Ismail Bin Othman v 1. ) Duta Skyline Sdn. Bhd. (BA-24NCC-122-08/2019)

There are four applications before the Court namely – 18 19

Enclosure 1 20 Encl 1 deals with an Originating Summons filed by the Plaintiff 21 for the following orders : 22 - A declaration that the Joint Venture Agreement (JVA) 23 entered into between the 1st and 2nd Defendants on 24 22.4.2019 is null and void ab initio and of no effect; 25 - A consequential order that the power of Attorney 26 granted in favour of the 2nd Defendant by the 1st 27 Defendant pursuant to the JVA be revoked and/or 28 cancelled. 29

Enclosure 3 1 Encl 3 is the Plaintiff’s application by way of Notice of 2 Application for interlocutory injunctive relief pending the 3 disposal of the OS. 4 5

Enclosure 13 6 Encl 13 is the 2nd Defendant’s application by way of Notice of 7 Application to strike out Encl 1 pursuant to O18 r 19(1)(a) ROC 8 2012. 9 10

Enclosure 18 11 Similarly the 1st Defendant has filed an application by way of 12 Notice of Application to strike out Encl 1 pursuant to O18 r 13 19(1)(a) ROC 2012. 14 15

On 27.5.2022 I allowed Enclosures 1 and 3 and dismissed 16 Enclosures 13 and 18. As the applications were related and were heard 17 simultaneously, it is convenient to deal with all the above said enclosures 18 in one judgement. This judgment as such contains the full reasons for 19 allowing Encls 1 and 3 and dismissal of Encls 13 and 18. 20 21 The Parties and the Background Facts 22

The Plaintiff was at the material time a director of the 1st Defendant. 23 24

Duta Skyline Sdn Bhd, the 1st Defendant is the wholly owned 25 subsidiary of Duta Nilai Holdings Sdn Bhd. 26 27

Duta Nilai Holdings Sdn Bhd (DN) is the wholly owned subsidiary of 28 Seacera Properties Sdn Bhd (SP). 29

SP is the wholly owned subsidiary of Seacera Group Bhd (SGB). 1 SGB is a listed company on the Bursa Malaysia but is now in PN17 status. 2 3

The 1st Defendant is the registered proprietor of a piece of land held 4 under Grant 23940, Lot 613, Mukim Ulu Semenyih, Daerah Ulu Langat 5 Selangor Darul Ehsan (the Land). 6 7

The Plaintiff on the first part, Zainab bt Mansor on the second part 8 with SP and SGB on the other part entered into a Share Sales Agreement 9 (SSA) dated 16.11.2016. Via the SSA the Plaintiff and Zainab sold their 10 shares in DN to SP. Hence by virtue of this SGB has become the ultimate 11 holding company of DN. 12 13

The SSA was entered into in part of and in furtherance of an overall 14 agreement between the Plaintiff, SGB, SP, DN and the 1st Defendant 15 wherein the overall agreement would have the effect of and would bind all 16 parties to eventually transfer the full interest in the Land to the benefit of 17 SGB and/or SP in exchange of which the Plaintiff and Zainab will receive 18 cash or equivalent to the full and fair value of the Land. 19 20

On 22.4.2019 the 1st and 2nd Defendants entered into a Joint 21 Venture Agreement (JVA) to develop the Land. On or around the same 22 time the 1st Defendant executed and attested an irrevocable limited power 23 of attorney in favour of the 2nd Defendant. 24 25

The Plaintiff strongly objected to the JVA and the Power of Attorney 26 (PA) hence the OS was filed on 28.8.2019 to have the JVA declared null 27 and void and of no effect and for it to be revoked and/or cancelled. 28

Simultaneous with the filing of the OS the Plaintiff filed an application 1 in Encl 3 for an interim injunction to prevent the 1st and 2nd Defendants 2 and or their agents from inter alia giving effect in any manner whatsoever 3 to the JVA and the PA and in dealing in any manner whatsoever with the 4 Land until the final disposal of the OS herein. 5 6

On 11.9.2019 after hearing parties the learned High Court Judge YA 7 Che Mohd Ruzima b Ghazali (as he then was) granted interim relief as 8 prayed for by the Plaintiff. On 30.9.2019 an ad interim injunction was 9 allowed pending the outcome of the disposal of Encl

10 11

Meanwhile the 1st and 2nd Defendants had on their own filed Encls 12 13 and 18 respectively to strike out the OS. 13 14 The Plaintiff’s case 15

In support of the OS, the Plaintiff has contended that it was well 16 within the knowledge of all the directors of the 1st Defendant that it is an 17 express term of the SSA that until such SSA has been fully performed and 18 the Plaintiff paid his dues, any encumbrances over the Land shall be with 19 the Plaintiff’s written consent. 20 21

It was contended that in spite of the said express term, SGB and its 22 directors together with 2 of the 5 directors of the 1st Defendant (identified 23 as Zulkarnin b Ariffin and Mohd Amir b Abdullah) had unlawfully caused 24 the 1st Defendant to enter into the JVA with the 2nd Defendant with respect 25 to encumbering and/or an arrangement/transaction pertaining to the 26 development rights of the Land. 27 28 29

