Majlis Amanah Rakyat (MARA) v NAGUIB BIN MOHD NOR (WA-22NCC-171-04/2021)

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1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE STATE OF WILAYAH PERSEKUTUAN (COMMERCIAL DIVISION) WRIT NO: WA-22NCC-171-04/2021 BETWEEN MAJLIS AMANAH RAKYAT …PLAINTIFF AND NAGUIB BIN MOHD NOR …DEFENDANT Grounds of Judgment A. Background Facts

Schedule

Schedule 3 Limitation of Liability The liability of the Vendor in respect of any breach of this Agreement including any breach of any of the Warranties, covenants or undertakings hereunder shall be limited as follows:- (a) no claims in respect of any of the Warranties, covenants or undertakings contained herein shall be made in respect of any breach or breaches of the said Warranties, covenants or undertakings against the Purchaser unless written notice of such claim or claims shall have been given by the Purchaser within the Indemnity Period; (b) no claims may be made in respect of any one matter arising under the Warranties, covenants or undertakings aforesaid for any loss arising from breaches of Warranties, covenants or undertakings to the extent that any such loss is or can be recovered from any third party (including under a policy of insurance in force at the date of such loss). (c) The Purchaser shall not be entitled to make a claim in respect of any breach of any of the Warranties, covenants or undertakings if such breach has been specifically disclosed to the Purchaser, its officers or advisers; (d) the total liability of the Vendor arising from breaches of the Warranties, covenants or undertakings shall not exceed Ringgit Malaysia One Hundred Thousand (RM100,000.00); and (e) the Vendor shall not be liable under the Warranties, covenants and undertakings to the extent that any breach thereof or liability thereunder occurs as a result of or is otherwise attributable to any legislation not in force at the date hereof or any change of law or administrative practice which takes effect retroactively. For the purpose of this schedule 3, “Indemnity Period” shall mean the period of thirty six (36) months from the Tranche 1 Completion Date. … 24. It is trite law that the interpretation of the terms of the Contract / Agreement is a question of law to be determined by the Court and not by witnesses through their oral evidence. See NVJ Menon v The Great Eastern Life Assurance [2004] 3 CLJ 96. 25. The interpretation of the terms of the contract must be undertaken in accordance with the principles of law laid down in Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2010] 1 CLJ 296. I reproduce parts of the judgment of Gopal Sri Ram FCJ: - “[42] Here it is important to bear in mind that a contract is to be interpreted in accordance with the following guidelines. First, a court interpreting a private contract is not confined to the four corners of the document. It is entitled to look at the factual matrix forming the background to the transaction. Second, the factual matrix which forms the background to the transaction includes all material that was reasonably available to the parties. Third, the interpreting court must disregard any part of the background that is declaratory of subjective intent only. Lastly, the court should adopt an objective approach when interpreting a private contract. See, Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98. As Lord Clyde said in Bank of Credit and Commerce International SA v. Munawar Ali [2001] 2 WLR 735” 26. I also refer to the decision of the Court of Appeal in Hewlett-Packard (M) Sdn Bhd v Agih Tinta Sdn Bhd [2022] 9 CLJ 15 where See Mee Chun JCA held: - “[39] It has been said in Rainy Sky SA and Others v. Kookmin Bank [2012] 1 All ER 1137 at para. 23 "Where the parties have used unambiguous language, the court must apply it" and at para. 30 "where a term of contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is more consistent with business common sense". [40] In Arnold v. Britton And Others [2015] UKSC 36 the following was stated: [15] When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to 'what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean', to quote Lord Hoffmann in Chartbrook Ltd v. Persimmon Homes Ltd [2009] UKHL 38, [2009] 4 All ER 677, [2009] AC 1101 (at [14]). And it does so by focusing on the meaning of the relevant words, in this case cl 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (Hi) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence.... [16] For present purposes, I think it is important to emphasise seven factors. [17] First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg, in Chartbrook, paras [16] [26]) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focusing on the issue covered by the provision when agreeing the wording of that provision. [18] Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning.... [19] The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language, Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made.... [20] Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.... [21] The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties.... [22] Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract, in such a case, if it is clear what the parties would have intended, the court will give effect to that intention... [41] SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 CLJ 177; [2016] 1 MLJ 464 at p. 478, para. 27 stated that ICS provided a helpful starting point to the principles of interpretation of contracts. It also considered Arnold and agreed on "the natural meaning of the words when giving effect to a contract" (at [39]). The Federal Court further held that "when one has to choose between two competing interpretations, the one which makes more commercial sense should be preferred if the natural meaning of the words is unclear." (at [178]). It was also affirmed at para. [92] that "if the parties had used unambiguous language, the court must apply the language." 