Ocean Worldwide Logistics (M) Sdn Bhd v Thow Sweat Peng (BA-22NCvC-176-04/2021)

The present case involves the dispute between two ex-colleagues in a logistics company who then became directors and shareholders in the Plaintiff-company in logistics service sector regarding a proposed purchase of a shop-office which was not proceeded with.

After a full trial, this Court on 25.3.2022 dismissed the Plaintiff’s claims with costs.

Dissatisfied with the said decision, the Plaintiff has appealed to the Court of Appeal.

The gist of the Plaintiff’s pleaded case is that the Defendant was in breach of director’s duty and/or was negligent in refusing to sign the relevant documents for opening the bank account with the bank which agreed to provide a loan or facility to the Plaintiff-company to part-finance the Plaintiff’s purchase of a shop-office, thereby causing the Plaintiff to suffer loss and damages. 2

In her Defence, the gist of the defences are that the Defendant has denied that she has committed any breach of duty or was negligent or that the Plaintiff-company has suffered any loss or damages as alleged or at all. The Defendant also avers that the purchase of the shop-office was the decision of the other majority shareholders but the Defendant as a minority shareholder merely tagged along and the Defendant was justified in resigning as director and not proceeding with the purchase of property because her MRTT insurance application has been rejected due to her medical condition. The Defendant argues further that notwithstanding her resignation as director of the Plaintiff-company before the expiry of the extended date for completion of the sale and purchase transaction, there was still sufficient time for the Plaintiff-company to appoint a replacement director or to take remedial steps to open the bank account without the Defendant’s involvement in order the complete the purchase in time.

At a pre-trial case management session on 17.8.2021 the following cause papers were marked as follows:

Ikatan Pliding in Enclosure 9 : "BP"

Senarai Saksi Plaintif (Enclosure 12) : "LW-1"

Isu-isu untuk Dibicarakan (Enclosure 13) : "SIT"

Fakta-Fakta yang Dipersetujui (Enclosure 14) : "SAF"

Ringkasan kes Plaintif (Enclosure 15) : "SPC"

Ikatan Dokumen Tambahan Bersama (Enclosure 16): "AB-1"

Ikatan Dokumen Bersama (Enclosure 17): "AB-2"

Tabulated Summary of Parties Positions and arguments on the issues and sub-issues (Enclosure 18) : "TS" [7] Subsequently, the parties re-filed and served a common agreed bundle of documents in Part B vide Court Enclosure 19 which has combined the documents in Enclosures 16 and 17 into a single 3 common bundle arranged in chronological sequence. At a case management session on 20.9.2021 prior to the commencement of the full trial, this Enclosure 19 bundle of documents was marked as bundle “AB”. At the commencement of the full trial on 19.01.2022 the parties mutually agreed to make a correction of typographical errors in the Index to Enclosure 19 in that the year stated for items 1 and 40 thereof should be amended from year 2020 to year 2021. It was also mutually agreed between the parties that Enclosures 16 and 17 bundles of documents would not be used anymore and that they can be ignored as a result of the combined bundle in Enclosure 19 marked as bundle “AB”. [8] It was also the agreed procedure that:

At the full trial, upon the witness' affirmation and confirmation of the contents of his/her Witness Statement as his/her evidence, the Witness Statement and its contents are deemed to be read and there is no necessity for the witness to read the contents of the Witness Statement into the CRT system. This procedure is without prejudice to the rule against hearsay, i.e. the principle of evidence which requires witnesses to testify as to facts and matters within their personal knowledge and not on hearsay evidence. Liberty is given to the counsel to ask supplementary or additional question in examination-in-chief to clarify or explain or highlight salient parts of the Witness Statement before the cross-examination begins.

