Itramas Technology Sdn Bhd v 1. ) RAPS Solution Sdn Bhd (BA-23NCvC-12-03/2022)

RAPS SOLUTION SDN. BHD. [COMPANY NO. 870736-H]

SELVARAJ A/L SUPRAMANIAM [IDENTITY CARD NO. 740727-06-5299)

BALA MURUGAN A/L KRISHNAN [IDENTITY CARD NO. 721213-06-5079)

SUBRAMANIAM A/L ARUMUGAM [IDENTITY CARD NO. 520723-10-5789)

SAKTHIVEL A/L ALAGAPPAN [IDENTITY CARD NO. 700306-14-5091)

MOGANA SUNDRA RAJ A/L ETHIRAJ [IDENTITY CARD NO. 861125-43-6161) ….. DEFENDANTS GROUNDS OF JUDGMENT (Enclosures 5 and 7) INTRODUCTION [1] The Plaintiff was the contractor for a construction project with multiple trades of construction works of which trenching works was part thereof. The contract of the Plaintiff in the project was described as “The Supply, Delivery, Installation, Testing and Commissioning of PV Electrical Works for the Proposed Development Of A 50MWac Large Scale Solar Photovoltaic Energy Producing Power Plant At 2 Lot PT 4526 (Part of Lot PT 4268), PT 4527, PT 4656 and PT 4660, Mukim Ayer Panas, Daerah Jasin, Hang Tuah Jaya, Melaka” [see paragraph 9 of the Statement of Claim]. [2] By a written subcontract, the Plaintiff employed the 1st Defendant-company as its subcontractor for trenching works in the construction project. There is an arbitration clause in the subcontract between the Plaintiff and the 1st Defendant-company [see paragraph 9 of the Statement of Claim]. [3] The 1st Defendant-company has at all material time a total of 5 Directors, i.e. the 2nd to 6th Defendants herein. All the Directors of the 1st Defendant-company have been cited as co-defendants by the Plaintiff here. [4] By Enclosure 5, the 1st Defendant-company made an application under section 10 of the Arbitration Act 2005 for stay of court suit pending arbitration. [5] The 2nd to 6th Defendants, the Directors of the 1st Defendant-company, filed an application in Enclosure 7 to summarily strike out the Plaintiff’s claims against them. [6] On 27 July 2022, this Court allowed the application of the 2nd to 6th Defendants in Enclosure 7 and struck out the Plaintiff’s claims against them. On the same day, this Court also granted a stay under section 10 of the Arbitration Act 2005 pursuant to the 1st Defendant-company’s application in Enclosure 5. [7] By two separate notices of appeal, the Plaintiff has appealed against this Court’s decisions in respect of both enclosure 5 and Enclosure 7. ENCLOSURE 7: APPLICATION FOR STRIKING OUT UNDER O.18 R.19 [8] O.18 r. 19 striking out of a plaintiff’s suit is only to be resorted to in clear and obvious case where the plaintiff’s action is frivolous, vexatious, or an abuse of the process. Where the plaintiff’s action is obviously unsustainable or has no chance of success, the plaintiff’s action is frivolous, vexatious, or an abuse of the process and can be summarily struck out. 3 [9] In the present case, the Plaintiff’s claims against the 1st Defendant-company are based on a subcontract for construction works which formed part of the construction project undertaken by the Plaintiff. It is clear and obvious that the 2nd to 6th Defendants, as the Directors of the 1st Defendant-company, have no privity of contract with the Plaintiff. [10] Here, the Plaintiff’s only ground for suing and including the 2nd to 6th Defendants as co-defendants, the entire Directors of the 1st Defendant-company, is that the 2nd to 6th Defendants allegedly conspired to injure and/or made fraudulent misrepresentations regarding the quality of the trenching works the 1st Defendant-company constructed at the project site, thereby resulting in the Plaintiff’s subsequent trades of construction works at the trenches to suffer alleged loss and damages. [see paragraphs 18 to 22 of the Statement of Claim] [11] From the appellate courts’ decisions, it is settled that all particulars of fraud and conspiracy to injure must be particularised and that a pleading of general or vague allegations of fraud or conspiracy to injure is liable to be struck out and/or is