23 27. I refer to the judgment of Mason J in the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 where he said that: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed." [paragraph 22] …. "Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except insofar as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties...". [paragraph 24] 24 28. The above principles are also seen in the judgment of Isaacs J in Cohen and Co v Ockerby and Co Ltd [1917] HCA 58; where he stated: "That does not, of course, mean you are to stretch its terms in favour of one party against the other; but, reading the two cases cited together, it means that the expressions, and particularly any elliptical expressions, in a mercantile contract are to be read in no narrow spirit of construction, but as the Court would suppose two honest businessmen would understand the words they have actually used with reference to their subject matter and the surrounding circumstances". 29. I further refer to the decision of the Federal Court in SPM Membrane Swith Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 CLJ 177 where Zainun Ali FCJ held: - “[45] As a relevant addendum, the relationship between interpretation and implication are considered in this discussion of the principles of construction. According to Lord Hoffmann in Attorney General of Belize v. Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988, PC this characterisation can be traced back to the speech of Lord Pearson in Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board[1973] 1 WLR 601, HL, where His Lordship had warned: the court does not make a contract for the parties. The court will not even improve the terms which the parties have made for themselves, however desirable the improvement might be. The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been suitable. An unexpressed term can be implied if and only if courts finds that the parties must have intended that term to form part of their contract.” 30. I also find it useful that Tee Geock Hock J had painstakingly considered the applicable case law on this area and summarized the position as follows in Imej Parking Sdn Bhd Koperasi Permodalan Felda Malaysia Berhad [2023] CLJU 1622: - “(a) in interpretation of the contract terms, the court is to ascertain objectively the intention of the contracting parties as gathered from the terms stated in the contract, and any evidence of subjective intention of either party is inadmissible; (b) in ascertaining the objective intention of the contracting parties, the court should begin by finding the natural and ordinary meaning of the words used in the contract terms; (c) in ascertaining the objective intention of the contracting parties in a clause, the court will also consider the other clauses of the contract so that the contract clauses can be construed harmoniously and effect can be given to the express words in all the contract clauses as far as possible; (d) if the natural and ordinary meaning of the words is clear and unambiguous, the court will give effect to the clear words in the contract terms, for it is not the court's role to re-write the contract or to improve upon it; and (e) if the meaning of the words is unclear, ambiguous or would lead to absurdity the court can resort to secondary rules of interpretation such as purposive approach, the commercial object, nature and character of the contract, the context of the contract and its surrounding circumstances construed objectively, etc.” 31. Considering the above principles, I find that the objective meaning of clause 6.1(b) and clause 6.2(b) are as follows: - (i) The Defendant warrants and represents to the Plaintiff that the profit after tax for the year ending 31-5-2014 and year ending 31-5- 2015 shall each be no less than RM 21,000,000 (2014) and RM 21, 300,000 (2015). (ii) If there is any shortfall, the Defendant shall assign to the Plaintiff his entitlement to the dividends he is entitled to in the form laid down in Annexure 1 . (iii) The maximum amount that would be paid by the Defendant through the dividends payment shall not exceed RM 6.6 million. 32. The said clauses do not provide for the consequences where there are no dividends paid by the company or where the dividends that are due to the Defendant are insufficient to pay the Plaintiff the total sum of RM 6.6 million. This was left out and does not appear in any clause in the Share Sale Agreement. 33. It is noted that the Plaintiff did not plead the existence of an implied term or the need to impute such terms by way of implication. Even if I were to entertain such a plea at this stage, I find that I could not impute search a term when the same was not included in the detailed contract that was drafted through solicitors. 