Malenee A/P Murugan v 1. Muhelen A/L Murugan (WA-22NCC-51-01/2020)

MUHELEN A/L MURUGAN

MATHANI A/P MURUGAN (NO. K/P: 891119-14-5568) ….DEFENDANTS JUDGMENT

This is an unfortunate case of a dispute amongst siblings over a barbershop business comprising four saloons (hereinafter referred to as the “KGR Wathiar Business”).

On the one hand, the Plaintiff contends that she is the sole proprietor of the KGR Wathiar business whereas the Defendants contend that the same is a partnership and seeks such a declaration.

A majority of the facts are not disputed such as those facts relating to the relationship of parties as siblings, the commencement of the KGR Wathiar business by their father as a sole proprietorship in 1988, the mother joining as a partner in 1996 and the fact that the parents ran the KGR Wathiar business without any partnership agreement.

2011 proved to be a sad year for the family. The father passed away on 13th June 2011 and the mother also passed away not long after on 18th October 2011.

The 4 siblings thereafter on 27th December 2011 signed the relevant forms declaring themselves as partners of KG Wathiar. These forms appear at pages 35 to 40 Bundle A.

6.

Nothing eventful seems to have occurred in relation to the KGR Wathiar business for a good 8 years or so thereafter. However, on 23rd December 2019, the Defendants claimed to be entitled to run the KGR Wathiar business and took control. The Plaintiff objected to the Defendants taking control which has led to this unfortunate dispute and these proceedings.

Through its Statement of Claim, the Plaintiff inter alia pleads the following: - a) that the 27th December 2011 SSM partnership registration is void; b) that the Plaintiff had taken over the assets of the partnership business on 1st December 2011 and commenced as a sole proprietor in that she took over tenancies, staff under her payroll and control, operated entirely on her own with no involvement, interference or contribution from her siblings; Page 4 of 25 c) that there was never an intention to carry on business with a view of profit; d) that the Defendants started interfering in December 2019 and took control etc. with there being issued various letters of demand and police reports aplenty; e) as such, the Plaintiff seeks a declaration that all previous partnerships are dissolved and she be declared a sole proprietor (legally and /or beneficially) with effect from 1st December 2011 and a perpetual injunction against the Defendants from interfering in the KGR Wathiar business. The Plaintiff also seeks for the Defendants to give an account of all monies collected whilst they were in control as well as exemplary damages of RM800,000.00.

The Defendants through their Defence and Counterclaim plead inter alia the following; Page 5 of 25 a) that all notifications to SSM were valid and on the SSM’s instructions. When the mother died, D1 was effectively the sole proprietor. Alternatively, even if dissolved, all assets of the KGR Wathiar business were that of mother’s estate; b) the Defendants helped the KGR Wathiar business with D1 helping with workers permits etc. At paragraph 56 ,it is pleaded that all decisions on the business done after the demise of the parents were done with the consent of partners and upon undertaking a meeting with family members. At paragraphs 67 & 107, it is further pleaded that it was the understanding and agreed by all siblings that the business to be continued and that profits to be utilised for the wedding and education expenses of D2 and the youngest sibling. c) that the Defendants as partners were entitled to accounts etc. which the Plaintiff had agreed to give; Page 6 of 25 d) that when the Defendants heard that the Plaintiff intended to shut two shops/saloons, they decided to interfere whereby the Defendants took over the KGR Wathiar business from 23rd December 2019 to 27th January 2020 and can account for collections during that period; e) seek a declaration that the KGR Wathiar business is a partnership/ or alternatively a business of the estate; and f) seeks and order that D1 to be allowed to run the KGR Wathiar business and for the Plaintiff to account for all profits and to disclose all her bank accounts, as well as damages.

In her Reply and Defence to Counterclaim, the Plaintiff then in brief pleads as follows: a) maintains that she is the sole proprietor; Page 7 of 25 b) any contributions by D1 were all paid for; c) that the Plaintiff had agreed to meet the Defendant to hand over accounts and the KGR Wathiar business as there was tremendous pressure for her to do so; d) any assistance to the sisters were undertaken by her as a responsibility as elder sister; and e) that the Defendants alternative claim on behalf of estate was time barred.

