Multi Meridian Sdn Bhd v Iskandar Regional Development Authority (Irda) (JA-22NCvC-4-01/2020)

This is a claim by the Plaintiff against the Defendant arising out of a joint venture to establish and operate a Private Auxiliary Police (“AP”) service in the Iskandar Malaysia region. The joint venture 26/02/2026 00:56:21 JA-22NCvC-4-01/2020 Kand. 89 S/N JyqntIF3G0KqIjdPvplkzQ was implemented through a special purpose company, IMSEC Sdn Bhd (“IMSEC”), in which the Plaintiff and the Defendant held 60% and 40% of the shares, respectively.

The Defendant is the statutory authority entrusted with the development of the Iskandar Malaysia economic corridor. In that capacity, it applied for and obtained an AP licence from Polis Diraja Malaysia (“PDRM”) to enable the provision of AP services within Iskandar Malaysia. Pursuant to the joint venture, that licence and all dealings with PDRM remained in the name of the Defendant.

Under the Joint Venture Cum Shareholders Arrangement dated 14 March 2012 (“JVA”), IMSEC was to be the vehicle through which the AP services were marketed and provided to end-users. The JVA allocated distinct roles and responsibilities to each party, which I shall set out in detail below.

The relationship between the parties subsequently deteriorated following regulatory action taken by PDRM in respect of the AP licence and the eventual cancellation of that licence. IMSEC ceased operations and its auxiliary police personnel were terminated. The Plaintiff claims that it funded termination and other operational liabilities and now seeks to recover its losses from the Defendant. The Defendant denies liability, asserts that the joint venture was terminated by supervening events and in turn, advances a counterclaim against the Plaintiff.

Several trial dates were fixed between 2021 and March 2025, but were vacated for various reasons. The trial ultimately proceeded S/N JyqntIF3G0KqIjdPvplkzQ before Justice Nurulhuda Nur'aini Binti Mohamad Nor on 28 October 2024, with PW1 partially being cross-examined. The trial continued before this Court, starting from 17 to 23 September, 9, 10, and 17 October 2025. Written submissions were filed thereafter and oral submissions were heard on 27 November 2025. This Court now delivers the decision. Background The Joint Venture Cum Shareholders Agreement and Private Auxiliary Police (“AP”) licence

On 14 March 2012, the Plaintiff and the Defendant entered into a Joint Venture Cum Shareholders Agreement (“JVA”) to incorporate IMSEC as a special purpose vehicle to provide AP services in Iskandar Malaysia. Under the JVA, the Plaintiff was to hold 60% of IMSEC’s shares and the Defendant 40%.

The AP licence, permitted the establishment of an auxiliary police contingent to serve specified premises within Iskandar Malaysia, subject to the conditions imposed by PDRM and the governing legislation and regulations.

The JVA allocated distinct roles and responsibilities to the parties. Broadly stated, the Defendant undertook responsibility for obtaining and maintaining the necessary governmental approvals, S/N JyqntIF3G0KqIjdPvplkzQ including the AP licence. The Plaintiff undertook responsibility for the management and operation of IMSEC as a going concern, including marketing, recruitment and deployment of AP officers through IMSEC.

IMSEC was duly incorporated. By virtue of Clause 2.3 of the JVA, the Board comprised nominees from both parties. Throughout the material period, IMSEC’s cheques and major decisions required participation from both sides at Board level. IMSEC’s business model and operations

IMSEC’s business model involved the recruitment, training and deployment of auxiliary police officers to service premises within the Iskandar Malaysia region. Evidence was led that the parties contemplated the use of Public–Private Partnership (“PPP”) arrangements and engagement with companies operating in the region, in addition to premises directly owned or controlled by the Defendant.

The Plaintiff’s case is that while it managed IMSEC's day-to-day affairs, all regulatory dealings concerning the AP licence, including compliance with PDRM’s conditions, remained within the Defendant’s sphere of responsibility as licence holder. The Defendant’s case is that the Plaintiff, as IMSEC’s manager and majority shareholder, was fully aware of and participated in the S/N JyqntIF3G0KqIjdPvplkzQ business model adopted, including the deployment of AP personnel to third-party premises through PPP mechanisms.

IMSEC commenced operations and incurred substantial expenditure on recruitment, training, salaries and related costs. Its financial statements, which were prepared annually, recorded continuing losses over the years of operation. By the financial year ended 31 December 2017, the accumulated loss recorded in IMSEC’s accounts was in excess of RM1.28 million. Regulatory concerns and cancellation of the AP licence

On 30 March 2015, PDRM issued a letter to the Defendant raising concerns about alleged breaches of certain conditions of the AP licence, including the deployment of auxiliary police to premises not directly related to the Defendant and other matters relating to the implementation of the project. PDRM requested an explanation and indicated that failure to address these concerns could affect the continuation of the licence.

The Defendant responded with explanations. The parties’ evidence diverges as to how PDRM treated those explanations and what further discussions took place. There is, however, no dispute that the AP licence remained under review and that the Defendant continued to engage with PDRM while IMSEC’s operations proceeded, albeit with some constraints.

On 17 January 2018, PDRM issued a letter cancelling the AP licence. The cancellation had immediate consequences for IMSEC : the company could no longer lawfully operate its auxiliary police service. Following the cancellation, IMSEC ceased operations, terminated its AP personnel and took steps to wind down existing contractual engagements with customers.

The Plaintiff’s evidence is that it funded termination benefits and other liabilities arising from the cessation of IMSEC’s business and that the losses so incurred form the basis of its present claim. The Defendant maintains that the cancellation of the licence was attributable to broader policy considerations and regulatory decisions beyond its control and contends that any losses suffered by IMSEC are part of the commercial risk assumed by the Plaintiff.

IMSEC’s audited financial statements up to the financial year ended 31 December 2017 were prepared and signed by its appointed auditors and approved by the Board. These accounts record that IMSEC had been continuously loss-making since incorporation, culminating in accumulated losses exceeding RM1.28 million by the end of 2017.

In 2018, financial statements were prepared showing further losses, bringing the accumulated losses to approximately RM2.4 million as at 31 December 2018. Those 2018 accounts were not formally signed off by the auditors due to difficulties in convening a Board meeting following the resignation or non-attendance of certain Defendant-nominated directors. Nevertheless, the figures S/N JyqntIF3G0KqIjdPvplkzQ were used as a reference in discussions between the parties concerning IMSEC’s financial position.

At IMSEC’s 6th Board of Director’s meeting held on 11 June 2018, the parties discussed the consequences of the licence cancellation and IMSEC’s financial state. The minutes record, in substance, that the losses borne by the Plaintiff and certain advances made were acknowledged and that an indicative figure of approximately RM2.087 million was discussed as the amount to be taken into account, subject to a detailed audit and formal settlement agreement. The Board also discussed the treatment of training costs and the possibility of winding up IMSEC. Pleadings and reliefs sought

The Plaintiff commenced this action by writ and statement of claim. In essence, the Plaintiff alleges that the Defendant, as holder of the AP licence and as a contracting party under the JVA, failed to ensure compliance with PDRM’s conditions and failed to preserve the AP licence. The Plaintiff pleads that such failure amounts to a breach of the JVA, which caused the collapse of IMSEC’s business and the losses which the Plaintiff now claims.

The Plaintiff originally claimed the sum of RM2,053,225.54 as its loss. At the end of trial, the Plaintiff now claims RM1,682,844.80, said to represent its share of IMSEC’s accumulated losses and advances, computed by reference to the company’s financial S/N JyqntIF3G0KqIjdPvplkzQ statements and the parties’ agreed shareholding proportions. The Plaintiff also seeks interest and costs.

The Defendant, in its Defence, denies any breach of the JVA and contends that the joint venture was rendered impossible of performance by supervening regulatory decisions, thereby discharging the parties’ obligations under section 57(2) of the Contracts Act 1950 [Act 56]. The Defendant further avers that the Plaintiff mismanaged IMSEC and failed in its duties as majority shareholder and manager.

By way of Counterclaim, the Defendant seeks, among others, a declaration that the Plaintiff is in breach of fiduciary and contractual duties in relation to the management of IMSEC, and an order that the Plaintiff bear all of IMSEC’s losses. The Defendant also claims the sum of RM1,028,505.10, being 60% of certain training costs, which it says the Plaintiff is obliged to contribute under the terms of the JVA. The trial

At trial, the Plaintiff called one factual witness, Muhamad Rafizam bin Taib (“PW1”), who is a director of the Plaintiff and was a director of IMSEC throughout the material period. The Defendant called two witnesses, Y.M. Engku Ahmad Kamel bin Engku Taib (“DW1”) who was involved in the Defendant’s dealings with IMSEC and PDRM and Chua Kan Chun (“DW2”) an accountant from Ecovis S/N JyqntIF3G0KqIjdPvplkzQ Malaysia as an expert witness to give evidence on IMSEC’s financial records.