28 34. I refer to the decision of the Supreme Court of the United Kingdom in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 where Lord Neuberger held: - “21. In my judgment, the judicial observaƟons so far considered represent a clear, consistent and principled approach. It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in BP Refinery as extended by Sir Thomas Bingham in Philips and exemplified in The APJ PriƟ. First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implicaƟon of a term was "not criƟcally dependent on proof of an actual intenƟon of the parƟes" when negoƟaƟng the contract. If one approaches the quesƟon by reference to what the parƟes would have agreed, one is not strictly concerned with the hypotheƟcal answer of the actual parƟes, but with that of noƟonal reasonable people in the posiƟon of the parƟes at the Ɵme at which they were contracƟng. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parƟes would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is quesƟonable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term saƟsfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in AƩorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simon's requirements are otherwise cumulaƟve, I would accept that business necessity and obviousness, his second and third requirements, can be alternaƟves in the sense that only one of them needs to be saƟsfied, although I suspect that in pracƟce it would be a rare case where only one of those two requirements would be saƟsfied. FiŌhly, if one approaches the issue by reference to the officious bystander, it is "vital to formulate the quesƟon to be posed by [him] with the utmost care", to quote from Lewison, The InterpretaƟon of Contracts 5th ed (2011), para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of "absolute necessity", not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of puƫng Lord Simon's second requirement is, as suggested by Lord SumpƟon in argument, that a term can only be implied if, without the term, the contract would lack commercial or pracƟcal coherence.” 35. The principles above were summarized by Males J in Marussia Communications Ireland Ltd v Manor Grand Prix Racing Ltd & 2 ors [2106 WLR (D) 186 as follows: - (1) For a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (2) it must be so obvious that "it goes without saying"; (3) it must be capable of clear expression; and (4) it must not contradict any express term of the contract. (These conditions are taken from what was said by Lord Simon of Glaisdale in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282–283, but omitting the requirement that the term should be "reasonable and equitable" which Lord Neuberger considered would not usually add anything to the other conditions). (2) It is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred: Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, per Bingham MR. (3) The need for implication usually arises where the contract terms have not been spelled out in detail or by reference to written conditions. It is much more difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully-drafted contract but have omitted to make provision for the matter in issue: ibid. (4) The implication of a term is not critically dependent on proof of an actual intention of the parties. The court is concerned with the intention of notional reasonable people in the position of the parties. (5) Business necessity and obviousness can be alternatives in the sense that only one of them needs to be satisfied, although in practice it would be a rare case where only one of those two requirements was satisfied. (6) Necessity for business efficacy involves a value judgment. The test is not one of "absolute necessity". It may be more helpful to say that a term can only be implied if, without the term, the contract would lack commercial or practical coherence. (7) The question whether a term is implied is to be judged at the date the contract is made.” 36. I again refer to the decision of Zainun Ali FCJ in SPM Membrane Switch v Kerajaan Negeri Selangor [2016] 1 CLJ 177 where on the issue of the relationship between interpretation and implication, the Federal Court held: - “[45] As a relevant addendum, the relationship between interpretation and implication are considered in this discussion of the principles of construction. According to Lord Hoffmann in Attorney General of Belize v. Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988, PC this characterisation can be traced back to the speech of Lord Pearson in Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board[1973] 1 WLR 601, HL, where His Lordship had warned: the court does not make a contract for the parties. The court will not even improve the terms which the parties have made for themselves, however desirable the improvement might be. The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been suitable. An unexpressed term can be implied if and only if courts finds that the parties must have intended that term to form part of their contract. [46] Meanwhile Mason J in the High Court of Australia, in Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales [1982] HCA 24 stated: When we say that the implication of a term raises an issue as to the meaning and effect of the contract we do not intend by that statement to convey that the court is embarking on an orthodox exercise in the