchase price yet to be paid at the time. And Encony knew this (it is stated in the SSA through which Encony bought Eramas’ shares). [63] The fact that the SSA (Encony purchasing Eramas’ shares) refers to the SPA (Eramas purchasing the Property), reveals that in effect, Encony bought over Eramas, to own the Property. [64] Encony would pay RM20.174 million to own Eramas, and Eramas would pay RM10.325 million to purchase the Property. Put differently, Encony owned Eramas, which owned the Property i.e. Encony is the beneficial owner of the Property. [65] But it must be noted that under the SSA, Encony had to pay for Eramas’ shares. And under the SPA, Eramas had to pay for the Property. Page 17 of 43 [66] Analysing the terms of the SSA (Encony buying Eramas’ shares, to own Eramas), such as Recitals 4 and 4A—it is easy to see that the SPA (Eramas buying the Property) is an important feature of the SSA. These Recitals disclose that Eramas was buying the Property and the balance purchase price yet to be paid at that time was RM5.162 million. [67] Then from Clause 3.1, it can be seen that the SSA was subject to several conditions precedent. One of the conditions precedent is that the written consent of the state authority must first be obtained for the transfer of the Property to Eramas before the SSA can go through (can be completed). This means that the SSA can only be completed with Encony owning the shares in Eramas, if and when the SPA for the Property is completed (with Eramas getting the state authority approval to own the Property). [68] Put differently, it is clear to me that the main purpose of the SSA (to own all the shares in Eramas) was for Encony to own Eramas, but only if and when Eramas owns the Property. The purpose was to own Eramas and to own the Property, concurrently. [69] But Eramas did not have the money to pay for the Property. Eramas did not appear to have the money to pay the full purchase price of more than RM10.325 million. So, Eramas had to depend on the money from Encony to pay for the Property. But Encony too had no money to give to Eramas. Encony was a loss-making company in 2013 and 2014. Encony also did not have any substantial assets. [70] What transpired then was that D3/Khor and D4/Chin transferred the RM9.397 million of P’s money to Encony and Eramas, so that Encony Page 18 of 43 could pay for the Eramas shares and so that Eramas could pay for the Property. Encony, on its own, could not pay for Eramas’ shares [71] Encony, on its own, could not pay for Eramas’ shares. [72] Encony was in a weak (worse than Eramas’) financial position in 2014, when the SSA was entered into. The SSA was dated 30.12.2013, the penultimate date for the year 2013. The payments of money due under the SSA would have to start taking place in 2014. So the year 2014 is pertinent. In 2014, Encony’s current liabilities exceeded their current assets by RM16,300,927.00 (RM16.3 million). And in 2014, Encony’s net loss was RM74,329.00 (RM74K). [73] In 2015, Encony’s current liabilities exceeded its current assets by RM16,439,511.00 (RM16.439 million)—an even bigger amount. And in 2015, Encony’s net loss increased to RM155,288.00 (RM155K). [74] This financial evidence discloses that Encony, on its own, could not pay the RM20.174 million purchase price for Eramas’ shares. Eramas, on its own, could not pay for the Property [75] Eramas too was in a weak financial position. In 2013, its total liabilities were RM1,829,675.00 (RM1.829 million) and its total assets were RM1,821,621.00 (RM1.821 million). Eramas’ total liabilities exceeded its total assets. [76] In 2014, Eramas’ total liabilities were RM14,118,384.00 (RM14.118 million). Its total assets were RM14,389,250.00 (RM14.389 million). Page 19 of 43 Total assets exceeded total liabilities by only RM279,866.00 (RM279K). Total assets increased to RM14.389 million only because the Property’s value was by then captured in the accounts for 2014. The accounting entry for "Land held for property development” was RM14,289,572.00 (RM14.289 million). But its total liabilities also ballooned to over RM14 million—RM14,118,384.00 (RM14.118 million), as it had to pay for the Property. [77] Further, Recital 4A of the SSA states that Eramas at the time still owed BIOD RM5,162,949.00 (RM5.162 million) for the Property. But this amount is not reflected in Eramas’ Accounts. So, the 2nd transfer of RM4,034,917.70 (RM4.034 million)—please refer to the Schedule Of Transfers below—from P to Rusnah Loh Ng & Co (BIOD’s solicitors) was to part-pay this RM5.162 million owed to BIOD. That RM4.034 million came from P. In other words, Eramas needed P’s money (the RM4.034 million) to pay BIOD the then-outstanding balance purchase price of the Property. [78] The fact that Eramas still owed BIOD RM5.162 million under the SPA for the Property means that the SPA for the Property was not completed yet. [79] Moreover, clauses 4.1(i), (ii) and (iii) of the SSA obligate Encony to pay 30% (8% + 2% + 20%) of the purchase price for Eramas’ shares under the SSA. The total amount is RM6,052,376.55 (RM6.052 million). This amount was defined as the Deposit Sum. Encony had to pay this RM6.052 million for Eramas’ shares. This RM6.052 million Deposit Sum was more than the RM5.162 million that Eramas still owed BIOD for the Property Page 20 of 43 under the SPA. In other words, Encony had to pay RM6.052 million. And Eramas still owed BIOD RM5.162 