Harvinder Singh A/L Santa Singh v Pu Say Chiang (W-02(NCvC)(W)-1943-10/2022)

Pu Say Chiang (No. K/P:690804-10-6267)

Mobile FPX Sdn. Bhd. (No. Syarikat:794790-M) ... Defendan-Defendan] CORAM: LIM CHONG FONG, JCA AZHAHARI KAMAL BIN RAMLI, JCA AHMAD KAMAL BIN MD. SHAHID, JCA GROUNDS OF JUDGMENT

This is an appeal by the appellant, who is the plaintiff in the High Court, against the decision of the learned Judicial Commissioner (JC) in dismissing his claim against the respondent, who is the defendant in the High Court.

In the High Court, the appellant's claim against the respondent is for the recovery of the sum of USD 1.5 million, being an advance payment made by the appellant for the benefit of the respondent.

The facts of the case have been neatly summarised by the learned JC in his grounds of judgment, which we now reproduce with minor modifications.

The appellant is a businessman and investor with experience in managing and investing in businesses relating to technology. The respondent is a director of a company registered as Mobile FPX Sdn. Bhd. (referred to as the Company). The company is the second defendant in the High Court, but not a party in this appeal.

On 23.9.2010, the Company entered into an agreement with Bank Islam Malaysia Berhad (referred to as BIMB) to supply a product known as Mobile Subscriber Identity Module (referred to as MPODs/the product) and its related services, which was reduced into a written agreement of even date (referred to as the BIMB Agreement).

As part of the Company's obligations under the BIMB Agreement, it was to source 150,000 units of the MPODs, which were valued at USD 1.5 million from a Singaporean company called Watchdata Technologies Pte Ltd (referred to as Watchdata) and to deliver the same to BIMB through a purchase order dated 11.10.2010.

The initial arrangement between the respondent and BIMB was for the Company to procure and deliver the MPODs utilizing the Letter of Credit (referred to as the LOC) issued by BIMB. The MPODs would then be leased to BIMB for thirty-six (36) months, and BIMB would pay the Company monthly lease rental into a collection account. However, the company later experienced financial difficulties in completing the order of 150,000 units of the MPODs.

At this point of time, the appellant came into the picture. The appellant was introduced to the respondent. Upon perusing the Company's profile, the appellant was sceptical about the financial situation of the Company because it was encumbered with multiple trading debts; hence he was quite reluctant to invest in the Company directly.

However, the appellant then proposed to acquire all of the Company's assets and liabilities, and intellectual property rights relating to its business including the BIMB Contract for RM4 million. This was done through a shell company in Singapore known as Tootpay Pte Ltd in which the plaintiff held 30% of the shares together with an individual by the name of Balvinder Singh (DW3) who held the remaining 70% of the shares. Tootpay Pte Ltd then acquired 100% shares of a Malaysian company known as Langkah VIP Sdn Bhd which was later renamed Tootpay Sdn Bhd (referred to as Tootpay). This arrangement was to insulate the appellant from the historical financial liabilities of the Company and any probable future claim which would affect the profitability of the BIMB Contract.

This acquisition of the Company's assets and Intellectual property rights was then reduced into writing in the form of Assets Purchase Agreement dated 1.1.2011 between Langkah VIP Sdn Bhd i.e. Tootpay Sdn Bhd and the Company.

The crucial clause of the Assets Purchase Agreement is clause 5A.01 where the Company is required to novate the BIMB Contract in favour of Tootpay. Clause 5A.01 provides: "On or before the Completion Date, the Seller should procure a novation of the following in favour of the buyer or its nominees, such novation to be effective from the Completion date: -

The Bank Islam Agreement (as defined in Schedule 1 annexed hereto); and

The OEM Contract (as define in Schedule 1 annexed hereto), collectively, the "Novated Agreements"

The dispute between the parties arose when the novation agreement for the BIMB Contract with BIMB did not materialise quickly enough. The appellant, in fear that the financial constraints that the Company was facing could jeopardise that BIMB Contract, agreed to advance the payments to Watchdata in return for: a) the LOC remaining unutilised and being returned; and b) a fresh LOC issued by BIMB after the novation to Tootpay.

It is the appellant's case that his agreement to give the advance was with the understanding that the advances would be repaid by the respondent.