interpretation of the language of the contract, that is, assigning a meaning to a particular provision. Nonetheless, the implication of a term is an exercise in interpretation, though not an orthodox instance. [47] Interestingly, this relationship between implication and interpretation was clearly alluded to by Lord Hoffmann in Belize when His Lordship drew from the reasoning of investors compensation scheme on interpretation of contracts, as referred to in Berjaya Times Square above. In laying down the general approach to implication at [16] His Lordship pronounced: The Board will make some general observations about the process of implication. The court has no power to improve upon the instrument which it is called upon to construct, whether it be a contract, a statute or article of association. It cannot introduce terms to make it fairer or more reasonable. However, that meaning is not necessarily or always what the authors or parties to the document would have intended. It is the meaning to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed: See Investors Compensation Scheme Ltd v. West Bromwich Building Society. It is this objective meaning which is conventionally called the intention of the parties, or the intention or Parliament or the intention of whatever person or body was or is deemed to have been the author of the instrument. [48] In this connection, the implication as laid out by Lord Hoffmann was the "reasonable person" test (at [21]): It will be noticed... that this question can be reformulated in various ways which a court may find helpful in providing an answer - the implied term must 'go without saying' it must be necessary to give 'business efficiency to the contract' and so on - but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean? [49] The principles set out by Lord Hoffmann are neatly summarised in an article by Professor Richard Hooley, Implied Terms After Belize Telecom [2014] 73 CLJ 315, 324-325. (1) A court has no power to improve the instrument it is asked to construe whether to make it fairer or more reasonable. It is concerned only to discover what the instrument means. (2) That meaning is what the instrument would convey to a 'reasonable person' or 'reasonable addressee' having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed. This objective meaning of the instrument is what is conventionally called the intention of the parties or of whoever is the deemed author of the instrument. (3) The question of implication arises where an instrument does not expressly provide for what is to happen when some event occurs. In most cases, the usual inference is that nothing is to happen, and the express provisions of the instrument continue to operate undisturbed. If the event causes loss to one of the parties, the loss lies where it falls. (4) In some cases, however, the 'reasonable addressee' of the instrument will conclude that the only meaning which the instrument can have, consistent with its other terms and the relevant background is that something is to happen in response to the particular event that has not been expressly provided for in the instrument's terms. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. (5) Nevertheless, that process does not add another term to the instrument; it only spells out what the instrument means. In other words, the implication of a term is an exercise in the construction of the instrument as a whole. (6) It follows that in every case of implication, the single question for the court is whether the implied term would spell out in express words what the instrument, read as a whole against the relevant background, would reasonably be understood to mean. [50] Interestingly, the Privy Council in Belize acknowledged an implied term, stating that it was [at 32] "required to avoid defeating what appears to have been the overriding purpose of the machinery of appointment and removal of directors, namely to ensure that the board reflects the appropriate shareholder interests in accordance with the scheme laid out in the articles." 37. After considering the above-referred clauses, the agreement as a whole and the relevant background facts, I find that clause 6.1(b) and clause 6.2(b) only provide that if there were any payments for any shortfall, this must be done solely from the dividends that the Defendant would be entitled from the company. The parties did agree that this was the sole payment method if the warranty and representations as to the profits for 2014 and 2015 were not achieved by the company. Parties did not provide any clauses to cover for the possible eventuality of the dividends were not declared due to losses in the company, where the dividends were not sufficient to cover the sum of RM 6.6 million or where the company refuses to declare any dividends. 38. I agree with the Plaintiff that the term “warrants” as it appears in the said clause, means that the Defendant guarantees or undertakes that the company will be profitable in the said years mentioned. I opine that the Plaintiff’s reliance on Lau Tek Sen @Lau Beng Chong & ors v S K Song [1995] MLJU 302, Bon Chong Hing V Gama Trading [2011] 4 MLJ 52 and HSBC Bank Malaysia Bhd v LH Timber Products Sdn Bhd [2005] 6 MLJ 625 are on point on the said issue of “warranty”. 