Hsbc Bank Malaysia Berhad .... Plaintiff v 1. Jejak Maju Resources Sdn Bhd (MT5-22-758-2009)

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TENGKU SHAIFFULIAZAN BIN .... DEFENDANTS

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LIEW TENG SHUEN GROUNDS OF JUDGMENT Enclosure 60 – Application to stay proceeding [1] This is an application filed by the fifth and sixth defendants for an order for this Civil Suit to be stayed pending the disposal of the Malacca Sessions Court Criminal cases No.62-66,114,115,125-2009 2 (the criminal trial) and the Inquiry under Section 61 of the Anti-Money Laundering and Anti-Terrorism Financing Act ( the AMLATFA) arising from the criminal trial. [2] As one of the defendants in the present case was involved in the criminal trial, the factual background and chronology of events of this civil suit and the criminal trial must be set out in order to fully understand the circumstances of the case which had led the fifth and sixth defendants to file in this application. The factual background and chronology of events revealed from the affidavits by both parties and the cause papers are as follows: a) The plaintiff is a banker running its business under the name of HSBC Bank Malaysia Berhad. b) Jejak Maju Resources Sdn. Bhd, a RM2.00 company (the first defendant), Plustrans Resources Sdn Bhd (the third defendant) and Microvest Engineering Sdn Bhd (the fifth defendant) are companies having their registered offices at 5A-1, 1st Floor, Jalan Memanda 7, Ampang, 03-32, 3rd Floor, PKNS Complex, 3 Shah Alam and No.117, Block A Damansara Intan No.1, Jalan SS 20/27, Petaling Jaya respectively. c) The second defendant (Vijayalatha a/p Velupillai) was the director of the first defendant, while the fourth defendant was the director of the third defendant and the sixth defendant is the director of the fifth defendant. d) The second defendant is also a lawyer running her own legal practice under the name of Messrs. Vellupillai & Associates. e) A Brazilian company by the name of Target Trading (Target), a valued customer to HSBC Bank Brasil S.A Banco Multiplo (HSBC Brazil) had intended to purchase “high speed diesel” from Petronas Dagangan Berhad. However, Brazil HSBC was informed that this can only be carried out through a local supply agent. f) HSBC Brazil had then contacted the plaintiff to finance the purchase of the diesel by the first defendant, the local supply 4 agent. Thereafter, the first defendant was granted a banking facility by the plaintiff on the basis of a standby letter of credit provided to the plaintiff by HSBC Brazil. g) Subsequently, a letter of offer dated 29.4.2008 was issued by the plaintiff to the first defendant agreeing to provide banking facilities up to USD 5.4 million (the funds) to finance the purchase of the diesel. h) On 29.4.2008, the plaintiff had alleged that an instruction was received from HSBC Brazil purportedly made on behalf of Target instructing the plaintiff to transfer the sum of USD 4.55 million to a Petronas account with Malayan Banking Bhd (MBB). On the same day, the plaintiff had also received an insistent request from the first defendant to transfer the same amount into the MBB account. i) Later, the plaintiff found out that the account number belongs to the third defendant who, the second defendant claimed was a Petronas dealer. 5 j) Upon request by the second defendant, the plaintiff had also on 2.5.2008 disbursed a sum of USD 0.75 million to the second defendant’s legal firm purportedly for shipping expenses. k) The first defendant had defaulted payment of the banking facility granted earlier. l) The plaintiff had also later discovered inter alia the following facts:

there was actually no transaction between the first defendant and Petronas.

(ii) documents relating the to the diesel’s sale and purchase transactions were confirmed forged documents.

(iii) the third defendant had paid a sum of USD 4 million to the fifth defendant.