The appellant paid the sum of USD 1.5 million to Watchdata for the delivery of the MPODs. This payment was not disputed by the parties. However, the appellant contended that the respondent is liable to repay the sum of USD 1.5 million advanced to him. On the other hand, the respondent argued that BIMB had granted the Company financial facilities amounting to RM 4.5 million (which is equivalent to USD 1.5 million) to finance the Company's purchase of the 150,000 units of the MPODs. This financing was tied to the BIMB Contract and had been released to the Company. The LOC for the purchase of the MPODs remained unutilised due to this arrangement between the appellant and the respondent.

It is not disputed that the novation had never been completed. In this respect, the appellant argued that the Company's duty to novate the agreement rested solely on the respondent on the basis that he was the sole director of the Company and was involved in the operations of the Company after the Assets Purchase Agreement was signed. The respondent, however, argued that he had attempted to complete the novation arrangement, but BIMB had rejected the novation agreement; hence it was unsuccessful. It was further contended that the rejection triggered the financing repayment by the Company. Hence, the Company's business could not be novated and has been closed down after the completion of the 36-month rental lease.

On the repayment of the USD 1.5 million advancement, the appellant contended that the respondent had admitted to the fact that the payments to Watchdata by the appellant were indeed advances, hence the respondent must repay the appellant. However, the respondent countered that the Company had deposited into Tootpay's account a sum of RM3.5 million which left a balance payable of RM1 million. On the balance, the respondent claimed that the appellant had reneged in a separate agreement to transfer shares held by DW3 (who is holding the shares as proxy for the respondent) to the respondent. In this regard, the respondent claimed that he stood to lose everything if he was not made a proper shareholder.

In dismissing the appellant's claim, the learned JC held that the appellant had failed to prove that the respondent had given any assurance, guarantee or representation that he would personally repay the USD 1.5 million advanced by the appellant to Watchdata. In this regard, the learned JC opined that there was no evidence, either oral or documentary to support the appellant's claim that such an agreement or arrangement to repay exists between the appellant and the respondent. There is also no provision under the Assets Purchase Agreement obligating the respondent to be personally liable to repay the appellant in the event that the novation of the BIMB Contract failed.

It is also the learned JC's finding that the respondent, being the director of the Company, is not personally liable for the debts or obligations of the Company and that there were no special circumstances justifying the lifting the corporate veil of the Company.

The learned JC opined that the payments made by the appellant were in fact made on behalf of Langkah VIP Sdn Bhd and/or Tootpay Sdn Bhd as stated in the remittance slips and not in his personal capacity. Hence, the appellant lacked locus standi to bring the claim in his personal capacity. According to the learned JC, Tootpay Sdn Bhd, and not the appellant, would have been the proper party to initiate the legal proceedings against the respondent.

In addition, the learned JC also held that due to the principle of privity of contract, the appellant's claim against the respondent is not sustainable because the relationship and obligation under the Assets Purchase Agreement and related transactions existed between the Company and Tootpay Sdn Bhd and not between the respondent and appellant personally.

With regard to the issue of pleadings, the learned JC acknowledged the distinction between common law fraud and equitable fraud as expounded by the Federal Court in the case of Takako Sakao v Ng Pek Tuen & Anor [2010] 1 CLJ 381; [2009] 6 MLJ 751; [2009] 3 MLRA 74. However, the learned JC opined that the appellant had not pleaded any particulars in the statement of claim to suggest that his claim is under equitable fraud. In his opinion, any attempt to say that the fraud alleged in this claim is under equitable fraud at post-trial stage could be greatly unfair and prejudicial to the respondent. The learned JC also held that the appellant had failed to establish any unconscionable act of the respondent, hence in his judgment, the learned JC found that the fraud alleged by the appellant is confined to common law fraud. In this respect, since the common law fraud would require proof of intention to defraud and since the appellant had failed to establish the element of intention, the learned JC held that the appellant had failed to prove his case on the balance of probabilities.

We start by reminding ourselves that the appeal before us arises from a full trial. It is settled law that the appellate court would be slow in interfering with the finding of facts arrived at by the trial court. This is because the finding of facts involves the process of evaluating the testimonies of the witnesses called by the parties. After hearing the witnesses, it is imperative for the trial court to evaluate the credibility and veracity of the evidence and to decide whether to believe or disbelieve any one of the witnesses. This exercise is best left to the trial court.

However, the appellate court is under a duty to intervene with the finding of fact of the trial court, if among others, the trial court has so fundamentally misdirected itself that one may safely say that no reasonable court which had properly directed itself and asked the correct questions would have arrived at the same conclusion (see Sivalingam a/l Periasamy v Periasamy & Anor [1995] 3 MLJ 395; [1996] 4 CLJ 545; [1995] 2 MLRA 432). Based on the settled law, we will now deliberate on appeal.