39. I also agree that a breach of a warranty or undertaking or guarantee is nothing peculiar and is a breach of contract as explained by the Court in Chase Perdana Sdn Bhd v CIMB Bank [2010] 1 MLJ 685 and Krishnasamy v Arab Malaysian Finance Bhd [2009] 7 MLJ 455. That position is trite. 40. However, I do not agree with the Plaintiff’s position that the damages will automatically arise and that payment should be extracted from the Defendant by way of cash payment as suggested by counsel for the Plaintiff. This Court is bound by what was agreed between parties and how the said breach ought to be rectified. The clause in question states: “the vendor shall make payment of the ..shortfall by way of an assignment of his entitlement to dividends of the company in favour of the purchaser”. As this is the sole mechanism in which the said default must be remedied, then this Court cannot rewrite the terms and add a new obligation on the Defendant that was never contemplated and agreed upon. 41. The instrument does not expressly provide for what is to happen when these events occur, the usual inference would be applicable i.e. “is that nothing is to happen.” My reading of the Share Sale Agreement also does not show that the Defendant should be made to pay if the dividends were not sufficient to pay the total agreed sum of RM 6.6 million. The other terms and relevant background facts do not show that this liability will arise. Instead, the parties had only agreed that the shortfall of the profits shall be paid solely from the dividends received by the Defendant and that this will continue until the said debt is fully paid. 42. Therefore, the Plaintiff’s reliance on Reg v Aik Hie & Co Ltd [1958] 1 MLJ 59 is misplaced. The terms as it appears in the agreement have specified how the payments are to be made. I cannot change what has been agreed upon. 39 43. In the circumstances, as the Defendant did assign its dividends to the Plaintiff, the Defendant did not breach the earlier referred clauses. 44. Nonetheless, as admitted by the Defendant in paragraph 12 (s) of his Defence, I find that this obligation shall continue until such time the full sums of RM 6.6 million are paid from any dividends due to him from the said company. I reproduce paragraph 12 (s) of the Defence filed: - “Ia adalah niat pihak-pihak bahawa penyerahakan dividen yang Defendan berhak dalam SAMSB akan termasuk dividen pada masa hadapan (future dividends) untuk dideklarasikan oleh SAMSB dalam tahun-tahun kemudain dan bukan hanya untuk FYE 2014 dan 2015 sehingga jumlah RM 6.6 juta yang dihadkan.” 45. Even if I were to agree that the said assignments were not undertaken as suggested by the Plaintiff, this does not mean that the Defendant has to pay the said RM 6 million as claimed. To repeat, no such clause appears in the said agreement that entitles the Plaintiff to such a right. The Defendant has also not shown that he is not agreeable to the said assignment. Therefore, at its highest, the Plaintiff is only entitled for the payment of any monies from the dividend receivable by the Defendant from the company. This obligation will continue until such a time that the said payment is made in full and does not expire even if the Contract is terminated as the debt from the Defendant to the Plaintiff has crystalised during the lifetime of the agreement. 46. On the issue of the alleged waiver of the said obligation, I find that the Defendant has failed to show this defence. It is clear in the said Share Sale Agreement that waivers of any rights will only be applicable if they were made in writing. This is provided for in clause 13.3 of the Share Sale Agreement. There is no such instrument that was produced by the Defendant. This defence therefore falters as well. 47. I also find that the fact that the Plaintiff proceeded with the purchase of the shares despite the failure of the company to achieve the profits is not to be taken as a waiver to its right to pursue payment following clause 6.1(b) and clause 6.2(b). This is provided for in clause 4.4 of the Share Sale Agreement. Therefore, I reject the Defendant’s contention on the issue of waiver of rights alleged in this case. 48. With regard to the issue limitation of time and extent of liability that is relied on by the Defendant allegedly per Schedule 3, I find that the said argument is wrong and reject the same. I find that the Latin maxim Generalia Specialibus Non Derogant is applicable in this case. The maxim suggests that Courts prefer specific provisions over provisions of general application where it is shown the existence of a potential conflict between the two. 49. The Defendant’s Counsel suggests that as parties agreed any breach of any warranties, covenants or undertakings must be taken within 36 months from the date of completion of the first tranche and that that any damages be limited to the sum of RM 100,000.00. 50. I find that Schedule 3 is only limited to breaches of warranties, covenants or undertakings that appear in clause 9 and Schedule 2 of the Share Sale Agreement. Parties had also agreed, as seen in clause 6.3, that the Defendant’s obligation is limited to RM 6.6 million which will be repaid by dividends that would be received by the Defendant. The warranties and representations made in clause 6 were also not specified in clause 9 and Schedule 2 of the Share Sale Agreement. Therefore, I do not accept the position put forth by the Defendant and reject the same. 51. Furthermore, as admitted by the Defendant in his pleading, the obligation continues until such time the full sums are paid from the dividend that may be received by the Defendant from the company. Under the said circumstances, this right is surely not limited to timeline stated in

