Pan Malaysian Pools Sdn Bhd ... Appellant v Kwan Tat Thai ... Respondents (W-02(W)-1453-08/2016)

KWAN TAT THAI

WAN KONG WAI HEARD TOGETHER WITH CIVIL APPEAL NO. W-02(W)- 1796-09/2016 WAN KONG WAI ... RESPONDENT HEARD TOGETHER WITH 2 CIVIL APPEAL NO. W-02(W)- 1802-09/2016 KWAN TAT THAI ... RESPONDENT [IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR] (CIVIL DIVISION) CIVIL SUIT NO: S-22-17-2009

KWAN TAT THAI

WAN KONG WAI Coram: David Wong Dak Wah, JCA Hamid Sultan bin Abu Backer, JCA Umi Kalthum binti Abdul Majid, JCA 3 Hamid Sultan Bin Abu Backer, JCA (Delivering Judgment of The Court) GROUNDS OF JUDGMENT [1] There are three appeals before us arising from a judgment of the High Court. We heard all the three appeals on 15-8-2017 and reserved judgment. [2] The main appeal is appeal No. W-02(W)-1453-08/2016. In this appeal, the appellant/plaintiff complains that inter alia its claim for breach of employment contract as well as claim related to secret profits made by the employees i.e. the 1st and 2nd defendants ought to have been allowed. [3] The 1st and 2nd defendants had filed appeal W-02(W)-1802- 09/2016 and No. W-02(W)-1796-09/2016 respectively complaining that the learned judge having dismissed the plaintiff’s claim had ordered the defendants to pay the costs of RM100,000.00 to the plaintiff. [4] In the instant case, it is not in dispute that the (i) defendants were dismissed from employment, for the misconduct related to breach of employment contract and claims related to secret profits; (ii) the defendants then proceeded to seek relief for unfair dismissal through the Industrial Court; (iii) before the hearing in the Industrial Court, the defendants withdrew their claim; (iv) the plaintiff had filed a notice of motion enclosure 5(a) to admit the document related to the Industrial Court for the purpose of the appeal; (v) we allowed the notice of motion 4 and directed the plaintiff to file a supplementary record consisting of the documents stated in enclosure 5(a). [5] In addition, it is also not in dispute that (i) the documents which the plaintiff had substantially relied on to establish its claim for breach of contract and the secret profits were recovered from the computer of the 1st defendant as was stated by PW3 in his witness statement; (ii) notwithstanding that the 1st defendant had filed a witness statement and was present in court during the hearing to instruct solicitors to cross-examine the witnesses of the plaintiff; the 1st defendant himself did not enter in the witness box to give evidence; (iii) the documents retrieved from the 1st defendant was placed in bundle B and subsequently marked as exhibit, thereby establishing a strong prima facie case against the 1st defendant as it was not controverted by the 1st defendant himself. [6] The learned trial judge has set out the facts and evidence in an articulate manner. On the first reading of the judgment it was quite obvious that the judgment suffered from grave error of law on the face of record as well as it was contradictory and in consequence warrants the judgment to be set aside in limine. [See Sidambaram a/l Torosamy v Lok Bee Yeong [2017] 1 LNS 1047]. Briefly there are three reasons for saying so. They are as follows:-

(i) The learned judge makes a finding that there was breach of contract but says the plaintiff is not entitled to damages as they have obtained a relief by dismissing the defendants for misconduct. This proposition in our view by the learned judge was not supported by any authorities. The proposition in our view is flawed. The act of dismissing the employee for 5 misconduct and the employee seeking relief in the Industrial Court is a separate cause of action per se. It has nothing to do with the right to sue for breach of contract and claiming damages. That part of the judgment reads as follows: “39. Accordingly, having regard to the analysis set out in the preceding paragraphs, I found that the joint property purchases amounted to a contravention of the Purchasing Policies, and consequently a breach of the defendants' terms of employment with the plaintiff.

Remedy available to the plaintiff for breach of terms of employment In my judgment, the plaintiff had already availed itself of its remedy for breach of the employment terms when it dismissed the defendants.”