In order to save time and costs at the full trial, the Part A and Part B documents referred to in the witnesses' statements and evidence are marked as per the marking of Agreed Bundles of Documents as “AB” numbers respectively followed by the page numbers and there is no necessity to mark the relevant pages of the Part A and Part B documents with separate exhibit numbers again. However, this procedure shall be without prejudice to the rule against hearsay. Part C document, when either upgraded into Part B document or its original having been tendered by the maker and verified as authentic, shall be marked with a separate exhibit number. [9] The trial proceeded for 3 days on 19.01.2022, 20.01.2022 and 21.01.2022 at which the following witnesses attended and gave oral evidence: 4 PW1 Tiew Lay Chen, the Plaintiff’s Managing Director, who gave evidence in Bahasa Malaysia on 19.01.2022 and 20.01.2022. PW1’s Witness Statement is in Enclosure 23 and marked as “WS-PW1”; DW1 Thow Sweat Peng, the Defendant, who gave evidence in Mandarin with the services of a qualified Chinese interpreter Lee Shi Wei on 21.01.2022. DW1’s Witness Statement in Enclosure 27 was marked as “WS-DW1”. [10] After the completion of the oral evidence, the parties filed and exchanged their respective written Closing Submissions by 23.2.2022 and Reply Submissions by 8.3.2022. FINDINGS ON CHRONOLOGICAL EVENTS: [11] 20.3.2018: Plaintiff-company was incorporated with a single shareholder and sole director with a paid-up capital of RM100,005. Chiam Soon Kiat, the sole shareholder and director, was maternal uncle of PW1 Tiew: [WS-DW1 Thow SP Q&A 1]. [12] 2018: PW1 Tiew LC and Defendant DW1 Thow SP were colleagues in a logistics company and left the company and joined Plaintiff-company initially as shareholders each holding 2 shares. [WS-DW1 Thow SP Q&A 1]. [13] 1.5.2019: both PW1 Tiew LC and Defendant Thow SPiwere appointed as Directors [WS-DW1 Thow SP Q&A 1]. Apart from being a Director of the Plaintiff-company, the Defendant was also employed as the Manager of the Plaintiff-company with a monthly salary of RM12,000 with other perks [WS-DW1 Thow SP Q&A 2]. [14] 28.5.2019: Chiam Soon Kiat passed away, and his shares were transferred to his wife Madam Tan Yoke Lay. [WS-DW1 Thow SP Q&A 1] [15] 2020: at the material time of decision to purchase, the shareholdings were PW1 Tiew LC 34,004 shares, Defendant DW1 33,000 shares and Mdm Tan Yoke Lay 33,000 shares; PW1 Tiew LC and Defendant DW1 Thow SP. [WS-DW1 Thow SP Q&A 1] [16] 16.11.2020: Maybank Islamic Bhd approved the Plaintiff’s application for facility of RM521,500.00 to part-finance the purchase 5 of the Subject Property: AB/5- 38; PW1 Tiew LC’s evidence in WS-PW1 Q&A 14. Terms of the loan contained conditions precedent including the following items:

Joint and several guarantee by all 3 shareholders: AB/7;

Current Account to be opened within 7 days of accepting offer: item g: AB/8;

Mortgage Reducing Term Takaful MRTT is a condition precedent: item h: AB/8;

Item 6a: Personal Reducing Term Takaful (MRTT) is to be taken prior to the release of the facility: AB/14; and