A substantial body of contemporaneous documents was admitted into evidence, including the JVA, the AP licence and correspondence from PDRM, IMSEC’s financial statements and Board minutes, the Ecovis report, and various internal memoranda. Both parties thereafter filed detailed written submissions and bundles of authorities and supplemented them with oral argument.

With that background in mind, this Court turns now to the issues requiring determination. Before addressing the substantive questions of liability and quantum, there are several preliminary matters this Court must deal with. Preliminary Issues A. Plaintiff’s oral application to amend the quantum of claim

At the close of the evidence, learned counsel for the Plaintiff applied orally to amend the Statement of Claim to reduce the quantum of the Plaintiff’s claim from RM2,053,225.54 to RM1,682,844.80. The cause of action and reliefs otherwise remained unchanged.

The Defendant objected. It was submitted that the Plaintiff had throughout pleaded and conducted the case on the higher figure of RM2,053,225.54 and that the proposed amendment came only after the completion of trial. The Defendant further pointed to what it described as a “pattern of shifting figures” : an approximate figure of RM2.087 million referred to in the IMSEC Board minutes, a different figure in the Notice of Demand, RM2,053,225.54 in the original Statement of Claim and now RM1,682,844.80 at the end of the trial. On that basis, the Defendant argued that the Plaintiff had failed to show cogent reasons for such a late amendment and that the Defendant would suffer prejudice.

The Plaintiff’s position was that the amendment was a reduction of the amount claimed and did not in any way alter the nature of the cause of action, which remained a claim for the Plaintiff’s share of IMSEC’s operational losses arising out of the Defendant’s breach of the joint venture agreement. Counsel explained that as the evidence unfolded, in particular with reference to the 2018 financial statements and reconciliations, it became clear that certain components of the original computation ought not to be pursued and the figure of RM1,682,844.80 more accurately reflected the loss which could properly be proved.

The governing principles are well settled. Under Order 20 rule 5 of the Rules of Court 2012 (“ROC 2012”), the Court has a wide discretion to allow amendments at any stage of the proceedings, if such amendments are necessary for determining the real questions in controversy between the parties and if any prejudice can be compensated by costs. In Yamaha Motor Co Ltd v S/N JyqntIF3G0KqIjdPvplkzQ Yamaha Malaysia Sdn Bhd & Ors [1983] 1 MLJ 213, the appellate court emphasised that amendments should generally be allowed, even at a late stage, so that the real issues between the parties may be adjudicated, provided no injustice is occasioned which cannot be cured by costs.

In Hong Leong Finance Bhd v Low Thiam Hoe and another appeal [2016] 1 MLJ 301, the Federal Court added that in the case of very late amendments, especially on the eve of the trial, the party seeking the amendment should show cogent reasons for the lateness. The Federal Court further held that lateness in an application to amend cannot necessarily be compensated by an order for costs.

Applying these principles to the present facts, this Court is satisfied that the amendment should be allowed. First, the amendment does not introduce a new cause of action, new defence, or a new factual narrative. The foundation of the Plaintiff’s claim remains the same : that IMSEC suffered operational losses and the Plaintiff bore those losses, for which the Defendant is liable under the joint venture agreement. The only change is the quantum which the Plaintiff now says is supported by the evidence.

Second, this Court accepts that there is a cogent explanation for the reduction. The Plaintiff has sought to align the pleaded sum with the figures emerging from the 2018 financial statements and the other evidence on record. The amendment therefore narrows, rather than expands, the Plaintiff’s claim.

Third, this Court does not consider that the Defendant suffers any prejudice of a kind which cannot be cured. The factual basis for the computation - namely, the IMSEC accounts and the parties’ Board discussions - has been fully ventilated at trial. The Defendant had ample opportunity to cross-examine the Plaintiff’s witness on those figures and to advance its own computations, including through the Ecovis report. The Defendant is not taken by surprise as to the nature of the claim. It has throughout been contesting both liability and quantum.

In these circumstances, and having regard to the liberal approach to amendments endorsed by the appellate courts, this Court exercises its discretion to allow the amendment. The Plaintiff’s claim will therefore proceed on the amended quantum of RM1,682,844.80. B. Ecovis “Forensic Verification” report on admissibility and weight

The next preliminary issue concerns the report prepared by Ecovis Malaysia, which the Defendant describes as a Forensic Verification Review of IMSEC’s accounting records. The report was exhibited to the affidavit of DW2, who was called as an expert witness for the Defendant.

The Defendant’s position is that the Ecovis report satisfies the requirements of section 45 of Evidence Act 1950 [Act 56] and Order 40A ROC 2012 on the following basis –

DW2 is a qualified accountant;

the report sets out his opinion on IMSEC’s accounts and the methodology adopted.

The Defendant contends that the report was prepared independently and that the Plaintiff, having chosen not to commission a rebuttal expert, cannot simply ignore or dismiss the findings.

The Plaintiff, on the other hand, raised several objections as follows –

Ecovis was appointed unilaterally by the Defendant, contrary to what was envisaged in the IMSEC Board minutes, where a joint appointment of auditors was contemplated;

the authenticity of the document, especially on the alleged discrepancies between the signature on the report and the signature on DW2’s affidavit;

the report was produced for litigation, is not an audit in the statutory sense, and should not be allowed to displace the company’s own financial statements prepared by its appointed auditors.

Under section 45 of Act 56, expert opinion is admissible where the Court has to form an opinion on a point of science or art. Order S/N JyqntIF3G0KqIjdPvplkzQ 40A ROC 2012 prescribes procedural requirements for expert reports, including that the expert state his qualifications, the issues on which his opinion is sought, the material facts and assumptions, and that he acknowledge his overriding duty to the Court.

In this Court’s view, for this trial, the Ecovis report meets the threshold for admissibility. It is annexed to an affidavit affirmed by DW2, a qualified accountant, who was called and cross-examined at trial. The affidavit, read together with the report, substantially complies with the structure contemplated by Order 40A ROC 2012. To the extent there are criticisms about form or the exact wording of the “duty to court” acknowledgment, those go more to weight than to admissibility.

In this case, there are several features that, in this Court’s view, justify a cautious approach to the Ecovis report. These include –

the circumstances of its appointment, which this Court has noted;

its preparation after the fact for the purpose of these proceedings;

the limited scope of its review; and

the absence of any direct challenge to the underlying methodology of IMSEC's appointed auditors.

The principles governing the evaluation of expert testimony are well summarised in National Justice Cia Naviera SA v Prudential Assurance Co Ltd, The Ikarian Reefer [1993] 2 Lloyd's Rep 68, which has been adopted in this jurisdiction (see : Chew Eng Choon & Ors v Profound Gateway Sdn Bhd & Ors [2021] MLJU 2959). An expert owes an overriding duty to the Court, must be objective and must not assume the role of an advocate. Where an expert report is prepared for litigation and commissioned unilaterally by one party the Court is entitled to approach it with appropriate circumspection.

Having considered the totality of the evidence, this Court rules that the Ecovis report is admissible. However, this Court attaches limited weight to it. This Court treats it as one piece of material that highlights certain gaps or weaknesses in record-keeping but this Court does not regard it as displacing IMSEC’s financial statements or as conclusive proof that the Plaintiff has suffered no loss or that the Plaintiff’s entire case on quantum must fail. C. Adverse inference under section 114(g) Act 56.

The Defendant invites the Court to draw an adverse inference under section 114(g) of Act 56 on the ground that the Plaintiff failed to call one Mr Dharmendran, who was said to be involved in advancing funds to IMSEC and in discussions at Board level concerning the losses. It was submitted that Dharmendran is a material witness, is clearly within the Plaintiff’s power to call and S/N JyqntIF3G0KqIjdPvplkzQ that his absence justifies a presumption that his evidence would not have supported the Plaintiff’s case.

The Plaintiff opposes this. It is contended that PW1, who was in charge of IMSEC’s operations and attended all relevant Board meetings had personal knowledge of the matters in question and was available for cross-examination. According to the Plaintiff, the Defendant has not identified any specific issue which lies exclusively within Dharmendran’s knowledge and which could not be addressed by PW1. Furthermore, the Plaintiff points out that if the principle is applied strictly, the Defendant itself did not call other potentially relevant witnesses, including its own former directors and representatives on IMSEC’s Board.

