Top Glove Corporation Bhd & 1 Lg v Low Chin Guan & 2 Lg (WA-22NCC-255-06/2018)

Content

1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION) SUIT NO.: WA-22NCC-255-06/2018

Preamble

Pursuant to recommendations by Credit Suisse (which had been appointed by Adventa Capital to advise on and assist in the potential sale of Aspion or Adventa Capital’s Glove Business) Adventa Capital decided to undertake a bidding process for the sale of all the shares in the capital of Aspion. Rahmat Lim & Partners (“RL&P”) was engaged as Adventa Capital’s legal advisors and the bidding process for the Aspion sale was launched in or about the end of June 2017.

Schedule

Schedule 3 provides for adjustment of the consideration in the event of any shortfall of the PAT from the 2018 Target Core PAT of RM80.9 million and the 2019 Target Core PAT of RM108.3 million subject to a cap of RM100 million. In the event of fraud, the cap shall not be applicable. 23.

Schedule

Schedule 8 of the SPA sets out the limitation of liability under the SPA: (a) Paragraph 1: Disclosures Adventa Capital shall not be liable in respect of any claim made against it under this SPA to the extent that the fact, matter or circumstance giving rise to the relevant claim has been Disclosed. (b) Paragraph 6: Conduct of Claims by the Purchaser This paragraph sets out how Top Glove must conduct its claims under the SPA. This includes notice requirements that Top Glove must abide by. 14 (c) Paragraph 8: Maximum Liability Paragraph 8(b): Adventa Capital’s aggregate liability in respect of all claims including for breaches of the Seller’s Warranties (other than the fundamental warranties) under this SPA shall not exceed an amount equal to RM50 million. (d) Paragraph 13: Fraud Nothing in Schedule 8 shall apply to any claim under the SPA which arises or is increased, or to the extent to which it arises or is increased, as the consequence of (or delay in discover of which is in consequence) any fraud, willful misconduct or willful concealment by Adventa Capital, any officer, employee, or former officer, employee of Adventa Capital. 24. Top Glove performed an inventory count of all 3 of Aspion’s factories on 29.3.2018 and 30.3.2018 and did not raise any concerns regarding the inventory of Aspion to Adventa Capital or Wong or Low prior to completion of the SPA on 4.4.2018. 15 25. On completion of the SPA: (a) Top Care paid a total of RM1.233 billion to Adventa Capital: (i) RM1.1607 billion to Adventa Capital’s bank account no. 0117792005 held at Citibank Berhad; and (ii) RM72.3 million to ACPL’s bank account no. 20340010183508 held at Alliance Bank Malaysia Berhad. (b) Top Glove allotted the Consideration Shares (i.e. 20,505,000 shares in Top Glove) at RM6.6813 per share to Adventa Capital which was subsequently listed on the Main Market of Bursa Securities on 5.4.2018. (c) In exchange, Adventa Capital provided Top Care with the Escrow Sum Undertaking and Tax Escrow Sum Undertaking. 26. On the same day, Low was appointed as an executive director of Top Glove. 16 27. Subsequent to completion of the SPA, Top Glove claims that it discovered that Low and Wong and Adventa Capital had made “fraudulent” misrepresentations to Top Glove and Top Care about the financial position and inventory of Aspion and had conspired with each other to defraud them. Accordingly, Top Glove and Top Care filed a writ action against Low and Wong and ACPL for “fraudulent” misrepresentation and an Originating Summons against Adventa Capital for ancillary relief in aid of arbitration pending the arbitration proceedings with Adventa Capital in Singapore. The disputes between the parties to the SPA are subject to an arbitration clause. Summary Of The Plaintiffs’ Contentions 28. The Plaintiffs contended that the following representations were made by Wong and Low and Adventa Capital to them and the representations were false: (a) Representation that Aspion’s gross profit for FY 2016 was RM98.9 million and the PAT was RM31.6 million; 17 (b) Representation that Aspion’s gross profit and PAT for FY 2016 was reduced as a result of a one off write off of inventories worth RM32.1 million; (c) Representation that Aspion’s adjusted PAT for FY 2016 was RM67.8 million after adding the sum of RM36.2 million which included the write off of RM32.1 million; (d) Representation that the forecasted adjusted PAT for FY 2017, FY 2018 and FY 2019 were RM73 million, RM80.9 million and RM108.3 million respectively; (e) Representations as to EBITDA, adjusted EBITDA, PAT