Richard Tan Han Sheng v 1. ) R&A Telecommunication Sdn. Bhd. (22NCVC-619-10/2017)

R & A TELECOMMUNICATION SDN BHD

MOHD TARMIZI BIN LEMAN (NO. K/P: 771129-05-5789) … DEFENDANTS BEFORE Y.A. TUAN GUNALAN A/L MUNIANDY JUDGE, HIGH COURT GROUNDS OF DECISION Page 2 of 22 [1] This is a striking out application (Enclosure 15) filed by the1st Defendant (‘D1’) pursuant to Order 18 rule 19(b), (c) and/or (d) of the Rules of Court, 2012 (‘ROC’) to strike out the Plaintiff’s Writ and Statement of Claim (‘SOC’) dated 26.10.2017. Vide the SOC the Plaintiff (‘P’) sought an order to impeach and set aside a Consent Judgment dated 05.10.2017 in another suit in the Shah Alam High Court for certain injunction reliefs. Background of Claim [2] P in his pleaded claim has prayed for, inter alia, the following orders: 1) Impeach and set aside the terms of a Consent Judgment (particularly paragraphs (3)(a) to (c), (4), (5)(a) to (d), (6), (7) and (8)) entered by both the Defendants at Shah Alam High Court Civil Suit No. BA-22NCVC-534-09/2017 (‘534 Suit’) on 05.10.2017 recorded before the Registrar, Mankiranjit Kaur A/P Mehinder Singh (‘Consent Judgment’); 2) Injunctive reliefs to restrain any transfer and/or dealing of 3,250,000 duly paid ordinary shares (‘the Shares’) of a company Page 3 of 22 known as Threesixty Technologies Sdn. Bhd. (‘ThreeSixty’) held in the name of D2 on behalf of P. [3] In support of his claim, P pleaded as follows:

The Consent Judgment was entered by way of fraud on the Court by both Defendants (D1 and D2) whereby they have colluded with each other, conspired to cheat and committed fraud on both the Court and P by failing to make full and frank disclosure of material facts that:

at all relevant material times, P is the beneficial owner to the Shares whereby D2 is merely holding the Shares as trustee pursuant to a Trust Deed dated 18.05.2017 signed between the P and D2 (‘the Trust Deed’); [Refer: the Trust Deed dated 18/5/2017 (particularly Clauses (1), (3) and ….

As such, D2 does not have any capacity to transfer the Shares to D1 (or its nominees) as the Shares are in fact held on trust for and on behalf of P.

D2 had committed breach of trust by entering into the Consent Judgment without the consent and knowledge of P;

The Consent Judgment entered into between both the Defendants is therefore unlawful, mala fide and an abuse of process of court. [4] The main thrust of Enclosure 15 is premised on the following grounds:

There are no triable issues that ought to be tried;

P failed to prove his beneficial rights and interest over the Shares, whether by way of Trust Deed of by way of gift;

P’s claim over the beneficial rights and interest over the Shares is contradictory to ThreeSixty’s Audited Report for Financial Year 2014;

P’s Writ and SOC is to prevent D1 from the fruits of the Consent Judgment. [5] According to the Written Submission of D1, the basis of the striking out application is this: Page 5 of 22 “R&A (‘D1’) is relying on sub-paragraphs (b) and/or (d) of Order 18 r 19 ROC 2012 in seeking for this action to be struck out. Essentially, R&A contends that:

The entire thrust of the Plaintiff’s SOC is premised on the Trust Deed. Richard Tan (‘P’) has not pleaded any other facts to derive his claim of beneficial ownership;

However, the Trust Deed does not create an actual trust between the Plaintiff and Tarmizi and is instead only for the purposes of creating a sham trust;

This is compounded by the Plaintiff’s own subsequent averment that the said shares were given to him as a ‘gift’ by his father, one Francis Tan, in complete contradiction with the terms of the Trust Deed;

