TC Scaffold Industrial Sdn Bhd v JSNT2 Sdn Bhd (BA-22NCvC-163-06/2020)

The Plaintiff commenced the present action against the Defendant for the sums due and owing by the Defendant to the Plaintiff. The Plaintiff claims the total sum of RM 3,276,647.95 (continuing losses) against the Defendant in the present action which consists of the following:

Outstanding rental for the Equipment in the sum of RM 1,880,123.77 (continuing losses);

Outstanding transportation charges for the delivery of the Equipment in the sum of RM 146,000.00;

Repair charges for the defective items of Equipment in the sum of RM 185,783.00 (continuing losses);

Replacement costs for the items of Equipment which are damaged beyond repair and deemed lost and/or missing in the sum of RM 987,931.14 (continuing losses); and 2

Late payment interest on the overdue account(s) in the sum of RM 76,810.04 (calculated as at 8.2.2023).

By Ex-Parte Notice of Application dated 27.4.2023, the Plaintiff filed an application to restrain the Defendant from removing, disposing of or dissipating, pledging, charging, assigning or otherwise dealing with or diminishing the value of its assets located within Malaysia pending the final determination of the present action (“Mareva Injunction Application”).

3.

On 12 July 2023 this Court, after hearing both parties, granted an interim Mareva injunction.

Dissatisfied, the Defendant has filed an appeal against this Court’s decision on Mareva injunction. Principles governing Marava injunction

The Court’s jurisdiction to grant a Mareva injunction has been settled in the following cases of the apex court:

Zainal Abidin bin Haji Abdul Rahman v Century Hotel Sdn

S and F International Limited v Trans-Con Engineering

Aspatra Sdn Bhd & 21 Ors v Bank Bumiputra Malaysia Bhd & Anor [1988] 1 MLJ 97 (Supreme Court).

The following elements are to be established by an applicant seeking the grant of a Mareva injunction by the Court (Creative Furnishing Sdn Bhd v Wong Koi [1989] 2 MLJ 153 (Supreme

The plaintiff has a ‘good arguable case’ against the defendant;

That the defendant has assets within the jurisdiction; and 3

There is a real risk of dissipation or secretion of assets so as to render any judgment which the plaintiff may obtain nugatory.

A good arguable case is a case which is more than being barely capable of serious argument but not necessarily one that the judge believes has more than a 50% chance of success: see S and F International Ltd (supra).

This is a higher threshold than the ‘serious issues to be tried’ test that is applicable in the usual application for an interlocutory injunction, but the applicant need not show that they have a case so strong so as to warrant summary judgment nor even a strong prima facie case. It is sufficient for the applicant to show on the evidence available that there is a fair chance that it will obtain judgment against the defendant (Biasamas Sdn Bhd & 3 Ors v Kan Yan Heng & Anor [1998] 4 MLJ 1 (Court of Appeal).

On the existence of assets within the jurisdiction, the assets owned by the Defendant can include, amongst others, cash (credit balances in bank accounts) (Third Chandris Shipping Corp v Unimarine SA [1979] 2 All ER 972. The applicant is required to furnish some grounds for its belief that the defendant has assets within the jurisdiction (Lien Hoe Sawmill Co Sdn Bhd v Yap Sing Hock & Ors [1992] 2 CLJ (Rep) 727.

In order to demonstrate that there is a real risk of dissipation of assets, the following legal principles are applicable:

In Menk Sdn Bhd v Joerg Hugo Schmidt [2009] 3 MLJ 205, the Court of Appeal held inter alia that there must be some facts upon which the court can properly infer that there is a real danger of the defendant dodging satisfaction of a judgment;

In Pacific Centre Sdn Bhd v United Engineers (M) Bhd [1984] 2 CLJ (Rep) 319, it was held as follows: “Whereas, a Mareva applicant need only show that there is a real risk, or at least a risk, that the defendant will dissipate his assets with the object, or with the effect, of putting them out of the plaintiff’s reach, thus stultifying any judgment he may recover. The Court will not go into the likelihood of prejudice in the shape of dissipation of assets; the risk of it is enough.” (Emphasis added) 4