Section 114(g) of Act 56 permits, but does not compel, the Court to presume that evidence which could and is not produced would, if produced, be unfavourable to the party who withholds it. The discretion is usually exercised where –

the witness is clearly material to a disputed issue;

the witness is available or within that party’s control; and

no reasonable explanation is offered for the omission, such that the Court is deprived of the best evidence.

As explained in Sabah Shell Petroleum Co Ltd & Anor v The Owners of and/or Any Other Persons Interested in the Ship or Vessel the ‘Borcos Takdir’ [2012] 5 MLJ 515, the power to draw S/N JyqntIF3G0KqIjdPvplkzQ an adverse inference under section 114(g) of Act 56 is not to be exercised as a matter of course. The Court must be satisfied that the witness in question is the person best placed to speak to the critical events, that his evidence is material, and that there is no reasonable explanation for the failure to call him, particularly where the party has not taken available steps such as issuing a subpoena. Only then is it appropriate to conclude that the missing evidence would have been adverse to that party’s case.

In the present case, this Court accepts that Dharmendran was involved in the affairs of IMSEC. However, on the evidence before this Court, this Court is not persuaded that his absence has deprived the Court of any critical factual narrative. PW1 was able to explain the key matters relating to IMSEC’s operations, the advances made, and the Board meetings. The Defendant conducted an extensive cross-examination of PW1 on these very issues. There was no point at which PW1 indicated that he lacked knowledge and that only Dharmendran could answer.

In addition, the Defendant has not demonstrated that it made any attempt to secure Dharmendran’s attendance, whether by subpoena or otherwise. Section 114(g) of Act 56 is not intended to become a general punishment for a party’s choice of witness, particularly where alternative witnesses with direct knowledge have been called.

In these circumstances, this Court declines to draw any adverse inference under section 114(g) of Act 56 against the Plaintiff for not calling Dharmendran. This Court assesses the Plaintiff’s evidence S/N JyqntIF3G0KqIjdPvplkzQ on its merits, bearing in mind, as with any witness, that the absence of corroboration in some respects may affect weight.

As for PDRM, the Plaintiff expressly disavows any reliance on section 114(g) of Act 56. This Court merely notes that the Defendant bears the burden of proving its assertion that the licence was cancelled solely as a result of a policy change and it has chosen not to call any officer from PDRM. That omission affects the strength of the Defendant’s evidential foundation on that point, but this Court does not invoke section 114(g) of Act 56 in relation to PDRM. D. Status of IMSEC’s 2018 Financial Statements

Finally, an issue arises as to the status and weight of IMSEC’s Financial Statements for the year ended 31 December 2018. Those statements show accumulated losses of RM2,404,064.00 They form an important plank of the Plaintiff’s case on quantum.

The Plaintiff’s explanation is that the 2018 financial statements were prepared and audited by IMSEC’s appointed auditors but the audit report remained unsigned because the IMSEC Board could not convene to approve the accounts after the resignation or non-attendance of the Defendant-nominated directors. PW1 gave evidence to this effect. The Plaintiff contends that, notwithstanding the lack of formal board approval and auditor’s signature, the 2018 accounts represent the best available evidence of IMSEC’s S/N JyqntIF3G0KqIjdPvplkzQ accumulated losses, especially when taken together with the signed and approved accounts up to 2017, which all parties accept.

The Defendant, conversely, urges caution, pointing out that the 2018 accounts are not signed, not approved by the board and that the Plaintiff has altered its figures more than once. The Defendant submits that the Court should not treat these accounts as reliable audited statements and that the Plaintiff has not discharged its burden to prove quantum with sufficient certainty.

As a matter of evidence, an unsigned set of accounts is not automatically inadmissible. It is a document whose contents may be proved through oral testimony. The absence of a signature or formal approval is a factor which goes to weight, not to admissibility. The Court is entitled to consider whether there is a plausible explanation for the absence of formalities, whether the figures are consistent with other evidence and whether any contrary financial evidence has been produced. This accords with the general principle that the probative value of a document is not determined solely by its formal status but by its reliability in the circumstances. As the Federal Court recognised in Abd Ghani Golamdin v Universiti Utara Malaysia & Ors [2023] 6 MLJ 1, admissibility and probative value are distinct inquiries, a document may be admitted into evidence and yet be found to carry little or no probative value. The Court is entitled to receive a document and then assess what reliance can safely be placed upon it.

In this case, this Court accepts PW1’s explanation as to why the accounts were not signed. The Defendant has not seriously S/N JyqntIF3G0KqIjdPvplkzQ challenged that explanation. The 2018 figures are also consistent with the trajectory of losses reflected in the earlier, signed accounts and with the broad range of loss discussed in the IMSEC Board minutes. The Defendant, despite engaging Ecovis, has not produced an alternative set of complete accounts showing that the 2018 loss figures are wrong.

This Court therefore hold that the 2018 Financial Statements, although unsigned, are sufficiently reliable to be used as evidential support for the fact and approximate quantum of IMSEC’s accumulated losses. This Court will treat them with appropriate caution and will not assume that every line item is beyond doubt; nonetheless, they represent the best available documentary picture of IMSEC’s financial position as at 31 December 2018.

Against that backdrop, when this Court later considers the Plaintiff’s claim for RM1,682,844.80, this Court will do so by reference to the 2018 Financial Accounts, the earlier accounts, the Board minutes and the other evidence as a whole, bearing firmly in mind the principles that the Plaintiff must prove its loss on a balance of probabilities and that mathematical perfection is not required, only reasonable certainty.

There are 7 issues filed by both parties to be trial (Enclosure 15). However, having considered the pleadings, the evidence and the S/N JyqntIF3G0KqIjdPvplkzQ submissions of counsel, this Court finds the following principal issues arise for determination –

whether the JVA was discharged by frustration under section 57(2) of Act 136, as contended by the Defendant, by reason of the cancellation of the AP licence; or whether, instead, the Defendant is in breach of the JVA, in particular clause 4.3, by failing to preserve the AP licence;

if liability is established, whether the Plaintiff has proved the quantum of its claim;

whether the Defendant has made out its counterclaim in respect of training costs and alleged mismanagement/breach of fiduciary duty by the Plaintiff; and

The appropriate orders as to interest.

This is this Court’s analysis and findings on each issue.

The Plaintiff’s case is that the Defendant, as holder of the AP licence and as a party to the JVA, assumed responsibility for securing and maintaining the regulatory approvals necessary for IMSEC’s business. Clause 4.3 of the JVA is relied upon as imposing the Defendant's obligation under the JVA. The Plaintiff S/N JyqntIF3G0KqIjdPvplkzQ contends that the AP licence was cancelled because the Defendant failed to comply with PDRM’s conditions, despite receiving warnings, and that such failure amounts to a breach of the JVA. On this footing, the Plaintiff contends that the doctrine of frustration has no application

The Defendant's answer to all this is that the JVA became impossible to perform through no fault of its own. This is due to PDRM's policy decision which resulted in the cancellation of the licence. This is a regulatory act beyond IRDA's control. Accordingly, the contract was frustrated under section 57(2) of Act 56.

It is convenient to begin with the terms of the JVA. The parties do not dispute that the JVA contemplated IMSEC to operate an auxiliary police business in Iskandar Malaysia and that this business was entirely dependent on the continued existence of the AP licence.

Clause 4.3 of the JVA provides, in substance, that IMSEC and/or the Defendant shall ensure the availability of the AP approval and other licences necessary for IMSEC’s business. Clause 19, in turn, provides for an indemnity or liability on the part of a party which is in breach of its obligations under the JVA.

In interpreting Clause 4.3, this Court applies the plain meaning rule. As held by the Federal Court in Far East Holdings Bhd & Anor v Majlis Ugama Islam dan Adat Resam Melayu Pahang and other appeals [2018] 1 MLJ 1 at [156], "It must be more than settled that S/N JyqntIF3G0KqIjdPvplkzQ the construction of a document is a question of law". Where the words of a contract are clear and unambiguous, the court must give effect to them according to their ordinary meaning. The word "undertakes" in Clause 4.3 is defined in Black's Law Dictionary (12th Ed) as "to give a formal promise; guarantee". The Defendant therefore promised and guaranteed that the necessary licences "shall continue to be available". This promise was breached when the licence was revoked.

The language of clause 4.3 is significant. It does not merely require the Defendant to make reasonable efforts to obtain a licence. It requires the Defendant to “ensure the availability” of the AP approval. That is a strong formulation. This reflects a deliberate contractual allocation, given that the Defendant was the statutory body with direct access to PDRM and the relevant ministries.