inventory, adjusted inventory for FY 2016, 6MFY2017 and for FY 2017, FY 2018 and FY 2019; (f) Representation that Aspion maintains proper records of its inventory; 18 (g) Low and Wong and Adventa Capital led the Plaintiffs to believe that Aspion properly writes off inventory in accordance with the applicable accounting standards and/or market practice; (h) Representation that Aspion had written off inventories amounting to RM32.1 million for FY 2016; (i) Representation that Aspion had by September 2017 written off RM13.8 million worth of inventories for FY2017 and would write off a further RM17.8 million worth of inventories for FY 2017; (j) Representation that approximately 78% of Aspion’s inventory as at 30.9.2017 were less than 4 months old; and (k) Representation that Aspion’s inventory as at 14.2.2018 was accurate. 29. The Plaintiffs alleged that there were the following false representations discovered by them subsequent to completion of the SPA and thereafter confirmed by an assessment and review conducted by BDO: 19 (i) There was non-existent inventory that were recognized in Aspion’s accounts and stock taking; (ii) Most of Aspion’s inventory was not in good condition which should not have been recognized as stock in Aspion’s accounts; (iii) There is a shortfall amounting to RM 57.48 million between stocks recorded in Aspion’s books and records against those actually verified as being in existence; (iv) RM13.8 million worth of inventory that was represented to have been written off for the 11th month of 2017 was in fact not written off; (v) 10 production lines in Kota Bharu were decommissioned since 2012 but were recognized in the fixed asset listing as at 30.4.2017 in the Virtual Data Room (“VDR”) with a net book value of RM14.5 million; 20 (vi) There was non-existent machinery in Kluang recognized in the fixed asset listing with a net book value of RM99,575.00; and (vii) The aging list of inventories as at 30.4.2017 and the aging list of inventory as at 30.9.2017 of Aspion that were provided to the Plaintiffs in the VDR and at the 5.11.2017 meeting respectively were false. There was a discrepancy of approximately RM27.68 million. 30. Accordingly, the forecasted PAT for FY 2017 of RM56.9 million was false since the actual PAT for 11MFY2017 was false. Accordingly, the projected PAT for FY 2018 of RM80.9 million (upon which the Plaintiffs said they based their calculation of the consideration) was inaccurate. The Plaintiffs had calculated the consideration by using a P/E Multiple of 16.93 applied to the estimated PAT for FY 2018 of RM80.9 million. From this, the Plaintiffs arrived at an adjustment of the consideration for the sale shares. Using the actual 7MFY2018 PAT of RM37.2 million, BDO obtained an annualized FY2018 PAT of RM43.1 million which shows a shortfall of RM37.8 million from the forecasted FY2018 PAT of RM80.9 million. BDO 21 then multiplied that figure by the P/E Multiple of 16.93 and estimated that the Plaintiffs had overpaid a sum of RM640.47 million in respect of the consideration for the shares. Taking into account an alleged overstatement of assets in the sum of RM74,392,759.00, the Plaintiffs arrived at the sum claimed of RM714,862,759.00. 31. During the hearing, Learned Counsel for the Plaintiffs submitted that actually the only claim that can be maintained by the Plaintiff is for the alleged overpayment of RM640.47 million and that the Plaintiff is no longer claiming the other sums amounting to RM74,392,759.00. This includes the claim in respect of the non-existence of inventory or machines or the 10 productions lines which were decommissioned. 32. The Plaintiffs asserted that Low and Wong were aware of the misrepresentations because Low was a director of Aspion and Wong was involved in the negotiations. As regards the write off of RM13.8 million, the Plaintiffs pointed to an email from Wong to Top Glove on 31.10.2017 saying this: “Note that, the numbers we read out to Tan Sri and you during the Kulim meeting on Saturday are Reported numbers which include RM13.8M of inventory written off, of which 9+M comes from Kluang and 22 are exam gloves. These are one-off items so it is fair and necessary to look at Aspion’s performance BEFORE the write off as this is more representative of the performance trend.” 33. The Plaintiffs submit that the “we” referred to Low and Wong as they were present at the meeting with Top Glove representatives on 28.10.2017. 