It is significant to make mention of the fact that I had by consent of parties vide an order dated 27th February 2020 issued an injunction and allowed the Plaintiff to continue the conduct of managing the KGR Wathiar business subject to her opening a new bank account and that all monies of the business to be conducted through this account and to inform the Defendant of the amounts deposited and expenses monthly. It was also agreed between the parties that the Plaintiff could/would not cease the business and that all insurance Page 8 of 25 payments for siblings as well as Muhelen’s education to be paid from this account.

Parties have agreed that there were three issues to be tried namely: I. Is KGR Wathiar a sole proprietorship (i.e. with the Plaintiff as sole proprietor)? II. Is KGR Wathiar a partnership? III. Are the parties entitled to the relief as claimed?

The Plaintiff submits that pursuant to Section 3 of the Partnership Act 1961, the determination of the existence of a partnership is a dependant on the facts. Section 3 reads as follows:- “(1) Partnership is the relation which subsists between persons carrying on business in common with a view of profit.

The relation between members of any company or association which is -

registered as a company under the Companies Act 1965 [Act 125] or as a co-operative society under any written law relating to co-operative societies; or

formed or incorporated by or in pursuance of -

any other law having effect in Malaysia or any part thereof; or

(ii) any letters patent, Royal Charter or Act of the Parliament of the United Kingdom, is not a partnership within the meaning of this Act.”

For there to be a partnership, it is clear that there must be a relationship that subsists between persons carrying on business in common with a view of profit. Both parties rely on the decision in the case of Aw Yong Wai Choo & Ors v Arief Trading Sdn Bhd & Anor [1992] 1 MLJ 166 and urges the court to scrutinise the overall conduct of the parties and surrounding circumstances in determining this issue. In that case, Peh Swee Chin J enunciated as follows: - “In my view, to find the existence of such relation, the court must find the real intention of the parties in dispute or involved. The real intention is not necessarily the expressed intention of the parties so that even if the parties express they are partners, the court may decide to the contrary after the court considers all relevant factors Page 10 of 25 taken together, please see the leading case of Cox v Hickman. [1992] 1 MLJ 166 at 180 The definition section really sets out the essence of the decided cases, ie the court is perfectly at liberty to determine from all the relevant factors taken together, if such relation exists or does not exist, then the court attributes this finding as the real intention of the parties. This has nothing to do with curbing contractual freedom but is meant for doing justice. Sir Montague Smith in the case of Mollwo, March, & Co v The Court of Wards 3 at p 438 said: 'If cases should occur where any partnership, under the guise of such an arrangement (ie a loan), are really trading as principals, and putting forward as ostensible, others, who are really their agents, they must not hope by such devices to escape liability; for the law in cases of this kind, will look at the body and substance of the arrangements and fasten responsibility on the parties according to their true and real character.' So much for the attributable real intention of the parties. I will also express my view on some other matters before proceeding to my findings. First, with reference to the rules for which the court shall have regard to in determining the question of the existence or non-existence of partnership as expressly stated in s 4 quoted above, in my view the stated rules cannot be exhaustive at all, for the category of such similar rules is never Page 11 of 25 closed certainly; there are far more pigeon-holes than the stated rules for factors to fit into them. Further, in my view the relevant factors to be taken together for consideration are those happenings of the relation between the parties, ie all the relevant incidents of the relation, including any written or verbal agreement, conduct of the parties at all times, and all surrounding circumstances.”

Reverting then to the facts at hand as well as the surrounding circumstances. As highlighted earlier, the Plaintiff contends and submits that she commenced operations of the business as a sole proprietor in October 2011. However, in my view, from the facts, there was no commencement per se but in reality, it was rather a continuation of the business after the demise of the parents as there has been no evidence that the KGR Wathiar business ceased and restarted after a lapse. There is also no evidence that the Plaintiff invested any monies to commence any operations.