unsustainable. The pleaded particulars must include all material facts and particulars which encompass the elements of the fraudulent misrepresentation and/or conspiracy to injure, as the case may be. See Renault SA v. Inokom Corporation [2010] 5 CLJ para [52] (Court of Appeal); Zung Zang Wood Products Sdn Bhd v. Kwan Chee Hang Sdn Bhd [2014] 2 CLJ 445 at para [34] (Federal Court); Syarikat Rodziah v. Malayan Banking Berhad [2021] 5 CLJ 170 para [44] (Court of Appeal); Yeohata Machineries Sdn Bhd v. Coil Master Sdn Bhd [2016] 2 CLJ414 para [23]. [12] Based on the principles laid down by the appellate courts in para (4) above, it is clear that the Plaintiff’s pleadings in paragraphs 18 to 22 of the Statement of Claim against the 2nd to 6th Defendants are vague and general and lacking in particulars and are therefore defective pleading vis-à-vis the 2nd to 6th Defendants. The Plaintiff has vaguely lumped its general allegations against the entirety of the 2nd to 6th Defendants. There is no specific pleadings of what representations were allegedly made, which defendant made what alleged representations, when the alleged representations were made, where were they allegedly made, to whom they were allegedly made, etc. There is also no specific pleading of alleged agreement in concert, what alleged agreement, when and where it 4 was made, etc. A comparison with the pleadings in the cases cited in paragraph [11] above, wherein the Courts held the pleadings of fraudulent misrepresentation and conspiracy to injure to be seriously defective and/or should be struck out, would show that the Plaintiff’s Statement of Claim in our present case is seriously defective. [13] Until the date of hearing of the application for striking out in Enclosure 7, there has been no application by the Plaintiff to amend its Statement of Claim. [14] Although the Court has residual discretion to allow a party leave to amend its pleadings which are found to be defective, this leave to amend should not be granted in the absence of valid reason and sufficient justification. [15] In paragraph 14 of the Plaintiff’s Submission in opposition to the 2nd to 6th Defendants’ application for striking out, the Plaintiff referred to the cases of AIC DotCom Sdn Bhd v. MTEX Corp & Ors [2011] 3 MLJ 476, Shahidan bin Shafie v. Atlan Holdings Bhd & Anor [2005] MLJU 279, Muniandy s/o Subravan v. The Chairman and Board Members of Koperasi Menara Maju Bhd [1997] 1 MLJ 557, Kuala Lumpur Finance Bhd v. KGV & Associates Sdn Bhd [1995] 1 MLJ 504 and Semenanjung Trading Co v. Teoh Cheng Hock [1963] 1 MLJ 89, the Plaintiff argues that even if the Plaintiff’s Statement of Claim were defective or unclear, the Plaintiff should be given leave to amend the Statement of Claim instead of being struck out. [16] A party who wishes the Court to consider whether or not to exercise the residual discretion to grant leave to amend the defective pleadings instead of striking out the defective pleadings must, before the hearing of the application for striking out pleadings, put in writing and present to the Court the proposed amendments to the defective pleadings so that the Court can consider whether or not such proposed amendments are bona fide and are capable of remedying the defects in pleadings. Here, the Plaintiff has not presented in writing any proposed amendment to the Plaintiff’s Statement of Claim. [17] On this ground alone, there is no basis for the Court to consider whether to grant leave for amendment of the Plaintiff’s Statement of Claim, and as such, the Plaintiff’s said argument on amendment 5 should be rejected. [18] Where the proposed amendments are timeously presented in writing to the Court, in considering whether or not the affected party with defective pleadings has valid reason and sufficient justification to be granted the leave to amend the defective pleadings instead of having the defective pleadings struck out, the Court has to consider various factors including:

(a) the nature and extent of the defects in the pleadings,

(b) whether or not the affected party was under time constraint in preparing its pleadings;

(c) whether the proposed amendments involve particulars or matters which the affected party had raised timeously or contemporaneously in the past via-a-vis the opposing parties;

(d) whether the proposed amendments are bona fide;

(e) whether the particulars or matters proposed to be added or included by the proposed amendment appear to be credible on the face of the affidavits and exhibits;

(f) whether any grant of such leave would cause prejudice to the opposing parties which cannot be compensated by costs. [19] On the question of nature and extent of defects [factor (a)], this Court finds that the Plaintiff’s pleadings in the Statement of Claim have failed to plead material facts and particulars which encompass the elements of the fraudulent misrepresentation and/or conspiracy to injure and the deficiency in pleading the elements of the fraudulent misrepresentation and/or conspiracy to injure is serious and extensive. The defects in pleading is serious and extensive. This is a factor which leans against the grant of discretion in favour of the Plaintiff here. [20] On the question of time constraint [factor (b)], this Court finds that as the Plaintiff is the party who decided whether and when to file the suit and Statement of Claim against the defendants herein, the Plaintiff was not under any time constraint in filing the present suit which could likely have caused it to overlook some particulars or matters during the course of preparing a pleading in a rush due to time constraint. Moreover, the claims and disputes in respect of the subcontract and works thereunder between 1st Defendant-company and the Plaintiff were already in litigation stage in adjudication proceedings and the consequential court suits since many months before the filing of the present suit herein, as such, this factor of 6 absence of time constraint is a factor which leans against the Plaintiff in the consideration of the court’s discretion whether or not to grant leave to amend the defective pleadings. [21] On the question of timeliness and contemporaneity of raising the matters to be included by the proposed amendment [factor (c)], this Court finds that from the affidavits and exhibits filed herein there is no letter or any written communication by the Plaintiff in the past to timeously or contemporaneously raised any allegation of any conspiracy or misrepresentation by any of the Directors of the 1st Defendant-company. This absence of timeous or contemporaneous allegation of such nature or effect is particularly pertinent and glaring in light of the fact that many months ago the Plaintiff and the 1st Defendant-company was also embroiled in disputes and litigation in adjudication proceedings and the consequential court suits. The documents before this Court herein shows that the first time the Plaintiff made allegations of misrepresentation and conspiracy (which turn out to be general and vague allegations) and communicated the same to the Defendants herein was when the Writ and Statement of Claim herein was served on them. This factor on absence of timeliness and contemporaneity of raising the matters to be included by the proposed amendment [factor (c)] leans against the grant of leave to amend the Plaintiff’s pleadings here. [22] On the question whether the proposed amendments are bona fide [factor (d)], the affidavits and exhibits in our present suit show that:

(i) there is no contemporaneous document to indicate that at the material times during the course of the project the Plaintiff has ever made allegations against the 2nd to 6th Defendants or any of them regarding alleged misrepresentation or conspiracy,

(v) the Plaintiff has not produced a draft of the proposed particulars which it intends or purports to add by amendment. Moreover, the Statement of Claim in our present suit was filed after the Plaintiff’s challenge against the adjudication decision in favour of the 1st Defendant-company in respect of the subcontract works had been dismissed by the High Court in the previous suits. Even in our present case, the Plaintiff’s suggestion of amendment of the pleadings was only in the course of submissions after the Plaintiff has realised that their existing pleadings, based on the case authorities submitted by the 2nd to 6th Defendants, seriously defective. In the circumstances, this Court finds that the proposed amendments are not bona fide. This factor on absence of bona fides in the proposed amendment [factor (d)] is against the grant of leave to amend the Plaintiff’s pleadings here. [23] On the whether the particulars or matters proposed to be added or included by the proposed amendment appear to be credible on the face of the affidavits and exhibits [factor (e)], this Court repeats paragraphs [16] and 17 above that until the date of hearing of the defendants’ application for striking out, the Plaintiff has not presented in writing its proposed amendments to the Statement of Claim. This Court also repeats the facts and circumstances stated in paragraphs [20] to [22] above. If any of the 1st Defendant-company’s Directors had committed such serious and intentional wrongdoing of fraudulent misrepresentation or conspiracy to injure the Plaintiff/main contractor in a construction project, one would expect the Plaintiff or its project staff to have put in writing, whether internally or by written communication to the 1st Defendant or some other persons in the same project, some complaint or details of such alleged wrongdoing. In our present case, the cause papers produced before this Court do not show any such written allegation nor any hint of allegation of such nature or to such effect. In the circumstances, this Court finds that the particulars or matters proposed to be added or included by the proposed amendment do not appear to be credible on the face of the affidavits and exhibits. As such, this factor (e) is also against the grant of leave to amend the Plaintiff’s pleadings here. [24] On the question whether any grant of such leave would cause prejudice to the opposing parties which cannot be compensated by 8 costs [factor (f)], this Court finds that under the Companies act 2016 men and women (including the 2nd to 6th Defendants) take up appointments as directors of the companies with the expectation that the the directors and the company are different legal entities, and that in the absence of exceptionally blameworthy and seriously wrongful conduct which fall under the lifting of corporate veil or using the company as a shell and cover to defraud the public, the directors as separate legal entities are not personally liable for the company’s contract dealings. A suit against the company, if it eventually culminates in a judgment against the company, is against the company and the company’s assets. On the other hand, a suit against the Directors personally would in the credit rating records of the financial institutions and in the CTOS search records, would show up as the Directors’ potential or contingent liability personal and has a negative impact on the Directors’ personal credit rating in such systems. Any negative impact on credit rating would, among others, affect a person’s capacity and credibility to take loans and facilities from the financial institutions. In view of the factors (a) to

