Lam Kim Kai v 1. ) Har Kah Seng (WA-24NCC-613-11/2023)

Har Kah Seng (NRIC No: 791015-14-5733)

Phon Chooi Peng (NRIC No: 751128-08-5822)

Apec Fasa Sdn Bhd [Company No: 202101031691 (1431991-U)] ….Defendants JUDGMENT [1] This judgment concerns an application to appoint an independent valuer for determining the fair value of shares in a private limited company, following a court order in a shareholders' dispute. The application arises from the parties' inability to agree on the selection of a valuer, as mandated by the court's previous order. At the heart of this dispute are conflicting proposals for potential valuers, with significant disparities in their quoted fees and proposed scopes of work. The applicant seeks the appointment of a well-established firm with international connections, citing its expertise and comprehensive approach to the valuation task. Conversely, the respondents propose alternative valuers with substantially lower fee quotes, arguing that these firms possess sufficient expertise for the task at hand. This case raises important questions about the criteria for selecting an independent valuer in complex shareholder disputes, the relevance of fee structures in such appointments, and the necessary qualifications for conducting a thorough and impartial valuation. Additionally, it highlights the challenges in balancing the need for a comprehensive valuation against concerns of cost-effectiveness, particularly in cases involving allegations of financial impropriety. The court must now navigate these competing considerations to ensure a fair and just resolution that gives effect to its previous order. Backgrounds facts [2] The Plaintiff, Lam Kim Kai, and the 1st Defendant, Har Kah Seng, are shareholders and directors of the 3rd Defendant, Apec Fasa Sdn Bhd (“Apec Fasa”), a company incorporated on 29.9.2021. The 2nd Defendant, Phon Chooi Peng, is the wife of the 1st Defendant and worked as the Human Resource Manager of Apec Fasa, from 5.10.2022. [3] On 2.11.2023, the Plaintiff filed an Originating Summons against the 1st and 2nd Defendants, alleging that they had oppressed his rights as a minority shareholder of Apec Fasa. [4] On 5.4.2024, the High Court allowed the Originating Summons with costs of RM50,000. In its Brief Grounds of Judgment, the court found that: a) The 1st and 2nd Defendants had persistently suppressed Apec Fasa’s accounting records from the Plaintiff for a prolonged period of 2 years. b) There was a clear pattern of misuse of Apec Fasa’s funds by the 1st and 2nd Defendants to the oppression of the Plaintiff’s as a minority shareholder. This included making false claims, unverified claims, misuse of funds for personal benefit, and making unauthorised transfers to a related company. c) The Plaintiff was placed in an unfair “locked-in” minority position due to the 1st Defendant’s behavior. [5] The Court Order dated 5.4.2024 (Enclosure 73) included several directives, including: a) the 1st and 2nd Defendants were to provide full access to Apec Fasa's accounting records to the Plaintiff within 7 days [paragraph (a) of Enclosure 73]. b) the 1st Defendant was ordered to purchase all of the Plaintiff's shares in Apec Fasa at a fair value determined by an independent valuer, with the valuer's fees to be borne by the 1st Defendant and/or the 2nd Defendant jointly and severally [paragraph

of Enclosure 73]. [6] There was no appeal against this Order. [7] Following the Court Order, the parties were unable to agree on the appointment of an independent valuer. On 24.5.2024, the Plaintiff filed an application to resolve this impasse and give effect to paragraph (d) of the Court Order in Enclosure 73. [8] The Plaintiff proposed Moore Stephens Associates PLT (“MSA”) as the independent valuer. MSA provided a fee quote of RM113,400 (including tax) for the valuation exercise. [9] The 1st and 2nd Defendants proposed three alternative valuers: a) Ng Kim Heng & Associates (“NKH”), with a fee quote of RM3,000 for “share valuation advisory services”. b) True Balance Sdn Bhd (“True Balance”), with a fee quote of RM6,000 (excluding out-of-pocket expenses) for preparing the share valuation report. c) myStrategists Consulting Sdn Bhd (“myStrategists”), with a fee quote of RM15,000/RM20,000 for “Business Valuation”. [10] On 6.5.2024, the Plaintiff's solicitors sent a letter to the 1st and 2nd Defendants's solicitors, stating that the proposed valuers might not have the necessary experience and skills to conduct the valuation exercise needed, especially given the facts of the case. The letter also noted that the fee quotes provided did not seem to consider the