Kang Hock Hin v Vasanthi A/P R Annamalai (J-02(NCvC)(A)-2075-11/2022)

This is an appeal against an alleged breach of a consent order recorded before the High Court.

The Appellant who is the defendant in the High Court is an individual.

The Respondent who is the plaintiff in the High Court is likewise an individual.

We heard the appeal on 18th July 2024 and unanimously allowed the Appellant’s appeal with costs of RM10,000.00 subject to allocator.

We now provide the grounds of our decision below.

By a share sale agreement dated 25th February 2020 (“Agreement”), the Respondent purchased from the Appellant all the shares in SBK Property Sdn Bhd (“Company”).

The express terms of the Agreement include the following: “(4.2) The sum of Ringgit Malaysia Three Hundred Fifty Thousand (RM350,000.00) only to be paid by the Purchaser to the Vendor’s solicitors who 3 is authorised to pay to the two caveators named in the Recital 1(b) and (c) within twelve (12) months from the date of this Agreement. (4.3) Upon receipt of the sum as stated in clause 4.2, the Vendors and/or Vendor’s solicitors shall cause and procure a duly executed withdrawal of caveat from the two caveators namely in recital (b) and (c) before the sum of RM350,000.00 is released to the said caveators.”

Additionally, Schedule 1 of the Agreement provides as follows: “(8) The Company has no other bank borrowings and/or any encumbrances created over its assets for any bank borrowings except for the following:

A loan from MB Rich Sdn Bhd (Company No.933483-W) of Unit 5.07 Level 5 Plaza DNP, No. 59, Jalan Dato’ Abdullah Tahir 80300 Johor Bahru pursuant to Money Lending Agreement dated 25/4/2018 for the sum as stated int eh Statement of Account as per Appendix B and had entered Lien Holder’s caveat under presentation No. 14570/2018 dated 3 May 2018.

A loan from Sie Kie Ching (NRIC No. 651221-13-5179) and Sie Kie Won (NRIC No. 630331-13-5409) of Lot 753, 2nd Floor, Jalan Merpati, 98000 Miri, Sarawak for the sum of RM350,000.00 and had entered a private caveat under Presentation No. 17192/2018 dated 30th May 2018.” [9] Subsequently, a dispute arose between the parties concerning the interpretation of the Agreement that resulted in the Respondent commencing Johore Bahru High Court Originating Summons no. JA- 24(NCvC)-371-07/2020 against the Appellant. [10] The matter was however settled privately between the parties on 21st October 2020 and they recorded a consent order in the following terms in Bahasa Malaysia (“Consent Order”): [11] Consequently, the Appellant on 20th January 2021 procured Sie Kie Ching to withdraw the private caveat lodged by him and the entry of the caveat has thereafter been cancelled. [12] The private caveat lodged by Sie Kie Won has been removed on 8th June 2021 on the application of the Company by the Appellant as its director; hence the entry of the caveat is also cancelled. [13] As the result of the cancellation of the aforesaid private caveats, the Appellant’s solicitors released the RM350,000.00 paid by the Respondent to the Appellant. [14] The Respondent is however dissatisfied with the manner of cancellation of the aforesaid private caveats and thus on 6th September 2021 instituted Johore Bahru High Court Suit Originating Summons no. JA-24(NCvC)-537-09/2021 against the Appellant (“Proceeding”). In this regard, the Respondent prayed for the following reliefs in the Proceeding (in Bahasa Malaysia): “(i) Suatu deklarasi bahawa Plaintif dan/atau Syarikat SBK Property Sdn Bhd (No. Syarikat : 1260991-M) telah menunaikan obligasi kontrak mereka sepertimana dan setakat yang dinyatakan di dalam Klausa 4.2 dan 4.3 (Company Liabilities) dan Jadual 1 (Schedule 1) Klausa 8 (ii) Perjanjian Jual Beli Syer (Share Sale Agreement) bertarikh 25.2.2020 yang dimasuki di antara Plaintif dan Defendan iaitu dengan membuat pembayaran jumlah wang RM350,000.00 tersebut kepada Defendan untuk memperolehi penarikan balik kaveat-kaveat persendirian oleh penghutang-penghutang/ pengkaveat-pengkaveat Sie Kie Ching dan Sie Kie Won tersebut;

(ii) Suatu deklarasi bahawa Plaintif dan/atau Syarikat SBK Property Sdn Bhd (No. Syarikat: 1260991-M) telah mematuhi perenggan 3 dalam Penghakiman Persetujuan bertarikh 21.10.2020 yang dimasuki melalui prosiding Mahkamah Tinggi Johor Bahru Saman Pemula No. JA- 24NCvC371-07-2020 iaitu dengan membayar jumlah wang RM350,000.00 kepada Peguamcara Defendan untuk memperolehi penarikan balik kaveat-kaveat oleh Sia Kie Ching dan Sie Kie Won tersebut;