Schedule

Schedule 3 of the said Agreement. 52. For the above reasons, I find that the Defendant did not breach clause 6 of the said Share Sale Agreement and that he owes no obligation to pay the sum of RM 6.6 million as alleged by the Plaintiff. The debt must be paid by the Defendant by way of the assignment of dividends that would be due from the company to him. This obligation continues until such time the full sum of RM 6.6 million is paid in full from the dividends payable by the company to the Defendant. (iii) Whether the Plaintiff had breached clause 3.1(c) and clause 10.1 of the Shareholders Agreement (Issue 3) 53. With regard to the Defendant’s allegation that the Plaintiff had breached clause 3.1(c) and clause 10.1 of the Shareholders Agreement, I find that the Defendant has failed to prove the said claim. 54. The issue concerning the said clause is the allegation that the Plaintiff had allegedly failed to: - (i) agree to the proposal by MTDC. (ii) inject further capital into the company. (iii) this led to the losses as the company allegedly could not expand into alternative businesses and undertake the alleged lucrative contracts with TM and other parties. 55. For convenience I reproduce clause 3.1 (c) and clause 10.1 of the Shareholders Agreement. 3. Business of the Company and Shareholders’ Covenants 3.1 Business of the Company (a) … (b) … (c) Each Shareholder shall use all reasonable and proper means in his power to maintain, improve and extend the business of the Company and its subsidiaries (if any) and to further the reputation and interest of the Company. … 10. Further Funding 10.1 Funding from Shareholders If the Board determines that the Company requires additional funds, the Board shall use its best endeavours to raise the funds in the following order:- (a) firstly, to seek additional funds from third parties, including from Governmental Agencies and/or financial institutions; (b) secondly, for advances to be provided by the Shareholders in the proportions of their respective shareholding, such advances to be provided on arm’s length basis with security being given by the Company over such advances as the Shareholder providing the advances may reasonably require; and (c) lastly, by subscription by the Shareholders for shares or other securities in the proportions of their respective shareholdings of a nature and on such terms as the Shareholders shall agree in writing. … 45 56. I find that the said clauses do not mean that the Plaintiff is required to agree to the proposal, or the facility to be issued by MTDC. I have considered the reason put forth by the Plaintiff justifying its rejection of the said proposal and I find that the Plaintiff had correctly exercised its discretion and did not breach clause 3.1 or clause 10.1. 57. In this case, the Plaintiff did explain as seen in its letter dated 21-5- 2019 and 1-7-2020, that the terms proposed by MTDC was onerous and that the Plaintiff could not provide a guarantee and be made responsible to pay for any losses or damages that may ensue if the company is unable to achieve the profits as required by MTDC. More so when the company has not been achieving the suggested profits for even year 2014 and 2015 and the accounts show that the company has suffered losses for the current years. I do not believe that clause 3.1 (c) requires absolute fidelity solely to the demands of the Defendant. The Plaintiff is entitled to consider the risk of any proposal, especially concerning the risk of financing from third parties and their obligations and has the right to reject the same. 58. (i) I also find that the decision by the Plaintiff not to agree to the proposals made by the Defendant is also not contractually wrong and is reasonable in this case. Even the loan granted by the Plaintiff remains unpaid and the company had continued to default in making payments of the obligations due to the Plaintiff under the terms of the loan granted. I reproduce relevant parts of the Defendant’s evidence: - NI Alright. Now, I’ve been made to understand that Strand hasn’t actually made the repayment as stated in Clause 6of that document. NAGUIB Yes. We have made some repayments but not enough. NI Not in compliance, right? Not in compliance. NAGUIB Yes, because we are in a difficult business situation JUDGE Are you in compliance? No, I’m not asking whether you are in difficult position, no – … JUDGE Are you in compliance, did you pay every month NAGUIB No. We tried but we can’t keep up because the business is tight.” (ii) Therefore, the Plaintiff is entitled to reject the proposals made by the Defendant and is entitled not to agree to the funding that was proposed by MTDC. The Plaintiff is entitled to weigh the risk and the implication of the MTDC funding especially when it may have to provide a guarantee for the risks and possible non-payment of the said facility. 