The Plaintiff relies heavily on the testimony of the 4 barbers of each saloon who were all Indian nationals to submit and contend that she managed and controlled the KGR Wathiar business at all times and that she never had to account to the siblings. In my considered view, Page 12 of 25 nothing much really turns on this as the Defendants have at paragraph 7.16 of their written submissions admitted that the Plaintiff’s role and contribution in the KGR Wathiar business is not disputed and that the day to day operations and management of the four saloons were under the care and control of the Plaintiff since the demise of the mother. This fact is also borne out by the contents D1’s own police report dated 23rd December 2019 (see pg. 14 of

With the above, whilst it is also not disputed that both D1 and D2 may have been involved in the KGR Wathiar business albeit in a very limited and minimal nature, the issue is quite academic as the Defendants do not dispute that the Plaintiff effectively had control of the KGR Wathiar business since 2012. IS IT A SOLE PROPRIETORSHIP OR A PARTNERSHIP?

In my view, the only 2 factors in favour of my deciding that the KGR Wathiar business was a sole proprietorship with the Plaintiff being the sole proprietor are: - Page 13 of 25 a) the fact that the Plaintiff was in charge of its operations. In my view, the fact that the 4 barbers recognised the Plaintiff and not D1 as owner is not conclusive. In any event, bearing in mind that the Plaintiff was managing the same, that would surely be their impression anyway; and b) the fact that there does not appear to be much involvement by the Defendants in the KGR Wathiar business from 2011 to 2019.

On the contrary, the factors in favour of a conclusion that there was in fact a partnership are the following: - a) the fact that all 4 siblings signed and filed the Borang B4 SSM forms on the 27th December 2011 which was a form for “Perubahan Maklumat Pemilik”. It is critical to note that even the Plaintiff signed the forms on 27th December 2011 and I cannot help but note that this was done after her alleged commencing as a sole proprietor in October 2011. This contemporaneous SSM form in my view clearly contradicts the Plaintiff’s Page 14 of 25 contention that she was the sole proprietor. It is to be noted that we are dealing with official government documentation relating to ownership of a business and the contention by the Plaintiff that it was so registered as a partnership only for “name sake” must really be taken with a pinch of salt. If it really was a sole proprietorship, she should have registered it as such. In addition, and in my opinion, the Plaintiff was clearly aware of the distinction between the two as exhibit P-1 clearly reveals that she had registered herself as the sole proprietor in 2013 for one Mural Multi Learning Centre; b) following the above, the current SSM search as evident at pages 96 – 100 of Bundle A will reveal that the KGR Wathiar business is a partnership with the 4 siblings as the owners with their entry into partnership in 2011. It is to be noted that this form as well as the Borang B4 referred to in the preceding paragraph were both placed in Part A of the Common Bundle of Documents; Page 15 of 25 c) that the Plaintiff made no personal investment but just carried on with the business where the parents left off. The Plaintiff contends that she had invested by paying for permits and workers etc. but in my considered view, these were all already in existence and being paid by the very income collected and part and parcel of running the KGR Wathiar business; d) there is no dispute that the Defendants had by WhatsApp in October 2019 requested the Plaintiff for all accounts of the KGR Wathiar business and for a transition on 31st December 2019. If it was really a sole proprietorship, one would have expected the Plaintiff to be aghast and object. However, the Plaintiff’s reply informed that she is gathering and will hand over without delay and suggested a meet up in December for a smooth handover (see pages 278 to 279 of B2). The Plaintiff suggests and contends that such message referred to returning gold, but upon reading such message, in my view, it clearly was not. The Plaintiff further contends that she was pressured to do so. However, I find insufficient evidence of any Page 16 of 25 such pressure. It is clear to me that the Plaintiff was at that point prepared to handover the KGR Wathiar business and the accounts to the brother/Defendants which in my considered view fortifies that it was indeed a partnership; e) that the Plaintiff had filed a police report on 24th December 2019 (see page 282, B2) wherein she has clearly referred to the Defendants as her partner; and f) again, in the Letter of Demand on behalf of the Plaintiff dated 31st December 2019 (page 296, B2), it is stated and contended therein that D1 had no right to take over control of the business without mutual agreement of all the partners.