volume of documents requiring scrutiny. [11] On 9.5.2024, the 1st and 2nd Defendants's solicitors replied, stating that they did not agree with the proposal to nominate MSA as the valuer because the professional fees quoted by MSA were purportedly too high. They stated that they would agree to the appointment of MSA if the Plaintiff paid MSA's fees. [12] The application filed by the Plaintiff on 24.5.2024 seeks to have MSA appointed as the independent valuer to determine the fair value of all of the Plaintiff's shares in Apec Fasa. The application also includes provisions for the payment of MSA's fees and the timeline for the valuation report. [13] This application is now before the court for determination. This application [14] The Plaintiff applies for an order to appoint MSA as the independent valuer to determine the fair value of his shares in Apec Fasa, as required by the Court Order dated 5.4.2024. He seeks provisions for the payment of MSA's fees (RM113,400 including tax) by the 1st Defendant and/or the 2nd Defendant, and a timeline for MSA to deliver the valuation report. Additionally, he requests an order for the 1st and 2nd Defendants to cooperate fully with MSA in the valuation process. [15] The Plaintiff's grounds for the application are that the execution of the Court Order is frustrated due to the parties' inability to agree on an independent valuer. He contends that MSA is willing and suitable to carry out the required valuation engagement, given their expertise and consideration of the case's complexity. Conversely, he argues that the valuers proposed by the 1st and 2nd Defendants are not suitable for the task, citing concerns about their experience, the scope of work outlined in their quotations, and the apparent lack of consideration for the volume of documents involved. The Plaintiff also notes that the 1st and 2nd Defendants did not appeal against the original court order and are deemed to have accepted the High Court's decision. The Plaintiff’s submissions [16] The Plaintiff submits that the independent valuers proposed by the 1st and 2nd Defendants are not suitable to carry out the required valuation engagement. He argues that the quotations by NKH and True Balance do not specifically set out the scope of works to be undertaken, making it impossible to ascertain the valuation process they would adopt. The low fees quoted by these firms suggest they have not properly considered the large amount of work required. [17] Regarding myStrategists, the Plaintiff points out that their quotation explicitly states that their report is “intended for internal decision-making purposes and may not be used for any other purpose, e.g., financial reporting, litigation or arbitration”. He argues that this defeats the entire purpose of the engagement, as the valuation is required for court proceedings. [18] The Plaintiff further submits that none of the valuers proposed by the 1st and 2nd Defendants have provided their consent to act in this capacity. He argues that this is a crucial requirement for any valuer to be considered for appointment by the court. [19] In contrast, the Plaintiff contends that MSA is the only suitable candidate before the court. He argues that MSA is an independent firm associated with the Moore Global Network Limited, which has 500 offices in over 110 countries. This, he submits, ensures MSA can provide an independent valuation without influence from any party, which is particularly important in a shareholder dispute. [20] The Plaintiff also highlights that MSA has wide experience in conducting share valuation exercises and has expressly taken into account the complexity of the proposed engagement in its fee quote. He points out that MSA has provided a detailed scope of work, including a comprehensive review of the company's financial records and consideration of the court's findings regarding the misuse of company funds. [21] Finally, the Plaintiff argues that MSA is the only firm that has provided its Consent to Act and has shown evidence of previous appointment by the court to provide its opinion. He submits that while MSA's fee quote is higher than those of the other proposed valuers, it is reasonable given the firm's size, quality assurance, and the detailed scope of work required for this complex valuation. The Defendants’ submissions [22] The Defendants submit that in requesting fee quotes from their proposed valuers, they informed them of the scope of work and expertise required for conducting the share valuation exercise. This included details about the nature of Apec Fasa’s business, the approximate transactions carried out in