34. There was another email from Wong to Top Glove dated 4.11.2017 wherein he gave a breakdown of the 2017 inventory write off of RM13.8 million and the remaining RM17.8 million to be written off. 35. As regards the RM13.8 million supposedly written off, BDO in its second report has established that at least RM7.89 million (57%) of the RM13.8 million adjustment was not made or was made and subsequently reversed, or was made and effectively negated by other related adjustments. These allegations of the Plaintiffs could not be denied by the Defendants because the affidavit containing BDO’s second report was only filed one day before the hearing date. However, the Plaintiffs showed that the audited financial records for FY 2017 ( before they were withdrawn by 23 Ernst & Young) only showed that inventories amounting to RM17.8 million were written off and did not show the RM13.8 million write off. 36. The Plaintiffs submitted that the court has jurisdiction to grant a mareva injunction against ACPL even though no cause of action is alleged against it. On risk of dissipation, the Plaintiffs submitted that the fact of fraudulent misrepresentation is a relevant factor in assessing risk of dissipation. Furthermore, the Plaintiffs allege the Defendants had also lied in their affidavit in reply and doctored the system by creating a product code which was never there. Summary Of The 1st Defendant’s (Low) Submissions 37. Learned Counsel for the 1st Defendant Low submitted inter alia that there was no proper plea of fraud for the claim in fraudulent misrepresentation. He submitted that the Plaintiffs have not exactly pleaded fraud. The Plaintiffs did not even say that when the Defendants made the representations that they knew the representations were not true. The question is whether the Plaintiff has met the test for pleading fraud and that is just another instance of the Defendants’ submission that the 24 Plaintiffs have not demonstrated a good arguable case. Another issue is whether the representation amounted to a representation of fact as opposed to a statement of intention or opinion and whether Low and Wong had made representations so as to subject them to personal liability. On the issue of reliance, Learned Counsel for Low submitted that it was the Plaintiffs who admittedly approached Adventa Capital and indicated its intention to acquire Aspion. The Defendants did not ask the Plaintiffs to buy Aspion. On the stock take, the Plaintiffs’ due diligence auditors KPMG had done a due diligence report and recommended that the Plaintiffs conduct a physical stock take. The Plaintiffs did not conduct the stock take that KPMG recommended. This shows that the issue of inventory was not critical enough. Of course, Plaintiffs would say that they did not do the stock take because of all the representations made to them. 38. On the writing off of the RM13.8 million in the FY 2017 accounts, the alleged representation on the RM13.8 million stock take was made on 4.11.2017. However, the third offer by the Plaintiffs offering a purchase price of RM1.37 billion was made on 29.9.2017 so again there is the question whether there was reliance on the representation. 25 39. On the risk of dissipation, Learned Counsel for the 1st Defendant submitted that even assuming the Plaintiff has made out a case of fraudulent misrepresentation, this does not show that they have shown a risk of dissipation. The SPA was a commercially negotiated agreement. The Plaintiffs had the benefit of good lawyers, due diligence auditors and the advice of Hong Leong Investment Bank. This was an arms’ length transaction. The issue is whether that is sufficient to show that the Defendants are likely to bury their spoils. The Defendants are established and reputable and the affidavit evidence on the character and positions held by Low had not been controverted by the Plaintiffs. Low is still involved in Adventa Berhad. Summary Of The 2nd Defendant’s (Wong) Submissions 40. Learned Counsel for Wong submitted that the real dispute should be between Adventa Capital and the Plaintiffs and that is the subject matter of the arbitration proceedings in Singapore. He relied on the numerous disclaimers of liability notified to the Plaintiffs and which the Plaintiffs are bound by and submitted that there is no basis for the Plaintiffs to say that 26 they have been induced by any representation made to them. He submitted that as a general rule, a concurrent or alternative liability in tort (example misrepresentation and/or fraud) would not be readily recognized by a court if it is tantamount to permitting a plaintiff from circumventing or