Kong Hui Fong v Pahlawan Sendirian Berhad (JA-12B-30-05/2016)

The appellant, Kong Hui Fong, being the defendant in the lower court, was not satisfied with the decision of the Sessions Court Judge (SCJ), Johor Bahru, who allowed the plaintiff‟s claim (respondent‟s claim) and recorded that a judgment sum of RM703,588.70 be entered against the defendant after a full trial. The parties hereinafter will be referred to according to their original status in the lower court.

On 31.5.2017, this Court, after hearing the appeal, set-aside the SCJ‟s decision in part and allowed a lesser judgment sum, i.e. a sum of RM46,153.00 to be entered against the defendant. The plaintiff is not satisfied with the decision of this Court and has filed an appeal to the Court of Appeal. This judgment serves as the reasons for this Court‟s decision. The reasons are set down as below.

The plaintiff, being a company, filed a claim against the defendant for breach of trust in that the defendant had dishonestly and without authority misappropriated the plaintiff company‟s fund amounting to RM703,588.70 during the period between April 2009 and March 2013.

The defendant was an employee of the plaintiff company between the period 1.1.2011 and 30.4.2013. The defendant was previously employed by a company known as Narcissus Development Sdn. Bhd. (Narcissus) for approximately 26 years. The defendant was also previously employed by Messrs. Kong Yeam & Chui Sieng. One thing in common about the defendant‟s history of employment is that she was Page 3 of 11 working for and assisting the same proprietor, Dato Ng Kong Yeam (Dato Ng), who was the de facto owner of all the companies whom employed the defendant.

At the material time while the defendant was under the employ of companies owned by Dato Ng, the defendant was charged with the task of managing the financial affairs and accounts of Dato Ng‟s companies, including the plaintiff company. Occasionally, the defendant had to run Dato Ng‟s personal errands, such as, to pay his household utility bills. The defendant also took care of the Dato Ng‟s personal household expenses in that she had to withdraw money from the plaintiff company to pay Dato Ng‟s lawful wife, Datin Ling Chooi Sieng (DW4), the household expenses every month.

The defendant was at all material times entrusted with the safe keeping of the plaintiff company‟s cheque books. It is not in dispute that the authorized signatories of the plaintiff company‟s cheques were Dato Ng and his lawful wife (either one to sign). It was in evidence that all the cheques in the cheque books were pre-signed by Dato Ng.

During the period between April 2009 and March 2013, the defendant had issued a total of 51 cheques from the plaintiff company. The total amount of all those cheques was RM703,588.70 which is the judgment sum entered against her at the lower court. The plaintiff alleged the defendant had dishonestly and without authorization issued these cheques, and as a result, the plaintiff company suffered losses.

Those 51 cheques could be categorized into two groups. The first group of cheques amounting to 38 cheques in which the total sum was Page 4 of 11 RM572,588.70. The payee for the first group of cheques was the defendant herself. The second group of cheques amounting to 13 cheques which the total sum was RM131,000.00. The payee of 12 out of these 13 cheques was „Narcissus Develoment Sdn Bhd‟; and one cheque was made payable to „Funridge Development Sdn. Bhd.‟

Sometime in May 2012, Dato Ng‟s health was deteriorating, and he was diagnosed with frontal-temporal dementia and was unable to handle his daily affairs, including the management of his companies‟ affairs. Dato Ng was taken care of by a lady by the name of Kay Swee Pin (PW1) who claimed to have shared a spousal relationship with him in Singapore. They had been living together from 1955 until mid-2013 in Singapore. Kay Swee Pin had borne Dato Ng a child who lived together with the couple.

Kay Swee Pin later became a director of the plaintiff company in early 2013. When she took over the control of the plaintiff company, she went through the books and accounts of the plaintiff company. She found that the defendant had made many payments using the pre-signed cheques to pay herself and others in the past, and that there were no supporting documents and/or proper records in reference to those payments.

On February 2013, Kay Swee Pin wrote an email (see pg. 1037 Rekod Rayuan Bhg C (Jilid 3) – D5) to the defendant giving strict instruction to her to stop issuing any payment using the pre-signed cheques. Kay Swee Pin then filed a civil suit against the defendant for those 51 unauthorized cheques at the lower court in 2014.