the company's two years of operation, the high volume of documents involved, and the purpose of the share valuation exercise. [23] They argue that their proposed valuers possess the necessary expertise and experience to conduct the share valuation based on their individual and corporate profiles. The Defendants note that the Plaintiff has not disputed the independence of these valuers. [24] Regarding NKH, the Defendants state that Mr. Ng Kim Heng has conducted over 40 share valuation exercises across various industries over his 20 years of experience. They claim that the scope of work includes reviewing the historical operating performance and accounting records of Apec Fasa and conducting a multiple pricing methodology appropriate for the available documents, business scale, and industry. [25] For True Balance, the Defendants submit that Mr. Chong Kean Huat has conducted numerous share valuation exercises and has over 29 years of experience in the industry. They note that Mr. Chong regularly prepares valuation reports for court litigation cases. [26] Regarding myStrategists, the Defendants state that Ms. Patricia Low has conducted numerous share valuation exercises in Malaysia and Singapore. They provide a detailed list of the scope of work to be undertaken by myStrategists, including discussions with management, industry review, and consideration of applicable discounts or premiums. [27] The Defendants argue that the fee quoted by MSA is extremely high and unreasonable compared to the fees quoted by their proposed valuers. They contend that MSA's fee is not commensurate with the industrial practice fee of 3-4% of the total claim amount. [28] They submit that the fees quoted by their proposed valuers should not be the basis for determining the suitability of the valuer, arguing that the Plaintiff's allegation regarding the amount of documents to be reviewed is baseless. [29] Finally, the Defendants request that the Plaintiff's application be dismissed with costs and that any one of their proposed valuers be appointed as the independent valuer to conduct the share valuation exercise of Apec Fasa. Analysis and findings of the court Appointment of MSA as Independent Valuer [30] The Plaintiff submitted that MSA should be appointed as the independent valuer to determine the fair value of his shares in Apec Fasa. It was argued that MSA possesses the necessary qualifications, experience and resources to conduct the required share valuation. The Plaintiff highlighted MSA's global network of 500 offices in over 110 countries and its prior experience in court-appointed engagements, such as in Looh Keo & Anor v Prospell Enterprise Sdn Bhd & Ors [2023] 5 CLJ 601 (High Court) where MSA was appointed by the court to provide its opinion. [31] The Plaintiff also emphasised that MSA has duly considered the specific scope of work required for this case, taking into account the complexity arising from the court's findings in its decision allowing the oppression claim on 5.4.2024. Specifically, the court had found that there was: a) persistent suppression of Apec Fasa's accounting records from the Plaintiff for a prolonged period of 2 years; b) a clear pattern of misuse of Apec Fasa's funds by the 1st and 2nd Defendants, including making false claims, unverified claims, misuse of funds for personal benefit and unauthorised transfers to a related company; and c) placement of the Plaintiff in an unfair “locked-in” minority position due to the 1st Defendant's conduct. [32] In this regard, MSA's fee estimate shows that it has considered the extensive work required, including: a) review of accounting records and supporting documents comprising about 25 folders with over 3,000 files to understand Apec Fasa's background and financial position; b) analysis of the entire general ledger data from 2021- 2024, which exceeds 200 pages, and normalisation of the profit after tax after adjusting for non-business expenses by cross-checking against invoices and supporting documents; c) understanding over 350 pages of expense documents previously submitted to the court and ensuring consistency of adjustments made to the relevant financial years in which the expenses were incurred; d) review of the movement of funds with related parties and entities that may appear related due to business relationships, which would impact Apec Fasa's assets and liabilities; e) given the unique circumstances of this case, the need to reconstruct the “base” taking into account the information, challenges and complexities before the valuation techniques can be applied; f) performance of industry research to understand the