million. [80] Then clause 4.2 provides that Hanim-Ong Badrul (the solicitors for the shareholder-vendors who sold Eramas’ shares to Encony) can (is permitted to) use part of the Deposit Sum (RM6.052 million) to fully settle the outstanding SPA balance (RM5.162 million) which Eramas had to pay BIOD for the Property under the SPA. [81] So, the Deposit Sum (RM6.052 million) in the SSA was used to pay off the outstanding purchase price (RM5.162 million) to BIOD for the Property under the SPA. [82] With this evidence, I am compelled to find that the money transfers were in fact to pay for the Property. The transfer of Ps’ money—at least RM4.034 million (the 2nd transfer)—went directly to Eramas, to enable Eramas to pay for the Property. Nine transfers, totalling the RM9.397 million, were made from P to Encony and Eramas [83] The nine transfers are particularised in P’s Amended Statement Of Claim. These transfers are summarised in the Schedule Of Transfers below— Transfers Date Particulars Amount (RM) 1st 25/2/2014 Encony—D4/Chin 1,613,967.08 2nd 15/4/2014 Rusnah Loh Ng & Co—BIOD 4,034,917.70 Page 21 of 43 [84] Nine transfers were made from P to Encony and Eramas. The first five transfers (1st to 5th) were to Encony and the last four transfers (6th to 9th) were to Eramas. [85] I think it suffices for me to opine on two transfers, as examples. First example—the 1st transfer of RM1,613,967.08 (RM1.613 million) was to Encony. The documents for the transfer, such as the banking remittance form for the transfer were signed by D3/Khor and D4/Chin. But the documents do not state the purpose of the transfer; or that it was a loan to Encony. And there is no specific company resolution that was passed for the transfer of this amount. [86] But, glaringly, this RM1.613 million constitutes the payment of the 8% of the purchase price that Encony had to pay the then shareholder-vendors of Eramas’ shares under the SSA (Encony buying Eramas 3rd 5/1/2015 JM Chong, Vincent Chee— Eramas 1,300,000.00 4th 6/1/2015 JM Chong, Vincent Chee— Eramas (late interest) 73,132.25 5th 9/2/2015 JM Chong, Vincent Chee 2,184,192.99 6th 6/3/2015 San & Associates—Eramas 63,085.00 7th 24/6/2015 Eramas 38,762.28 8th 30/6/2015 Eramas 39,000.00 9th 19/1/2016 AM 185055 50,000.00 TOTAL 9,397,057.40 Page 22 of 43 shares). DW1 (D4/Chin) admitted that this RM1.613 million relates to the 8% of the purchase price under the SSA. [87] Effectively, this RM1.613 million was transferred from P to Encony, for Encony to pay the 8% of the purchase price for Eramas’ shares. As Eramas was purchasing the Property, this transfer benefits Encony. It enabled Encony to pay for Eramas’ shares. This transfer was effectively and ultimately for Encony to own the Property through Eramas. [88] Second example—the 2nd transfer of the RM4.034 million to Rusnah Loh Ng & Co (BIOD’s solicitors in the SPA) was exactly 20% of the purchase price in the SSA transaction. This RM4.034 million of P’s money was used to pay 20% of the purchase price that Encony had to pay for Eramas’ shares. The RM4.034 million was then channelled to part-pay the balance purchase price that Eramas had to pay BIOD for the Property. This RM4.034 million benefitted both Encony and Eramas. [89] D3/Khor and D4/Chin signed the remittance form and the cheque. No relevant document states that the transfer was a loan from P to Encony. No specific resolution was passed for the transfer of this amount. Encony admits to receiving the 1st to 5th transfers [90] Encony admits to receiving the 1st to 5th transfers, including the 2nd transfer of RM4.034 million that directly went to Eramas to pay to BIOD’s solicitors for the Property. [91] In paragraph 4 of EnconyD3D4’s Amended Defence, they admit to receiving the whole RM9.397 million. And then in post-trial submissions, Page 23 of 43 Encony accepts and concedes to liability for the 1st to 5th transfers, amounting to RM9,206,210.02 (RM9.206 million). Eramas admits to receiving the 6th to 9th transfers [92] In post-trial submissions as well, Eramas accepts and concedes liability for the 6th to 9th transfers totalling RM190,847.28. This is the balance sum that makes up P’s claim for the RM9.397 million (RM9,397,057.40). (Note: RM9,206,210.02 + RM190,847.28 = RM9,397,057.40.) Eramas also received and thus got the benefit of the 2nd transfer of RM4,034,917.70 (RM4m+) [93] I also find that Eramas cannot evade the fact that the 2nd transfer of P’s money—the RM4.034 million—went directly to BIOD’s solicitors. The RM4.034 million directly benefitted Eramas. This RM4.034 million was used by Eramas to part-pay BIOD the RM5.162 million balance purchase price for the Property under the SPA. DEALING WITH ENCONYD3D4’s ARGUMENT The two due diligence reports did not show conspiracy, fraud or breach of fiduciary duty [94] One of EnconyD3D4’s arguments is that the two due diligence reports did not show conspiracy, fraud or breach of fiduciary duty. [95] However, I find that both the reports were not forensic in nature. From the contents of the two reports, I do not find any reference to whether there was or there was no conspiracy, fraud or breach of fiduciary duty, one way or the other. On the contrary, I find that the makers of the reports were careful to limit the scope and purpose of their reports. Page 24 of 43 [96] In the Financial Due Diligence Report by CH International, I find disclaimers expressed in the following terms—

