MIDF Amanah Ventures Sdn Bhd v Lim Thiam Chye (22NCC-439-12/2016)

The Plaintiff’s application for specific performance under Order 81 rule 1 of the Rules of Court 2012 (RoC 2012) was allowed by this court. Aggrieved by the said decision, the Defendant filed this appeal.

The Plaintiff is a private company incorporated in Malaysia under the provisions of the Companies Act 1965 with its registered address at Level 21, Menara MIDF, 82 Jalan Raja Chulan, 50200 Kuala Lumpur.

The Defendant, Lim Thiam Chye, is an individual has an address for service at No. 18-C, Jalan Glugor, Kampung Baru, 08000 Sungai Petani, Kedah Darul Aman and/or at No. 8, Jalan Teratai 1/1, Amanjaya, 08000 Sungai Petani, Kedah Darul Aman. 3

On 13 March 2007 the Plaintiff and a company known as BTS Holdings (M) Sdn. Bhd. (BHSB) entered into a Subscription Agreement (the Subscription Agreement). By the Subscription Agreement the Plaintiff agreed to subscribe for 500,000 redeemable convertible cumulative preference shares of RM1.00 each in the share capital of BHSB (the Subscription Shares) at a subscription price of RM10.00 only for each share and the total subscription price of RM5,000,000.00 (the Subscription Price) subject to the terms and conditions contained therein.

Also on 13 March 2007 a Shareholders Agreement was entered into between the Plaintiff, BHSB, the Defendant and one Leong Soek Fun to, inter alia, regulate their relationship inter se as shareholders of BHSB. By way of a Supplemental Shareholders Agreement dated 15 April 2016, the parties agreed to amend, vary and/or alter certain terms of the Shareholders Agreement dated 13 March 2007 as set out therein. The Shareholders Agreement dated 13 March 2007 and the Supplemental Shareholders Agreement dated 15 April 2016 are hereinafter collectively referred to as “the Shareholders Agreements”. 4

The Plaintiff then subscribed for the Subscription Shares for the Subscription Price in accordance with the terms and conditions set out therein making the Plaintiff the legal and beneficial owner of the Subscription Shares.

On or about 13 March 2007, the Plaintiff and the Defendant entered into a Put And Call Option Agreement (the Put and Call Option Agreement). The Put and Call Option Agreement provided, inter alia, as follows:

7.1 in consideration of the Plaintiff, at the request of the Defendant, entering into the Subscription Agreement with BHSB, the Defendant irrevocably granted to the Plaintiff a Put Option (as defined therein) to require the Defendant to purchase up to 500,000 redeemable convertible cumulative preference shares of RM1.00 each in BHSB held by the Plaintiff (the Option Shares) from the Plaintiff at the aggregate of the Subscription Price of RM5,000,000.00 and an additional 25% per annum of the Subscription Price (which is inclusive of the cumulative dividend of 10% per annum) (the Put Option Price) on the terms and conditions set out therein; 5

7.2 the Put Option may be exercised by the Plaintiff at any time during the Put Option Period (as defined therein) by serving a notice in writing on the Defendant (the Put Option Notice);

7.3 upon service of the Put Option Notice by the Plaintiff, the Defendant shall purchase from the Plaintiff, free from all liens, charges and other encumbrances in favour of the Plaintiff and with all rights attaching thereto, all the Option Shares specified in the Put Option Notice at the Put Option

7.4 that upon the Put Option Notice being duly served on the Defendant, completion of the sale and purchase of the Option Shares shall take place on the Completion Date (as therein defined);

7.5 that if the Defendant were to default in making payment of causing payment to be made of any sum payable by it under the Put and Call Option Agreement, the Defendant shall pay to the Plaintiff the amount due together with interest from the date such payment is due until the date of actual payment (as well after as before judgment) at the rate per annum 6 equivalent to the prevailing fixed deposit rate in the banking industry. [8] On or about 4 January 2011, the Plaintiff exercised the Put Option by serving a notice in writing of such exercise on the Defendant in accordance with the provisions of the Put and Call Option Agreement. By way of the Put Option Notice dated 4 January 2011 (the Put Option Notice), the Plaintiff informed the Defendant that he was required to purchase the Option Shares from the Plaintiff at the Put Option Price of RM9,835,349.00 wherein completion of the purchase was to take place on 25 January 2011. [9] However, the Defendant failed to purchase the Option Shares from the Plaintiff. Thus the Plaintiff filed this proceedings. The Plaintiff’s Statement of Claim dated 29 December 2016 seeks for the following reliefs -