It is the contention of the Plaintiff that the JVA entered into with the 1 2nd Defendant was : 2 i. without the Plaintiff’s consent or knowledge as required under 3 the SSA; 4 ii. without due compliance with the law and its requirements; 5 iii. without obtaining the approval of the shareholders of the 1st 6 Defendant, DN, SP and SGB; 7 iv. without the Plaintiff’s knowledge as director of the 1st 8 Defendant and overriding him; 9 v. without the knowledge of the two other directors of the 1st 10 Defendant; 11 vi. Zulkarnin and Amir as directors of the 1st Defendant owe 12 fiduciary duties, contractual duties, duty of care, duty of trust 13 and statutory duties towards the 1st Defendant and they broke 14 those duties by entering into the JVA. 15 16

The Plaintiff claimed that he and the other 2 directors only came to 17 know of the JVA through the public announcement made to Bursa 18 Malaysia on 22.4.2019 by SGB. 19 20

They lodged police reports and a complaint to SSM and Securities 21 Commission Malaysia (SC) for what they claim are the unlawful actions of 22 Zulkarnin and Amir. 23 24

The Plaintiff together with 2 other directors (i.e. Razip and Suffian) 25 convened a meeting and resolved that the JVA be aborted but such 26 resolution has been ignored by the 1st Defendant. 27 28 29

It is the further contention of the Plaintiff that the 1st Defendant 1 executed and attested the irrevocable PA without the knowledge and 2 consent of the Plaintiff and overriding the rest of the Board of Directors. 3 Furthermore, the Plaintiff, Razip and Suffian were not allowed access to 4 the 1st Defendant’s books and records. 5 6

The Plaintiff has contended that no payment has been received by 7 the 1st Defendant under the JVA from the 2nd Defendant as the same has 8 not been substantiated with documentary evidence. The Plaintiff 9 contended that the explanation offered by the 1st Defendant that payment 10 had been received but was directed to other parties because it was afraid 11 that the Plaintiff will misuse the funds being a signatory to the 1st 12 Defendant’s account is without basis and in clear breach of the terms of 13 the JVA itself. 14 15

The Plaintiff stated that notice was given to all parties of the non- 16 payment and to date only the 2nd Defendant responded denying any 17 wrongdoing. Neither SGB nor Zul and Amir have responded to the notice. 18 The Plaintiff further complained that he was not furnished with a copy of 19 the PA at the material time and had to go to the trouble and expense of 20 having to extract it from court records. 21 22

The Plaintiff has explained that the original title to the Land is in his 23 safe custody and will remain there as SGB is seeking to have possession 24 of the title to the Land without giving valid reasons. The Plaintiff is of the 25 opinion that the Defendants’ action is a cause for concern and suspicion 26 as the Land is an asset of the 1st Defendant and not SGB. 27 28 29

It is the Plaintiff’s contention that Zulkarnin has disregarded the 1 Memorandum and Articles of Association of the company by unlawfully 2 appointing 2 new directors to the Board of Directors and 2 new Company 3 Secretaries without the Plaintiff’s knowledge and he has convened an 4 unlawful meeting attended by these two unlawful Directors without 5 compliance with the law. The Plaintiff has also discovered that the 6 registered office of the 1st Defendant was changed without their 7 knowledge. 8 9

In addition to the above the Plaintiff has asserted that the failure to 10 secure his consent to enter into the JVA to encumber the Land is fatal. 11 And further the Plaintiff claimed that the failure to secure the approval of 12 the shareholders of the relevant holding companies is fatal thereby 13 making the JVA illegal, unenforceable and contrary to public policy. In 14 addition, it was argued that Zulkarnin and Amir being directors of the 1st 15 Defendant owe fiduciary obligations, a contractual duty, a duty to take 16 care, a duty of trust and a statutory duty toward the 1st Defendant. It was 17 contended that they were in breach of all those duties when they 18 compelled the 1st Defendant to enter into the JVA. If nothing else it was 19 asserted that enforcement of the JVA would be contrary to public policy. 20 21

Relying on all the above the Plaintiff has urged this Court to allow 22 the injunction to remain as there are serious questions to be tried, that the 23 balance of convenience lies in favour of the Plaintiff and that damages 24 would not be an adequate remedy. 25 26

In relation to the Plaintiff’s contention that the interim injunction was 27 correctly obtained, it was submitted that the status quo of the Land must 28 be maintained as the terms of the JVA allowed the 2nd Defendant to 29 occupy and take possession of the Land with a view to carrying out 1 quarrying works. It was also contended that the Land is valued at more 2 than RM700 million and if dealt with unlawfully it could not be put back to 3 its original status quo by those defendants. 4 5

Finally, the Plaintiff trained his guns on the solicitors representing 6 the 1st Defendant, i.e. M/s Lim Chong Pang & Amy claiming that they are 7 in a position of conflict for having received monies due to the 1st 8 Defendant. These monies were payment to the 1st Defendant in 9 pursuance of the JVA but were instead directed by Zulkarnin and SGB to 10 be paid to M/s Lim Chong Pang & Amy. 11 12 The 1st Defendant’s Contentions 13