the makers of the report would not have “uncovered all possible issues”;

the report is only a “limited review report”;

“the work is confined to the areas specified in the letter of engagement”;

“you should not rely on our work as being comprehensive”;

“the procedures and enquiries which we undertook did not constitute an audit”;

under the heading “Important Notes To the Reader”—the makers of the report “have not sought to establish the reliability of the sources by reference to evidence”;

under clause 3.02—“our scope of work did not include all procedures considered necessary under generally accepted auditing standards”;

the report “was prepared solely for the use of” DSK (PW1). [97] The Legal Due Diligence Report was a report merely on the sufficiency of the legal documentation in P’s records. [98] I find that the conclusions presented in these two due diligence reports cannot constitute a defence for EnconyD3D4 against P’s cause for conspiracy to injure, fraud or breach of fiduciary duty. [99] The findings in the two reports cannot refute the evidence (direct and inferential) that supports D3/Khor’s and D4/Chin’s conspiracy to injure, fraud or breach of fiduciary duty. Put differently, the lack of a finding Page 25 of 43 of conspiracy or fraud or breach of fiduciary duty in these two reports does not necessarily mean that there is no evidence that proves conspiracy or fraud or breach of fiduciary duty on the part of D3/Khor or D4/Chin against P. [100] EnconyD3D4 argue that in CH International’s letter of engagement, CH International stated that “CH will inform of any material error or fraud that comes to CH’s attention”. EnconyD3D4 argue that CH International did not find conspiracy, fraud or breach of fiduciary duty, which means that there is no evidence of these torts being committed. [101] I find this argument untenable. The numerous other statements in this letter indicate to me that CH International was not looking for (investigating) conspiracy, fraud or breach of fiduciary duty. The statement relied on by EnconyD3D4 here simply means that if an error or fraud comes to CH International’s attention, they would inform DSK. [102] Also, even though EnconyD3D4 rely on these two due diligence reports to prove their defence, they did not call the makers of these two reports to testify as to what they did, what they found or did not find, and to elaborate on their respective opinions on the state of P’s accounts and documents. DEALING WITH ERAMAS' ARGUMENTS The 2nd transfer of RM4.034 million was only for Encony’s benefit, and not for Eramas’ benefit [103] First—Eramas argues that the 2nd transfer of RM4.034 million was to enable Encony to complete the SSA transaction (for Encony to buy Page 26 of 43 Eramas shares). Encony owed the shareholder-vendor of the Eramas shares the monetary consideration for the shares. Eramas, however, owed BIOD the balance purchase price for the Property. So, Eramas’ shareholders instruct Encony to pay BIOD directly on Eramas’ behalf. The 2nd transfer was for Encony to acquire Eramas. It was not for Eramas’ benefit. [104] I find this argument insupportable. Firstly, if the 2nd transfer of RM4.034 million was only for Encony’s benefit (so that Encony could pay for the Eramas shares), there would have been no need to transfer the money to Eramas. Encony had no obligation to transfer the money to BIOD (under the SPA for Eramas to buy the Property). [105] Secondly, the fact remains that both Encony and Eramas received the benefit of the 2nd transfer of RM4.034 million. D3/Khor and D4/Chin effected this 2nd transfer from P’s money directly to BIOD’s solicitors. And in doing so, benefitted Encony (in that Encony paid for the Eramas shares), as well as Eramas (in that Eramas paid for the Property). [106] Thirdly, the evidence of the 2nd transfer of RM4.034 million from P to BIOD’s solicitors proves that Eramas benefitted from it. This evidence is irrefutable, which makes the fact undeniable. P did not plead the cause of action of breach of constructive trust against Eramas, or that Eramas unjustly enriched itself [107] Second—Eramas argues two points—