“Section 114(g) of the Evidence Act 1950 It was advanced for the plaintiff that this court ought to draw an adverse inference against the first defendant on account of his failure to take the stand to give testimony in support of the defendants' case. The brief answer to this argument is that, where the burden of proof in a civil case is not on a defendant, his failure to testify will not raise the presumption in section 114(g) of the Evidence Act 1950: see Selvaduray v Chinniah [1939] MLJ 253.”. 6 [7] It is well established as a general rule that ‘burden of proof’ in a civil case is on the plaintiff but the burden will shift when the plaintiff has adduced sufficient evidence of probative value which requires the defendant to rebut the plaintiff’s evidence. The facts of this case are not one related to no case to answer where the defendant is not required to give evidence. [See Khoo Teng Chye v Cekal Berjasa Sdn Bhd & Anor [2015] 6 CLJ 449]. The facts of the case requires the 1st defendant to give evidence as the documents recovered from his computer is within his knowledge, failing which the plaintiff’s evidence has to be accepted by the court, unless it is inherently improbable. [See Datuk M Kayveas v See Hong Cheng & Sons Sdn Bhd & Ors [2014] 4 MLJ 64]. In addition, if the 1st defendant does not give evidence, the court may have to grant all the prayers sought against him if the prayers are legally maintainable. [8] Support for the proposition is found in a number of cases as well as the provisions of the EA 1950. To name a few are as follows:

(a) In R. v Kakelo [1923] 2 KB 793 the court considered the ground rules for the burden to shift and stated:- "In considering the amount of evidence necessary to shift the burden of proof, the court has regard to the opportunities of knowledge, with respect to the fact to be proved, which may be possessed by the parties respectively."

(b) For example, section 106 of the EA1950 states:- “When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.” 7

(c) At page 638 of Janab’s Key to Law of Evidence, 4th ed. revised by Dato’ Mah Weng Kwai, the learned authors in dealing with section 106 observes: “106. Burden of proving fact especially within the knowledge. This section appears to be an exception to the rule in section 101 which states that he who asserts must prove. Under this section where a fact is especially within the knowledge of a party, the burden of proving that fact lies upon him. [See PP v Kum Chee Cheong [1992] 2 SLR 126]”.

(d) In Takako Sakako (f) v Ng Pek Yuen (f) & Anor [2009] 6 MLJ 751, the Federal Court observed: "[4] In our judgment, two consequences inevitably followed when the first respondent who was fully conversant with the facts studiously refrained from giving evidence. In the first place, the evidence given by the appellant ought to have been presumed to be true...... [5] The second consequence is that the court ought to have drawn an adverse inference against the first respondent.......Where, as here, the first respondent being a party to the action provides no reasons as to why she did not care to give evidence the court will normally draw an adverse inference....." (emphasis added).

(e) Section 114(g) of the EA 1950 states: “ILLUSTRATIONS The court may presume – 8 …