(iv) the third defendant had paid RM1 million each to the fourth defendant and a person by the name of Mohd. Fuad. vi) a sum of USD 3 million was paid by the fifth defendant to the sixth defendant. 6 vii) the entire transaction in connection with the disbursement of USD 5.4 million by the plaintiff to the first defendant and thereafter to the rest of the defendants was a fraudulent transaction. m) On 18.6.2008, the second defendant had lodged a police report against, inter alia the fifth and sixth defendants, accusing that the fifth and sixth defendants were conspiring with the third defendant to defraud her in the sale and purchase dealings for the diesel. n) On 26.6.2008, the plaintiff lodged a police report alleging that they have been defrauded by a syndicate consisting of the above named defendants for the sum of USD 5.4 million. o) As a consequence of the police investigation, it was found that there are reasonable grounds to suspect an offence under subsection 4(1) of the AMLATFA is being committed, and the authority exercising their powers under sections 44(1) and 50(1) of the AMLATFA had seized and frozen all of the defendants’ accounts. The amount seized is approximately USD 3.327 million (the monies). 7 p) On 21.5.2009, the plaintiff commenced the present action claiming damages for the sum of USD 5.4 million from all of the defendants for conspiracy to defraud. q) On 18.4.2011, the plaintiff had obtained a Mareva Injunction to restrain all the defendants from dealing with the funds. r) On 3.6.2009, the sixth defendant was charged at the Malacca Sessions Court for an offence under subsection 4(1)(a) of the AMLATFA. s) At the same time the fourth defendant and Mohd Fuad were charged for the predicate offence under section 420 of the Penal Code, which was to be read together with section 34 of the Penal Code. The fourth defendant and Mohd Fuad were also charged for five other offences each under subsection 4(1)(a) of the AMLATFA. t) All the criminal cases were heard together. The learned Sessions Judge on 20.9.2013, at the end of the prosecution case, had 8 concluded that the prosecution had failed to prove a prima case against the three accused and ordered all the accused be acquitted and discharged without their defence being called. At the end of the criminal trial, the learned Sessions Judge had also made an order under section 61 (the Inquiry) of the AMLATFA for an inquiry to be conducted in respect of the monies. [3] It was the order of the Inquiry that have led the fifth and sixth defendants to file this Enclosure 60 applying for an order to stay this civil suit pending the disposal of the Inquiry. [4] The first, second and fourth defendants had failed to file their Statement of Defence, thereafter Judgment in default of defence were entered against them. [5] The plaintiff had been granted leave to proceed with the action against the third defendant which has been wound up. [6] For ease of reference, for the purposes of the stay application, the fifth and sixth defendants will be referred to as the defendants. 9 [7] In applying for the stay order the defendants contended the following:

that, by virtue of Order 4 rule 1(1) Rules Of Court 2012 (ROC), this court should stay this present civil suit until the determination of the disposal of the Inquiry as both the Inquiry and the civil suit involved the same question of law and facts and the rights to relief claimed in both proceedings are in respect of or arise out of the same transaction or series of transactions.

(ii) prohibition under section 54(3) of the AMLATFA. [8] It was submitted by the counsel for the defendants that the question of law and facts as well as the rights to relief claimed for in both of the civil and criminal proceedings are the same. In support of this contention, the counsel for the defendants argued that the second defendant had testified as one of the prosecution witness in the criminal trial in which she had described and explained in detail on how the sum of USD 4.55 million was released to the defendants. Another prosecution witness by the name of Mr. Chandrasegaran had confirmed that the USD 4.55 million was released to the defendants in the manner described by the second defendant. 10 [9] It was also submitted on behalf of the defendants that the transactions which took place in the criminal proceeding in respect of the funds were the same transactions which were alleged by the plaintiff to have occurred in this civil action. And thus, the counsel contended that the factual matrix in both criminal and civil cases is the same. [10] The counsel for the defendants had also submitted that the basic question for consideration of the Sessions Court in the Inquiry would ultimately be who the rightful owner of the monies. To determine the rightful owner of the monies, the same facts and transactions in relation to the monies need to be canvassed before the learned Sessions Judge. The counsel for the defendants further submitted that proceeding with the present civil suit would give rise to a risk of duplicity of proceedings or res judicata. More so, the plaintiff had taken steps to participate in the Inquiry. On duplicity of proceedings and res judicata he had referred to the following cases:

Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189 Peh Swee Chin FCJ at pp 197-198; 11

JH Rayner (Mincing Lane) Ltd & Ors v Manilal & Sons (M) Sdn Bhd & Anor [1987] 1 MLJ 312. [11] It was also submitted by the counsel for the defendants that the present civil suit cannot continue and must be stayed by virtue of section 54(3) of the AMLATFA. The counsel submitted that section 54(3) of the AMLATFA prohibits the institution or continuation of any civil proceedings in respect of the property which has been so seized under the AMLATFA. [12] Therefore, it was submitted on behalf of the defendants that there arise special circumstances to warrant this court to exercise its unfettered discretion to grant a stay order. [13] In support of his contention, the counsel for the defendants cited several cases relating to principles guiding the courts in exercising their discretionary powers to grant or to refuse an application to stay proceedings. The cases are namely: 12 i) Jaqdis Singh a/l Banta Singh v Outlet Rank (M) Sdn Bhd [2013] 4 MLJ 213 ii) Kosma Palma Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd [2004] 1 MLJ 257 iii) Leong Poh Shee v Ng Kat Chong [1966] 1 MLJ 86 iv) Government of Malaysia v Datuk Haji Kadir Mohamad Mastar & another application [1993] 3 MLJ 514 [14] The plaintiff had strongly opposed the defendants’ application and forwarded several grounds in opposing it. The grounds can be summarized as follows:

there is no issue of multiplicity or duplicity of proceedings

(ii) non - disclosure on the part of the defendants who were also acting in an inconsistent manner

