Ranjeet Singh Sidhu & Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir v Zavarco Plc & 15 Yang Lain (22NCC-179-06/2015)

1.

TAN SRI SYED MOHD YUSOF BIN TUN SYED NASIR (The Plaintiffs bring this action in a representative capacity and for the benefit of Zavarco Plc and for themselves, as shareholders of Zavarco Plc other than the Defendants who are shareholders of Zavarco Plc and also for the benefit of Zavarco Bhd) … PLAINTIFFS

1.

ZAVARCO BERHAD (Company No. 887017-M)

OPEN FIBRE SDN BHD (Company No. 783109-M)

MESSRS. GUNAVATHY MANIKAM (Sued as a firm)

MESSRS. A.R. YAHYA & CO. (Sued as a firm)

6.

7.

ROSLINA BINTI IBRAHIM (In her own name and also carrying on business under the name and style of Eros Consulting)

9.

10.

11.

12.

TEOH HOCK PENG PANEAGLE HOLDINGS BERHAD (Company No. 401192-M)

VINAI VARAYANANDA … DEFENDANTS BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 2 GROUNDS OF JUDGMENT (Enclosures 90 and 94) Introduction [1] The first, second and third Defendants on the one part and the sixth to the sixteenth Defendants on the other part filed two separate Notice of Applications Enclosures 90 and 94 respectively to strike out the Writ and Statement of Claim dated 24 June 2015 under Order 18 rule 19 Rules of the High Court 2012 (RoC 2012). I allowed the said applications. Thus this appeal by the first and second Plaintiff. Parties [2] The Plaintiffs are as follows:

the first Plaintiff, Ranjeet Singh Sidhu (Ranjeet); and

the second Plaintiff, Tan Sri Syed Mohd Yusof bin Tun Syed Nasir (Tan Sri Syed Mohd Yusof). both are collectively referred to as “the Plaintiffs”. 3 [3] Whilst the Defendants are as follows:

the first Defendant is Zavarco PLC (Zavarco Plc) a company incorporated in the United Kingdom on or about 29 June

Zavarco Plc was formerly known as Vasseti (UK) PLC;

the second Defendant, Zavarco Bhd, a private company incorporated under the laws of Malaysia. It was formerly known as Vasseti Bhd;

the second Defendant, Open Fibre Sdn Bhd, also a private company incorporated under the laws of Malaysia;

the fourth Defendant is a legal firm, Messrs Gunavathy

the fifth Defendant is Messrs A.R. Yahya & Co;

the sixth Defendant is Zulizman bin Zainal Abidin;

the seventh Defendant is Ku Hasniza binti Hani Ku Hashim;

the eighth Defendant is Roslina binti Ibrahim;

the ninth Defendant is Shailen a/l Popatlal;

the tenth Defendant is Tunku Mazlina binti Tunku Abdul Aziz;

the eleventh Defendant is Zarudin bin Ramlee;

the twelfth Defendant is Teoh Hock Peng;

the thirteenth Defendant is Paneagle Holdings Bhd; 4

the fourteenth Defendant is Vertu Capital Ltd a company incorporated in the Cayman Islands;

the fifteenth Defendant is Aries Telecoms Ltd (Aries), a company incorporated in Jersey; and

the sixteenth Defendant is Vinai Varayananda an individual of Thai national. Factual Background [4] The Plaintiffs brought this common law multiple derivative action in a representative capacity and for the benefit and on behalf of the 1st and 2nd Defendants. In their Statement of Claim the Plaintiffs pleads the following:

the Plaintiffs are shareholders of Zavarco Plc but they are not shareholders of Zavarco Bhd. However Zavorco Plc is the sole shareholder of Zavarco Bhd which in turn holds 91% of the shareholding of V Telecoms Bhd (V Telecoms). V Telecoms principal business is in the provision of fibre optic network. V Telecoms has licences as network facilities provider as well as network services provider (Telecommunication Business). The Telecommunication 5 Business was at the material time, the core business of Zavarco Plc and Zavarco Bhd. V Telecoms is now known as

for purpose of enhancing the Telecommunication Business Ranjeet and Shailen agreed V Telecoms would be injected into Zavarco Bhd and be part of a listing exercise. As part of the agreed collaboration Open Fibre was to be jointly owned by Ranjeet and Shailen. In furtherance thereto Open Fibre and Zavarco Bhd executed a share purchase agreement dated 13 December 2010 (2010 Share Swap). The terms of the 2010 Share Swap provides, among others, the following:

Open Fibre would transfer 1,046,000,000 ordinary shares held by Open Fibre in V Telecoms (approximately 91% of the ordinary shares in V

(ii) the consideration of Open Fibre's transfer of shares (held by Open Fibre in V Telecoms) was RM396,000,000 which was to be settled in the form of a new issue of 3,960,000 ordinary shares of RM100 each in Zavarco Bhd to Open Fibre. 6 [5] As a result of the completion of the 2010 Share Swap, Telecoms became a subsidiary of Zavarco Bhd and the following became shareholders of Zavarco Bhd –

Open Fibre;

(ii) Ranjeet;

(iii) Tan Sri Syed Mohd Yusof;

(iv) Dato' M Harisharan Pal Singh; and

General (Retired) Dato' Sri Hj Suleiman bin Mahmud (Shareholders). [6] On 29 June 2011 Zavarco Plc was incorporated with the intention of injecting the entire Zavarco Bhd and its subsidiaries into Zavarco Plc. As agreed between Ranjeet and Shailen, Zavarco Plc was the vehicle which was to be listed on the Frankfurt Stock Exchange, Germany (FSX). [7] Zavarco Plc's directors at the material time were Roslina, Tunku Mazlina, Zarudin, Teoh, Tan Sri Syed Mohd Yusof, Gustav Carl Jan Brunner (Mr Gustav) and Hirofumi Ouchi (Mr Hirofumi). Tan Sri Syed Mohd Yusof, Gustav and Hirofumi ceased to be Zavarco PLC's directors 7 on or around 25 July 2014 when they were not re-elected as directors of Zavarco PLC at Zavarco PLC's annual general meeting of shareholders. [8] Simultaneously and/or concurrently with the incorporation of Zavarco PLC and the issuance of 1.2 billion ordinary share capital of Zavarco PLC (of Euro 0.10 each), the shareholders and the plaintiffs executed a sale of shares agreement on 29 June 2011 (2011 Share Swap). Among the terms of the 2011 Share Swap were –

the entire issued and paid-up share capital of Zavarco Bhd held by the shareholders, would be transferred to Zavarco