The crux of the appellant's claim against the respondent centres on his allegation that the respondent had induced him (the appellant) to advance USD1.5 million to pay Watchdata and that the respondent had given assurance/representation to repay such advances made by the appellant. In this respect, the appellant pleaded that the advances were tainted with the purported fraud committed by the respondent.

To the contrary, the respondent's defence is premised on his contention that the advances made by the appellant made on behalf of Langkah VIP (or Tootpay Sdn Bhd). It is also the respondent's case that he had not made any assurances or representation to repay the said advances.

Upon considering the memorandum of appeal, we are of the opinion that the main issue for determination in this appeal can be summarised as follows: I. Whether, based on the pleading, the learned JC was correct in confining himself to the issue of common law fraud and not considering whether the appellant had proven the element of equitable fraud as well; and II. Whether, based on the evidence, the learned JC was correct in finding that the appellant has failed to prove common law fraud or equitable fraud against the respondent. Whether, based on the pleading, the learned JC was correct in confining himself to the issue of common law fraud and not considering whether the appellant had proven the element of equitable fraud as well.

It is settled law that the distinction between common law fraud and equitable fraud lies on the element of intention to deceive. The term "common law fraud" is often used to describe the tort of deceit or the making of fraudulent misrepresentation. To succeed, the plaintiff must prove that a false representation has been made knowingly; without belief in its truth; or recklessly, carelessly whether it be true or false. There must be a lack of an honest belief in the truth of the representation and there must be proof of actual intention to deceive (see Takako Sakao v Ng Pek Yuen & Anor (supra)).

On the other hand, intention to deceive is not the element of equitable fraud. In essence, equitable fraud is associated with unconscionable conduct in circumstances where there is a relationship of trust or confidence, be it express, implied or imposed.

In the case of Takako Sakao (supra), the Federal Court referred to the case of The Bell Group Ltd (in liquidation) v Westpac Banking Corporation (no 9) [2008] WASC 239; 70 ACSR 1 on the distinction between equitable fraud and fraud at common law as follows: "[24] ...

2.1.2 Equitable fraud and common law fraud compared

The term common law fraud is often used to describe the tort of deceit, or the making of fraudulent misrepresentation. The tort of deceit is said to encompass cases where the defendant knowingly recklessly makes a false statement, with the intention that another will rely on it to his or her detriment.

Derry v Peek [1880] UKHC 1; [1889] 14 App Cas 337 illustrates the principle that honesty is a duty of universal obligation, existing independently of contract or fiduciary obligation. In Derry v Peek, the House of Lords rejected the argument that a claim of negligence would support an action for fraudulent misrepresentation. In so doing, their Lordships set the standard for common law fraud. Lord Herschell said, at 374, that to succeed, a plaintiff must prove 'that a false representation has been made (1) knowingly, or (2) without belief in its truth or (3) recklessly, careless whether it be true or false'. In other words, there must be a lack of honest belief in its truth of the representation. In Armitage v Nurse [1997] EWCA Civ 1279; [1998] Ch 241; [1997] 3 WLR 1046, Millet LJ discussed the meaning of 'actual fraud' in the context of an exemption clause. At 1053, His Lordship described actual fraud as connoting, at least. 'an intention on the part of the trustee to pursue a particular cause of action, either knowingly that it is contrary to the interest of the beneficiaries or being recklessly indifferent whether it is contrary to their interest or not.

This, then, marks out a significant difference between common law fraud and equitable fraud. The latter does not require proof of an actual intention to deceive. To summarise, a plea of fraud at common law will not succeed absent proof of an intention to deceive. Such an intention is not an ingredient of equitable fraud which is, essentially speaking, unconscionable conduct in circumstances where there exist or is implied or imposed a relationship of trust or confidence." Whether fraud has been sufficiently pleaded

In view of the distinction between common law fraud and equitable fraud, it is incumbent for this court to consider whether the appellant has sufficiently pleaded material facts to support his claim of fraud.

