Titisan Air Sdn Bhd v Mohd Radzali Bin Mamek (JA-22NCVC-118-07/2019)

The Plaintiff’s claim against the Defendant is for breach of fiduciary duty, breach of trust and for obtaining secret profits from the sale of rice to customers of the Plaintiff. The Plaintiff has also accused the Defendant of “poaching” its customers and employees.

The Plaintiff is a wholesaler and distributor of rice and general merchandise. The Plaintiff was incorporated on 25.05.1992 and has been operating its business at No.3, Lorong C, Off Jalan Majid, Kg. Melayu Majidee, Johor Bahru since 1993.

The Defendant was a Managing Director (“MD”) of the Plaintiff from 1993 to 30.06.2015. He continued as a director until 16.10.2017, when he resigned from the Board of Directors of the Plaintiff.

It is not disputed that from the date of his resignation as MD of the Plaintiff, the Defendant was no longer involved in the management of the Plaintiff’s business. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 3 All operations of the Plaintiff, including the financial management and administration of the Plaintiff were taken over by one En Mohd Azlan bin Mamek (“PW1”).

The Plaintiff’s shareholders, including the Defendant, are all siblings. The Plaintiff at all material times was a family-owned company. The Plaintiff and another company owned by the family members, called Permata Semangat Sdn Bhd (“PSSB”), operate from the same premises and share assets, including office premises, computers and accounting systems.

The parties failed to agree on the issues to be tried and they each filed a separate list of issues. The main issues to be tried, which can be extracted from the Plaintiff’s long list of issues, some of which are repetitive, are as follows: i. Whether the Defendant, while he was MD of the Plaintiff, committed acts which amounted to a breach of fiduciary duty towards the Plaintiff, breach of trust of the Plaintiff’s assets and other unlawful acts which were in conflict with his duty as MD of the Plaintiff and which resulted in substantial losses to the Plaintiff. ii. Whether this Court ought to order a forensic investigation of the accounts and finances of the Plaintiff during the period the Defendant was its MD and whether to order the Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 4 Defendant to produce all relevant accounting records of the Plaintiff which the Plaintiff alleges are still in the possession of the Defendant.

The Plaintiff produced only one witness, En Mohd Azlan bin Mamek (“PW1”), the person who took over the management of the Plaintiff from the Defendant. The Defendant produced two (2) witnesses, including himself (“DW1”), and one Hajah Norlida binti Mamek (“DW2”), who, as the Plaintiff’s accounts clerk, was the person handling the day-to-day accounts and office administration of the Plaintiff. DW2 is a sister to both PW1 and the Defendant.