59. I also find that the obligation to obtain funding as contained in clause 10.1 is not limited to funding from external sources such as MTDC. Funding could also be sought from financial institutions and even from all shareholders in proportion to their shares. This could be done by way of shareholders’ advances and even by way of further capital calls by the company. This was not done by the Defendant and the appropriate notices were not undertaken. I also note that the Plaintiff did provide a loan to the company which was guaranteed by the Defendant. This indicates that the Plaintiff did attempt to assist the company with its business plans. 60. Even if I were to agree with the Defendant’s contention that there was a breach of clause 3.1 and 10.1 as suggested, I find that the Defendant has not shown he has suffered any losses recognized in law. The evidence before me on this issue is based solely on the expectations of the Defendant. He suggests that if the Plaintiff had agreed to the MTDC proposal they could have successfully pursued the TM projects and other third-party projects which would have been successful. He further suggests that this would eventually cause the company to be profitable thus increasing the value of the company and eventually causing dividends to be declared and paid to shareholders. 48 61. I find that this is speculative at best. Not only did the Defendant fail to produce any evidence of the existence of the TM projects and other projects in documentary form, but he also failed to explain how these projects would have even been profitable eventually. How lucrative these TM projects and other projects from third parties was not shown to the satisfaction of this Court. Neither did the Defendant prove that the company could have landed these projects in any event. Therefore, I find that these claims are mere conjectures or expectations by the Defendant without any real basis shown to this Court to support these contentions. 62. This Court cannot grant damages if it is not shown that this could have been achieved or realistically achievable. Based on the evidence before me, I find these are mere speculation on the part of the Defendant and are not claimable against the Plaintiff. The allegation that the company had lost revenue to the sum of about RM 4.6 million and that as a result, he would have lost the potential dividends of RM 1.8 million was not shown. These are mere conjectures on the part of the Defendant. Whether the said revenue will eventually lead to any profits was not successfully shown by the Defendant. 49 63. It is trite law that the purpose of damages in contract law is to put the party whose rights have been violated in the same position as if the contract is performed, so far as money can do so. This is seen in section 74 of the Contracts Act and the judgment of Edgar Joseph Jnr J in Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777. This was not shown by the Defendant and the claim as it stands is merely speculative at best. 64. For the reasons stated herein, I reject the Defendant’s claim that the Plaintiff had breached clause 10.1 and clause 3.1 of the Shareholders’ Agreement. (iv) Whether the Plaintiff had breached clause 11.1 of the Shareholders Agreement (Issue 4) 65. I reproduce clause 11.1 of the Shareholders Agreement: - 11. Option 11.1 Option to purchase (a) NMN shall have the option, but not the obligation, to purchase all Shares held by MARA, at any time upon the expiry of a three (3) year period from the date of this Agreement. (b) NMN may exercise the option by giving written notice to MARA stating:- (1) that he intends to exercise the option referred to in clause 11.1(a) for a price per share to be determined by the Auditor in accordance to clause 17.4 payable in [cash] on the delivery of the duly executed transfer document and original share certificates; and (2) the time and date for the completion of the sale which must not be earlier than [30] days not later than [90] days from the date of service of the notice. (c) Where a notice is given under clause 11.1(b) above, MARA must sell all of its Shares in accordance with the notice. … 66. In this case, I find that the Defendant had correctly issued the notice to the Plaintiff following clause 11.1. The Plaintiff did not deny that it received the notice from the Defendant and that the Defendant did exercise its right to purchase the 300,000 shares at a price to be determined by the auditors of the company based on the guidelines provided for in clause 17.4 of the Shareholders Agreement. This must be undertaken within 90 days from the date of the notice issued by the Defendant. 67. The only issue in this case is whether the Defendant had complied with the requirements laid down in clause 17.4 of the Shareholders’ Agreement to have the share price valued by the auditors of the company and whether the Plaintiff is required to sell the shares at the price determined by the auditors. 68. The Defendant contends that the Plaintiff did not agree to the said appointment and that the Plaintiff had requested to appoint a third party to undertake the said task. I agree that there was such a request by the Plaintiff, but this was rejected by the Defendant. As such, this issue is no longer alive at this stage. 69. What the Defendant has undertaken is to have the price determined by the said auditors and price determined. However, the determination by the said auditors was only addressed to the members of the board of directors and no copy was sent to the Plaintiff under clause 21 of the said Agreement. 