Jurukur Bahan Fps Sdn Bhd v Leong Kah Weng (WA-22NCC-214-05/2021)

LIM KEE UAN [NRIC No. 690928-04-5259]

CHOO THIN NEE [NRIC No. 751127-08-5994]

LOCK MEI YEE [NRIC No. 811030-08-5180]

TEY SUK REEI [NRIC No. 811107-01-5384]

TEY HEONG TIONG [NRIC No. 630201-04-5771]

JURUUKUR BAHAN FPS SDN BHD [Company No. 200001022533 (525140-P)] … PLAINTIFFS AND LEONG KAH WENG (NRIC No. 740207-08-5309) ... DEFENDANT ! (ORIGINAL CLAIM) BETWEEN LEONG KAH WENG (NRIC No. 740207-08-5309) ... PLAINTIFF

JURUKUR BAHAN FPS SDN BHD [Company No. 200001022533 (525140-P)]

TEY HEONG TIONG (NRIC No 630201-04-5771) ... DEFENDANTS (COUNTERCLAIM) GROUNDS OF JUDGMENT A. Introduction [1] This is a claim for breach of a shareholder’s agreement, arising from the defendant’s failure to return shares that had been allotted to him. The defendant filed a counterclaim, seeking a declaration that he is the beneficial owner of the shares. He also sought director’s fees and dividends he claimed are due to him. [2] The court allowed the plaintiffs’ claim and dismissed the defendant’s counterclaim. The reasons for this decision are set out below. ! B. Background Facts [3] The parties shall be referred to in the following manner: a. The 1st plaintiff in the main action, Lim Kee Uan, is referred to as “Lim”; b. The 2nd plaintiff in the main action, Choo Thin Hee, is referred to as “Choo”; c. The 3rd plaintiff in the main action, Lock Mei Yee, is referred to as “Lock”; d. The 4th plaintiff in the main action, Tey Suk Reei, is referred to as “Tey SR”; e. The 5th plaintiff in the main action and the 2nd defendant in the counterclaim, Tey Heong Tiong, is referred to as “Tey HT”; f. The 6th plaintiff in the main action and the 1st defendant in the counterclaim, Jurukur Bahan FPS Sdn Bhd, is referred to as “FPS”; g. Lim, Choo, Lock, Tey SR, Tey HT and FPS are collectively referred to as the “plaintiffs”; and h. The defendant in the main action and the plaintiff in the counterclaim, Leong Kah Weng, is referred to as “Leong”. ! [4] FPS is a company in the business of quantity surveying and construction cost management consultancy. [5] Lim and Leong were senior directors in FPS, while Choo, Lock and Tey SR were junior directors. Tey HT is one of the founding shareholders of FPS. [6] The terms of Leong’s employment with FPS are set out in the following documents: a. A letter of offer dated 1 November 2007 (“Letter of Offer”); and b. A shareholders agreement dated 1 January 2013 (“SA”). [7] By the Letter of Offer, Leong was given 10% shareholding in FPS, held on trust by Tey HT. The Letter of Offer requires Leong to return shares allotted to him (including shares in any sister and associate companies) if Leong leaves FPS within five years. [8] The SA was executed between the founders of FPS, Foo Chow Luh and Tey HT, with FPS’ senior directors (Lim and Leong) and junior directors (including Choo, Lock and Tey SR). By the SA, Leong’s shareholding in FPS was increased from 10% to 20%, subject to conditions. The SA contains similar terms as the Letter of Offer, requiring Leong to return shares allotted to him in the event of his premature departure from FPS. ! [9] I will refer to the shares allotted to Leong in the following manner: a. The initial 10% shareholding in FPS allotted to Leong pursuant to the Letter of Offer is referred to as the “First Tranche of Shares”; b. The additional 10% shareholding in FPS allotted to Leong pursuant to the SA is referred to as the “Second Tranche of Shares”; and c. The First Tranche of Shares and the Second Tranche of Shares are referred to as the “Shares”. [10] Leong resigned on 12 June 2018, at 44 years of age. He did not return the shares that he received, including shares he held in FPS Project Management Sdn Bhd, Magnum Elite Sdn Bhd and Perresia Resources (M) Sdn Bhd (collectively, the “Companies”). [11] FPS filed this action, seeking a return of the Shares, and shares in the Companies that were allotted to Leong. FPS also sought damages against Leong. [12] Leong filed a counterclaim, seeking a declaration that he is the beneficial owner of the shares allotted to him. He also sought director’s fees and dividends he claimed are due to him. ! C. Issues [13] The court considered the following issues in the determination of this action: a. Whether the Shares are unconditionally and fully owned by Leong; b. Whether the Companies are sister or associate companies of FPS; c. Whether Leong breached his duties as a director of FPS; and d. Whether Leong is entitled to other claims under the SA. [14] Leong also argued that the contra preferentum rule should apply in the interpretation of the documents governing the relationship between the parties. D. Issue 1: Are The Shares Unconditionally and Fully Owned By Leong? [15] The Shares were allotted to Leong in two tranches: a. The