Condition Precedent (c): no material change in Plaintiff’s financial position : AB/15. [17] 16.11.2020: passing of Directors’ Resolution (signed by PW1 Tiew LC and DW1 Thow SP) and Members’ Resolution ( signed by PW1, DW1 and Mdm Tan Yoke Lay) accepting the financing facility granted by the Bank and “Access to MAYBANK2U.COM INTERNET BANKING SERVICE”: AB/40- 43; WS-DW1 Thow SP Q&A 9] [18] 23.11.2020: Plaintiff’s Directors’ Resolution was passed to purchase the Property at a price of RM745,000: AB/44 – 45; WS-DW1 Thow SP Q&A 14. [19] 25.11.2020: Plaintiff’s cheque No. 398280 for RM72,500 was issued in favour of Ting & Yong; signed by PW1 and Mdm Tan Yoke Lay: AB/54. [20] 25.11.2020: Plaintiff’s cheque No. 398281 for RM22,200 issued in favour of Ting & Yong; signed by PW1 and Mdm Tan Yoke Lay: AB/49. [21] 25.11.2020: Plaintiff’s cheque No. 398282 for RM12,344.55 issued in favour of Ravi Moorthi, Noriza & Mala Partners; signed by PW1 and Mdm Tan Yoke Lay: AB/51. [22] 25.11.2020: Plaintiff’s cheque No. 398283 for RM149,000 issued in favour of Ting & Yong; signed by PW1 and Mdm Tan Yoke Lay: AB/53. 6 [23] 3.12.2020: Sale and Purchase Agreement was signed by the Plaintiff-company, with the common seal affixed in the presence of both Directors: Agreed Facts (SAF) para 4; AB/55 – 71; PW1 Tiew LC’s evidence in WS-PW1 Tiew LC Q&A 7 - 11; DW1 Thow SP’s evidence in WS-DW1 Q&A 9. Particulars of the Property and proposed transaction include: 133 sq meters in area with Ground Floor Shoplot at Bandar Bukit Tinggi, Klang: Recital 1.1 at AB/55; Of the purchase price of RM745,000: (a) RM2,000 already paid to agent Roof Realty Sdn Bhd as earnest deposit; (b) RM22,350 to be paid to Purchaser’s Solicitors as stakeholders being retention sum payable to DGIR; (c) RM50,150 to be paid to Purchaser’s Solicitors simultaneously with the execution of SPA: clause 3.1.2 in AB/56. Balance Price of RM670,500 shall be paid within 3 months from the date of this SPA: clause 3.1.3: AB/57. Extension of time” automatic extension of 1 month or such further period as the parties may agree: clause 4.1 : AB/57. Automatic extension of time in event of MCO RMCO or CMCO” clause 19.13.3 in AB/69. Deposit Sum shall be forfeited in event of Purchaser’s failure to complete with the stipulated time: clause 15.1 in AB/62. [24] 15.12.2020: Maybank’s letter notifying Messrs Ravi Moorthi Noria Mala & Partners to prepare the security documents: AB/72. [25] 16.12.2020: Allianz Life Insurance Malaysia Bhd did not approve Defendant’s application for MRTT life insurance regarding the loan due to her medical condition (Left ventricular hypertrophy, a heart condition): AB/73; WS-DW1 Thow SP Q&A 35. [26] 29.12.2020: Allianz approved and issued life insurance for Mdm Tan Yoke Lay and PW1 Tiew LC: AB/75 & AB/82; the Plaintiff-company made payments for such insurance premiums: AB76- 81. [27] 5.1.2021: joint and several guarantee signed by PW1 Tiew LC, the Defendant Thow SP and Tan Yoke Lay in favour of Maybank: AB/83 – 93. 7 [28] 18.01.2021: Plaintiff’s payment of fee for valuation report: AB/94 –

[29] 26.2.2021: PW1 Tiew LC signed letter on behalf of Plaintiff to state that one partner in Sarawak with Covid infection complication and could not return to open bank account and Maybank did not allow 2 other shareholders to open account; asked for waiver of interest on late payment: AB/97. This infected partner refers to Mdm Tan Yoke Lay: PW1 Tiew LC’s cross-examination on 20.01.2022. [30] 1.3.2021: Ting & Yong’s letter confirming the Vendors agreed to extend to 31.3.2021 without interest: AB/98; WS-PW1 Tiew LC Q&A 21. [31] 9.3.2021: Defendant’s Whatsapp message on her intention to resign as Director and to sell her shares to other shareholders: AB/2; WS-DW1 Thow SP Q&A 1 , 4 & 23. [32] 10.3.2021: PW1 Tiew, as Managing Director, suspended the Defendant from duty with immediate effect pending investigation into possible misconducts, with a list of prohibitions and restraints: AB/99; [WS-DW1 Thow SP Q&A 3, 28] [33] 10.3.2021: Defendant’s letter to PW1 Tiew and Mdm Tan Yoke Lay: referred to Whatsapp messages and voice-notes regarding her intention to resign as Director and also to re-sell shares to other shareholders, and proposed terms to settle and part company: AB/101; WS-DW1 Thow SP Q&A 6, 7 & 25. [34] 10.3.2021: Plaintiff’s Managing Director’s letter to Defendant alleging that Defendant in breach of fiduciary duty regarding the purchase of property etc: AB/103 – 104; WS-DW1 Thow SP Q&A