in return for the transfer of the shareholders' shares (in Zavarco Bhd) to Zavarco Plc, Zavarco Plc issued 1,500,000,000 ordinary shares of Euro 0.10 each to persons stated in Schedule 2 to the 2011 Share Swap (recipients). At the material time, Schedule 2 to the 2011 Share Swap was left blank and the recipients were to be made available to Zavarco Plc by 23 July 2011 or such other dates as agreed by the parties to the 2011 Share Swap. 8 [9] It is the Plaintiffs’ position that the list of recipients has been agreed between Ranjeet and Shailen, namely, both of them (Ranjeet and Shailen) would have equal shareholding in Zavarco Plc upon Zavarco Plc's listing on the Frankfurt Stock Exchange Germany (FSX). This equal shareholding of Zavarco Plc between both of them would take into account the shares to be allocated to Tan Sri Syed Mohd Yusof and shares to be issued to various other investors including employees who had subscribed for shares in Zavarco Plc. [10] The 2011 Share Swap was completed and accordingly Zavarco Plc holds the entire issued and paid-up share capital of Zavarco Bhd. By 3 August 2011, Zavarco PLC's share capital was increased to a total of 1,500,000,000 ordinary shares. The entire share capital of Zavarco Plc had been issued to the recipients as agreed between Ranjeet and Shailen. [11] The original intention between Ranjeet and Shailen to hold their equal number of shares in Zavarco Plc through Open Fibre was subsequently and mutually varied in that Ranjeet and Shailen would each hold his block of shares, individually or through nominees. Ranjeet's shares were held by him personally and through his nominees. 9 Shailen's shares were held by, among others, his nominees, VCB AG and Paneagle Holdings. [12] At the material time Zavarco Bhd held 91% of the shares in V Telecoms. The directors of Zavarco Bhd at the material time were Zarudin, Tunku Mazlina, Teoh and Roslina. The directors of Zavarco Plc at the material time were Shailen, Roslina, Tunku Mazlina, Zarudin and Teoh. Whilst Open Fibre's only directors at the material time, were Zulizman and Ku Hasniza. [13] In respect of Shailen, the Plaintiffs aver that he is the "true, sole or substantial" owner and/or controller of Zavarco Plc, Zavarco Bhd, Open Fibre, Paneagle Holdings, Vertu and Aries and that the directors of the said six companies are accustomed to act in accordance with Shailen's directions or instructions. [14] As regards to Open Fibre, at all material times and prior to May 2014, its ordinary shares were held by Ranjeet (99,999 shares), Zulizman (133,330 shares), Ku Hasniza (100,000 shares) and Roslina (1 share). The transfer of the 133,330 Open Fibre shares to Zulizman is disputed by Tan Sri Syed Mohd Yusof in another court proceedings which is still pending. 10 [15] Whilst Open Fibre preference shares prior to May 2014 were held by the following persons:

Primawin Ltd (Primawin), a company incorporated in British Virgin Island (BVI), holds 96,000,000 preference shares;

China Finance Ltd (China Finance), a company incorporated in Samoa, holds 150,000,000 preference shares; and

Arab Emirates Capital Ltd (AEC), a company incorporated in BVI, holds 150,000,000 preference shares. It is the Plaintiffs’ position that Primawin, China Finance and AEC are wholly and substantially owned and/or controlled by Shailen. [16] Around 18 May 2014 Primawin converted 6,000,000 out of its 96,000,000 preference shares of Open Fibre into ordinary shares (disputed 6 million Open Fibre ordinary shares) which conversion is disputed in another court proceedings which is still pending. Subsequently Primawin fraudulently transferred the disputed 6 million Open Fibre ordinary shares to Zulizman. [17] The Plaintiffs aver that the purported transfer of Open Fibre shares from Tan Sri Syed Mohd Yusof to Zulizman, Primawan's purported 11 conversion and purported transfer of the disputed 6 million Open Fibre ordinary shares to Zulizman was part of an overall scheme to transfer the control of Open Fibre's shareholding to Shailen through Shailen's nominee who is Zulizman with the active assistance and/or participation of Open Fibre's board of directors. [18] On or about 12 May 2014, Open Fibre filed Civil Suit No. 22NCC- 164-05-2014 (Suit 164) against Zavarco Plc and Zavarco Bhd. In Suit 164 Messrs Gunavathy represented Open Fibre while Messrs Yahya acted for both Zavarco Plc and Zavarco Bhd. On or about 23 July 2014, Open Fibre, Zavarco Plc and Zavarco Bhd entered into a consent judgment (Consent Judgment) which provides, among others, the following orders:

Zavarco Bhd to transfer immediately all shares owned by Zavarco Bhd in V Telecoms to Open Fibre and Zavarco Plc was ordered to allow Zavarco Bhd to carry out the Consent

both Zavarco Plc and Zavarco Bhd to transfer immediately control and management of V Telecoms to Open Fibre together with all the documents of V Telecoms; and 12

Zavarco Plc to issue new shares (based on the market price of Zavarco Plc's shares) to Open Fibre equivalent to RM150,000,000 and allot the same to Open Fibre as full settlement of a RM150,000,000 liability placed on V Telecoms due to the negligence of the officers of Zavarco Plc and Zavarco Bhd between the years 2011 to 2012 for utilising the said sum for the interest of Zavarco Plc and Zavarco Bhd. [19] The Plaintiffs allege that Suit 164 and the Consent Judgment was a fraud and sham proceedings in furtherance of and/or pursuant to a conspiracy to defraud Zavarco Plc and/or Zavarco Bhd designed primarily to misappropriate the core business of Zavarco Plc and Zavarco Bhd, which is V Telecoms, to Open Fibre (and by extension, to Shailen) and had caused Open Fibre to gain effective control of Zavarco Plc and Zavarco Bhd. [20] Pursuant to the Consent Judgment, on or around 27 February 2015, Zavarco Plc issued and allotted 7,052,159,653 shares (of Euro 0.10 each) to Open Fibre. This issuance and allotment effectively gave Open Fibre (and by extension, Shailen) ownership and control of approximately 82.5% of the shares in Zavarco Plc. 13 [21] Subsequently the Plaintiffs discovered that V Telecoms has been injected into Aries and Aries is now the sole shareholder of V Telecoms while the sole shareholder of Aries is Vertu. Vertu in turn is owned by Open Fibre (holding 91% of the issued and paid-up share capital of Vertu) and Paneagle Holdings (holding 9% of the issued and paid-up share capital of Vertu). Open Fibre is now substantially owned and controlled by Shailen through Zulizman. The sole shareholder of Paneagle Holdings is Paneagle Sdn Bhd. Shailen wholly owns and controls Paneagle Holdings through Zulizman and Wan Alias. [22] The Plaintiffs allege that Shailen was part of a conspiracy with various persons stated above to defraud Zavarco PLC, Zavarco Bhd and the court in Suit No. 164 and/or injure the Plaintiffs by unlawful means, namely by misappropriating V Telecoms from Zavarco PLC and Zavarco Bhd (alleged conspiracy). As a result of the alleged conspiracy the Plaintiffs have suffered loss and damage. [23] The Plaintiffs also aver that the Defendants’ lawyers Messrs Gunavathy Manikam and Messrs A.R. Yahya & Co. the fourth and fifth Defendant respectively have knowingly assisted and/or participated to carry and/or execute the alleged conspiracy. 14 [24] The Plaintiffs therefore seek, among others, for the following relief:

that the Consent Judgment be set aside;

a declaration that the transfer of all ordinary shares in V Telecoms to Open Fibre or any other party through the Consent Judgment, is null and void;

an order that Aries Telecom transfers all the shares in V Telecoms back to Zavarco Bhd within eight days from the date of this court's order and for all incidental orders and/or directions to effect such a transfer;

an order that Open Fibre to deliver up and/or caused to be delivered to the plaintiffs all documents of V Telecoms that have been transferred and/or taken through the Consent Judgment within eight days from the date of this court's order;

an order that all the Zavarco Plc shares that were issued and/or transferred to Open Fibre through the Consent Judgment be cancelled within eight days from the date of this court's order and Zavarco Plc's share register be rectified and restored accordingly;

as against Zulizman, Ku Hasniza, Roslina, Shailen, Tunku Mazlina, Zarudin and Teoh: 15

damages for fraud, conspiracy and breach of fiduciary duty; and/or

(ii) exemplary damages; and

as against the defendant lawyers, damages for knowingly assisting in the fraud, conspiracy and breach of fiduciary duty. The striking out applications: Enclosure 90 – the first, second, eighth to twelfth and sixteenth Defendants application to strike out under Order 18 rule 19(1) (a), (b) and (d) of the RoC 2012 and/or under the inherent jurisdiction of the court. Enclosure 94 – the third, sixth, seven and thirteenth to fifteenth Defendants’ application to strike out under Order 18 rule 19(1) (a), (b) or