P did not plead breach of constructive trust against Eramas; and Page 27 of 43

there is no evidence to show that Eramas had conducted itself unconscionably, or that Eramas was unjustly enriched by the 2nd transfer of RM4.034 million and the 6th to 9th transfers totalling approximately RM190K. [108] Regarding the 1st point—P has not pleaded constructive trust (or breach of constructive trust) as a cause of action against Eramas. Instead, P seeks a Declaration that there is a constructive trust over the money transferred. P is seeking a form of relief. P seeks a Declaration that Eramas holds, on a constructive trust, P’s money that was transferred to Eramas by D3/Khor and D4/Chin’s act of conspiring to injure by unlawful means, or by their fraudulent conduct, or by their breach of their fiduciary duty to P. [109] I find that P is not prohibited from raising the issue of the creation of a constructive trust over the moneys transferred or over the Property (which was purchased with the moneys transferred). [110] On the evidence, I find that there is a constructive trust created over the moneys transferred and the Property that Eramas purchased. P’s money was transferred to Encony, for Encony to buy Eramas shares. Encony owned Eramas. Eramas in turn owned the Property. [111] In the same vein, P’s money was transferred to Eramas, for Eramas to pay for the Property. I am of the view that it suffices for P to pray, at prayer 18(f) in its Amended Statement Of Claim, for a Declaration that Eramas is the constructive trustee of the Property, which it purchased with P’s money. Page 28 of 43 [112] I find that P has satisfactorily made out a case for a Declaration that Eramas holds the Property (purchased with the use of P’s money) on a constructive trust for P as the beneficiary. [113] Regarding the 2nd point—case law authorities guide me that it is not a prerequisite factor that there must be unconscionable conduct on Eramas’ part, or that Eramas must be unjustly enriched, before it can be declared that a constructive trust was created for Eramas to hold the Property in P’s favour. Put differently, there is no need to plead unjust enrichment against Eramas, or to prove that Eramas unjustly enriched itself, or that there was an “unjust factor” involved, for the Court to apply the tracing process to trace what P’s money has become—Foskett v McKeown & Ors [2001] 1 AC 102 (HL); [2000] 3 All ER 97; [2000] 2 WLR

