Ho Hau Wong & 2 Lagi v Tan Kim Chuan & 10 Lagi (WA-22NCC-263-06/2017 (Lamp 9))

RED AND BLUE INVESTMENT CO LTD PLAINTIFFS

KPMG MANAGEMENT &

CHIN CHOONG HOONG @ PHILIP CHIN

CHING CHOONG KIT @ JOSPEH CHIN

CHIN PENG SIN DEFENDANTS JUDGMENT Introduction [1] This judgment is only pertaining to the first and second defendants’ application (‘the applicants’) to strike out the plaintiffs’ claim. The application is made pursuant to O. 18 r. 19(1)(b) and (d) of the Rules of Court 2012 (‘RC 2012’). 2 [2] In gist, the plaintiffs alleged that the applicants were negligent, and are claiming for declarations and damages with regards to the actions taken and/or omissions by the applicants. [3] The applicants’ took umbrage with the plaintiff’s claim. One of the grounds raised is that they were court experts appointed by the High Court and therefore enjoy immunity. The applicants therefore contended that the plaintiffs’ claim is an abuse of process. Brief facts [4] The first plaintiff is a Hong Kong resident, and is a director and shareholder of the second and third plaintiffs. The first defendant is the second defendant’s director of forensic services. The second defendant (‘KPMG’) provides audit, tax and advisory services for accounting matters. [5] This suit is a sequel from the suits filed by the plaintiffs in the Ipoh High Court against the third to eleventh defendants in

The suits were as follows:-

22NCVC-102-06/2013,

22NCVC-104-06/2013, and

22NCVC-109/2013. (‘the Ipoh suits’) 3 The claims were essentially over the shareholdings and properties of three companies, namely the third, 4th and 5th defendants (‘the companies’). [6] The parties had entered into consent orders for the Ipoh suits on the 15 January 2014. These orders were recorded before Justice Lee Swee Seng. All three consent orders were similar in terms. [7] In essence, all parties agreed that KPMG be appointed as the court’s expert to determine within a month from the date of the consent orders the following:-

the contributions made by all original shareholders including their successors in title for the companies,

the payments made by the plaintiffs towards the companies’ account and the payments made by the companies,

the validity of payments and any unaccounted amount to ascertain the payments due from the sixth to eleventh defendants to the companies,

The value of the companies’ shares and assets, [8] It was also a term of the consent orders that KPMG’s decision be binding on all parties, and that they bear the 4 costs and expenses of KPMG’s appointment jointly and severally. [9] KPMG carried out its tasks, and prepared a report dated 9 June 2014. This report was titled ‘Independent Forensic Review – Final Report’. [10] The plaintiffs and the sixth to eleventh defendants then entered into a consent judgment before Justice Lee Swee Seng on the 24 June 2014 (‘consent judgment’). Only one of the terms concerned KPMG, where it was again appointed as the court’s expert to determine the ratio of the parties’ shares. [11] Subsequent to the consent judgment, the applicants prepared two reports through letters dated 30 January 2015 and 16 February 2015. [12] The sixth to eleventh defendants then instructed the companies’ company secretary to rectify the shareholdings of the companies based on KPMG’s latest reports. [13] The plaintiffs were unhappy with the rectification, and commenced several suits against the sixth to eleventh in 2015 for an loss of shares as a result of the alleged erroneous rectification of shareholding in the companies. [14] As for this suit, the plaintiffs alleged that the defendants were negligent and in breach of their duties in performing and/or 5 failing to perform their obligations under the consent order dated 15 January 2014 and the consent judgment dated 24 June 2014. [15] I shall for the purposes of the applicants’ application, not indulge in the labyrinth of interlocutory applications filed in the Ipoh suits, and shall merely focus on the grounds of the applicants’ application for brevity. The applicants’ application [16] The grounds that the applicants have sought to rely in support of their application were as follows:-

That the plaintiffs did not obtain the court’s leave to sue the applicants as officers of the court,

