Lim Hui Seng v Sungei Wang Investment Ltd (W-02(NCvC)(W)-323-03/2023)

SUNGEI WANG INVESTMENT LTD (No. Syarikat: 1293557)

TAN PENG KOON ...RESPONDENTS CORAM NANTHA BALAN A/L E.S MOORTHY, JCA MOHD NAZLAN BIN MOHD GHAZALI, JCA COLLIN LAWRENCE SEQUERAH, JCA BROAD GROUNDS Brief background facts [1] On or about 2015, the Appellant offered the Respondent, through a Mr. Tan Peng Koon also known as Derrick, a representative of the Respondent, an opportunity to participate in a mining venture in the Philippines through an equity investment by acquiring 5% shares in Phil Alstron Mining Corporation ("PAMC") and Asia Alstron Mining and Development Corp ("AAMDC"). [2] A formal Agreement was reached dated 5.1.2016 where in exchange for a 5% share acquisition of in PAMC and AAMDC for a consideration of USD 5 million, a sum of RM2 million was transferred to the Appellant's account while the sum of RM2.8 million was transferred to the Appellant through several cash advances intended for operational expenses at the request of A. [3] Although the sums of money were paid, the shares were not transferred despite extensions of time being given. There were also other breaches of the agreement by the Appellant resulting in the Respondent terminating the Agreement and bringing an action against the Appellant while seeking for several remedies. [4] The Appellant sought to counter-claim against the Respondent. After a full trial, the High Court ("HC") allowed the Respondent's claim while dismissing the Appellant's counter-claim. High Court's Findings [5] The Learned High Court Judge's ("HCJ") principal findings were as follows: a) The Agreement of 5.1.2016 principally governed the obligations and rights of the parties; b) There was never in existence a partnership agreement between the Appellant and Tan Peng Koon prior to the Agreement of 5.1.2016 and no such Investment letter as alleged; c) The only parties to the Agreement of 5.1.2016 were the Respondent and the Appellant and not the Philippines Corporation; d) The Appellant besides failing to effect the transfer of the shares PAMC and AAMC to the Respondent, also failed to appoint Tan Peng Koon to the Board of the Philippines Corporation. There were also other breaches, after which the Appellant could not be contacted; e) The breaches by the Appellant resulted in a total failure of consideration and the Respondent was rightly entitled to elect to terminate the Agreement on this basis; f) The Appellant had also received a further sum of RM2.8 million from the Respondent outside of the terms of the Agreement which was not intended to be gratuitous and therefore ought to be returned to the Respondent; g) The law governing the Agreement are the laws of Malaysia and not that of the Philippines as alleged by the Appellant as evident from the plain terms of the Agreement itself; h) The Appellant's witnesses including the Appellant himself were not credible witnesses; i) The Respondent was never supposed to continually finance the Appellant's mining exploits in the Philippines and there was no prior investment of partnership arrangement; j) The $ 2^{n d} $ to the $ 4^{t h} $ payments under the Agreement were not due and payable due to failure to fulfill conditions precedent such as the failure to appoint professionals for the due diligence exercise; k) The Appellant's claim that the RM2.8 million were due as shortfall for the $ 2^{n d} $ payment under the Agreement had no merit; I) The Appellant's claim that the sums of RM4.8 million were to be considered burnt lacked merit and resulted in the Appellant's unjust enrichment; m) The Appellant's claim that he had disposed of his properties to fund the IPO or that he made advances of around PHP12,178,260.00 also lacked merit. Our Unanimous Findings and Decision [6] Despite the findings of the HCJ set out above, during the course of the appeal before us, the main plank in the argument of the Appellant was whether the suit should have been instituted by Sungai Wang Investment Ltd ("Respondent") or Tan Peng Koon hereinafter, Derrick. [7] This argument was predicated on the Appellant's interpretation of the Respondent's letter dated 5/1/2016 that the phrase" us or our nominees" was a reference to Derrick. [8] The said letter dated 5/1/2016 is a letter from the Respondent to the Appellant referring to various meetings held between Derrick and the Appellant wherein the IPO and the offer of 5% equity stake in PAMC and AAMC was made to the Respondent and/or their nominees in exchange for the total sum of USD 5 million. [9] It is