[35] 11.3.2021: Defendant’s reply to Plaintiff’s suspension letter: AB/105; WS-DW1 Thow SP Q&A 30. [36] 11.3.2021: The meeting scheduled for 11.3.2021 did not take place. [37] 12.3.2021: letter of resignation of the Company Secretary of the Plaintiff: AB/106; ; WS-PW1 Tiew LC Q&A 21; WS-DW1 Thow SP Q&A 31. 8 [38] 16.3.2021: Chern & Co on behalf of Plaintiff demanded damages from Defendant regarding breach of duty pertaining to the property purchase: AB/107 – 108. [39] 18.3.2021: the Defendant tendered her resignation as Director to the Plaintiff’s Board of Directors: AB/109; Agreed facts (SAF) para. 3; ; WS-PW1 Tiew LC Q&A 2;1 WS-DW1 Thow SP Q&A 32. [40] 18.3.2021: Puspa’s reply to Chern & Co’s letter on behalf of Defendant: AB/110 – 111; WS-DW1 Thow SP Q&A 33. [41] 31.5.2021: Plaintiff-company’s Financial Statements for Year ending 31.12.2020: AB/112 – 119 - Loss for year 2020: RM123,525: AB/114; Defendant resigned on 18.3.2021: AB/115; Current Assets: RM1,299,133; Current liabilities: RM1,388,513: AB/124; Net cash (used in) or from operating activities: (484,297): AB/127. Deposit written off : RM74,500: AB/127; Cash and cash equivalents dropped from RM755,732 in December 2019 to RM299,133 in December 2020: AB/139. As from 11.1.2021 : MCO, CMCO and RMCO imposed for various parts of country: AB/144. Amount due to directors RM211,258; amount due to a shareholder RM350,000: AB124. As at 31.12.2020, the directors were PW1 Tiew LC and the Defendant DW1 Thow SP, and the shareholder who was not a director was Mdm Tan Yoke Lan. [42] The Sale and Purchase Agreement was terminated by the vendors because the Plaintiff-company failed to pay the balance purchase price within the stipulated period of time: Agreed Facts (SAF) para 6; WS-PW1 Tiew LC Q&A 35. LEGAL PRINCIPLES [43] Section 213 of the Companies Act 2016 provides for the duties of a company director as follows:

(1) A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.

A director of a company shall exercise reasonable care, skill and diligence with— (a) the knowledge, skill and experience which may reasonably be expected of a director having the same 9 responsibilities; and (b) any additional knowledge, skill and experience which the director in fact has. [44] The general principle is that “… as a director of the plaintiff, the second defendant owed a fiduciary duty to the company and the shareholders. Decided cases abound had made the relationship between a director and his company as being trite. As an employee of the plaintiff, the second defendant also had the duty of fidelity towards the company. Basically, that would mean a duty to be loyal to the interest of the company and its shareholders. Both duties presuppose the need to ensure that a director and an employee must act and discharge their responsibilities in a manner that is in the best interest of the company and not act in a manner that may be detrimental to the interest of the company”: per Abang Iskandar JCA (now CJSS) in Zaharen bin Hj Zakaria v Redmax Sdn Bhd and other appeals [2016] 5 MLJ 91 para [38]. In Zaharen bin Hj Zakaria case two directors who colluded to siphon off the company’s monies were held to have acted in breach of their fiduciary duties to the company. [45] As a general principle, a company director who has agreed to and has signed company resolution for the company to purchase a property has an implied duty to do his/her reasonable endeavours to facilitate the implementation and completion of the property purchase by the company in accordance with the wishes of the majority of directors, unless the wishes of the majority of directors are not in the best interest of the company or are detrimental to the interest of the company. This general principle flows from the statement of principle by the Court of Appeal in Zaharen bin Hj Zakaria case. However, there may be extenuating circumstances which exonerate the director from such an implied duty. COURT’S FINDINGS AND ANALYSIS OF EVIDENCE [46] In the present case, the Defendant was a Director who held a minority 31% shares in the Plaintiff-company while the other shares are held by PW1 Tiew LC and Mdm Tan Yoke Lay, an aunt of PW1. In her evidence the Defendant DW1 testified that the earlier decision to purchase the Property was initiated and driven by PW1 Tiew LC and that although the Defendant DW1 was against the purchase, she tagged along with that decision because she was a minority shareholder in the Plaintiff-company controlled by PW1 Tiew LC and Mdm Tan Yoke Lan who were relatives. According to DW1 Tiew LC, 10 she said that she planned and decided to purchase the Property for the Plaintiff-company’s own use. The Defendant Thow SP’s evidence was to the effect that when her application for MRTT insurance coverage in respect of the loan facility and property was rejected by the insurance company, she perceived that it was very prejudicial to her and her estate, and she then offered to resign from the Plaintiff-company and to sell her shares to the other shareholders. [47] Some of the conditions precedent to the drawdown of bank loan in our present case were:

the execution of joint and several guarantee by all 3 shareholders;

the MRTT Takaful insurance for 30% of loan amount to be obtained severally by each of the shareholders and/or security parties;

no material change in the financial condition of the Plaintiff-company;

opening of a bank account by the Plaintiff-company; and

valuation by a licensed valuer that the Property’s market value is not less than RM745,000. [48] The joint and several guarantee was signed by all 3 shareholders including PW1 Tiew LC and the Defendant DW1 Thow SP, but the bank account was not opened as a result of the Defendant’s neglect to attend the bank. In out present case, the main complaint by the Plaintiff-company against the Defendant was that the Defendant refused to go the Maybank to open the bank account which was one of the conditions precedents for the drawdown of the bank loan. [49] MRTT Takaful insurance was issued by the insurance company in respect of PW1 Tiew LC and Mdm Tan Yoke Lay as the assureds, but the insurance company refused to issue MRTT insurance coverage for the Defendant Thow SP on ground of her medical conditions. [50] There is no evidence to show any step or effort by the Plaintiff-company or its officer to apply to the Bank for waiver of the 11 Defendant’s MRTT insurance coverage as a condition precedent for drawdown of the loan. In the circumstances, this Court finds that the Plaintiff-company has not proven that this condition precedent relating to the MRTT insurance coverage has been fulfilled by the Plaintiff-company. [51] The Plaintiff-company’s Financial Statements for year ending 31.12.2020 (i.e. about 2 months after the Plaintiff’s loan application) shows that the Plaintiff-company’s financial position as at 31.12.2020 became materially worse that its financial position as at 31.12.2019. There is no evidence to show there was any management account as at October 2020 which was prepared and provided to the Bank for the purposes of the loan application. In the absence of such management account, it is to be inferred that the audited account for financial year ending 31.12.2019 was used for the loan application. In the circumstances, the material deterioration of the Plaintiff-company’s financial position as at 31.12.2020 was a reason who gave the Bank a discretion to cancel the loan and/or to refuse drawdown of the loan. [52] Although the evidence shows there was a valuation done on the Property, no evidence on the market value of the Property based on the valuation report has been adduced. No valuation report has been tendered in evidence in our present case. [53] In the circumstances the Plaintiff-company has not proved that except for the opening of bank account, it has fulfilled all the Conditions Precedent for the drawdown of the loan facility in respect of the Property. [54] Arising from the Defendant’s inability to obtain MRTT insurance coverage for the loan but PW1 Tiew and Mdm Tan Yoke Lay could obtain their MRTT insurance coverage for the loan and having charged the insurance premiums to the Plaintiff-company’s account as company expenses, the fair and reasonable solution among the 3 shareholders of this private limited company would be for the Plaintiff-company to apply to the Bank for waiver of the Defendant’s MRTT coverage and for increase of the amount of coverage for PW1 Yiew LC and Mdm Tan Yoke Lay, coupled with an internal written agreement between the 3 shareholders that the total combined amount of the insurance coverage would be for their respective benefits in proportion to their shareholdings in the Plaintiff-company. In the considered view of this Court, it would be unfair and 12 unreasonable for 2 out of 3 shareholders of a private company to enjoy the protection and coverage of insurance in respect of the proposed property purchase at the company’s expense and yet expect the Defendant, being the third and minority shareholder, to be exposed to uninsured risks and, as a shareholder, bear her portion of the insurance premiums for the other two shareholders. Unfortunately, neither of these steps was taken or attempted. [55] Instead, PW1 Tiew LC kept pressure upon the Defendant Thow SP to go to the Bank and sign the opening of the bank account. [56] After sometime, the Defendant Thow SP by her Whatsapp message 9.3.2021 notified PW1 Tiew LC that the Defendant wanted to resign as Director and to sell her shares to PW1 Tiew LC and/or Mdm Tan Yoke Lay. On 10.3.2021, PW1 Tiew LC issued a letter on behalf of the Plaintiff-company to suspend the Defendant from her works, with a list of prohibitions and restraints. This was followed by a solicitor’s demand letter dated 16.3.2021 on behalf of the Plaintiff-company, to which the Defendant also replied by her solicitor’s letter dated 18.3.2021. [57] After this, the Defendant by letter dated 18.3.2021 officially submitted her resignation as Director to the Board of Directors of the Plaintiff-company. The Defendant’s resignation as Director of the Plaintiff-company was accepted by the Plaintiff-company, and was later officially recorded in the Plaintiff-company’s audited accounts for year ending 31.12.2020. [58] The original Date for Completion of the SPA transaction of the Property was 28.2.2021, and the Vendors agreed in writing to extend the time for completion until 31.3.2021. This 1-month extension was in reality the Plaintiff-company’s entitlement with interest to be payable pursuant to the express clauses of the SPA; what the vendors agreed was merely a waiver of interest for the said one (1) month. While taking up issues against the Defendant regarding the opening of the bank account, PW1 Tiew LC as Managing Director of the Plaintiff-company overlooked the provisions of the SPA which allows automatic interest-free extension of