Marlinda Binti Malek v 1. Teras Power Engineering Sdn Bhd (1021641-X) (JA-22NCVC-167-11/2020)

TERAS POWER ENGINEERING SDN BHD (1021641-X) (sebelum ini dikenali sebagai Malik Engineering (M) Sdn Bhd)

ABDUL MALIK PERU MOHAMED

FAIZAL BIN ABDUL MALIK (NRIC NO: 791031-01-6843) … DEFENDANTS  GROUNDS OF JUDGMENT  Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 2 JUDGMENT [ENCLOSURE 27 – APPLICATION FOR SUMMARY JUDGMENT] INTRODUCTION [1] This is the Plaintiff’s application for summary judgment against the Defendants under Order 14 of the Rules of Court (“ROC”) 2012. BACKGROUND FACTS [2] The Plaintiff and the Second Defendant (“D2”) were the shareholders of the First Defendant (“the Company”). The Plaintiff owned seventy per cent (70%) of the shares while D2 owned thirty per cent (30%). Both the Plaintiff and D2 were directors of the Company. [3] D2 offered to purchase all the shares of the Plaintiff amounting to 394,770 shares at RM1 each for the total purchase price of RM2,000,000.00. [4] The Plaintiff and D2 then entered into a Sales and Purchase Agreement (“SPA”) dated 10.02.2020 in respect of the Plaintiff’s shares in the Company. [5] The SPA provides for payment of the purchase price to be made in two (2) stages; First stage: Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 3 i. RM500,000.00 to be paid on/or before 10.01.2020; and ii. RM500,000.00 to be paid on/or before 10.02.2020. Upon payment of both the above sums, the Plaintiff shall transfer half of her shares, amounting to thirty–five per cent (35%) of the issued capital in the Company to D2. Second stage: i. RM500,000.00 to be paid on/or before 10.04.2020; and ii. RM500,000.00 to be paid on/or before 10.05.2020. Upon payment of both the above sums, the Plaintiff shall transfer the balance of her shares amounting to another thirty-five per cent (35%) of the issued capital in the Company to D2. [6] The First stage of payment of the purchase price was honoured by D2, and the Plaintiff transferred half her shares in the Company to D2. Thereafter, D2 had problems honouring the Second stage of payment of the balance RM1,000.000.00. [7] Meanwhile, to facilitate the takeover of management of the Company by D2, the Plaintiff consented to the appointment of the Third Defendant (“D3”) who was D2’s nominee to the board of the Company. [8] Following D2’s failure to settle the balance of the purchase price of RM1,000,000.00 in the Second stage, the Plaintiff sent a letter dated 02.06.2020 to D2 demanding an explanation. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 4 [9] D2 then called for a meeting on 04.06.2020 to discuss his proposal to settle the balance payment. Following the meeting on 04.06.2020, it was agreed that D2 would be given an extension of time to settle the balance purchase price. The agreed terms of the extension of time are as follows: i. Full payment of RM1,000,000.00 shall be made within thirty