On this issue, we find guidance from the case of Zung Zang Wood Products Sdn Bhd & Ors v Kwan Chee Hang Sdn Bhd & Ors [2014] 2 CLJ 445; [2014] 2 MLJ 799; [2014] 5 MLRA 85 In discussing the question of pleading, Jeffery Tan FCJ opines as follows: "The particular kind of fraud (actual or constructive) was not classified by the respondents. But there was no requirement for that to be classified. There was also no requirement that the means by which the respondents were kept from knowledge of their right to institute action be classified as actual or constructive. 'Conclusions of law, or of mixed law and fact, are no longer to be pleaded. It is for the court to declare the law arising from the facts proved before it (Odgers on Civil Court Actions, (24th Ed), at p 151). What was required of the pleadings was that the appellants had adequate notice of the case to meet. The pleading of fraud with particulars was enough for the appellants to know what to answer. With those particulars, there was notice of the kind of fraud alleged. It is not the label to it, but the pleaded facts that determine the ultimate classification of the kind of fraud. Whether it is actual, constructive or equitable fraud is not for the pleader but for the trier to find. So in Nocton v Lord Ashburton [1914] AC 932, the House of Lord held that the statement of claim supported the cause of action for equitable fraud involving a breach of fiduciary duty which entitled the plaintiff to relief, although the charge of common law fraud failed at the trial, and the charge of equitable fraud did not emerge until the case reached the House of Lords (Spencer Bower, Turner and Handley, Actionable Misrepresentation (4th Ed) at p 386)"

Zung Zang Wood Product (supra) not only has reiterated the importance of the rule of pleadings in civil litigation, but also has illustrated how the said rules is to be complied with, with particular reference to claims involving the allegation of fraud. What is required of a plaintiff is to plead fraud with sufficient particulars so as to give notice to the defendant the case they need to answer. The duty of the court is to determine the classification of fraud based on the plaintiff's pleaded facts.

In this case, the appellant submitted that he had plead sufficient fact and circumstances that give rise to the claim of equitable fraud. At paragraph 19 of the Statement of Claim, it was pleaded as follows: "The Fraud

The Plaintiff contends and will contend that the Defendants have both jointly and/or individually conspired to defraud the Plaintiff the sum of US$ 1.5 Million as aforesaid. The particulars of the acts and/or omissions of the defendants or either of them in furtherance of the conspiracy to defraud the Plaintiff are as follows:

Deceiving the Plaintiff into paying the advances of US$1.5 million to Watchdata by giving false and/or misleading assurances to the Plaintiff that the 1st and/or 2nd defendants would repay the Plaintiff fully upon receipt of the monies or other payments from BIMB towards the MPODs and/or the Bank Islam Contract, as and when the payments were received;

(ii) Failure to inform the Plaintiff of the receipt of the monies or any other payments from BIMB towards the MPODs and/or Bank Islam Contract as and when the payments were received;

(iii) Expressly and/or impliedly misleading the Plaintiff to believe that the monies or any other payments due from BIMB towards the MPODs and/or the Bank Islam Contract had yet to be received.

(iv) Diverting the monies received from BIMB towards MPODs and/or the Bank Islam Contract towards and for their personal and other use and/or to other third parties without the Plaintiff's knowledge or consent;

Failure to repay the Plaintiff for the advances made by him personally to Watchdata in the sum of US$1.5 million by fraudulent means and/or devices;

(vi) Colluding with other party/ies to divert monies and funds from the BIMB Bank account and/or any other account/s where monies from BIMB towards the MPODs and/or the Bank Islam Contract were received; and/or

(vii) Fraudulently and/or wrongfully appropriating all the benefits of the Bank Islam Contract without reimbursing the Plaintiff of the advances made by the Plaintiff towards the Bank Islam Contract."

Earlier, in paragraph 17 and 18, the appellant pleaded as follows: "Failure to Make Repayments to Plaintiff

Since the last payment to Watchdata, the Plaintiff has been making inquiries with William as to whether BIMB has made payments to Mobile FPX in respect of the MPODs. Whenever inquiries were made by the Plaintiff, William claimed that BIMB had yet to release the payments to Mobile FPX due to the various issues under the Bank Islam Contract. The Plaintiff accepted the explanations given by William in good faith and believed that the payments will be made in due course.

In or about 2018, the Plaintiff discovered that BIMB had in fact already settled all payments due and owing to Mobile FPX in respect of the MPODs under the Bank Islam Contract. The Plaintiff then confronted William regarding this and was informed by William that Mobile FPX and William personally required the monies for other projects and both were not in a position to reimburse the Plaintiff. William has failed and/or refused to provide the Plaintiff with details of the payments made by BIMB."