On the evidence, the Plaintiff, though responsible for IMSEC’s operations and marketing, was not the licence holder. The licence was obtained and held in the Defendant’s name. This was because the AP licence could only be issued to the Defendant as a statutory body; IMSEC, as a private company, was not eligible to hold the licence in its own name. All formal correspondence from PDRM concerning the licence was addressed to the Defendant. It was the Defendant who was to answer any regulatory queries and ensure compliance with the licence conditions. This allocation of responsibility is consistent with clause 4.3 and the commercial context.

The Defendant emphasises that it is a statutory body established under the Iskandar Regional Development Authority Act 2007 (Act 664) and that the joint venture was approved at the highest level of government, including by the Members of Authority chaired by the Prime Minister. While this Court accepts that IRDA is a statutory body with a public mandate, this status does not exempt it from the contractual obligations it voluntarily assumed under the JVA. Section 45 of Act 664 expressly authorises IRDA to form subsidiaries and enter into joint ventures and it was pursuant to this power that IRDA entered into the JVA with the Plaintiff. Having done so with the benefit of legal advice and governmental approval, IRDA is bound by the terms of that agreement like any other contracting party. The principle of sanctity of contract applies with equal force to statutory bodies entering into commercial arrangements. As the Federal Court observed in Berjaya Times Squares Sdn Bhd (Formerly Known As Berjaya Ditan Sdn Bhd) v M Concept Sdn Bhd [2010] 1 MLJ 597, parties who enter into a contract are at complete liberty, in accordance with the doctrine of freedom of contract, to agree on any terms they think fit and the role of the court is to interpret the contract in a sensible fashion. IRDA cannot now invoke its statutory character to escape liability for breach of a contract it willingly executed.

The supervening event relied on by the Defendant is the PDRM letter dated 17 January 2018 cancelling the AP licence. There is no dispute that, once the licence was cancelled, IMSEC could no longer lawfully operate its auxiliary police business. The venture, as conceived, could not continue.

The more difficult and crucial question is : what caused PDRM to cancel the licence? Was it, as the Plaintiff claims, the result of the Defendant’s own non-compliance with licence conditions, despite earlier warnings and opportunities to rectify? Or was it, as the Defendant claims, essentially a matter of regulatory and policy change beyond its control?

This Court also finds the following factual aspects are also relevant–

PDRM’s earlier correspondence (including the 2015 show-cause letter) identifies concerns that auxiliary police officers were being deployed to premises not directly related to the Defendant, that there were questions about the involvement of a third-party entity in recruitment and training arrangements, and that required manpower levels had not been met. The Defendant was requested to explain these matters and warned that failure to comply could affect the status of the licence;

the Defendant responded and there were ongoing engagements. However, the Defendant’s own witnesses accept that PDRM had raised specific alleged breaches and that the licence remained under scrutiny; and

the Defendant did not call any witness from PDRM to testify as to the true basis of the eventual cancellation in January

Instead, the Defendant relies on its own internal S/N JyqntIF3G0KqIjdPvplkzQ understanding and communications to say that the cancellation was due to a broader policy decision.

This Court also finds significant the Defendant's delay in communicating PDRM's concerns to the Plaintiff and to the IMSEC Board. The evidence shows that PDRM's letter dated 30 March 2015, which identified serious alleged breaches of the AP licence conditions, was only discussed at the IMSEC Board meeting on 11 October 2016, a delay of approximately eighteen months. Similarly, the critical letter from Bukit Aman dated 17 January 2018, which cancelled the AP licence, was received by the Defendant on 21 January 2018 but was only forwarded to the Plaintiff on 26 February 2018 - a delay of over five weeks. This pattern of delayed disclosure is inconsistent with the obligation of mutual trust and cooperation enshrined in Clause 25.1 of the JVA, which declares it a "cardinal principle" that the parties shall act in the best interests of IMSEC and shall not withhold information prejudicial or detrimental to the joint venture. The Defendant's failure to promptly and transparently communicate PDRM's regulatory concerns deprived the Plaintiff of the opportunity to participate in any remedial efforts and reinforces my finding that the Defendant failed to discharge its obligations under the JVA.

This Court accepts that regulatory policy considerations may have formed part of the background. Nevertheless, on the totality of the evidence, this Court is not persuaded that the Defendant has shown that the cancellation was a purely external policy act unconnected with its own conduct. The letters show that PDRM had identified alleged breaches of conditions by the licence holder S/N JyqntIF3G0KqIjdPvplkzQ and had given the Defendant an opportunity to respond and to bring itself into compliance. The cancellation did not come like a bolt from the blue. It was the culmination of a process in which the Defendant had been expressly put on notice of potential non-compliance.

The Defendant, through DW1, testified that there were "some discussions" with PDRM following the revocation and that IRDA was "later asked to bagi penjelasan". However, DW1 candidly admitted that he could not confirm whether a formal appeal was actually lodged against the cancellation. The Plaintiff submits and this Court accepts, that informal discussions or requests for clarification do not amount to the Defendant's obligation under Clause 4.3.

Given that the burden lies on the Defendant to establish frustration and in light of the omission this Court has noted, this Court is not prepared to accept the Defendant's characterization that the licence was cancelled solely on policy grounds and in a manner wholly unrelated to its own performance of its obligations.

Section 57(2) Act 136 provides that a contract to do an act which, after the contract is made, becomes impossible or by reason of some event which the promisor could not prevent becomes unlawful, becomes void when the act becomes impossible or unlawful.

The doctrine of frustration embodied in section 57(2) Act 136 is of limited application. As explained by the Federal Court in Kin Nam Development Sdn Bhd v Khau Daw Yau [1984] 1 MLJ 256 – "…It occurs in a situation where, due to a change of circumstances, a contract is rendered legally and physically impossible of performance. The doctrine is an exception to the general rule as to an absolute contract... The doctrine does not apply just because the promisor's obligation has become, because of change of circumstances, more onerous than what he has contracted for..." (see also Pacific Forest Industries Sdn Bhd & Anor v Lin Wen-Chih & Anor [2009] 6 MLJ 293).

Importantly, the authorities stress that a party cannot rely on frustration where the alleged impossibility is self-induced or where the risk has been contractually allocated. In Guan Aik Moh (KL) Sdn Bhd & Anor v Selangor Properties Bhd [2007] 4 MLJ 201, the Court of Appeal identified three elements for section 57(2) Act 136 to apply – "(a) the event relied upon must be one for which no provision has been made in the contract - if provision has been made then the parties must be taken to have allocated the risk between them;

the event must be one for which the promisor is not responsible - self-induced frustration is ineffective; and

the event must render the obligation radically different from that which was undertaken".

If any of these elements is absent, section 57(2) does not apply.

The classic formulation, in both local and English authorities is that frustration occurs where an unforeseen event, beyond the control of the parties and not due to their fault, so radically alters the nature of the contractual obligation that it would be unjust to hold them to it. Frustration is not lightly to be invoked to relieve a party from a bad bargain or from a risk which it has assumed.

The doctrine of sanctity of contract requires that freely negotiated agreements be honoured. As already noted, the Defendant, being a statutory body with access to legal advice, entered into the JVA with full knowledge of its obligations under Clause 4.3. It cannot now seek to escape those obligations by invoking frustration where the frustrating event was of its own making.

Where the contract itself assigns a particular risk to one party, it is generally inconsistent with that allocation for that party to later say that the occurrence of that very risk frustrates the contract. To that extent, the contract may be said to have 'pre-empted' the operation of frustration.

Applying these principles, this Court is of the view that the Defendant has not made out its plea of frustration.

First, by virtue of clause 4.3 of the JVA and the commercial scheme of the joint venture, the licensing risk was allocated squarely to the Defendant. As this Court has explained, Clause 4.3 allocated the licensing risk to the Defendant.

Second, the documentary trail shows that PDRM raised concrete concerns about how the licence was being implemented. Those concerns were directed to the Defendant as licence holder. While the Defendant disagrees with PDRM's characterisation, the eventual cancellation is closely linked to the Defendant's own conduct and compliance (or lack thereof) with licence conditions. Applying the second limb of Guan Aik Moh, the Defendant's own acts or omissions contributed to the cancellation, as this Court shall now explain.

Third, even if PDRM's internal policy considerations played some part in its decision, the Defendant has not discharged its burden of showing that the cancellation was solely attributable to those policy factors and not at all to its own implementation of the licence. In the absence of direct evidence from PDRM, to which this Court has already referred, it would be speculative to attribute the cancellation entirely to a supervening policy change.