to forty-five (45) days after the meeting; ii. Payment may be made in instalments of not less than RM100,000.00 each and full payment shall be made not later than forty-five (45) days after 04.06.2020 (date of the meeting). [10] D2 failed to make payment of the balance purchase price on the expiry of the extended completion date i.e. 19.07.2020. The Plaintiff then issued a letter of demand through her solicitors on 16.07.2020, and on 06.08.2020 the Plaintiff, through her solicitors, sent a notice of termination of the SPA. PLAINTIFF’S SUBMISSION [11] One of the key terms of the SPA is that D2, as the purchaser, shall not be entitled to any refunds of payments made upon termination of the SPA by the Plaintiff for breach of the terms of the SPA. (See clauses 4 and 8 of the SPA – Exhibit MBM-3 Affidavit in Support.) [12] The Plaintiff submits that D2 has breached the terms of the SPA and consequently, she was entitled to terminate the SPA. The Plaintiff Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 5 avers that there are no triable issues and she is entitled to summary judgment. [13] The orders prayed for in the Plaintiff’s Statement of Claim are: a) A declaration that the SPA is terminated; b) A declaration that the appointment of D3 as a director in the Company since 06.03.2020 is terminated; and c) An order that the Plaintiff be reappointed as the Company’s director, and that shares amounting to thirty-five per cent (35%) of the issued capital in the Company be retransferred to the Plaintiff and reinstated as before 06.03.2020. PRINCIPLES GOVERNING AN APPLICATION FOR SUMMARY JUDGMENT UNDER ORDER 14 OF THE RULES OF COURT [14] The Federal Court in National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300 expounded the principles governing applications under Order 14 of the ROC: “For the purpose of an application under Order 14, the preliminary requirements are: i. the defendant must have entered an appearance; ii. the statement of claim must have been served on the defendant; and iii. the affidavit in support of the application must comply with the requirements of Rule 2 of Order 14. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 6 ... if however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. The burden then shifts to the defendant to satisfy the court why judgment should not be given against him.” Based on the above authority, the burden of proof is on the defendant to satisfy the court that there is a bona fide defence or triable issue. [15] In the Court of Appeal case of Chen Heng Ping @ Tian Seow Hock & 5 Ors v Intradagang Merchant Bankers (M) Berhad [1995] 3 CLJ 690, Mahadev Shankar JCA held that: “When an application is made for summary judgment under O. 14 supported by an affidavit which goes to show that there is no defence, the defendants must show cause why leave to defend must be given. This means that the defendants must provide answers on oath which constitute evidence that they have a defence which is fit to be tried. Denials in a defence do not constitute evidence. They are challenges to the other side to show proof. In the present case, the guarantors do not appear to have appreciated this. Their affidavits merely relied on the defence they pleaded, which consists of bare denials and points of law which they could not sustain.” ISSUES RAISED BY D2 IN HIS AFFIDAVIT IN REPLY AND SUBMISSION [16] D2 raised a few issues, which he claims are triable issues, and to be ventilated during a full trial. The triable issues raised are as follows: Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 7 i. The Plaintiff has made a fatal error in naming the Company and D3 as parties to this suit; ii. There is a variation to the terms of the SPA between the Plaintiff and D2; iii. The Plaintiff had wrongly terminated the SPA; and iv. The Plaintiff is under investigation by the police for alleged criminal breach of trust and cheating, when she was a director of D3, thus, disentitling the Plaintiff to summary judgment. [17] I shall now deal with the first issue raised by D2. The first prayer sought by the Plaintiff is a declaration that the SPA has been lawfully terminated. The other orders sought by the Plaintiff are orders consequential upon the first prayer. There is a requirement to name the other parties to enable the Plaintiff to enforce the consequential orders in the event the Plaintiff is successful in her application for the first prayer. In the Court of Appeal case of Frankey Leong Pit Fui (as the administrator of the estate of Louis Leong Kui Yung, deceased) v Foong Da Realty Sdn Bhd [2020] MLJU 2338, the Court held; “[15] In this judgment, where necessary, I shall collectively refer to the first to fourth defendants as “the defendants” as the fifth defendant is merely a nominal defendant for the purpose of enforcing reliefs.” [18] One of the consequential Orders sought by the Plaintiff is for the removal of D3 as director of the Company, hence, I see nothing wrong in naming D3 as one of the Defendants. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 8 The Plaintiff is also seeking an injunction to prevent the Defendants from dissipating the assets of the Company pending the disposal of this action. Therefore, it is necessary and prudent for the Plaintiff to name the Company although it is merely a nominal Defendant. Thus, the Defendants’ submission of a wrong joinder of parties is a non-starter and is not a triable issue. [19] The Defendants allege there was a variation of the terms of the SPA when the Plaintiff agreed to give an extension of time to D2 to pay the balance purchase price. The Defendants submit that the extension renders time as no longer of the essence to the SPA. What is not disputed is that despite the extension of time by about forty-five (45) days, D2 still failed to pay the balance purchase price of RM1,000,000.00 after the expiry of the extended time for payment. In fact, the balance purchase price was never paid even up until the hearing date of this application. Therefore, it is patently clear that D2 has breached a fundamental term of the SPA which entitles the Plaintiff to terminate the SPA. That settles the second and third issues raised by the Defendants. [20] The fourth issue raised by the Defendants is the alleged criminal breach of trust committed by the Plaintiff against the assets of the Company. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 9 This was, however, not pleaded in the Defendants’ Statement of Defence. Since this application by the Plaintiff was filed after the Defendants’ entered their Defence, it is trite law that the Defendants’ are bound by their pleadings. Having failed to plead this issue in their Statement of Defence and not even applying to amend the Defence to include this issue, the Defendants are estopped from raising this issue to defeat the Plaintiff’s application for summary judgment. [21] The claim by the Plaintiff is, basically, premised on D2’s failure to pay the balance purchase price, which entitles the Plaintiff to terminate the SPA. Any alleged breach of trust committed by the Plaintiff against the Company would, if true, be a separate cause of action by the Company against the Plaintiff. That cannot be a defence by D2, to withhold payment of the balance purchase price. If this was a bona fide issue, the Company should have filed a counter-claim to this suit, since it was already made a nominal Defendant. However, the Company neither pleaded this issue in its Defence nor filed a counter-claim against the Plaintiff for the alleged breach of trust. It is trite law that parties are bound by their pleadings and should not be allowed to submit on matters not pleaded. I am guided by the decision of the Federal Court in Saiman bin Umar v Lembaga Pertubuhan Peladang and Another [2015] 6 MLJ 492. “[40] In our view, there is merit in the submissions of learned counsel for the defendant. It is a well-settled legal principle that the court should not decide on an issue that was not pleaded by the parties as had been decided in Yew Wan Leong v Lai Kok Chye where the Supreme Court Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 10 cited Janagi v Ong Boon Kiat [1971] 2 MLJ 196 and agreed with the following passage of Sharma J which stated: The court is not entitled to decide a suit on a matter on which no issue has been raised by the parties, it is not the duty of the court to make out a case for one of the parties when the party concerned does not raise or wish to raise the point. In disposing of a suit or matter involving a disputed question of fact it is not proper for the court to displace the case made by a party in its pleadings and give effect to an entirely new case which the party had not made out in its own pleadings. The trial of a suit should be confined to the pleas on which the parties are at variance. [41] We should remind ourselves that parties to an action are bound by their own pleadings. It is therefore, necessary to make the point that the court is also bound by the pleadings in as much as the parties themselves. The most important purpose of pleadings is to plead reasonable cause of action, define the issues of fact and questions of law to be determined by the court. It is a valid argument to make that the court is constrained to decide an action on which no issue has been raised by the parties in their respective pleadings (see Ambank (M) Bhd v Luqman Kamil bin Mohd Don [2012] 3 MLJ 1; [2012] 3 MLRA 459 and Victory Avenue Mfg (M) Sdn Bhd v Matsushita Electronic Devices (M) Sdn Bhd [2009] 5 MLJ 243).” In any event, there has been no criminal charge laid against D2 by the police despite the fact that reports were filed by D2 in 2018. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 11 CONCLUSION [22] In conclusion, I am in agreement with the Plaintiff’s submission that this is a straight forward case of failure by D2 to make payment of the balance purchase price, which entitles the Plaintiff to terminate the SPA. This case revolves around undisputed facts and interpretation of the SPA. Thus, there is no necessity for this matter to proceed for trial. For the reasons aforesaid, I allow the Plaintiff’s application for summary judgment only against D2 for prayers (a), (b) and (g) of enclosure 27 and costs of RM5,000.00 subject to allocatur fees. [23] Prayer (a) is for a declaration that the SPA was lawfully terminated and prayers (b) and (g) are consequential orders following the lawful termination of the SPA. The other prayers are superfluous and unnecessary as the orders prayed for by the Plaintiff can be undertaken by the Plaintiff herself and the Company, once the shares are retransferred to her and she then becomes the majority shareholder of the Company. Dated 22nd November 2021 Signed, ………………………….. Ahmad Murad Bin Abdul Aziz Judicial Commissioner High Court of Malaya Johor Bahru Johor Darul Ta’zim Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 12 Counsel / Solicitors: For the Plaintiff : Manian Marappan & Gajelan Messrs Manian K. Marappan & Company Suite 7.02, Tingkat 7, Wisma Sing Long, No.9, Jalan Zabedah, 83000 Batu Pahat, Johor Darul Takzim [Ref No.: MKM/BP/9617/2020/my] For the Defendants : Mohd Zamri Bin Mohd Idrus, Yusman & Daniel Messrs Alias, Kang, Ungku Mas & Associates A-2-19 (First Floor Pusat Komersial Bayu Tasek, Persiaran Southkey 1, Kota Southkey, 80150 Johor Bahru, Johor [Ref: 2021/ 8416/jk/it ] Cases Referred To:  National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300  Chen Heng Ping @ Tian Seow Hock & 5 Ors v Intradagang Merchant Bankers (M) Berhad [1995] 3 CLJ 690  Frankey Leong Pit Fui (as the administrator of the estate of Louis Leong Kui Yung, deceased) v Foong Da Realty Sdn Bhd [2020] MLJU 2338  Saiman bin Umar v Lembaga Pertubuhan Peladang and Another [2015] 6 MLJ 492 Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 13 Legislation Referred To:  Order 14 of the ROC  Rules of Court 2012 Hearing Date:

01.07.2021 Decision Date: 15.08.2021