market dynamics of Apec Fasa's business; g) application of discounts for lack of marketability after considering empirical studies and/or precedent transactions; and h) conducting research on public listed companies in Malaysia and potentially expanding to other regions to derive suitable comparable companies, taking into account the relevant financial data, ratios and multiples. [33] I am satisfied that based on the above, the share valuation exercise in the present case is a substantial undertaking and MSA has comprehensively evaluated the amount of work required in deriving its fee quotation. A valuer would have to grapple with voluminous accounting records and supporting documentation to normalise Apec Fasa's financial position, against the backdrop of the findings of misuse of company funds and suppression of records by the 1st and 2nd Defendants in the oppression proceedings. It is evident that MSA has proposed a detailed methodology involving significant time and resources, which justifies the fees sought. [34] The 1st and 2nd Defendants argued that MSA's fees are unreasonable as they exceed the “industry standard” of 3- 4% of the claimed sum. However, as noted by the Plaintiff, this contention was only raised by way of a statement from the Bar by the Defendants' counsel, Mr. Siau, and not supported by any evidence on affidavit. It is trite law that such unsubstantiated assertions from the Bar are inadmissible and should be disregarded. This principle was firmly established by the Court of Appeal in Ng Hee Thoong & Anor v Public Bank Bhd [1995] 1 MLJ 281, where Gopal Sri Ram JCA (as he then was) held at 287: “It is a principle fundamental to our system of adversarial litigation that evidence upon a matter must be given on oath. The practice of counsel giving evidence from the Bar, as was done in this case, is to be deprecated... Here was a positive assertion on oath by the appellants that there had been inordinate delay. The proper way in which that was to be met was by way of affidavit in answer, explaining the delay. Once this is done, then it is up to the judicial arbiter to accept or reject the explanation proffered. But to ride roughshod over such an important point, as was done here, does little to advance the course of justice according to the law.” [35] Further, and in any event, I agree with the Plaintiff's submission that there is no justification to use a percentage of the claimed sum as a guide, given that the value of Apec Fasa's shares have not even been determined at this stage. Doing so would be approaching things in the wrong order. In fact, applying a fixed percentage of the claim amount to derive the valuer's fees gives rise to the perverse presumption that the valuer has already pre-determined the value of the shares even before conducting the valuation exercise, which would undermine the very independence of the process. [36] On the criticism that the Plaintiff did not obtain alternative fee quotes for comparison, I accept the Plaintiff’s explanation that it was not necessary for the Plaintiff to do so, since the Defendants did not take issue with MSA's expertise but only its fees. Furthermore, the Defendants themselves did not provide satisfactory alternative valuers, given the concerns over the inadequate consideration of scope of work and lack of formal consent to act by their proposed candidates. The mere fact of fees quoted by other valuers being lower than MSA does not itself render MSA's fees unreasonable, without looking at the commensurate work to be undertaken in each case. [37] In this regard, I find instructive the Anselm Charles Fernandis J in the unreported grounds of judgment in Lim Jit Kim @ Lim Tian Jee & 18 Ors v Goh Siew Koon @ Eng Sing Kuan & 3 Ors (Companies (Winding-Up) No. MT2-28- 32/2004): “Finally, I find that the charge-out rate given by LA to be the same as that of PWC i.e., RM1,785.00 per hour. Even Ms. Tan whose qualifications were not proven commands a charge-out rate equal to an Associate Director in PWC i.e., RM1,330.00 per hour. I am of the view that the charge out rate for LA and Ms. Tan cannot be equated with that of PWC. PWC is part of the “Big Four” accounting firms with international standing. LA on the other hand is Malacca based and hence operating on a much smaller scale. The profit projection between the two would obviously also be vastly different.” [38] Similar considerations apply in the present case. MSA is an established international firm with 500 offices in over 110 countries. It possesses the scale, resources and infrastructure to undertake an engagement of this complexity and volume. It is