The 1st Defendant opposed the OS and the application for an 14 interlocutory injunction. In support of its application pursuant to O18 r 15 19(1)(a) of the ROC 2012 to strike out the OS the 1st Defendant has relied 16 on what is contained in the entitlement of the OS which states the plaintiff’s 17 main complaints are grounded on inter alia section 223 of the Companies 18 Act 2016 (CA 2016) and the SSA dated 16.11.2016. It was thereby 19 submitted that the Plaintiff does not have a reasonable cause of action 20 against the 1st Defendant if the entitlement is to be relied upon. 21 22

The 1st Defendant has emphasized the following points : 23 - that the Plaintiff has no legal standing to invoke s. 223 CA; 24 - the 1st Defendant is not a contracting party to the SSA which 25 is the subject matter of the OS. 26 27 28 29

Counsel drew the attention of the Court to the fact that the Plaintiff 1 is not a member of the 1st Defendant as his name is not in the register of 2 members in the 1st Defendant. 3 4

Accordingly, it was contended that there is no reasonable cause of 5 action as the Plaintiff not being a member as defined in s. 223 CA 2016 6 would have no locus standi to institute the action against the 1st 7 Defendant. 8 9

Besides the above, the 1st Defendant has also contended that it is 10 not a contracting party to the SSA whereas the JVA and PA are between 11 the 1st and 2nd Defendant only. The Plaintiff is also not a party to the JVA. 12 13

In view of all the above the 1st Defendant has thereby contended 14 that the OS and the application for the interim interlocutory injunction 15 ought to be dismissed because there is no pre-existing cause of action. 16 17 The 2nd Defendant’s Contentions 18

The 2nd Defendant’s striking out application in Encl 13 is premised 19 on almost identical grounds as those raised by the 1st Defendant. The 2nd 20 Defendant urged the court to exercise its discretion to strike out the OS 21 as it does not disclose any reasonable cause of action against it. 22 23

In like fashion the 2nd Defendant too has pointed out that the Plaintiff 24 is merely a director of the 1st Defendant. He is not a shareholder/member 25 of the 1st Defendant and is not a party to the JVA. On those grounds it was 26 contended that the doctrine of privity of contract applied to the detriment 27 of the Plaintiff. Counsel cited the case of Boustead Naval Shipyard Sdn 28 Bhd v Dynaforce Corp Sdn Bhd [2015] 1 MLJ 284 where the Court of 29 Appeal upheld the proposition of law to say that in Malaysia, the doctrine 1 of privity is confined to the rule that only a party to a contract may sue on 2 it hence ‘no one but the parties to a contract can be bound by it or entitled 3 under it.’ 4 5

Counsel for the 2nd Defendant cited the case of Tan Poh Yee v Tan 6 Boon Thien [2017] 3 MLJ 244 where it was emphatically decided as 7 follows : 8 9 “[18] The fundamental principle of law on this point has been constantly 10 followed and repeated by our courts that only a party to a contract can 11 sue on it and only the parties to a contract has enforceable rights and 12 obligations under such contract….” 13 14

It was therefore respectfully submitted that the Plaintiff must fail in 15 his claim for the declaratory reliefs in the OS as well as in his application 16 for an interim interlocutory injunction (Encl 3) as : 17 - the Plaintiff and the 2nd Defendant have no rights or 18 obligations against or to each other; and 19 - the Plaintiff and the 2nd Defendant are not in a contractual 20 relationship. 21 22

The 2nd Defendant advanced the contention that the Plaintiff had no 23 locus to claim for any declaratory relief under section 223(5) of the CA 24 2016 to invalidate the JVA as he was merely a director. As a director the 25 Plaintiff had no legal or equitable right to an asset of a company. Counsel 26 relied on this rationale which was approved and applied by the Court of 27 Appeal in the case of Pioneer Haven Sdn Bhd v Ho Hup Construction 28 Co Bhd [2012] 3 MLJ 616. 29

The stand taken by the 2nd Defendant in this matter is that it had no 1 knowledge of the SSA at the time the JVA was executed. Be that as it may 2 the 2nd Defendant denied that it breached the JVA. The 2nd Defendant has 3 disputed the Plaintiff’s assertion that prior written consent has to be 4 obtained from the Plaintiff first before the JVA could be executed. 5 According to the 2nd Defendant the JVA is nothing more than a simple 6 agreement for the development of the land. It is not a charge or 7 encumbrance upon the land and hence there is no need to obtain the 8 Plaintiff’s prior written consent. 9 10

In any event the 2nd Defendant argued that even if there was an 11 obligation to obtain the Plaintiff’s written consent, the obligation was solely 12 upon SP, not the 2nd Defendant. 13 14

Moreover the 2nd Defendant asserts that it gave valuable 15 consideration for the JVA and without actual notice of any contravention 16 of section 223 CA 2016. Furthermore, SGB had vide letter dated 17 23.5.2019 had given the assurance that it had approved the JVA. 18 19