It is trite that the appellate court will not interfere with the decision of the lower court if the trial court has not committed any error of law in coming to its decision. However, in this appeal, this Court finds there were several errors of law committed by the trial court.

Firstly, it was the plaintiff‟s pleaded case that the defendant had dishonestly and without prior permission paid out all those payment using the pre-signed cheques to herself and others. The burden then lies with the plaintiff to first prove that the defendant was not authorised to issue those cheques. The plaintiff did not adduce any evidence to prove that the defendant was not authorised to issue and make payment using those cheques (except three cheques which will be explained later). The SCJ took into account the fact that the defendant was entrusted with those pre-signed cheques, therefore, the defendant had to justify as to why she made those payments and to justify by supporting documents as to why the payments were made.

This Court could not agree with the approach taken by the SCJ in that the burden was on the defendant to justify as to why she issued those payments. This Court is of the considered view that the plaintiff must first prove that the defendant was not authorised to issue payments to herself and others. In order to do so, only the authorised signatories at that time could verify whether the defendant had dishonestly and without permission issued those cheques. At the time of the trial, Dato Ng, the signatory of those cheques, was not fit to give evidence in court. The next best person that could verify whether those payments were authorised or otherwise would be the other authorised signatory, namely, Page 6 of 11 Dato Ng‟s lawful wife. She gave evidence for the defendant. She acknowledged receipt of payments from the defendant every month for her household expenses. She did not give evidence to suggest the defendant had dishonestly or without permission issued those cheques.

There is nothing in fact to suggest the defendant had misused the pre-signed cheques. When one is entrusted with pre-signed cheques, it in fact implies that the person holding those pre-signed cheques is authorised to make payments at the holder‟s discretion, unless specific instruction is given to whom those pre-signed cheques are supposed to be paid to.

From the evidence of this case, the defendant had been issuing cheques since April 2009 to herself until end of 2012, and yet, there was no complaint by Dato Ng concerning the conduct of the defendant. The defendant‟s evidence was that she took the money to pay various expenses, including management fees, cleaning fees, utility bills, petrol expenses, et cetera. There was a consistent pattern of payments made out by the defendant every month. Some of these payments were made payable to one Sumardi (DW2) as cleaning fees, who gave evidence that he received payments from the defendant every month for his services. The defendant‟s repeated actions were not questioned by Dato Ng when he was in control of the plaintiff company. The defendant had been carrying out her responsibility as “the manager” of the finances of the plaintiff company all these years without interference from Dato Ng. The defendant‟s actions were questioned only when the lady Kay Swee Pin came into the picture to purportedly take over the management of the plaintiff company.

From the evidence of the plaintiff‟s case, the plaintiff could only establish that some of the payments were not properly accounted for, in that no proper payment vouchers were made out or recorded. The SCJ took into account these facts as well as the relationship between PW1 and Dato Ng, and also particularly Dato Ng‟s health condition, and concluded that the defendant was dishonest and had without proper permission issued payments of those cheques. This approach, in the opinion of this Court, is an error of law in that the SCJ had shifted the burden of proof to the defendant to prove she was not dishonest and had issued the cheques with authorization.

What is material is that PW1 admitted that the cheques that were pre-signed by Dato Ng were left by Dato Ng entirely to the defendant as to whom she intended to pay out to (see pg. 545 Rekod Rayuan Bhg B (Jilid 3)) . This confirms that there was implied authority given to the defendant to use those pre-signed cheques to whom she intended to pay out to. On a balance of probabilities, the defendant has explained to whom she had paid out the money to for those cheques. Further, some of the recipients of the money gave evidence for the defendant admitting that they had received the money from the defendant for various reasons. This evidence shows that the defendant did not misuse the pre-signed cheques. The defendant had genuinely used those pre-signed cheques to pay expenses for the plaintiff company. The trial court seems to have ignored and failed to appreciate this part of the defendant‟s evidence. The trial court made a sweeping finding that the defendant was in breach of trust in that she had misused the pre-signed cheques and issued the same without authority.

After having scrutinized the trial court evidence and the decision of the SCJ, this Court was satisfied that the trial court had made an error of law in the finding of facts and evidence in coming to its decision.