(iii) Suatu deklarasi bahawa Defendan adalah bertanggungan sepenuhnya sekiranya penghutang-penghutang / pengkaveat-pengkaveat bernama Sie Kie Ching dan Sie Kie Won tersebut memulakan sebarang tindakan undang-undang terhadap Syarikat SBK Property Sdn Bhd (No. Syarikat: 1260991-M) dan/atau memasuki semula kaveat persendirian keatas tanah milikan SBK Property Sdn Bhd (No. Syarikat: 1260991-M).

(iv) Bahawa sekiranya Defendan tidak setuju kepada deklarasi-deklarasi yang dipohon oleh Plaintif di prayer (i), (ii) dan (iii) di atas, Defendan dikehendaki mengembalikan wang amanah RM350,000.00 tersebut yang telah dibayar oleh Plaintif kepada Defendan selaras Penghakiman Persetujuan bertarikh 21.10.2020 dalam masa empat belas (14) hari dari tarikh perintah Mahkamah ini.

Kos permohonan ini adalah dibayar oleh Defendan kepada Plaintif;

(vi) Lain-lain relif yang Mahkamah yang Mulia ini anggap adil dan sesuai.” IN THE HIGH COURT [15] The Respondent’s pivotal contention is that the appellant breached the Consent Order by failing to pay any money to the caveators to withdraw the caveats. The caveats were instead removed by the Appellant who had no authority to do so at the material times. [16] However, the Appellant refuted that he has fully and satisfactorily complied with the Consent Order. [17] The learned Judge found against the Appellant (“Judgment”) and stated, inter alia, as follows in the grounds of Judgment (“GOJ”): “[10] This Court finds that the Defendant has committed a breach of the clear terms of the Consent Order and appropriated the money to himself instead of paying the sum of RM350,000.00 to the two (2) caveators to settle the loans given by them to the Company (as stated in clauses 8 of Schedule 1 of the SSA) Likewise, the solicitors for the Defendant also breached their stakeholder duty by releasing the monies to the Defendant without waiting for the executed withdrawal of caveat forms as provided by clause 4.3 of the SSA. [11] The sum of RM350,000.00 is not the only amount misappropriated by the Defendant. As part of the Consent Order, the Plaintiff had earlier paid a sum of RM300,000.00 to the Defendant to settle all other debts of the Company, which was not disclosed in the SSA (see the other parts of the Consent Order, Exhibit V6 of the Plaintiff’s Affidavit in Support Enclosure 2). However, this sum was never paid to the Company’s creditors but was again appropriated by the Defendant for himself. This is evidenced by the fact that a creditor called Bandari Simma Realty had filed a suit against the Company at the Johor Bahru Sessions Court (Suit no. JA-A252NCVC-200-11/2021)) for the sum of RM252,000.00 owed by the Company. [12] The Defendant had not provided any evidence in his Affidavit in Reply nor had he averred that he had paid the sum of RM350,000.00 to the caveators. Thus, the Plaintiff’s averment that the Defendant had failed to pay the sum of the caveators remains unrebutted (see Ng Hee Tong & Anor v Public Bank Berhad [1995] 1 CLJ 609). [13] One can thus, see the pattern of deceitful conduct by the Defendant. [14] The Defendant’s failure to pay the sum of RM350,000.00 owed to the caveators (the debts were acknowledged by the Defendant in his representations in Schedule 1 to the SSA) would render the Company still liable for those debts and the Company’s liability to the caveators will remain outstanding. Additionally, the failure by the Defendant to pay the caveators was a clear breach of the terms of the Consent Order. [15] To allow the Defendant to retain the sum of RM350,000.00, which was meant to discharge the liability of the Company to its creditors, would be clearly unjust as the Defendant would stand to benefit from his dishonest conduct and be unjustly enriched.” [18] The Appellant is dissatisfied with the Judgment and has on 28th October 2022 appealed to the Court of Appeal. FINDINGS OF THIS COURT [19] Before us, the parties basically re-hashed their contentions made in the High Court. [20] Our appellate function here is review of the Judgment only as encapsulated in Wah Bee Construction Engineering v. Pembinaan Fungsi Baik Sdn Bhd [1996] 3 CLJ 858 (CA) where Gopal Sri Ram JCA (later FCJ) held as follows: “Now, it is settled law that in an appeal against the exercise of discretion by a Judge, the initial function of this Court is one of review only, there being no original discretion vested in this Court. Only after an appellant is able to demonstrate to a conviction that his case comes within one or more of those categories of cases in which appellate interference is warranted does this Court become entitled to exercise a