Kenanga Investors Berhad v Zulrafq Capital Sdn Bhd (WA-22NCC-489-07/2023)

ZULRAFQ CAPITAL SDN BHD [Registration No. 202101012497 (1412796-A)]

TAN SRI ZULHASNAN BIN RAFIQUE (NRIC No.: 460315-01-5301) … DEFENDANTS (by original action)

ZULRAFQ CAPITAL SDN BHD [Registration No. 202101012497 (1412796-A)]

TAN SRI ZULHASNAN BIN RAFIQUE (NRIC No.: 460315-01-5301) … PLAINTIFFS

KENANGA INVESTORS BERHAD [Registration No. 199501024358 (353563-P)]

MUHAMMAD TAQIUDDIN HALIM S/N pfgPy9zpMkyGAkmbBUk0g (NRIC No.: 841208-14-5441)

DATUK WIRA ISMITZ MATTHEW (NRIC No.: 741029-01-5387) … DEFENDANTS (by Counterclaim) JUDGMENT [1] Before the court is an application for discovery of documents and inspection under Order 24 Rules 3, 4 and 5 of the Rules of Court 2012, together with a prayer for an interim stay of proceedings pending disposal of the discovery application. The documents sought relate to payment records, receipts and transaction details concerning certain agreements between the parties, where payments were allegedly made through third parties. At the heart of the dispute is whether these documents should be disclosed, and whether such disclosure is relevant and necessary for the fair disposal of the substantive action between the parties, where the validity and enforceability of the underlying agreements are contested. Brief Facts of the Case [2] On 22.10.2021, the 1st Defendant in the Counterclaim, Kenanga Investors Berhad (“KIB”), and the 1st Plaintiff in the Counterclaim, Zulrafq Capital Sdn Bhd (“ZCSB”) entered into a Put and Call Option Agreement (“1st S/N pfgPy9zpMkyGAkmbBUk0g Option Agreement”) relating to 190,476,190 shares in KNM Group Berhad worth RM40,000,000 (“Option Shares”). Under this agreement, ZCSB was granted a Call Option to buy back the Option Shares from KIB during specified periods, while KIB was granted a Put Option to sell the Option Shares to ZCSB. On the same date, the 2nd Plaintiff in the Counterclaim, Tan Sri Zulhasnan bin Rafique (“TSZ”) executed a Personal Guarantee in favour of KIB to guarantee ZCSB's performance under the Option Agreement. [3] The initial Call Option period was for 6 months from 05.11.2021 (Call Option 1), followed by another 3-month period (Call Option 2). The Put Option period was set at 9 months from 05.11.2021, with a maturity date of 04.08.2022. [4] On 19.01.2022, KIB and ZCSB entered into a second Put and Call Option Agreement ("2nd Option Agreement"). Following this agreement, five Maybank cheques totalling RM1,979,418 were paid to KIB in January 2022. [5] On 27.07.2022, ZCSB applied to KIB for an extension and rollover of both the Call Option and Put Option periods for a further 9 months from 04.08.2022. This led to the execution of a Supplemental Option Agreement dated 03.08.2022 (“Supplemental Option Agreement”). Under this agreement, ZCSB was required to pay a premium of S/N pfgPy9zpMkyGAkmbBUk0g RM4,800,000 by 15.09.2022 and a rollover fee of RM400,000 by 30.08.2022. [6] Two sets of payments were made to KIB in relation to these agreements. The first set comprised six payments totalling RM2,600,000 through various Public Bank and Maybank cheques. The second set consisted of five Maybank cheques totalling RM1,979,418 made in January 2022. [7] On 02.05.2023, KIB issued a notice requiring ZCSB to purchase the Option Shares for RM44,952,380.84. When this was not fulfilled, KIB issued a letter of demand dated 19.06.2023 to both ZCSB and TSZ. [8] On 13.07.2023, KIB filed this action against ZCSB and TSZ seeking specific performance of the obligation to purchase the Option Shares or alternatively, damages of RM44,952,380.84. [9] In their Counterclaim, ZCSB and TSZ allege that KIB (through its director Datuk Wira Ismitz Matthew (“Ismitz”), the 3rd Defendant in the Counterclaim, and Muhammad Taqiuddin Halim (“Taqiuddin”), the 2nd Defendant in the Counterclaim, conspired to injure them by inducing them to enter into the 1st Option Agreement, 2nd Option Agreement and the Supplemental Option Agreement (together, “Option Agreements”) while concealing that S/N pfgPy9zpMkyGAkmbBUk0g Taqiuddin would make the payments, subsequently allowing Taqiuddin to default on payments and attempt to purchase the KNM Group Berhad shares at a reduced price. [10] On 26.03.2024, ZCSB and TSZ, through their solicitors Messrs Jeeva Partnership, sent a letter to KIB's solicitors requesting disclosure of documents related to payments made by third parties pursuant to the Option Agreements. KIB refused this request. [11] On 20.05.2024, ZCSB and TSZ filed an application (Enclosure 134) seeking discovery of documents relating to the payment transactions, including receipts and financial records showing details of the payments made under the Option Agreements. The Application in Enclosure 134 [12] The application in Enclosure 134 is for discovery of documents under Order 24 Rules 3, 4 and 5 of the Rules of Court 2012. ZCSB and TSZ seek orders for: (1) leave to make the discovery application; (2) an interim stay of proceedings pending disposal of the discovery application;