of the RoC 2012 and/or under the inherent jurisdiction of the court. [25] The basis which prompted the Defendants in both Enclosures 90 and 94 to file the said applications is centred on the issue of the Plaintiffs’ locus to commence the common law derivative action as the Defendants took the position that the Plaintiffs has no locus standi to file 16 the common law derivative action. The Defendants also rely on the same facts and documents to support their application to strike out the Plaintiffs’ Statement of Claim. Under the circumstances both the applications in Enclosure 90 and 94 will be discussed together for purpose of this judgment. Reference to “Defendants” hereinafter refers to all the Defendants except the 4th and the 5th Defendants who are not concerned with Enclosures 90 and 94. [26] The Defendants admit their applications in Enclosures 90 and 94 to strike out the Statement of Claim is the second striking out applications by the Defendants. In this respect the Defendants submits the law does not prevent an applicant from filing a second striking out application based on separate points and/or issues (Tan Heng Chew & Ors v Tan Kim Hor [2009] 2 CLJ 234). Both Enclosures 90 and 94 are premised entirely on different grounds. Furthermore as averred in the Defendants’ affidavit the points and/or issues in support of the current striking out application only came to the attention of the Defendants after disposal of the first striking out applications. [27] At the outset the Defendants reminded that derivative action in common law is an equitable devise to enable shareholder to take action on behalf of the company which could not do so because the wrongdoer 17 is controlling the company. This device is an exception to the proper plaintiff rule as enunciated in Foss v Harbottle, where a shareholder is allowed to bring a claim on behalf of the company for the benefit of the company. However since it is an equitable device formulated by the court of equity, the applicant must have equitable rights and must come with clean hands and with full and frank disclosure. The Defendants emphasised the pertinent issue here is whether the Plaintiffs have the locus standi to commence this common law derivative action. In other words, whether the Plaintiffs have the requisite equitable rights to commence this action. [28] The Defendants further submit at this stage the court is not concern with the merits of the action and the equitable remedy sought. Contrary to the Plaintiffs’ argument, the burden is on the Plaintiffs (and not on the Defendants) to prove that this action is in accordance with the equitable requirements. [29] The Defendants aver that the second Plaintiff Tan Sri Syed Mohd Yusof, has no locus to initiate this common law derivative action because by his own admission, he is merely a bare trustee as he has disposed of his shares in Zavarco Plc way before the commencement of this action. Since he has no locus standi to commence this action it 18 follows that he does not have the requisite locus standi to maintain and/or continue this action. [30] The Defendants refers to the following documents to support their position –

in a letter dated 29 June 2016 issued by Tan Sri Syed Mohd Yusof’s solicitors in England, Teacher Stern, Zavarco Plc was informed by Tan Sri Syed Mohd Yusof for the first time that Tan Sri Syed Mohd Yusof holds no beneficial interest in Zavarco Plc after having sold his shares to one New Asia Telecom Ltd. A copy of the said letter is exhibited and marked Exhibit SP-1 to Enclosure 91.

besides the said letter, in his Defence in a suit in England between himself and Zavarco Plc, Tan Sri Syed Mohd Yusof has confirmed that he has disposed of his shares in Zavarco Plc as far back as 5 December 2014. A copy of the said Defence is exhibited and marked Exhibit SP-2 to Enclosure 91. 19 [31] In respect of the first Plaintiff Ranjeet, the latest search on the register of Zavarco Plc shows that Ranjeet has been actively disposing his shares in Zavarco Plc and he no longer has any of Zavarco Plc’s shares registered solely under his name. A copy of the Shares Movement List is exhibited and marked Exhibit SP-3 to Enclosure 91. As pointed out by the Defendants the List shows that on 27 July 2011, there were 840,000,000 shares in Zavarco Plc registered in the 1st Plaintiff’s name. The said List recorded the number of shares were gradually decreasing in number and finally the balance recorded on 24 July 2013 was zero. This is two years before the Plaintiffs filed this Writ Action on 24 June 2016. As the Defendants has pointed out the 1st Plaintiff did not at any time in his affidavit or submission deny that on 24 July 2013 he has zero shares in Zavarco Plc. [32] A copy of the List of Shareholders of Zavarco Plc as at 2 March 2017 is exhibited and marked Exhibit SP-4 to Enclosure 91. Based on the said Exhibits SP-3 and SP-4 Ranjeet does not solely hold any shares in Zavarco Plc beneficially and/or legally which is a requirement to initiate this common law derivative action for and on behalf of Zavarco Plc. At best it is only beneficial interest (which is denied) in such shares 20 which is insufficient to clothe him with the locus to commence and/or continue this writ action. [33] The Defendants contend a document of V-Bank’s Custody Account Statement (marked Exhibit RSSMS-25 to Enclosure 98) which were produced by Ranjeet to show that he holds shares in Zavarco Plc is of no effect. The said Statement did not state that Ranjeet is the owner of those shares. Importantly, V-Bank AG has not explained what is the said documents and the contents in an affidavit. To compound the matter, V-Bank AG which is said to be the purported nominee of Zavarco Plc was not even listed as a shareholder in the latest list of Zavarco Plc’s shareholders as in Exhibit SP-5 to Enclosure 91. [34] Having disposed their beneficial interest in the shares of Zavarco Plc, the Plaintiffs are therefore outsiders and/or strangers to Zavarco Plc and not entitle to bring or maintain suits of an equitable nature on its behalf. The Defendants avers the Plaintiffs’ failure to mention the disposal of their beneficial interest in Zavarco Plc tantamount to failure to make full and frank disclosure of material facts which is an abuse of the process of the court. 21 Plaintiffs’ contentions [35] The Plaintiffs submit Enclosure 90 and 94 is an abuse of the process of the court as the Defendants could have raised the allegations in the first striking out applications. The Plaintiffs claim that the Defendants are well aware of the purported issues raised in the current applications and that they have reasonable access of the documents on the said issues. It is the Plaintiffs’ position that the Defendants are moving the two applications in bad faith given that they have failed in the first striking out applications. The applications are an afterthought and an attempt to re-litigate on the Plaintiffs’ locus and presenting their case in instalments. As such the Defendants are estopped from raising such issues. [36] On substance, the Plaintiffs advanced the following argument –

Tan Sri Syed Mohd Yusof is still the legal and registered owner of those 360 million shares hold by him in Zavarco Plc. In fact the UK Court held that the 360 million shares hold by him was fully paid. A copy of Approved Judgment of the High Court of England and Wales [2016] EWHC 1143 22 (Ch) is attached and marked Exhibit RSSMS-24 to Enclosure 98.

The issue whether or not Tan Sri Syed Mohd Yusof holds beneficial interest in the said shares are irrelevant to common law derivative action. According to the Plaintiffs they only need to show legal ownership and not beneficial ownership because the wrong that the Plaintiff sought to remedied is wrong to the company which is not per se equitable relief. The Plaintiffs further argued that this common law derivative action is only a procedural device created by the court of equity but the relief the Plaintiffs are seeking which is setting aside the Consent Judgment is not an equitable relief. This is because their cause of action is breach on the part of the Defendants of their fiduciary duties to the company and tort of conspiracy. In the event the Plaintiffs prove breach by the Defendants and the conspiracy, the court has no choice but to grant the relief sought. In contrast to equitable relief, even if it had been proven to the court of equity the wrong done, the court has the discretion not to grant the relief for various considerations including if the applicant comes to the court not with clean 23 hands. Whereas if the Plaintiffs proves there is breach of fiduciary duty and conspiracy, the court will have to grant damages to the Plaintiff.