discretion of its own.” [21] The Respondent in the Proceeding sought for various declaratory reliefs against both the Appellant and the Company. The main plank of the Respondent’s contention is that the private caveats were not withdrawn by both Sie Kie Ching and Sie Kie Won as envisaged by the Share Sale Agreement but were instead removed by the Company; thus, the Consent Order has been breached. [22] Upon our review, we find that the critical and pivotal issue revolves around the construction of the Consent Order, particularly clause 3 thereof. [23] First and foremost, we are mindful that the construction of the Consent Order must be confined and subject to the “four corners” rule in that it must be read in its textual content as expressed excluding extraneous considerations. [24] In this respect, we noted in passing that the obligation in clause 3 of the Consent Order does not synonymously mirror clauses 4.2 and 4.3 of the Share Sale Agreement. Nonetheless and in any event, both clauses 4.2 and 4.3 of the Share Sale Agreement are extraneous considerations here and are hence irrelevant for purposes of construing clause 3 of the Consent Order. [25] Upon our careful reading of clause 3 of the Consent Order, we find that the Appellant merely gave an undertaking to withdraw the caveats lodged by Sie Kie Ching and Sie Kie Won and thereafter upon the withdrawal of the caveats, the Appellant’s solicitors may release the Respondent’s payment of RM350,000.00 to the Appellant. [26] As the matter of law, the Appellant is definitely not in the position to withdraw the private caveat because that can only be done by the caveator based s. 325 of the National Land Code 1965. In other words, the obligation consented upon as expressed is unworkable. [27] Consequently, the Appellant, in actuality, procured Sie Kie Ching to withdraw his own private caveat but caused the Company to remove the private caveat lodged by Sie Kie Won based on s. 326 of the National Land Code 1965. On the facts here, Sie Kie Won neither contested the removal of the private caveat nor subsequently lodged a new private caveat. [28] Notwithstanding the un-workability of clause 3 of the Consent Order, we nonetheless find that the central object of clauses of the Consent Order is to have both the private caveats cancelled. This has been achieved and we therefore conclude that clause 3 of the Consent Order has been complied instead of breached when the payment of the RM350,000.00 is paid out to the Appellant. In this regard, we take the view that the word “withdrawal” in clause 3 of the Consent Order should be liberally interpreted contextually in view of its imprecision. We are also mindful that there is no prejudice caused to the Respondent because there is no evidence of any litigation brought against the Company or the Respondent by Sie Kie Won as the result of the cancellation of his private caveat. [29] In the premises, we find the learned Judge erred when the declaratory reliefs sought by the Appellant were allowed. There is no unjust enrichment or deceitful/dishonest conduct in the circumstances on the part of the Appellant contrary to that as found by the learned Judge, particularly when this Proceeding has not been disposed by way of trial to justify such findings of fact. [30] Additionally, we find that learned Judge erred by having wrongly exercised his discretion in allowing declaratory reliefs against the Company which is not a party in the Proceeding following Balamoney Asoriah v. MMIP Services Sdn Bhd [2020] 1 CLJ 476 CA as well as declaratory reliefs that are hypothetical and/or premature following Goh Joon v. Kerajaan Negeri Johor & Others [1999] 5 CLJ 335. CONCLUSION [31] For the foregoing reasons, we find that appellate intervention is warranted and we thus allowed the appeal as so ordered. Dated this 30th December 2024 Sgd. LIM CHONG FONG JUDGE COURT OF APPEAL LIST OF COUNSELS:

Counsels for Appellant

Dinesh Kanavaji A/L Kanawagi Rabia binti Abd Halim Solicitors for Appellant MESSRS. RABIA FARIHAN & SURES. Advocates & Solicitors Suite 33-01,33rd Floor, Menara Keck Seng, 203, Jalan Bukit Bintang, 55100 Kuala Lumpur

Counsels for Respondent

Chandrakandan A/L Sankaran Maithily A/P Manoher Solicitors for Respondent MESSRS. C SANKARAN & CO. Advocates & Solicitors Susur Larkin Perdana 1, Jalan Persiaran Larkin Perdana, Taman Larkin Perdana, 80350, Johor Bahru, Johor. CASES REFERRED TO: Wah Bee Construction Engineering v. Pembinaan Fungsi Baik Sdn Bhd [1996] 3 CLJ 858; Balamoney Asoriah v. MMIP Services Sdn Bhd [2020] 1 CLJ 476; and Goh Joon v. Kerajaan Negeri Johor & Others [1999] 5 CLJ 335.