The Defendant relies on the three-element test for frustration in Guan Aik Moh (KL) Sdn Bhd & Anor which this Court has set out above. The Defendant submits that all three elements are S/N JyqntIF3G0KqIjdPvplkzQ satisfied. This Court respectfully disagrees. The Defendant's argument fails at the second element, namely, that the event must be one for which the promisor is not responsible.

On the first element, whether the JVA provided for the revocation. The Defendant is correct that there is no express provision dealing with the scenario of licence revocation by PDRM. As this Court has set out above, Clause 4.3 imposes on the Defendant a positive obligation to maintain the necessary licences. Therefore, while the JVA may not have expressly provided for revocation, Clause 4.3 implicitly addresses this contingency.

On the second element, whether the event was self-induced, this is where the Defendant's argument collapses entirely. The evidence before this Court establishes that the revocation of the auxiliary police licence by PDRM was not an arbitrary or unexpected act of the regulator. It was the direct consequence of IRDA's own breaches of PDRM's conditions, including –

the deployment of auxiliary police personnel to premises not owned by IRDA (19 premises identified in PDRM's letter dated 30 March 2015);

the involvement of third parties such as QCPI in sending trainees to PULAPOL; and

the failure to rectify these breaches within the time stipulated by PDRM despite being given opportunities to do so.

It is trite law that a party cannot invoke the doctrine of frustration where the frustrating event is self-induced. In Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, the Privy Council established the principle that frustration cannot be self-induced, holding that where the appellants' own election determined which vessel would be deprived of a licence, they could not plead frustration of the charter-party. The principle was affirmed by the English Court of Appeal in Lauritzen (J) AS v Wijsmuller BV, The Super Servant Two [1990] 1 Lloyd's Rep 1, where it was held that frustration cannot be self-induced and is unavailable where the frustrating event results from the act or election of the party seeking to rely on it. This line of authority was cited with approval by the Malaysian Court. (see : Hong Leong Bank Bhd v Tan Siew Nam & Anor [2014] 5 MLJ 34).

In the present case, the Defendant's own non-compliance with PDRM's conditions precipitated the licence revocation. The Defendant cannot now turn around and claim that this revocation, which it caused, has frustrated the JVA. To allow the Defendant to do so would be to permit it to benefit from its own wrong, which is contrary to the maxim commodum ex injuria sua nemo habere debet (no one ought to derive advantage from his own wrong).

On the third element, whether performance was rendered radically different. It is unnecessary for this Court to consider this element given the finding on the second element. However, for completeness, this Court observes that even if the licence had been revoked through no fault of IRDA, the contractual allocation under Clause 4.3 would preclude reliance on frustration.

Accordingly, this Court finds that the defence of frustration under section 57(2) of Act 136 is not available to the Defendant. The Guan Aik Moh test is not satisfied because the frustrating event i.e. the licence revocation was self-induced by the Defendant's own breaches.

The Defendant also relies on Setiausaha Kerajaan Negeri Sembilan Darul Khusus & Anor v NS Water Konsortium Sdn Bhd & Ors [2021] 3 MLJ 302, where the Court of Appeal held that a water services concession agreement was frustrated by the 21 March 2005 amendment to the Ninth Schedule of the Federal Constitution, which removed "water supply and services" from the jurisdiction of the State Government and placed them under the exclusive jurisdiction of the National Water Services Commission. The Defendant submits that, similarly, PDRM's revocation of the auxiliary police licence was a sovereign regulatory act that frustrated the JVA.

This Court finds NS Water Konsortium to be distinguishable on its facts. In that case, the frustrating event was a constitutional amendment, an act of the Legislature at the highest level, effecting a fundamental change in the legal framework governing water supply. Neither contracting party caused or contributed to that constitutional change. It was a true supervening event, external to both parties, which rendered performance legally impossible.

The present case is fundamentally different. The revocation of the auxiliary police licence was not the result of a change in legislation S/N JyqntIF3G0KqIjdPvplkzQ or policy affecting all auxiliary police licence holders nationwide. It was a specific regulatory enforcement action taken by PDRM against IRDA due to IRDA's own breaches of the conditions attached to its licence. The evidence shows that PDRM issued warning letters, gave IRDA 14 days to explain and later afforded a 3-month grace period to rectify the breaches. IRDA failed to do so. The revocation was therefore not an arbitrary sovereign act but a proportionate regulatory response to IRDA's non-compliance.

To equate such a revocation with a constitutional amendment would be to ignore the causal chain. In NS Water Konsortium, the State Government did not cause the constitutional amendment. In the present case, IRDA's breaches caused the licence revocation. The Defendant's reliance on NS Water Konsortium is therefore misplaced.

In these circumstances, the JVA was not discharged by frustration. The event relied upon - the cancellation of the AP licence - is within the realm of risk which the Defendant assumed under the JVA and is substantially related to its own conduct as licence holder. The parties remained bound by their contractual obligations until the JVA came to an end in accordance with its terms.

Once the frustration plea is rejected, the question is whether the Defendant is in breach of the JVA, particularly clause 4.3, and if so, whether the Plaintiff’s loss flows from that breach.

For the reasons already discussed, this Court finds that the Defendant undertook the contractual duty embodied in Clause 4.3.

The Defendant’s failure to preserve the AP licence, in this Court’s judgment, amounts to a breach of clause 4.3 of the JVA. In contractual terms, the Defendant did not perform the obligation which it had assumed. That breach caused IMSEC to lose the legal ability to carry on its core business and thereby brought the joint venture to an end.

In addition to the breach of Clause 4.3, this Court is also satisfied that the Defendant's conduct constitutes a breach of Clause 25.1 of the JVA, to which this Court has already referred. The Defendant failed to promptly disclose PDRM's regulatory concerns to the Plaintiff. It also did not involve the Plaintiff in efforts to address those concerns, nor did it take adequate steps to preserve the AP licence. All of this is inconsistent with the cardinal principle enshrined in Clause 25.1. While the Plaintiff did not specifically plead breach of Clause 25.1 as a separate cause of action, the conduct in question forms part of the same factual matrix and supports the overall finding that the Defendant failed in its duties under the JVA.

Further, Section 38(1) of Act 136 provides : "The parties to a contract must either perform or offer to perform, their respective promises, unless such performance is dispensed with or excused under this Act, or of any other law". The Defendant was obliged to perform its promise under Clause 4.3.

Clause 19 of the JVA provides, in effect, that a party in breach is liable for the loss arising from such breach. The exact wording of S/N JyqntIF3G0KqIjdPvplkzQ clause 19 need not be set out in full here. It suffices to say that it reinforces the ordinary contractual position that the party responsible for the breach must bear the losses which naturally result from it.

On the evidence, the collapse of IMSEC's business, which this Court has described earlier, was a direct consequence of the licence cancellation. The Plaintiff's losses flowed in a straightforward way from the Defendant's breach.

The causal link between the Defendant's breach and the Plaintiff's loss is further supported by the testimony of DW1, the Defendant's own witness. During cross-examination, DW1 was asked whether IMSEC would have been profitable if more auxiliary police personnel had been available. His answer was unequivocal : "Definitely".

This admission confirms that the failure to maintain the AP licence and the consequent inability to recruit, train, and deploy further auxiliary police, directly caused IMSEC to remain loss-making and ultimately to fail. The Defendant cannot argue that the Plaintiff's losses are unconnected to the breach when its own witness has acknowledged that the venture would have succeeded but for the constraints imposed by the regulatory action which the Defendant's breaches precipitated.

This Court therefore finds that the Defendant is liable in damages to the Plaintiff for losses which the Plaintiff, as IMSEC’s majority shareholder and funder, has incurred by reason of the Defendant’s S/N JyqntIF3G0KqIjdPvplkzQ breach of clause 4.3 of the JVA. The precise quantification of those losses will be addressed under Issue (b).

For completeness, this Court adds that nothing in this analysis turns on the Plaintiff’s knowledge of the business model or its role in day-to-day operations. Even if the Plaintiff was aware of and participated in the manner in which IMSEC marketed and deployed auxiliary police personnel, the primary responsibility for regulatory compliance under the AP licence remained with the Defendant as licence holder. The Plaintiff’s knowledge does not erase the contractual allocation of responsibility under clause 4.3.

This Court should address the Defendant's submission, based on PW1's concession during cross-examination, that the JVA contains no clause expressly prohibiting the sharing of auxiliary police personnel with other companies or the deployment of auxiliary police to third-party premises through Public-Private Partnership arrangements. The Defendant submits that this admission is fatal to the Plaintiff's case.