The law of tracing [114] The House Of Lords in Foskett (supra) rendered an exposition on the process of tracing and how it can be applied. I set out below the pertinent portions of the Judgment (with my emphases added)— In truth tracing is a process of identifying assets: it belongs to the realm of evidence [at AC page 113, paragraph B] . Tracing and following The process of ascertaining what happened to the plaintiffs' money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the plaintiffs and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old. Where one asset is exchanged for another, a claimant can elect whether to follow the original asset into the hands of Page 29 of 43 the new owner or to trace its value into the new asset in the hands of the same owner…[at AC page 127, paragraph B-C] …The transmission of a claimant's property rights from one asset to its traceable proceeds is part of our law of property, not of the law of unjust enrichment. There is no "unjust factor" to justify restitution (unless "want of title" be one, which makes the point). The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment…[at AC page 127, paragraph E] A beneficiary of a trust is entitled to a continuing beneficial interest not merely in the trust property but in its traceable proceeds also, and his interest binds every one who takes the property or its traceable proceeds except a bona fide purchaser for value without notice…[at AC page 127, paragraph G] Tracing . …We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it. Tracing is thus neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property. . . …the present is a straightforward case of a trustee who wrongfully misappropriated trust money, mixed it with his own, and used it to pay for an asset for the benefit of his children. Even on the traditional approach, the equitable tracing rules are available to the plaintiffs…[at AC page 129, paragraph B] . . The cause of action As I have already pointed out, the plaintiffs seek to vindicate their property rights, not to reverse unjust enrichment. [at AC page 129, paragraph D] …a plaintiff who brings an action like the present must show that the defendant is in receipt of property which belongs beneficially to him or its traceable proceeds, but he need not show that the defendant has been enriched by its receipt. He may, for example, have paid full value for the property, but he is still required to disgorge it if he received it with notice of the plaintiff's interest. [at AC page 129, paragraph F-G] . . Page 30 of 43 The tracing rules . The simplest case is where a trustee wrongfully misappropriates trust property and uses it exclusively to acquire other property for his own benefit…If the traceable proceeds have increased in value and are worth more than the original asset, he will assert his beneficial ownership and obtain the profit for himself. There is nothing unfair in this. [at AC page 130, paragraph A-B] …The beneficiary's proprietary claims to the trust property or its traceable proceeds can be maintained against the wrongdoer and anyone who derives title from him except a bona fide purchaser for value without notice of the breach of trust…[at AC page 130, paragraph E] [115] I now apply the process of tracing to the facts of this suit. Tracing is neither a claim nor a remedy. It is a process of identifying property and tracing that property to another property that has substituted it. Here, the property in its original form was P’s money. P’s money was transferred out by the wrongdoers D3/Khor and D4/Chin to Encony and Eramas, for Encony’s and Eramas’ use and benefit. Encony used the money to partially pay for the Eramas shares that it bought under the SSA. So, in Encony’s hands, P’s money was turned into Eramas shares. [116] Eramas used the money, particularly the 2nd transfer of RM4.034 million, to partially pay for the Property, which Eramas bought from BIOD. In Eramas’ hands, P’s money was turned into the Property. Constructive trust [117] The Courts have steered away from an encapsulating definition of a constructive trust. But to put it in brief—a constructive trust is created when a trustee or fiduciary acquires property or asset, which includes money, by way of some tortious or wrongful act. Then the trustee or fiduciary holds that property on a constructive trust for the true beneficiary. Page 31 of 43 A constructive trust is created because it is “unconscionable” (not right) for the trustee or fiduciary to retain the property or asset, or to have a beneficial interest in the property or asset—Takako Sakao v Ng Pek Yuen & Anor [2009] 6 MLJ 751 (FC); [2010] 2 AMR 609; [2010] 1 CLJ 381; [2009] 3 MLRA 74; at paragraphs [14] and [15]. [118] I further gleaned that a constructive trust is “a trust imposed by equity to satisfy the demands of justice and good conscience”. It is “a device employed to prevent unjust enrichment”. It has “the effect of taking the title to property from one party whose title unjustly enriches him, and transferring it to another person who has been unjustly deprived of it— Perbadanan Kemajuan Pertanian Selangor v JW Properties Sdn Bhd [2017] 6 AMR 114 (FC); [2017] 8 CLJ 392; [2017] 5 MLRA 633; [2017] MLJU 1107. THE CAUSE FOR CONSPIRACY TO INJURE BY UNLAWFUL MEANS [119] The guiding case for the cause of action for conspiracy to injure is the Court Of Appeal case of Renault SA v Inokom Corp Sdn Bhd & Anor and other appeals [2010] 5 MLJ 394 (CA); [2010] 5 CLJ 32; [2008] 3 MLRA 504, which sets out the elements of the cause of action. The elements were elaborated on in Muniandy a/l Nadasan & Ors v Dato’ Prem Krishnan Sahgal & Ors [2016] 11 MLJ 38 (HC); [2016] MLRHU 324. [120] From these case law authorities, I gleaned that there are three elements in the cause of action of conspiracy to injure—

an agreement or a combination of efforts between two or more persons to injure;

there are acts done under the agreement or a combination of efforts to injure the plaintiff; Page 32 of 43

the plaintiff has suffered damage from those acts. [121] I find that on the balance of probabilities, P has satisfied the elements of the cause of action for conspiracy to injure. The co-conspirators are D3/Khor and D4/Chin. They had a pact with each other. Their pact to transfer P’s money to Encony and Eramas caused loss and damage to P, because P was deprived of the money and the use of the money. [122] I find that as Encony and Eramas received and had the use of the money through D3/Khor’s and D4/Chin’s tortious acts, the money is trust money. I find that there is a constructive trust created over the money and the Property. [123] And on the guidance from case law authorities such as Forstett (supra) and Takako Sakao (supra), I find that the process of tracing is an appropriate process to utilise to give the reliefs and remedies that P seeks. THE CAUSE FOR BREACH OF FIDUCIARY DUTY [124] Being directors of P, D3/Khor and D4/Chin owe a fiduciary duty to P. The evidence demonstrates that they breached that duty. They conducted themselves against P’s interest, and in their own interest— transferring P’s money to Encony and Eramas, ultimately for their own benefit. Regarding D3/Khor and D4/Chin [125] I hold D3/Khor and D4/Chin jointly and severally liable to P for the RM9,397,057.40, with interest at 5% per annum on that sum from Page 33 of 43