As such, the Plaintiff’s claim is one that is scandalous, vexatious and/or frivolous or otherwise an abuse of this Honourable Court’s process, as it would not be possible for the Plaintiff to prove at trial both that: Page 6 of 22

he had paid for the subscription of the shares in accordance with Recital (B) of the Trust Deed; or

he had received them as a gift.” The Law on Striking Out of Pleadings [6] P referred to the case of Solai Realty Sdn. Bhd. v United Overseas Bank (M) Bhd. [2013] 4 MLJ 545 (COA), where it was held: “Judges dealing with striking out application under O 18 r 19 of the RHC must always bear in mind that the power to strike a case under the order without having to go for trial should be exercised sparingly and only in a plain and obvious case. The procedure is of a summary nature. The party affected should not be deprived of his right to have his case proceeded by a proper trial unless the claim is obviously unsustainable. The Federal Court in the case of CC Ng & Brothers Sdn Bhd v Government of State of Pahang [1985] 1 MLJ 347, had said that 'the inherent power to dismiss an action summarily without permitting the plaintiff to proceed to trial is a drastic power. It should be exercised with utmost caution' — It is a power which ought to be very sparingly exercised and only in very Page 7 of 22 exceptional cases, (per Lord Herschell in Lawrence v Norrey — as cited in CC Ng & Brothers).” [7] Striking out of pleadings is governed by Order 18 rule 19(1)(a), (b) and (c) of the Rules of Court, 2012 (‘ROC’) which provide as follows: “19.(1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, on the ground that-

It discloses no reasonable cause of action or defence, as the case may be;

It is scandalous, frivolous and vexatious;

…………….

It is otherwise an abuse of the process of Court, And may order the action to be stayed or dismissed or judgment be entered accordingly, as the case may be.” [8] The principles applicable to the exercise of the Court’s discretionary power under O. 18 r 19(1), RHC have been lucidly expressed by the Supreme Court in Bandar Builders Sdn. Bhd. and Ors v. United Malayan Banking Corporation Bhd. [1993] 3 MLJ 36 where Mohd Dzaiddin, SCJ (later CJ) pronounced that: Page 8 of 22 “The principles upon which the court acts in exercising its power under any of the four limbs of O 18 r 19(1) of the RHC are well settled. It is only in plain and obvious cases that recourse should be had to the summary process under this rule (per Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd 7, and this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’ (see AG of Duchy of Lancaster v L & NW Rly Co 8). It cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause of action or a defence …” [9] It is trite law that a claim should not be struck out summarily save in exceptional circumstances where, for instance, it is without any sustainable basis or has no prospect at all of success. The strength or weakness of the claim is not a relevant factor. In the Court of Appeal case of See Thong and Anor v. Saw Beng Chong [2013] 3 MLJ 235, Ramly Ali, JCA concluded that: “The statement of claim is not hopeless, baseless or without any foundation in law. The statement of claim may not be perfect and Page 9 of 22 ‘not-so strong’ in supporting the appellants’ claim; but the mere fact that the case is weak and is unlikely to succeed at trial is not a ground for the claim to be struck out.” Further that, “Striking out a claim for no reasonable cause of action under sub-para (1)(a) is only appropriate in a plain and obvious case. The learned judge must be satisfied that the statement of claim as it stands is insufficient, even if proved, to entitle the plaintiffs to the relief which they asked for. The procedure is a summary procedure. It should only be adopted when it is conspicuously clear that the claim on the face of it is obviously unsustainable. Just look at the statement of claim. The test to be applied is whether on the face of the statement of claim, the court is prepared to conclude that the cause of action is obviously unsustainable (see Federal Court decision in New Straits Times (Malaysia) Bhd v Kumpulan Kertas Niaga Sdn Bhd & Anor [1985] 1 MLJ 226).” Page 10 of 22 Finding [10] P submitted that his action before this “Court is to protect and enforce his rights and interest as the beneficial owner to the Shares under the Trust Deed as follows: “The enforcement of P’s right and interest under the Trust Deed is a legitimate means. P submits that both P’s and D2’s rights and obligations as beneficiaries and trustee over the Shares are clearly stipulated under the Trust Deed;” [11] As can be seen, the entire case of P depends wholly on the purported Trust Deed (‘TD’) between P and D2. [12] 3 Recitals as set out in the TD form the basis of the supposed trust, of which Recitals (A) and (B) of the TD are pertinent for the present purposes. Recitals (A) and (B) as summarised in D1’s submission are as follows: “Under Recital (A) of the Trust Deed, it is provided that at Richard Tan’s request, Tarmizi is the registered owner of the 3,250,000 shares in ThreeSixty; Page 11 of 22 Under Recital (B), Richard Tan’s supposed beneficial ownership is described as being because the 3,250,000 shares in ThreeSixty were ‘in fact subscribed and paid for by the Trustee’ being Tarmizi, ‘with monies belonging to the Beneficiary’.” [13] D1 pointed out that from the wording of Recital (B) it can be gathered that the TD is commercial as opposed to being gratuitous in nature as the quantity of shares was subscribed and paid for using the beneficiary’s monies. [14] As correctly contended by D1, in order to establish the alleged trust, D1 must prove 2 fundamental elements, namely:

The 3.25 million shares were subscribed by D2; and

P paid D2 from monies belonging to himself for the said subscription. [15] However, there was absolutely no evidence from P that D1 actually subscribed for the shares and that P paid for them from his own funds. Importantly, since the commencement of this action more than 4 months ago, P has till todate failed to exhibit any documentary evidence of the Page 12 of 22 payment for the shares as claimed which is plainly crucial to ascertain the veracity of the TD. [16] D2, on the other hand, has contradicted the claim by P as to payment for the 3.25 million shares in Three Sixty (‘360’). He has on this issue averred that P never paid for the quantity of shares contrary to what is stated in Recital (B). [17] D1 via its Affidavit In Support traced in specific detail 360’s Audited Accounts and contemporary records to show the history of its share capital, including the 3.25 million shares presently held by D2. [18] The 3 distinct stages of 360’s share capital history were shown to be these: “Prior to December 2011, it had 100,000 shares issued and paid up. Of this, 49,000 shares were held by Tarmizi (49%); In December 2011, there was an allotment of 400,000 new shares in ThreeSixty, bringing the total to 500,000 shares (‘1st Increase’). Tarmizi was not a shareholder at this point. In December 2014, 4,500,000 new shares were allotted, bringing the total to 5,000,000 shares (‘2nd Increase’). Tarmizi had resumed Page 13 of 22 being a shareholder at this point and had received 2,925,000 shares, bringing to his total to the present 3,250,000 shares.” [19] D2 became a shareholder of 360’ from 2007 onwards when D2 was under the control of Francis Tan, the father of P, with a break from September 2011 until March 2013 during which period he did not hold any shares in 360. [20] It was the 2nd increase in 360’s share capital history that was significant in that it was by way of capitalizing the debts for working capital purpose. Importantly, it negated D1’s claim of having paid for the subscription of shares due to the inconsistency with 360’s records and the debts from the 2013 Audited Accounts were a liability owed by 360 since 2013. [21] Based on the 2013 Audited Accounts of 360, the directors’ and members’ resolutions and the letters of consent from Francis Tan, D2 and one Zuraini all taken together, the only conclusion that could be drawn was that no actual payment was made by any person for the 2nd increase, including P. It followed that at least 90% of the 3.25 million shares held by D2 were not paid for by P. Neither were there facts attesting to P having paid for the balance 10%. Inter alia, when the original 49,000 shares were Page 14 of 22 being held by D1 since 2007, P was only about 15 years old and thus, could not have financed and subscribed for the shares. Secondly, D2’s return to 360 in March 2013 when he held 325,000 shares after the previous gap in September 2011 was not addressed in the TD or by P in any of his affidavits. Thirdly, D2 himself averred in his affidavit that none of the shares held by him in 360 were paid for in cash, whether by P or anybody else. [22] The above contradictions rendered Recital (B) of the TD untrue and against the facts disclosed in the affidavits. [23] Next for consideration is P’s gift averment in regard to the shares he claims D2 is holding under the TD. P avers that the shares were a gift from his father to him around 2010 to 2011. [24] First and foremost, this averment of gift is obviously inconsistent with Recital B of the TD which says that P paid for the 3.25 million shares in 360. [25] Secondly, the gift contention is so obviously inconsistent with the facts relating to ownership of the shares. Inter alia, Francis Tan (‘FT’) was never at any point in time a shareholder of 360 and as such, he could not Page 15 of 22 have given to P what he himself did not own. D1 urged the Court, in this regard, to invoke the Latin maxim nemo dat quod non habet. [26] Thirdly, P has been unable to identify a particular date when the gift was made which made it highly improbable bearing in mind that it was part of a succession plan for