SJ securities Sdn Bhd [No Sykt: 141671-T] v Eureka Fountain Sdn Bhd [No. Sykt: 470322-H] (22NCVC143-05/2020)

The plaintiff instituted this action against the defendant for the sum of RM19,547,822.40 together with interest allegedly due under three share trading accounts. The plaintiff’s action is founded on fraud and misrepresentation and concealment of facts.

The defendant has applied under Order 18 rule 19 (1) (b) (c) and (d) of the Rules of Court 2012 to strike out the plaintiff’s action on the ground that the plaintiff’s claim is barred by limitation. The application is supported by two affidavits affirmed by one Chan Kok Keong on 14 August 2020 and 17 2 September, respectively. The plaintiff has filed an affidavit affirmed by one Ayub Khan bin Zakariah on 1 September 2020 to oppose the application. Statement of Claim 3. The plaintiff’s claim is that the defendant opened the following three share trading accounts (“the trading accounts”) with the plaintiff for the purpose of investment related to the shares in Fountain View Development Bhd (“FVDB”):

EUR001 dated 26 November 2002;

SJS0153 dated 24 November 2002; and

SMT0266 dated 24 November 2002

At the defendant’s request, the plaintiff provided credit facilities to the defendant for its investments under the trading accounts. The trading accounts were used to purchase FVDB’s shares between November and December 2003.

As at 14 June 2005, the trading accounts were in default and the outstanding sum was RM7,815,427.69 whereupon the plaintiff requested for additional security from the defendant and the defendant passed a director’s resolution dated 29 June 2005 (“the director’s resolution”) to settle the amount owed to the plaintiff by way of assignment of some landed properties to the plaintiff. 3

The director’s resolution stated, among others things, that by various sale and purchase agreements executed with LCBN Development Sdn Bhd the defendant became the beneficial owner of various pieces of land held under Master Title HSD 5305, PT 3862, Mukim Ijok, Daerah Kuala Selangor (hereinafter referred to as “the collateral assets”). The resolution further stated that a settlement agreement will be entered between the defendant and the plaintiff, and pursuant to the said settlement agreement, the defendant was authorised to execute the relevant Trust Deeds, Deeds of Assignment and Power of Attorney in relation to the collateral assets in favour of the plaintiff to settle the amount owed.

In order to induce the plaintiff, a copy of the director’s resolution and the sale and purchase agreement dated 3 May 2005 between LCBN Development Sdn Bhd and the defendant in respect of the collateral assets (“the sale and purchase agreement”) were furnished to the plaintiff. After receiving the director’s resolution and the sale and purchase agreement, the plaintiff repeatedly requested the defendant to prepare the settlement agreement as stated in the said resolution but to no avail.

Thereupon, the plaintiff instructed its solicitors to do a land search on the collateral assets. The plaintiff was shocked when it received the land search results dated 18 May 2015 issued by Pejabat Tanah dan Galian Gelangor that LCBN Development Sdn Bhd was still the registered proprietor of the collateral assets. 4

The plaintiff pleads that the defendant has wilfully and intentionally deceived and/or misled the plaintiff into believing that the defendant is the beneficial owner of the collateral assets pursuant to the aforesaid sale and purchase agreement and that it would have the rights to assign the said collateral assets to the plaintiff in settlement of the amount owed at all material times.

Due to the deceit/fraud, false representation and concealment of facts by the defendant, the plaintiff has suffered continuous losses and the total amount owed including interest under the accounts as at 6 September 2019 was RM19,547,822.40. Defence 11. In its defence, the defendant pleads that the action is barred by limitation. Reply to defence 12. In the reply to defence, the plaintiff pleads the following facts to avail itself of section 29 of the Limitation Act: “15. Plaintif menafikan perenggan 17 Pernyataan Pembelaan dan menegaskan bahawa plaintif telah diperdayakan untuk mempercayai bahawa defendan akan menyerahkan hak Aset Cagaran tersebut kepadanya untuk menyelesaikan hutang 5 tersebut dan plaintif hanya menyedari akan penipuan, frod, representasi salah dan/atau penyembunyian fakta yang dilakukan oleh defendan selepas menerima catatan carian persendirian bertarikh 18/5/2015 tersebut.