The 2nd Defendant averred that it had complied with Clause 3A of 20 the JVA and had made the necessary payments as required pursuant 21 thereto. Otherwise the 1st Defendant would have issued a notice of 22 termination followed with legal proceedings had there been a failure to 23 make the initial payments. 24 25

The 2nd Defendant has raised the following reasons which it says 26 would merit a dismissal of the Plaintiff’s application for an interlocutory 27 interim injunction in Encl 3 i.e. : 28 - inordinate delay in filing the application; 29 - no explanation given for the delay; 30 - unjust to issue an injunction when the Plaintiff has chosen to 1 sleep on his rights, if any; 2 - doubtful that the 2nd Defendant will be adequately protected 3 by the Plaintiff’s undertaking as to damages. 4 5

In light of the above it was contended that the interim interlocutory 6 injunction ought to be dismissed as there were no serious questions to be 7 tried, that the balance of convenience did not lie in favour of granting the 8 injunctive reliefs prayed for and it is doubtful that the 2nd Defendant will be 9 adequately protected by the Plaintiff’s undertaking. 10 11 Findings of the Court 12

I have set out the background and the respective contentions of the 13 parties. I intend to deal with the issues that arise out of the OS in Encl 1 14 first as I am of the view that a decision on Encl 1 will have a determining 15 effect on Encls 13 and 18. If the Plaintiff is able to convince this court that 16 the grounds relied on in the OS are maintainable and sustainable then the 17 Defendants’ applications in Encls 13 and 18 will accordingly fall. 18 19

I begin with a consideration of the cause papers, the written 20 submissions and the oral clarification by all parties and it seems to me that 21 the determining factor in the consideration of all the 4 applications require 22 the Court to make a finding as to the validity of the SSA, the JVA and the 23 PA in relation to the parties concerned. 24 25

The SSA contains the terms and obligations that bind the parties in 26 this OS. It will therefore be necessary to construe the SSA as to what the 27 parties had bargained for and what effect is to be given to it. It is not 28 disputed that pursuant to the SSA dated 16.11.2016 the 1st Defendant 29 acquired the entire shares of Duta Nilai from the Plaintiff and Zainab for a 1 total consideration of RM165,100,000.00 to be paid by way of an issuance 2 of 90 million SGB shares and the sum of RM75,100,000.00 on the terms 3 and in the manner as set out in the SSA with SGB as the guarantor 4 (Clause 4 SSA). It is also evidently clear that by virtue of the SSA Duta 5 Nilai and the 1st Defendant effectively became the wholly owned 6 subsidiaries of SGB. In that same vein SGB has thereby secured interest 7 in the Land through its subsidiaries. 8 9

The SSA names SPSB and SGB as parties of the agreement. At the 10 time the SSA was executed the Plaintiff was a director of the 1st Defendant 11 with four others namely Mohd Razip b Hamzah (Razip), Mohd Suffian b 12 Ismail (Suffian), Zulkarnin b Arifin (Zulkarnin) and Mohd Amir b Abdullah 13 (Amir). 14 15

Prior to the sale of the shares, Duta Nilai was the registered and 16 beneficial owner of all the shares in 1st Defendant. The 1st Defendant is 17 the registered owner of the Land and that makes SPSB its beneficial 18 owner. 19 20

The SSA sets out the obligations and conditions for the sale. An 21 express term of the SSA is that until such SSA has been fully performed 22 and the Plaintiff paid his dues, any encumbrance over the Land shall be 23 with the Plaintiff’s written consent. This is found in Clause 11.2 of the SSA 24 as follows : 25 26 11.2 Charging the Principal Property 27 During the period from Completion to the date of payment of the Balance 28 Purchase Price in full to Ismail, the Purchaser shall not charge the 29 Principal property or create any encumbrance over the Principal 1 property in favour of any person without the prior written consent of (i) 2 Ismail (which consent shall not be unreasonably withheld or delayed); 3 and (ii) if applicable those creditor(s) who have entered into a Settlement 4 Agreement, if the Settlement Agreement expressly provides that the 5 Purchaser shall not charge the Principal Property without the prior 6 written consent of the creditor(s). the consent of Ismail shall not be 7 required where Seacera, the Purchaser, Duta Nilai or Duta Skyline 8 charges the Principal Property or creates an encumbrance over the 9 Principal Property in favour of any end-financier as security for financing 10 granted to Seacera, the Purchaser, Duta Nilai and/or Duta Skyline in 11 connection with the development of the Principal Property. For the 12 avoidance of doubt, the foregoing restriction shall no longer apply once 13 the Balance Purchase Price has been paid to Ismail. 14 15 The importance of this clause cannot be emphasized enough. 16 17

It is not disputed that Zulkarnin and Amir caused the 1st Defendant 18 to enter into a JVA dated 22.4.2019 with the 2nd Defendant followed with 19 an irrevocable PA a few days later. The Defendant’s affidavit does not 20 challenge that fact. 21 22