In Bank Bumiputra Malaysia Bhd v Lorrain Osman & Ors [1985] 2 MLJ 236 [PBA: Tab 10], it was held as follows: “I shall now turn to the third ingredient viz., whether there is a risk of the assets being removed before the judgment is satisfied. The question that arises here is what is the test to be applied by the court in determining whether there is such a risk. In Third Chandris Shipping’s case...Lawton L.J. in his judgment at pages 671, 672, said, ‘there must be facts from which the Commercial Court, like a prudent, sensible commercial man, can properly infer a danger or default if assets are removed from jurisdiction…’” (Emphasis added)

The Court of Appeal in Motor Sports International Ltd & Ors v Delcont (M) Sdn Bhd [1996] 2 MLJ 605 has held inter alia that where a plaintiff claims an exact sum, a Mareva injunction that restrains the defendant from dissipating his assets must specify an upper limit.

According to decided cases, the Court, in granting a Mareva injunction, must allow the defendant to pay (i) reasonable and ordinary living expenses and legitimate and bona fide debts as they become due; and (ii) legal costs in defending the suit (Larut Consolidated Bhd & Anor v Khoo Ee Bee & Ors [1997] 5 MLJ 77. 1st main issue: whether the plaintiff has a ‘good arguable case’ against the defendant

The Defendant is a sub-contractor for a project known as “AT&S Malaysia Construction Project Phase 1 (No. 5, Lebuhraya Perdana, Zone Industry 4, Kulim, Hi-Tech Park 09090 Kulim, Kedah)” (“Project”).

In August 2022, the Plaintiff agreed to supply and rent scaffolding equipment described as ‘C60 Shoring System’ (“Equipment”) to the Defendant for the Project.

By way of a Letter of Contract dated 1.8.2022 [the Plaintiff’s Affidavit in Support, “AIS”: Exhibit TCS-3], the Plaintiff offered rental of the Equipment (namely Crab Basic Standard C60, Crab Standard, Crab Jack Base, Crab U-head, Crab Ledger and Crab Brace) of specified items and quantities to the Defendant based on a monthly rental of 5 RM 381,361.30. This monthly rental was premised on a Purchase Order No. 714 dated 30.7.2022 (“PO 714”) issued by the Defendant to the Plaintiff together with the General Terms and Conditions of Procurement (“GTCP”) [AIS: Exhibit TCS-3, Pages 13 - 22]. This Letter of Contract dated 1.8.2022 was signed and accepted by the Defendant’s representative Wang Jue: see Exhibit TC3 at page 13 of AIS. The Defendant’s Purchaser Order dated 30.7.2022 was attached as an appendix to this Letter of Contract dated 1.8.2022.

17.

The total monthly rental for the Equipment to be paid by the Defendant to the Plaintiff is RM381,376.14. The amount of monthly rental is premised on the Defendant’s Purchase Order No. 829 dated 19.8.2022 (“PO 829”) [AIS: Exhibit TCS-3: Page 38].

Subsequent to the Defendant’s execution of the Contract, the Defendant issued the following revisions to PO 829 to the Plaintiff:

Purchase Order No. 829R dated 21.9.2022 (“PO 829R”) [AIS: Exhibit TCS-4 at pages 41 - 44]. The Defendant had revised inter alia the total items of Equipment to nineteen (19) and their respective quantities, as well as the monthly rental of RM431,719.37; and

Purchase Order No. 829R1 dated 4.10.2022 (“PO 829R1”) [AIS: Exhibit TCS-4]. PO 829R1 particularizes the 16 items of Equipment to be rented and stipulated inter alia revised quantities of the Equipment and the revised monthly rental of RM 432,269.37 These Purchase Orders were issued and signed by the Defendant’s representatives and were not signed by the Plaintiff. 6

By way of 142 trips, the Plaintiff duly delivered all the items of Equipment to the Defendant and issued 130 invoices to the Defendant for the rental of the Equipment and transportation charges. In this regard, the relevant invoices have been tabulated in Appendix 1 of the Statement of Claim, “SOC”. Copies of the invoices and Delivery Orders can be found in Exhibit TCS-6 at pages 64 (dated 9.4.2022) - 343 (dated 01.12.2022) of the AIS (Enclosure 9). The acknowledgements of receipt of invoices and Delivery Orders were signed by the Defendant’s staff and affixed with the Defendant’s rubber stamp. Records of Shoring Return Note and Credit Notes upon the Defendant’s return of the Equipment were produced at pages 344 (dated 6.12.2022) – 1613 (dated 8.2.2023).