Notwithstanding the list of Zavarco Plc shareholders exhibited as Exhibit SP-4 to Enclosure 91 Ranjeet still holds 36,119 units of Zavarco Plc shares in a nominee bank V-Bank AG as of 31 December 2016. This is supported by a copy of V-Bank’s Custody Account Statement marked as Exhibit RSSMS-25 to Enclosure 98.

Besides that, the List exhibited by the Defendants as Exhibit SP-4 to Enclosure 91 also shows Ranjeet owns Zavarco Plc shares jointly with Gurmeet KG Singh. As Ranjeet is the person first named in the share register, he has the locus to commence this derivative action. In support of this argument Ranjeet relies on s. 286 of the CA which according to Ranjeet, recognises the right of person first named in the share register if there is a joint holder of shares.

Furthermore, Zavarco Plc via its Article of Association recognises, in the case of joint holder of shares, the person 24 first named in the share register can exercise the right on the shares on behalf of other joint holder of the shares. The Plaintiffs refer to the following Articles – Article 45 45 Voting: general

45.3 In the case of joint holders the vote of the senior who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the register of members. Article 62.5 62 Certificates to be issued except in certain cases

62.5 If more than one person holds a share, only one certificate may be issued in respect of it. Delivery of a certificate to the person first named on the register as the holder of such shares shall be sufficient delivery to all joint holders. Article 89.2.2 89.2 In the Articles, the distribution recipient means, in respect of a share in respect of which a dividend or other sum is payable:

89.2.1 the holder of the share; or 89.2.2 if the share has two or more joint holders, whichever of them is named first in the register of members; or ... 25 The law [37] Under Order 18 rule 19 of the RoC 2012, the court may at any stage of the proceedings order to be struck out any pleadings on the ground that it discloses no reasonable cause of action, it is scandalous, frivolous or vexatious, or that it is otherwise an abuse of the process of the Court. [38] The principle upon which the court may exercise such powers are well established by the Court of Appeal in Bandar Builders Sdn Bhd & Ors v United Malaysan Banking Corporation Bhd [1993] 2 AMR 1969 where the Supreme Court held it is only in plain and obvious cases that recourse should be had to the summary process and that it can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’. In Aras Jalinan Sdn Bhd v Tipco Asphalt Public Co Ltd & Ors [2012] 1 MLJ 510 the Court of Appeal further held that so long as the claim discloses some cause of action or raises some question fit to be tried it should not be struck out. The mere fact the case is weak and not likely to succeed is no ground for the pleadings to be struck out. This summary process is only to be invoked sparingly (Affin Bank Bhd v Eye Bee Sdn Bhd [2005] 1 LNS 291; [2005] 7 MLJ 1). 26 [39] With regard to what amount to ‘plain and obvious’ reference is made to the Court of Appeal case in Tuan Haji Ishak bin Ismail v Leong Hup Holdings and other appeals [1996] 1 CLJ 393; [1996] 1 MLJ 661 where it was stated – The words 'plain and obvious' also need clarification. This case involved complex questions of company law. What may be 'plain and obvious' to a specialist in this field may not be so to another who does not have this specialized knowledge. I therefore feel obliged to state that the standard here is an objective one and implies that the perception required here is that of a person who has the required expertise. Support for this view can be found in McKay v. Essex Area Health Authority [1982] 2 All ER 771, where it was held that the right course was for the court to strike out a claim, even though it required a long and elaborate hearing before the court was satisfied that there was no cause of action, because the plaintiff was entitled to be relieved of the objection to meet it. And in Re Saul D Harrison & Sons [1994] BCC 162 at p 179 where Hoffman LJ said: But the question in this case is whether on the evidence taken as a whole and assuming in favour of the petitioner any disputed questions of primary fact, there is any case to answer. Of course it is always possible that discovery and cross examination may produce some written or oral confession that the board were indeed acting in bad faith. But I do not think that the petition can be allowed to proceed to trial simply in the hope that something may turn up. 27 Findings of the court Whether the Defendants are estop from applying to strike out the Plaintiffs’ Statement of Claim for the second time? [40] Based on the court’s records four separate striking out applications were filed previously –

Enclosure 14 filed on 27 August 2015 by Zavarco Plc, Zavarco Bhd, Roslina, Shailen, Tunku Mazlina, Zarudin,

Enclosure 19 filed on 2 September 2015 by Messrs Yahya;

Enclosure 22 filed on 7 September 2015 by Messrs

Enclosure 25 filed on 7 September 2015 by Open Fibre, Zulizman, Ku Hasniza, Paneagle Holdings, Vertu and Aries. [41] For purpose of this instant issue only the applications in Enclosure 14 and 25 which are relevant. The judgment of the learned Judicial Commissioner in respect of the four applications is reported in Ranjeet Singh Sidhu & Anor v Zavarco Plc & Ors [2016] 2 CLJ 975. To appreciate the grounds of Enclosures 14 and 25 it is necessary to peruse and reproduce the relevant passages from the said judgment – 28 [5] Court Encl. No. 14 is premised on O. 18 r. 19(1)(a), (b) and (d) of the Rules of Court 2012 (RC) and the court's inherent jurisdiction. [6] In support of Court Encl. No. 14, Mr Lim Kian Leong, learned counsel for the applicants in Court Encl. No. 14 (Mr Lim), has submitted as follows: a) the plaintiffs have no locus standi to file this common law "multiple derivative action" for two reasons. The first reason is as follows:

(i)

(ii) for the plaintiffs to bring a derivative action on behalf of Zavarco PLC, the plaintiffs must obtain "permission" from the English High Court (s. 261(1) CA (UK) provides that a member of a company must apply for "permission" (in Northern Ireland, "leave") to continue a derivative action)

(iii) the principle of "lex incorporates" regulates the right to commence a derivative action. Under the "proper plaintiff rule", a shareholder of a company has no "direct right" to file a derivative suit…

(iv) the right to bring a "multiple derivative action" is governed by the law of the place of incorporation of the companies…

failure to obtain leave of the court where the company is incorporated, amounts to an abuse of court process…

(vi) Zavarco PLC as the parent company of Zavarco Bhd, is an indispensable party in this multiple derivative action. Upon the plaintiffs' failure to obtain permission of the English High Court for this suit against Zavarco PLC, this entire multiple derivative suit "crumbles"… 29

(vii) when a plaintiff has no locus standi to bring a common law derivative action, the action should be struck off in limine as held by the English Court of Appeal case of Prudential Assurance Co Ltd v. Newman Industries Ltd & Ors (No 2) [1982] 1 All ER 354

the second reason why the plaintiffs have no locus standi to file this suit against Zavarco PLC is as follows:

Zavarco PLC has filed Kuala Lumpur High Court Civil Suit No. 22 NCVC-131-03-2015 against, among others, the plaintiffs (Suit No. 131). On 13 July 2015, Hue Siew Kheng J has made the following order, among others:

Zavarco PLC is restrained from forfeiting or cancelling 360,000,000 shares held by Tan Sri Syed Mohd Yusof in Zavarco PLC until the final outcome of Suit No. 131 (injunction against Zavarco PLC); and

as a condition for the injunction against Zavarco PLC, the plaintiffs are restrained from exercising any right in respect of shares in Zavarco PLC until the final outcome of Suit No. 131 (Zavarco PLC's injunction);

