Mr Shajir Ahmed v Protection Rigging Access Services Sdn Bhd (BA-22NCvC-63-02/2020)

PROTECTION RIGGING ACCESS SERVICES SDN BHD (No. Syarikat: 825990-M)

DATUK WAHIRUDDIN BIN ABDUL WAHID (No. K/P:590905-03-5397)

ZAIMAH BINTI ZAINI (No. K/P: 640202-13-5946 …DEFENDAN-DEFENDAN (Tuntutan Utama)

PROTECTION RIGGING ACCESS SERVICES SDN BHD (No. Syarikat: 825990-M)

DATUK WAHIRUDDIN BIN ABDUL WAHID (No. K/P:590905-03-5397)

ZAIMAH BINTI ZAINI (No. K/P: 640202-13-5946 …PLAINTIF-PLAINTIF DAN MR. SHAJIR AHMED (No. Passport: BR0712584) …DEFENDAN (Tuntutan Balas) 06/12/2024 11:43:38 BA-22NCvC-63-02/2020 Kand. 92 S/N Vvcbfx4Ar0ScZOdn8ycIw GROUNDS OF JUDGMENT Introduction [1] For ease of reference, the parties referred to hereinafter are the parties in the main action. [2] The present action arises from a counterclaim of the Defendants after the main suit had been determined in the Plaintiff’s favour. The Defendants sue the Plaintiff for breach of contract in failing to fulfill his promise to invest in the 1st Defendant company, Protection Rigging Access Services Sdn. Bhd. [3] The Defendants claim that as a result of the Plaintiff’s breach, the Defendants had been put to loss. They now seek to be compensated in damages. Salient facts [4] The Plaintiff is of Bangladesh nationality. The 1st Defendant (“D1”) is a locally incorporated company, involved in the business of providing rigging access services. At the material time, the 2nd and 3rd Defendants (“D2 and D3 respectively”) were the directors of the 1st Defendant. [5] At the request of D2, the Plaintiff agreed to provide initial funds of RM 2,100,000.00 to D1, which was to be treated as corporate financing. An agreement dated 4.7.2017 titled Agreement For S/N Vvcbfx4Ar0ScZOdn8ycIw Sale and Purchase of Shares (“1st Agreement”) was executed by the parties. [6] In the 1st Agreement, the funds provided by the Plaintiff was referred to as ‘initial investment’. The terms state inter alia, for a due diligence exercise to value D1 within a period of 6 months after payment of the initial investment, and the parties are to thereafter reach an agreed valuation of D1. In the event this condition was not met, the initial investment paid to D1 was to remain as corporate financing. The period of financing was to be 12 months from the date of disbursement of the funds. [7] Upon completion of the due diligence process, the Plaintiff decided not to proceed with the purchase of shares in D1. Resulting from this decision, the initial investment payment of RM 2,100,000.00 was treated as corporate financing and had to be repaid by D1 within 12 months. [8] D1 failed to repay the corporate financing upon the expiry of the 12 months. In order to allow D1 more time to repay, parties entered into another agreement titled Financing Extension Agreement (“2nd Agreement”) to grant D1 an extension of one year to repay the sum of RM 2,100,000.00 by 31.10.2019. In addition, D2 and D3 also executed directors’ personal guarantees towards the financing amount. [9] Upon the expiry of the extended period, D1 purported to repay the sum of RM 2,100,000.00 by issuing three post-dated cheques S/N Vvcbfx4Ar0ScZOdn8ycIw each for the amount of RM 700,000, in favour of the Plaintiff. All the cheques were however, dishonoured. [10] The Plaintiff then demanded repayment of the amount of RM 2,210,250.00 inclusive of the penalty imposed on late payment at the rate of 5% per annum as provided for in the 2nd Agreement and a profit rate of 10% as provided for in the 1st Agreement. When the demand was not met, the Plaintiff proceeded to file the present suit. [11] A series of litigation ensued thereafter. The Plaintiff obtained summary judgment for his claim before the High Court of Shah Alam on 30.3.2021. The Defendants were ordered to pay the Plaintiff as follows:-

The sum of RM 1,705,000.00 being the balance unpaid sum together with interest at the rate of 5% per annum from 24.9.2018 being the date of execution of the 2nd Agreement until realisation;

