LI Lyusheng v Ho Chung Meng (DA-22NCvC-40-07/2019)

This is an action by the Plaintiff against the Defendant in regards to an Agreement between both parties dated 4th April, 2017 (“the said agreement”). The agreement is for the Defendant to purchase the Plaintiff’s shares in a company known as Eastcoast Universe Smelting & Mining (M) Sdn Bhd (the said company). 02/10/2024 13:53:09 DA-22NCvC-40-07/2019 Kand. 145 S/N Eybein0JG0mRFmdg/lv2zg **Note : Serial number will be used to verify the originality of this document via eFILING portal 2

The Plaintiff contended among others that the Defendant had failed to perform the Defendant’s obligations under the said agreement and as such due and owing for a balance payment. On record, it is important to note that on 26/2/2020, the Plaintiff had obtained a summary judgement on portion of their claim as in paragraph 8.4 and 8.5 of the Statement of Claim.

Hence, before this court, the Plaintiff is asking for reliefs such as follows:

RMB 5,888,246.00 Chinese national currency (or RM 3,531,181.13 at the exchange rate of 0.5997 on 16/10/2018).

interest on RMB 5,888,246.00 (RM 3,531,181.13) at a rate of 2% per month starting from 17/10/2018 until full settlement; and

RMB 1,646,590.54 Chinese national currency or (RM 987,460.35). Issue to be tried [4] The only issue to be tried as agreed by both parties before the commencement of the trial is as follows: “Whether the Defendant is entitled to avoid payment under the said agreement on the grounds of misrepresentation, incomplete S/N Eybein0JG0mRFmdg/lv2zg Company Secretary Document or incompliance of the said agreement”. The Plaintiff’s position [5] The Plaintiff’s stand is that this case is a very straight forward case in which there is no dispute about the enforceability of the said agreement. The Plaintiff had duly executed all requisite documents and divested his rights in the company and his shares to the Defendant. This resulted to the full control of the Defendant over the company. [6] According to the Plaintiff, the Defendant made 3 payments amounting to RMB 2,111,753.94 but failed to pay the balance purchase price. As such, the Defendant is said to has breached the payment terms under the agreement invoking the late payment interest of 2% per month as at 16/10/2017 which is stipulated in paragraph 4.2 of the Statement of Claim. The Defendant’s position [7] On the other hand, the Defendant alleged that the Plaintiff had breached the said agreement by failing to transfer the shares notwithstanding numerous demands by the Defendant. In other word, it is the Plaintiff who failed to perform out or complete the terms of the agreement thus making the agreement as invalid, null and void. S/N Eybein0JG0mRFmdg/lv2zg Analysis and findings of this court [8] During the trial, the Plaintiff himself gave evidence as SP1 and was supported by the Company Secretary, Mr Yap Yen Suan (SP2). While the Defendant gave evidence as the last witness as SD3 and was supported by Mr Foo Chuan Thong (SD1) who is one of the Director to the said company and also by the lawyer who was in charged of the agreement known as Miss Wong Meng Wui (SD2) from Messrs Yeap and Ang. [9] It is pertinent to put on record that there is no dispute in regard to the validity and enforceability of the said agreement. Apart from the said agreement, there were also documents supporting the said agreements. The duty of the court is to construe such agreement and documents fairly and broadly in order to justly and reasonably ascertained the contractual intention of both parties in the agreement (refer; Charles Grenier Sdn Bhd v Lau Win Wong [1996] 3 MLJ 327). [10] The Defendant argued that the agreement is unenforceable due to the fact that SD1 had never consented for the transfer of the Plaintiff’s share. It was due to Article 3 of the Memorandum of Associations of the company which requires SD1’s consent as one of the Director. [11] Article 3 reads as follows; Article 3: Transfer of Shares S/N Eybein0JG0mRFmdg/lv2zg The directors may in their absolute discretion and without assigning any reason therefore decline to register any transfer of any shares, whether or not it is fully paid