(ii) the plaintiffs however obtained a stay of execution of Zavarco PLC's injunction in the Court of Appeal (Court of Appeal's decision); [7] Court Encl. No. 25 is premised on O. 18 r. 19(1)(a), (b), (d), O. 92 r. 4 RC and the court's inherent jurisdiction. [8] Mr Wong Chong Wah (Mr Wong), learned counsel for the applicants in Court Encl. No. 25, associated himself with the aforesaid submission by Mr Lim. Mr Wong relies on the following cases … 30 [9] Mr Wong advanced the following additional contentions to support Court Encl. No. 25:

This suit is a mere afterthought as this suit has been filed after Mr Ranjeet Singh has filed the winding up petition. No action has been filed when the plaintiffs have allegedly discovered the consent judgment. Accordingly, the bona fides of the plaintiffs is absent and this suit should be struck out accordingly;

for a rescission of an agreement to take place, parties must be capable of being restored to their original position prior to the agreement, namely restitutio in integrum must take place… [42] Based on the aforesaid the issue in the previous striking out applications was whether permission of English High Court is required before a common law derivative action can be initiated in Malaysia against a company incorporated in England (ie Zavarco Plc). The Defendants’ in Enclosures 14 and 25 took the view that the Plaintiffs must obtain permission from the English High Court. Since the Plaintiffs failed to obtain such permission they have no locus to file this derivative action. [43] Both Enclosures 14 and 25 was dismissed by the High Court on 9 October 2015 and the Defendants’ appeal to the Court of Appeal was also dismissed. The Defendants’ motion for leave to appeal to the Federal Court was also dismissed. 31 [44] In the instant case it is the Defendants’ contention that the Plaintiffs have no locus standi for the simple reason they are not shareholders of Zavarco Plc. Under the circumstances the Plaintiffs do not possess the equitable right to act on behalf and for the benefit of Zavarco Plc in this common law derivative action. [45] It is therefore clear the grounds and facts on which the Defendants framed their previous striking out applications in Enclosures 14 and 25 is totally different from the present striking out applications in Enclosures 90 and 94. Furthermore the Defendants through Shailen, the ninth Defendant, provides a reasonable explanation, that it was not possible to raise the points highlighted in the present striking out applications as the previous striking out applications were filed in August 2015 whereas Tan Sri Syed Mohd Yusof’s position as a bare trustee of the Zavarco Plc shares was only made known by Tan Sri Syed Mohd Yusof on 29 June 2016 (Exhibit SP-1 to Enclosure 91) and 17 October 2016 (Exhibit SP-2 to Enclosure 91). In so far as Ranjeet is concerned the status of his shareholding in Zavarco Plc as at 24 June 2015 (date of Writ and Statement of Claim) shows he has no shares registered solely under his name which is contrary to what he pleaded in the Statement of Claim, namely, he holds at all material times 555,000,000 shares in Zavarco Plc. 32 [46] The Defendants cited the case Tan Heng Chew & Ors v Tan Kim Hor & Ors [2009] 2 CLJ 234 which is a winding up proceeding, to support their position that the law does not prohibit a second striking out application. Whilst it is true, as contended by the Plaintiffs, that Tan Heng Chew (supra) did not discuss whether successive applications can be made or whether it was barred by virtue of res judicata or estoppel, it is noted that the Court of Appeal at the same time did not make any adverse observations regarding successive striking out applications by the respondent. The first striking out application was made four months after the winding up petition was presented whilst the second striking out application was filed three years after the presentation of the winding up petition. The first striking out application was premised on the ground that the petition was an abuse of the process of the court and that the petitioners failed to show any just and equitable ground to wound up the respondent company. The ground for the second striking out application was, inter alia, the petitioner failed to file the affidavit verifying petition as required under rule 26 of the Companies (Winding Up) Rules 1972. [47] In this respect it is noted that the Plaintiffs did not cite any authority to support their contention that the Defendants are barred from making a second application to strike out the Statement of Claim. As such I am of the view there is no restriction in law for the Defendants to file a 33 subsequent application (Enclosures 90 and 94). The issue of estoppel and res judicata is not applicable since the facts and issues upon which the previous and the present striking out applications are made are entirely different and entail different considerations all together. The facts in respect of the Plaintiffs’ shareholding of Zavarco Plc’s shares were only discovered by the Defendants after the disposal of the previous striking out application, so it could not be raised in the same. The facts are personal to the Plaintiffs as they are/were the owner of the shares in Zavarco Plc and it is the Plaintiffs obligation to disclose this material facts when they sought for equitable relief in this common law derivative action. [48] It can be seen from contemporaneous evidence that at the time when the previous striking out applications in Enclosures 15 and 25 were filed by the Defendants in August 2016, Ranjeet has no shares in Zavarco solely registered in his name and Tan Sri Syed Mohd Yusof was/is a bare trustee. Yet the Plaintiffs blame the Defendants for not raising this facts and issue (facts and issue which is within their own personal knowledge) when Enclosures 15 and 25 were filed. I do not think it is fair and just for the court to concede with the Plaintiffs’ contention that estoppel and res judicata operates against the Defendants when the Plaintiffs themselves are guilty of not providing full 34 and frank disclosure of material facts which is well within their personal knowledge. Whether the Plaintiffs has the requisite locus standi to commence and maintain this common law derivative action [49] At the outset it is pertinent to note that the Plaintiffs’ capacity to bring this action is expressly stated to be in a representative capacity for the benefit of Zavarco Plc. The Plaintiffs has stated it in this manner –

1.