(ii) Interest on the sum of at the rate of 10% being profit as provided for in the 1st Agreement on the sum of RM 2,100,000.00 from the date of 4.7.2017 until 3.7.2018 being the date of termination of the 1st Agreement; and

(iii) Costs of RM 5000. [12] The Defendants appeal to the Court of Appeal against the summary judgment, was dismissed on 10.3.2022. S/N Vvcbfx4Ar0ScZOdn8ycIw [13] Following the decision of the Court of Appeal, the Plaintiff applied to strike out the Defendants’ counterclaim on the grounds that was frivolous and vexatious. It was contended that in the light of the judgment obtained against the Defendants, the merits of the counterclaim had been already determined in the summary judgment application. [14] The Plaintiff’s application was dismissed by this Court on 20.4.2022. His appeal to the Court of Appeal was also dismissed on 21.2.2023. Consequent to the outcome, this counterclaim of the Defendants was set down for trial before this Court. The Defendants’ counterclaim [15] The Defendants’ counterclaim for breach of contract is essentially this. [16] The Plaintiff was involved in the paint business in his home country, as the director of Elite Paint and Chemical Industries Ltd, a company incorporated in Bangladesh. [17] Sometime in 2017, the Plaintiff and D2 explored the possibility of expanding the paint business into the Malaysian market. Parties then agreed to collaborate to market the Plaintiff’s products for use in the oil and gas industry. Pursuant thereto, the 1st Agreement was executed on 4.7.2017. [18] The 1st Agreement was between D1 and the Plaintiff. The Plaintiff agreed to invest RM 2,100,000.00 in D1. S/N Vvcbfx4Ar0ScZOdn8ycIw [19] The resources of D1 were utilized to obtain approvals from the authorities. D2 obtained samples of the Plaintiff’s products for approval by SIRIM and the Customs Department. Apart from the paint product, parties also agreed to market the Plaintiff’s other products, namely abrasive and garnet for which D2 was to also obtain approval from SIRIM and the Customs Department. [20] The Plaintiff and D2 also agreed to incorporate Superindustries Malaysia Sdn Bhd (“Superindustries”), and it was duly incorporated on 27.10.2017. D2 was made a director of Superindustries on 17.8.2018. He was also given some shares in the company. [21] Following D2’s appointment as a director in Superindustries, he intensified his efforts to ensure that the requisite approvals were issued. He succeeded in obtaining favourable responses from the Customs Department in respect of the product samples. [22] Notwithstanding the efforts made, in early 2019 the Plaintiff informed D2 and D3 that he was no longer interested in collaborating with them and that he wanted to terminate the 1st Agreement. D2 was then compelled by the Plaintiff to relinquish his position as a director and shareholder in Superindustries. [23] The actions of the Plaintiff were tantamount to a breach of his promise to invest in D1. The Defendants claim that the Plaintiff had wrongly resiled from his intention to invest in D1 when he converted his investment in D1 to a loan instead. This happened after D2 had expended much effort to market the Plaintiff’s S/N Vvcbfx4Ar0ScZOdn8ycIw products, causing him to incur expenses amounting to RM 350,909.30. He seeks to be compensated the said amount as special damages. He further