James Theophilus Fredericks v Zainuddin Bin Baharuddin (BA-22NCVC-514-11/2019)

This is the Defendant’s application to strike out the Plaintiff’s Writ of Summons and the Statement of Claim in pursuant to Order 18 Rule 19(1)

(a), (b) and/or (d) Rules of Court 2012 (ROC) (Enclosure 9) 25 CAUSE PAPERS

The cause papers are as follows: - 30

Plaintiff’s Writ and Statement of Claim dated on the 15th of November 2019; 2

The Defendant’s Statement of Defence and Counterclaim dated on 16th of December 2019;

Plaintiff’s Reply to Defence and Defence to Counter claim dated on the 30th of December 2019;

The Defendant’s Notice of Application dated on the 18th of December 2019;

Defendant’s Affidavit in Support dated on the 18th of December 2019;

The Plaintiff’s Affidavit in Reply dated on the 3rd of January 2020;

The Defendant’s Affidavit in Reply dated on the 16th of January 2020; and 15

The Plaintiff’s Affidavit in Reply II dated on the 6th of February 2020. THE PLAINTIFF’S CLAIM 20

The Plaintiff is claiming against the Defendant amongst others, for: a. A declaration that the 500,000 shares of Pelopor Dinamik Sdn Bhd held by the Defendant belongs to the Plaintiff. 25 b. An order that the Defendant is to pay the Plaintiff a total sum of RM 1,900,000.00 with interest being the dividend received by the Defendant for the 500,000 shares. 30 3

On the 2nd of December 1996, a trust deed was entered between the Plaintiff (“Beneficiary”) and the Defendant (“Trustee”) for the Defendant to hold 350,000 shares on trust for the Plaintiff in which one of the salient 5 terms of the trust deed is as follows: - “1. The Trustee, hereby declares that he holds all the shares specified in the schedule and all dividends and interest accrued or to accrue upon the same or any of them upon 10 trust for the Beneficiary and the Trustee agrees to transfer, pay and deal with the said shares and the dividends and interest payable in respect of the same in such manner as the Beneficiary shall from time to time direct”.

In 2002, the Plaintiff and the Defendant had entered into another oral trust agreement to hold another 150,000 of shares in the Company per the same terms as in the trust deed. As a result of the two trust agreements, the Defendant was holding a total of 500,000 shares on trust for the Plaintiff in the Company.

On the 20th of January 2012, a Directors’ Circular Resolution (“DCR”) was passed by the Board of Directors in the Company consisting of Lim Julian, the Defendant and the Plaintiff to resolve a total of RM 3.8 million dividends to be payable on the 26th of January 2012 to holders of ordinary shares in 25 the Company for financial year 2012.

Based on the said DCR and Warrant No.002, the Defendant had acknowledged receipt a sum of RM 1.9 million being the interim dividend of 500,000 shares of RM3.80 per share (net of tax) for financial year ending 30 31st of August 2012.

In 2016, the Plaintiff had requested the Defendant to transfer his total shares of 500,000 holding on trust for the Plaintiff back to him. The 4 Defendant had, as a result, resigned as a Director of the Company with immediate effect and executed the transfer of securities form (“Form 32A”) to transfer all the 500,000 shares back to the Plaintiff.

A DCR was also passed by Lim Julian and the Plaintiff to resolve such 5 transfer. However, the Plaintiff did not know that the resignation letter, the DCR and the Form 32A signed by the Defendant were later not properly lodged with the Registrar by the Company Officers to give effect to them.

Upon being questioned by the Plaintiff, the Defendant has on the 12th of 10 January 2017, transferred 350,000 shares back to the Plaintiff instead of the full 500,000 shares.

Therefore, the Plaintiff claimed that the remaining 150,000 shares and the dividend of RM 1.9 million in relation to the 500,000 shares held on trust by 15 the Defendant for the Plaintiff are still holding by the Defendant.

On the 21st of October 2019, the Plaintiff through his solicitors sent a letter of demand to the Defendant to demand for the dividend for the 500,000 shares received by the Defendant on behalf of the Plaintiff for the amount of 20 RM 1.9 million and 5% of interest per annum.

The Plaintiff has subsequently filed a Summary Judgment application under Order 14 of the ROC (“Enclosure 5”) for the amount of RM 1.33 million in relation to the 350,000 shares held on trust based on the clear terms of the 25 trust deed dated 2nd of December 1996.