TAN SRI SYED MOHD YUSOF BIN TUN SYED NASIR (The Plaintiffs bring this action in a representative capacity and for the benefit of Zavarco Plc and for themselves, as shareholders of Zavarco Plc other than the Defendants who are shareholders of Zavarco Plc and also for the benefit of Zavarco Bhd) Further thereto the Plaintiffs pleaded in their Statement of Claim as follows: Paragraph 2 The Plaintiffs are and were at all material times shareholders of Zavarco Plc. 35 Paragraph 7 Whilst the Plaintiffs are shareholders of Zavarco Plc, they are not shareholder of Zavarco Bhd. Nevertheless, Zavarco Plc wholly controls Zavarco Bhd … Paragraph 15 Therefore the Plaintiffs further contend and will contend that the Plaintiffs are entitle to bring this representative action/derivative action in a representative capacity and for the benefit of Zavarco Plc and for themselves, as shareholders of Zavarco Plc and all the other shareholders of Zavarco Plc other than the Defendants who are shareholders of Zavarco Plc and also for the benefit of Zavarco Bhd… Paragraph 16 Ranjeet is an individual with an address for service at … Ranjeet was at all material times the registered owner of 555,000,000 ordinary shares in Zavarco Plc. Paragraph 17 Tan Sri is an individual with an address for service at … Tan Sri was at all material times and remains the registered owner of 360,000,000 ordinary shares of Zavarco Plc. [50] One of the grounds upon which the Defendants sought to strike out the Plaintiffs’ Statement of Claim is that it discloses no reasonable cause of action against the Defendants. The Plaintiffs action is grounded on the allegation that the Defendants has conspired to defraud Zavarco Plc and/or Zavarco Bhd by misappropriating the core business 36 of Zavarco Plc and/or Zavarco Bhd, namely, V Telecoms to Open Fibre. The allegation essentially means a purported wrong perpetrated against both the companies. In this respect the Plaintiffs have chosen to pursue the action under common law on behalf and for the benefit of Zavarco Plc and/or Zavarco Bhd to seek equitable remedy for the wrong done. The onus is therefore on the Plaintiffs to prove they are entitle to file this common law action against the Defendants, namely, they have the requisite locus standi to commence this common law action. [51] In common law derivative action it is trite that the issue of locus standi must first be determined at the outset as a preliminary issue as stated in Prudential Assurance Co Ltd v Newman Industries Ltd & Co (No. 2) [1982] 1 AER 354; [1982] Ch 204 in order to save the company from going through torture of the trial. [52] In Abdul Rahim bin Aki v Krubong Industrial Park (Melaka) Sdn Bhd & Ors [1995] 4 CLJ 551;[1995] 3 MLJ 417 the Court of Appeal discussed the exception to the proper plaintiff rule and held – We now turn to consider the one exception with which this case is concerned. It is the derivative action; an ingenious procedural device created by Court of equity by which the rule of judicial non-interference is overcome. It is based upon the premise that the company which has 37 been wronged is unable to sue because the wrongdoers are themselves in control of its decision making organs and will not, for that reason, permit an action to be brought in its name. In these circumstances, a minority shareholder may bring an action on behalf of himself and all the other shareholders of the company, other than the defendants. The wrongdoers must be cited as defendants. So too must the company. The title to the action must reflect that the suit is being brought in a representative capacity. The statement of claim or other pleading filed in support of the originating process must disclose that it is a derivative action and recite the facts that make it so. Further, there must be an express statement in the pleading that the action is being brought for the benefit of the company named as a defendant. An action that does not meet these requirements is liable to be struck out as being frivolous and vexatious. The juridical basis upon which the Court entertains such an action is that the majority who have either de facto or de jure control of the company have by commission or omission committed what is described as "a fraud upon a minority". It is the second category of case mentioned by Edgar Joseph Jr. J in Tan Guan Eng (supra). The principle was stated by James LJ in MacDougall v. Gardiner [1875] 1 Ch. D 13, 21 where he said: I think it is of the utmost importance in all these companies that the rule which is well known in this Court as the rule in Mozley v. Alston and Lord v. Copper Miners' Company and Foss v. Harbottle should be always adhered to; that is to say, that nothing connected with internal disputes between the shareholders is to be made the subject of a bill by some one shareholder on behalf of himself and others, unless there be something illegal, oppressive, or fraudulent - unless there is something ultra vires on the part of the company qua company, or on the part of the majority of the company, so that they are not fit persons to determine it; but that every litigation must be in the name of the 38 company, if the company really desire it. Because there may be a great many wrongs committed in a company - there may be claims against directors, there may be claims against officers, there may be claims against debtors; there may be a variety of things which a company may well be entitled to complain of, but which, as a matter of good sense, they do not think it right to make the subject of litigation; and it is the company, as a company, which has to determine whether it will make anything that is wrong to the company a subject-matter of litigation, or whether it will take steps itself to prevent the wrong from being done. (Emphasis added.) In Burland v. Earle [1902] AC 83, 93, Lord Davey, when delivering the advice of the Privy Council expressed the proposition in the following words: It is an elementary principle of the law relating to joint stock companies that the Court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so. Again, it is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. These cardinal principles are laid down in the well-known cases of Foss v. Harbottle and Mozley v. Alston, and in numerous later cases which it is unnecessary to cite. But an exception is made to the second rule, where the persons against whom the relief is sought themselves hold and control the majority of the shares in the company, and will not permit an action to be brought in the name of the company. In that case the Courts allow the shareholders complaining to bring an action in their own names. This, however, is mere matter of procedure in order to give a remedy for a wrong which would otherwise escape redress, and it is obvious that in such an action the plaintiffs cannot have a larger right to relief 39 than the company itself would have if it were plaintiff, and cannot complain of acts which are valid if done with the approval of the majority of the shareholders, or are capable of being confirmed by the majority. The cases in which the minority can maintain such an action are, therefore, confined to those in which the acts complained of are of a fraudulent character or beyond the powers of the company. A familiar example is where the majority are endeavouring directly or indirectly to appropriate to themselves money, property, or advantages which belong to the company, or in which the other shareholders are entitled to participate, as was alleged in the case of Menier v. Hooper's Telegraph Works[1874] LR 9 Ch. 350. [53] Taking into consideration the aforesaid, the common law derivative action is an equitable device providing remedy to a company against which a wrong is committed by persons who are in control of the company and the wrongdoer will obviously not permit an action to be brought in the name of the company. Under this circumstances the court of equity allows the minority shareholders to commence an action against the wrongdoer for and on behalf of the company. In this respect, it is noted that the person to whom the right is given to seek redress on behalf of the company are persons who are connected with the company in that they are members of the company. To my mind this is understandable in the sense that members of a company are in a contractual relationship with the company via the memorandum and articles association of the company. It goes without saying persons who 40 are not member of the company are strangers and not in no position to be concern with the company in the context of initiating court action on behalf of the company. The proper plaintiff rule as established in Foss v Harbottle was compromised to allow members in a company that is being wronged to sue on behalf of the company. However it cannot be construed as to allow stranger to the company to act on behalf of the company. [54] In the instant case it is the Plaintiffs’ pleaded case that they are and were at all material times shareholders of Zavarco Plc which controls Zavarco Bhd. It is pleaded that Ranjeet was at all material times the registered owner of 555,000,000 ordinary shares in Zavarco Plc and Tan Sri Syed Mohd Yusof was at all material times and remains the registered owner of 360,000,000 ordinary shares of Zavarco Plc. Therefore the Plaintiffs contends they are entitled to bring this representative action/derivative action in a representative capacity and for the benefit of Zavarco Plc and for themselves, as shareholders of Zavarco Plc and all the other shareholders of Zavarco Plc other than the Defendants. It is the Defendants’ contention that such statement in respect of the Plaintiffs being shareholders of Zavarco Plc is false. 41 [55] In so far as Ranjeet is concerned, the Shares Movement List (Exhibit SP-3 to Enclosure 91) clearly shows Ranjeet had, on 24 July 2013, disposed of his last 420,000.000 shares in Zavarco Plc. Consequentially he no longer has any of Zavarco Plc’s shares registered solely under his name. It must be noted this multiple derivative common law action was filed by the Plaintiffs on 24 June 2016 which is about 3 years after Ranjeet disposed of the last of his shares in Zavarco Plc. Yet in the Statement of Claim Ranjeet had falsely pleaded he was at all material times the registered owner of 555,000,000 ordinary shares in Zavarco Plc. [56] It is also pertinent to note that the Plaintiffs’ grievances in this multiple derivative common law action is the execution of the Consent Judgment dated 23 July 2014. It is the Plaintiffs’ position that the Consent Judgment is a fraud and sham proceedings with the intention to defraud Zavarco Plc and/or Zavarco Bhd by misappropriating its core business which is V Telecoms. Based on contemporaneous evidence it is apparent even at the time when the Consent Judgment was executed Ranjeet was not the registered owner of 555,000,000 shares in Zavarco Plc as he had, by 23 July 2014, already disposed of his entire shares in Zavarco Plc. 42 [57] As Ranjeet was not at the material time the registered owner of 555,000,000 shares in Zavarco Plc as pleaded, he simply has no locus standi to commence this multiple derivative common law action in the first place, what more to maintain it. Learned counsel for the Plaintiffs pointed out that Ranjeet is the joint owner of 24,365,050 shares in Zavarco Plc with one Gurmeet KG Singh and therefore he is a registered owner of Zavarco Plc shares. He further submits the other joint owner of the shares, Gurmeet KG Singh, need not be named as a party to this action. The learned counsel further argued that even if he is wrong, it is a small issue as it is curable by amending the Statement of Claim. [58] In this respect I do not think it is small issue which can simply be rectified by amendment. We are dealing with the issue of locus standi, namely, whether the Plaintiffs has the requisite locus to initiate this derivative action. The pleaded case of Ranjeet is that he is acting in his capacity as the sole registered shareholder of 555,000,000 ordinary shares in Zavarco Plc. Based on the contemporaneous evidence in Exhibit SP-3 and Exhibit SP-4 to Enclosure 91, he does not solely hold any shares in Zavarco Plc since 24 July 2013. So when he pleaded, on 24 June 2015, in the Statement of Claim that he was at all material times the registered owner of 555,000,000 shares in Zavarco Plc it is simply not true. 43 [59] With regards to amendment, I am mindful of the position of the law that pleadings may be amended at any stage of the proceedings to enable the real question in issue to be pleaded and adjudicated between the parties. In Janab’s key to Civil Procedure at page 257, reference was made to the case Clarapede v Commercial Union Association