20.1.2016 (the date after the last date of transfer i.e. the 9th transfer made on 19.1.2016) to the date of full payment. Concerning general and punitive damages for breach of fiduciary duty [126] P’s prayer 18(c) prays for general and punitive damages against D3/Khor and D4/Chin for breach of fiduciary duty. At the stage of submissions, P withdrew its prayer for punitive damages, leaving only the prayer for general damages for breach of fiduciary duty. [127] P also represented, at the stage of submissions, that their cause of action against D3/Khor and D4/Chin is only for conspiracy to injure, and not for breach of fiduciary duty. In other words, P withdrew their cause of action for breach of fiduciary duty against D3/Khor and D4/Chin. As such, I make no order for general damages against D3/Khor and D4/Chin for breach of fiduciary duty. [128] Another reason that I make no Order for general damages against D3/Khor and D4/Chin is that in P’s Amended Statement Of Claim, P does not pray for damages against D3/Khor and D4/Chin for the tort of conspiracy to injure by unlawful means. Regarding Encony and Eramas [129] Since Encony admitted to receiving RM9.206 million (RM9,206,210.12), which includes the 2nd transfer of RM4.034 million (RM4,034,917.70). Leaving out the 2nd transfer of RM4.034 million first, I find Encony liable to P for RM5,171,292.42 (RM9,206,210.12 – Page 34 of 43 RM4,034,917.70), with interest at 5% per annum on that sum from 20.1.2016 to the date of full payment. [130] Since Eramas admitted to receiving RM190,847.28 (the 6th to 9th transfers), I find Eramas liable to P for this RM190,847.28, with interest at 5% per annum on that sum from 201.2016 to the date of full payment. [131] As for the 2nd transfer of RM4.034 million (RM4,034,917.70), I find Encony and Eramas jointly and severally liable to P for this RM4,034,917.70, with interest at 5% per annum on this sum from 20.1.2016 to the date of full payment. [132] Concerning the tracing of P’s money to the value of the Property to determine the amount of Eramas’ liability, my findings are—

The purchase price for the Property stated in the SPA with BIOD is RM10,325,898.00.

The amount Eramas received is RM4,039,917.70.

In addition to the RM190,847.28 (the 6th to 9th transfers) and the RM4,034,917.70 (the RM4.034 million) received, Eramas is liable to P for: 4,039,917.70 / 10,325,898.00 x 100% = 39.1% of the value of the Property.

The subsequent SPA purchase price with Lee Foo San was RM25,000,000.00 (RM25 million).

The amount due to P is therefore 39.1% of RM25 million = RM9,775,000.00. [133] Eramas received the 2nd transfer of RM4.034 million. Eramas used that money to pay for the Property. Eramas got the benefit of the RM4.034 Page 35 of 43 million. The RM4.034 million was used to buy the Property from BIOD for the price of RM10.352 million. The Property was then sold to Lee Foo San for RM25 million. The evidence is the Sale And Purchase Agreement for the sale of the Property to Lee Foo San. This is an undisputed fact. Hence, the value of the Property increased from RM10.352 million to RM25 million. [134] There is a constructive trust created over the Property, such that Eramas is to proportionately account for the RM4.034 million. Eramas is liable to pay 39.1% of RM25 million to P. Dealing with Eramas’ arguments [135] Firstly—Eramas argues that they should only be liable to pay back the RM4.034 million and the RM190K. This point is untenable. It cannot be that—as a result of D3/Khor and D4/Chin’s wrongdoing, Eramas used P’s RM4.034 million (which is trust money), to directly partially pay for the Property, which created a constructive trust over the Property, but when the Property’s value crystalised at RM25 million (which was the price that the Property was sold to Lee Foo San)—Eramas only has to return RM4.034 million to P. This would be unjust and inequitable. [136] The tracing process dictates that the amount Eramas has to pay P is the proportion (39.1%) of the eventual value of the Property which the money was used to purchase. [137] Secondly—Eramas argues that if judgment is entered against Eramas, and the process of tracing is applied to the RM4.034 million used by Eramas to buy the Property, then Eramas should pay P only RM8,769,855.05 (RM8.769 million). Page 36 of 43 [138] This RM8.769 million amount is arrived at by using the RM25 million purchase price in the sale of the Property by Eramas to Lee Foo San, and deducting the expenses incurred (the cost) in the sale of the Property. Eramas submits that they incurred RM145,293.00 in solicitors’ fees and RM2,425,410.20 in Real Property Gains Tax imposed by the Inland Revenue Board (IRB). [139] As such, Eramas submits that the 39.1% should be calculated from RM22,429,296.80 (RM25 million – RM145,293.00 - RM2,425,410.20). This RM22,429,296.80 is the net proceeds of the sale of the Property to Lee Foo San. [140] Eramas argues that the 39.1% should not be calculated from the RM25 million purchase price, which is the gross proceeds realised. [141] To support its argument, Eramas cites and relies on the case of Gurbachan Singh a/l Bagawan Singh & Ors v Vellasamy a/l Pennusamay & Ors [2015] 1 MLJ 773 (FC); [2015] 2 AMR 1; [2015] 1 CLJ 719; [2015] 1 MLRA 107. Gurbachan Singh (supra) stands for the proposition that when considering an account of profits relief, the expenses-incurred element must be deducted; it must be accounted for. [142] Accordingly, Eramas’s calculation of the amount traced, and which Eramas is liable to pay P is—