him to take over 360 from FT. This was important as merely saying “sometime in 2010 or 2011” meant that P could not have been gifted the said quantity of shares simply because that quantity of shares did not even exist then in 360. As such, on the facts adverted to, this contention was not credible at all. [27] The conflict and inconsistency between the gift contention and the terms of the TD were not resolved by P in any of his affidavits. [28] What is crucial to note is that the gift averment runs counter to the TD that states that P’s interest in the shares arose from P having paid for the subscription of the shares. Instead, based on this averment, his interest arose wholly from FT who in turn did not own any shares to transfer the same to P as a gift. Hence, P could not have acquired any interest in the shares via such a route. Likewise, P could not assert, in view of the alleged gift by FT, that he had derived an interest over the shares through D2 under the TD. Page 16 of 22 [29] Lastly, nowhere in P’s SOC is the gift contention pleaded in support of the claim. It is trite law that issues and facts that are not pleaded become non issues and cannot be litigated at the trial nor considered by the Court in deciding the claim. [30] Apart from the above, P brought to the attention of the Court a 3.07.2017 Resolution, executed by the present directors of 360, one Johari and one Zashua, approving the transfer of 3.25 million shares from D2 to Zashua. There was no mention or reference of any consent or approval by P for this transfer, which should have been obtained if he was indeed the owner of the shares. No document is found in P’s affidavits showing such a consent or approval by P. [31] P’s explanation and version, which were not pleaded, for the 3.07.2017 Resolution that was itself inconsistent with the TD, appeared to be an afterthought and plainly lacking in credibility. The version was also inconsistent with the facts surrounding the gift contention and the reason given for D2 to hold the 3.25 million shares in trust for P. [32] On the whole, the explanation of P and the sequence of events referred to, pointed irresistibly to the TD being a sham and a concoction for P to bring this claim as pleaded. There was absolutely no documentary Page 17 of 22 evidence whatsoever produced by P to support his version of the event before and after the said Resolution. No subsequent Resolution was produced by P cancelling the 3.7.2017 Resolution which was against his supposed beneficial interest in the impugned shares. [33] From the affidavit and documentary evidence considered as a whole, D1 correctly contended that to date P has failed or neglected to show any documentation to support and substantiate his beneficial interest under the TD. Having averred and maintained, contrary to his own SOC, that had received the shares as a gift from FT, it was in any event redundant for him to produce any evidence tending to establish Recital (B) of the TD. Hence, P’s own averment rendered Recital B baseless and untrue. [34] As against the above, D1 and D2, on the other hand have, as contended, also produced voluminous documents which conclusively show that there is no way Richard Tan (‘P’) could possibly be the beneficial owner of the 3,250,000 shares in question, and that instead, the TD is solely for the purposes of creating a sham trust. [35] In support of D1’s contention that upon taking into account all the surrounding documents and facts in relation to the TD, the TD should be Page 18 of 22 found to be a sham and invalid, reference was made to the Court of Appeal case of Tan Sri Dato’ Rozali Ismail & Ors. v Chua Lay Kim (P) & Ors. [2016] 3 CLJ 84 where it was adjudged, inter alia, that: “The entire basis of the defence case rests on two (2) documents, the trust deed dated 28 February 2011 and the bill for professional fees dated 3 December 2010. The learned trial judge, in holding that the trust deed was validly executed, had preferred the documents of trust and the bill as evidence and rejected circumstantial evidence relied by the plaintiffs to impeach the validity of these documents. In our view the learned trial