an order that the Defendant specifically perform its obligation to purchase the Option Shares in accordance with the terms of the Put and Call Option Agreement within 7 days hereof; 7

alternatively to paragraph (a) above, damages in the sum of RM9,835,349.00 in lieu of specific performance;

interest on the damages in paragraph (b) above, at the rate per annum equivalent to the prevailing fixed deposit rate in the banking industry from 26 January 2011 until full settlement thereof;

further or alternatively to paragraphs (a) and (b) above, damages for breach of the Put and Call Option Agreement;

interest on the damages in paragraph (d) above, at the rate per annum equivalent to the prevailing fixed deposit rate in the banking industry from 26 January 2011 until full settlement thereof;

that a date be fixed by this Honourable Court for damages to be assessed;

costs; and

such further or other relief as this Honourable Court thinks just and proper. [10] Subsequently the Plaintiff filed a notice of application dated 10 April 2017 (Enclosure 6) pursuant to Order 81 rule 1 of the RoC 2012 seeking for the prayers as stated in its Statement of Claim. The said notice of application was subsequently amended vide the court order 8 dated 20 July 2017. By the amendment the Plaintiff seeks for an order that the Defendant specifically perform its obligation to purchase the Option Shares within fourteen days from the date of the court order as opposed to seven days in the initial notice of application. Plaintiff’s case [11] By the affidavit in support of the said application, the Plaintiff through its director Foo Wei Hoong, deposed as follows –

vide the Subscription Agreement (Exhibit FWH-1 Enclosure 7) the Plaintiff had subscribed for the Subscription Shares at the Subscription Price making the Plaintiff the legal and beneficial owner of the Subscription Shares. The Share Certificate No. 001P (of the Subscription Shares) in the name of the Plaintiff is marked as Exhibit FWH-3 of

the Plaintiff, the Defendant, Leong Soek Fun and BHSB entered into the Shareholders Agreements (Exhibit FWH-2 Enclosure 7) to regulate the relationship inter se as the shareholders of BHSB; 9

(c)

the Put Option Notice was issued pursuant to clause 3.1 of the Put and Call Option Agreement. At the date of the issuance of the Put Option Notice –

the Defendant had not exercised the Call Option under the Put and Call Option Agreement; and

(ii) no notice had been given by BHSB to redeem the 500,000 redeemable convertible cumulative preference shares in the share capital of BHSB held by the Plaintiff in accordance with the terms of the Subscription Agreement.

the Defendant acknowledged receipt of the Put Option Notice vide letter dated 27 January 2011 where the 10 Defendant informed the Plaintiff that the company was experiencing financial difficulties due to the economic downturn. Despite reminders by the Plaintiff, the Defendant failed to purchase the Option Shares at the Put Option Price in accordance with the Put and Call Option Agreement;

the Defendant is, and was at the commencement of this action is justly and truly indebted to the Plaintiff in the sum RM9,835,349.00 being monies owing pursuant to the Defendant’s obligations under the Put and Call Option Agreement together with interest at the rate per annum equivalent to the prevailing fixed deposit rate in the banking industry from 26 January 2011 until full settlement;

the prevailing fixed deposit rate in the banking industry at present (the time the notice of application under Order 81 rule 1 RoC 2012 filed) ranges from 2.7% per annum to 4.3% per annum depending on amongst others, the tenure of the deposit. In this case the Plaintiff claims interest at the rate of 3.2% per annum against the Defendant; 11

Clause 5.4 of the Put and Call Option Agreement enable the Palintiff to claim interest at the rate per annum equivalent to the prevailing fixed deposit rate. The rate 3.2% per annum is a median of the average Fixed Deposit rates of commercial banks in Malaysia from 2011 to the present day based on information published by Bank Negara Malaysia as can be seen at Exhibit FWH-8 Enclosure 7;

the Plaintiff has been at all material times and is ready and willing to perform its obligations under the Put and Call