It is quite obvious that the appellant had not specifically categorised the allegation of fraud against the respondent. In paragraph 73 and 74 of the grounds of judgment, the learned JC stated that: [73] In view that the Plaintiff has not pleaded any particulars in the statement of claims to suggest that his claim is under equitable fraud, any attempt to say that the fraud alleged in this case is under equitable fraud at posttrial stage is fruitless and futile effort, it could be greatly unfair and prejudicial to D1 if the claim under equitable trust is allowed. Also, I agree with counsel for D1 that the plaintiff has failed to establish any unconscionable act. Thus, the fraud alleged by the Plaintiff is confined to common law fraud. As mentioned earlier, under common law fraud, establishment of intention is a must. I see no evidence adduced by the Plaintiff in this case to establish such intention. Hence, the Plaintiff's claim under common law fraud has also failed. [74] To complete his refutation of the Plaintiff's claim against him, D1 also argued that the burden is on the plaintiff to prove that the circumstances of this case shows a clear inference of fraud, be it common law fraud or equitable fraud based on its pleaded set of facts. This the Plaintiff has not done. Therefore, I find that the Plaintiff's claim falls on all counts.'

We are of the view that the learned JC had erred in law when he shut off the appellant's claim on equitable fraud simply on the ground that the appellant has 'not pleaded any particulars in the statement to suggest his claim is under equitable fraud' and that 'any attempt to say that the fraud alleged in this case is under equitable fraud at post-trial stage is fruitless and futile effort' and that 'it could be greatly unfair and prejudicial to D1 if the claim under equitable fraud is allowed'. By such statement, the learned JC has acted outside the guideline as laid down by Zung Zang Wood Product (supra), i.e. the court must examine the statement of claim and determine whether sufficient particulars have been pleaded so as to give the respondent sufficient notice of the claim against him. In the context of the dispute before him, there is no obligation for the appellant to label the category of fraud alleged against the respondent. It is the pleaded facts of the appellant that would determine the ultimate classification of the category of fraud and it is the duty of the learned JC to make the necessary finding based on the evidence before him.

Be that as it may, and in all fairness to the learned JC, in the later part of paragraph 73, he has found that the appellant had failed to establish any unconscionable conduct and that, based on the pleaded set of facts, the appellant has failed to prove fraud be it common law fraud or equitable fraud. It could be inferred that, he did consider the element of equitable fraud in his deliberation of the issues before him.

Hence, while we are of the view that the learned JC had erred in his finding on the issue of pleading, we would now consider the next issue in this appeal. Whether, based on the evidence, the learned JC was correct in finding that the appellant has failed to prove common law fraud or equitable fraud against the respondent.

In the light of the pleadings, the appellant case against the respondent can be summarised as follows:

the respondent had given false and misleading assurances to the appellant that the respondent would repay the appellant the advances of USD 1.5 million made by the appellant to Watchdata. And based on the purported assurances, the appellant had made advances of USD 1.5 million to Watchdata for the purchase of the MPODs.

(ii) the respondent had not informed the appellant about the payment received from BIMB. In this regard, it is the appellant's contention that the respondent had allegedly misled the appellant into believing that the payment had not been received from BIMB in respect of the BIMB Contract when in fact it had been received.

(iii) the respondent had allegedly diverted the monies received from BIMB under the BIMB Contract for personal use together with the other third party without the appellant knowledge. In this regard, the appellant also contended that the appellant had fraudulently devise plans together with other third parties, not to pay or repay the appellant of the USD1.5 million.

(iv) the respondent had allegedly colluded with other third parties to divert the monies received from BIMB under the said BIMB Contract. In this regard the appellant contended that the respondent had appropriated all the benefits of the said BIMB Contract fraudulently and wrongfully without reimbursing the appellant for the advances made by the appellant.

In view of the limited power of this court in disturbing the finding of fact of the trial court, it is now pertinent for us to scrutinise the finding of the learned JC and determine whether there are any appealable error warranting our intervention. Whether the respondent had given false and misleading assurances to the appellant that the respondent would repay the appellant for the advances of USD 1.5 million made by the appellant to Watchdata.