32 WR) where it was stated however negligent or careless the original omission may have been the amendment should be allowed if it can be without injustice to the other party. In the instant case, it is my finding based on the affidavit evidence there is a deliberate and conscious effort by the Plaintiffs not to disclose material facts which is vital, namely, the Plaintiffs’ status in respect of their shareholding in Zavarco Plc. Under the circumstances, it is not a case of being negligent or careless in providing full and frank disclosure in respect of their shareholding. I am of the view this is fatal and it goes to the root of the matter, especially so when the Plaintiffs chose to seek the intervention of the court of equity for remedy. From the facts, one cannot help but to infer that it was never the intention of Ranjeet to consider amending the pleading to reflect his actual position. If he had such intention, he would have done so when served with the Enclosures 90 and 94. 44 [60] Learned counsel for the Plaintiffs cited the Court of Appeal case Solai Realty Sdn Bhd v United Overseas Bank (M) Bhd [2013] 1 LNS 384 to support its argument that the court is empowered to direct for the Statement of Claim to be amended rather than striking out the Statement of Claim. The relevant passage of the judgment states –

The power under Order 18 rule 19(1) of the RHC is not only confined to the power to strike out pleading or claim. It also empowers the court to amend any pleadings, in appropriate case. To facilitate that, the court may order the action to be stayed, so as to give time to the Plaintiff to effect the necessary amendment to the pleadings or the statement of claim. Where the pleadings are defective and the opposing party seeks to strike out those pleadings, the court ought not to act summarily if an amendment can correct the defect (see: Kuala Lumpur Finance Bhd v. KGV & Associates Sdn Bhd [1995] 1 CLJ 519; [1995] 1 MLJ 504; and Lim Weow @ Lim Neu v. Perwira Habib Bank Malaysia Bhd [2001] 2 AMR 1307). Based on the above passage and the authorities referred thereto it is trite that pleadings may be amended in appropriate cases which includes defective pleadings which is capable of being amended so as to correct the defect. It is not a matter as of right. [61] In Kuala Lumpur Finance Bhd (supra) the defendant applied to strike out the plaintiff’s claim on the ground the claim is time barred. At the same time when the application to strike out was filed by the 45 defendant, the plaintiff had also filed an application to amend its statement of claim by incorporating the date on which the plaintiff discovered fraud and negligence by the defendants. The date is vital as limitation period starts to run from such date. The plaintiff explained the date was inadvertently omitted in its statement of claim. The court allowed the amendment and dismissed the defendant’s application to strike out. [62] In the instant case the facts strongly suggest the defective Statement of Claim is not due to inadvertence omission but intentional and deliberate concealing of material facts which relate to the Plaintiffs’ legal capacity to initiate the action on behalf of Zavarco Plc. Given the circumstances I do not think it is an appropriate case for amendment, especially so when the Plaintiffs failed to provide full and frank disclosure of its own position vis-à-vis Zavarco Plc. More importantly, the first Plaintiff himself did not at any time aver to deny that he has disposed his 555,000,000 shares in Zavarco Plc and that he has no shares registered solely under his name in Zavarco Plc. [63] The first Plaintiff submits as he has shares in Zavarco Plc jointly held with Mr Gurmeet Singh, he is entitled to bring this action because it was his name which appears first followed by Mr Gurmeet Singh. The 46 first Plaintiff made reference to various provisions (as stated in paragraph 35 above) in the Articles of Association of Zavarco Plc which he claims as giving him the locus standi to commence this derivative action. In this respect it is my view that the said provisions are meant to regulate the relationship between Zavarco Plc and the first Plaintiff and between the Plaintiff and the other shareholder of Zavarco Plc. Nothing in those provisions which can be construed that the Plaintiff is entitled or mandated to bring an action on behalf of the other joint owner. The first Plaintiff brought this writ action in his capacity as the sole shareholder of 555,000,000 ordinary shares in Zavarco Plc and not as a joint owner of 24,365,050 shares in the same. Assuming for a moment that he brought this action as a joint owner of the 24,365,050 shares, the law requires both joint owners to be named as plaintiff or that if the other joint owner refused to be named as plaintiff then he may authorised the first Plaintiff to initiate this derivative action on behalf of Zavarco Plc (Cullen v Knowles And Birks [1898] 2 QB 380; Zaidin Abd Ghani @ Zaidin Sthothard v Raja Raan Nair@ Mohd Yusof & Ors [2001] MLJU 227). [64] However there is no evidence to show the other joint owner, namely, Mr Gurmeet Singh has authorised Ranjeet to commence this derivative action and on behalf of Zavarco Plc. In any event Ranjeet is suing the Defendants in his capacity as the sole registered shareholder 47 of 555,000,000 ordinary shares in Zavarco Plc, therefore the issue of Mr Gurmeet Singh be named as a co-plaintiff or that his authority must be obtained to commence this derivative action is a non-issue. [65] In another attempt to convince the court that he has the locus standi to bring this derivative action on behalf of Zavarco Plc, Ranjeet avers he holds 36,119 units of Zavarco Plc shares in a nominee bank, V-Bank AG as at 31 December 2016. In support of such position a copy of V-Bank’s Custody Account Statement as at 31 December 2016 was produced and marked Exhibit RSSMS-25 to Enclosure 98. I have perused the said Exhibit and I am compelled to agree with learned counsels for the Defendants that nothing turns from the said Exhibit RSSMS-25. The said Exhibit which appears to be a statement of account did not state that Ranjeet is the owner of the said 36,119 units of Zavarco Plc shares. It is pertinent to note nowhere in the latest list of Zavarco Plc shareholders (Exhibit SP-4 to Enclosure 91) was V-Bank AG listed as a registered shareholder of Zavarco Plc. Therefore Exhibit RSSMS-25 is of no effect and significance in so far as the first Plaintiff’s ownership of shares in Zavarco Plc is concerned. 48 [66] In respect of the second Plaintiff Tan Sri Syed Mohd Yusof, the case against him is his own admission that he had sold his 360,000,000 shares in Zavarco Plc to New Asia Telecoms Ltd. Such admission is found in the following documents –

Via letter dated 29 June 2016, Ranjeet’s solicitor informed Zavarco Plc the following - Dear Sirs Zavarco plc (the “Company”) – Purported Call and Intended Forfeiture Notices respectively dated 30 May and 15 June 2016 issued against Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir (Mr Tan Sri) We act for Mr Tan Sri. We understand that you act for the Company. Mr Tan Sri has received the purported notices referred to above (and an earlier purported Call Notice dated 5 June 2015). Although still the registered holder of the shares the subject of the purported notices, he retains no beneficial interest in them, having sold them to New Asia Telecom Ltd.

in a civil matter in the English High Court between him and Zavarco Plc, Tan Sri Syed Mohd Yusof’s defence states as follows – 49 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION LEEDS DISTRICT REGISTRY BETWEEN: C30LS585 ZAVARCO PLC Claimant-and TAN SRI SYED MOHD YUSOF BIN TUN SYED NASIR Defendant DEFENCE