Secondly, it is the considered view of this Court that the defendant was able to establish that payments were in fact made for utility bills, postage expenses and petty expenses for the plaintiff company. These payments prove, on a balance of probabilities, that she had indeed made payments not for her benefit, but for the monthly expenses of the plaintiff company so as to keep the plaintiff company running. It is incomprehensible as to why the trial court could find the defendant is liable for those expenses, and that the defendant has to now pay back such sums to the plaintiff company.

The trial court had taken a simplistic approach in analysing the evidence before the court. The counsel for the plaintiff in the appeal acknowledged that some payments were indeed made for the expenses of the plaintiff company. The counsel for the plaintiff in the appeal had prepared a list itemizing each and every payment for the first group of cheques as directed by this Court. The object was to facilitate the parties to reach a compromise for an amicable settlement. However, the parties could not reach any compromise.

Thirdly, the same analysis applies with regard to the second group of cheques. Those payments were made to Dato Ng‟s own company, i.e. Narcissus Development Sdn Bhd and Funridge Development Sdn. Bhd. Those payments were made during the period between May 2009 and July 2011. At that time, Dato Ng was still capable of making decisions and was in control of the plaintiff company, yet, Dato Ng did Page 9 of 11 not complain about those payments. Why is PW1 questioning the defendant now? She was not in charge of the management of the affairs of the plaintiff company at that time, obviously she would not know what transpired between Dato Ng and the defendant.

Those payments were all made payable to Dato Ng‟s own company, obviously, the defendant must have acted under the instruction of Dato Ng to pay from the plaintiff company to Dato Ng‟s other companies. Why would the defendant have paid out money from the plaintiff company to Dato Ng‟s companies if there was no instruction from Dato Ng to do so?

The defendant was not the recipient of the money nor was she in control of Dato Ng‟s other companies. Why should she be made responsible for these payments? This Court could not make sense of the SCJ‟s judgment as to why the SCJ found the defendant to be liable for these group of cheques.

The plaintiff had failed to prove that the defendant was dishonest, and had made payments to Dato Ng‟s other companies without his authorization or had acted in breach of trust. Therefore, the defendant should not have been held liable for the cheques issued to Dato Ng‟s other companies.

This Court could only find the defendant to be liable for three cheques that she had issued in breach of strict instruction given to her not to use pre-signed cheques. This strict instruction could be found in the email from PW1 (when she assumed control of the plaintiff company Page 10 of 11 in early 2013) to the defendant dated 6.2.2013 (see exhibit D5). PW1 wrote in the email as follows: “…With that authority, I am instructing you that all blank checks presigned by Dato Ng (either for his personal accounts or the account of Kong Yeam and Chui Sieng) must be destroyed immediately and he shall not be made to sign any more checks or any kind of documents hereon. Any matters concerning him must be directed to me.”

That instruction has to be taken to include those pre-signed cheques of the plaintiff company. However, three cheques pre-signed by Dato Ng were issued by the defendant, namely cheques 843647, 843651 and 843655 for the amounts RM18,883.00, RM13,935.00 and RM13,335 respectively after the strict instruction was given to her. The three cheques amounted to RM46,153.00.

This Court could only find these three cheques were clearly issued without authorization and permission. After PW1 had issued the email on 6.2.2013 to the defendant, it could be said that the defendant‟s implied authority to use the cheques that had been pre-signed by Dato Ng had been revoked. Hence, the defendant no longer had the discretion to use those pre-signed cheques to make any payments, including payment for plaintiff company‟s expenses. Hence, this Court could only find the defendant liable for to the amount RM46,153.00 as the plaintiff company‟s losses.

Based on the above analysis and reasoning, this Court allowed the defendant‟s appeal in part and set aside the SCJ‟s decision in part and allowed only a judgment sum of RM46,153.00 to be entered against the defendant, and costs of RM2,000.00 be paid to the defendant by the plaintiff. -Signed- ………………………………………… (CHOO KAH SING) Judicial Commissioner High Court, Johor Bahru Counsel for the plaintiff : Salma Sakeena Tetuan Azwad Ihsan & Co. Counsel for the defendant : HK Ling Tetuan Kong Yeam, Chui Sieng & Shim