After assessing the submissions of the parties, the learned JC concluded, at paragraph [59], [60] and [61] of his grounds of judgment that: [59] I am in total agreement with D1 regarding this. As I have discussed earlier, there was no formal agreement executed by the Plaintiff and D1 to suggest that D1 is obligated to repay the advances made by the Plaintiff. Likewise, the APA executed between the parties does not have any provision to express this. The absence of such a crucial term in the APA could draw inference that no such term had ever been promised by the parties. Furthermore, there is no evidence, oral or documentary, to suggest that D1 has in fact given any assurance, guarantee or representation to the Plaintiff with regard to the repayment of the advances made by the Plaintiff. Although the Plaintiff had alleged that the 1st and 2nd Meetings really took place, the Plaintiff had failed to prove that D1 had on those meetings given any assurance or representation alleged by the Plaintiff. [60] Without any contemporaneous documentary evidence to corroborate the Plaintiff's oral testimony, the existence of such a crucial arrangement is dubious. It is against commercial sense or common sense that such a requirement has not been documented anywhere if indeed the parties have agreed to this. Any prudent and seasoned businessman like the Plaintiff here would have insisted for this to be written down and agreed by the parties before any advances would be given. Bearing in mind the first of these advances were made almost the same period of the time when the APA was executed by the parties, to the very least, the Plaintiff would have asked for this arrangement be inserted in the APA (or in a supplementary agreement). In the alternative, a simple letter or note could be drafted and executed by the parties to indicate such arrangement and or guarantee. None of these have been done in this Case. It is illogical and noncommonsensible that such a crucial term is not documented anywhere if it was indeed agreed by the parties. Thus, there is nothing to even persuade this court of the existence of such an arrangement. I find the following ratio of Arden LJ in English case of Re Mumtaz Properties Ltd; Wetton (as liq of Mumtaz Properties Ltd) v Ahmed & others [2011] EWCA Civ 610, [2012] 2 BCLC 109, [2011] NLJR 779, [2011] All ER (d) 237 (may) extremely relevant: [14] In my judgment, contemporaneous documentation is of the very greatest importance in assessing credibility. moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral agreement correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence." [Emphasis added] [61] In similar veins, it is my finding that the clause regarding the personal liability of D1 is so crucial that it should have been documented either in the APA or elsewhere if the oral evidence by the Plaintiff (PW2) is correct. However, no such contemporaneous written documentation has been tendered. I thus find the absence of such a document conspicuous and infer that such an arrangement (that D1 is to be personally liable) has never been agreed upon by the parties.

Having examined the grounds of judgment and in particular to the conclusion made by the learned JC, it is our considered view that the learned JC was merely focusing on the fact that:

there is no formal agreement between the parties that the respondent is obligated to repay the advances made by the appellant;

(ii) there is no evidence that the respondent had given assurances and guarantee or representation to the appellant regarding the repayment of the advances by the appellant;

(iii) no contemporaneous documentary evidence corroborating the appellant's oral testimony on the existence of the arrangement for the respondent to repay the advances;

(iv) as a prudent and seasoned businessman and having legal advisor, the appellant should have insisted that any arrangement on the repayment of the said advances should be documented, especially in the APA.

However, from the record of appeal, it appears that the learned JC had failed to consider several relevant facts in favour of the appellant. Those relevant facts are:

(i)(a) the cross examination of DW2 (the respondent's witness) which revealed that there was a collateral agreement that was agreed upon between the parties pertaining to the novation of the BIMB Contract and the usage of the LOC issued by BIMB. In the cross examination of DW2 on 24.6.2022 the witness revealed as follows: BSK: Agreed? Ok, ok. Now because of the way the Bank Islam contract was structured which I went through with you just now, my question to you is that, if the LC had been used to pay Watchdata, if the letter of credit had been used to pay Watchdata for the delivery of the MPODs, it would have become very difficult to novate the various agreements, the three agreements that we talked about. MOHD: Yes. BSL : In fact, you already said in your examination-inchief. Now, do you agree that there was a discussion and it was agreed that the LC would be returned to Bank Islam and Mr Harvinder would advance his personal funds to pay Watchdata until such time that the contracts can be novated and some sort of a new financing can be arranged with Bank Islam for the MPODs? Were you privy to that discussion? MOHD: Yes, privy to discussion. Yes. BSK: You were. Ok, thank you. Now, this was a personal advance made by Mr Harvinder for the MPODs, from his personal bank account in Singapore, right? MOHD: Yes. BSK: He paid the money directly to Watchdata from his personal bank account in Singapore. RFG Bank. MOHD: From a facility by EPG Bank.