Undoubtedly the terms of the SSA regulate the respective rights of 23 the parties. It is my considered view that the SSA clearly gave rights to 24 the Plaintiff over the said Land. Clause 11.2 of the SSA is clear and 25 precise in its terms and in its language. Clause 11.2 ensures that the 26 Plaintiff is given security for the sale of his shares until full settlement of 27 his dues. This gave rise to the Plaintiff acquiring rights to the Land. To my 28 mind there was conferment of legal interest/rights on the Land to the 29 Plaintiff immediately upon the execution of the SSA. 30

In the circumstances therefore, it is difficult to see how the Plaintiff 1 can be said to be a stranger to the JVA. The Plaintiff’s unbridled rights rise 2 and flow from the SSA. 3 4

The JVA is in respect to an arrangement/transaction pertaining to 5 the development rights of the Land. By entering into the JVA to encumber 6 the Land without the knowledge of the Plaintiff and without first obtaining 7 his express consent constitutes a clear breach of the terms of the SSA. 8 That condition precedent must be fulfilled unless there are exceptions in 9 the agreement which state otherwise. Parties must keep within the bounds 10 of the four corners of the Agreement which they willingly and voluntarily 11 signed up for. I find there is no ambiguity in the express terms found in 12 Clause 11.2 of the SSA. A single non fulfilment of any of the terms and 13 conditions of the SSA would make any action taken in breach of it 14 unlawful, void and unenforceable. Here the Plaintiff was given express 15 rights over the Land pursuant to the SSA and the consequences of not 16 obtaining his express consent would in my view cause it to be rendered 17 unlawful and unenforceable. 18 19

It was argued that the 1st Defendant is not a contracting party to the 20 SSA and that only parties to a contract are bound by its terms and 21 conditions. 22 23

It is of course settled law that a stranger to a contract cannot enjoy 24 rights or benefits to him nor can he be forced to comply with its terms and 25 conditions. I am in this context, reminded of the observation by Abdul 26 Malik Ishak CJA in the case of Punca Klasik Sdn Bhd v Foh Chong & 27 Sons Sdn Bhd & Ors ]1998] 1 CLJ 601 where His Lordship Abdul Malik 28 Ishak CJA held as follows : 29 “A contract which purports to confer a benefit on a stranger to the 1 contract cannot be enforced by that stranger. Only parties to a contract 2 can enjoy the benefits of that contract, or suffer the burdens of it. 3 Consideration must flow or move from the promise. A person cannot 4 simply sue on a contract if the consideration is provided by another, even 5 where the contract is made for his benefit.” 6 7

I do not in the slightest disagree with counsel for the Plaintiff who 8 rightly contended that the 1st Defendant is far from being a stranger to the 9 SSA. On the contrary it is very much involved in the whole scheme of 10 things. I reiterate again that the SSA must be read and understood for its 11 proper and full construction on the rights and obligations of all parties. 12 Certainly a good starting point would be to look at the nature of the 13 transaction embodied in the SSA. 14 15

The 1st Defendant is referred to and expressly named in the SSA. In 16 effect the SSA dealt with 4 parties and their identities and roles are 17 specified and particularized in the agreement. The SSA involves the 1st 18 Defendant, DN, SP and SGB. The SSA gives the Plaintiff express rights 19 over the Land. The Defendants cannot choose to disregard those rights. 20 21

Recital B of the SSA names and identifies Duta Skyline which is the 22 1st Defendant in the instant OS. The 1st Defendant is identified again in 23 Clause 1.1. 24 25

Clause 3.3.5 states in no uncertain terms that the 1st Defendant is 26 the legal and beneficial owner of the Land. 27 28

Looking again at Clause 11.2, it no doubt sets out the intention of 29 the parties which was to give rights over the Land to the Plaintiff. A careful 30 perusal of this clause will unequivocally divulge that until and unless the 1 terms are fully performed and payment of the balance purchase price is 2 paid in full to the Plaintiff the 1st Defendant and SGB shall not charge the 3 principle property or create any encumbrance over it in favour of any 4 person without the prior written consent of the Plaintiff. It would therefore 5 be erroneous to conclude that the 1st Defendant is a stranger to the SSA. 6 7

It would be appropriate at this juncture for me to restate briefly that 8 the SSA contains the express intentions of the parties and in construing 9 the parties intentions, I must give effect to the plain meaning of the words 10 of the agreement. Parties have intended what is contained in Clause 11.2 11 of the SSA. There shall be no encumbrance over the Land without first 12 obtaining the Plaintiff’s written consent. This is well within the knowledge 13 of the 1st Defendant and its directors. In fact, I find that the Plaintiff’s 14 objections are proper and in accord with the terms of the SSA. 15 16

The 2nd Defendant’s contention that the Plaintiff is not a party to the 17 JVA is without merit and the same reasons as adumbrated earlier apply 18 to toss out that objection. 19 20

I have no quibble with the law which states that a person who is not 21 a party to a contract has no right to sue on the contract. In this context this 22 principle of law has been affirmed in the Court of Appeal case of 23 Boustead Naval Shipyard Sdn Bhd v Dynaforce Corp Sdn Bhd [2015] 24 1 MLJ 284 and restated in the case of Tan Poh Yee V Tan Boon Thien 25 [2017] 3 MLJ 244 where the Court of Appeal held as follows : 26 27 “[18] The fundamental principle of law on this point has been constantly 28 followed and repeated by our courts that only a party to a contract can 29 sue on it and only the parties to a contract has enforceable rights 1 and obligations under such contract…..”. (emphasis added) 2 3