(iii) the civil court is the more suitable forum

(iv) the application has been filed at a late stage, was made in bad faith and prejudicial to the plaintiff. Ground (i) - there is no issue of multiplicity or duplicity of proceedings 13 [15] It was submitted by the counsel for the plaintiff that the civil action filed by the plaintiff is essentially different in all aspects from the criminal proceeding. He further submitted that the two actions are different in terms of the injured party or victim, alleged wrongdoers, causes of action, factual basis in support of the complaint and the wrongdoings and the relief claimed. To convince the court, the counsel for the plaintiff in his written submission had even tabulated all the differences. Ground (ii) - non - disclosure on the part of the defendants who were also acting in an inconsistent manner [16] It was submitted by the counsel for the plaintiff that both the defendants are not genuine in their application. The defendants had filed Enclosure 60 to stay this civil action on the premise that the Inquiry proceeding should be completed first to avoid duplicity of proceedings but at the same time, in contrary, the defendants had also applied to set aside the order of Inquiry made by the learned Sessions Judge disputing the basis which the Inquiry was ordered and contended that the monies ought to be returned to defendants. 14 It is the contention of the plaintiff that the defendants are constantly prevaricating and had acted in an inconsistent manner. Ground (iii) - the civil court is the more suitable forum [17] The counsel for the plaintiff submitted that the civil court is the more suitable forum to adjudicate the plaintiff’s claim which is based on tort of conspiracy to defraud. It was further submitted by the counsel for the plaintiff that the Inquiry will only confine itself to the issue of ownership of the monies and not the commission of the tort, especially fraud. To support this contention, the counsel for the plaintiff had referred to two cases, namely Public Prosecutor v Thong Kian Oon & Ors [2012] 10 MLJ 140 and Hong Leong Bank Berhad v Pendakwaraya [2009] 8 CLJ 33. [18] It is the contention of the counsel for the plaintiff that the ultimate order that the court can make in the Inquiry is whether to release or to forfeit the monies and it does not adjudicate plaintiff’s cause of action against the defendants. Hence, it was further contended by the counsel for the plaintiff that the civil court would be the more suitable forum for adjudicating allegations of conspiracy to defraud. 15 Ground (iv) - the application has been filed at a late stage, was made in bad faith and prejudicial to the plaintiff. [19] It was argued on behalf of the plaintiff that the application by the defendants was too late. The present civil action was commenced by the plaintiff in May 2009 and parties had appeared numerous times before the courts, where witness statements were exchanged between the parties. [20] The counsel for the plaintiff also contended that the defendants have taken active steps in the civil action and this application was made barely one month before this case is scheduled for hearing on the second trial date i.e. 13.2.2014. The defendants had written in to the court for an adjournment of the second trial date on the same ground as in Enclosure 60. The high court judge had adjourned the trial and instructed the defendants to file a formal application. The formal application was not filed by the defendants until two weeks before the third trial date. In addition, the present case had reached an advanced stage where the plaintiff is ready with its witnesses, three 16 of whom are from 3 different banks and one from the United Kingdom and is scheduled for hearing for the third time on the 8th to 11th September 2014, whilst the Inquiry still has a long way to go. It was therefore contended on behalf of the plaintiff that this civil action should proceed. Decision of the court [21] The principles in relating to the exercise of court’s discretion whether to allow or refuse stay of proceedings had been well-established and well-illustrated in an abundance of authorities. The paramount consideration in allowing or refusing a stay of proceedings is the existence of special circumstances in that particular case warranting the court to exercise its discretionary powers. It is also trite that the principles to be applied in an application for stay of execution are also applicable in an application for stay of proceedings. (See; Re Hj Abdul Malik Khan; Ex P Bank Bumiputra Bhd [2006] 8 CLJ 534 ) [22] In the case of Leong Poh Shee v Ng Kat Chong [1966] 1 MLJ 86, which was cited by the counsel for the defendants, Raja Azlan Shah 17 (as His Majesty then was) had defined special circumstances in the following excerpt: “Special circumstances, as the phrase implies, must be circumstances as distinguished from ordinary circumstances. It must be something exceptional in character, something that exceeds or excels in some way that which is usual or common” [23] However, what could constitute special circumstances varies from case to another case and it depends on its own facts and the onus is on the applicants to demonstrate the existence of special circumstances to justify the grant of a stay. (See Kosma Palma Oil Mills Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd [2004] 1 MLJ 257) [24] Zawawi bin Salleh (JCA) on behalf of the Court of Appeal in the case of Jagdish Singh a/l Banta Singh v Outlet Rank (M) Sdn Bhd in emphasising the unfettered court discretionary power in granting stay, had also outlined several considerations as a guideline to which the courts had considered on what constitutes special circumstances. At page 221, the Court of Appeal had said this: 18 “...Now, what factors or principles will, and should, guide the courts in applications for a stay of an order granted by a court. These factors or principles have been reiterated in very many of cases decided by our courts. The factors or principles so enumerated are in exhaustive, and not all of them are application to every case. Each has its own peculiar principle. Some of the principles to be considered in the motions may be stated as follows; a) the courts have an unimpeded discretion to grant or refuse stay. In this, like in all other instances of discretion, the court is bound to exercise that discretion both judicially as well as judiciously and not erratically (see Serangoon Garden Estate Ltd v Ang Keng [1953] 1 MLJ 116; Leong Poh Shee v Ng Kat Chong [1966] 1 MLJ 86; b) an unsuccessful party applying for a stay must show “special circumstances”. What will constitute “special circumstances” will no doubt vary from case to case. The fact that an appeal would be rendered nugatory if stay was refused is the most common one (see Kosma Palma Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Markmur Bhd [2004] 1 MLJ 257; [2003] 4 CLJ 1 and Re Kong Thai Sawmill (Miri) Sdn Bhd; Ling Beng Sung v Kong Thai Sawmill (Miri) Sdn Bhd &Ors (No.2) [1976] 1 MLJ 131). The application is not granted as matter of routine and it is not an automatic or mechanical relief slavishly followed after filing an appeal. In every matter or suit before a court of law, whether in its original or appellate stage of proceedings, the court will consider the competing rights of both parties including the applicant and respondent to justice; 19

there is a need to preserve the res or preservation of the subject matter of litigation. The courts have an obligation to protect the res for the purpose of ensuring that the appeal, if successful, will not be rendered nugatory (see Erinford Properties Ltd v Cheshire County Counsil [1974] 2 WLR 749). But where it is shown by affidavit evidence, say by the respondent that the res will not be destroyed or there is in fact no res, an application may not be granted.