The Defendant herein applied to strike out the Plaintiff’s claim pursuant to Order 18 Rules 19(1)(a), (b) or (d) of the Rules of Court 2012. 30

There is plethora of case laws that dealt with the principles for a striking out application under Order 18 Rule 19 of Rules of Court. The said principles 5 are well recognised and settled. Of the many case laws, suffice to mention here, the three apex court decisions which laid out the said principles.

In the case of Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 the Supreme Court, amongst others, 5 held as follows at pp 43 :- “It is only in plain and obvious cases that recourse should be had to the summary process under this rule (per Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd 7, and this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it 'obviously unsustainable' (see AG of Duchy of Lancaster v L & NW Rly Co 8). It cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause of action or a defence (see Wenlock v Moloney & Ors 9). The authorities further show that if there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under O 33 r 3 (which is in pari materia with our O 33 r 2 of the RHC) (see Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd 7). The court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.”

In Seruan Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul 10 Makmur & Anor [2016] 3 MLJ 1, the Federal Court held as follows: - “[25] The principles for striking out pleadings pursuant to O 18 r 19 of the ROC are well settled. It is only in a plain and obvious case that recourse should be had to the summary process under this rule; and this summary process can only be adopted when it can clearly be seen that a claim on the face 6 of it is obviously unsustainable (see Bandar Builder; Hubbuck & Sons v Wilkinson, Heywood and Clark [1899] 1 QB 86; A-G of Duchy of Lancaster v London and North Western Rly Co [1892] 3 Ch 274). [26] The tests for striking out application under O 18 r 19 of the ROC, as adopted by the Supreme Court in Bandar Builder are, inter alia, as follows:

it is only in plain and obvious cases that recourse hould be had to the summary process under the rule;

this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’ (Emphasis added);

it cannot be exercised by a minute examination of the documents and facts of the case in order to see whether the party has a cause of action or a defence; and

if there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under O 33 r 3 of the ROC; and

the Court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.”

Further, the Court of Appeal enunciated in details the principles of striking out a claim in the case of Tan Wei Hong & Ors v Malaysia Airlines System Bhd & Ors [2017] 4 MLJ 540. The Court held that: - 5 “[7] The Court will adopt the following as principles applicable to the consideration of an application to strike out pleadings and endorsements:

In considering the Defendants’ application under O 8 r 7 19(1)(a), no affidavit evidence is admissible;

all the averments in the statement of claim must be assumed to be true;

the Court should only exercise its powers sparingly and only in clear cases;

the test to be applied is whether on the face of pleadings, the claim is obviously unsustainable. The matter must be unarguable or almost incontestably bad;

the burden is on the Defendants to show to the Court that the Plaintiffs’ claim is so plain and obviously unsustainable or in other words, the Plaintiffs’ claim is bound to fail at trial;

where there is a dispute as to the factual matrix of the case, the court would not strike out the pleadings and endorsements;

the power to strike out pleadings and endorsements should be exercised after the court has considered all facts, but the Court must not embark a minute examination of the documents and the facts of the case as this is solely reserved for the trial judge;

a pleading is ‘frivolous’ or ‘vexation’ when its discloses no reasonable cause of action on its face. The Oxford English Dictionary defines ‘frivolous’ as follows: b Law. In pleading: Manifestly insufficient or futile. Black Law Dictionary, (9th Ed). (Thomson Reuters, St Paul, Minnesota, 2009), defines ‘frivolous’ as ‘lacking a legal basis or legal merit; not serious; not reasonably purposeful …’; and ‘frivolous suit’ as ‘A lawsuit having no legal basis, often filed to harass or extort money from the Defendant’. Among the definitions of ‘vexatious’ and ‘vexation’ in the Oxford English Dictionary are the following:

Causing, tending or disposed to cause, vexation. 8 c spec of legal actions: Instituted without sufficient grounds for the purpose of causing trouble or annoyance to the Defendant. And, ‘Vexation, the action of troubling or harassing by aggression or interference (sometimes spec by unjustifiable claims or legal action)’. Black Law Dictionary defines ‘vexatious suit’ as ‘a lawsuit instituted maliciously and without good grounds, meant to create trouble and expense for the party being sued’;

the Oxford English Dictionary defines ‘abuse (of process) as (ii) wrong or improper use, misuse, misapplication, perversion; turning the wrong way, diversion to an improper use, corruption, distortion’. A pleading is an abuse of process if the litigation process is used for improper purpose; eg, where the proceedings constitute a sham; where the process of the court is not being fairly or honestly used, or is employed for some ulterior or improper purpose;

in exercising the power under O 18 r 19(1)(d), the court is not limited to considering the pleadings of the parties, but is entitled to consider affidavit relating to the issues in the case; and

where the Court is to exercise its inherent jurisdiction to dismiss a claim, it is important that there is no dispute between the parties on issues of facts. (See Bandar Builders Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36; Metroplex Holdings Sdn Bhd v Commerce International Merchant Bankers Bhd [2013] 4 MLJ 520; Tanalachimy a/p Thoraisamy & Ors v Jayapalasingam a/l Kandiah & Ors (sued as liquidators of the Great Alonioners Trading Corp Bhd) and 9 another appeal [2014] 4 MLJ 85; See Thong & Anor v Saw Beng Chong [2013] 3 MLJ 235; Sivarasa Rasiah & Ors v Che Hamzah Che Ismail & Ors [2012] 1 MLJ 473; Gabriel Peter & Partners (suing as a firm) v Wee Chong Jin & Ors [1998] 1 SLR 374).” FINDINGS

Upon perusal of the pleadings, the Defendant’s application herein and 5 hearing the submissions of both counsels for the Plaintiff and Defendant, I am of the view that this is not a fit and proper case for a striking out application under Order 18 Rule 19 of Rules of Court. My reasons are elaborated below. 10 A. Issues: Whether the Plaintiff’s Statement of Claim disclose no cause of action (Order 18r 19 (a) of ROC)

The Defendant contended that the Plaintiff himself had received the RM 1.9 million and it was deposited into 3 accounts in which none of the said 15 belongs to the Defendant. To support the said contention, the Defendant produced several documents, amongst others a CIMB cash cheque and payment voucher as exhibits. And based on the payment voucher, the payment was authorised and received by the Plaintiff. Further, it is the Defendant’s contention that there was no oral trust agreement between the 20 parties.

On the other hand, the Plaintiff contended that in order to satisfy limb (a), the Court needs to look into the pleadings alone. Nevertheless, in response, the Plaintiff contended amongst others, which are as follows: 25 10 a. That he had lodged a police report stating that his signature and initial have been forged after he came across to the said payment voucher. b. The payment voucher is self-explanatory; it is clearly written on the payment voucher that the RM 1.9 million is to “pay to Zainuddin 5 Baharuddin”, the Defendant himself (not the Plaintiff). c. The Director’s Circular Resolution (Exhibit “JTF-2”) adduced by the Plaintiff shows that the Defendant had acknowledged receipt of the RM1.9 million being the interim dividend for the 500,000 shares.

Firstly, based on the perusal of the pleadings per se, it could not be said that the Plaintiff’s Statement of Claim does not disclose any reasonable cause of action. I am satisfied the Plaintiff has clearly and sufficiently 15 pleaded the supporting facts in relation to the cause of action in the Statement of Claim, namely, the Defendant breached the trust agreements by refusing to transfer back the 150,000 shares and also retaining the dividends received 500,000 shares holding in trust for the Plaintiff. It can be seen that the necessary or supported facts are all pleaded at the 20 following paragraph in the statement of claim :- a. the trust agreements are pleaded at paragraph 5 and paragraph 8 respectively; 25 b. the RM 1.9 million received on behalf of the Plaintiff is pleaded at paragraph 12; c. the transfer back of 350,000 shares only is pleaded at paragraph 14; 30 d. the demand for the RM 1.9 million is pleaded at paragraph 16; and e. the refusal to pay amount claimed is pleaded at paragraph 18. 11

Thus, it could not be said on the face of the pleadings that the Plaintiff’s claim is obviously unsustainable.

Furthermore, upon perusing the pleadings, exchange of affidavits between the parties herein and the exhibits filed, I find that there are many issues 5 raised, which are contentious and are triable in nature. Amongst the triable issues are, namely,

Whether there is an oral trust agreement between the Plaintiff and the Defendant in respect of the 150,000 shares;

Whether the Plaintiff’s signature and initial on the said payment voucher was forged; and

Whether the Plaintiff had actually received the RM 1.9 million from 15 the Defendant.