70. Therefore, the Defendant did not inform or provide to the Plaintiff the finding made by the auditors as to what price should the shares be sold to the Defendant. Without such determination, there cannot be performance of the said right as suggested by the Defendant. This requirement must be complied with under clause 17.4 and clause 21 of the said Shareholders’ Agreement. 71. It is also to be noted that the Defendant did not produce the finding by the auditors in this suit. What has been produced is merely a letter issued by the auditors, Messrs Nashadruddin Wong & Co dated 30-8- 2019 but the Defendant failed to produce the report that makes the determination. 72. The Defendant suggests that as the letter was given to the Board of Directors, it must be presumed that the Plaintiff would have known of the valuation as well. This assumption cannot be made by this Court for the following reasons. Firstly, there is no evidence that all the members of the board of directors received the said letter. The letter was addressed specifically to the Defendant and there is no evidence that the other board members were given a copy that contains the allegedly attached report. 73. Secondly, even if I were to assume the board members did receive a full set, this is not a matter that should have been addressed to the board. This is a personal issue between the Plaintiff and the Defendant. As a result, the notice clause as provided in clause 21 must be complied with. The Defendant is therefore required to issue a notice in writing to the Plaintiff at its stated address, informing the latter of the contents of the said report with a copy of the same, to enable the Plaintiff to know the price at which the shares are to be purchased. 74. This is important as the report must be made following clause 17.4 of the Shareholders’ Agreement. I repeat that the Plaintiff is entitled to know whether the shares were valued under the said clause. This report was not produced to the Defendant without any justification. Neither did the Defendant produce the report to this Court. 75. I also note that the option must be fully exercised within 90 days from the date of the issuance of the notification as seen in clause 11.1 (b) and requires the delivery of the valuation report of the shares to the Plaintiff following clause 17.4 of the Shareholders’ Agreement. 54 76. Therefore, since the Defendant failed to exercise his rights appropriately following clause 11.1 and clause 17.4, this Court cannot grant specific performance of the said clause on the terms as prayed for by the Defendant. 77. As I have said earlier, this Court cannot grant the order for specific performance as prayed for by the Defendant. The terms of the agreement must be complied with and failure to undertake the said notices following the terms of the agreement. The option once triggered must be fully exercised within 90 days and failure to comply with all of the requirements would mean that the said right falters. 78. I refer to section 21 (3) of the Specific Relief Act and the decision of the Federal Court in Ganam Rajamany v Somoo Sinniah [1984] 2 CLJ 268 where George Seah FCJ held: - “Another matter which the learned Judicial Commissioner ought to consider which he did not appear to have done so is s. 21(3) of the Specific Relief Act 1950 which reads: A case in which the court may properly exercise a discretion to decree specific performance is where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance. It seems clear that the defendant would be unable to bring his case under the provision of this subsection on the evidence produced before the Court below. Up-to-date of hearing in the High Court the defendant was proved to have paid the sum of RM26,000 only to the plaintiff and this amount represents less than one-third of the contract price of RM90,000. Furthermore, this cannot by any stretch of imagination be said to constitute substantial acts within the meaning of the subsection.” 79. I also refer to the decision of the Court of Appeal in Ooi Siew Eng & Ors v Link Ventures Sdn Bhd (in liquidation) & another appeal [2018] 5 CLJ 668 and the recent decision of the Court of Appeal in Jalani Mohamed & Anor v Shahrom Abdullah & Anor [2024] 4 CLJ 868. 80. I, therefore, find that the Defendant did not comply with the full requirements of the Shareholders agreement and cannot be said to have constituted substantial acts as required under section 21(3) of the Specific Relief Act to obtain specific performance and force the sale of the Plaintiff’s shares to him. I decline to grant the order for specific performance as prayed for by the Defendant. E. Orders of this Court 81. For the above reasons, I make the following orders: - (i) The Plaintiff’s claim is dismissed. (ii) The Defendant’s Counter Claim is dismissed. 82. In terms of costs, I find that each party should bear their own costs. The facts show that both are not free from blame and as such it would be fair that the costs of this litigation be equally borne by the litigants. Dated 13th June 2024 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya Kuala Lumpur NCC5 Parties Appearing: 1. For the Plaintiff 2. Natalia Izra Dato’ Nasaruddin 3. Tengku Nazmi Tengku Anuar Wong Yan Zhang [Messrs. Azmi & Associates (Kuala Lumpur)] 1. For the Defendant 2. Ashok K Raman Nair 3. R Rajasurian Fatin Syahirah [Messrs. A K Raman Nair (Kajang)]