The Plaintiff also sent to the Defendant reminders of outstanding amounts and Statements of Accounts from time to time:

(1)

19.10.2022: reminder and Statement of Account that total outstanding amount as at 30.9.2022 was RM773,645.93: page 1614 – 1618 of AIS;

(2)

7.12.2022: letter stating that total amount outstanding as at date of letter was RM1,874,767.37: pages 1619 – 1621 of AIS.

Subsequently, further invoices were issued between 31.12.2022 (pages 1625 of AIS) and 8.2.2023 (page 1627 of AIS).

The Plaintiff commenced the present action against the Defendant for the following sums:

Outstanding rental for the Equipment in the sum of RM 1,880,123.77 (continuing losses);

Outstanding transportation charges for the delivery of the Equipment in the sum of RM 146,000.00;

Repair charges for the defective items of Equipment in the sum of RM 185,783.00 (continuing losses);

Replacement costs for the items of Equipment which are damaged beyond repair and deemed lost and/or missing in the sum of RM 987,931.14 (continuing losses); and

Late payment interest on the overdue account(s) in the sum of RM 76,810.04 (calculated as at 8.2.2023) 7

Subsequent to the commencement of the present action, the Plaintiff has since received payment in the sum of RM50,000.00 directly from the Main Contractor, Exyte Malaysia Sdn Bhd (“Exyte”) on 5.4.2023. The payment of the sum of RM 50,000.00 [AIS: Exhibit TCS-8] consists of the following:

a sum of RM 43,664.52 being part payment towards the rental of the Equipment under the Contract; and

a sum of RM6,335.48 being part payment towards the rental of scaffolding equipment relating to the Project, pursuant to a separate contract between the Plaintiff and the Defendant. For avoidance of doubt, this is the subject matter of a separate civil suit between the Plaintiff and the Defendant (Shah Alam High Court Civil Suit No. BA-22NCvC-108-03/2023).

On the question whether there is a valid and binding contract between the parties and if so, which document forms the contract, the parties do not dispute that there was a valid contract of equipment rental between them but their dispute is which set of documents constitute the terms of the valid and binding contract.

The Plaintiff’s position is that the Letter of Contract dated 19.8.2022 and the STC attached thereto constitute the valid and binding agreement between the Plaintiff and the Defendant. On the other hand, the Defendant contends that PO 714 and/or the GTCP is the valid and binding agreement between the parties [Defendant’s Affidavit in Reply, Paragraphs 14 and18 and Defendant’s Supplementary Affidavit in Reply: Paragraphs 6 and 13-15].

Irrespective of which documents constitutes the terms of the valid and binding contract, the equipment was in fact rented to the Defendant and the rentals were payable. The question of which document constitutes the contract would affect the issue whether or not the Defendant has a valid defence against the Plaintiff’s claim.

It is the argument of the Plaintiff that there is a good chance that the Plaintiff will succeed on this issue of whether the Letter of Contract dated 19.8.2022 and the STC attached thereto constitute the contract documents for the following reasons:

Clause 17 of the STC provides that the standard terms and conditions therein supersedes all prior arrangements and 8 undertaking between the parties and the same constitutes the entire agreement between the parties [Plaintiff’s AIS: Exhibit

As such, the Defendant is not entitled to rely on any alleged representations made by the Plaintiff prior to the execution of the Contract, which includes but is not limited to PO 714 and/or the GTCP;

PO 714 is an invitation by the Defendant to the Plaintiff to offer rental of the Equipment and its main purpose is for the Defendant’s to specify the items of Equipment and the quantities of the items of Equipment to be supplied by the

The Plaintiff did not, at any material time, sign or execute PO 714 and/or the GTCP or any other Purchase Order issued by the Defendant to the Plaintiff;

Conversely, the Defendant had validly accepted the terms and conditions of the Contract by executing the LOC and affixing its company stamp on the same [Plaintiff’s AIS: Exhibit TCS-3: Page 25] In the Defendant’s Defence, the Defendant argued inter alia that (a) it was entitled to set off and deduct the sum of RM789,417.80 being liquidated damages for he alleged delay in the delivery of the equipment supplied by the Plaintiff [Supplementary Affidavit: Paragraph 9.10].