Perenggan 19 Pernyataan Pembelaan adalah dinafikan dan plaintiff menegaskan bahawa had masa hanya berjalan selepas penipuan dan/atau frod oleh defendan diketahui oleh plaintif.” Parties’ submissions 13. The defendant contends that it had applied and obtained further and better particulars from the plaintiff and these particulars demonstrate that the facts allegedly giving rise to the false representations were made between June and July 2005 at the plaintiff’s office through the delivery of the director’s resolution and the sale and purchase agreement. The defendant submits that pursuant to section 6 of the Limitation Act 1953, the 6 years would thus have elapsed in July 2012, and as the present writ and statement of claim was filed on 18 May 2020, it is nine years after the limitation period.

The defendant further submits the plaintiff should have filed this action in 2005 to claim for the outstanding sum of RM7,815,427.69 under the 3 share trading accounts when the settlement agreement was not prepared and not wait for 15 6 years to file this action based on fraud and misrepresentation and concealment of facts to claim RM19,547,822.40 together with interest. The defendant contends that the plaintiff is trying to couch the present claim as a claim based on fraud and misrepresentation and concealment of facts to escape the defence of limitation.

Next, the defendant argues that, even if, on the assumption that the plaintiff could bring itself within section 29(1)(a) or 29(1)(b) of the Limitation Act 1953, the limitation period for the plaintiff’s cause of action started to run once the alleged fraud or concealment of facts could have been discovered by the plaintiffs with the exercise of reasonable diligence. The defendant submits that there has been want of reasonable diligence on the part of the plaintiff in conducting the land search only in 2015.

In reply, the plaintiff contends that section 29 of the Limitation Act is applicable to postpone the limitation period because its right of action had been concealed by fraud on the part of the defendant. The plaintiff says that it had requested the defendant to prepare the settlement agreement but the defendant did not do so. As a result of the delay, it instructed its solicitors Messrs Chellam and Wong to do a search on the collateral assets and only upon receiving the land search dated 18 May 2015, the plaintiff argues, it discovered that the defendant had made a false representation to it as the collateral assets were still registered in the name of LBCN Development Sdn Bhd and not the defendant. 7

The plaintiff submits that pursuant to section 29 of the Limitation Act, the limitation period in section 6 of the Limitation Act only starts running from the date the fraud and concealment of facts was discovered the plaintiffs i.e. May 2015. The plaintiff contends that as the writ was issued within 6 years of that date, its claim is not time barred.

The plaintiff further submits that even if section 29 does not apply and the claim is caught by limitation, the defendant has acknowledged that the sum of RM7,815,427.69 is due and owing to the plaintiff in its affidavit in support dated 14 August 2020. By so doing, there is now a fresh accrual of cause of action pursuant to section 26(2) of the Limitation Act. The law on striking out 19. Order 18 Rule 19 (1) of the ROC provides, inter-alia, that the court may at any stage of the proceedings order to be struck out any pleading on the grounds that:

it discloses no reasonable cause of action or defence; or

it is scandalous, frivolous or vexatious; or

it may prejudice, embarrass or delay the fair trial of the action; or

it is an abuse of the process of the Court. 8

There is a long line of decided cases, coupled with the decisions of the Supreme Court in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 [SC] and Raja Zainal Abidin Bin Raja Haji Tachik & Ors V British-American Life & General Insurance Bhd [1993] 3 MLJ 16 [SC] that have held that a court deciding a striking out application must consider whether the action is “plainly and obviously unsustainable” or whether there are other reasons relating to the abuse of process and impossibility of a fair trial that justify striking out the action.

With these principles in mind, I turn to the arguments of the parties. Whether claim barred by limitation 22. The following propositions of law are well established and not in dispute between the parties in this case. First, that a cause of action for breach of contract, fraudulent misrepresentation or concealment of facts is six years from the date the cause of action accrues. Second, when a defence of limitation is asserted or relied on by the defendant, the burden then shifts to the plaintiff to show that the claim is commenced within the prescribed period of limitation. Third, in the event a plaintiff relies on section 29 of the Limitation Act to plead that the limitation period has been postponed, this fact must be specifically pleaded in the reply to the statement of defence. See Order 18 rule 12(1) ROC. 9

It is not in dispute that the plaintiff’s claim would be caught by limitation unless section 29 of the Limitation Act is applicable to postpone the limitation period on the ground that its right of action had been concealed by fraud on the part of the defendant.

