Impresive Circuit Sdn Bhd v Setia Haruman Sdn Bhd & 11 Lg (WA-24NCC-290-07/2017)

SETIA HARUMAN SDN BHD (No. Syarikat: 425145-U)

TAN SRI DATUK HAJI MUSTAPHA KAMAL BIN HAJI ABU BAKAR (NRIC No.: 490318-08-5599)

AHMAD KHALIF BIN TAN SRI DATUK HAJI MUSTAPA KAMAL (NRIC No.: 791126-14-6173)

DATO’ HAJJAH FAZWINNA BINTI TAN SRI DATUK HAJI MUSTAPA KAMAL (No. K/P: 760913-14-5178) 2

FARAH MAHAMI BINTI TAN SRI DATUK HAJI MUSTAPA KAMAL (No. K/P: 820512-14-5662)

LAO CHOK KEANG (No. K/P: 561117-07-5293)

AZHAR BIN OTHMAN (No. K/P: 671008-10-5753)

ANWAR SYAHRIN BIN ABDUL AJIB (No. K/P: 730502-10-5027)

UEM LAND BERHAD (sebelum ini dikenali sebagai Renong Berhad)

MENARA EMBUN SDN BHD (No. Syarikat: 428618-M)

MODERN EDEN SDN BHD (No. Syarikat: 623037-H)

VIRTUAL PATH SDN BHD (No. Syarikat: 408496-M) … DEFENDAN-DEFENDAN

This is an application by the Plaintiff to convert the Originating Summons herein into a Writ Action. The Originating Summons is filed pursuant to section 346 of the Companies Act 2016 (“CA 2016”). I have dismissed the application. These are the full reasons for my decision. 3

The 10th Defendant Menara Embun Sdn Bhd (“Menara Embun”) has a total issued share capital of RM300,000.00. The 2nd Defendant Tan Sri Datuk Haji Mustapha Kamal Bin Haji Abu Bakar (“TSMK”) holds 65% stake in Menara Embun whereas Datuk Kasi A/L K.L. Palaniappan (“DK”) held the remaining 35% stake.

The 11th Defendant Modern Eden Sdn Bhd (“Modern Eden”) has a total issued share capital of RM5.00 and TSMK holds 3 ordinary shares (a 60% stake) whereas DK held the remaining 2 ordinary shares (a 40% stake).

TSMK and DK were the only 2 directors of Menara Embun and Modern Eden until 1.12.2008 when TMSK’s daughter Felina, was appointed to the board of the 2 companies.

Menara Embun and Modern Eden were vehicles used by TSMK and DK for their joint participation in the 1st Defendant Setia Haruman Sdn Bhd (“Setia Haruman”) and by extension, their participation in the Cyberjaya project. 4

Setia Haruman was a company incorporated on 28.3.1997 to carry out the business of township development, project development and sale of land. The specific project undertaken by Setia Haruman was the Cyberjaya project.

Setia Haruman’s total issued share capital amounted to RM6 million comprising 6,000,000 ordinary shares and the shareholders were as follows: a) Menara Embun holding 1,500,000 ordinary shares, 25% equity; b) the 9th Defendant UEM Land Berhad (“UEM”) holding 1,500,000 ordinary shares, 25% equity; c) the 12th Defendant Virtual Path Sdn Bhd (“Virtual Path”) holding 1,500,000 ordinary shares, 25% equity; d) Modern Eden holding 750,000 ordinary shares, 12.5% equity; and 5 e) the Plaintiff, Impressive Circuit Sdn Bhd (“Impressive Circuit”) holding 750,000 ordinary shares, 12.5% equity.

Virtual Path was a company controlled and owned by TSMK whereas Impressive Circuit was owned and controlled by DK and his wife.

The 9th Defendant UEM is a public company and a wholly owned subsidiary of UEM Sunrise Berhad. UEM was formerly known as Renong Berhad until 10.12.2003 when the name was changed to UEM Land Berhad.

TSMK and DK had known each other since about 1981 and had formed various companies together, including Menara Embun and Modern Eden. It is alleged by DK that the two of them had a personal relationship premised on mutual trust and confidence.

In particular, according to DK: a) both TMSK and DK would jointly manage their business ventures; 6 b) TSMK was always the Executive Chairman and chaired the board meetings as he was the face of these ventures, given that he was and remained a better known name in the property sector; c) DK was always the Executive Director and Chairman of the Executive Committee (“EXCO”) that raised key matters for board decisions and that implemented board decisions; d) DK also took the lead and spearheaded business strategy and all corporate and financial matters and addressed technical issues as and when they arose; and e) The profits would be shared mainly between TSMK and DK, and hence both of them were also shareholders, in person or via their nominees, as the case may be, in all such business ventures undertaken together, with TSMK holding the majority shareholding and DK the remainder and/or the minority shareholding. 7

DK referred to the above alleged relationship as “the Understanding”.