As such, in my considered view, having considered all facts and circumstances, the irresistible inference and conclusion that is to be drawn is that it was indeed a partnership with the Plaintiff seemingly acknowledging it as such. However, I am mindful that placing Page 17 of 25 reliance on the mere reference and usage to the word “partner” is not necessarily conclusive.

In this regard, quite apart from the several factors I have mentioned above that certainly reflect to me a partnership, as highlighted earlier, the Defendants have pleaded at paragraphs 67 and 107 of their Defence that it was an understanding/agreement that the Plaintiff would run the business and that profits would be utilised towards D2’s wedding and the younger sisters Muhelen’s entire education for which she was studying medicine as an undergraduate. It is not disputed that the Plaintiff carried out such obligations as per such agreement. In fact, the Defendants at paragraph 7.46 of their written submissions conceded that the Plaintiff at all material times had fulfilled the arrangement made between the parties as to the payment obligations of the Plaintiff. The Plaintiff suggests that such payments were made in her personal capacity and responsibility as an elder sister. However, I find it hard to believe that despite not being the eldest of siblings, that she would undertake to use vast sums of her own personal money to pay for D2’s wedding, PW5’s education to study medicine as well as pay the premiums for insurance policies of all siblings. In my considered view, it is clearly more probable that there was such Page 18 of 25 an understanding and or agreement that the profits of the business would be so utilised for those purposes.

Therefore, upon a total scrutiny and consideration of the facts in this matter, it is my conclusion that the business was indeed being carried on as a partnership with an agreement that it be managed by the Plaintiff with the intention to utilise the profits as aforestated. In my further considered view, the documents and conduct of the parties lead me to conclude that that was the real intent of the parties i.e. that it was indeed a partnership as was expressly stated in the SSM forms filed way back in December 2011.

As such, reverting back to the issues to be tried, I would conclude, hold and declare that the KGR Wathiar business was a partnership. That now leads me to the issue of what the respective parties are entitled to and what orders that should be made to meet the ends of justice. Page 19 of 25

In light of my observations and conclusions above, I would dismiss the prayers sought for by the Plaintiff and am unable to declare her as the sole proprietor of the business since 1st December 2011. This necessarily means that the consequential orders sought by the Plaintiff for a dissolution of all purported partnerships and damages must also fail. The order sought for a perpetual injunction that the Defendants do not interfere in the KGR Wathiar business must also fail as that was predicated on a finding that the Plaintiff was the sole proprietor.

The Defendants have through their counterclaim sought a declaration that the KGR Wathiar business is a partnership and based on my conclusions above, I would make such a declaration. I would declare that it is a partnership with the partners being those as registered with the SSM on 27th December 2011 with all four siblings as partners.

The Defendants have sought consequential orders that the Defendants be allowed to run the entire KGR Wathiar business henceforth without any interference by the Plaintiff. Notwithstanding my conclusion that it is a partnership, I see no basis to make such an order. The undisputed evidence that has been adduced is that the Plaintiff has been managing the KGR Wathiar business for almost 10 years now without any complaints. In fact, as highlighted earlier, pursuant to an injunction application by the Plaintiff, by consent, parties had on the 27th February 2020 recorded a consent order before me that the Plaintiff be allowed to continue managing the KGR Wathiar business without interference from the Defendants and/but a new bank account be opened whereby all finance (income /expenditure) of the 4 saloons be operated by the Plaintiff via this account from 1st March 2020. Such separate bank account was indeed thereafter opened and still being utilised solely for the KGR Wathiar business.