(f) The court in Donavan Crawford v Financial Institute Services Ltd [2005] UKPC 40 observed: "It is well settled that in civil proceedings the court may draw adverse inferences from a defendant's decision not to give or call evidence as to matters within the knowledge of himself or his employees. In Herrington v British Railways Board [1972] AC 877, 930, Lord Diplock said of such a decision, "This is a legitimate tactical move under our adversarial system of litigation. But a defendant who adopts it cannot complain if the court draws from the facts which have been disclosed all reasonable inferences as to what are the facts which the defendant has chosen to withhold" (emphasis added).” [9] In the instant case, the documents recovered from the 1st defendant’s computer which was placed in bundle B was marked as exhibits. That is to say, if the contents are not discredited by the 1 st defendant it may be fatal for the 1st defendant’s case. [See Yeo Ing King v Melawangi Sdn Bhd [2016] 5 MLJ 631]. General Jurisprudence on Nominal Damages [10] The measure of damages whether in contract or tort is not an easy subject to deal with, as the courts have not set out clear guideline or methodology for the calculation for the head of damages. [See Mediana 9 [1930] A.C. 113; Gee v Lancashire and Yorkshime Ry. Co. [1860] 6 HSN 211]. [11] In an action for breach of contract it is often the case that it is possible to determine damages with precision or at least to some accepted norms of accuracy, though it may not be able to compensate the actual loss suffered by the litigant. In tort, measure of damages to property can be based on some factors to derive at quantum. However, it is much more difficult in the case of personal wrongs. In short, no hard and fast rules can be employed and the measure certainly depends upon variety of circumstances, which the trial court may want to consider but it may not have been set out in the judgment the methodology in a precise manner. The quantum of damages is a subject matter, which even the appellate courts are reluctant to disturb unless it is exorbitant and/or does not reflect the gravity of the loss. [See Hew Kon Far & Anor v Kwan Ngen Wah & Ors [2008] 1 LNS 89]. [12] It is now trite that the court in assessing damages take into consideration three fundamental principles. They are as follows - (1) restitution in integrum, (ii) remoteness of damages; (iii) mitigation of damages. C. Kameshwar Rao's Treatise on Law of Damages Compensation (5th edition) succinctly summarizes the concept as follows: "There are three fundamental principles upon which the law proceeds to determine the measure of damages. The first and foremost principle is that of restitution in integrum. As has already been observed, in all cases of wrongful acts, whether of tort or breach of contract, the law only adopts the principle of institution in integrum subject to the qualification that the damages must not be too remote; that they must be, in other words, such damages as flow 10 directly and in the usual course of things from the wrongful act. Therefore, where an injury is to be compensated by damages, in settling the sum of money to be given in reparation of the damage, you should as nearly as possible get at that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been in, if he had not sustained the wrong for which he is now getting his compensation or reparation. In other words, the award must be of such a sum as that by which he is the worse for the defendant's wrongdoing. The rule appears to be the same in actions upon contract also, for a party who has sustained loss by reason of a breach of contract is, with respect to damages, entitled to be placed in the same situation as he would been in if the contract had been performed. But as Lord Dunedin has forcibly put it, "restitution in integrum" is a phrase which is properly applied when you wish to express a condition which is imposed upon a person seeking to rescind a contract. I do not think it can be properly applied to questions of tort, and the illustration I give a very simple one in the sense say, I have had restitution in integrum. The true method of expression, I think, is, that in calculating damages you are to consider what is the pecuniary sum which will make good to the sufferer, in so far as money can be, the loss which he has suffered as the natural result of the wrong done to him. There is no particular limit to the amount of damages that can be awarded by a court of law, and in proper cases the amount may rise to almost any sum of money while, on the other hand, it may be a single farthing. It is largely in the discretion of the Judge or the jury, but is regulated by well-established rules.

(g) that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it;”

(i) time spent to enter into contract of employment;

The breach is in respect of two heads of claim, viz,

The Appellant was in the business of forecast and racing totalisator.

Both Respondents were senior management employees in the IT department, with critical functions in the purchasing of IT items from the Appellant's registered vendors.

This involved initiating purchases of IT items, and where a tender is required, the Respondents would participate in the evaluation of tenders as well as in the recommendation of awards to vendors.

The Appellant conducted an internal review of the reasonableness of the prices it paid for IT related items. It revealed that a select group of the Appellant's registered IT vendors were consistently invited to participate in the tender exercise and their bids were regularly successful. On average, these successful bids were between 30% to 100% higher than the bids of IT vendors that were independently sourced.

The successful select group of IT vendors included Gallant Mark Sdn Bhd ("Gallant Mark") and iConnect2 Technologies Sdn Bhd ("iConnect2"). 14

Upon further investigations, it was discovered that the Respondents had a private/commercial relationship with two shareholders and directors of Gallant Mark and iConnect2.

The investigations revealed that the Respondents had jointly purchased a property ("Solaris") with a director and shareholder of Gallant Mark and iConnect2 ("Ho Yew Fai"). This is not disputed by the Respondents. The transaction was not disclosed to the Appellant.

The Appellant suspended the Respondents because they had not disclosed their personal relationship with Ho Yew Fai and they had therefore placed themselves in a position of conflict of interest.

It was subsequently discovered that the 1st Respondent had jointly purchased another property ("Lorong Midah") from another shareholder and director of Gallant Mark and iConnect2 ("Foo Kok Kee"). This is not disputed by the 1st Respondent. This transaction was also not disclosed to the Appellant.