disclosure of documents listed in Annexure A related to transaction details, receipts and financial records for payments made under the Option Agreements; and (4) costs. The specific documents sought include details of six S/N pfgPy9zpMkyGAkmbBUk0g cheques totalling RM2,600,000, five Maybank cheques totalling RM1,979,418, and all payment records related to “Perjanjian Opsyen Put dan Panggilan bertarikh 28.10.2021, Perjanjian Opsyen Put dan Panggilan bertarikh 19.01.2022 dan Perjanjian Tambahan bertarikh 3.08.2022.” It is is to be noted that no agreement dated 28.10.2021 is referred to in the pleadings and it is likely that this is a typographical error referring to the 1st Option Agreement dated 22.10.2021. [13] The key grounds advanced in support of the application are that: (1) the requested documents are in KIB's possession, custody or power and are relevant to establishing ZCSB and TSZ's defence and counterclaim;

the documents could adversely affect KIB's case by showing that Taqiuddin made payments through third parties with KIB's knowledge; (3) disclosure is necessary for fair disposal of the case as it relates to core issues regarding payment obligations under the agreements; (4) the documents requested are specific and identifiable, not a fishing expedition; and (5) KIB has never denied having the documents but merely refused to disclose them. The applicants also argue that an interim stay is warranted to allow their discovery application to be heard before other pending applications, as the documents sought could impact those matters. S/N pfgPy9zpMkyGAkmbBUk0g ZCSB and TSZ’s submissions [14] In support of their discovery application, ZCSB and TSZ contend that the requested documents are specific, identifiable and within KIB's possession, custody and power. They argue that the payment records and transaction details are relevant and necessary for fairly disposing of the case as they would establish that payments were made by Taqiuddin through third parties with KIB's knowledge, thereby supporting their defence that they were not the true contracting parties. They emphasise that the documents sought are basic financial records involving transactions from their own account with KIB, and that KIB has never denied possessing these documents but has merely refused to disclose them. They submit that disclosure is crucial to prove their allegations regarding the true nature of the payment arrangements and would prevent them from being prejudiced in presenting their case. KIB’s submissions [15] KIB opposes the discovery application on several grounds. They argue that the source of payments is irrelevant to the contractual obligations under the Option Agreements, as Clause 18 does not restrict who can make payments but specifies the obligation to pay. They contend that the discovery application is a fishing expedition attempting to S/N pfgPy9zpMkyGAkmbBUk0g shift the burden of proof onto KIB, as the documents sought pertain solely to allegations that were never pleaded in ZCSB and TSZ's case. KIB submits that since the cheques were originally exhibited by ZCSB and TSZ in their own affidavits, they should already have knowledge of these documents, making the discovery application unnecessary. They further argue that producing these documents would be onerous given the high volume of transactions through their accounts, and that disclosure based on unclear information might risk revealing unrelated transactions that could breach their statutory obligations. Analysis and findings of the court Whether the requested documents are relevant to the matters in issue [16] ZCSB and TSZ contend that the requested documents relating to payments made by Taqiuddin are relevant to establish their defence that there was a “mutual understanding” between the parties that Taqiuddin would be responsible for all payments under the agreements. They argue that Taqiuddin had made initial payments totalling RM2,600,000.00 for the 1st Option Agreement and RM1,979,418.00 for the 2nd Option Agreement through third party cheques, which KIB had accepted. This, they submit, evidences the existence of such an S/N pfgPy9zpMkyGAkmbBUk0g understanding. According to ZCSB and TSZ's pleadings, Taqiuddin attended meetings between the parties and made these payments pursuant to this mutual understanding. [17] KIB maintains that the source of payments is irrelevant to the contractual obligations under the agreements. They argue that Clause 18 of the 1st Option Agreement does not restrict the source of payment but rather specifies the obligation to pay. KIB contends that the documents sought pertain solely to the narrative pleaded by ZCSB and TSZ regarding the alleged “mutual understanding”, which was never part of the written agreements between the parties. [18] Having carefully considered the submissions and evidence, I find that the requested documents are relevant to the matters in issue. The leading authority on relevance in discovery applications remains The Compagnie Financiere Et Commerciale Du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55, where Brett LJ held that documents are