(i)(b) Later, in re-examination, DW 2 clarified as follows: AO: I see. Now, why you say that if the LC has been used, it will be difficult to novate? Do you know why you say that? In cross-examination, it was asked, you know, by my learned friend-MOHD: Naturally, if you have a lot of transaction activities or facilities tied up to Mobile FPX, it will getting more messier, and more difficult to novate. It will be easier to novate if you don't have all this string, or all these restrictions, whereby you have to do all legal documents to undo all these things. So, by having lesser agreement tied to the novation, it will be faster and easier.

(ii)(a) an email dated 27.12.2012 from one Mr Michael Loo, on behalf of the appellant, to Balvinder Singh (DW3) seeking to absolve himself of his personal responsibility for the monies due and owing to the appellant. In view of the importance of the content of the email, we reproduce the same herein: "Dear Balvinder, Subsequent to the meeting with Harvinder on 27 Dec 2012, the meeting on 27 Dec 2012 between Balvinder, Henry, Faudzi and myself have come to an agreement on the following: 1) The entire amount due to Harvinder shall be borne by Balvinder, Henry and Faudzi. I shall be absolved of all claims from Harvinder. 2) Balvinder, Henry and Faudzi shall offer to purchase my 28% share in Tootpay Group, presently held under Balvinder and Faudzi as nominees, within 2 weeks at a mutually agreed purchase price; and 3) I shall offer to sell my shares in Wave X to Balvinder, henry and Faudzi at a mutually agreeable price after item A formal agreement shall be drafted to account for the above."

(ii)(b) We are of the view that from the phrase 'I shall be absolved of all claims from Harvinder", the learned JC could have made an inference that there was an admission by the respondent that he had made the assurance or representation that he would repay the advances from the appellant being the payments made to the Company.

(iii) The appellant was relying on an oral collateral agreement between the parties that the respondent had orally made an assurance or representation that he would repay the advances made by the appellant to the Company.

We are of the considered opinion that the evidence as referred to above are relevant to prove that the appellant had made advances to Watchdata personally so as to expedite the novation process of the BIMB Contract to Tootpay Sdn Bhd. The evidence also supported the appellant's case that the first LOC issued by BIMB was not utilised by the Company to pay for the MPODs that was supplied to BIMB as this would complicate the process of novating the BIMB Contract to Tootpay, hence necessitating the personal advance from the appellant.

On the other hand, the email dated 27 December 2012, if it is considered from a proper perspective, shows that the respondent had acknowledged the fact that he had to pay the appellant the amount that had been advanced by the appellant to the Company. The email also shows that the meeting on 27 December 2012 had resolved that the respondent would be absolved from repaying the sum advanced by the appellant as the same would be repaid by Balvinder, Henry and Faudzi.

The reasonable inference that can be made from these evidences is that the appellant had proven that the respondent had made assurances that he would repay the appellant for the advances of USD 1.5 million made by the appellant. However, in his ground of judgment the learned JC did not consider the above relevant facts. This, in our view, is a plain error committed by the learned JC which warrants appellate intervention by this court. Whether common law fraud or equitable fraud has been proven

At the risk of repetition common law fraud involves an intentional misrepresentation or concealment of fact made to induce another party to act. This category of fraud requires proof of actual dishonesty and intent to deceive. Whereas, equitable fraud is broader than common law fraud and can include conduct that is unconscionable, even if not deliberately deceptive (see Takako Sakao (supra)). The importance of this principle is that the successful party (in alleging fraud) would be entitled to lift the corporate veil of the company that is guilty of fraud and to attach liability on its director or shareholder.

In his judgment, the learned JC had confined himself to the common law fraud and ruled that the appellant had failed to prove the element of intention hence dismissing the appellant's claim of common law fraud. At the same time, the learned JC also found that there is no proof of unconscionable conduct and thereafter held that the appellant had failed to prove fraud, both common law fraud and equitable fraud.

Can this finding be sustained in light of the evidence adduced during the trial?

From the appeal record, the following evidence have been adduced by the appellant to prove fraud:

the respondent is the sole director of the Company and had been the controlling mind of the Company;

(ii) after the appellant resigned as director of Tootpay, DW2 (respondent's witness Faudzi) was appointed to replace the appellant on 17.10.2011 and was then appointed as director of the Company on 28.10.2011 when DW2 was still receiving salary from Tootpay.

(iii) DW2 was also the director of the Company when the RM4.5 million was received from BIMB and had co-signed all cheques for the payment out of the money from the Company.