First Tranche of Shares, consisting of 10% of the shares in FPS, was initially allotted pursuant to the Letter of Offer on 1 November 2007; and ! b. The Second Tranche of Shares, consisting of an additional 10% of the shares in FPS, was then allotted pursuant to the SA on 1 January 2013. [16] The terms of the allotment of the Shares are set out in both the Letter of Offer and the SA. However, I find that the Letter of Offer has been superseded by the SA, as recital 2 of the SA provides that the parties have agreed: “… to be bound by the stipulations, terms and conditions hereinafter contained notwithstanding anything to the contrary as may appear in the Memorandum and Articles of Association of the Company or any other prior form of agreements entered into …” (emphasis added) [17] As such, in determining the rights and obligations of the parties, I will refer to the terms of the SA, being the document governing the relationship between them. [18] As highlighted, the Shares were allotted to Leong in two tranches, and at different times. [19] In respect of the First Tranche of Shares which were allotted pursuant to the Letter of Offer, it is not in dispute that these shares are recognised as “unconditional” under the SA. This is acknowledged by the parties, since Leong was referred to in the following manner in the SA: ! “2. LEONG KAH WENG (I/C: 740207085309) who was given conditional gratuitous 10% shareholding In the Company by and out of the Founding Shareholders’ stake since 2007 and has since, fulfilled the conditions …” (emphasis added) [20] The Second Tranche of Shares were allotted pursuant to the SA. Clause A(i) of the SA provides that: “The conditional gratuitous shareholding given to the New Shareholders shall become unconditional upon the New Shareholders performing and discharging their duties and responsibility as directors and shareholders of the Company satisfactorily within five years from the allotment of the conditional gratuitous shareholding.” (emphasis added) [21] Based on clause A(i), the Second Tranche of Shares would have been recognised as “unconditional” on 1 January 2018, five years after the SA was executed and the shares allotted to Leong. [22] Leong resigned on 12 June 2018, approximately five and a half years after the SA was executed and the Second Tranche of Shares were allotted to him. The fact that Leong resigned after the Shares were recognised as “unconditional” under the SA has been accepted by FPS. ! [23] What is in dispute is the implications of the Shares being recognised as “unconditional” under the SA. Leong argued that since the Shares are recognised as “unconditional” under the SA, the Shares are unconditionally and fully owned by him. [24] I am unable to agree with Leong’s stand. Although the Shares are recognised as “unconditional” in the SA, there is nothing in the SA which states that these shares are unconditionally and fully owned by Leong. Instead, the SA makes it clear that if a new shareholder (including Leong) leaves FPS prematurely, the shares that had been allotted to him are required to be returned, whether the status of the shares is “unconditional” or otherwise. [25] The difference in the treatment of shareholders would depend on whether a shareholder leaves before or after the cut-off period of five years from the date of allotment of shares. [26] Where a new shareholder leaves FPS within five years from the date of the allotment of shares to him (in which case the shares would still be recognised as “conditional” shares), clause A(ii) would apply. Under this clause, the shareholder must return the shares including new and/or bonus shares, and shares in any sister and associate companies, for a token sum of RM1, without any claims against FPS. No monetary compensation is offered to the shareholder. [27] In Leong’s case, he resigned after the cut-off period of five years, and as such, his resignation is governed by clause H of the SA. Clause H provides that: ! “i) Should there be any premature departure of New Shareholders before reaching the compulsory retirement age of 55 in accordance with Clause B(ii) but after fulfilling the overriding conditions stipulated in Clause A, the New Shareholders shall be entitled to monetary compensation, as follows:- a) Senior Directors – lump sum of RM250,000.00 nett of taxes, b) Junior Directors – lump sum of RM150,000.00 nett of taxes, ii) It is unequivocally and expressly agreed by the New Shareholders that in the event of premature departure of New Shareholders before reaching the compulsory retirement age of 55 in accordance with Clause B(ii) but after fulfilling the overriding conditions stipulated in Clause A, the lump sum compensation of RM250,000.00 nett of taxes in the case of Senior Directors and RM150,000.00 nett of taxes in the case of Junior Directors