shares or shares on which the Company has a lien. [12] SD1 during examination in chief, vehemently said that he never gave his consent for the said agreement as Director of the said company and the said company had never passed any resolution for the said shares transfer. The reason behind his action was due to the company’s financial standing in which SD1 fears it will effect him as a Director. [13] The learned counsel for the Defendant thus brought the attention of this court to section 52 and 55 of the Contract Act 1950 and argued that the Defendant was not bound to perform his obligation due to the failure of the Plaintiff to perform his reciprocal obligation. [14] According to the counsel, based on this evidence, Plaintiff had failed to comply with Clause 2 of the agreement and as such, Clause 1 cannot be imposed onto the Defendant to make the payments. It makes the agreement as voidable and warrant the Defendant to repudiate the agreement. The court’s attention was brought to the case of Leong Ah Kew & ors v Prisma Suria Sdn Bhd [2016] 1 MLRHA 673. [15] In order to adjudicate this issue, it is pivotal for this court to analyse the evidences before this court. SD1 in his evidence admitted that the Defendant as an experienced businessman involved in various companies and businesses. This involved in the companies known S/N Eybein0JG0mRFmdg/lv2zg as Ratusan Ardi Sdn. Bhd. and Jangka Barat Sdn. Bhd. though the Defendant’s name was not appearing in the formal documents. [16] SD1 further admitted that the said company was formed by both the Plaintiff and the Defendant and the Defendant’s shares were later transferred to a company known as Ratusan Ardi Sdn. Bhd. The Defendant then brought SD1 to replace the Defendant as a Director to the company. SD1 also admitted that it was the Defendant who managed the company. [17] These facts were supported by exhibit P4, a Judgement dated 30/9/2014 which shows that the Defendant stood as guarantor to a commercial debt by Ratusan Ardi Sdn. Bhd. and by exhibit P5, a Judgement dated 30/9/2014 which shows that the Defendant stood as guarantor to a commercial debt by Jangka Barat Sdn. Bhd. [18] Apart from that, the Defendant was also proved to have sign the Companies Reports and Financial Statements where he was in charge of the financial management of the company. This can be seen from P22. [19] These evidences raised serious questions to the credibility of SD1’s evidence especially in considering the position of SD1 in the company as well as the way SD1 responded to the question during the cross examination. [20] This brings this court to test SD1’s evidence with independent evidence given by SP2 i.e. the Company Secretary. In her unchallenged evidence, SP2 confirmed the Plaintiff resigned as S/N Eybein0JG0mRFmdg/lv2zg Director of the company on 4/4/2017. The Plaintiff was replaced by the Defendant and SP2 had duly filed Form 58 to reflect the change of the directorship. [21] The transfer form was prepared by SP2 on the instruction of the Defendant and duly witnessed by SD2. SP2 confirmed that the Director’s resolution was signed by the Plaintiff and SD1 on 4/4/2017 (P10), which she received from Messrs Yeap and Ang vide a letter dated 11/4/2017 (P21). [22] SP2 further explained that the transfer form could not be stamped by The Inland Revenue Board of Malaysia (LHDN) due to the format of the form and this prompted SP2 to give SD2 a new form to be executed. Nevertheless, the form went missing and a new form was emailed to SD2 on 23/11/2017. [23] With regard to the resolutions, SP2 confirmed that all resolutions were in order and what was left is the return of the signed forms and stampings which all must come from the Plaintiff. [24] SP2’s evidence was supported by contemporaneous documents as follows:

Exhibit P11 – Form 38 of Companies Act 2016 which was lodged by SP2;

Exhibit P2 – Reports and Financial Statements which shows the declaration that the Plaintiff resigned as Directors on S/N Eybein0JG0mRFmdg/lv2zg 4/4/2017 and the Defendant was appointed on the same date;

Exhibit P10 – the Directors Resolution dated 4/4/2017 for the approval of the transfer of the Plaintiff’s shares;