The Plaintiff verily believe the Defendant has no defence and the defence raised in the Statement of Defence are not sustainable. [12] The Subscription Price of the Subscription Shares at RM5,000,000.00 was agreed by the parties and set out in the Subscription Agreement. The Put Option Price which was agreed by the parties under the Put and Call Option Agreement was the aggregate of 12 the Subscription Price (which is inclusive of the cumulative dividend of 10% per annum). [13] The financial situation of BHSB and/or its subsidiaries and the suits brought by the third party creditors against the said companies are not relevant in the context of the Plaintiff’s claim herein and do not release the Defendant from the performance of his obligations under the Put and Call Option Agreement. Defendant’s case [14] The Defendant admits executing the Subscription Agreement and the Shareholders Agreement. However the Defendant resists the Plaintiff’s application for specific performance. [15] As regards to the Put and Call Option Agreement, the Defendant’s objection is premised on the following grounds –

The Put Option Price is unjust, excessive and oppressive;

The Put Option Notice and the execution of the Put and Call Option Agreement by the Plaintiff is unjust and oppressive; 13

The Put Option Notice dated 4 January 2011 was issued about 6 years ago and it is only now the Plaintiff scrambles for a judgment against the Defendant. In its Statement of Defence the Defendant deny receiving the Put Option Notice;

The exercise of the Put Option is subject to the occurrence of the events stipulated in clause 6 of the Put and Call Option Agreement and not at any time during the Put Option Period as contended by the Plaintiff. Clause 6 refers to events of default. Since there is no default on the part of the Defendant and/or BHSB, the Plaintiff is not entitled to exercise the Put Option;

The Plaintiff did not offer any explanation for the exercise of the Put Option;

There is no basis for the Plaintiff to impose the high fixed deposit rate. The Plaintiff is also not entitle to claim any interest. The interest rate at 3.2% per annum is excessive in view of the fixed deposit rate imposed at the same time;

The Plaintiff disputes the sum RM9,835,349.00 stated in the Put Option Notice. There is double calculation on the Option Price of the Option Shares without any justification. 14 [16] The Defendant had informed the Plaintiff that he is not able to honour the terms of the Put and Call Option Agreement due to BHSB’s financial position which is affected as a result of the ongoing dispute between the Defendant and BHSB with Malaysian Development Venture Berhad (MDVB). [17] BHSB and its subsidiary BTS Tools Manufacturing (M) Sdn Bhd (BTS) is in the business of “cutting-tools” which requires sophisticated computerised machines specially designed for BHSB and BTS which has its main business network in Bangkok Thailand. In 2011 the said machines were damaged due to a severe flood in Bangkok. For purpose of repairing the machines the Defendant has applied for insurance money from AXA Insurance Public Company Limited Thailand. However the machines could not be repaired because the Defendant’s claim for insurance was impeded by MDVB. As a result, the business operations of BHSB and BTS was paralysed. [18] Defendant, BHSB and BTS are currently engaged in litigation with not only MDVB but also with other creditors. The Plaintiff is aware of the situation. As a shareholder of BHSB, the Plaintiff has a social obligation to support BHSB to continue with its business operation and not to initiate this proceeding against the Defendant which is oppressive. 15 The law [19] The provision of Order 81 of the RoC 2012 reads as follows – 81 Actions for specific performance, summary judgment

Application by plaintiff for summary judgment (O. 81 r. 1)

In an action begun by writ endorsed with a claim –

for specific performance of an agreement (whether in writing or not) for the sale, purchase or exchange of any property, or for the grant or assignment of a lease of any property, with or without an alternative claim for damages;

for rescission of such an agreement; or

for the forfeiture or return of any deposit made under such an agreement, the plaintiff may, on the ground that the defendant has no defence to the action, apply to the Court for judgment.

An application may be made against a defendant under this rule whether or not he has entered an appearance in the action.

Manner in which application under rule 1 shall be made (O. 81 r. 2)

An application under rule 1 shall be made by notice of application supported by an affidavit made by some person who can swear positively to the facts verifying the cause of action and stating that in his belief there is no defence to the action.

The notice of application shall set out or have attached thereto minutes of the judgment sought by the plaintiff. 16

The notice of application, a copy of the affidavit in support and of any exhibit referred to therein shall be served on the defendant within fourteen days from the date of issue of the notice of application.

Affidavits (O. 81 r. 2A) Order 32, rule 13(2) shall apply mutatis mutandis to all affidavits in respect of an application under this Order.

Judgment for plaintiff (O. 81 r. 3) Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of the action, the Court may give judgment for the plaintiff in the action.

Leave to defend (O. 81 r. 4)

A defendant may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the Court.