therefore not unreasonable for its fees to be significantly higher than the Defendants' proposed valuers who are smaller local outfits. The Plaintiff should not be faulted for not canvassing a wider pool of candidates at lower fee quotes, as this may come at the expense of not securing a valuer with the requisite capacity and commitment to properly discharge the task, as seen from the quotations and proposals of the Defendants' nominees. [39] I am also guided by the analogous principle that, unless good reason is shown, the default position is to appoint the liquidator or expert nominated by the applicant, and the onus is on the objecting party to demonstrate why such candidate should not be accepted. This was well articulated by Master Adams in the Supreme Court of Western Australia case of Re Australian National Finance Ltd [1992] 7 ASCR 697 at 699-700: “The liquidator nominated by the petitioning creditor should normally be appointed unless some good reason can be shown why he should not be... the onus is upon the supporting creditors to satisfy the court that there is good reason why the nominee of the petitioning creditor should not be accepted and in my view the petitioning creditors have not discharged that onus.” [40] Although decided in the context of the appointment of a liquidator in a winding-up scenario, the same principle should apply in the appointment of a valuer in a minotirty oppression action where a buy out of shares is ordered by the court such as in the instant case. [41] Here, in the absence of evidence from the Defendants to support their bare assertion that MSA's fees are unreasonable, and in light of MSA's demonstrated suitability for the task, including its global resources and specific consideration of the work required as shown in its fee estimate, I find that the Plaintiff's nomination of MSA should be accepted. The Defendants have not shown good reason to deviate from this default position. [42] I am buttressed in this conclusion by the decision in Tam Shuk Yin Anny v Choi Kwok Chan & Ors [2008] HCMP 2399/2004 (Hong Kong High Court), where Kwan J held that the size and resources of the firm are relevant factors in selecting an appropriate valuer for a section 168A share valuation. Her Ladyship stated at paragraph 27: “Secondly, it was argued that the size of the firm from which the individual comes is irrelevant. I disagree with this as well. The petitioner's candidate would appear to have access to better support, more resources and global connections not available to the respondents' candidate. I cannot see how this should be irrelevant.” [43] In the premises, I find that the Defendants have failed to discharge the burden of showing their proposed valuers would be more suitable than MSA for appointment in the present circumstances. The Plaintiff's concerns over the adequacy of the work to be undertaken by the Defendants' nominees have not been satisfactorily addressed. The size and resources of the firm, while not conclusive, are material considerations which favor MSA over the Defendants' proposed valuers. Defendants' Proposed Valuers [44] The 1st and 2nd Defendants proposed three alternative valuers - NKH, True Balance, and myStrategists. However, I find that none of these proposed valuers are suitable for appointment in the present circumstances. [45] Firstly, while the 1st Defendant deposed in his affidavit that these valuers have the necessary qualifications and experience, no documentary evidence was provided to substantiate these claims. The corporate profiles exhibited did not disclose relevant expertise for the share valuation exercise required here. [46] Secondly, the quotations provided by NKH and True Balance contained scant details on the scope of work to be undertaken. NKH's quotation of RM3,000 for “share valuation advisory services” and True Balance's quotation of RM6,000 for “Professional Fees” provided no indication that these firms had given due consideration to the extensive work required, in light of the voluminous documentation and issues of misuse of funds. As such, there is valid concern, as raised by the Plaintiff, that these valuers may not conduct the sufficiently detailed review warranted in this case. [47] Thirdly, none of the Defendants' proposed valuers provided any formal consent to act in this matter, unlike MSA. This casts doubt on their readiness to take on the appointment if selected by the court. myStrategists' Inconsistent Statements [48] myStrategists initially stated in its quotation that its report was intended for internal decision-making purposes only and could not be used for litigation. The 