relevant if they may either directly or indirectly enable the party requiring them to advance their own case or damage their adversary's case. [19] ZCSB and TSZ have sufficiently pleaded in their Defence and Counterclaim that there was a mutual understanding whereby Taqiuddin would make all payments relating to the agreements. They allege at paragraph 11(a) of their S/N pfgPy9zpMkyGAkmbBUk0g Defence that “Pursuant to various discussion among the parties, it is well within the Plaintiff's knowledge and/or Ismitz's knowledge that Taqiuddin has undertaken to make all payments relating to the said Agreements including any fees which is due and payable to the Plaintiff.” [20] The requested documents comprising receipts and financial records relating to payments made under the agreements could potentially substantiate ZCSB and TSZ's case regarding the existence of this alleged understanding. If the documents show that payments were indeed made by Taqiuddin through third parties and accepted by KIB, this could lend support to their contention that there was such an arrangement known to all parties. [21] Accordingly, I find that the requested documents meet the test of relevance for discovery purposes. However, relevance alone is not sufficient to warrant an order for discovery. The court must next consider whether compelling production of these documents would result in an improper shifting of the burden of proof. Whether ordering discovery would result in an improper shifting of the burden of proof [22] ZCSB and TSZ argue that the requested documents are necessary to prove their defence that there was a mutual S/N pfgPy9zpMkyGAkmbBUk0g understanding regarding payment obligations. They contend that KIB's refusal to produce basic documents showing payments received from Taqiuddin amounts to active concealment which gives rise to reasonable suspicion of collusion between KIB and Taqiuddin. They submit that the documents will shed light on their claim that KIB was involved and had knowledge of receiving payments from third party cheques arranged by Taqiuddin. [23] KIB maintains that ZCSB and TSZ are attempting to shift their burden of proof through this discovery application. KIB argues that since ZCSB and TSZ have exhibited the alleged third party cheques in their affidavits, they should already have access to the evidence needed to prove their case. KIB contends that the discovery application is a fishing expedition aimed at building ZCSB and TSZ's case through KIB's documents when ZCSB and TSZ bear the burden of proving their own allegations. [24] Having considered the submissions, I find that ordering discovery in this case would improperly shift the burden of proof from ZCSB and TSZ to KIB. Under Section 103 of the Evidence Act 1950, the burden of proving the existence of the alleged mutual understanding lies squarely with ZCSB and TSZ who are asserting it. This principle was emphasised by the Court of Appeal in Juahir Sadikon v Perbadanan Kemajuan Ekonomi Negeri Johor [1996] 3 MLJ 627 per Siti Norma JCA, who held that “He S/N pfgPy9zpMkyGAkmbBUk0g who alleges must prove such allegation and the onus is on the appellant to do so.” [25] The pleadings show that ZCSB and TSZ are making serious allegations against KIB, including claims of conspiracy and collusion with Taqiuddin. In their Defence and Counterclaim dated 10.08.2023, they allege at paragraph 14 that KIB and Taqiuddin “through their combined efforts, have conspired to injure the Defendants.” These are weighty allegations that ZCSB and TSZ must prove through their own evidence, not by compelling KIB to produce documents. [26] This principle was clearly articulated in Kenwood Electronics (Malaysia) Sdn Bhd v People's Audio Sdn Bhd & Ors [2003] 5 MLJ 276, where Su Geok Yiam JC held that compelling disclosure of documents would improperly shift the legal burden of proving conspiracy from the party making the allegation. In that case, Kenwood sought documents to establish its claim of conspiracy to defraud, but the court held that it is the plaintiff’s duty to prove its case, and it would be improper to compel the defendants to provide the evidence that the plaintiff needed to substantiate its claims. [27] Similarly, in Ng Pik Lian v United Eastern Resources Sdn Bhd & Ors [2022] MLJU 2676 (High Court), the court dismissed a discovery application on the grounds that it S/N pfgPy9zpMkyGAkmbBUk0g would improperly shift the burden of proof. In that case, the plaintiff sought documents to support her claim of misappropriation of funds, but the court emphasised that it is the plaintiff's responsibility to prove such allegations and that discovery cannot be used as a way to reverse the burden of proof. Her Ladyship Liza Chan Sow Keng JC emphasised that “A discovery application cannot be a backdoor way of reversing the burden of proof.” [28] ZCSB and TSZ have already exhibited in their affidavits the alleged third party cheques showing payments of RM2,600,000.00 and RM1,979,418.00. If they wish to prove that these payments were made by Taqiuddin pursuant to some mutual understanding, they should obtain evidence directly