Khaw Tiew Chai v Lee Chai Seng dan 4 Lagi (P-02-(IM)-209-01/2018 Heard Together with P-02(W)-211-01/2018)

Content

Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 1 IN THE COURT OF APPEAL, MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. P-02-(IM)-209-01/2018 BETWEEN … APPELLANT

Subparagraph

(ii) Whether the first to the fourth defendants have paid the RM80,000.00 to the plaintiff for the purchase of the shares in the fifth defendant; and

Subparagraph

(iii) Whether the issuance of the new 2,946,283 shares in the fifth defendant is valid. Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 8 [26] On the first issue, the learned judge noted the following facts:

Subparagraph

(ii) that subsequent to the making of the aforesaid statutory declaration, Ong made several other statutory declarations, where he made changes to his statutory declaration;

Subparagraph

(iii) that by way of an application to adduce fresh evidence in the appeal against the dismissal of the OS, these statutory declarations and the guilty plea of Ong in the Magistrates Court were drawn to the attention of this Court; and

Subparagraph

(iv) that this Court nevertheless dismissed the plaintiff’s appeal against the dismissal of the OS. [27] Adverting to Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189 and Malpac Capital Sdn Bhd v Yong Toi Mee & Ors and another appeal [2017] 1 MLJ 262, the learned judge held that the instant suit is an attempt by the plaintiff to re-litigate the disputes between the parties in the OS, and that based either on the doctrine of res judicata or issue estoppel or both, the plaintiff is prevented from re-litigating the disputes. [28] His Lordship also considered the plaintiff’s argument that he had the right to initiate this suit as an impeachment action on the earlier OS judgment. Citing Seruan Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul Makmur & Anor [2016] 3 MLJ 1, the learned judge held that the plaintiff cannot avail himself of the doctrine of impeachment of action by Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 9 way of fresh action as this is an instance of intrinsic fraud and not extrinsic fraud. [29] However, for completeness, the learned judge proceeded to consider the other issues. [30] On whether the first to the fourth defendants have paid RM80,000.00 to the plaintiff, the learned judge found that there was an obvious conflict of evidence between the testimony of the plaintiff and Ong on the one side and that of the first to the fourth defendants on the other side. His Lordship found Ong to be an unreliable witness and hence concluded that it would be unsafe for him to act on Ong’s testimony. The learned judge preferred the evidence of the first to the fourth defendants that they have already paid to the plaintiff (for him and Chen) RM80,000.00 in cash on or sometime shortly after 18.2.2005. [31] On the third issue, the learned judge held that notwithstanding that a general meeting was not convened to obtain the approval of the existing shareholders prior to the board of directors approval for the issuance of the new shares in the fifth defendant on 3.5.2005, no injustice had been occasioned as all the existing shareholders are also directors and they were all present at that meeting. In exercise of the powers under section 355(2) of the Companies Act 1965 (“the CA 1965”), his Lordship declared that the issuance of the new shares in the fifth defendant company is valid. Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 10 The Appeal [32] For brevity, we do not propose to set out the submissions of the respective parties, except to state that the plaintiff submitted that the learned judge erred in concluding that the doctrine of res judicata is applicable to the instant suit. In support of his submission, learned counsel relied on the cases of Seruan Gemilang (supra) and Chee Pok Choy & Ors v Scotch Leasing Sdn Bhd [2001] 4 MLJ 346. [33] It was further submitted for the plaintiff that the learned judge erred on the second issue as there was no evidence of payment by the first to the fourth defendants of the RM80,000.00 and that the issuance of the 2 million over new shares contravened section 132D of the CA 1965. Our Decision [34] The principles of res judicata and/or issue estoppel as set out in Asia Kawal Teliti (supra) is reproduced below: “What is res judicata? It simply means a matter adjudged, and its significance lies in its effect of creating an estoppel per rem judicatum. When a matter between two parties has been adjudicated by a court of competent jurisdiction, the parties and their privies are not permitted to litigate once more the res judicata, because the judgment becomes the truth between such parties, or in other words, the parties should accept it as the truth: res judicata pro veritate accipitur. The public policy of the law is that, it is in the public interest that there should be finality in litigation – interest rei publicae ut sit finis litium …”. [35] Thus, for the doctrine of res judicata to apply, the matter or point in issue must be adjudicated between the parties. In other words, there must Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 11 be a decision or judgment on the issue. In Tong Lee Hwa & Anor v Lee Yoke San [1979] 1 MLJ 24, Chang Min Tat F.J. said: “At the hearing of the appeal, it was put to counsel for the appellants that to constitute a res judicata, the earlier judgment must, in terms of the Privy Council decision in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] A.C. 993; [1964] MLJ 49, “necessarily and with precision” determine the point in issue, and he was asked to indicate to the court how the earlier judgment did necessarily and with precision determine the liability of the appellants to pay the respondent for work done for them at their request. He did not do so. We do not, with respect, see how he could succeed.”