But crucially it must be emphasized that the Plaintiff and his wife 4 disposed of their entire shares in DN for a value that is commensurate 5 with the 1st Defendant’s asset which is the value of the Land owned by the 6 1st Defendant. In this context the purchase of the shares effectively gave 7 ownership and control of the Land to the 1st Defendant, SP and SGB. 8 9

It bears repetition that effect must be given to the intent and purpose 10 of the SSA. It is a basic rule of law that what has been agreed to by 11 contracting parties should be given effect to. Here the truth is the content 12 of Clause 11.2 of the SSA stipulates that the prior written consent of the 13 Plaintiff must be obtained before any encumbrance is placed over the 14 land. Here the 1st Defendant had patently failed to obtain the written 15 consent of the Plaintiff prior to executing the JVA. I thus agree with the 16 Plaintiff’s submission that since there was a failure to secure the Plaintiff’s 17 written consent to enter into the JVA, the JVA is unlawful, illegal and 18 unenforceable. 19 20 Whether the Plaintiff has a cause of action under section 223 of CA 21 2016 22

The Plaintiff has submitted that the failure to secure the approval of 23 the shareholders of the relevant holding companies is fatal thereby 24 making the JVA illegal. The Defendants on the other hand argue that the 25 Plaintiff lacks legal standing to invoke section 223 to begin with. 26 27

The starting point in addressing this issue would therefore be 28 whether the Plaintiff has a cause of action under section 223. 29

Section 223 CA 2016 in its entirety provides as follows : 1 2 “223. Approval of company required for disposal by directors of 3 company’s undertaking or property 4

Notwithstanding anything in the constitution, the directors shall not 5 enter or carry into effect any arrangement or transaction for :

the acquisition of an undertaking or property of a 7 substantial value; or 8

the disposal of a substantial portion of the company’s 9 undertaking or property unless :

the entering into the arrangement or transaction is 11 made subject to the approval of the company by 12 way of a resolution; or 13

(ii) the carrying into effect of the arrangement or 14 transaction has been approved by the company by 15 way of a resolution. 16 17

For the purposes of subsection (1) :

the term “undertaking or property” includes the whole or 19 substantially the whole of the rights, including 20 developmental rights, benefits or control in the undertaking 21 or property;

in the case of a company where all or any of its shares are 23 quoted on a stock exchange, or its subsidiary, the term 24 “substantial value” or “substantial portion” shall mean the 25 same value prescribed in the listing requirements of the 26 stock exchange where approval of the shareholders at a 27 general meeting is required;

in the case of an unlisted subsidiary whose holding 29 company is a listed company, the directors of such holding 30 company shall procure the shareholders’ approval of the 31 holding company in a general meeting for the arrangement 32 or transaction by the unlisted subsidiary in addition to the 33 shareholders’ approval of the unlisted subsidiary in a 1 general meeting procured by the directors of the unlisted 2 subsidiary. 3 4

In the case of any company other than a company to which 5 subsection (2) applies, an undertaking or property shall be considered 6 to be of a substantial value and a portion of the company’s undertaking 7 or property shall be considered to be a substantial portion if : 8 a) its value exceeds twenty-five per centum of the total assets 9 of the company; 10 b) the net profits, after deducting all charges except taxation 11 and excluding extraordinary items, attributed to it amounts 12 to more than twenty-five per centum of the total net profit 13 of the company; or 14 c) its value exceeds twenty-five per centum of the issued 15 share capital of the company, 16 whichever is the highest. 17 18

The Court may, on the application of any member of the company, 19 restrain the directors from entering into or carrying into effect an 20 arrangement or transaction which is in contravention of subsection (1). 21 22

An arrangement or transaction which is in contravention of 23 subsection (1) shall be void except in favour of any person dealing with 24 the company for valuable consideration and without actual notice of the 25 contravention. 26 27

This section shall not apply to proposals for disposing of the whole 28 or substantially the whole of the company’s undertaking or property 29 made by a receiver or receiver and manager of any part of the 30 undertaking or property of the company appointed under a power 31 contained in any instrument or by a Court or a liquidator of a company 32 appointed in a voluntary winding up. 33

Any director who contravenes this section commits an offence and 1 shall, on conviction, be liable to imprisonment for a term not exceeding 2 five years or to a fine not exceeding three million ringgit or to both”. 3 4

The term ‘member’ is defined in section 2 CA 2016 as 5 6 “(a) in the case of a company limited by shares, a person whose name 7 is entered in the register of members as the holder for the tie being of 8 one or more shares in the company; or 9

in the case of a company limited by guarantee, a person whose name 10 is entered in the register of members.” 11 12