from Taqiuddin or the relevant third parties. As noted in KIB's affidavit in reply affirmed by Ismitz on 30.07.2024, if ZCSB and TSZ's pleaded defence is that the whole transaction was due to Taqiuddin's involvement, then questions about payment should be directed to Taqiuddin rather than seeking to compel production of documents from KIB. [29] The Court cannot allow discovery to be used as a mechanism to build ZCSB and TSZ's case through KIB's documents. This would effectively require KIB to assist in proving allegations made against itself, which would be an improper reversal of the burden of proof. ZCSB and TSZ must prove their allegations through independent S/N pfgPy9zpMkyGAkmbBUk0g evidence, not through documents they seek to compel KIB to produce. Whether the discovery request amounts to a fishing expedition [30] ZCSB and TSZ contend that the documents sought are specific and identifiable, relating to particular cheque numbers and amounts as detailed in their affidavit in support. They argue that they are seeking precise documentary evidence of payments made through specific cheques totalling RM2,600,000.00 for the 1st Option Agreement and RM1,979,418.00 for the 2nd Option Agreement. This, they submit, cannot be characterised as a fishing expedition as they have provided specific details of the documents sought. [31] KIB argues that the discovery request is too wide and constitutes a fishing expedition. They point out that Document 3 in Annexure A of ZCSB and TSZ's application seeks “any payments transactions paid in relation to the Put and Call Option dated 28.10.2021, Put and Call Option Agreement dated 19.01.2022, and Supplemental Option Agreement dated 03.08.2022,” which is overly broad. KIB contends that as a financial institution handling high volumes of transactions, such a wide-ranging request would be onerous and potentially expose unrelated transactions. S/N pfgPy9zpMkyGAkmbBUk0g [32] I find that this discovery application amounts to an impermissible fishing expedition. While ZCSB and TSZ have provided some specific cheque numbers, their request extends beyond these to encompass all transaction details, receipts and payment information related to the agreements. As held in Licvem Shipping & Trading Aos & Anor v JLM Logistics (M) Sdn. Bhd & Ors [2016] 10 MLJ 247, the High Court found that seeking discovery of all bank accounts and statements was “far too wide and wholly inappropriate.” [33] The documents exhibited by ZCSB and TSZ in their own affidavits are telling. In their affidavit in support dated 14.05.2024, they have exhibited as “TS-2” the Maybank cheques allegedly used for payment. As noted in KIB's affidavit in reply affirmed by Ismitz on 30.07.2024, if ZCSB and TSZ already possess these cheques and have exhibited them, it stands to reason that they already have access to the evidence needed to support their allegations. [34] Furthermore, it is significant that while ZCSB and TSZ allege that Taqiuddin made these payments through third parties, they have not sought discovery from Taqiuddin himself who is the Second Defendant in the Counterclaim. This selective targeting of KIB for discovery while not pursuing similar documentation from the alleged source of S/N pfgPy9zpMkyGAkmbBUk0g the payments raises serious questions about the genuine purpose of this application. [35] The High Court in Wong Hou Liang & Anor v Wong Kie Yik & Ors [2015] MLJU 358, as cited in Licvem Shipping, held that granting such a wide order for discovery without determining the type and nature of the documents would lead to further delay and expenses. This concern is particularly relevant here, as compliance with such a broad request would require extensive review of its banking records and risk disclosure of unrelated transactions. [36] The Court must be vigilant against attempts to use discovery as a means to conduct a general investigation in the hope of uncovering helpful evidence. This is precisely what ZCSB and TSZ appear to be doing here - casting a wide net over KIB's financial records in the hope of finding something to support their allegations of a “mutual understanding” regarding payment obligations. Such speculative discovery cannot be permitted. Conclusion [37] While the documents sought by ZCSB and TSZ may be relevant to their pleaded case, allowing discovery in this instance would result in the improper shifting of the burden of proof from ZCSB and TSZ to KIB. ZCSB and TSZ must prove their claims through independent evidence, and S/N pfgPy9zpMkyGAkmbBUk0g discovery cannot be used as a tool to compel KIB to produce the very evidence that ZCSB and TSZ should be providing. Additionally, the broad nature of ZCSB and TSZ’s discovery request amounts to a fishing expedition, which cannot be permitted. [38] For these reasons, ZCSB and TSZ’s discovery application is dismissed with costs of RM3,000.00. 10 December 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiffs in the Counterclaim: For the 1st Defendant in the Counterclaim: R. Kumarappan and Nur Parvin Kausar (Messrs Jeeva Partnership) Teoh Jo Vi (Messrs Shaikh David & Co) S/N pfgPy9zpMkyGAkmbBUk0g