judge misdirected herself in doing so. Had the learned judge not misdirected herself she would have agreed that the trust deed and the bill should in fact be scrutinised against the circumstantial evidence adduced before her. Had such analysis been undertaken, she would have come to a different conclusion.” [36] Further on, as regards the effect of circumstantial against a primary document such as a trust deed, the Court of Appeal held that: “In our view all the above circumstances had overwhelmingly supported a case of a sham trust. We agree with the learned judge Page 19 of 22 that these are in the nature of circumstantial evidence. However, it has been judicially recognised that circumstantial evidence are good evidence and sometimes it can be better than direct evidence… In the circumstances of this case, it would not be possible to obtain any direct evidence to proof that the trust deed is a sham. The only possible direct evidence would be merely available through the confession of the very people who were acting in concert against the plaintiffs. Hence, the plaintiffs would have to inevitably depend on circumstantial evidence to prove their case (see Vijay Kumar Arora v. State (NCT of Delhi) [2010] 2 SCC 353).” [37] In accordance with the principle enunciated in the above case, the proper approach in our case would be for the Court to scrutinize the TD against the relevant documents produced by the Defendants via their affidavits to determine its validity and genuineness as proposed by D1 and D2. Rightly, the TD cannot be simply treated as valid by the mere fact that it has been duly executed. Additionally, as remarked in Tan Sri Dato’ Rozali’ case, if a certain provision of the TD is construed as a dead letter by reason of the same not being in accord with undisputed surrounding Page 20 of 22 documentary evidence, and can only be justified by an irrational explanation, the TD must be regarded as prima facie a sham. Likewise, in our case, Recitals (A) and (B) of the TD, which formed the basis of the trust relationship relied upon by P in this claim, have to be considered dead letters in view of their inconsistency with the surrounding evidence produced by D1 and D2. Hence, the finding of the obvious non-existence of the supposed trust relationship. Conclusion [38] Upon considering the grounds of application (Enclosure 15), the submissions tendered by both parties, the facts and the principles of law applicable to striking out of pleadings, the Court finds as follows. [39] The basis and foundation of the Plaintiff (‘P’)’s claim is premised on the Trust Deed (‘TD’) under which P claims to have a beneficial interest in the impugned 3.25 million shares. [40] Apart from all the evidence, particularly the undisputed documentary evidence, pointing to the TD not being genuine and a sham to support this claim, most importantly, P has failed to produce any kind of evidence whatsoever to prove ownership of the impugned shares, whether Page 21 of 22 through direct purchase by himself or by his father or via a gift by the latter, even when challenged by D1. Equally important is that the gift averment is in complete contradiction with the terms of the TD, particularly Recital (B) which is crucial to this claim being sustainable. Hence, on the inconsistent and contradictory evidence as it stands, P’s claim is obviously unsustainable and hopeless with no prospect of success. At the least, the pleaded claim, in view of the lack of evidence, is frivolous, vexatious and an abuse of process of the Court and accordingly, has to be struck out summarily without going to trial. [41] I, therefore, allow on OIT of Enclosure 15, prayers 1) and 2). Costs of RM50,000.00 to D1 subject to allocatur. Dated : 5 June 2018 (GUNALAN A/L MUNIANDY) Judge High Court of Malaya Shah Alam Page 22 of 22 COUNSEL: For the Plaintiff : Mr. Max Yong together with Mr. L.H. Tan Messrs Shui Tai Petaling Jaya, Selangor For the 1st Defendant : Mr. Mak Lin Kum together with Mr. R. Rakesh and En.Mohamed Izzul Faris bin Mohd Ghani Messrs Syed Ibrahim & Co. Kuala Lumpur For the 2nd Defendant : Ms. Himahlini a/p M. Ramalingam Messrs Himahlini & Loh Kuala Lumpur