PW1 in his witness statement (“PWS1”) avers as follows: “Jawapan kepada Soalan 5

(ii) Defendan mempunyai pegangan dan kawalan penuh ke atas perniagaan Syarikat Plaintif selaku pengarah dan pengurus Syarikat namun Defendan telah bertindak secara menjejaskan dan memudaratkan kepentingan Syarikat Plaintif seperti berikut:- a) Tidak menyediakan dan/atau mengekalkan Akaun Kewangan Syarikat Plaintif secara teratur dan lengkap di dalam simpanan Syarikat Plaintif. b) Tidak menyediakan dan/atau mengemukakan Laporan Stok Plaintif dalam simpanan Syarikat Plaintif. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 5 c) Membuka sebuah perniagaan tunggal bernama ZM Mega Maju (No. Pendaftaran JM0701820-P) yang menjalankan perniagaan yang sama dan/atau serupa dengan Syarikat Plaintif. d) Mengambil alih pelanggan-pelanggan Syarikat Plaintif tersebut untuk perniagaan ZM Mega Maju (No. Pendaftaran JM0701820-P) tersebut. e) Mengaut keuntungan besar dari penjualan beras yang sepatutnya dibayar kepada Syarikat Plaintif. f) Syarikat Plaintif akan membeli beras dari BERNAS melalui Borang Pesanan Beras. Jenis-jenis beras di antara lain adalah basmati (tiga jenis), beras pulut dan beras nasional. (Sila lihat m/s 8-9 Ikatan Dokumen Tambahan Plaintif.) Hanya harga jualan beras nasional dikawal oleh kerajaan, beras-beras jenis lain tidak ada kawalan harga. Beras-beras ini akan dijual kepada beberapa pelanggan. Defendan telah menjual beras-beras lain yang tidak mempunyai kawalan harga. Hasil jualan yang patut dibayar kepada Syarikat Plaintif diambil oleh Defendan sendiri. Kebiasaan Syarikat Plaintif akan memesan lebih kurang 50 tan setiap bulan. Bernas menjual pada harga RM1.40 sekilo kepada Syarikat Plaintif dan Syarikat akan menjual kepada pelanggan RM1.80 satu kilo maka untung kasar untuk jualan 50 tan adalah RM20,000.00 sebulan dan RM240,000.00 setahun. Saya mendapati duit keuntungan ini tidak dalam akaun syarikat Plaintif. g) Tidak mengemukakan akaun-akaun tahunan Syarikat Plaintif kepada Suruhanjaya Syarikat Malaysia kerana tiada dalam Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 6 simpanan Syarikat Plaintif. h) Tidak mengadakan sebarang Mesyuarat Agong Tahunan oleh kerana tiada Rekod dalam simpanan Syarikat Plaintif. i) Mengambil alih pekerja-pekerja Syarikat Plaintif untuk bekerja dengan perniagaan Defendan. Pekerja-pekerja bernama Mohamed bin Taib (No. K/P: 551109-01-5699) dan Mohd Niza bin Abd Wahab (No. K/P 881007-43-6249) telah diambil oleh Defendan. (Sila Rujuk m/s 6 Ikatan Dokumen Tambahan Plaintif.) Jawapan kepada Soalan 8 J Implikasi dari kegagalan atau ketinggalan Defendan tersebut adalah bahawa Defendan telah mengaut keuntungan besar untuk diri sendiri dari penjualan beras yang sepatutnya dibayar kepada Syarikat Plaintif. Tindakan Defendan tersebut menunjukkan bahawa Defendan telah memungkiri tugas fidusiari beliau dan/atau telah melakukan pecah amanah dan Defendan telah memperkayakan diri sendiri. Jawapan kepada Soalan 9 J (i) Saya ingin menyatakan bahawa Defendan sebagai pengurus/pengarah Syarikat hanya menerima pendapatan/ imbuhan dalam lingkungan RM4,000.00 hingga RM7,000.00 sebulan dari tahun 2004 hingga 2014 seperti dinyatakan dalam Dokumen Defendan sendiri pada m/s 72 Ikatan Dokumen Bersama Kedua (Bahagian B).