. [36] In the OS, the statutory declaration affirmed by Ong formed the basis of the decision of the High Court in dismissing the plaintiff’s claim. This can be seen from the following extract of the judgment of John Louis O’Hara J (ROA Vol. 2B: pg. 562-563): “Saya melihat dakwaan Pemohon ini sama sekali tidak berasas. Keterangan menunjukkan bahawa pada 18.2.2005 Responden Pertama hingga Responden Keempat membeli 49,990, 10,000, 10,000 dan 10,000 saham masing-masing Syarikat tersebut. Responden Pertama hingga Responden Keempat telah menjelaskan secara tunai kepada Pemohon sebagai balasan. Pemohon dan Chen Mun Heng telah menandatangani Borang 32A dan mengarahkan setiausaha Syarikat tersebut, Ong Ghin Leong untuk memindahmilik saham Syarikat tersebut kepada Responden Pertama hingga Responden Keempat. Pemohon telah menandatangani sijil saham baru yang dikeluarkan selepas pindahmilik. Surat akaun (sic) setiausaha Syarikat tersebut mengesahkan: a) kesemua Borang Pindahmilik 32A ditandatangani oleh semua pihak di hadapan setiausaha Syarikat dan disaksikan oleh setiausaha Syarikat; Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 12 b) Pemohon mengesahkan dam memberitahu setiausaha Syarikat bahawa kesemua balasan dalam Borang Pindahmilik telahpun dijelaskan dengan sepenuhnya oleh Responden-Responden; c) Pemohon mengarahkan setiausaha Syarikat membuat pindahmilik saham menurut Borang Pindahmilik; d) Pemohon yang menandatangani sijil saham dam memberikuasa kepada setiausaha Syarikat untuk melepaskan sijil saham asal tersebut.”. [37] We were mindful of the fact that the decision of John Louis O’Hara J in dismissing the OS was affirmed by this Court and that the plaintiff’s application for leave to appeal was refused by the Federal Court. [38] The instant suit was filed to impeach the decision in the OS on the basis that the company secretary had committed perjury in the making of the statutory declaration relied upon by John Louis O’Hara J. While we agreed with the learned judge that the instant case involved intrinsic fraud and therefore the plaintiff could not avail himself of section 44 of the Evidence Act 1950 (see Seruan Gemilang, supra), we nevertheless found nothing in the record of appeal to show that the issue of false statutory declaration by the company secretary was canvassed and adjudicated by this Court in dismissing the plaintiff’s appeal and/or by the Federal Court in dismissing the leave application. [39] As a matter of fact, the plaintiff’s application to adduce fresh evidence in respect of the statutory declaration and the charge for perjury against Ong was dismissed by this Court which means that this issue was not canvassed and decided in the appeal. The statutory declaration and the guilty plea of Ong were merely drawn to the attention of this Court. As such, with respect, Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 13 we disagreed with the learned judge that the plaintiff’s instant suit is caught by the doctrine of res judicata. [40] Be that as it may, we were not persuaded that the learned judge erred on the other two issues. It is trite that an appellate court will not intervene unless it was shown that the trial court was plainly wrong in arriving at its decision or that there had been no or insufficient judicial appreciation of the evidence (see Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor [2003] 2 MLJ 97; China Airlines Ltd v Maltran Air Corp Sdn Bhd [1996] 2 MLJ 517). [41] The learned judge found that there was a direct clash in the testimony of the plaintiff and the first to the fourth defendants over the payment and receipt of the RM80,000.00 for the purchase of the shares in the fifth defendant company. His Lordship accepted the evidence of the latter and he gave his reasons for doing so. [42] Ong testified for the plaintiff and in respect of his evidence, the learned judge stated: “42. … I find him to be a perfidious and shifty witness from this demeanour and answers in response to questioning of counsel. This is corroborated by the chronicles of his contemporaneous conduct in 2005 to 2007 in changing statutory declarations whenever confronted by the parties. I also find his justifications and excuses for his action feeble if not incredulous. In Tan Ban Ulu & Anor v Ong Ghin Leong [2017] MLJU 244, Collin Lawrence Sequerah J shared the same sentiments and found him as follows: “[75] Given the numerous contradictions in the statements made by the Defendant as outlined above, the Defendant’s actions clearly Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 14 amounted to a blatant disregard as to whether his statements were true or false. He could not possibly have entertained the belief that what he said in all the statements he made were true. His actions displayed a reckless abandon for the sanctity of the truth … … [92] From the overall conduct of the Defendant as alluded to above, it is evident that the plea by the Defendant that he was subject to duress and coercion in making these statements in his (SD’s), police reports and affidavits cannot hold true. The Defendant was a company secretary and an educated man. He came across as no “country bumpkin” who would meekly succumb to whatever pressures placed upon him by others. There was therefore nothing that operated to negative malice on the part of the Defendant.”