The Appellant further took possession of the notebook computers assigned to the Respondents. A forensic examination of the data contained in the hard disc of the 1st Respondent's notebook computer showed:-

(a) the above-said Microsoft Excel spreadsheets were discovered in the 1st Respondent's notebook computer, and

(b) the evidence of Cavin Choo ("SP-5"), the independent forensic expert from KPMG, indicated that the 1st Respondent was the author of the spreadsheets. He testified that the contents of the 1st Respondent's notebook was "last modified" whilst still in his possession and a large number of the Microsoft Excel files were moved to" recycle".

It was evident that the Respondents were involved in an unauthorized profit sharing arrangement with certain IT vendors of the Appellant, and they had received a percentage of the purchase price as secret profits that the Appellant paid to these 16 IT vendors. In this regard, the acronyms (in the reward files) 'mek' referred to the 1st Respondent whilst 'wan' referred to the 2nd Respondent.

The IT vendors who were complicit in the arrangement included Gallant Mark and iConnect2. It was established at the trial that a majority of the tenders (51) in the 65 impugned transactions in this case, were with these two vendors, and the tenders were awarded to them on the recommendation of the 2nd Respondent with the approval of the 1st Respondent.

The Appellant convened a domestic inquiry and the Respondents were dismissed for misconduct. Both Respondents filed representations of unfair dismissal under s.20 IRA 1967 and their cases were referred to the Industrial Court for determination. The High Court.

The Appellant commenced the instant action in the High Court and the learned Judge decided as follows:-

Subsequent to the decision of the High Court, the Respondents unconditionally withdrew their cases (of unfair dismissal) against the Appellant at the Industrial Court. Their cases were struck off without liberty to file afresh. At the time, the 2nd Respondent's trial at the Industrial Court had already commenced (and there were 7 days of trial) while the 1st Respondent's case was embroiled in a number of interlocutory matters without the trial beginning.

The legal effect of the withdrawal to the instant appeal is important for the purposes of this appeal, as:-

It is submitted that the Respondents cannot "approbate and reprobate" and are estopped from contending now that they are not liable for the breaches of their employment contracts, which were also the substance of misconducts for which they were dismissed.19 Please see the Court of Appeal in Cheah Theam Kheng v City Centre Sdn Bhd (see Tab 30, ABA(3)):- "In the words of Sir Nicolas Browne-Wilkinson VC in Express Newspapers plc v News (UK) Ltd and others [1990] 3 All ER 376, at pp 383-384: There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance."

In Lennon v. Birmingham City Council [2001] IRLR 826 the UK Court of Appeal held that withdrawal of a sex discrimination complaint at the Employment Tribunal amounted to issue estoppel and the employee was estopped from bringing a civil claim on the same allegations although there was no determination of the merits of the complaint (see also Srivatsa v. Secretary of State for Health [2016]

It is therefore submitted that the Respondents have conceded to liability for the breaches of their contracts of employment by withdrawing their claim for unfair dismissal without protest. In this regard, Appellant's claim for breach of the contracts of employment is no longer open to challenge by the Respondents.” [18] The Memorandum of Appeal reads as follows: “1. The learned Judicial Commissioner erred in law and in fact when he failed to award general damages to the Appellant/Plaintiff, for the 19 Respondents/ Defendants' breaches of the terms and conditions of their respective contracts of employment, as a result of their failure to disclose, in writing, the joint purchases of the Lorong Midah and Solaris properties with the shareholders / directors of the Appellant's vendors.

The learned Judicial Commissioner erred in law and in fact when he failed to appreciate that the Appellant is entitled to general damages for breaches of fiduciary obligations by the Respondents as a result of their failure to disclose, in writing, the joint purchases of the Lorong Midah and Solaris properties with the shareholders / directors of the Appellant's vendors.

The learned Judicial Commissioner erred in law and in fact when he refused to grant an order for general damages on the basis that the Appellant has availed itself to the remedy of dismissal. In this regard, the learned Judicial Commissioner failed to appreciate that the remedies for breach of employment contract is not limited to the exercise of Appellant's discretion to dismiss the Respondents and would include, inter alia, a claim for general damages.

The learned Judicial Commissioner erred in law and in fact when he refused to grant an order for general damages, nominal or otherwise, which is the direct and natural consequence of the proven breach of the terms and conditions of the contracts of employment of the Respondents, on the basis that the Appellant has suffered no financial losses.