(ii) Oleh yang demikian, adalah mustahil untuk Defendan memperolehi aset-aset dan hartanah yang dianggarkan Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 7 keseluruhan dalam lingkungan RM5 juta berdasarkan pendapatan/imbuhan seperti yang dinyatakan di atas.” THE DEFENDANT’S DEFENCE [9] Save for the agreed facts, the Defendant denies all the allegations of wrongdoing and/or unlawful acts alleged by the Plaintiff. [10] The Defendant pleads that since the date of his resignation in 2015, all matters relating to the finances and accounts of the Plaintiff, including the Plaintiff’s ledger, profit and loss statements and all other financial documents of the Plaintiff were given by the Defendant to the Plaintiff’s auditor, C S Tan and Associates, for the financial years up until 2012, and to MD 2 & Co., the replacement auditor from the financial years 2013 up until the date of the Defendant’s resignation as MD. The Defendant says he does not have any of the Plaintiff’s financial records in his possession since all had been handed over to the auditors. [11] With respect to the Plaintiff’s allegation that the Defendant failed to keep proper accounting records during the period he was the Plaintiff’s MD, the Defendant avers that all transactions of the Plaintiff were recorded in the accounting software used by the Plaintiff. In his reply to questions 20 and 21 in his witness statement, he states as follows: “Saya gunakan perisian Mr Accounting bagi system akaun dan Three – P bagi merekodkan stok dan jualan: system yang saya guna, masih digunakan Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 8 oleh Plaintif sehinggalah tarikh saya berhenti dan saya percaya Plaintif masih menggunakan system perisian perakaunan yang sama sehinggalah sekarang ini. Semua maklumat sama-ada pengeluaran dan kemasukan wang pengeluaran dan kemasukan wang peruntukan stok serta pembayaran terlibat dan juga bentuk pengeluaran stok adalah direkodkan dan semua data-data dimasukkan ke dalam sistem ini.” This evidence by the Defendant was supported by the Plaintiff’s accounts clerk DW2. This evidence by the Defendant and DW2 was not rebutted by the Plaintiff. With respect to the Defendant’s financial records and their accuracy, the Defendant states that accounts were approved by the Plaintiff’s directors and signed off by the Plaintiff’s auditors during each of the relevant financial years and submitted to Suruhanjaya Syarikat Malaysia (“SSM”) for each financial year while the Defendant was still MD. All the audited financial statements were approved at the general meetings of the company during relevant financial years and were never questioned by other directors or shareholders during board meetings and general meetings of the company. All the Plaintiff’s audited accounts are admitted as exhibit evidence and their veracity was not challenged by the Plaintiff. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 9 [12] With respect to the allegation of breach of trust of the Plaintiff’s assets, and having receiving secret profits, the Defendant denies the allegations. The Defendant gave evidence to show that he had, over the years, received salaries from both the Plaintiff and the other family company. The Defendant gave further evidence to show that he had purchased the first piece of land in the year 1993 and had built three (3) houses on the land with financing from a bank. Since the completion of the houses, he has, for the past fifteen (15) years, used money obtained from rent of the properties to pay off the loan installments. Over the years, he constructed a few more units of houses on the piece of land and has continued collecting rentals from them. All this evidence was unchallenged by the Defendant and remains unrebutted. The Defendant tendered documentary evidence showing the breakdown of expenses incurred in building the homes and in terms of rental collections. (See Defendant’s Bundle of Documents A- 4 Part B of the Common Bundles.) All this documentary evidence and the oral explanation of income and expenses given in the Defendant’s witness statement was not effectively challenged by the Plaintiff. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 10 EVIDENCE BY DW2 [13] DW2, who was the person handling the accounts and office administration of the Plaintiff during the time the Defendant was its MD, gave evidence in support of the Defendant. DW2 was the person responsible for data entry with respect to all transactions concerning the Plaintiff and the other family company, PSSB. DW2 testified that all hard copies of the accounts, bank statements invoices, receipts and vouchers were kept at the Plaintiff’s office and can still be accessed by any of the Plaintiff’s directors. [14] With respect to the Plaintiff’s allegation that the Defendant was running a parallel business while he was still the MD of the Plaintiff, DW2 states that to her knowledge, the business known as ZM Mega Maju was registered on 07.10.2014, shortly before the Defendant resigned as MD of the Plaintiff and that the Defendant was not actively involved in the business, which was dormant during that period. She said the Defendant only got involved in that business after he resigned as MD the following year. This evidence was also not challenged by the Plaintiff. FINDINGS BY THIS COURT [15] I will first deal with the most serious allegation by the Plaintiff against the Defendant, which