In the case of Setia Haruman, DK alleged that there was joint control of that company by TSMK and him by virtue of the 75% equity held by their joint vehicles, Menara Embun and Modern Eden as well as their personal vehicles, Virtual Path and Impressive Circuit. In this regard, TSMK effectively held 48.75% equity of Setia Haruman and DK effectively held 26.25% equity in Setia Haruman with UEM holding the remaining 25% equity.

DK alleged that there was an understanding at Setia Haruman that TSMK could appoint 4 nominees to the board of directors while both UEM and DK were accorded 2 nominees each. DK referred to this as the “New Board Understanding”.

As a result thereof it was alleged by DK that: a) despite several board changes, the changes were in tandem with the aforesaid New Board Understanding; and 8 b) DK together with his nominee, Balasingam a/l Govindan (“Balasingam”), were appointed to the board of Setia Haruman. Both Balasingam and DK were always re-elected as directors of Setia Haruman.

In breach of the said Understanding and/or New Board Understanding and/or DK’s legitimate expectation it was alleged by him that: a) TSMK and TSMK’s nominees to the board of Setia Haruman, together with the remaining members of Setia Haruman failed or refused to appoint DK’s nominee to replace Balasingam who had resigned; b) nominees of TSMK and UEM had also excluded DK from participating in the management of Setia Haruman by refusing to re-elect him as a director of Setia Haruman; c) UEM had abstained from voting in DK and his nominee; DK alleged that UEM’s abstention was nothing but as a result of a conspiracy with TSMK and his nominees or UEM had 9 knowingly assisted in the breach of the New Board Understanding; and d) prior to the non-election of DK, DK was excluded from management of Setia Haruman by giving DK a run-around on dates for crucial meetings.

The allegedly oppressive acts were said to be in breach of the Understanding and the New Board Understanding.

There was also an alleged non-payment of dividends.

DK also alleged oppression of him as a shareholder at the Menara Embun and Modern Eden levels. The oppression actions in respect of the affairs of Menara Embun and Modern Eden were filed vide Originating Summons No. WA -24NCC-410-09/2017 (“OS 410”) and Originating Summons No. WA-24NCC-411-09/2017 (“OS 411”) in the Kuala Lumpur High Court. OS 410 and OS 411 are also before this Court.

The Defendants deny the Understanding and the New Board Understanding. 10

The relief sought in the Originating Summons was inter alia: a) A declaration that the 2nd to 12th Defendants had managed and conducted the affairs of Setia Haruman and/or exercised their powers oppressively and/or disregarded and/or acted in a manner unfairly prejudicial to the interest of the Plaintiff as member of the company; b) An order that the 2nd to 12th Defendants do jointly and severally purchase the 750,000 ordinary shares of the company owned by the Plaintiff at such price and on such terms as shall be determined by the Honourable Court; c) Costs.

DK was previously one of the Plaintiffs in this Originating Summons but he had been struck out as a party as he did not hold any shares in Setia Haruman. There is a pending appeal in respect of this issue. Now only Impressive Circuit, his company, is the Plaintiff. 11

In July 2018, the Plaintiff filed an application to convert the Originating Summons to a writ action on the grounds that its claims were premised upon, amongst others, the Understanding and the New Board Understanding, in respect of which there were material disputes of fact. The Plaintiff alleged that the material facts were inappropriate to be decided summarily by the Court by relying simply on affidavit evidence and that the affidavits filed by the parties disclosed disputes of fact that required inquiry through a full trial.

The Defendants contended that it is not every dispute of fact which calls for a writ action. The Plaintiff delayed in filing the conversion application and, even if there are disputes of fact concerning the Understanding and the New Board Understanding, the deponents of affidavits could be subject to cross examination if appropriate.

This conversion application was made pursuant to Order 28 rule 8 of the Rules of Court 2012 which reads as follows: 12 “8. Continuation of proceedings as if cause or matter begun by writ (O. 28 r. 8)

Where, in the case of a cause or matter begun by originating summons, it appears to the Court at any stage of the proceedings that the proceedings should for any reason be continued as if the cause or matter had been begun by writ, it may order the proceedings to continue as if the cause or matter had been so begun and may, in particular, order that pleadings shall be delivered or that any affidavits shall stand as pleadings, with or without liberty to any of the parties to add thereto or to apply for particulars thereof.

Where the Court decides to make such an order referred to in rule (1), Order 34 shall apply with the necessary modifications.

This rule applies notwithstanding that the cause or matter in question could not have been begun by writ.

Any reference in these Rules to an action begun by writ shall, unless the context otherwise requires, be construed as including a reference to a cause or matter proceedings in which are ordered under this rule to continue as if the cause or matter had been so begun”.