. [43] In so far as the evidence of the first to the fourth defendants on the payment and receipt of RM80,000.00 is concerned, his Lordship said: “44. … I prefer the evidence of the latter from their demenour and candour generally especially that of the Fourth Defendant who is the nephew of the Plaintiff. I quote the relevant portion of his testimony below under cross examination: “Counsel: Mr Khaw, I am putting it to you that you together with the three other Defendants had forced the company secretary to release the new share certificates for the allotment of the new shares and to register the transfer of the 80,000 shares into your respective names despite you all not having paid for the 80,000 shares and for the new shares? Witness: Disagree. Can I explain? Judge: Alright, yes. Since Mr Khaw is English speaking, so easier to understand. Yes? … Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 15 Witness: I don’t agree My Lord because during the time Khaw Tiew Chai was the person who run the company. All the people as My Lord can see like myself I got my own work. Law Ah Lean I think he got other business. So Khaw Tiew Chai was the person who run and operate the company. And he was the person who liaised with the company secretary. So we know nothing, we pay all we have to pay and share cert all been issued accordingly and then after that some discrepancy going on regarding the CBT, all these kind of nothing, may be I put it aside and since that day Khaw Tiew Chai suddenly start the summons against us and say we never pay the 80,000. So we are not the professional like Ong Ghin Leong who prepare all the company cert all these kind of things, we don’t know head or tails ok. You guys prepare all these kind of things and suddenly you guys come and tell me that it’s not there.”. [44] The learned judge also found that the plaintiff is an astute businessman and that he would not have signed Form 32A and the new share certificates dated 18.2.2005 if the payment for the shares had not already been received by him. Even if he had only pre-signed the forms and the new share certificates and given them to Ong to be held in escrow pending payment, his Lordship found that the plaintiff must also have instructed Ong to effect the transfer and release of the new share certificates to the first to the fourth defendants. Otherwise Ong would not have released the new share certificates to them. The learned judge further found that Ong had acted voluntarily because his complaints of threats and harassment by the first to the fourth defendants only took place in July 2005 as stated by him in his police report dated 3.7.2007. [45] His Lordship also considered the evidence that parties met on 3.5.2005 and jointly approved the board of directors’ resolution to increase the share Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 16 capital in the fifth defendant to 2,946,283 shares. The learned judge found that by then, the first to the fourth defendants had paid the RM80,000.00 to the plaintiff and Chen; if not, this board of directors’ resolution would not have been approved and that it otherwise affronts common sense. His Lordship further considered the fact that there was no contemporaneous note of protest at the material time by the plaintiff pertaining to the alleged non-payment of his 79,998 shares from the documentary evidence adduced. The learned judge also found that the plaintiff did not in his oral evidence, allude to any protest or qualification that he made on that day in relation to the same. [46] We found no basis to rule otherwise and to depart from the learned judge who had the audio visual advantage of seeing and hearing the witnesses. We agreed with the learned judge that on the preponderance of the evidence, the first to the fourth defendants had paid the plaintiff in respect of the purchase of the shares in the fifth defendant. [47] As regards the validity of the issuance of the new shares, it was the plaintiff’s primary contention that the issuance was invalid because it was only approved by the board of directors but not at the general meeting. This was in contravention of section 132D of the CA 1965, which provides that the directors shall not without the prior approval of the company in general meeting, exercise any power of the company to issue shares. [48] Notwithstanding the non-compliance with section 132D of the CA 1965, the learned judge declared the issuance of the new shares as valid. His Lordship opined that it was unnecessary for the issuance of the new shares to be approved by the general meeting because all the existing Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 17 shareholders are also directors; they were all present at the board of directors’ meeting on 3.5.2005 and that no existing shareholders were affected and prejudiced by the non-holding of the prior general meeting. In declaring that the issuance of the new shares is valid, his Lordship exercised the power available to him under section 355(2) of the CA 1965. [49] In our judgment, the learned judge was correct in his application of section 355 of the CA 1965 which provides: “355. Irregularities in proceedings