Taking the value of the Property at RM25 million— 1% of RM22,429,296.80 (RM25 million - RM RM145,293.00 - RM2,425,410.20 = RM8.769 million Page 37 of 43 P’s argument [143] First—P argues that tracing should apply to the market value of the Property. P submits that it has consistently submitted that it is entitled to trace its money to the market value of the Property. [144] P argues that since Eramas informed P about the sale of the Property to Lee Foo San for RM25 million (which is evidenced by the Sale And Purchase Agreement for the sale), P took it that the market value of the Property was the stated purchase price of RM25 million. [145] However, in the course of written submissions, Eramas disclosed an Assessment Of RPGT form which revealed that the IRB assessed the market value of the Property was a much higher amount of RM34,580,000.00 (RM34.58m). With this document, P submits that tracing should be applied to this RM34.58 million as the market value of the Property, and not to the RM25 million purchase price. [146] P argues that it initially accepted the purchase price of RM25 million as the market value to be traced to, simply because the true market value of the Property was never disclosed by the Defendants to P at the trial. [147] Arguing in favour of tracing to the RM34.58 million market value of the Property, P submits that it should be entitled to 39.1% of this RM34.58 million and not 39.1% of the RM25 million. The difference, needless to say, is substantial. I calculate the difference in this manner—39.1% of RM34.58 million is RM13,520,780.00; RM39.1% of RM25 million is only RM9,775,000.00. The difference is RM3,745,780.00 (RM3.745 million). Page 38 of 43 [148] P also argues that the RM25 million purchase price in the sale to Lee Foo San was understandably undervalued because the sale was to Eramas’ own shareholder. However, I find that there is no evidence that this RM25 million purchase price was undervalued. [149] Second—P submits that the case law authority of Gurbachan Singh (supra) cited by Eramas, is not about tracing, but about the remedy of an account of profits. In an account of profits, the expenses incurred or the cost element should be taken into account. The cost component should be deducted from the amount of the liability in an account of profits. [150] P submits that this jurisprudence of taking into account the expenses incurred or the cost element like in an account of profits proceeding, “has not found its way into the law of tracing”. In other words, in the process of tracing, the expenses incurred or the cost element need not be taken into account in the calculation. The tracing is simply made to the value of the property being traced. [151] In my view, this rationale is right. The principle of tracing is to the value of the prop, not to the net value of the Property arrived at after deducting the expenses or costs incurred when the original asset turned into another asset (such as it is here: trust money turning into landed property). [152] Another way of looking at this is that it is unfair to the beneficiary of the trust property being traced to, to have to bear the expenses incurred to acquire the property in its current form, when the expenses were incurred due to a wrong committed against the beneficiary. Page 39 of 43 My findings [153] These are my findings. One—concerning accounting for the expenses incurred in the process of tracing—I go back to the principle of tracing and hold that tracing is applied to the value of the Property. Eramas has not shown me case law authorities that instruct me to take the expenses-incurred element or the cost component into account when I make the calculation in a tracing exercise. [154] Two—the reasoning in Gurbachan Singh (supra) is for the remedy of an account of profits, which is essentially for a party to pay over or surrender the profits made. And profits are arrived at after necessarily deducting expenses or costs. [155] Three—whether I compute tracing with the RM25 million SPA purchase price or the RM34.58 million IRB-assessed market value—is an evidential issue. [156] P had the evidence of the RM25 million SPA purchase price before the trial. Since P wanted to trace its money to the Property’s market value, P could have challenged the RM25 million amount and said that it was not the market value, or that it was undervalued, or that the sale transaction with Lee Foo San was not done at arm's length. But P did not do this. [157] In the course of written and oral submissions, P had positively accepted the RM25 million purchase price as the market value to be used in the tracing calculation. P also provided me with the suggested calculation for the tracing exercise based on the RM25 million amount as the market value. Page 40 of 43 [158] It was only when the Assessment Of RPGT form surfaced in the course of submissions that P took the opportunity to submit that the tracing calculation should be based on the higher amount of RM34.58 million as the market value. [159] The Assessment Of RPGT form was not produced at trial. It was not part of the body of evidence in this suit. It emerged only when Eramas enclosed it to one of their written submissions to argue that in tracing, the calculation of the amount of liability should take into account the expenses incurred or the cost element that Eramas paid when it sold the Property to Lee Foo San. [160] As the Assessment Of RPGT form was not produced at trial, all the parties did not get to exercise their procedural right to respectively endeavour to prove that this RM25 million amount was or was not the market value of the Property; or to prove that another amount was the market value of the Property. P asked for a tracing exercise. P has the burden to produce the evidence, or to give the prescribed notice to the Defendants to produce the evidence, or to subpoena the production of the evidence—to prove the market value of the Property. But P did not do so. [161] As such, I find that the amount for the value of the Property to be used in the tracing calculation is the RM25 million purchase price for the sale of the Property to Lee Foo San. My judgment on what the tracing calculation should be [162] This is my judgment on the tracing calculation—

