Kgfc(M) Sdn Bhd v Chequers Hotel Sdn Bhd & 2 Others (WA-22NCVC-824-12/2020)

CHEQUERS HOTEL SDN. BHD. [NO SYARIKAT: 200801041176 (842528-P)]

NG MEI MEI [NO. PASPORT SINGAPURA : S6919698E]

LEE CHONG PENG [NO. PASPORT SINGAPURA : S2126973E] …DEFENDAN-DEFENDAN

The Defendants in this case applied for the hearing of this writ and statement of claim be stayed until the matter is resolved by way of arbitration under section 10 of the Arbitration Act 2005. 2

The Plaintiff and the 1st Defendant had agreed to purchase a Hotel through a company called Glittering Team Sdn Bhd from Brampton Holdings Sdn Bhd apart from supplying furniture and materials to equip the Hotel.

To facilitate this joint venture the Plaintiff agreed to purchase 60% share of Glittering Team Sdn Bhd whereas the 1st Defendant agreed to purchase 40% shares in the said company by way of a share purchase agreement on 11/3/2016.

On 28/12/2016 an additional agreement (supplemental agreement) was executed between the Plaintiff and the 1st Defendant whereby the 1st Defendant undertook to make good all arrears of payment amounting to RM1,825,448.48 to 3rd parties which included the managing body of Komplek Metro Pudu before the issuance of the certificate of completion and compliance (“CCC”).

Under the share purchase agreement all arrears and expenses after the issuance of the CCC, which was issued on July 2017, was to be shared according their shareholding of Glittering Team Sdn Bhd and this amounted to RM1,756,490.18.

The 1st Defendant failed to make payments for both the arrears of payment i.e. the arrears before the issuance of the CCC and the arrears after the issuance of the CCC. With the agreement of the 1st Defendant the Plaintiff undertook to make the total payment of the arrears with the understanding that the 1st Defendant would repay back the sum paid. 3

This repayment by the 1st Defendant was guaranteed by the 2nd and 3rd Defendant by way of an undertaking agreement dated 19/9/2019 (“to be referred to as the 1st undertaking agreement. Under this 1st undertaking agreement the Plaintiff allowed the 1st Defendant until 29/2/2020 to pay the sum owed. The 2nd and 3rd Defendants signed a Guarantee Agreement dated 19.9.2019 (“the 1st guarantee agreement”).

By way of a letter from the 2nd Defendant dated 28/2/2017 the Plaintiff had made a payment of RM310,752.19 to the contractors to facilitate the issuance of the CCC. A second undertaking agreement was entered between the Plaintiff and the 1st Defendant to repay this sum of money. The 2nd and 3rd Defendant guaranteed the repayment of this sum of money. The 2nd and 3rd Defendant signed the 2nd letter of guarantee guaranteeing the repayment of the said money within 6 months.

The Defendants failed to comply with either the 1st and 2nd undertaking agreement or the 1st and 2nd guarantee agreement and thus the filing of this suit by the Plaintiff.

In the Court’s view the sole issue in with regards to the application of the Defendants is whether there is a binding arbitration agreement or clause between the parties. 4

It is to be noted that the provision to refer any dispute to arbitration is only contained in the share purchase agreement under clause 18.10.2. There is no such clause in either the undertaking agreements or the guarantee agreements.

To determine the intentions of the parties in entering the various agreements it is best to look at the contents of the various agreements itself.

The share purchase agreement is annexed to the affidavit in support of the Defendants application. From the preamble of this agreement it is clear that the sole purpose of this agreement as stated in preamble F is that the Plaintiff and the 1st Defendant are desirous of entering a joint venture agreement for “completing the purchase of the Hotel property” and in H the agreement is entered “in order to establish the manner in which the Company is to be managed and to set out the terms governing their relationship as Shareholders (as defined below) in the Company.

The role of the Plaintiff is elaborated in clause 7 of the share purchase agreement whereby the Plaintiff will undertake the day to day operation of running thee company whereas the 1st Defendant will liaise with the various authorities.

It can be summarized from reading the share purchase agreement as a whole that all the terms and conditions of the agreement are geared towards the main aim of facilitating the joint venture of purchase of 5 the Hotel as well as running of the Hotel subsequently between the Plaintiff and the 1st Defendant.

The contents of the 1st and 2nd undertaking agreement as well as the 2 guarantee agreements are annexed with the affidavit in reply of the Plaintiff.

The thing to note is that the 1st undertaking agreement and the 1st guarantee agreement is as stated in the preamble is entered in pursuance of the supplemental agreement entered between the parties on 28/12/2016. Whereas the 2nd Undertaking agreement and the 2nd guarantee agreements are made in pursuance of the letter issued by the 2nd Defendant dated 28/2/2017.

In short there is no apparent connection between the Undertaking agreements and the guarantee agreements on which the claim of the Plaintiff is founded upon, to the share purchase agreement.

The Court therefore concludes that the Undertaking and guarantee agreements are independent and separate agreements from the share purchase agreement.

The arbitration clause is therefore applicable only in the share purchase agreement but not all the subsequent agreements between the parties.

As a further ground the 2nd and 3rd Defendants are no privy to the share purchase agreement and therefore are not bound by the agreement. 6

Following the case of Press Metal Sarawak Sdn Bhd V Etiqa Takaful Bhd [2016] 9 CLJ 1 it is mandatory to stay proceedings only if there is a binding arbitration agreement or clause between the parties. In this case there is none.

As there is no binding arbitration agreement or clause between the Plaintiff and the Defendants the Court dismissed the Defendant’s application to stay proceedings to refer to arbitration, with a cost of RM3,000. Dated: 15.7.2021 sgd Dato’ Haji Akhtar bin Tahir Judge High Court of Malaya, Kuala Lumpur PARTIES For the Plaintiff: Tetuan Soh Hayati & Co. No. 109A Batu 3 ¼ Jalan Kelang Lama 58000 Kuala Lumpur 7 For the Defendants: Tetuan Dennis Nik & Wong Sutie 601-602 Level 6 Bangunan ANG No. 1 Jalan Jeram Taman Tasek 80200 Johor Bahru Johor

Press Metal Sarawak Sdn Bhd V Etiqa Takaful Bhd [2016] 9 CLJ 1.