is that the Defendant obtained secret profits from the sale of rice to the Plaintiff’s customers while he was MD and that Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 11 he committed a breach of trust of the Plaintiff’s assets. Reading PW1’s witness statement, and the documents tendered, the Plaintiff has failed to produced any evidence to support his allegation that the Defendant obtained secret profits or even committed a breach of trust of the Plaintiff’s assets. The Plaintiff relied on the bare allegations of PW1 to support its claim of secret profits and breach of trust. The Plaintiff did not call any of the Plaintiff’s customers to give evidence that the Defendant requested any of them to pay for their purchase directly to him instead of to the Plaintiff’s account. If the allegations were true, the Plaintiff should have been able to call at least one customer to give evidence of such a request. Instead, the Plaintiff relied on conjecture and assumptions as proof of its allegations. [16] The Plaintiff merely provided a list of properties belonging to the Defendant and based on the Plaintiff’s own estimated gross value of the properties, alleged that the Defendant’s income was not sufficient for him to acquire those properties. The Plaintiff tendered photos of the Plaintiff’s wife on overseas holidays and submitted that since the Defendant’s income could not support his assets and the apparently lavish lifestyle of his wife, therefore, ipso facto, the Defendant must have earned secret profits from the Plaintiff. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 12 It is trite law that bare allegations without any supporting or corroborative evidence does not amount to proof of any allegations in the Statement of Claim (“SOC”). [17] The burden of proof in a civil case lies with the Plaintiff. Section 102 of the Evidence Act 1950 states: “The burden of proof in a suit or proceedings lies on that person who would fail if no evidence at all were given on either side.” Burden of proof as to particular fact Section 103 of the Evidence Act provides: “The burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.” The Court of Appeal in the case of The Carbon Co Sdn Bhd & Anor v Ng Lee Hoon [2017] 4 MLJ 791 enunciated the law with respect to the burden of proof in a civil case as follows: “[2] The respondent (the plaintiff in the trial court) had to discharge her burden of proof to prove her case as well as to introduce evidence in support of her pleaded case. It was not the appellant’s (the defendant in the trial court) duty to fill up the gaps in the respondent’s case or be accused of not establishing their defence. [3] Given the factual matrix of the case, the respondent had not discharged the burden of proof placed on her by the law, on the balance of probabilities.” Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 13 [18] Since the Plaintiff did not tender any documentary evidence or produce any witness to establish the allegations of secret profits or breach of trust as pleaded in the SOC, the Plaintiff attempted to invoke the powers of this Court under the provisions of the Courts of Judicature Act, in what is clearly a “fishing expedition”. Among the prayers in the Plaintiff’s SOC are for the following orders: i. Defendan perlu mengemukakan dalam satu (1) bulan dari tarikh perintah Mahkamah Yang Mulia ini, segala rekod-rekod kewangan syarikat Plaintif dalam simpanan Defendan bagi tempoh masa 2011- 2017 untuk pemeriksaan seorang Akauntan yang dicadangkan oleh Plaintif dan dilantik oleh Mahkamah Yang Mulia ini. ii. Akauntan tersebut memberikan akujanji yang diperlukan kepada Mahkamah Yang Mulia ini dalam menjalankan tugasnya seperti para (i) di atas. iii. Pengambilan akaun oleh Penolong Kanan Pendaftar Mahkamah Tinggi untuk menentukan segala keuntungan yang kena dibayar oleh Defendan kepada Plaintif. iv. Satu Perintah mengarahkan Defendan untuk membayar Plaintif segala keuntungan yang didapati terhutang oleh Defendan kepada Plaintif selepas pengambilan akaun di dalam para (iii) di atas. v. Gantirugi (untuk ditaksirkan). [19] The gist of the orders prayed for by the Plaintiff is for this court to appoint a forensic accountant to investigate the accounts of the Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 14 Plaintiff to establish if the Defendant had obtained secret profits or had siphoned off monies from the accounts of the Plaintiff and had committed any breach of trust of the Plaintiff’s assets. [20] To support its prayers in (i), (ii) and (iii) above, the Plaintiff cited the case of Zaharen Bin Hj Zakaria v Redmax Sdn Bhd And Other Appeals [2016] 5 MLJ 91, where the court had found the Defendant liable to the Plaintiff for making secret profits by producing fictitious invoices from third parties and by causing he Plaintiff to make payments on such fictitious invoices. In fact, the Defendant admitted that the third parties did not sell any goods or provide any services to the Plaintiff. Therefore, the Defendant was found liable for, inter alia, fraud on the Plaintiff. [21] The Plaintiff, however, failed to appreciate that in Redmax’s case, the Plaintiff had earlier appointed an accounting firm, PWC, to conduct a forensic investigation into its accounts and from such investigation into its accounts and financial documents, it collected enough evidence against the Defendant before filing its claim in court.