I am in agreement with the submission of the Plaintiff that pursuant to Order 88 rule 2 of the Rules of Court 2012, an application pursuant to section 346 of the Companies Act 2016 shall be filed by way of an Originating Summons. 13

The Plaintiff submitted that there was no delay in this case. The various Defendants had filed applications to strike out the claim and, pending disposal of the striking out applications, the exchange of affidavits in respect of the Originating Summons was stayed. On 25.4.2018, the Court had delivered its decision on the striking out applications and gave directions for the exchange of affidavits. It was only towards the end of May 2018 that affidavits in respect of the Originating Summons were first filed and served.

Upon realising that the Defendants are disputing the existence of the Understanding and the New Board Understanding, the Plaintiff had filed the application for conversion of the Originating Summons.

I agree with the Plaintiff that there was no inordinate delay on the part of the Plaintiff in filing the application.

Conversion of an Originating Summons to a writ was allowed in the case of HSBC Bank Malaysia Bhd v Wong Thien Boon & Ors [2008] 6 CLJ 381 when it was found that there were conflicts of evidence on several issues and a serious dispute between the parties, which require viva voce evidence to determine the issues: 14 “[10] Here, the learned judge had before him a serious claim by the plaintiff bank that it did not owe any monies to the defendants. The bank had produced all documents available to it given the 27 years’ lapse in the defendants making their demand. Equally, on the other hand he had before him a serious claim by the defendants that the RM21,350 was due to them. Given the material that was placed before him by way of affidavits a conflict of evidence emerged on several issues including, whether the defendants were either estopped or barred in making their demand due to the operation of equitable doctrine of laches. There also appears to be a serious dispute between the parties as to whether, and if so, when limitation set in. These are matters which require full argument and mature consideration. It is also plain that viva voce evidence is necessary to determine in which direction the balance of equity would turn...”.

Similarly, in a case involving a minority oppression originating summons, the High Court in ISM Sdn Bhd v Queensway Nominees (Tempatan) Sdn Bhd & Ors [2016][ 2 CLJ 294 ordered a conversion to a writ action on the following grounds: “[16] Having noted the plaintiff’s contention in respect of the minority oppression for the OS proper, I have little doubt that it would be more prudent, economical, faster and fairer for both the plaintiff and the defendants that the case on minority oppression as a whole be disposed of by way of a writ action where witnesses are called instead of merely proceeding by way of affidavits 15 evidence as in the normal OS. I state my reasons for saying so in the succeeding paragraphs below. [17] The nature of the case on minority oppression as alleged by the plaintiff is one where it will involve various conflicting facts or disputed facts that will be contended by both parties. These disputed facts include the question on what is the term of the JVA on shareholding since this JVA is verbal and not written. Also what is the position with regard to the loan and the charging of the relevant lands. These conflicting or disputed facts would mean that it is insufficient merely to rely on affidavits evidence alone to come to the determination whether there is in fact minority oppression exercised on the plaintiff. The disputed facts would only mean that witnesses ought to be called not only to allow for their version of events to be narrated in court but more importantly for this court to make an assessment on the veracity of their oral testimony. There is nothing better than this court being able to have the opportunity to look at the demeanour of the witnesses before judging the truth of what had been testified in open court. This of course cannot be done if the case is proceeded based merely on affidavits evidence. It is also to say the least more prudence and fairer to all parties concerned including the plaintiff who opposed this application for the matter to be heard as a writ action in view of the need for witnesses to testify... [21] I am of the findings too that the allegation on minority oppression alleged by the plaintiff is also premised on oral evidence as opposed to pure documentary evidence. Since it is not largely premised on documentary 16 evidence but also on direct oral evidence, I am of the view that this allegation be best resolved and determined by way of writ action instead of by way of OS... [22] Also to be considered is the fact that the events concerning the case of the plaintiff against the defendants spanned roughly seven years suggesting the need to carefully examine these events that occurred thus rendering it best that oral evidence be heard instead of just affidavits evidence. Further these events almost entirely involved not documentary evidence but verbal exchanges between the parties indicating it would be more appropriate and fitting that this court should hear oral evidence as opposed to affidavits evidence. Although it cannot be denied that affidavits evidence would have achieved the same purpose, there should be no dispute that hearing oral evidence would do no harm to all parties in this case. After all it is only fair to suggest that under normal circumstances the same past events are perceived to happen differently to different set of people. That is precisely the more reason to allow for oral testimony to better gauge, assess and evaluate what actually happened with regard to these past events”.