Further, I am of the view that the conflicting affidavit evidence pertaining to these issues can only be properly resolved and determined at full trial under the full glare of cross examination of the witnesses, in particular, the parties 20 herein and/or calling other witnesses whose evidence can only be evaluated by the Court after hearing and seeing them. In the case of Sivara Rasia & Ors v. Che Hamzah Che Ismail [2021] 1 MLJ 473, the Court of Appeal had this to say, “A striking out order should not be made summarily by the Court if there is issue of law that requires length argument and 25 mature consideration. It should not also be made if there is issue of facts that is capable of resolution only after taking viva voce evidence during the trial”. B. Issue: Whether the Plaintiff action is scandalous, frivolous and 30 vexatious and abuse of Court process.

It is the Defendant’s contention that the Plaintiff’s claim is res judicata as the issue of 150,000 shares were pleaded in the earlier suit taken by the 12 Plaintiff (KLHC Suit 191) and subsequently a consent judgement dated 2nd of May 2019 was entered between the parties.

In response, the Plaintiff submitted that the Defendant is estopped from raising the issue of res judicata as the same is not pleaded in the 5 Defendant’s pleading nor in the Defendant’s affidavit.

Upon close examination of the Defendant’s pleading, the issue of res judicata is nowhere to be found or simply put, pleaded in the defence. Thus, I am of the view, this Court is not entitled to decide on this issue of 10 res judicata by the Defendant. As in the case of Aseambankers Malaysia Berhad & Ors v. Shencourt Sdn Bhd & Anor [2014] 4 MLJ 619, the Court of appeal held: - “(4) It is trite that the parties are bound by their pleadings. The Court is not entitled to decide a suit on a matter that is not pleaded. It is a fundamental rule of natural justice that the opposite party must be informed of any adverse issue so that the other party has the opportunity to challenge it and not be caught by surprise. When the trial Court decides on an issue that is not pleaded, the judgment can be set aside.” 15

In any event, looking at the said Consent Judgment per se, this Court find the said Consent Judgment deals with the 350,00 shares only, whereas, in the present case, the Plaintiff’s claims are in relation to the 150,000 (paragraph 20 (a) and (b) of the Statement of Claim) and are also in relation 20 to the dividend received from the total 500,000 (paragraph 20 (c) and (d) of the Statement of Claim). Thus, I am of the view that the Defendant’s contention that the Plaintiff’s claim is res judicata is devoid of merits. 13

In respect of the defence of limitation raised by the Defendant, in that, the Plaintiff’s cause of action is barred by section 22(2) of the Limitation Act 1953, I am inclined to agree with the Plaintiff’s submission that the Plaintiff is entitled to rely on section 22(1) of the Limitation Act 1953 as the Plaintiff’s claim is based on trust relationship with the Defendant as a trustee to 5 recover the trust property (shares) and the proceed there of from the Defendant. Thus, by virtue of the said section 22(1) “no period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust being an action” and accordingly, section 22(2) relied by the Defendant is not applicable in the present case.

In light of the aforesaid reasons, it could not be said that the Plaintiff’s statement of claim is scandalous, frivolous and vexatious and amount to an abuse of Court process.

Accordingly, the Defendant’s application (Enclosure 9) herein is dismissed with cost of RM 5,000.00. 20 Dated 21st of August 2021 signed (KHAIRIL AZMI BIN HAJI MOHAMAD HASBIE) 25 Judicial Commissioner High Court Shah Alam 30 14 For the Plaintiffs : Encik Leonard Raj together with Cik Kristie Chew (Messrs Tan Swee Im, Siva & Partners) 5 For the Defendants : Encik Amrit Pal Singh together with Encik Ng Jun Wei & Cik Agwaisha Pillai (Messrs Amrit & Company) 10

Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36.

Seruan Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul Makmur & Anor [2016] 3 MLJ 1.

Tan Wei Hong & Ors v Malaysia Airlines System Bhd & Ors [2017] 4 MLJ

540.

Sivara Rasia & Ors v. Che Hamzah Che Ismail (2021) 1 MLJ 473.

Aseambankers Malaysia Berhad & Ors v. Shencourt Sdn Bhd & Anor [2014] 4 MLJ 619. 25

Order 18 of Rules of Court.

Section 22(1) of the Limitation Act 1953.

Section 22(2) of the Limitation Act 1953.