The Court may give a defendant against whom such an application is made leave to defend the action either unconditionally or on such terms as to giving security or time or mode of trial or otherwise as it thinks fit.

On the hearing of such an application the Court may order a defendant showing cause or, where that defendant is a body corporate, any director, manager, secretary or other similar officer thereof, or any person purporting to act in any such capacity –

to produce any document;

if it appears to the Court that there are special circumstances which make it desirable that he should do so, to attend and be examined on oath. 17

Directions (O. 81 r. 5) Where the Court orders that a defendant have leave to defend the action, the Court shall give directions as to the further conduct of action.

Costs (O. 81 r. 6) If the plaintiff makes an application under rule 1 where the case is not within this Order, or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then, without prejudice to Order 59, and, in particular, to rule 4(1) thereof, the Court may dismiss the application with costs and may, if the plaintiff is not an assisted person, require the costs to be paid by him forthwith.

Setting aside judgment (O. 81 r. 7) Any judgment given against a defendant who does not appear at the hearing of an application under rule 1 may be set aside or varied by the Court on such terms as it thinks just. [20] An application under Order 81 of the RoC 2012 is similar to an application under Order 14 for a summary judgment. It is trite law that the court would exercise its discretion for summary judgment only in plain and obvious cases, ie, that there is no bona fide defence (Tan Yaw Soon & Anor v Teng Sian Loong Enterprise Sdn Bhd [1994] 2 CLJ 301; [1994] 1 MLJ 239). In Woolley Development Sdn Bhd v Mikien Sdn Bhd [2008] 2 CLJ 303 the Court of Appeal laid out the principles and procedure applicable in an application pursuant to Order 81 of the RoC 2012 – 18 [46] The plaintiff in a summary judgment application first needs to establish a prima facie case that "he is entitled to judgment". The burden then shifts to the defendant to satisfy the court why judgment should not be given against him (see National Company For Foreign Trade v. Kayu Raya Sdn Bhd [1984] 2 CLJ 220; [1984] 1 CLJ (Rep) 283 per Seah FJ). "Ought" in O. 81 r. 3, is an expression of a strong probability. In other words, the issue in dispute must be critically investigated and be determined as genuine. This is what a defendant needs to prove to be entitled to a trial of that disputed issue. [47] A judge in allowing for a summary judgment under O. 81 RHC 1980, does so in the exercise of his discretionary jurisdiction. He may enter a judgment for the plaintiff or allow leave to defend the action. If an appellate court finds that this discretion had been judicially exercised in the sense that he had properly evaluated the facts to find no arguable case, and had not been wrong in law or erred in principle, then the judge's decision should not be disturbed here. (see Wee Choo Keong v. MBf Holdings Bhd & Anor And Another Appeal [1993] 3 CLJ 210; Eng Mee Yong & Ors v. Letchumanan, supra). Findings of the court [21] The Plaintiff’s cause of action against the Defendant is contractual in nature. It is premised on the agreements executed by the parties, namely, the Subscription Agreements, Shareholders Agreement and most significantly the Put and Call Option Agreement. 19 [22] Thus the Plaintiff in the instant case must satisfy the court that there is a prima facie case for the Plaintiff to be entitled to judgment in accordance with the terms and conditions of the Put and Call Option Agreement. [23] The Plaintiff’s affidavit in support of the Order 81 rule 1 of the RoC 2012 was affirmed by its director who has verified the facts which forms the basis of the Plaintiff’s claim against the Defendant. The relevant provisions under the Put and Call Option Agreement are identified and a copy of the said agreement is produced and marked as Exhibit FWH-4 of Enclosure 7. Another vital document which is the Put Option Notice is also produced and marked Exhibit FWH-6 of Enclosure 7. The deponent has clearly states his belief that the Defendant has no defence to the claim made against him by the Plaintiff. [24] The Plaintiff’s notice of application Enclosure 18 has also set out or have attached thereto minutes of the judgment sought by the plaintiff. The same minutes was also attached to the initial notice of application