This Court is not persuaded. The question posed to PW1 was specifically directed at the act of sharing auxiliary police personnel. PW1's answer, when properly understood, was that the JVA contained no express prohibition against such sharing. This Court accepts that interpretation.

However, the Plaintiff's case does not rest on an alleged breach of a clause prohibiting the sharing of personnel. The Plaintiff's S/N JyqntIF3G0KqIjdPvplkzQ primary contention is that the Defendant breached Clause 4.3 of the JVA.

PW1's admission is therefore not inconsistent with the finding that the Defendant breached Clause 4.3. The two are distinct issues. The former concerns a specific operational practice; the latter concerns the overarching obligation to maintain the licence. The Defendant's argument conflates these issues and must be rejected.

Accordingly, Issue (a) is therefore answered in favour of the Plaintiff. The JVA was not discharged by frustration. The Defendant is in breach of its contractual obligation to ensure the continued availability of the AP licence and is liable for the resulting loss, subject to the Plaintiff proving the extent of such loss.

Having found that the Defendant is in breach of clause 4.3 of the JVA, the next question is whether the Plaintiff has proved, on a balance of probabilities, the quantum of loss it claims, namely

The Plaintiff’s case on quantum may be summarised as follows. IMSEC operated at a loss throughout its existence. The Plaintiff, as 60% shareholder and manager, funded IMSEC's operations and following the cancellation of the AP licence, bore the costs of S/N JyqntIF3G0KqIjdPvplkzQ winding down the business. These losses are reflected in IMSEC’s audited financial statements up to 2017 and the prepared, albeit unsigned, financial statements for the year ended 31 December 2018.

On the basis of those accounts and the parties’ 60:40 shareholding, together with the discussions recorded in the IMSEC’s 6th Board of Directors’ meeting minutes, the Plaintiff originally quantified its loss at RM2,053,225.54, later refining it to RM1,682,844.80. The Plaintiff submits that this reduced figure is a conservative and realistic estimate of the loss it has in fact borne, and that the Court should accept it.

The Defendant's position is that the Plaintiff has failed to prove its loss with sufficient certainty. It stresses that the figures have changed over time, a point this Court has already noted in the context of the amendment application. The Defendant says this "moving target" demonstrates that the Plaintiff itself does not know what it has lost. It also relies on the Ecovis forensic verification report as suggesting that the underlying accounts are unreliable and that there is no clear indebtedness from IMSEC to the Plaintiff.

The law on proof of damages is well established. The burden lies on the Plaintiff to prove, on a balance of probabilities, both the fact of loss and its amount. The Court will not act on pure speculation. At the same time, the authorities recognise that mathematical precision is not always possible, particularly in cases involving business losses or complex accounts.

In Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177, often cited in our courts, it was said that a plaintiff “must prove his damage; he must prove it with such certainty as the nature of the case permits”, and that he cannot simply “throw figures at the court”. The Malaysian cases have adopted this approach while acknowledging that reasonable estimates based on credible records may suffice where exact calculation is impracticable.

Local decisions such as Hong Yik Trading v Liziz Plantation Sdn Bhd [2017] 5 MLJ 398 emphasise that the Court must be satisfied that the documentary and oral evidence is sufficiently reliable to support the claimed figures. Where the evidence is unsatisfactory, the Court may either award only nominal damages or adopt a conservative global figure that reflects what has been proved.

It follows that the Plaintiff must show, first, that it has in fact suffered loss as a result of the Defendant’s breach and second, that the sum of RM1,682,844.80 represents a fair and reasonable quantification of that loss having regard to the available evidence.

On the first limb, the fact of loss, this Court is satisfied that the Plaintiff has comfortably crossed the threshold.

The financial statements of IMSEC up to the financial year ended 31 December 2017, which were duly signed by the auditors and approved by the Board, show that IMSEC had been making losses every year since incorporation and had accumulated losses of over RM1.28 million by the end of 2017. This was not seriously disputed.

Following the cancellation, as this Court has described, IMSEC ceased operations. PW1's evidence, which this Court accepts, is that the Plaintiff funded IMSEC's wind-down obligations during this period. There is no suggestion that IMSEC ever returned to profitability; the venture effectively collapsed.

The 2018 financial statements (albeit unsigned) show that IMSEC’s accumulated losses increased further to approximately RM2.4 million as at 31 December 2018. The Defendant has not produced any alternative set of accounts which contradicts this broad picture.

On this evidence, this Court has no difficulty in finding that IMSEC suffered substantial losses and that the Plaintiff, having funded those losses, was left out of pocket as a result of IRDA's breach. The suggestion that 'no loss is proved' is, with respect, untenable.

The more contentious question is whether the Plaintiff has proved that the portion of IMSEC’s losses and advances it bears, properly attributable to the Defendant’s breach, is RM1,682,844.80.

This Court has already dealt with the status of the 2018 financial statements in the preliminary section and need not repeat that analysis here. This Court regardss the 2018 figures as sufficiently reliable, being broadly consistent with the trajectory of losses recorded in the earlier accounts.

The IMSEC’s 6th Board of Directors’ meeting minutes are also of considerable significance. They record a discussion in which the S/N JyqntIF3G0KqIjdPvplkzQ losses borne by the Plaintiff and advances made on IMSEC’s behalf were acknowledged and an approximate figure of around RM2.087 million was referred to as the amount to be taken into account, subject to a detailed audit and a formal settlement agreement. The Board also agreed that the training costs of RM1.8 million would not form part of this calculation and would be borne by the Defendant.

This Court agrees with the Defendant that the Board minutes do not constitute, in themselves an immediately enforceable settlement agreement. They contemplate further audit work and documentation. However, they are highly probative of two points of importance –

first, that both sides, including the Defendant’s own representatives recognised that the Plaintiff had advanced substantial sums for IMSEC’s operations and that, in broad terms, the amount owing was in the region subsequently reflected in the financial statements; and

second, that the Defendant agreed in principle that training costs would be excluded from the calculation of what was owing to the Plaintiff, a matter relevant to the counterclaim but also to the structure of the computation.

Taken together, the 2017 and 2018 financial statements and the IMSEC’s 6th Board of Directors’ meeting minutes provide a coherent and mutually reinforcing picture of IMSEC’s financial position and the magnitude of the Plaintiff’s exposure.

The Defendant’s principal attack on quantum rests on the Ecovis forensic verification report. As this Court has indicated earlier, this Court treats the Ecovis report as admissible but of limited weight.

The Ecovis report highlights deficiencies in IMSEC’s record - keeping, missing supporting documents and limitations in the underlying data. These are not trivial matters. They show that the accounting records are not ideal. However, in my view the report stops short of demonstrating that the 2018 financial statements are fundamentally wrong or that no reliable conclusion about IMSEC’s losses can be drawn.

The Ecovis report does not provide a fully worked alternative set of accounts showing that IMSEC’s accumulated losses were materially less than those recorded or that IMSEC, in fact owed nothing to the Plaintiff. Instead, it raises questions and flags items for which detailed supporting documentation was not located. That is a reason for some caution, but it is not sufficient, in this Court’s view, to displace the combined weight of the company’s own financial statements, the Board minutes and PW1’s oral testimony.

Furthermore, the Defendant’s own reliance on the 2018 accounts for certain aspects of its counterclaim and its participation in the Board discussions undercuts the suggestion that those accounts are wholly unreliable when they operate against the Defendant’s interests.

In light of this, this Court does not accept that the Ecovis report renders the Plaintiff’s evidence on quantum so unsafe that only nominal damages can be awarded. It justifies close scrutiny and a conservative approach, but not a wholesale rejection of the Plaintiff’s figures.

The Plaintiff originally advanced a higher figure but has, by amendment, confined itself to a claim of RM1,682,844.80. That figure is lower than the indicative amount discussed at the IMSEC’s 6th Board of Directors’ meeting and lower than the total accumulated losses shown in the 2018 financial statements. It therefore operates as a conservative subset of the overall loss picture.

The Plaintiff has explained and this Court accepts, that the reduction reflects the exclusion of items which could not be conveniently proved or which overlapped with other components, leaving only those sums which, in counsel’s view could be supported by the available documentation and reconciliations. The Defendant has not identified any specific component of the RM1,682,844.80 figure which is demonstrably wrong or duplicative; its criticism has been directed more at the historical fluctuations than at the internal structure of the final figure.

Having considered the evidence as a whole and bearing in mind the Bonham-Carter principle that damages must be proved with such certainty as the nature of the case permits, this Court is satisfied that the Plaintiff has proved, on a balance of probabilities, that it has suffered loss in at least the amount of RM1,682,844.80 S/N JyqntIF3G0KqIjdPvplkzQ as a result of the Defendant’s breach of the JVA. Similarly, in Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360, Edgar Joseph Jr J observed at p 367 that "it is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right". However, His Lordship also recognised that where damage is shown but absolute precision is not achievable, the court is entitled to make a reasonable assessment based on the available evidence.