important to note that Derrick is the sole shareholder and one of the two directors of the Respondent. [10] Even though he may have agreed during cross-examination that 5% of the shares was to be transferred to him, the said letter in our view clearly and unequivocally states that the phrase "to us and or our nominees" refers to the Respondent or its nominee, Derrick. [11] It cannot be read in any other way in accordance with a common sense and a business commercial sense approach, and as such we disagree with the Appellant's interpretation of the Respondent's letter of 5/1/2016. [12] We thus hold that the 5% shares should have been but was not transferred to the Respondent. [13] There was therefore was a total failure of consideration and the sum of RM4.8 million paid to the Appellant's must be returned to the Respondent albeit that funds came from Pure Success Sdn Bhd and from Derrick personally. [14] These are all internal matters for the Respondent and Derrick to sort out. This does not mean that the Respondent is not the proper plaintiff and lacks the requisite locus standi to sue. [15] A perusal of the HCJ's grounds of judgement will reveal that she had subjected the evidence both oral and documentary to an exacting and meticulous examination. [16] The HCJ had scrutinized with a great deal of care and attention the credibility of both the Appellant's and the Respondent's witnesses and came to a finding based also on the observation of demeanour that the evidence of the Respondent's witnesses were credible while the Appellant's witnesses were not. [17] In fact, the HCJ found that that DW1 and DW2 had vested interests, were inconsistent, untruthful and evasive when giving evidence. [18] The HCJ further found that the Appellant's conduct in making himself uncontactable spoke volumes of his demeanor with respect to the unfulfilled obligations. [19] The HCJ also found based upon the facts of the case, that the argument by the Appellant that he signed the Agreement as a representative of PAMC and AAMC and that he acted as a mere conduit for the Philippine corporation, to be without merit and a mere ploy to evade liability for the sum of RM4.8 million. [20] These are all findings of fact which an appellate court will not interfere with lightly. [21] The HCJ had also correctly applied the applicable law in that she held that there was a total failure of consideration when the Appellant had failed inter alia, to effect the transfer of the 5% shares, failed to appoint Derrick to the Board of PAMC and AAMC as well as failed to approve and facilitate the IPO exercise despite the initial payment by the Respondent. [22] There was also a failure to comply with conditions precedent to authorize the scheduled 2nd, $ 3^{rd} $ and $ 4^{th} $ payments as per the terms of the Agreement. [23] The HCJ had also correctly held that the Respondent was entitled under section 40 of the Contracts Act 1950 to elect to rescind the contract and sue for moneys paid under the Agreement. [24] The HCJ had also rightly concluded that based on the evidence and the applicable principles of law, that the Appellant held the impugned sum of RM4,800,000.00 on trust for the Respondent as beneficiary. [25] With regard to the sum of RM2.8 million constituting several cash advances at the request of the Appellant and thus fell outside the scope of the Agreement, the HCJ also correctly held that section 71 of the Contracts Act applied and that the Appellant had unjustly enriched himself at the expense of the Respondent. [26] We find that these findings of the HCJ are unassailable and that she was not plainly wrong in coming to the findings and decision that she did. [27] In the result, taking into account all the facts and circumstances, including but not limited to the trial judges several findings of fact including findings on credibility which were adverse to the Appellant, we find no reason to disturb the trial judge's findings of fact on liability and in respect of the reliefs ordered against the Appellant. [28] This is not a case where there were errors or misdirection by the trial judge warranting appellate intervention. [29] Both appeals are accordingly dismissed with costs of RM15,000.00 for each appeal subject to allocator. Dated: 13 May 2024 (COLLIN LAWRENCE SEQUERAH) JUDGE Court of Appeal Malaysia Parties: Solicitors for the Appellant Calvin Khoo Kwan Yee, (Wong Zhun Huei With Him) [Calvin Khoo, Petaling Jaya] S. Selvarajah, (James Lopez A/L Marshall Lopez, Heidi Saw Ching Ying With Him) [Fernandez & Selvarajah, Petaling Jaya]