20 [25] As regards to service of the notice of application on the Defendant within fourteen days from the date of the issuance of the notice of application, the Defendant did not raise any issue of non-compliance in his pleadings and affidavit. As such the service requirement is deemed complied. [26] Thus the Plaintiff has fulfilled the requirement stipulated under Order 81 rule 1(2) of the RoC 2012. [27] It is therefore incumbent upon the Defendant to prove that there are bona fide triable issues and that a trial ought to be carried out to determine the triable issues. The issues raised by the Defendant and the finding of this court in respect of such issues are discussed below. Whether the exercise of the Put Option by the Plaintiff is in accordance with the terms and conditions of the Put and Call Option Agreement [28] On 4 January 2011 the Plaintiff exercised the Put Option by serving a notice in writing on the Defendant. The written Put Option Notice states as follows – 21 4th January 2011 Mr Lim Thiam Chye No. 8, Jalan Teratai 1/1 Amanjaya 08000 Sungai Petani Dear Sir, PUT AND CALL OPTION AGREEMENT RELATING TO THE OPTION SHARES OF BTS HOLDINGS (M) SDN BHD BETWEEN LIM THIAM CHYE (NRIC NO. 660517-07-5077) AND MIDF AMANAH VENTURES SDN BHD (COMPANY NO. 205310-W) We refer to the above and the Put Option granted by you to us in relation to the abovementioned shares. Terms defined in the Put and Call Option Agreement dated 13th March 2007 shall have the same meaning herein. We hereby give you notice that we require you to purchase from us in accordance with the terms and conditions of the Put and Call Option Agreement of 13th March 2007, the 500,000 Redeemable Convertible Cumulative Preference Shares (“RCCPS”), being the Option Shares on the Completion Date, which shall be 25th January 2011, at the aggregate Put Option Price of RM9,835,349. The breakdown of Put Option Price is as follows: Details

500,000 RCCPS at RM10.00 each 5,000,000

15% per annum on RM5,000,000 from 13th March 2007 till 25th January 2011* 2,901,210

10% cumulative dividend per annum on RM5,000,000 from 13th March 2007 till 25th January 2011* 1,934,140 4,835,349 Total repayment amount as at 25th January 2011* 9,835,349 * Completion date (i.e. 21 days from this put option notice dated 4th January 2011) 22 Thank you Yours faithfully. MIDF AMANAH VENTURES SDN BHD sgd LOY TECK WOOI Designated Officer [29] Under the Put and Call Option Agreement the Plaintiff’s right to exercise the Put Option granted to it by the Defendant is subject to the terms and conditions of the said agreement which will be discussed below. Whether the Put Option was exercised within the Put Option Period [30] It is to be noted the above issue relating to the Put Option Notice was not specifically pleaded by the Defendant. The court invited the parties to submit on this issue as the court need to be sure that the Put Option Notice was exercised within the Put Option Period. [31] Clause 3.1 of the Put and Call Option Agreement provides –

3.1 Subject to Clause 6 of the Agreement and unless the Promoter has exercised the Call Option and completion has taken place in accordance with Clause 3 of this Agreement, the Put Option may be 23 exercised by MAVSB at any time during the Put Option Period by serving a notice in writing to the Promoter, such notice to be served at any time during the Put Option Period and to be in or substantially in the form set out in Schedule I. …

3.3 The Promoter agrees that he shall upon service of the Put Option Notice of MAVSB, purchase from MAVSB, free from all liens, charges and other encumbrances in favour of MAVSB (but otherwise without any warranty or representation) and with all rights attaching thereto, all the Option Shares specified in the Put Option Notice at the Put Option Price. Subject to Clause 6 of this Agreement, the Call Option may be exercised by the Promoter at any time during the Call Option Period. [32] Pursuant to clause 3.1, the Plaintiff may exercise the Put Option subject to –

Clause 6. This particular clause sets out certain triggering events the occurrence of which would entitle the Plaintiff to exercise the Put Option; and

The Defendant has not exercised the Call Option wherein completion has taken place. [33] Based on the facts adduced there is no occurrence of triggering events under clause 6 and that the Defendant has not exercise its right 24 for a Call Option. As such the Plaintiff is at liberty to exercise its right for a Put Option under clause 3.1 of the Put and Call Option Agreement. Under the circumstances, the Defendant’s contention that the exercise of the Put Option by the Plaintiff is subject to the occurrence of an event of default is a misconstruction. Also, contrary to the Defendant’s insistence, the said clause 3.1 does not require the Plaintiff to justify its exercise of the Put Option. [34] Be that as it may, the said clause 3.1 provides further conditions, that is, the Put Option may only be exercised –

during the Put Option Period;

a notice in writing to that effect must be served on the Defendant at any time during the Put Option Period; and

the notice is to be in or substantially in the form set out in