This is not a case where the Court is being asked to accept arbitrary figures. There are financial statements prepared by the company’s auditors, corroborated by Board minutes and by unchallenged aspects of PW1’s testimony. There are no competing accounts suggesting that the true loss is less. The Ecovis report, while highlighting gaps, does not displace this evidential foundation.

In these circumstances, this Court sees no sufficient reason to discount the Plaintiff’s final, reduced claim. To do so would, in effect, penalise the Plaintiff for having refined its claim downwards as the evidence crystallised. That would not be consistent with the underlying objective of doing substantive justice on the evidence before the Court.

The Defendant submits that the Plaintiff has failed to discharge its burden of proof, relying on Mammoth Empire Construction Sdn S/N JyqntIF3G0KqIjdPvplkzQ Bhd v Lifomax Woodbuild Sdn Bhd [2017] 1 MLJ 453, where the Court of Appeal held (at paragraph 39) – "From the perspective of the burden of proof on the respective parties, it was indisputable that the plaintiff had to prove to the hilt their case as pleaded... There was no evidence led to satisfy the court on that count and in the absence of such necessary evidentiary material the plaintiff had therefore plainly failed to discharge the burden on them to prove the sum claimed or any alternative amount".

The Defendant argues that the Plaintiff's shifting figures : from RM2.087 million in the IMSEC Board Minutes (11.06.2018), to RM1,474,886.95 in the Notice of Demand (29.03.2019), to RM2,053,225.54 in the Statement of Claim (20.01.2020) and finally to RM1,682,844.80 as amended during trial (17.10.2025), demonstrate a lack of verified accounting and render the claim speculative.

This Court accepts that the figures have evolved over time. However, the evolution is explicable. The initial figure of RM2.087 million was recorded in the Board Minutes as "subject to audit", it was always provisional. The subsequent variations reflect the ongoing process of reconciliation between the parties. The final figure of RM1,682,844.80, which the Plaintiff now claims, is derived from the Ecovis Malaysia reconciliation and represents 70% of the total verified loss of RM2,404,064.00, in accordance with the shareholding ratio (MMSB 60%, IRDA 40%. However, IRDA to S/N JyqntIF3G0KqIjdPvplkzQ bear 70% under the loss-sharing arrangement discussed at Board level).

Mammoth Empire is distinguishable. In that case, there was "no evidence led to satisfy the court". The plaintiff simply failed to adduce any documentary basis for its claim. In the present case, the Plaintiff has adduced –

IMSEC's Financial Statements for the years 2012 to 2018, which were prepared by the company's management and presented to the Board;

the Ecovis Malaysia reconciliation report, which while commissioned by IRDA and given limited weight by this Court, nevertheless provides an independent verification of the quantum;

the testimony of PW1 Muhamad Rafizam, who explained the basis of the computation and was cross-examined at length; and

the Board Minutes dated 11.06.2018, which recorded the parties' in-principle agreement to share losses, subject to audit.

This is not a case where the Plaintiff has simply plucked a figure from thin air. This is not a case where the Plaintiff has simply plucked a figure from thin air. The quantum is supported by IMSEC's own financial records. These records were maintained S/N JyqntIF3G0KqIjdPvplkzQ during the joint venture and reflect the actual expenditure incurred by IMSEC in operating the auxiliary police services. The absence of individual vouchers for every item of expenditure does not, in this Court's view, render the financial statements unreliable. As the Court of Appeal held in Juta Damai Sdn Bhd v Permodalan Negeri Selangor Bhd [2014] 5 MLJ 676, the best evidence rule requires proof not by the "best evidence" but by the "best evidence available"; and where a claim on quantum is supported by evidence that has not been strongly challenged or discredited, and the opposing party places nothing on its side of the scale on the balance of probabilities, the scales tilt in favour of the claimant.

Accordingly, the Plaintiff has discharged its burden of proving the quantum of loss.

Section 74(1) of Act 136 provides that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss which naturally arose in the usual course of things from such breach, or which the parties knew at the time of making the contract to be likely to result from the breach. The Plaintiff's loss - being the expenditure incurred in operating IMSEC which could not be recovered due to the premature termination of the joint venture - naturally arose from the Defendant's breach of Clause 4.3.

This Court therefore awards the Plaintiff such as damages for the Defendant’s breach of the JVA, subject to the question of interest, which this Court addresses later in this judgment.

(A) Training costs - the RM1,028,505.10 claim

Clause 4.1.1(v) of the JVA, in substance, provides that the Defendant’s 40% equity participation in IMSEC would be satisfied by capitalising certain training costs funded from a government grant and that the Plaintiff would “concurrently” subscribe such number of shares as necessary to maintain the agreed 60:40 shareholding ratio. Each RM1 of training cost was to be treated as RM1 of share value.

The Defendant’s case is that training costs of RM1.8 million were incurred and capitalised by the Defendant. On the Defendant’s reading of clause 4.1.1(v), the Plaintiff was obliged to match that capitalisation by subscribing further shares equivalent to 60% of that sum. Because this matching subscription did not in fact take place, the Defendant claims that the Plaintiff is now liable to it in the sum of RM1,028,505.10 (i.e. 60% of the relevant training costs).

The Plaintiff disputes both the construction and the effect of clause 4.1.1(v). It contends that the clause regulates how the parties' equity in IMSEC is to be structured and funded, not a free-standing obligation to reimburse training expenditure in cash. Further, the Plaintiff relies on the IMSEC’s 6th Board of Directors’ meeting minutes, to which I have already referred, recording that training S/N JyqntIF3G0KqIjdPvplkzQ costs would not be taken into account and would be borne entirely by the Defendant. On that footing, the Plaintiff argues that the Defendant has either varied or waived any rights it might otherwise have had in respect of training costs, or is estopped from pursuing the present claim.

In this Court’s view, clause 4.1.1(v) is properly read as part of the share capital and funding mechanics of the joint venture, not as creating a direct monetary debt between the parties.

The clause envisages that training costs paid out of a government grant would be capitalised as part of IMSEC’s equity structure, with the Defendant’s 40% interest being satisfied by such capitalisation and the Plaintiff concurrently subscribing the balance of the shares to maintain its 60% interest. The language used is that of subscription of shares and capital contribution, not of repayment of a loan or reimbursement of expenditure.

Nothing in clause 4.1.1(v) states that if, for whatever reason, the share subscription mechanism does not fully proceed as contemplated, the Plaintiff becomes personally indebted to the Defendant for 60% of those training costs. That is a significant obligation; if it had been intended as a direct inter partes debt, one would expect clear words to that effect. The absence of such wording is telling.

This Court therefore does not accept that clause 4.1.1(v), read in its proper contractual context, gives rise to an automatic right in the S/N JyqntIF3G0KqIjdPvplkzQ Defendant to claim RM1,028,505.10 from the Plaintiff as a cash debt.

Even if clause 4.1.1(v) could, in isolation, be read as conferring such a right (which I do not accept), the subsequent conduct of the parties, particularly at Board level, is inconsistent with the Defendant’s present claim.

The IMSEC’s 6th Board of Directors’ meeting minutes, record in substance, that in computing the amount owing as between IMSEC and the Plaintiff, the parties agreed that training costs of RM1.8 million would not be included and that those costs would be absorbed entirely by the Defendant. This was part of a broader discussion on how to regularise IMSEC’s financial position and to allocate the burden of losses and costs.

The Defendant argues that this Board discussion was merely tentative and subject to further audit and the execution of a formal settlement agreement. As this Court has already observed in relation to the Plaintiff's quantum, this Court accepts that the minutes do not constitute a concluded settlement contract. However, the minutes remain compelling evidence of how the parties, including the Defendant's own representatives, understood and intended the training costs to be treated going forward.

At no point after that meeting did the Defendant take steps to resile from or qualify this position at Board level. It did not plead or prove any vitiating factor such as mistake, duress or lack of authority. Instead, it now advances a counterclaim premised on a S/N JyqntIF3G0KqIjdPvplkzQ construction of the JVA which is inconsistent with the Board’s recorded decision.

In this Court’s judgment, the combined effect of the contractual context and the Board minutes is that –

any strict rights the Defendant might have had to insist on contemporaneous capitalisation or matching subscription in relation to training costs were, at the very least, waived or varied by the Board’s subsequent agreement that the Defendant would fully absorb those costs; and

the Defendant is estopped, as between the parties to this litigation, from asserting that the Plaintiff remains liable to reimburse 60% of those training costs in cash.