Taking the value of the Property at RM25 million— 1% of RM25 million = RM9,775,000.00 Interest: 5% per annum on RM9,775,000.00 = RM488,750.00 per annum Interest per day: RM488,750.00 divided by 365 = RM1,339.04 per day. The number of days between 26.11.2021 (date of the SPA) and 9.10.2024 (Judgment date) is 1,048 days Total interest payable for 1,048 days is RM1,339.04 x 1,048 days = RM1,403,313.92 Total payable is: RM9,775,000.00 + RM1,403,313.92 = RM11,178,313.90 CONCLUSION [163] In conclusion, this is a summary of the terms of my Judgment—

D3/Khor and D4/Chin are jointly and severally liable to P for RM9,397,057.40 with interest;

Encony is liable to P for RM9,206,210.12 (the 1st to 5th transfers) with interest;

Eramas is liable to P for RM190,847.28 (the 6th to 9th transfers) with interest;

Under the tracing process on the RM4,034,917.70 (the 2nd transfer) that was used by Eramas to pay of for the Property, Eramas is additionally liable to P for RM11,178,313.90. Page 42 of 43

The Defendants are to pay P costs of RM50K (as agreed between them). Dated: 5 December 2024 KENNETH ST JAMES Judge Penang High Court Counsel/Solicitors: For the Plaintiff— Ranjit Singh, A. Suppiah, Karim Lim and David Tan [Messrs. Presgrave & Matthews (Georgetown)] For the 2nd Defendant—Dato’ Kiru and YH Yeo [Messrs. Shui Tai (Petaling Jaya)] For the 1st, 3rd and 4th Defendants—Vincent Lim [Messrs. Dennis Nik & Wong (Kuala Lumpur)] Legislation referred to:

Section 7 of the Companies Act 2016. Cases referred to:

Foskett v McKeown & Ors [2001] 1 AC 102 (HL); [2000] 3 All ER 97; [2000] 2 WLR 1299.

Takako Sakao v Ng Pek Yuen & Anor [2009] 6 MLJ 751 (FC); [2010] 2 AMR 609; [2010] 1 CLJ 381; [2009] 3 MLRA 74.

Perbadanan Kemajuan Pertanian Selangor v JW Properties Sdn Bhd [2017] 6 AMR 114 (FC); [2017] 8 CLJ 392; [2017] 5 MLRA 633; [2017] MLJU 1107.

Renault SA v Inokom Corporation Sdn Bhd & Anor and other applications [2010] 5 MLJ 394 (CA); [2010] 5 CLJ 32; [2008] 3

Muniandy a/l Nadasan & Ors v Dato’ Prem Krishnan Sahgal & Ors [2016] 11 MLJ 38 (HC); [2016] MLRHU 324.

Gurbachan Singh a/l Bagawan Singh & Ors v Vellasamy a/l Pennusamay & Ors [2015] 1 MLJ 773 (FC); [2015] 2 AMR 1; [2015] 1 CLJ 719; [2015] 1 MLRA 107.