shall represent the final settlement sum for exiting the Company and the exiting New Shareholders shall cause his/her equity shareholding in the Company or it’s sister companies and associate companies to be transferred to the remaining New Shareholders proportionate to the remaining New Shareholders’ equity shareholding in the Company, its sister companies and associate companies …” ! (emphasis added) [28] Leong resigned from FPS before the age of 55 years but after the Shares have been recognised as “unconditional” under the SA. As such, under clause H(i) of the SA, being a senior director of FPS, he is entitled to monetary compensation of RM250,000. Further, pursuant to clause H(ii), Leong is required to surrender the Shares, including the shares of what are termed as FPS’ “sister or associate companies”. [29] It is my considered view that the terms of the SA are clear, and this interpretation of the SA – which will ultimately lead to the Shares being surrendered to other new shareholders – is the only interpretation that would be consistent with and bring harmony to the overall provisions of the SA. [30] Leong’s argument that he unconditionally and fully owns the Shares and that they are not required to be surrendered upon his premature resignation is not in line with clause B of the SA, which deals with succession planning. Under clause B(i), a shareholder is required to surrender 50% of his shareholding to incoming shareholders when he reaches 53 years of age, and to surrender the balance of his shares when he reaches the compulsory retirement age of 55. [31] It is thus clear from the provisions of the SA that the intention of the parties is that a new shareholder of FPS does not unconditionally own shares in FPS. Instead, his ownership of the shares is conditional upon him remaining a director of FPS. ! [32] In Leong’s case, the Shares are not unconditionally and fully owned by Leng but instead, should be surrendered upon his resignation. E. Issue 2: Are The Companies Sister Or Associate Companies Of FPS? [33] Clause H(ii), which governs Leong’s resignation from FPS, provides that in the event of premature departure of a new shareholder before reaching the compulsory retirement age of 55: “… the exiting New Shareholders shall cause his/her equity shareholding in the Company or it’s sister companies and associate companies to be transferred to the remaining New Shareholders proportionate to the remaining New Shareholders’ equity shareholding in the Company, its sister companies and associate companies …” (emphasis added) [34] It is undisputed that Leong was given shares in the Companies. However, Leong argued that the Companies do not fall within the legal definition of “sister and associate companies”. He cited Abdul Malik bin Said Omar & Anor v Sri Kehuma Sdn Bhd [2017] MLJU 998, where the court held that sister companies are subsidiary companies owned by the same parent company. Leong also referred to the Co-Operative Societies Act 1993 (“COSA”) and the Financial Services Act 2013 (“FSA”), which have similar definitions of the term “associate corporation”. ! [35] Section 2 of the COSA defines “associate corporation” as: “… a corporation where not less than twenty per centum and not more than fifty per centum of the shares of that corporation are held by another corporation, the first-mentioned corporation thereby being an associate corporation of the other corporation …” [36] Similarly, section 2 of the FSA defines “associate corporation” as: “… a corporation in which not less than twenty per cent but not more than fifty per cent of the voting shares of that corporation are held by another corporation, where the first-mentioned corporation is an associate corporation of the other corporation …” [37] Leong argued that the Companies do not qualify as a “sister company” or “associate company” of FPS in accordance with these definitions. Thus, his shareholding in the Companies does not fall within the scope of the shares of “sister companies and associate companies” of FPS which he is obliged to surrender in accordance with clause (H)(ii) of the SA. [38] I am unable to agree with this argument. [39] I am of the view that in determining whether the Companies are “sister companies and associate companies” of FPS within the meaning of the SA, the overriding consideration is not the strict legal definition of the term. Instead, what has to be considered is the definition of the term ! “sister companies and associate companies” in the context of the SA, and the understanding of the parties to the SA as to the meaning of this term. [40] In this regard, when the parties executed the SA, the new shareholders including Leong would have been aware of clause H(ii), which states that in the event they leave FPS before the age of 55, they would be required to