Even leaving aside the waiver/variation and estoppel points, the Defendant has not, in my view, discharged its burden of proving that the sum of RM1,028,505.10 is a present, enforceable debt owed by the Plaintiff.

The evidence on how the figure is computed is limited. The Defendant has not demonstrated that this sum appears as a liability from the Plaintiff to IMSEC or to the Defendant in any of the financial statements. Nor has it shown that IMSEC itself has any subsisting cause of action against the Plaintiff in relation to the training costs, which the Defendant could then somehow adopt or enforce. The claim is framed directly between the Defendant and S/N JyqntIF3G0KqIjdPvplkzQ the Plaintiff, yet the contractual machinery it relies on is primarily concerned with capitalisation within IMSEC.

In light of the foregoing, this Court finds that the Defendant has failed to establish its training-cost claim. That limb of the counterclaim is therefore dismissed.

(B) Alleged mismanagement and breach of fiduciary duty

Under the second limb of the counterclaim, the Defendant alleges that the Plaintiff, as majority shareholder and manager of IMSEC, mismanaged the company, failed to maintain proper records and breached fiduciary duties owed to IMSEC and/or the Defendant. On that basis, the Defendant seeks, among others, a declaration that the Plaintiff is responsible for all of IMSEC’s losses and an order that the Plaintiff indemnify the Defendant accordingly. As emphasised by the Federal Court in Keruntum Sdn Bhd v The Director of Forests & Ors [2017] 3 MLJ 281, "the burden of proof rests throughout the trial on the party on whom the burden lies". Where, as here, the Defendant has failed to particularise and prove specific breaches, the evidential burden does not shift to the Plaintiff to disprove generalised allegations.

The particulars of mismanagement are framed in fairly general terms. They include assertions that –

IMSEC’s funds were allegedly expended without proper Board approval;

there were weaknesses in documentation and supporting vouchers; and

the Plaintiff failed to keep the Defendant adequately informed of IMSEC’s financial position.

The Defendant relies significantly on the Ecovis forensic verification report, which it says demonstrates poor record-keeping and calls into question the reliability of IMSEC’s accounts.

The Plaintiff’s answer is that, as this Court has noted in the Background, IMSEC's operations were supervised by a Board comprising nominees of both parties with joint signatory requirements and that budgets and expenditures were tabled for Board approval. PW1 testified that the Plaintiff acted within the authority given by the Board and that the Defendant’s representatives had full access to the accounts and were invited to examine them.

The law recognises that directors and, in certain circumstances, controlling shareholders may owe fiduciary duties to the company in the conduct of its affairs. A serious allegation of breach of fiduciary duty or mismanagement, however, must be specifically pleaded and strictly proved. Vague assertions or general dissatisfaction with how a venture turned out are not sufficient.

The burden of proof lies on the party making the allegation - in this case, the Defendant. It must identify what acts or omissions are said to constitute the breach, how they departed from the duties owed, and what loss flowed from those breaches. An expert report highlighting deficiencies in documentation may inform the analysis, but cannot by itself establish that fiduciary duties have been breached.

It is also relevant that IMSEC is a separate legal entity. To the extent that the complaint is that the Plaintiff mismanaged IMSEC, the natural claimant would be IMSEC itself, typically through a derivative action or via its liquidator if wound up. The Defendant’s attempt to repackage such allegations as a direct claim to shift all company losses onto the Plaintiff must be approached with caution.

In the present case, the Defendant has not, in this Court’s view, discharged the burden of establishing mismanagement or breach of fiduciary duty to the requisite standard.

First, the allegations are pleaded and presented at a relatively high level of generality. The Defendant has not particularised specific transactions which were said to be unauthorised, self-serving or manifestly improvident. Nor has it shown that any such transactions were carried out without Board knowledge or in defiance of Board decisions.

On the contrary, the unchallenged evidence of PW1 is that IMSEC’s cheques required joint signatures from representatives of S/N JyqntIF3G0KqIjdPvplkzQ both parties and that budgets and major expenditures were brought to the Board for approval. The Defendant’s nominees sat on the Board throughout the material period and had the opportunity to question and, if necessary, veto proposed expenditures.

Secondly, while the Ecovis report does highlight weaknesses in record-keeping and the absence of complete supporting documentation, it does not go so far as to say that funds were misappropriated, that expenditures were fictitious, or that any director acted dishonestly or in bad faith. The report is critical of the quality of documentation, but it does not identify specific breaches of fiduciary duty in the legal sense.

Thirdly, the Defendant has not demonstrated that any of the alleged shortcomings in IMSEC’s administration were the cause of IMSEC’s losses, as opposed to the losses being the natural consequence of a venture which never reached the scale necessary to be profitable and which was ultimately brought to an end by the cancellation of the AP licence. In a loss-making start-up venture, the mere fact of loss does not, without more, imply mismanagement or breach of duty.

Finally, the relief sought by the Defendant - that the Plaintiff be made solely responsible for all of IMSEC’s losses - sits uneasily with the corporate structure and the allocation of risk agreed in the JVA. Both parties entered into the joint venture as shareholders of IMSEC, with equal representation on the Board. They contemplated the possibility of losses and those losses were, in principle, to be borne in proportion to their equity interests unless S/N JyqntIF3G0KqIjdPvplkzQ otherwise agreed. To rewrite that allocation through broad, unparticularised allegations of mismanagement would, in my view, be unwarranted on the evidence.

For these reasons, this Court finds that the Defendant has not proved its allegations of mismanagement and breach of fiduciary duty against the Plaintiff. The declaratory reliefs sought and the associated claim that the Plaintiff should bear all of IMSEC’s losses are accordingly dismissed.

The Defendant’s Counterclaim is therefore dismissed in its entirety, with costs to the Plaintiff. The precise order as to costs will be addressed together with the costs of the main claim at the end of this judgment.

The Plaintiff claims interest on the judgment sum at the rate of 5% per annum from the date of the writ until the date of full and final settlement. The Defendant has, in its submissions, not taken a distinct position on interest beyond contending that no principal sum is payable. It has not suggested any different rate or period in the event the claim is allowed.

The Court’s power to award interest is found in, among others, section 11 of the Civil Law Act 1956 [Act 67] and Order 42 rule 12 ROC 2012. The usual practice in commercial and contractual S/N JyqntIF3G0KqIjdPvplkzQ matters is to grant interest at a conventional rate, often in the region of 5% per annum, from the date of the writ or from the date of judgment, depending on the circumstances.

In the present case, the Plaintiff’s loss arose progressively over the period of IMSEC’s operation and was substantially crystallised by the time the action was commenced. The Defendant has had the use of money which, in light of my findings, ought to have been borne by it. This Court sees no reason to deprive the Plaintiff of pre-judgment interest or to depart from the conventional rate sought.

This Court therefore awards interest on the judgment sum of RM1,682,844.80 at the rate of 5% per annum from the date of the writ until the date of full and final settlement.

For the reasons set out above, this Court summarises its findings as follows –

The JVA was not discharged by frustration under section 57(2) of Act 136.

The Defendant, as licence holder and contracting party under the JVA, is in breach of clause 4.3 for failing to ensure the S/N JyqntIF3G0KqIjdPvplkzQ continued availability of the AP licence, and is liable in damages to the Plaintiff.

The Plaintiff has proved, on a balance of probabilities, that it has suffered loss in the sum of RM1,682,844.80 as a result of the Defendant’s breach.

The Defendant has not established its claim for RM1,028,505.10 in respect of training costs under clause 4.1.1(v) of the JVA.

The Defendant has not proved its allegations of mismanagement or breach of fiduciary duty against the Plaintiff. The declaratory and consequential reliefs sought in the Counterclaim are not made out.

Accordingly, the Court makes the following orders –

Judgment for the Plaintiff against the Defendant in the sum of RM1,682,844.80;

Interest on the said sum at the rate of 5% per annum from the date of the writ until the date of full and final settlement;

the Defendant’s Counterclaim is dismissed in its entirety; and

The Plaintiff’s claim is allowed, and Defendant’s Counterclaim is dismissed with costs of RM 150,000.00 to be paid forthwith within 60 days as agreed parties. Dated : 23 January 2026 -signed-Dr Noradura Binti Hamzah Judicial Commissioner High Court Civil 2 Johor Bahru Solicitor for the Plaintiff : : George Varughese together with Johan Mohan Bin Abdullah Messrs. Johan Arafat Hamzah & Mona Solicitor for the Defendant : :