where an application is an abuse of the court process, then the stay of proceedings will not be granted. A typical example of abuse of court process is where a suit is duplicated or where a party employs improper and perverse procedure to obtain an advantage undeservedly;

it is important to stress that initiation of a suit in a court of law demands the suit will be heard expeditiously and completed without any inhibition midway. Therefore where an application for stay of proceedings is intended to merely stop or suspend the proceedings, it will be refused. Some applications, on seeing the weakness of their client’s case, would resort to application for stay and thereby waste the time of the other party and the court. The party simply cannot resort to the interlocutory of stay proceedings on having the slightest disagreement with any ruling of a trial judge. Courts are enjoined not a encourage such unwholesome practice; and

an application for stay of proceedings must come with clean hands because what he is asking is an equitable relief. Equity will not assist the unclean. That is why the court has to look into the antecedents of the parties”. 20 [25] Having considered the submission forwarded by both the parties and taking cognizance of all the well-established principles in granting stay of proceedings, I will now determine the merits of the defendants’ application. I do appreciate that the Inquiry before the Session’s Court and the civil suit in this High Court before me are of two different causes of action. The former, being an Inquiry under section 61 of the AMLATFA and the latter, under the tort of conspiracy to defraud. I am also equally minded that the underlying cause and facts behind the two actions, in actual fact rooted from the same set of facts and background. I must also bear in mind that the monies or the subject matter which was seized by the authority are monies related to both actions. [26] The essential factor in determining the propriety of a stay of proceedings is the existence of special facts and circumstances of a particular case and these special circumstances differ from case to case. And it must be noted that the considerations in determining the existence of special circumstances as laid down in Jagdish Singh a/l Banta Singh v Outlet Rank (M) Sdn Bhd is not exhaustive. 21 [27] Assuming if I were to proceed with the civil suit and I would have to decide whether or not there was a conspiracy to defraud, consequently I would ultimately have to decide whether the plaintiff is entitled to the damages of USD 5.4 million being the amount of monies which had been disbursed to the first defendant of which USD

4.55 million was later, either paid or remitted to the rest of the defendants. Hypothetically, if the High Court finds that there was conspiracy to defraud, the Bank would be entitled to recover the funds which had been earlier disbursed in terms of damages of USD

5.4 million from the defendants inclusive the monies. Hypothetically and equally so, if the Sessions Court Inquiry finds the monies rightfully belongs to the Bank, the Bank would also be entitled to claim for the return of the monies. Bearing in mind that the monies which were seized and frozen from all the defendants’ accounts forms part of the USD 5.4 million, which was also the subject matter for determination of the Sessions Court in the Inquiry. At the end of the Inquiry the Sessions Judge would ultimately again decide who will be the rightful and the bona fide owner of the monies. Notwithstanding the differences in the cause of action, and/or burden 22 of proof, in my mind, the ultimate consequence and the end-result of both the High Court civil suit and the Sessions Court Inquiry would obviously concern the bona fide rights over the monies. I have said earlier and I reiterate here again that the monies in all of the defendants’ accounts which were seized and frozen forms part of the USD 5.4 million funds which the plaintiff had disbursed under the letter of credit. [28] In this situation, special circumstances would arise in which obviously there would be duplicity of decisions which would probably result in contradictory decisions by the two courts. Particularly in this case, the duplicity would be the decision between the Sessions Court Inquiry and the High Court here. I must say that both of the two actions would achieve the same effect relating to these monies in which both of the two actions would ultimately decide which party is entitled to the monies. This may give rise to two conflicting decisions on the same monies. The duplicity here is not so much on the proceedings which saw the same parties’ involvement but instead would be the preceding hypotheses, which entails the duplicity of decisions from the proceedings in which both causes of action would decide which party is entitled to the monies. 23 [29] Thus, the ensuing effect of both decisions may contradict each other even if the two decisions derive from different causes of actions and/or burden of proof. It is my judgment that this situation falls squarely into the category of special circumstances. A stay of proceedings should be granted in order to avoid unnecessary contradictions and appeal processes. [30] In this regard, I would like to refer to the decision of the Supreme Court in the case of Lesco Development Corp. Sdn. Bhd. v Malaysia Building Society Bhd [1988] 2 MLJ 184. In the case of Lesco Development, the Supreme Court had already envisaged that it is undesirable to allow a situation where two different courts would try and determine the same issues arising between the same parties relating to the same subject matter. In this case, the Supreme Court had dealt with a foreclosure proceeding which resulted in an order for sale and a claim for default of payments on the same monies claimed in the foreclosure application. The Supreme Court had held the following: 24