The statutory requirement contained in section 223 CA 2016 is 13 manifestly clear. It expressly prohibits directors of a company from 14 disposing of a substantial portion of the company’s undertaking or 15 property unless shareholders approval has been obtained in a general 16 meeting of the company. I do not find any evidence to show that the 1st 17 Defendant had obtained the approval of the shareholders of DNH, SPSB 18 and SGB before entering into the JVA. The Plaintiff and the other 2 19 directors i.e. Razip and Suffian only came to know of the JVA 20 encumbering the Land through the public announcement made to Bursa 21 Malaysia on 22.4.2019 by SGB. This is in clear contravention of section 22 223 CA 2016. The requirement to obtain shareholders approval is a 23 mandatory statutory requirement under section 223 CA 2016. It must be 24 complied with even if the agreement makes no provision for it. 25 26

Counsel for the 2nd Defendant took great pains to remind this court 27 that the Plaintiff is not a shareholder let alone a member of the 1st 28 Defendant, he is therefore not the proper party and has no locus standi to 29 institute the action. Following on that it was contended that there was no 1 reasonable cause of action. 2 3

In my view this contention is untenable and misconceived. Certainly 4 the content and objective of section 223 CA and counsel’s reference to 5 the case law is not inaccurate. However, on the facts of this particular 6 case, what lies at its core is the fact that the JVA was entered into between 7 the 1st and 2nd Defendant without the written consent of the Plaintiff, 8 without the knowledge of the 3 directors of the 1st Defendant, without due 9 compliance to the requirements of section 223 CA 2016 and without 10 obtaining the consent of the shareholders of DS, DN, SP and SGB. 11 12

It is pertinent to note that Clause 4 of the JVA dated 22.4.2019 13 provides that the 2nd Defendant is allowed to develop the said Land into a 14 mixed development project spanning over a period of 30 years. In 15 furtherance of that a PA was executed to give effect to the JVA. The 16 payment terms are found in Clause 3A of the JVA. It provides for interalia 17 a total cash sum of RM10 million of which a sum of RM1 million is to be 18 paid upon execution of the JVA, thereafter a sum of RM2 million to be paid 19 within 3 months from the date of the JVA. The balance sum of RM7 million 20 will only be paid over 7 annual payments of RM1 million each. 21 22

The Plaintiff’s contention that there was non-compliance with the 23 protective provisions of section 223 CA 2016 has merits. Thus far the 24 Defendants have not produced any resolutions passed by the company to 25 prove that the shareholders had authorised the 1st Defendant to enter into 26 the JVA and for the issuance of the PA to the 2nd Defendant. Merely by 27 making a public announcement to the Bursa is with respect a clear non- 28 compliance with the legal requirements. 29

On this matter I am reminded of what Ramly Ali FJC said in Tan 1 Chee Hoe & Sons Sdn Bhd v Code Focus Sdn Bhd [2014] 3 CLJ 141 2 where his Lordship held as follows : 3 4 “Section 132C(1) of the Companies Act 1965(‘s. 132C’) statutorily 5 emplaces the power of disposal of company’s substantial property and 6 undertaking inn the hand of the shareholders at the general meeting and 7 declares transaction as ‘invalid’ and ‘void’ without such shareholders’ 8 approval. The agreement between the plaintiff and the defendant 9 involved an agreement to dispose of a substantial portion of the 10 defendant’s asset. The mandatory requirement of shareholders’ 11 approval under s. 132C(1) had not been obtained by the defendant by 12 the completion date (see paras 24 – 25). 13 The mandatory statutory provisions under s. 132C must be complied 14 with and cannot be waived by agreement of the parties. Non-compliance 15 or contravention of the requirement renders the contract as void and 16 invalid; and thus cannot be enforceable by law (see para 58)” 17 18

I find it clearly stipulated that parties must fulfil the conditions set out 19 in the SSA and the fulfilment of any condition precedent imposed in the 20 agreement is binding upon all parties. Without doubt it must have been 21 the intention of parties that the Plaintiff be given added security for the 22 sale of his shares with the imposition of the requirement of his written 23 consent. Consequently, any step taken without that consent would be void 24 and unenforceable. 25 26

I additionally find that the 2nd Defendant’s action in seeking the 27 protection of section 225 CA to be misplaced. The 2nd Defendant is relying 28 on the fact that it is a third party which dealt with the 1st Defendant for 29 valuable consideration insisting it had no actual notice of any 30 contravention of the provisions of section 223 CA. The 2nd Defendant also 31 relied on a letter dated 23.5.2019 issued by SGB informing that it had 1 approved the JVA. In my opinion whether SGB approved the JVA is 2 irrelevant. As I have stated earlier, non-compliance or contravention of 3 terms and conditions in the said agreement as well as with statutory 4 requirements rendered the JVA inevitably to be void and unenforceable 5 by law. 6 7

I find the assertion that the 2nd Defendant having made payments 8 under the JVA to be lacking in proof. I am in agreement with counsel for 9 the Plaintiff’s complaint that the 1st and 2nd Defendants have rendered a 10 somewhat convoluted explanation alleging that the 2nd Defendant has 11 paid to the 1st Defendant. Exhibit IBO 7(Affidavit in Support by Plaintiff – 12 Encl 2) which is the Statement of the bank account of the 1st Defendant at 13 that point in time shows that no monies of the sum stated were banked in. 14 It was then averred that the payment was directed to be paid to parties 15 other than the 1st Defendant as there was a fear that the Plaintiff will 16 misuse the funds in the 1st Defendant. This method of payment is not 17 provided for in the JVA and hence is of no advantage to the Defendants. 18 19