1st Defendant attempted to explain this away in his affidavit by claiming myStrategists was aware the report was for the purpose of this suit. However, this is contradicted by the contemporaneous documentary evidence in myStrategists' own fee quotation and proposal. [49] It is settled law that the evidential value of documentary evidence far outweighs the evidence of an interested party like the 1st Defendant (Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229). As such, despite the subsequent assertion that myStrategists would conduct a detailed review, its initial express statement renders it unsuitable to be appointed as valuer in this court proceeding. Fairness and Reasonableness in Appointment [50] In considering who to appoint as valuer, the court must balance the interests of all parties and come to a fair and reasonable decision. The Defendants protested that it would be inequitable for them to bear the substantially higher costs of appointing MSA. However, this concern is outweighed by the importance of ensuring that the share valuation exercise is comprehensive and not compromised by the appointment of a valuer who has not demonstrated the same level of appreciation of the work required or whose commitment to the task is questionable. Ultimately, the Buy-Out Order was made to remedy the oppression against the Plaintiff. It would be counter-productive to undermine the relief granted by appointing an unsuitable valuer. Conclusion [51] For the foregoing reasons, I find that MSA is the most suitable candidate to be appointed as the independent valuer to determine the fair value of the Plaintiff's shares in Apec Fasa, in accordance with the Buy-Out Order dated 5.4.2024. The Plaintiff's application is allowed. It is hereby ordered as follows: a) MSA is appointed as the independent valuer to determine the fair value of all the Plaintiff's shares in Apec Fasa, with the basis for the share valuation to be determined by MSA as it deems appropriate. b) MSA shall prepare and deliver a copy of its valuation report (“Valuation Report”) to this court and to the solicitors for the Plaintiff and the solicitors for the 1st and 2nd Defendants in such manner as directed by this court within 30 days after full payment of MSA's fees and the relevant sales and service tax amounting to RM113,400.00 as attached in MSA's pro forma invoice in Appendix 1 of Enclosure 109. c) The 1st and/or 2nd Defendants shall pay MSA's fees and the relevant sales and service tax amounting to RM113,400.00 as attached in MSA's pro forma invoice in Appendix 1 in full, jointly and severally, within 7 days from the date of this Order (or 4 days after service of the sealed Order). d) In the event the 1st and/or 2nd Defendants fail to pay MSA's fees and the relevant sales and service tax amounting to RM113,400.00 in full as provided in paragraph 3 of this Order: e) The Plaintiff is given liberty to make the payment of RM113,400.00 to MSA on behalf of the 1st and 2nd Defendants; and f) It is declared that the 1st and/or 2nd Defendants jointly and severally owe the sum of RM113,400.00 to the Plaintiff with interest at 4% per annum calculated from the date the payment of RM113,400.00 is made to MSA. g) The 1st Defendant is required to purchase all of the Plaintiff's shares in Apec Fasa according to the fair value determined by MSA in the Valuation Report within 7 days from the date the Valuation Report is submitted to this court and the solicitors for the Plaintiff and the solicitors for the 1st and 2nd Defendants. h) The 1st and 2nd Defendants and all agents and employees of Apec Fasa are required to provide full cooperation to MSA in relation to the process of valuing the Plaintiff's shares in Apec Fasa, including but not limited to any requests by MSA to be supplied with accounting records (including but not limited to invoices, receipts, orders for payment of money, bills of exchange, checks, promissory notes, vouchers and other primary entry documents and including any working papers and other documents required in the valuation process) and any other information required by MSA within 3 days after receiving such requests from MSA. i) Personal service of this Order on the 1st and 2nd Defendants is dispensed with and service of this Order on the solicitors for the 1st and 2nd Defendants shall be deemed good and sufficient service. j) Parties are given liberty to apply. k) Costs on a standard basis of RM3,000.00. 4 October 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Justin Wee with Cheong Ai Dee (Messrs Justin Wee) For the 1st and 2nd Defendants: William Siau (Messrs JT Chong Associates)