transfer their shareholding in FPS’ “sister companies and associate companies” to the remaining new shareholders. When they were granted shares in FPS and shares in other companies connected to FPS (namely, the Companies), they would or should have been aware that these Companies are the “sister companies and associate companies” referred to in the SA. [41] The understanding that the Companies are the “sister and associate companies” of FPS is clear from the evidence before this court. [42] Lim, who testified as PW1, explained the background of the setting up of the Companies, and expressed an understanding that the Companies are the “sister companies and associate companies” referred to in the SA: “TYY Alright, so, first question, Mr Lim, you were asked a question about whether do you know the legal definition of sister and associated company to which you answered no, ok, and then you answered also, in your answer you said you only know the layman definition, so, can you explain to the Honourable Court, what is, in your understanding, sister and associated companies? ! … LIM When this company was set up, earlier when we was, I was appointed as a so-called senior director, there are, prior to that there are some property being contra through, contra because the developer didn’t pay us cash, so, what they do is they ask us to buy the property as a so called substitution of the, our professional fee. So, by doing that, we set up a few companies, so-called, be it the sister company or so-called associate company, the term, sorry, we set up three, FPS Project Management Sdn Bhd, Magnum Elite Sdn Bhd, Perresia Resources Sdn Bhd is to address how we park, so-called this property in the different so-called company name.” (emphasis added) [43] A letter dated 9 January 2015 issued by FPS was also tendered as evidence of the understanding of what constituted FPS’ “sister companies and associate companies”. The letter contains a severance package for Sam Kin Hin, a director and shareholder who resigned from FPS. The second paragraph of the letter states: “As discussed and agreed between yourself and Steven Tey on 7th January 2015, we set out below the severance compensation package for you on the conditions that you resign from your current post as director and shareholder in Jurukur Bahan FPS Sdn. Bhd., FPS Project Management Sdn. Bhd, and Magnum Elite Sdn. Bhd. and transfer your entire equity ! shares in these three companies to Mr Foo Chow Luh and Mr Tey Heong Tiong …” (emphasis added) [44] In a mutual separation agreement dated 15 April 2021 executed between FPS and a junior director Ng Keat Mee (“Ng”), who was also a signatory to the SA, Ng’s resignation was treated as a resignation under clause H(i) of the SA. Clause 1 of the mutual separation agreement states that: “In accordance with Clause H(i)(b) of the Shareholder Agreement governing the Premature Departure of New Shareholders, for the 5% gratuitous share given to the Junior Director in 2013, and another 2.5% gratuitous share verbally given in January 2019 (total 7.5% shareholding held in trust by the Founding Shareholder as the Junior Director is not registered with the Board of Surveyors Malaysia), the Junior Director will be paid monetary compensation of RM150,000.00 nett of taxes and this shall represent the final settlement sum for exiting the Company and the Junior Director shall cause her equity shareholding in the following sister companies and/or associate companies (property holding companies) to be transferred to the Founding Shareholder a) FPS Project Management Sdn. Bhd.” (emphasis added) ! [45] As such, the evidence before the court is clear – that the intention of the parties to the SA is for the shareholders of FPS to also receive shares of FPS’ “sister companies and associate companies” together with shares of FPS. The allotment of the shares of the Companies to the shareholders of FPS is consistent with the understanding that the Companies are “sisters and associate companies” of FPS within the meaning of the SA. [46] From company searches conducted, it is clear that at all material times, FPS and the Companies had the same or similar shareholding. The Companies were owned by shareholders of FPS – namely, Lim, Choo, Lock, Tey SR, Tey HT and Leong – or a combination thereof. Thus, I am of the view that the finding that the Companies are “sister and associate companies” of FPS is not inconsistent with prevailing authorities, as ultimately, FPS and the Companies are connected through the same shareholders. [47] Based on the considerations set out above, I find that the Companies are the “sister and associate companies” of FPS within the meaning of the SA. It would follow that Leong is obliged to surrender shares of the Companies allotted to him upon his resignation, pursuant to clause