It is undesirable to allow a situation where two different courts would try and determine the same issues arising between the same parties relating to the same subject matter.

In this case the hearing of the foreclosure proceeding should have been postponed until the final disposal of the claim on the debt.

The order of sale should be set aside and the hearing of the foreclosure application be dealt after the final disposal of the claim on the debt. [31] Although the present case is not factually similar with the case of Lesco Development, the underlying principles of the case of Lesco Development can be mirrored to that of the present case. This is because and I reiterate again that the present case and the Sessions Court Inquiry would involve the same parties, the same facts and transactions, and the same subject matter i.e. the monies. Thus, it is equally undesirable, alike the case of Lesco Development, to have this High Court here, to try and determine the same subject matter. [32] With regard to the prohibition under section 54(3) of the AMLATFA raised by the counsel for the defendants, I am in agreement with the plaintiff’s counsel that section 54(3)of the AMLATFA is not applicable in the present case as the disputed subject matter here is monetary in 25 nature while section 54(3)of the AMLATFA deals only with seized property under section 51 of the AMLATFA. [33] With regard to the issue of the application being filed at a very late stage of the proceeding, in bad faith and prejudicial to the plaintiff, my answer to this is that the Inquiry under section 61 of the AMLATFA only came about in September 2013 when it was ordered by the Sessions Judge at the end of the criminal trial on 20.9.2013. By this time, it is acknowledged that the civil suit has reached its advanced stage. However, the calculation of time could not be from the time the plaintiff had filed this civil suit as submitted by the plaintiff’s counsel because the Inquiry had only been ordered in September 2013. Only upon September 2013 that the defendants would have the justification to apply for a stay of proceedings. A stay order would certainly not prejudice the plaintiff as the stay order would only be putting a halt to the plaintiff’s claim in respect of the tortious liability against the defendants but not in respect of the monies. And since the plaintiff has taken step to participate in the Inquiry, the plaintiff should not complain of prejudice. 26 [34] With regards to the defendants’ contention that the duplicity would give the plaintiff a second bite of the cherry or double jeopardy, whereby the plaintiff would unjustly be compensated twice from the two actions, which the plaintiff had replied that the decision in this high court would be accounted for in the Sessions Court Inquiry, I do not see the necessity to embark on this issue in view of my earlier findings on the existence of special circumstances in this case. [35] Based on the aforesaid reasons, the defendants’ application in Enclosure 60 is allowed with no order as to costs. Hence, this civil suit is stayed until the disposal of the Inquiry at the Malacca Sessions Court. t.t. ...................................................... (DATUK AZIMAH BINTI OMAR) Judicial Commissioner High Court NCVC 13 of Shah Alam Selangor Darul Ehsan Dated the 20th day of August, 2014. 27 For the Plaintiff - Tetuan Benjamin Dawson, Solicitors Cik Fazillawati Jaafar For the Defendants - Tetuan K.F.Ee & Co Nur Amalina Haris for the 5th and 6th Defendant DAO/huda/sar/27814/4832