Exhibit P12A, P12B and P12b – the part payments made to the Plaintiff; and

Exhibit P21 – letter by Messrs Yeap and Ang dated 11/4/2017 [25] The principle of contemporaneous documents has been set out by the Court od Appeal in the case of Len Ming Kong v UMBC Bhd & anor [1998] 2 CLJ 879 as follows; “[15] The approach that a trial court should take to circumstances as appear in the present instance has been discussed in many authorities and we think it appropriate to quote from two of them. The first is Tindok Besar Estate Sdn Bhd v. Tinjar Co [1979] 1 MLRA 81; [1979] 2 MLJ 229, where Chang Min Tat FJ said (at p 234): ... the learned trial judge expressed himself to be completely satisfied with the veracity of the respondent's witnesses and their evidence. He purported to come to certain findings of fact on the oral evidence but did not notice or consider that the respondent's oral evidence openly clashed with its contemporaneous documentary evidence. For myself, I would S/N Eybein0JG0mRFmdg/lv2zg with respect feel somewhat safer to refer to and rely on the acts and deeds of a witness which are contemporaneous with the event and to draw the reasonable inferences from them than to believe his subsequent recollection or version of it, particularly if he is a witness with a purpose of his own to serve and if it did not account for the statements in his documents and writings. Judicial reception of evidence requires that the oral evidence be critically tested against the whole of the other evidence and the circumstances of the case. Plausibility should never be mistaken for veracity. [16] The second is Eastern & Oriental Hotel (1951) Sdn Bhd v. Ellarious George Fernandez & Anor [1988] 1 MLRA 172; [1989] 1 MLJ 35; [1988] 1 CLJ (Rep) 50, where the Supreme Court, after quoting with approval the following observation made in "The Ocean Frost" [1985] 1 Lloyd's Rep 1: It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents to the witnesses' motives, and to the overall probabilities can be of very great assistance to a judge in ascertaining the truth. said: In commercial cases there is usually a substantial body of contemporary documentary evidence. This is not strictly speaking a commercial case, but the relevancy of contemporaneous documents nevertheless holds true.” S/N Eybein0JG0mRFmdg/lv2zg [26] This court finds that SP2 as the official Company Secretary gave more convincing evidence compared to the evidence of SD1. It was also unchallenged and was supported by strong documentary evidences. The documents were all in her custody as the official Company Secretary and were never denied or contested by the Defendant. [27] This court also finds that the contention of the Defendant that there is no proper resolution and documents solely based on SD1’s evidence is void without merit. SD1’s evidence on the other hand must be weighed with cautious. Though SD1 denied he signed the resolution in exhibit P10 on 24/12/2018 but he never attempt to lodge any police report against the fabrication of his signature or against Messrs Yeap and Ang for sending the resolution to SP2 via letter in exhibit P21. [28] This court is not convinced by the defence of the Defendant that the Plaintiff who had breached the said agreement or failed to perform out and completed the said agreement. As such, the said agreement cannot be concluded as invalid, null and void. [29] The next issue was the claim of the Defendant that the said agreement was executed on misrepresentation based on the following grounds:

the said company at all times has a return on capital and good return of investment;

the said company has good or high profits;

the said company is a profitable company;

the Plaintiff's shares in the company is worth RMB 8,000,000.00;

the Plaintiff has the power and/or without restriction to sell the Plaintiff's shares in the said company to the Defendant; and

the Plaintiff has obtained approval/approval from the board of directors in the said company regarding the sale and purchase of the Plaintiff's shares in the company. [30] The principle of misrepresentation in a contract are well settled as explained by the Court of Appeal in Sim Thong Realty Sdn Bhd v The Kim Dar [2003] 1 MLRA 272. [31] The grounds of the misrepresentation as argued by the Defendant’s counsel may be summarised as follows:

that the Defendant was misled into the profitability of the said company; and

that there is no proper resolution or approval for the sale of the shares. [32] This court is however of the opinion that the claim of misrepresentation shall be weighed with other evidences and facts. S/N Eybein0JG0mRFmdg/lv2zg [33] The first consideration is the said company was formed by both the Defendant and the Plaintiff. It is vital to note that the Defendant has all the information regarding the company. The Defendant is the person who is running the company since its incorporation as admitted by SD1. [34] Furthermore, the Defendant was the one who replaced the Plaintiff as Director and signed the Financial Statement of the said company which shows the following: Total assets : RM 23,340,674.89 Share Holders Equity : RM 7,060,302.59 [35] In view of the above, it is manifestly and evidently clear that the Defendant knew what he was purchasing and its value thereof. As such, this court finds that there is no evidence of any misrepresentation by the Plaintiff. [36] The subsequent consideration is in regards to the payment to the Plaintiff which were exhibited as P12A, P12B and P12C. The payments were made by Jangka Bakat Sdn Bhd and not by the Defendant. The Defendant’s counsel argued that the Defendant in his evidence denied that the Defendant was neither the Director of Jangka Bakat Sdn Bhd nor the shareholder. [37] On his issue, this court finds that SD1 had in his evidence during cross examination affirmed that the Defendant involved in many companies though his name was not registered. This includes Jangka Barat Sdn Bhd. This answer was never re-examined by the S/N Eybein0JG0mRFmdg/lv2zg learned counsel of the Defendant and as such it deems accepted by the Defendant. [38] The counsel of the Plaintiff upon the approval of the court was later asked SD1 about the management and controlling of Jangka Bakat Sdn Bhd’s payment and cheques in which SD1 admitted that he had Miss Liana who is in charge in the management of Jangka Bakat Sdn Bhd’s account and the payment in P12A, P12B and P12C were aligned to Miss Liana. No evidence was brought as to who is Miss Liana and why the payments were made to the Plaintiff. [39] This brings serious question as to who made the payments. As deliberated earlier, the Defendant as admitted by SD1, was having control over other companies as well as Jangka Barat Sdn Bhd. As such, this court is of the opinion that the cheques were issued to the Plaintiff for obvious reasons as part payments of the transfer of share. It is illogical for a company to make 3 payments to the Plaintiff without valid reasons and the evidences before this court is more than sufficient for this court to conclude that the cheques were part of the part payments. [40] Finally, the Defendant’s counsel raised the issue of premature action by the Plaintiff. This argument is based on the interpretation of clause 4 of the agreement which reads as follows; “The Purchaser further agrees that he shall on demand compensate and indemnify the Vendor to the full amount of any loss or damage which the Vendor may sustain or be deemed to have sustained as a result of a failure by the S/N Eybein0JG0mRFmdg/lv2zg Purchaser to pay the said Purchase Price. In the event of default by the Purchaser upon expiration of this agreement, the Vendor shall have right to dealt with and dispose of the said Shares and the Vendor’s personal assets to settle the outstanding amount due.” [41] This court is of the opinion that the learned counsel has misconstrued the interpretation of Clause 4. It is this court considered view that the said clause is to provide options for the Plaintiff as vendor in any event of default by the Defendant who is the Purchaser. It gives the right to the Plaintiff to dispose the said shares and assets to settle any outstanding amount due by the Defendant. [42] The clause never stipulates that the right of the Plaintiff to act against the Defendant will only accrues upon the Plaintiff disposing the said shares and assets. There is no such pre-condition upon the Plaintiff. [43] To interpret Clause 4 as a pre-condition is obviously without merits and of no basis. As such this court finds that such argument by the counsel of the Defendant is of no bearings. Conclusion [44] In the upshots, this court finds that the Plaintiff has, on the balance of convenience, proved his case. As such, this court orders as follows:

Judgement as at para 8.1, 8.2, 8.3 and 8.6 of Statement Of Claim against the Defendant;

The security for cost dated 26/2/2020 be discharged and a consequential order that the sum of RM10,000.00 paid to Jabatan Akauntan Negara be returned to the Plaintiff’s solicitor; and

Cost of RM40,000.00 to be paid by the Defendant to the Plaintiff. Dated: 2nd October, 2024 (DATUK MOHAMAD ABAZAFREE BIN MOHD ABBAS) Judge High Court Malaya S/N Eybein0JG0mRFmdg/lv2zg Counsel: For the Plaintiff : Gainneos Jacob Goldie Messrs Jacob Goldie S.S. Chew Advocates & Solicitors B48, Tingkat 1 Lorong Tun Ismail 8 Sri Dagangan II 25000 Kuantan Pahang Darul Makmur For the Defendant : Cheah Kit Yee, Rachel Messrs Tze & Yee Advocates & Solicitors C-3A-08, Seri Gembira Avenue Jalan Senang Ria Taman Gembira 58200 Kuala Lumpur Trial Date : 19th August 2024 Decision Date : 18th September 2024 S/N Eybein0JG0mRFmdg/lv2zg Laws reffered: ➢ Contract Act 1950 Cases referred: ➢ Charles Grenier Sdn Bhd v Lau Win Wong [1996] 3 MLJ 327 ➢ Leong Ah Kew & ors v Prisma Suria Sdn Bhd [2016] 1 MLRHA 673 ➢ Len Ming Kong v UMBC Bhd & anor [1998] 2 CLJ 879 ➢ Sim Thong Realty Sdn Bhd v The Kim Dar [2003] 1 MLRA 272