(e) above and in light of the foregoing, it is rather prejudicial for the Plaintiff’s present suit to hang over the heads of the 2nd to 6th Defendants for many years to come and such prejudice cannot be compensated with costs. [25] In the entire circumstances, even if the Plaintiff had timeously presented its proposed amendments to add new allegations of fraud and/or conspiracy to the Statement of Claim before the hearing of the Enclosure 7 application, this is still not a just and proper case for exercising the Court’s residual discretion to grant leave for amendment of the Statement of Claim instead of striking it out. [26] This Court also notes that in the Plaintiff’s submission in opposition to the 1st Defendant-company’s stay application under s. 10 of the Arbitration Act 2005, the Plaintiff has cited the Court of Appeal’s decision in Protasco Bhd v. Tey Por Yee [2018] MLJU 993 to argue that stay pending arbitration should not be granted because of the existence of 2nd to 6th Defendants as co-defendants here. In light of the background facts and surrounding circumstances stated in connection with factor (b) to factor (f) above, this Court finds that the Plaintiff’s inclusion of the 2nd to 6th Defendants here was actuated by a motive to avoid a stay pending arbitration by relying upon the Protasco case although the Plaintiff has no genuine bona fide claim against the 2nd to 6th Defendants. Such attempt on the part of the 9 Plaintiff was an afterthought. [27] In the circumstances, this Court holds that the Plaintiff’s claims against the 2nd to 6th Defendants for alleged fraudulent misrepresentation and for conspiracy to injure are obviously unsustainable or has no chance of success, and that in the circumstances of the present case, it is not appropriate for the Court to grant leave for the Plaintiff to amend its pleadings merely to avoid the consequence of being struck out under O.18 r.19. ENCLOSURE 5: STAY UNDER SECTION 10 OF ARBITRATION ACT 2005 [28] In the subcontract between the Plaintiff and the 1st Defendant-company [Exhibit “SS-1” to the 1st Defendant’s Affidavit in Support, Enclosure 6], there is an arbitration clause in clause 20.2(c) thereof which reads as follows: “20.2 Dispuste Resolution Any dispute or difference arising under or in connection with this Contract and any other non-contractual obligations connected with it shall be determined in accordance with the following:

(a) Amicable Settlement

(i) Both parties shall attempt to settle any dispute arising out of, in relation to or in connection with this Contract including its validity amicably and in accordance with the provisions of this Sub-Clause 20.2 before the commencement of arbitration.

(b) Dispute Resolution Procedures

(i) If within thirty 30 days from the commencement of negotiations pursuant to Sub-Clause 20.2(a), such dispute is not resolved, such dispute shall be resolved in a binding award in arbitration conducted in English and in Kuala Lumpur in accordance with the procedures set forth in Sub-Clause 20.2(c).

(a) RM8,000 as the total costs of Enclosure 7 application;

(b) RM4,000 as the costs of Enclosure 5 stay application. Dated this : 21st September 2022. Signed ….............................................................. TEE GEOK HOCK JUDICIAL COMMISSIONER HIGH COURT OF MALAYA AT SHAH ALAM (NCVC 10) To the parties’ solicitors:

(c) Arbitration Any dispute, controversy or claim arising out of or relating to this Contract, or the breach, termination or invalidity thereof, shall be settled by arbitration at the Kuala Lumpur Regional Central of Arbitration (“KLRCA”) in Kuala Lumpur in accordance with the Rules of 11 Arbitration of the KLRCA as at present in force. The number of arbitrator shall be a single arbitrator and be jointly appointed by the Paties, failing any mutual agreement by the Parties to make such joint appointment, the Director of the KLRCA shall appoint the said individual arbitrator. The language to be used in arbitral proceedings shall be English. The arbitration award shall be final and binding upon both Parties.” [29] By letter dated 3.9.2021 the Plaintiff issued a Notice of Arbitration to the 1st Defendant and proposed its choice of arbitrator: see paragraphs 10.1 of the 1st Defendant’s Affidavit in Support and Exhibit “SS-2” thereof at pages 169 to 172 of Enclosure 6. [30] By Response to Arbitration dated 14.9.2021, the 1st Defendant agreed to the Plaintiff’s choice of arbitrator, denied the Plaintiff’s claims, put forward a counterclaim of RM4,663,266.41 and stated that the Plaintiff’s N0tice of Arbitration was defective for non-compliance with clause 20.2: see paragraphs 10.2 of the 1st Defendant’s Affidavit in Support and Exhibit “SS-2” thereof at pages 173 to 177 of Enclosure 6. [31] In paragraphs 19 and 20 of the Plaintiff’s Affidavit in Reply (Enclosure 10), the Defendant did not deny the existence of the arbitration clause in the subcontract and also did not deny that notice of arbitration dated 3.9.2021 and reply dated 14.9.2021 were issued by the Plaintiff and the 1st Defendant respectively. [32] In our present case the Plaintiff has not alleged that the arbitration clause was in any way invalid, unenforceable or incapable of being performed. [33] Under the amended section 10 of the Arbitration Act 2005, a court matter which falls within the ambit of a valid and enforceable arbitration clause shall be stayed pending arbitration, and it is irrelevant to consider whether or not there is in fact a dispute between the parties. [34] The Federal Court in Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd [2020] 4 CLJ 301 paragraphs [52] and [53] and in Press Metal Sarawak Sdn Bhd v. Etiqa Takaful Bhd [2016] 9 CLJ 1 has made it clear beyond doubt that the allegation or argument that there is no 12 dispute between the parties is not defence to a section 10 application for stay pending arbitration. [35] Although there is an argument in the Plaintiff’s submission in opposition to the 1st Defendant-company’s stay application under s. 10 of the Arbitration Act 2005 whereby the Plaintiff purported to rely the Court of Appeal’s decision in Protasco Bhd v. Tey Por Yee [2018] MLJU 993 to argue that stay pending arbitration should not be granted because of the existence of 2nd to 6th Defendants as co-defendants here, this Court finds that such attempt on the part of the Plaintiff was an afterthought. In light of the background facts and surrounding circumstances stated in connection with factor (b) to factor (f) above in connection with Enclosure 7, this Court finds that the Plaintiff’s inclusion of the 2nd to 6th Defendants here was actuated by a motive to avoid a stay pending arbitration by relying upon the Protasco case although the Plaintiff has no genuine bona fide claim against the 2nd to 6th Defendants. [36] Anyway, this Court has allowed the 2nd to 6th Defendants’ application in Enclosure 7 to strike out the Plaintiff’s claims against them. Accordingly, the 2nd to 6th Defendants have ceased to be parties in the present suit and Protasco case is of no assistance to the Plaintiff here. [37] Moreover, the facts in the Protasco case are materially different from the facts and circumstances of our present case. [38] In our present case there is no valid or sufficient basis for saying that the arbitration clause in the subcontract between the Plaintiff and the 1st Defendant is in any way invalid or unenforceable or inoperative. [39] In the circumstances, this is a suitable case for grant of section 10 stay pending arbitration. CONCLUSION [40] By reason of the aforesaid, this Court 27 July 2022, this Court allowed the application of the 2nd to 6th Defendants in Enclosure 7 and struck out the Plaintiff’s claims against them. On the same day, this Court also granted a stay pending arbitration under section 10 of the Arbitration Act 2005 pursuant to the 1st Defendant-company’s 13 application in Enclosure 5. [41] This Court also assessed and awarded the following amounts of costs, subject to allocator, in favour of the respective defendants:

For the Plaintiff : Muhammad Azrul bin Abdul Hamid Messrs Azrul, Liew & Co. (Kuala Lumpur)

For the Defendants : Faeza Suraya binti Roselan Messrs Azmi Fadzly Maha & Sim (Kuala Lumpur)