The plaintiffs bear the burden of proving that it could not have discovered the facts leading to the discovery of the alleged fraud and concealment of facts without reasonable diligence.

The relevant part of section 29 of the Limitation Act reads as follows: “(1) Where, in the case of any action for which a period of limitation is prescribed by this Act, either—

the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or

the right of action is concealed by the fraud of any such person as aforesaid; or

the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the 10 case may be, or could with reasonable diligence have discovered it.”

The question of what constitutes reasonable diligence has been considered in numerous cases. In Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193 it was held that it is that it is impossible to devise a meaning or construction to be put on those words which can be generally applied in all contexts as the precise meaning to be given to them must vary with the particular context in which they are to be applied.

In Liaw Hen Kyun @ Alex Liaw & Ors v Ho Mui Fen @ Ho Kon Thiam … Respondent (Nric No.551009-12-5407) [2016] MLJU 1741, the Court of Appeal observed that a plaintiff who is put on inquiry or has a suspicion of wrongdoing, cannot claim exemption from limitation if he merely shuts his eyes to the obvious. At paras 30 to 34 it was stated: “With respect, we are unable to accept this finding as correct in the circumstances of this case. We are of the view that the statute of limitation will begin to run when the plaintiff suspects or should have suspected that his injury was caused by wrongdoing or that someone had done something wrong to him, but does not choose to avail himself of the remedy of filing a suit (see Bibee Solomon v Abdool Azeez (1881) ILR 6 Cal 687). Further, a plaintiff 11 need not be aware of the specific acts necessary to establish the claim. Once the plaintiff has a suspicion of wrongdoing, he must decide whether to file a suit or sit on his rights. Consequently, if a suspicion exists, the plaintiff cannot sit back and wait for the facts to unfold before him as the burden of finding the facts falls upon his or her shoulders. It was observed by the Court in the case of Kashi Ram v Pragi (1913) 20 I.C.538 that when a thing is openly done, it is unjustifiable for a plaintiff to claim exemption from limitation when the plaintiff merely shuts his eyes to the obvious (See also Dhunput v Ruhman (1868) 9 W.R. 329). In other words, the statute of limitation begins to run when the plaintiff has notice or information of circumstances that puts a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to him such as public records or companies’ records. In the case of Jalal Mohammed Ibrahim v Kakka Mohammed Ghouse Sahib AIR 1972 Mad 86, the Court held that the suit was liable to be dismissed on the ground that it was filed beyond the period of limitation prescribed under Article 95 of the Indian Limitation Act 1908 (in pari materia with item 77 of the SLO). In that case, the plaintiff, the second defendant and 12 one Abdul Ahmad were carrying on a business under the name and style of Rosham & Co. The first and second defendants had been carrying on another partnership in the name and style of Ghouse Sahib & Co. The partnership was carried on under an unregistered agreement. The plaintiff sought to set aside the decree obtained by the first defendant as he was not aware of the partnership between the first and second defendants. The Court held that the evidence of the plaintiff that he only came to know of the fraud when Rukuddin told him that the second defendant who was a partner of Ghouse Sahib & Co was unreliable. The plaintiff knew of the partnership between the defendants when a suit was filed by Ghouse Sahib & Co for goods supplied to Roshan & Co with whom they were dealing with was a partnership firm. The second defendant also stated in his affidavit filed in the insolvency petitions that he was a partner in Ghouse Sahib & Co. The plaintiff admitted that he was present when the petitions were dismissed. The Court held that it was not open to the plaintiff to keep quiet indefinitely. It would not prevent time to run against the plaintiff despite the fact that the plaintiff had not taken any steps to get fuller facts. 13 In the case of Diamond v. Davis. 680 A.2d 364, 371 (D.C.1996), the Court held at page 365 that: “The existence of a fiduciary relationship between the parties is a fact to consider in determining whether a plaintiff has exercised reasonable diligence in the inquiry of the existence and cause of his or her injury.”. In the appeals before us, …. It is difficult to comprehend the plaintiff’s lack of action when he had the means of obtaining information but chose not to avail himself of those means when his suspicions were aroused. Had the plaintiff made the necessary inquiry, he would have discovered the wrongdoing in 2005. Therefore, the plaintiff is guilty of extraordinary inaction.”