That there is multiplicity of proceedings, and

This suit had a collateral purpose. Findings [17] The law on striking out is settled and needs no elaboration. The Supreme Court’s decision in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 (SC) is the foremost authority on striking out applications, where the court stipulated that a claim should only be struck out if it is obviously unsustainable. 6 [18] I have considered all three grounds, and came to the conclusion that the applicants’ application has merits based on the first two grounds. Leave of court has not been obtained [19] It is not disputed that KPMG’s appointment as an expert was made by the court pursuant to O. 40 RC 2012. By virtue of this, KPMG’s position as a court expert is that of an officer of the court; Cassin v Richardson [2006] NZFLR 1068. [20] The Supreme Court then in Zainal Abidin Putih & Anor v Che Wan Development Sdn Bhd [1992] 2 MLJ 233 (SC) held that the appellants appointment as receivers was made by the court, and that they were as such first and foremost officers of the court. The Supreme Court also held that as court officers, they are only beholden to the court. The court also emphasized that they do not stand as agents to the parties in the suit. [21] The consequence of their stature as officers of the court is this: that no action can be brought against them without firstly obtaining the court’s leave. [22] The case of Re Maidstone Palace of Varieties Limited. Blair v Maidstone Palace of Varieties [1909] 2 Ch 283, is most relevant. In that case, the receiver took out an application to restrain the respondent from taking proceedings against it. 7 The application was allowed. Neville J in his judgment held as follows:- “In this case the applicant is a receiver appointed by this Court in a debenture-holders’ action, and by virtue of that appointment he has had the management of the theatre known as the Maidstone Palace of Varieties. In the course of that management he made use of certain plant which is claimed by the respondent company as their property. They say that he had no right to use it except on the terms of paying them a rent, and they claim a considerable sum. It appears to me that a dispute of that kind is one which, as is shown by Aston v. Heron, the Court will deal with itself, and that it will not allow its officer to be subject to an action in another Court with reference to his conduct in the discharge of the duties of his office, whether right or wrong. The proper remedy for any one aggrieved by his conduct is to apply to this Court in the action in which he was appointed. If any wrong has been done by the officer, the Court will no doubt see that justice is done, but no one has a right to sue such an officer in another Court without the sanction of this Court. (pg 286) (emphasis added) [23] The ratio in Re Maidstone Palace (supra) was adapted by the Supreme Court in Zainal Abidin Putih & Anor v Che Wan Development Sdn Bhd (supra), where the Supreme Court held as follows:- 8 But the important point in this case was that as the appellants are officers of the court, leave of the court should have been obtained to proceed against them in the second originating summons and the case of Re Maidstone Palace of Varieties Ltd was correctly cited by counsel for the appellants in support of his submission that leave of court was necessary. Unfortunately, the preliminary objection of counsel in the lower court was overruled by the learned judge for if his Lordship had upheld that preliminary objection, then the further prosecution of the second originating summons should have been restrained and dismissed with costs if leave was not obtained.” [24] It is therefore sacrosanct, that leave of the court is firstly required before an action can be commenced against its officer. In this case, the plaintiffs should have sought leave from the Ipoh High Court first. [25] The plaintiffs had clearly not taken any steps to obtain leave. Their suit here is clearly an abuse of the court’s process, and should therefore be struck out. Multiplicity of proceedings [26] The applicants took issue with the prayers sought in paragraph 34(a), (b) and (g) of the statement of claim. I shall firstly address paragraph 34(a) and (b), where the plaintiffs are seeking for the following declarations:- 9

That the applicants’ report dated 9 June 2014 are not binding on the parties, and

That the applicants’ letters dated 30 January 2015 and 16 February 2015 are not deemed as part as the applicants’ performance under the consent judgment, and that these two letters do not bind the parties in the Ipoh suit. [27] The consent orders recorded and the report dated 9 June 2014 remain valid and binding on the parties. If the declaration in prayer 34(a) is allowed, it would in effect nullify the binding effect of the report under the consent order. [28] The declaration sought under prayer 34(b) is spent. The sixth to eleventh defendants had already filed an application for further orders in the Ipoh High court. This application was subsequently heard by Komathy JC (as her ladyship was). Her ladyship had dismissed prayer (1) of the application, which is similar to the prayer sought under paragraph 34(b) of the statement of claim. There was no appeal against the dismissal of prayer 1. [29] The prayer sought is therefore res judicata and should not be litigated again. [30] As for the relief sought under paragraph 34(g), the plaintiff seeks to restrain the applicants from taking any further steps in relation to the Ipoh suits pending the disposal of this suit. 10 [31] The effect of this relief is to firstly restrain the applicants from carrying out their duties as the court’s experts. It would have the effect of restraining the proceedings ordered by the Ipoh High Court. [32] It is settled law that a High Court cannot restrain the proceedings of another High Court; Pilecon Engineering Bhd v Malayan Banking Bhd & Ors [2012] 3 MLJ 100 (HC) and Maybank Investment Bank Berhad & Ors v Million Westlink Sdn Bhd & Anor [2015] MLJU 2252 (HC). [33] The relief sought by the plaintiffs is therefore an abuse of process. Conclusion [34] I had for these reasons allowed the applicants’ application with costs of RM8,000.00. Dated: 17 July 2018 -sgd- (Mohamed Zaini Mazlan) Judge Kuala Lumpur High Court (Commercial Division) 11 Counsel for the plaintiff C. Vignesh Kumar Chellapah & Ritalakhsmi Chellapah [Messrs Vignesh Kumar & Associates] Counsel for the first and second defendants Andrew Chiew & Amandev Singh [Messrs Lee Hishamuddin Allen & Gledhill] -