In the circumstances, this Court finds that the Plaintiff has a good arguable case that the Letter of Contract dated 19.8.2022 and the STC attached thereto constitute the contract documents.

From the Delivery Orders, invoices, reminders and Statements of Accounts produced in the exhibits to the Plaintiff’s AIS, the Plaintiff has shown a good arguable case here vis-à-vis the Defendant for two (2) heads of the Plaintiff’s claim, namely (a) claim for unpaid rentals amounting to RM1,873,788.29 and (b) claim for transportation charges of RM146,000.00. 2nd main issue: whether the defendant has assets within the jurisdiction

The exhibits produced in the Plaintiff’s AIS shows that the Defendant as subcontractor in a construction project in Malaysia still 9 has a bank account with China Construction Bank within the jurisdiction [paragraph 65 of the AIS and Exhibit TCS-10 at page --- ] and also retention money held in the hands of the project owner and/or the main contractor in the Project: see Exhibit TCS-14 in AIS (Enclosure 14) at pages 1642 - 1702 @ 1703 - 1706.

The court order in another court case by another subcontractor Vicent Lite Electrical Engineering Co. Sdn Bhd against the Defendant shows that the amount of the retention money of the Defendant in the Project is RM9,717,999.00: see Exhibit TCS-14 in AIS at pages 1642 - 1702 @ 1692 - 1702 (Enclosure 14).

In the circumstances, the Plaintiff here has shown that the Defendant has substantial assets within the jurisdiction of the Court, namely money in a bank account, monies received and/or receivable in connection with a construction project being carried out in Malaysia, including the retention money in the construction project. 3rd main issue: whether there is a real risk of dissipation or secretion of assets

The affidavit evidence adduced here shows the following the facts and circumstances:

all the Directors of the Defendant-company are foreign nationals: see Exhibit TCS-2 to AIS in Enclosure 8 at page 9;

(ii) the sole shareholder of the Defendant is a foreign company with no evidence of having any business in Malaysia: see Exhibit TCS-2 to AIS in Enclosure 8 at page 10;

(iii) the Defendant has not filed its audited accounts for financial years 2021 and 2022: see Exhibit TCS-2 to AIS in Enclosure 8 at pages 11 and 12;

(iv) the Defendant’s financial position as shown in the last audited account for financial year 2020 has been weak and has shown a loss: see Exhibit TCS-2 to AIS in Enclosure 8 at page 12;

apart from the construction project to which the Plaintiff supplied scaffold and shoring equipment to the Defendant and which form the subject matter of this suit, the Defendant has no other business or material or sizeable construction project 10 in Malaysia: see the contents of the Defendant’s Affidavit in Reply which does not aver to the existence of other specific project or business in Malaysia: Enclosure 20;

(vi) the construction project from which the claims in this suit emanated is very near to practical completion, and accordingly to the Defendant’s counsel, only 2 months before the Defendant’s completion of its subcontract works in the project, and the Defendant has not disclosed the identity or existence of any other specific project or business in Malaysia;

(vii) in addition to the Plaintiff’s claims in this suit, there are also 3 other High Court suits filed by other subcontractors and/or suppliers against the Defendant for payments [Exhibits TCS13 and TCS-14 at pages 1642 – 1701 including a suit by Vicent Life Electrical Engineering Co Sdn Bhd wherein the parties agreed that pending the final disposal of the suit the sum of RM7,100,152.48 shall be secured and assigned for Vicent Lite from the Defendant’s retention sum of RM9,717,999.00 held by Exyte Malaysia Sdn Bhd: see Exhibit TCS-14 in AIS at pages 1642 - 1702 @ 1692 - 1702 (Enclosure 14); and

(viii) there was an occasion when even the access to the construction site was obstructed by other suppliers who alleged that they were not paid by the Defendant for works and/or services [paragraphs 71 and 72 of the Plaintiff’s AIS and photographs in Exhibit TCS-12 at pages 1633 – 1635],

After considering the totality of the affidavit evidence here, this Court finds that the Plaintiff has proved there is a real risk of dissipation of assets on the part of the Defendant after the Defendant’s completion of its subcontract works in the project and the Defendant’s demobilisation from the project site which would have the effect of rendering any judgment, which the plaintiff may obtain, nugatory Balance of convenience