time on ground of RMO, MCO, CMCO or any governmental restriction on movement: clause 19.13.3 [see AB/69] and did not take steps to persuade the vendors of the Property to recognise the automatic extension on such grounds. In the considered view of this 13 Court, while trying to address the inter-personal relationship with the Defendant, the Plaintiff-company through its Managing Director PW1 Tiew LC should, in pursuit of the best interest of the Plaintiff-company, also concurrently explore and negotiate with the Vendors the application and benefit of this clause 19.13.3. Unfortunately, this was not done by the Plaintiff-company or its Managing Director. If that step was taken, the Plaintiff-company would probably get some extension of time beyond 31.3.2021 for the completion of the sale and purchase transaction. [59] It is the argument of the Defendant that despite the Defendant’s resignation there was still enough time for the Plaintiff-company to apply to the Bank to amend the terms of the loan by replacing a Director to open the bank account. As the Defendant has already signed the joint and several guarantee in favour of the Bank and the operation of the loan account by another new director or another shareholder has not been shown to be prejudicial to the loan disbursement, this Court finds the Defendant’s argument to be probable. This Court also finds on a balance of probabilities that in view of clause 19.13.3 of the SPA, the Defendant’s argument should be accepted that despite her resignation as Director there was still enough time for the Plaintiff-company to appoint a new director or a new account signatory for completing the transaction within the extended time. [60] The evidence shows that the Defendant has disputed the Plaintiff-company’s suspension instruction dated 10.3.2021 against her. The suspension letter imposed a number of restrictions on the Defendant and vaguely mentioned the ground of suspension as “pending investigation of possible misconduct”: see AB/99. At the trial, the Plaintiff-company has not adduced any evidence of the alleged “possible misconduct”. From the surrounding circumstances, this Court infers that the reason for the suspension was the Defendant’s Whatsapp notification dated 9.3.2021 of her intention to resign as Director and to sell her shares to the other shareholders. In the considered view of this Court, a director-employee’s notification of intention to resign was not a valid or sufficient ground for suspending the director-employee from her duties. [61] By the suspension instruction dated 10.3.2021 [AB/99] the Defendant inter alia was barred from going to the Plaintiff-company’s office, cut off the access to the Plaintiff-company’s data and communications, prohibited from taking part in any transactions 14 (for and on behalf of the Company) or activities etc. The general wording of the prohibition was wide enough to cover signing of document or opening of bank account for the purpose of the company’s transactions or activities which included property transaction. After 10.3.2021, there was no letter from the Plaintiff-company’s Managing Director to authorise the Defendant to sign bank document or to open bank account for the company’s purposes or to operate any bank account on behalf of the company. [62] Pursuant to the general principle on the implied duty of a director, this Court finds that prior to 10.3.2021 the Defendant’s conduct was indicative of her intention to commit a breach of her implied duty to the Plaintiff-company by failing or neglecting to go to the bank to sign documents and to open a bank account despite having signed the company resolutions, Sale and Purchase Agreement and acceptance of Loan Offer on behalf of the company. However, as from 10.3.2021, in view of the Plaintiff-company’s suspension of the Defendant without valid and sufficient ground and the Plaintiff’s failure to provide a solution or remedy to the Defendant for her inability to obtain the MRTT insurance coverage for the loan and the absence of any reasonable solution proposed by the Plaintiff or its Managing Director, this Court finds on a balance of probabilities that as from 10.3.2021 onwards the Defendant was not in breach of her duty as a Director of the Plaintiff-company. The Plaintiff-company’s failure to provide a solution or remedy to the Defendant for her inability to obtain the MRTT insurance coverage for the loan, the company’s suspension letter dated 10.3.2021 and the company’s prohibitions in the suspension letter without subsequent specific permission or instruction to sign bank document, open bank account and operate bank account for and on behalf of the company constituted extenuating circumstances which exonerate the Defendant from signing bank document or opening bank account for and on behalf of the company as from 10.3.2021. [63] In the circumstances this Court has found and concluded that as at the date of expiry of the extended date for completion of 31.3.2021 as agreed by the vendors of the Property, the Defendant was not in breach of her duty as a director of the Plaintiff-company. [64] Further or in addition, this Court finds that in the circumstances of our present case the Plaintiff-company has also failed to prove a causal link between its alleged damages and the alleged breach of the Defendant. In order to prove the causal link, the Plaintiff- 15 company has to prove that the failure of the Defendant to open the bank account was the only condition precedent for loan drawdown which has not been fulfilled as at end March 2021, the deadline for completion of the sale and purchase transaction. However, the evidence before this Court shows that these other conditions precedent for loan drawdown had still not been fulfilled as at end March 2021:

the MRTT Takaful insurance for 30% of loan amount to be obtained by each of the shareholders and/or security parties;

no material change in the financial condition of the Plaintiff-company; and

valuation by a licensed valuer that the Property’s market value is not less than RM745,000. As such, the Plaintiff has filed to prove that the Defendant’s refusal to open the bank account until 10.3.2021 has proximately or effectually caused the Bank’s eventual refusal to allow the drawdown of the loan facility. [65] Further or alternatively, even if there was any breach by the Defendant of director’s duty, the causal link between the alleged breach and the alleged damages was broken by the Plaintiff-company’s suspension of the Defendant through the suspension letter dated 10.3.2021. [66] As regards quantum of the alleged damages, the Plaintiff-company has proved that the following costs of expenses have been spent and wasted as a result of the aborting of the sale and purchase transaction:

RM2,000 paid to property agent as earnest deposit: see clause 3.1.2 in AB/56;

some legal fees and disbursements wasted, but the amounts actually wasted due to abortion of the sale and purchase transaction have not been proved.

In clause 3.1.2 of the SPA, RM22,350 was to be paid to Purchaser’s Solicitors as stakeholders being retention sum payable to Director-General of Inland Revenue; the Plaintiff- 16 company issued a cheque for this amount but with the termination or abortion of the SPA, this amount would ordinarily be refundable and the Plaintiff-company has not proved to the contrary.

Under clause 3.1.2 of the SPA, RM50,150 was to be paid to Purchaser’s Solicitors simultaneously with the execution of SPA: clause 3.1.2 of SPA in AB/56. This part of the deposit was paid to the Vendors and acknowledged receipt in clause 3.1.2 of the SPA; and

Valuation fee of RM2,300.00 was invoiced by the valuer and was paid or payable by the Plaintiff. [67] Nevertheless the Plaintiff-company has failed to prove the quantum of the following heads of alleged damages:

The specific amounts of SPA legal fees and disbursements actually wasted. Although the Plaintiff-company issued a cheque of RM22,200.00 in favour of the SPA solicitor in respect of the SPA, the amount was well in excess of the standard scale of solicitor’s fees for conveyancing as a great part of the amount was for stamp duties on the Memorandum of Transfer. The Court agrees with the Defendant’s submission that it is unlikely that the solicitor’s fees and disbursements for SPA of property value RM745,000 could be so high. There is no specific proof that the Memorandum of Transfer has been stamped and the stamp duty paid and non-refundable, and thereby has eventually become actually wasted. In the cross-examination by the Defendant’s counsel on 20.01.2022 PW1 Tiew LC confirmed that there was no billing, receipt or bank statement produced to prove this item. The Plaintiff has failed to produce the solicitor’s invoice to show the breakdowns of various items of the said amount. In the premises, this Court accepts the Defendant’s submission that the Plaintiff-company has failed to prove the quantum of this head of alleged damages.