From the principles of law enunciated in the foregoing cases, it is clear that the central issues for the purpose of considering whether this is a plain and obvious case for striking out are: (a) when the plaintiff discovered the (alleged) false representation and concealment of facts; and (b) whether the plaintiff could not with reasonable diligence have discovered the fraud prior to May 2015.

In the instant case, the plaintiff pleads in its reply to the defence at [12] that it discovered the alleged fraudulent misrepresentation only when it received the land search results dated 18 May 2015. The plaintiff is bound by its pleading. 14 The critical issue therefore is, has there been reasonable diligence on the part of the plaintiff. It is the plaintiff’s pleaded case that it was not put on inquiry of a possible fraud prior to 18 May 2015.

In Lin Kai Wing & Anor v Lin Kai Lam & Ors [2016]10 CLJ 77, the Court of Appeal held that section 29 of the the Limitation Act requires the person seeking to fall within its ambit and lengthen the period of limitation to establish that he could not, with reasonable diligence, have discovered the fraud.

The basis facts are these. The plaintiff was given the directors resolution in

The defendant was required to draw up the settlement agreement and the defendant did not do so. The defendant’s conduct in delaying the preparation of the settlement agreement, ipso facto would have been sufficient to put the plaintiff on inquiry and arouse at least some suspicion. Given that the defendant was delaying the drawing up of the settlement agreement, it is odd that the plaintiff did not take the obvious and common sense step of conducting a land search to verify whether the defendant was indeed the beneficial owner of the collateral assets as stated in the sale and purchase agreement. The plaintiff oddly did nothing about this until 18 May 2015.

It is instructive in this regard to refer to the case of Kang Hai Holdings Sdn Bhd & Anor v Lee Lai Ban (trading as the sole proprietor under the name and style of ‘Sang Excavating Services’) [2018] 2 MLJ 574. There, the Federal Court held that when it comes to matters where a search can be done 15 to determine the status of a director of a company or status of land from public documents, failure to so would justify a finding that the person is deemed to have constructive knowledge of the status of a director or the status of the land. In this regard, it was said: “[16] Lee in this case on the facts did not verify the position of Siva in the plaintiffs’ companies by way of a search. Lee did not check on the status of the land and all payments were made to Siva (see notes of evidence Tab 28, pp 197-209). [17] The learned judge in paras 43, 44-48 of his grounds of judgment made findings of fact in relation to the authority of Siva to act on behalf of the plaintiffs which the learned judge held he had not. The Court of Appeal particularly in paras 30-31 of their grounds of judgment found there was no evidence to impute Lee with a need to be put on an enquiry, despite the fact that Lee had failed to make any company or land searches. We found the Court of Appeal had misdirected itself on its reversal of the High Court finding of facts and curial intervention is called for.” 16

Applying that here, there is no gainsaying that a land search could have been done anytime from 2005 and if done this would have led discovery of alleged fraudulent misrepresentation. The plaintiff ‘s failure to take the obvious step of conducting a land search to determine the status of the collateral assets shows the plaintiff has not exercised reasonable diligence and as such is not entitled to rely on section 29 of the Limitation Act to postpone the period of limitation. Whether there is acknowledgment of debt 34. The plaintiff relies on para 6 of the defendant’s affidavit in support to contend that there is an admission of debt, and constitutes a fresh accrual for the purposes of section 26 of the Limitation Act. The affidavit in support was affirmed by the defendant’s director on 14 August 2020 and reads: “Oleh kerana pada lebih kurang 14 Jun 2005 3 Akaun Perdagangan Saham berkenaan berada dalam keadaan keingkaran dan jumlah tertunggak adalah RM7,815,427.69, plaintif telah meminta untuk cagaran tambahan dan defendan telah membuat suatu cadangan dalaman seperti yang terdapat di dalam resolusi Pengarah defendan betarikh 29 Jun 2005 (“Resolusi Berkenaan”) saya adalah salah seorang pengarah defendan yang telah menandatangani resolusi berkenaan.” 17

Section 26(2) of the Limitation Act provides: “Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment.”