In this case, the Plaintiff has supplied the Equipment and incurred costs of the Equipment which were supplied and rented to the Defendant. It is rather unfair and/or inconvenient to expect the Plaintiff to bear the real risk that when it obtains judgment from the Court later, it would have no means of enforcement of the judgment against the Defendant in the jurisdiction. 11

The Defendant has enjoyed the use of the Equipment for months to execute its construction works under its subcontract in the Project and has earned incomes from the subcontract works executed by using the Plaintiff’s Equipment. Having failed to show the existence of specific asset or business or project which is likely to remain within the jurisdiction, it is rather unfair for the Defendant, after having enjoyed the benefit and value of the rented Equipment within the jurisdiction, should still have the free hand to dissipate its asset within the jurisdiction and then leave the Defendant without any real prospect of recovering the judgment sum which it might obtain within the jurisdiction.

Here, the Defendant has not disclosed or shown that it has specific business or project which is ongoing and which would be prejudiced by the proposed Mareva injunction. Even if there is any specific business or project which is ongoing and which would be prejudiced by the proposed Mareva injunction, the Defendant can disclose sufficient details of the same to the Court and ask for the ordinary payments in the normal course of business to be exempted from the ambit of the Mareva injunction. However, no such specific disclosure has been done by the Defendant here.

In the circumstances and based on the affidavit evidence adduced here, the balance of convenience is in favour of granting a Mareva injunction on suitable terms against the Defendants pending the full trial of this suit. Scope of the Mareva injunction

The main objective of the Mareva injunction is to prevent dissipation of assets which would render the eventual court judgment useless or futile, and in granting Mareva injunction, the Court should avoid an order which would impair or stop the normal business operations of the defendant-company.

In the circumstances of the present case, if this Court were to grant a wide scope of Mareva injunction against the Defendant it would have the probable dangers of causing damage and impairments to the Defendant’s performance in its execution and completion of its subcontract works in the project and the consequences thereof would not be beneficial to either the Defendant or the entities (including the Plaintiff) having claims against the Defendant. 12

In the entire circumstances, this Court finds that a proper balance has to be struck by limiting the Mareva injunction to restraining the Defendant from receiving or dissipating of the Defendant’s retention monies in the construction project which is being held by the Defendant’s main contractor or the employer in the project and the amount so restrained is RM2,019,788.29 being the sum total of the unpaid rentals and the transportation charges claimed by the Plaintiff.

With this limited scope of the Mareva injunction, any other funds and assets of the Defendant within the jurisdiction can still be used by the Defendant to disburse its remaining financial commitments within the jurisdiction, while allowing the RM2,019,788.29 portion of the retention monies in the Project to be preserved pending the final outcome of the legal proceedings between the Plaintiff and the Defendant.

In conclusion, this Court held on 12 July 2023 that the Plaintiff’s application for Mareva injunction is partly allowed on the following terms:

That the Defendant is hereby prohibited, restrained, whether by themselves, their directors, servants, agents or otherwise howsoever, from receiving or removing within or from Malaysia or in any way disposing of or dissipating, pledging, charging, assigning or otherwise dealing with or diminishing the value of the Defendant’s retention monies in respect of the construction project known as AT&S Malaysia Construction Project Phase 1 (No. 5, Lebuhraya Perdana, Zone Industry 4, Kulim Hi-Tech Park 09090 Kulim, Kedah (“the said project”), whether legally owned or beneficially owned, in Malaysia, whether solely or jointly owned up to the value of RM2,019,788.29 until the final determination or outcome of the action commenced by the Plaintiff against the Defendant herein or until further order;

That within ten (10) days from the date of service of this Order, the Defendant discloses and confirms, by way of an affidavit which must be served on the Plaintiff’s solicitors, the following:

The name and address of the main contractor who engaged the Defendant as the subcontractor in the said project; and (b) the name and address of the employer in the said project who 13 employed the said main contractor as the contractor in the said project; and

Costs in the cause. Dated : 12th September 2023 Signed ….............................................................. TEE GEOK HOCK JUDGE HIGH COURT OF MALAYA AT SHAH ALAM (NCVC 10) To the parties’ solicitors:

For the Plaintiff : Felicia Lai Wai Kim Messrs Harold & Lam Partnership (Kuala Lumpur)

For the Defendant : Jany Fong Chui Nee J Nee & Azinuddin Karim (Kuala Lumpur)