seeks compensation in the form of aggravated and exemplary damages amounting to RM 10,000,000.00. Plaintiff’s defemce to the counterclaim [24] The Plaintiff denies the alleged breach. The terms of the 1st Agreement were clear. He could refuse to proceed with the purchase of the shares in D1, upon which the initial investment of RM 2,100,000.00 would remain as a corporate financing to be repaid before the expiry of 12 months after the date of disbursement. [25] The 2nd Agreement was entered into to provide for allow for an extension of time to repay the corporate financing when it was not repaid within the stipulated time. D2 and D3 were also asked to provide guarantees. [26] The Defendants’ counterclaim which was in fact a defence to the main action. As the Plaintiff had succeeded in obtaining judgment of the corporate financing advanced, the merits of their counterclaim had in fact been determined. [27] The Plaintiff also relies on clause 3 of the 2nd Agreement which stipulates that by executing the 2nd agreement, D1 warrants that no event of default exists with respect to the 1st Agreement. S/N Vvcbfx4Ar0ScZOdn8ycIw Premised on this representation, there is no basis for the counterclaim for breach of contract of the 1st Agreement. Issues for determination [28] Arising from the contention of the parties, the central issue for determination is whether there is a breach of the agreement by Plaintiff to invest in D1, and the consequential issue whether the damages as claimed, has been proven to arise from the breach. Analysis and decision of this court [29] It is law well established that a plaintiff bears the onus of proving its claim and the parties asserting the existence of a fact bears the burden of proving that fact. (See: sections 101 and 102 of the Evidence Act, 1950 and Letchumanan Chettiar Alagapan (as executor to SL Alamelooo Achi (Deceased) & Anor v Secure Plantation Sdn. Bhd.) [2017] 5 CLJ 418). In this regard, the Defendants are obliged to prove their allegations of breach of contract on a balance of probabilities. Whether there was a breach of contract to invest in D1 [30] The defence called 3 witnesses in support of its case. The main witness was D2, the director of D1. He testified that sometime in 2018, he met the Plaintiff who agreed to collaborate with him to market the Plaintiff’s product, using D1’s name. The Plaintiff agreed to invest in D1 by the purchase of equity in D1 upon due diligence done on the company. His expectations were dashed S/N Vvcbfx4Ar0ScZOdn8ycIw when the Plaintiff refused to proceed with the purchase of D1’s shares. Instead, the initial investment was wrongly considered as a corporate loan subsequently, when at all material times, the Plaintiff had agreed for it to be an investment. [31] The claim of the Defendants that the Plaintiff agreed to invest in D1 is not supported by any written agreement. I find the allegations of the Defendants to be but mere oral assertion on their part. [32] On the other hand, the evidence pertaining to the Plaintiff’s agreement to invest is the 1st Agreement itself. The terms of the 1st Agreement are clear. The funds provided to D1 amounting to RM 2,100,000.00 was to be treated as corporate financing. It was only to be converted into shares in D1 subject to the terms and conditions in the 1st Agreement. The relevant terms are as follows,