(iv) the respondent did receive benefit from the Assets Purchase Agreement upon transferring the assets to Tootpay. The Company received RM4.5 million from BIMB which was utilized to pay its debts. After the transfer of the assets to Tootpay, the Company was supposed to become dormant and left only with liabilities. However, the Company continued to receive the 30% commission from BIMB as it had failed to novate the BIMB Contract to Tootpay.

the respondent did not immediately pay the appellant the RM4.5 million which was received from BIMB, being the purchase price of the MPODs which the appellant paid in advance. Instead, the Company only paid RM3 million to Tootpay and the respondent had retained the balance of RM 1 million claiming that he was justified in doing so because of a dispute regarding the 70% shares between himself on the one hand and Henry, Balvinder and Faudzi. In this respect, the appellant has nothing to do with the dispute and the monies which were rightfully repayable to the appellant cannot be held back merely because the dispute between the group.

(vi) the appellant was never told about the receipt of the RM4.5 million from BIMB at the material time and only became aware of the dispute when he attended the meeting on 22.12.2012 to mediate the dispute between the group. At the material time the group merely told the appellant that the sum of RM4.5 million from BIMB is an amount due to the appellant will eventually be paid when the money is received from BIMB. It is to be noted that after this meeting, another meeting was held among the group which culminated in the email dated 27.12.2012 where the group had agreed to repay the advance to the appellant and then, the respondent would be absolved from paying the advance.

(vii) there is no real effort by the respondent, to procure the novation of the BIMB Contract to Tootpay. In fact, as submitted by the appellant, even the BIMB officer who testified for the respondent stated that she was given the impression that the Company had changed their name to Tootpay.

(viii) the production of a dubious Tax Invoice dated 19.1.2011 purportedly issued by Tootpay to the Company for the delivery of the MPODs on the following reasons: a) that the Tax Invoice was an unofficial document created only for the purposes of capturing the transaction to be dealt with at a later time. b) the Tax Invoice was not supported by any valid transaction. It did not reflect any actual transaction and is merely a 'book entry'; c) the Tax Invoice was issued even though most of the MPODs had yet to be delivered at the time of its issuance; d) the respondent himself testified that the Company had never received the Tax Invoice and he had only sighted the said Tax Invoice for the first time when he was questioned by the police.

(ix) the cross examination of DW2 that revealed that the entries made into the financial statements of Tootpay Singapore and Tootpay were questionable as the Tax Invoice had been shown to be sham document. The entries based of the Tax Invoice did not reflect the actual transactions and income of Tootpay and fell short of the applicable accounting standards to be observed in preparing the accounts of the company.

These evidences, if considered in a proper perspective, would at least show unconscionable acts of the respondent in denying the appellant's entitlement to the repayment of the sum advanced for the benefit of the Company. It shows that there were positive steps taken by the respondent and the Company to defraud the appellant by not repaying the sum that had been advanced to Watchdata. Most importantly, the evidence also show that the respondent had admitted that the appellant is entitled to be repaid, but had push the burden of repaying the advances/loan to Balvinder, Henry and Faudzi. By doing so, the respondent was hoping that he would be absolved from his obligation to repay the plaintiff of the advance. However, when the Company received the payment of RM4.5 million, the respondent chose not to repay the advances to the appellant, and instead had paid the other creditor and withheld the balance RM1 million based on the purported dispute on the shareholding of the Company.

The standard of proof of fraud in civil cases is on the balance of probability. This principle has been laid down in the case of Sinnayah & Son Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1; [2015] 7 CLJ 584 ; [2015] 5 MLRA 191 where the Federal Court held: [52] We therefore reiterate that we agree and accept the rationale in In Re B (Children) (supra) that is, on the balance of probabilities, should apply. And perhaps it is not our 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."

In determining whether the appellant has discharged the standard of proof, it is the duty of the trial court to, among others, consider all relevant facts and to disregard all irrelevant facts. In this appeal, by not considering the relevant facts as referred to in paragraph 50 (i) to (ix) above, the learned JC has plainly erred in arriving at his decision.

For the reasons stated above, we are of the view that there are merits in this appeal. We allow the appeal and set aside the decision of the learned JC. We find that the appellant/plaintiff has proven his case on the balance of probabilities. We enter judgment in terms of the statement of claim. Costs of RM 55,000 here and below to the appellant, subject to allocator. Dated: 8 December, 2025 AZHAHARI KAMAL BIN RAMLI JUDGE

RISHIPAL SINGH [KENTH PARTNERSHIP]

NURSAIDATUL ATHIRAH BINTI ABDUL NAIM [ADRIAN, SYUHADA, SIA & ASSOCIATES]