H(ii) of the SA. F. Issue 3: Did Leong Breach His Duties As A Director of FPS? [48] The plaintiffs claimed that Leong had failed to discharge his duties and responsibilities as a senior director of FPS, in failing to attend multiple client consultation meetings (“CCMs”) for various projects, leading to complaints by FPS’ clients. ! [49] Leong’s contention is that it was not possible for him to attend all CCMs, and that he had sought permission from the relevant clients when he was unable to attend CCMs for specific projects due to other work commitments. He also claimed that FPS knew of his absence from CCMs, but no complaint had been made against him. [50] The evidence before the court does not support Leong’s contention. On the contrary, a complaint was made against Leong by FPS’ client, Wajatex Sdn Bhd (“Wajatex”). This complaint was set out in a letter dated 28 May 2018 from Wajatex, signed by Wong Ah Chai, a Project Manager of Wajatex. The content of the letter is as follows: “We wish to bring to your attention on the poor performance of your director, Mr Leong Kah Weng on the above-mentioned project. For your information, your director has been skipping majority of the Client-Consultants meetings and project site meetings despite repeated reminders given to him via tele conversations. To make the matter worse, some of the meetings were attended by incompetent junior QS without being accompanied by senior QS and ended up with the junior QS who cannot even answer to the matters discussed in these meetings and need to refer to the office before reverting.” (emphasis added) ! [51] Tey HT then issued an email dated 6 June 2018 to Leong, informing Leong of the complaints raised by Wajatex. Amongst the issues highlighted in the email are: a. Leong’s failure to attend CCMs, and sending as his replacement assistant quantity surveyors who were not equipped to advise the client; b. Leong’s failure to attach the mechanical and electrical consultant’s certificate to FPS’ valuation; and c. Leong’s delay in providing costing and financial statements to the client. [52] Tey HT went on to state as follows in the email: “Frankly, I am sad as to what is going on and really beyond my comprehension as to why you have opted to show such gross complacency in your services to the client and put the company in jeopardy of losing a client, especially considering that you are a Senior Director of the company. Mr Wong has actually wanted to terminate our services but Mr Yao has asked him to talk to me first and give us a chance to redeem ourselves. After the Gamuda High Park incidence, I already told you that as working director, even though you are a Senior Director, we must make it a point to attend all CCM and on occasions that if you ! can't make it, must arrange another director to sit it but my advice seems to be falling on deft ears. Leong, if you continue to be complacent, very soon we will not only lose one client but a few. I just checked through projects that you are In charge and it is tremendously shocking that you have skipped most of the CCM and for some CCM, we were not even represented. (emphasis added) [53] Leong countered these correspondences with a letter dated 15 September 2022 from Wajatex, which sought to confirm that the letter dated 28 May 2018 issued by Wajatex could not be located, and that the content of the letter is purely a personal view of Wong Ah Chai. I considered this letter but placed little evidential value to it, as it was issued after the filing of this action, mere weeks before trial. Further, Leong did not call the author of the letter as a witness, raising questions as to the context and circumstances upon which the letter dated 15 September 2022 was issued. [54] Based on the evidence before this court, I find there to be sufficient evidence to support the plaintiffs’ claim that Leong had breached his duties as a director of FPS in his failure to attend CCMs and to carry out his duties as a senior director of FPS professionally and diligently. [55] However, I find the plaintiffs’ claim that Leong was negligent in managing the project by SkySierra Development Sdn Bhd (“SkySierra ! Project”) has not been sufficiently proven. The plaintiffs claimed Leong had negligently measured the skim coating and painting works for the podium of the SkySierra Project, which caused losses amounting to RM1,075,120.30 to FPS. [56] However, Leong had supervised the SkySierra Project in 2017, and had provided the skim coating and painting work measurements based on specifications provided in 2017. Since then, and by the time the SkySierra Project recommenced in 2019, changes had been made to the measurements for skim coating and painting works for the project. Lim had also taken over the supervision of the project. Thus, the errors in the measurements cannot