3.1 The Investor hereby declare the following mechanism for the initial investment.

3.1.1 the initial investment that the investor wishes to make is

3.1.2 the amount above shall be treated as corporate financing by The Investor to The Company for a period of six (6) months from the date of disbursement.

3.1.3 the financing shall be convertible into a Redeemable, Convertible Preference Shares (RCPS) upon the following:

3.1.3.1 Within a period of six (6) months after the initial investment, The Investor complete the due diligence process to value The Company.

3.1.3.2 The Investor and The Company reaches an agreeable valuation of The Company

3.1.3.3. The Company and The Investor agree on a separate Shareholder’s and Operating Agreement 3.1.3.4 For the purpose of RCPA conversion, the net worth of the company shall be based on the report of a due diligence exercise issued by appointed third-party Malaysia Auditor (s) or a mutually agreed valuation.

3.2 If any of the conditions as outlined in Clause 3.1 is not met, the initial investment is remain as corporate financing with the following terms:

3.2.1. the financing is for a period of 12 months from the date of disbursement 3.2.1 the financing carries a profit rate of 10 (ten) percent per annum ….. S/N Vvcbfx4Ar0ScZOdn8ycIw [33] The Plaintiff himself testified that apart from the 1st Agreement, there was no other agreement to invest as alleged. Upon due diligence on D1, he decided not to proceed with the purchase of shares in D1. He was entitled to do so by the terms of the 1st Agreement as the other terms were not fulfilled. Consequent to his decision, the amount of RM 2,100,000.00 was to continue as corporate financing. [34] I find the Plaintiff’s evidence to be credible and consistent with the terms of the 1st Agreement. This agreement was not disputed, but agreed to in toto as it was categorized as a Part A document in the Agreed Bundle of Documents. [35] Having considered both versions of the Plaintiff and the defence, I also find the Plaintiff’s version to be more plausible. The Defendants’ claim if it is true, is tantamount to saying that the Plaintiff intended to invest in any event. That cannot be possible when the Plaintiff had made clear his intentions in the 1st Agreement. It is also incredible that the Plaintiff, being a businessman would have readily agreed to invest in D1, without having conducted a due diligence exercise. The 1st Agreement contained terms which parties are more likely to provide in the ordinary course of business. It also accords with prudent business practice. [36] I therefore find on a balance of probabilities, that the intention of the parties to invest in D1 is governed by the terms of the 1st Agreement only. There is no other agreement apart from the 1st Agreement. Any oral agreement pertaining to the intention to S/N Vvcbfx4Ar0ScZOdn8ycIw invest in D1 would have been superseded by the 1st Agreement when the intention was reduced to writing. [37] The Plaintiff’s contention that the counterclaim is in fact a defence to the main claim has some merit. When the Plaintiff sued for repayment of the corporate financing, the Defendants claim that the sum provided was in fact an investment in D1. The Plaintiff wrongly breached his agreement to invest when he refused to purchase any equity in D1. The Statement of Defence pleading the counterclaim made express reference to the 1st Agreement. [38] In particular, paragraph 22 of the Statement of Defence (in which the counterclaim was pleaded) stated as follows:- 22 (c) Plaintif juga telah bersetuju untuk membuat pelaburan berjumlah RM 2,100,000.00 kepada Defendan Pertama dengan terma bahawa jumlah pelaburan tersebut akan diterjemahkan kepada pegangan ekuiti di dalam Defendan Pertama setelah pihak Plaintif menjalankan usaha wajar (due diligence) terhadap Defendan Pertama dan setelah itu pihak-pihak telah memasuki Perjanjian bertarikh 4/7/2017 tersebut;

Setelah usaha wajar dijalankan terhadap Defendan Pertama, Plaintif tidak berhasrat untuk mengambil saham atau ekuiti di dalam Defendan Pertama dan menukarkan pelaburannya menjadi pinjaman sahaja kepada Defendan Pertama S/N Vvcbfx4Ar0ScZOdn8ycIw (e ) Defendan-Defendan kata bahawa tindakan Plaintif sendiri yang memungkiri persetujuan asalnya untuk melabur dan bukannya berbangkit atas apa-apa kesalahan Defendan-Defendan. [39] It would appear from the pleaded counterclaim, the Defendants were also relying on the 1st Agreement to contend that the Plaintiff agreed to invest in D1. However, the Defendants conveniently overlooked the terms therein which allow the Plaintiff to treat the funds provided as a continuing corporate guarantee if the other conditions were not fulfilled after the due diligence exercise. Therefore, when the Plaintiff’s claim for repayment was allowed in the summary judgment application, implicit in the judgment is that there is no breach by the Plaintiff. In any event, after hearing the evidence of the parties, I do not find the Defendants to have succeeded in establishing any breach by the Plaintiff. [40] There is one other fact which shows the Defendants’ counterclaim to lack merit. When the corporate financing was not refunded, the Plaintiff and D1 entered into the 2nd Agreement to extend the period for repayment. Clause 3 of the 2nd Agreement contains a warranty by D1 as follows,