(ii) There is also no sufficient proof of the specific amounts of loan documentation legal fees and disbursements actually wasted. Although the Plaintiff-company issued a cheque of RM12,344.55 in favour of the solicitor in respect of the loan documentation, a great part of the amount was for stamp 17 duties on the Loan Agreement, Charge and Discharge of Charge. There is no specific proof that the Memorandum of Transfer has been stamped and the stamp duty paid and non-refundable, and thereby has eventually become actually wasted. In In the cross-examination by the Defendant’s counsel on 20.01.2022 PW1 Tiew LC, in addition to confirming that no receipt was produced, also admitted that the loan document was not stamped. The Plaintiff has failed to produce the solicitor’s invoice to show the breakdowns of various items of the said amount. In the premises, this Court accepts the Defendant’s submission that the Plaintiff-company has failed to prove the quantum of this head of alleged damages.

(iii) Although the Plaintiff has proven that RM19,080.02 was paid as insurance premium for MRTT, the insurance premium was ordinarily refundable in the event of termination or abortion of the loan. The Plaintiff has not proved that the insurance premium for the abortive transaction has eventually been actually wasted.

(iv) There is no specific document to prove that the Plaintiff would have earned a rental fee compensation of RM2,500 per month from the Property. In any event, if the bank loan were drawn down and disbursed, the Plaintiff would have to pay monthly interests on the bank loan to the bank. There is no specific proof that the alleged gross rental income of RM2,500 per month would exceed the amount of monthly interest payment to the bank in respect of the loan.

Alleged damages of RM1,000,000.00 for alleged loss of reputation is too remote as a head of damages for aborting a property sale and purchase transaction. Moreover, it is purely conjecture or speculation that a private logistics company which aborts a proposed property purchase would suffer any loss of reputation. Further, there is no evidence to prove the alleged amount of this alleged loss. Nor was there any cogent evidence to show the basis for computing such alleged amount. The Plaintiff-company has totally failed to appreciate the reality that purchase of properties by taking interest-bearing loans can also lead to loss in the capital value of the properties or loss due to the costs of financing interests. In the considered view of this Court, the alleged amount of 18 RM1,000,000 is a figure which the Plaintiff plucks out of thin air. DECISION AND JUDGMENT OF THIS COURT [68] In the circumstances, this Court has found and concluded that:

The Defendant was not in breach of her duty as Director of the Plaintiff-company as from 10.3.2021, 3 weeks before the expiry of the extended SPA completion date agreed to by the vendors;

The Plaintiff has failed to prove that the Defendant’s alleged breach has rendered it impossible for the Plaintiff to appoint replacement director or to remedy the situation for completion of the sale and purchase transaction;

The Plaintiff has failed to prove that if not for the Defendant’s alleged breach, the Plaintiff would be able to complete the sale and purchase transaction;

The Plaintiff has failed to prove the causal link between the Plaintiff’s alleged damages and the Defendant’s alleged breach;

The causal link (if any) between the Defendant’s alleged breach and the Plaintiff’s alleged damages was broken by the Plaintiff’s suspension letter dated 10.3.2021; and

The Plaintiff has failed to prove the quantum of the heads of damages except for several small items as described above. [69] In the premises, this Court on 25.3.2022 dismissed the Plaintiff’s claims against the Defendant with costs. Costs of action have been assessed at RM25,000, subject to allocator. 19 Dated : 29 April 2022 Signed ….............................................................. TEE GEOK HOCK JUDICIAL COMMISSIONER HIGH COURT OF MALAYA AT SHAH ALAM (NCVC 10) To the parties’ solicitors:

For the Plaintiff : Azwan Abdul Wahab Messrs Law Office of KC Lim (Puchong)

For the Defendant : K. Puspalingam & Tan Kar May Messrs Puspalingam, Kasmani & Partners (Klang)