The learned Judicial Commissioner committed errors of law and fact when he dismissed the Appellant's claim for recovery of secret profit despite the following findings of facts:-

(a) that the computer generated documents (spreadsheets) were genuinely recovered from the computer assigned to the 1st Respondent and were authentic; 20

(b) that the computer generated documents (spreadsheets) recovered from the computer assigned to the 1st Defendant were not tampered with i.e. not fabricated and planted to implicate the Respondents;

(c) that the contents of the reward spreadsheets matched the Appellant's Purchase Orders, Suppliers' Invoices and payments made therein to the vendors; and

(d) that the reward spreadsheets are direct evidence of the existence of a profit sharing arrangement.

The learned Judicial Commissioner erred in law and in fact when he held that the pecuniary relationship between the Respondents and the shareholders / directors of the Appellant's vendors are merely circumstantial evidence and do not prove, on a balance of probabilities, receipt of secret profits by the Respondents and/or the third parties identified in the excel spreadsheets. In this regard, the said pecuniary relationship amplifies the probabilities of receipt of secret profits in light of all other evidence, circumstantial or direct, tendered by the Appellant.

The learned Judicial Commissioner erred in law and in fact when he failed to appreciate that various circumstantial evidence as detailed in paragraph 68 of the Grounds of Judgment, when viewed together, point towards the irresistible conclusion that the Respondents and/or the third parties identified in the spreadsheets received secret profits by virtue of the profit sharing arrangement.

The learned Judicial Commissioner erred in law and in fact when he failed to take into consideration the large sum of monies deposited in the various bank accounts of the 2nd Respondent, which remained unaccounted for, and further, is not commensurate with his financial standing. 21

The learned Judicial Commissioner erred in law and in fact when he concluded that the Respondents, who owed a fiduciary obligation to the appellant, are not required to account for the secret profits made in breach of their duties as employees of the Appellant, despite the existence of sufficient evidence, circumstantial or direct, to establish that such profits were received.

The learned Judicial Commissioner erred in law and in fact when he failed to take into account that the Respondents have breached their contract of employment and/or fiduciary duties by reason of their pecuniary relationship with the shareholders / directors of the Appellant's vendors.

The learned Judicial Commissioner erred in law and in fact when he failed to recognize that the 1st Respondent's failure to give evidence and subject himself to cross-examination would entitle the Court to draw an adverse inference against the 1st Respondent.

The learned Judicial Commissioner erred in law and in fact when he failed to apply the binding principle propounded by the Federal Court in Takako Sakao (F) v. Nq Pek Yuen [2009] 6 MLJ 751 in respect of a party who, being fully conversant with the facts of a case, elects not to give evidence. In this regard, the learned Judicial Commissioner ought to have drawn an adverse inference against the 1st Respondent and presumed the Appellant's evidence to be true.

The learned Judicial Commissioner erred in law and in fact when he misconstrued the principle in Selvaduray v. Chinniah [1939] 3 MLJ 253 in deciding that no presumption under section 114(g) of the Evidence Act 1950 can be raised against the 1st Respondent for his failure to testify as the principle in Selvaduray v. Chinniah relates to the shifting of burden of proof in a civil case as a result of the defendant's failure to call a material witness to support his version.” 22 [19] We have read the appeal record and the able submissions of the learned counsel. After giving much consideration to the submission of the learned counsel for the defendants, we take the view that the appeal by the plaintiff must be allowed and the 1st and 2nd defendants’ appeals must be dismissed with costs. Our reasons inter alia are as follows:

(i) in the instant case as stated earlier, the decision of the learned judge is not in consonant with his findings of facts leaving the appellate court with no option but to set aside the judgment of the High Court in refusing to enter judgment for the plaintiff;

(a) Against the 1st and 2nd Defendants

(b) Against the 1st Defendant

(i) The sum of RM1,122,708.00.

(c) Against the 2nd Defendant

(i) The sum of RM687,728.20.

(e) Interest at the rate of 5% per annum on the sums pleaded in paragraphs 64(a)(i) and (ii), 64(b)(i) and 64(c)(i) of the Statement of Claim, from the date of the writ until full and final settlement of the judgment sum.