This is also what was said in that case: “[19] Also it must be considered that even when a party is able to apply for cross-examination of the deponents of the affidavits of opposing parties, in this particular case that is not an expedient way to determine the crux of the dispute on minority oppression. If cross-examination is contemplated, parties 17 will then have to apply and in all likelihood there may be arguments to oppose the application to cross-examine resulting in further time be taken and wasted instead of having this determined by oral evidence from the outset. This is not to mention the possibility of appeals against the decision to allow for cross-examination on any particular deponent of the affidavit. Thus, this is further reason to say that the conversion applied by the defendant ought to be allowed. [20] Apart from that, this court is of the view there is a great possibility that third parties would have to be called in to determine the issue on minority oppression. These third parties cannot be compelled to affirm an affidavit if this matter is allowed to proceed only on affidavits evidence. However they have no options if this case proceeded as a writ action in open court for witnesses to testify as they will be obliged to attend court as they are always open to be subpoenaed. ... [23] I have also considered there is no real substance for the plaintiff to argue that the present application is merely a strategy by the defendants to delay the hearing of the OS to its conclusion. In fact I am of the contrary view that having this case heard by calling witnesses would dispose the issue of minority oppression in the OS faster, having regard to various disputed facts and the largely oral evidence as opposed to documentary evidence needed to prove the issue on minority oppression in the OS. Proceeding with the OS and having to apply for cross-examination of the deponents of the affidavits 18 would mean taking a longer route in concluding the case instead of having witnesses ready to testify by oral testimony in open court... [24] I am also of the opinion that it would be more prudent and appropriate to have the oral hearing as allowing for the case to continue on the OS will only mean there could be several affidavits of just one deponent alone but if this case is to proceed by way of writ, than there is no requirement to file these affidavits. What would be needed is to file probably just one witness statement for each witness of the plaintiff and defendants without the need to reply affidavits back and forth”.

In this case, it is significant to note that DK was originally a plaintiff but he had been struck out as a plaintiff (although there is an appeal pending) and now the only Plaintiff is Impressive Circuit. Accordingly, the Defendants submitted that the only complaint remaining is that of non declaration of dividends and there is no need for a trial to determine that issue. The Plaintiff submitted that the Understanding and the New Board Understanding are still relevant but I am of the view that it is not every dispute of fact that requires the conversion of an Originating Summons into a Writ Action. The Rules of Court provide for oppression actions to be commenced by way of an Originating Summons and such actions invariably involve some disputes of fact. There is no reason why the existence of the Understanding and the New Board Understanding, 19 the existence of which was disputed by all the Defendants, cannot be determined by way of affidavit evidence with perhaps cross examination of the deponents of the affidavits if appropriate. In the 2 other Originating Summons relating to the affairs of Menara Embun and Modern Eden, I had allowed the conversion of the Originating Summons into a Writ because it was contended that there was a necessity to issue a subpoena against UEM in relation to the New Board Understanding. However, in this action, UEM is a party and even though it is submitted by the Plaintiff that the officer involved, who is named as a defendant, did not affirm an affidavit and cannot therefore be cross examined, the fact is that he is named as a defendant and he stands or falls on the affidavit affirmed on behalf of UEM. Also, there are no particulars as to exactly what the nature of the so-called conspiracy on the part of UEM was. UEM used to always vote in favour of the re-election of DK and his nominee as directors of Setia Haruman but when the disputes between DK and TSMK had arisen, UEM decided to abstain from voting. That, in my view, does not raise an issue on conspiracy which would require the calling of witnesses but more importantly, UEM and its officers have been named as Defendants in this action.

Some of the Defendants have submitted that one of the reasons DK was not re-elected as director of Setia Haruman was because he 20 had been blacklisted by the Ministry of Housing. The Plaintiff submitted that it might have to call officers from the Ministry of Housing to prove this alleged fact. Whether or not DK has been blacklisted is something which can be ascertained simply by referring to the letter from the Ministry of Housing and I am of the view that there does not need to be a trial in order to prove or disprove that point.

In all the circumstances of the case, I am of the view that this case is different from the other 2 cases involving the affairs of Menara Embun and Modern Eden and there is accordingly no necessity to convert this Originating Summons into a Writ Action. Accordingly, I have dismissed the application. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Dated: 29th November 2018 21 Solicitors for the Plaintiff C M Owee Messrs Owee & Ho Advocates & Solicitors D2-U2-15, Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur Tel : 03-6203 7951 / 6203 7952 Fax: 03-6203 7989 Solicitors for the 2nd, 3rd and 4th Defendants Shirin Devi Pathmanathan Messrs M Pathmanathan & Co Advocates & Solicitors 2A-23A-2, Block 2A, Plaza Sentral Jalan Stesen Sentral 5 Kuala Lumpur Sentral 50470 Kuala Lumpur Tel : 03-2260 3350 Fax: 03-2260 3351 22 Solicitors for the 1st & 5th Defendant Eric Clement A/L A Sebastian Messrs ABD Halim Ushah & Associates Advocates & Solicitors No. 22, 1st Floor, Jalan Kemuja