As such, in my view, the appropriate order to be made now is that the Plaintiff in the meantime be allowed to continue managing the KGR Wathiar business and that all income and expenditure of the business to be operated via that account opened pursuant to the February 2020 consent injunction order with the other partners Page 21 of 25 being entitled to inspection of such account with reasonable prior notice being given. To clarify, this Order that the Plaintiff be allowed to continue managing the KGR Wathiar business is an interim one only pending the partners deciding otherwise. It will then be up to the partners to decide on the future managing of the KGR Wathiar business and to all incidental matters that may be related including but not limited to any remuneration if any to the Plaintiff for managing the business since 1st March 2020 and in the future.

The Defendant has also sought Orders that the Plaintiff provide the profit and loss account of the KGR Wathiar business from December 2011 to December 2019 as well as for her to pay the Defendants their share of profits. In my view, based on the facts of this case, it would be unjust to make such an Order. I say this because of the Defendants own pleaded case at paragraphs 67, 107 and 108 of the Defence highlighted earlier whereby the Defendants have pleaded that upon the demise of their mother, the four siblings had agreed that the business be continued and that profits derived be utilised for the younger siblings (PW-5’s) education expenses as well as D2’s wedding. The evidence has shown (and as admitted by the Defendants) that the Plaintiff kept her end of the bargain and did in fact pay these expenses as well as maintain insurance policies for Page 22 of 25 all four siblings out of the profits of the KGR Wathiar business. There was certainly no other agreement for sharing of profits and to do so now would in my view be clearly inequitable to the Plaintiff.

I have also considered that there is no evidence of the Defendants ever requesting for such account or for profits during the years 2011 to 2019. I also bear in mind that the other partners have hardly contributed to the management of the KGR Wathiar business in those years. As such, in my considered view, the Defendants ought not to be entitled to any accounts or profits for the period 2011 to

In light of my earlier observations, in my considered view, all shares of the profits of the KGR Wathiar business for the said period up until 31st December 2019 are considered settled.

Similarly, flowing from the above and in light of the circumstances of this case, I see no basis to make any order for damages in favour of the Defendants as prayed for. To reiterate, the evidence reveals that the Plaintiff has been managing the KGR Wathiar business with the permission of the Defendants and without any complaints throughout those years and critically, the Defendants themselves do Page 23 of 25 not dispute that the Plaintiff has fulfilled her part of the agreement in making all those agreed payments.

In so far as the income and expenditure for the months of January and February 2020 whereby the business was run by different parties, no accounts are ordered to be delivered and I order that the respective parties are entitled to retain all profits (if any) for that month they managed and collected monies. Moving forward, I would order that the new date for the account of the partnership is to commence from 1st March 2020 and to be operated solely through that separate bank account

In my considered view, upon a careful consideration of the facts and evidence of this case, the Orders I have made hereinabove would meet the ends of justice.

Further, whilst I am unable to make any Orders in relation to the smooth running of the partnership hereafter, it is my fervent hope that the siblings find some common understanding in relation to the future management and distribution of profits hereafter and if possible, to reduce any such understanding to writing if possible. Page 24 of 25

As such, in the upshot, the Plaintiff’s claim is dismissed and the Defendants counterclaim allowed in part as per the orders above.

As for costs, although quite a number of the orders sought by the Defendants were not successfully obtained, on the core issue of whether the business was a partnership, the Defendants has succeeded and ought to be awarded costs. As the trial was conducted over two days and in light of the fact that the parties are siblings and the undisputed evidence reveals that the Plaintiff has indeed been managing the business well all these years, in my view and in exercising my discretion, an amount of RM15,000.00 (subject to 4% allocator) as costs is fair and reasonable and I so order the Plaintiff to pay the Defendants such sum. Date: 23rd August 2021 Anand Ponnudurai Judicial Commissioner High Court NCC1 Kuala Lumpur Page 25 of 25 Counsel: Mr Arun Kasi together with Ms Prema Subramaniam (Messrs Sumitra Prema & Associates) for the Plaintiff. Mr R. Karnan (Messrs Firdaus Azlina & Co) for the Defendants. Legislation: Section 3 of the Partnership Act 1961 Cases referred: Aw Yong Wai Choo & Ors v Arief Trading Sdn Bhd & Anor [1992] 1 MLJ 166