Most notably the Defendants were given notice of the non payment 20 but the 1st Defendant, SP and SGB have not responded to that notice. 21 The 2nd Defendant has merely denied any wrongdoing. 22 23

It is a fact that the payments referred to by the 2nd Defendant has 24 not been paid to the 1st Defendant as has been contractually agreed to 25 under the JVA. More importantly the Defendants have admitted payments 26 were not made directly to the 1st Defendant as provided for in the JVA. As 27 I have pointed out earlier, the obligations imposed on the parties must be 28 strictly adhered to and any breach of the terms of the JVA must be 1 construed to be fatal thereby rendering it null and void. 2 3

Premised on the aforesaid reasons, I am of the view that the Plaintiff 4 is entitled to the reliefs claimed in Encl 1. I allowed Encl 1 with costs. 5 6 The Striking out Applications in Encl 13 and 18 7

In view of my findings and decision for Encl 1, there is therefore no 8 premise for the 1st and 2nd Defendants applications to strike out the OS. 9 In any event I would readily determine that this is not a suitable case for 10 striking out of the OS. 11 12

Both these applications were made pursuant to O 18 r 19(1)(a) ROC 13 2012 i.e. on the premise that the OS disclosed no reasonable cause of 14 action. 15 16

The law pertaining to striking out pleadings under O 18 r 19 of the 17 ROC 2012 is well settled (See the Supreme Court case of Bandar Builder 18 Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 4 19 CLJ 17) It is only in plain and obvious cases that recourse should be had 20 to the summary process under this rule and the summary procedure can 21 only be adopted when it can clearly be seen that a claim or answer is on 22 the face of it ‘obviously unsustainable’. It cannot be exercised by a minute 23 examination of the documents and facts of the case, in order to see 24 whether the party has a cause of action or a defence (see Bandar Builder 25 Sdn Bhd v United Malayan Banking Corporation Bhd [1993] 3 MLJ 26 36.) 27 28 29

Taking a step back to properly peruse and evaluate the pleadings, I 1 did not consider the Plaintiff’s claim to be so obviously unsustainable that 2 it ought to be struck off summarily. In my view this is not a plain and 3 obvious case for striking out. The reasons for my decision are based on 4 the very same reasons why I allowed Encl 1. 5 6

In view of the above the Defendants’ applications in Encls 13 and 7 18 are hereby dismissed with costs. 8 9 Encl 3 – the interim inter partes injunction 10

On 11.9.2019 the Plaintiff was given an interim inter partes 11 injunction pending disposal of the OS. 12 13

In view of the outcome of my decision in Encl 1, it follows that the 14 injunction granted on 11.9.2019 shall stay in place and Encl 3 is to be 15 allowed with costs. 16 17

For the avoidance of any doubt whatsoever, I was satisfied the 18 Plaintiff had demonstrated and fulfilled that there were serious questions 19 to be tried as I was of the view that the Land could not be disposed of 20 without the proper approval and consent to be obtained in law and under 21 the SSA. This OS involved immovable property and therefore the balance 22 of convenience lay in granting the injunctive reliefs sought. I kept in mind 23 that the Land is the only asset of the 1st Defendant and hence the status 24 quo ought to be maintained. I agreed with the Plaintiff’s unease that if not 25 allowed the 2nd Defendant would take occupation of the land and carry out 26 quarrying works and if dealt with unlawfully may not be put back to its 27 original status quo by the Defendants. I was also of the view that damages 28 did not seem to be an adequate remedy at the time when the injunctive 29 reliefs were sought. In short, I was of the view that the grounds relied on 1 by the Plaintiff in seeking the interlocutory interim injunction clearly met 2 the general test of granting an injunction as laid out in case of Keet Gerald 3 Francis Noel John v Mohd Noor b Abdullah [1995] 1 MLJ 193. 4 5 Conclusion 6

In conclusion and without any intention to ignore the submissions of 7 all parties here, I did not address each and every allegation raised as I 8 was of the opinion it was not necessary in coming to my decision on all 9 the 4 applications before me. 10 11

For the reasons explained in this judgment I allowed Encl 1 and 3 12 and dismissed Encls 13 and 18. 13 14 Dated 15 August 2022 15 16 17 18 (DATO’ JULIE LACK) 19 Judge 20 High Court of Malaya 21 Shah Alam, Selangor Darul Ehsan 22 23 24 25 26 27 28 29 Counsel 1 For the Plaintiff : 2 Renu Zechariah with Cheryl Kwan 3 (MESSRS. ROSLEY ZECHARIAH) 4 5 For the 1st Defendant : 6 Chong Loong Men with Tan Su Ning 7 (MESSRS. CHONG + KHENG HOE) 8 9 For the 2nd Defendant : 10 Alex Tan Chie Sian 11 (MESSRS. WONG KIAN KHEONG) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29