It is clear from the foregoing that a fresh cause of action accrues when: a. there is an acknowledgment of the claim b. there is a payment in relation to the claim

It is instructive in this regard to refer to the decision of the Federal Court in Wee Tiang Teng v Ong Chong Hooi & Anor [1978] 2MLJ 54 where it was held: There are three kinds of acknowledgment:

an acknowledgment by the debtor that a debt subsisted in the past but not at the time of the acknowledgment;

an acknowledgment that it subsists at the time of the acknowledgment; and

an acknowledgment that it may subsist in the future but not at the time of the acknowledgment. 18 In Consolidated Agencies Ltd v Bertram Ltd [1965] AC pg the Privy Council at page 482 approved the following statement of an author on the law of limitation: "To take a demand out of the statute of limitation on the ground of an acknowledgment, the language of the debtor must amount to an unequivocal admission of a subsisting debt, that is subsisting at the time of the acknowledgment." Though that was a decision on the Indian Limitation Act, 1908, we would respectfully follow the principle therein stated, since the acknowledgments of kinds (1) and (3) are not really admissions that the debtor is indebted to the creditor.

I find no basis for the plaintiff to contend that by paragraph 6 the defendant has acknowledged that the sum of RM7,815,427.69 is due and owing to the plaintiff. It is patently clear that paragraph 6 is not an unequivocal acknowledgment of the debt at the time the affidavit in support was affirmed by the defendant but sets out what is stated in the director’s resolution. The said Resolution dated 14 June 2005, is an acknowledgment of the debt at time the director’s resolution was signed and not at the date of the affirmation of the affidavit. 19 Preliminary objection 39. There is one other matter. The plaintiff raises a preliminary objection that the defendant’s notice of application is defective as it is an application to strike out the writ as opposed to the endorsement to the writ. The plaintiff argues that based on Order 18 r 19 (1) ROC what can be ordered to be struck out is the endorsement to the writ and not the writ itself. I find no merit in the point taken as it is contrary to the decision of the Federal Court in Ikatan Kelab-Kelab Melayu Negeri Pulau Pinang (400-Penang) (suing through its President, Dato Seri Hj Mohd Yussof Latiff) & Ors v Yayasan Bumiputra Pulau Pinang & Ors and another appeal [2014] 1 MLJ 27. There, the Federal Court in dismissing the appeal observed: “[9] The appellants then filed a suit against the respondents for breach of trust and/or breach of fiduciary duties and unjust enrichment in the high court, seeking a declaration that the transfer of the said properties was null and void. The respondents then filed an application under O 18 r 19 (1) (a), (b), (c) and (d) of the Rules of the High Court 1980 (‘RHC’) to strike out the appellants writ summons and statement of claim on the ground that the appellants did not have the locus standi to commence the action against all of the respondents. 20 [29] Both of the high court and court of appeal held that the appellants had no locus and therefore allowed the striking out application by the respondents. [38] We see no reason to differ with the decision of the courts below. [40] We therefore answer the question posed in the negative. The appeal is therefore dismissed with costs.”

In any event, the objection taken is purely technical and does not cause any prejudice to the plaintiff. The objection is accordingly dismissed. Conclusion 41. For these reasons, I am of the view that the plaintiffs claim was already time barred when it was instituted in 2020. I therefore order the plaintiff’s statement of claim and endorsement to the writ to be struck out and the action be dismissed with costs of RM3,000.00. Dated : 11 October 2021 (S.M KOMATHY SUPPIAH) Judge High Court of Malaya Shah Alam 21 Date of Decision : 27 August 2021 Solicitors :- For the Plaintiff: Vinnodhini Murugays, [Messrs Kenneth William & Associates] For the Defendants: Nalini a/p Murugiah, [Messrs Thangaraj & Associates]