This Defence is served without prejudice to the Defendant’s contention that the Claimant’s claim (“the Claim”) should be stayed pending the final determination of the Defendant’s claim commenced on 9 September 2016 by part 8 Claim Form in the High Court of Justice, Chancery Division, no HC2016.002599 (“the Defendant’s Part 8 Claim”). …

Paragraph 4 is admitted. It is averred that the said 360 million ordinary shares in the Claimant held by and registered in the Defendant’s name (“the Defendant’s Shares”) have since 5 December 2014 been held by him on bare trust for New Asia Telecom Ltd (company number 9262452). As the practice in England, Tan Sri Syed Mohd Yusof’s solicitor had verified the truth of his defence – 50 Statement of Truth The Defendant believes that the facts stated in this Defence are true. I am duly authorised to sign this Statement of Truth on the Defendant’s behalf. sgd Lee James Donoghue – Defendant’s Solicitor Teacher Stern LLP 17 October 2016 [67] The second Plaintiff Tan Sri Syed Mohd Yusof admitted that he had disposed of his 360,000,000 shares in Zavarco Plc and that although he is still registered as the holder of the shares, he has no beneficial interest in the said shares. It is also his admission that since 5 December 2014 he is holding the shares as a bare trustee for New Asia Telecom Ltd. Simply put, there is clear contemporaneous evidence that at the time when the second Plaintiff filed this derivative action on 24 June 2015 he was not the registered owner of 360,000,000 ordinary shares of Zavarco Plc. [68] It must be noted that Tan Sri Syed Mohd Yusof did not file any affidavit to deny the positive assertions made by the Defendants that he had admitted, via the two documents (Exhibit SP-1 and Exhibit SP-2 to Enclosure 91) that he has disposed his shares in Zavarco Plc and that 51 he is holding the shares in trust. His failure to contradict such positive assertion tantamount to admission of the facts as contained in the positive assertion (Johor Capital Holdings Sdn Bhd v Frank Khoo Shao [2002] 6 CLJ 288). [69] Tan Sri Syed Mohd Yusof’s failure to deny that he had disposed of his shares to New Asia Telecom Ltd is telling yet expected as he cannot be seen to contradict his own admission when confronted. Be that as it may the second Plaintiff insists as he is still registered as the holder of the 360,000,000 shares in Zavarco Plc (see Exhibit SP-4 to Enclosure 91) he has the requisite locus standi to bring this derivative action. According to the learned counsel, the second Plaintiff need only show that he is the registered owner of the said shares in Zavarco Plc which gives him the locus to commence action on behalf of Zavarco Plc. Beneficial interest (which the Defendants argued is required for the second Plaintiff to has the standing to initiate this derivative action), is irrelevant because the Plaintiffs’ cause of action is breach of fiduciary duty and seeking for the Consent Judgment to be set aside which is not an equitable relief. Learned counsel further argued since the remedy sought is not an equitable relief and for the benefit of the company the Plaintiffs should therefore be allowed to pursue this action to prove the 52 wrong done to the company as they are the registered shareholder of Zavarco Plc. [70] It appears that in his desperate attempt to justify the second Plaintiff’s locus standi, the learned counsel is saying it does not matter that the second Plaintiff had disposed of his shares in Zavarco Plc to another party. As long as his name still appears on the register of Zavarco Plc as a registered shareholder he is entitled to act on behalf of the company. Also, it does not matter that he holds the said shares in trust. As long as his name appears on the register of Zavarco Plc as a registered shareholder the second Plaintiff said he is entitled to act on behalf of the company. [71] With respect, such argument simply does not hold water and it is self-serving. The legal position in respect of a registered shareholder who is a vendor is well settled. The second Plaintiff having disposed of his shares in Zavarco Plc becomes a bare trustee for New Asia Telecoms Ltd in respect of the shares in Zavarco Plc. Beneficial ownership is vested upon New Asia Telecoms Ltd which is in the same position as the legal owner in terms of enforcing proprietorship rights against the world at large (Temenggong Securities ltd & Anor v Registrar of Titles & Ors [1974] 2 MLJ 45; Samuel Naik Siang Ting v Public Bank 53 Bhd [2015] 8 CLJ 944; Tan Ong Ban v Teoh Kim Heng [2016] 3 CLJ 193). The second Plaintiff has, for all intent and purposes, departed ownership in the said shares as he is merely a bare trustee with no beneficial or legal rights over the said shares. It is obvious in the English Suit he unequivocally disclaim liability in respect of the 360,000,000 shares in Zavarco Plc by pleading he is a bare trustee because he had disposed of the shares to New Asia Telecoms Ltd despite the shares are still registered under his name. Whereas in this derivative common law action filed in June 2015 he unequivocally pleaded he is the registered holder of 360,000,000 shares in Zavarco Plc at all material times and therefore he has the equitable right to act on behalf of Zavarco Plc. Nothing was ever mentioned about his disposal of the 360,000,000 shares. In this respect I am compelled to agree with learned counsel for the Defendants’ contention that the second Plaintiff is obviously blowing hot and cold to suit his interest. [72] Since the Plaintiffs are seeking the court of equity to intervene, the Plaintiffs must comply with the equitable requirements. The final relief sought by the Plaintiffs in this derivative action may not be equitable but the issue here is the Plaintiffs’ standing to commence this action. The Plaintiffs must have the equitable right and must come with clean hands. Being a bare trustee, the second Plaintiff does not possess the equitable 54 right required for purpose of commencing this common law derivative action for and on behalf of Zavarco Plc. Besides that the Plaintiffs failed to disclose material facts which goes to the root of the matter, namely, their legal capacity to commence this common law derivative action on behalf and for the benefit of Zavarco Plc. As such I am of the view the Plaintiffs are not entitle to seek the assistance of the court of equity. Conclusions [73] Taking into considerations the facts and the issues discussed above, it is my finding that the Plaintiffs do not have the requisite locus standi to commence and maintain this common law derivative action. The contemporaneous evidence adduced by the Defendants shows what was pleaded by the first and second Plaintiffs in their Statement of Claim in respect of their shareholding of 555,000,000 and 360,000,000 ordinary shares respectively in Zavarco Plc are just not true. Those shares had already been disposed of by the Plaintiffs at the point in time when they commenced this common law derivative action. As such they are not legal and beneficial owner of the said shares in Zavarco Plc and it follows that they do not have the locus standi to act on behalf of Zavarco Plc. Under such circumstances it is plain and obvious, due to the absence of locus standi, this common law derivative action is 55 unsustainable. The absence of locus standi on the part of the Plaintiffs has rendered this common law derivative action frivolous and vexatious and otherwise an abuse of the process of the court under Order 19 rule 18 of the RoC 2012 and/or under the inherent jurisdiction of the court. Accordingly, I allowed Enclosures 90 and 94 with costs. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 21 DECEMBER 2017 Counsel: Plaintiffs : Owee Chia Ming and John Kan of Messrs Izral Partnership Defendants : Lim Kian Leong, Lui Kar Yee of Messrs Lim Kian Leong & Co. (for the 1st, 2nd, 8th, 9th, 10th, 11th, 12th and 16th Defendants) : Wong Chong Wah and Wong Chun Keat for Messrs Sia Siew Mun & Co (for the 3rd, 6th, 7th, 13th, 14th and 15th Defendants) : Dhalini Raj of Messrs Azim Tunku Farik & Wong (for the 4th Defendant) : Helen Lim of Messrs Ranjit Ooi & Robert Low (for the 5th Defendant)