No Defaults. The Company, by execution of this Agreement, hereby represents and warrants that as of the date hereof, no Event of Default exists or is continuing with respect to the Investment Agreement or Sale and purchase of shares agreement. S/N Vvcbfx4Ar0ScZOdn8ycIw [41] In the light of the clear warranty given, there cannot be any question of the Plaintiff’s breach of the 1st Agreement. [42] Having considered all the available evidence in respect of the counterclaim, and weighing the probabilities of each parties’ case, I do not find the counterclaim of the Defendants proven. Damages claimed by the Defendants [43] Although I do not find the Plaintiff liable for the counterclaim, nonetheless for the sake of completion, I shall deal with the damages claimed. [44] The Defendants’ claim for special damages of RM 350,909.30 is set out in paragraph 29 of the Statement of Defence and Counterclaim. It comprises management fees for D2 and D3 as well as DW2 who was then the Project Manager in D1. He was instrumental in liaising with the relevant authorities in obtaining approval to market the Plaintiff’s products. D3 is the wife of D2. She was also the director of D1 at the material time. The management fees were claimed for the period from April to December 2018. [45] Apart from the management fees, the special damages also comprise of the rental for the office of D1 and other miscellaneous expenses such as travelling expenses for the staff of D1 and payment to SIRIM. S/N Vvcbfx4Ar0ScZOdn8ycIw [46] It is trite law that special damages must be strictly proved. (See: Child N (claiming through her father) & Ors v Kerajaan Malaysia [2022] 1 MLJ 666). [47] I shall deal with the more substantial claims. To substantiate the Defendants’ claim for management fees, D2 referred to several documents in the Agreed Bundle of Documents. They are payment vouchers for management fees paid by D1 to D2 and D3. These payment vouchers were prepared by D3. I find these payment vouchers are merely self-serving documents. I do not find any independent evidence to support the basis for these amounts. There is also no evidence showing the actual flow of moneys from D1 to the persons to whom the management fees were paid. I therefore conclude that these payment vouchers are bereft of any evidential value. [48] The claim for payment of fees to the Project Manager also suffers from the lack of any convincing proof. As for rental pertaining to the office space of D1, there is no documentation to substantiate the claim. [49] In short, the Defendants’ claim for special damages has not been established by cogent evidence. [50] Apart from its claim for special damages, the Defendants have also included a claim for exemplary and aggravated damages to the tune of RM 10,000,000.00. (See: paragraph 31(b) of the Statement of Defence and Counterclaim). In his evidence, D2 stated that D1 lost the opportunity to benefit financially from S/N Vvcbfx4Ar0ScZOdn8ycIw marketing the Plaintiff’s products. The profit forecasted to be received was RM 10,841,000.00. As the Plaintiff was responsible for causing the economic loss, D1 ought to be compensated. [51] The Defendants are totally misconceived in their claim for aggravated and exemplary damages. Firstly, the basis for the award of such damages lies in the realm of tortious actions. The Court of Appeal in National Feedlot Corporation Sdn Bhd & Ors v Public Bank Bhd [2023] MLJU 2023, had this to say, [119] And as for whether aggravated and exemplary damages are claimable in a breach of contract case, it is relevant to refer to the judgment of Lee Swee Seng Judicial Commissioner (as he then was – now JCA) in Ang Beng Choo v. RHB Insurance Berhad [2013] 1 LNS 382 (HC) where the Learned Judge said: Damages Whether aggravated and exemplary damages are claimable for breach of contract The basis for assessment of damages in a breach of contract is to put the Plaintiff, the non-defaulting party, in the position as if the contract has not been wrongfully terminated. It is compensatory in nature. As such aggravated damages is generally not awarded for a breach of contract simpliciter. In this respect the House of Lords decision in Farley v. Skinner [2002] 2 A.C. 732 summarised succinctly the general principle in a breach of contract against an award for anxiety, distress, disappointment and loss of credibility, reputation and the like as follows in the speech of Lord Hitton at page 757-758: S/N Vvcbfx4Ar0ScZOdn8ycIw “47. It is clearly established as a general rule that where there has been a breach of contract damages cannot be awarded for the vexation or anxiety or aggravation or similar states of mind resulting from the breach. The principle was stated by Bingham LJ in Watts v. Morrow [1991] 1 WLR 1421, 1445: “A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party. This rule is not, I think, founded on the assumption that such reactions are not foreseeable, which they surely are or may be, but on considerations of policy.” This general principle has recently been approved by this House in Johnson v. Gore Wood & Co [2002] 2 AC 1. The principle has particular application to commercial cases and in Johnson v. Gore Wood & Co Lord Cooke of Thorndon observed, at p 49, that: “Contract-breaking is treated as an incident of commercial life which players in the game are expected to meet with mental fortitude.” [52] Secondly, if the Defendants had intended to claim for loss of expected profits, it should have been claimed as general damages, and evidence led as to its computation. [53] To conclude on the claim by the Defendants for damages, I do not find the claim to be supported both on the evidence and established legal principles. S/N Vvcbfx4Ar0ScZOdn8ycIw Conclusion [54] Premised on the foregoing reasons, the counterclaim of the Defendants is dismissed. The Defendants shall pay costs of RM 15,000.00 to the Plaintiff. Dated : 6th December 2024 -sgd- ....………………..….... Alice Loke Yee Ching Judge High Court in Malaya at Shah Alam Counsel for the Plaintiff : Mr. Zulfahami bin Abu Bakar Zul Bakar Chamber Counsel for the Defendant : Mr.Zawharul Haq bin Abu Bakar