Subsection

(1) No proceeding under this Act shall be invalidated by any defect, irregularity or deficiency of notice or time unless the Court is of the opinion that substantial injustice has been or may be caused thereby which cannot be remedied by any order of the Court.

Subsection

(2) The Court may if it thinks fit make an order declaring that the proceeding is valid notwithstanding any such defect, irregularity or deficiency.

Subsection

(3) Without affecting the generality of subsections (1) and (2) or of any other provisions of this Act, where any omission, defect, error or irregularity (including the absence of a quorum at any meeting of the company or of the directors) has occurred in the management or administration of a company whereby any breach of this Act has occurred, or whereby there has been default in the observance of the memorandum or articles of the company or whereby any proceedings at or in connection with any meeting of the company or of the directors thereof or any assemblage purporting to be such a meeting have been rendered ineffective including the failure to make or lodge any declaration of solvency pursuant to section 257, the Court –

Subsection

(4) The Court (whether the company is in process of being wound up or not) may enlarge or abridge any time for doing any act or taking any proceeding allowed or limited by this Act upon such terms, if any, as the justice of the case may require and any such enlargement may be ordered although the application for the same is not made until after the time originally allowed or limited.”. Conclusion [50] The learned judge had arrived at his decision by assessing, weighing and for good reasons had accepted the evidence of the first to the fourth defendants over the plaintiff. There was no reason for us to disturb the findings of the learned judge. We therefore unanimously dismissed the plaintiff’s appeal No. 211 with no order as to costs. Civil Appeals No. P-02(IM)-209-01/2018, P-02(W)-211-01/2018 19 Dated: 16th October 2018 signed (TENGKU MAIMUN BINTI TUAN MAT) Judge Court of Appeal Counsel/Solicitors : For the Appellant: V. Amareson Messrs. Amareson & Meera For The Respondents: Adrian Silvarajoo Messrs. Ramli Yusuff & Co.