be attributable to Leong alone. In view thereof, I find the plaintiffs have failed to prove negligence on Leong’s part in his management of the SkySierra Project. G. Issue 4: Is Leong Entitled To Other Claims Under The SA? [57] Following my finding in issue 3, that Leong had breached his duties as a director of FPS, I am of the further view that Leong should not be allowed to receive further entitlements under the SA. [58] Tey HT was cross-examined extensively on director’s fees and dividends due to Leong. He explained that when director’s fees and dividends were paid, the shareholders and directors of FPS were informed of the payments, and cheques were issued and handed over directly to them. The evidence before this court shows that director’s fees and dividend payments were made to Leong. ! [59] I found Leong’s testimony on this issue to be peculiar, considering that he was a shareholder and a senior director of FPS. He testified that he was not aware of director’s fees and dividends paid, and that he did not raise any questions when the payments were made. As Leong had taken this position while he was in the employment of FPS, the raising of the issue of non-payment of director’s fees and dividends at this stage seems to me to be an afterthought to damage FPS and Tey HT’s credibility and reputation. [60] In any event, the payment of director’s fees and dividends to shareholders are ultimately at the discretion of the board of directors of FPS. With the finding that Leong had failed to carry out his duties in FPS professionally and diligently, it would follow that Leong would not be entitled to further payments by FPS. H. Issue 5: Does The Contra Preferentum Rule Apply? [61] Leong argued that the contra preferentum rule applies to the interpretation of the SA. If the contra preferentum rule applies, this would mean that the clauses in dispute should be construed more strongly against FPS as the maker of the SA. [62] The contra preferentum rule was explained by the High Court in Long Kee Piling Works Sdn Bhd v Stradex Corporation Sdn Bhd [2011] MLJU 1449: “This is a rule of construction of contracts whereby any deed or instrument is construed more strongly against the grantor or maker on the justification that he is more likely to have ! looked after his own interests or derived a particular benefit where the words used leave room for doubt. It is more so where the document itself presents two alternative and different readings. The purpose and application of the rule is explained in Chitty on Contracts Vol. I General Principles at 12- 081: "Another rule of construction is that a deed or other instrument shall be construed more strongly against the grantor or maker thereof. This rule is often misinterpreted. It is only to be applied in cases of ambiguity and where other rules of construction fail. Nevertheless, despite certain doubts which have been cast upon it from time to time, the rule has been constantly cited as a rule of construction from Coke's time to the present day. For instance, Coke says: "It is a maxim in law that every man's grant shall be taken by construction of law most forcibly against himself …” (emphasis added) [63] It is clear that the contra preferentum rule would only apply in a case where there is ambiguity in the construction of a document. [64] From my assessment of the terms of the SA, I am of the view that there is no ambiguity or vagueness in the terms and specifically in clause H of the SA. ! [65] Leong argued that there is an inconsistency between clauses A and H of the SA. I do not agree. As explained above, the fact that the Shares became “unconditional” in nature five years after their allotment does not mean that the Shares are unconditionally and fully owned by Leong. Further, the two clauses clearly deal with different periods of a shareholder’s resignation. Clause A deals with the resignation of a shareholder within five years from the allotment of shares to him, while clause H deals with resignation after five years of allotment of shares but before the shareholder reaches the age of 55 years. [66] There is sufficient clarity in these clauses and I am thus of the view that the contra preferentum rule cannot be invoked in this case.

[67] Following the considerations and findings as set out, the court allowed the plaintiffs’ claim in the main action. The court dismissed Leong’s counterclaim, except for prayer 48(a)(v), on the compensation of RM250,000 to be paid to Leong under clause H of the SA. [68] The court ordered costs of RM30,000 to be paid by Leong to the plaintiffs. Dated 28 March 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiffs : Tan Yan Yong (together with Nadia Ahmad Suhaidin) of Messrs. YY Tan & Co Defendant : Alfred Lai Choong Wui (together with Toh Mei Swan) of Messrs. Alfred Lai & Partners