escaping contractual exclusion or limitation of liability for the act, omission that would otherwise constitute the tort. In support of this proposition, Learned Counsel for Wong referred to the case of Lim Soh Wah & Anor v Wong Sin Chong & Anor and another appeal [2001] 2 CLJ 344. Learned Counsel for Wong also submitted that there is no solid evidence of the likelihood of dissipation of assets on the part of the Defendants and what the Plaintiffs are doing is trying to secure for themselves an unjustified discount on the purchase price of the shares. He also submitted that in a contractual setting, courts will generally not recognize attempts to impose liability on a recognized agent (particularly in a contractual setting involving the principal, example, director of a contracting party. For this proposition, he referred to the case of Abdul Manaf Mohd bin Ghows & Ors v Nusantara TImur Sdn Bhd & Ors [1997] 3 MLJ 661. 41. In answer to the query by the Court whether fraud would vitiate all the disclaimer clauses in this case, Learned Counsel for Wong relied on the 27 case of HIH Casualty and General insurance Ltd & Ors v Chase Manhattan Bank & Ors [2003] 2 Lloyd’s Rep 61 and E A Grimstead & Son Ltd v McGarrigan [1999] EWCA civ 3029 and Peekay Intermark Ltd & Anor v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386 which support the validity of disclaimer clauses even in a case of fraud, provided the wording to exclude liability for fraud is clear enough. Summary Of The Submission For Adventa Capital And ACPL 42. Learned Counsel for Adventa Capital and ACLP (referred to for convenience as “the 3rd Defendant”) submitted inter alia that there is no risk of dissipation, no good arguable case and no intent to deceive. As for the damages claimed, he submitted that the sums claimed other than the alleged overpayment constitute reflective losses and are not claimable. In any event, the Plaintiffs have abandoned their claim for those alleged losses. As for the alleged overpayment, Learned Counsel for the 3rd Defendant submitted that there is no causation, it has nothing to do with the RM13.8 million purported write off. There is no agreed formula for the purchase price. The purchase price of RM13.7 billion is not subject to a PE Multiple. It is a Fixed Amount as stated in the SPA. There is an entire 28 agreement clause in the SPA and there is no PE Multiple in the SPA. Learned Counsel stressed that the claim for alleged overpayment is not borne out because this was arrived at using a formula that was not reflected in the SPA and the SPA price is fixed by agreement. There is no causation between the misrepresentation in relation to the RM13.8 million write off and the derivation of the figure for overpayment. He submitted that even if there is misrepresentation there is no fraud and that fraud is very difficult to prove. The Defendants must have been dishonest and knew at the time of the representation that it was untrue. He submitted that the assertion of belief and reliance on the office as director are insufficient to prove deceit. On the risk of dissipation, he submitted that what was done by the Defendants had no material bearing on the issue of dissipation of assets. All the lies that were alleged by the Plaintiffs have no bearing on the dissipation of assets. Low and Wong had averred that they had no personal knowledge of the inventory of Aspion and they would rely on the records and books of the company. Learned Counsel for the 3rd Defendant admitted that he cannot prove conclusively that there were not misrepresentations but that is not the determining point, he submitted. In March 2017, the Plaintiffs conducted a stock take and there were no objections or complaints from the Plaintiffs. 29 43. Learned Counsel for ACPL conceded that if I were to order a mareva injunction against Low and Wong and Adventa Capital then I would be entitled to order a mareva injunction against ACPL (even though there is no cause of action alleged against ACPL by the Plaintiffs, they having abandoned the allegation of knowing receipt against ACPL) on the principles set out in the case of T.S.B. Private Bank International S.A. v Chabra And Another [1992] 1 WLR 231. 44. In that case, the Plaintiff bank issued a writ against the first defendant claiming, inter alia, £1.5million for his failure to honor a guarantee which he had given in respect of advances made to a British Virgin Islands company by the plaintiff. Prior to the hearing the plaintiff obtained a Mareva injunction which, inter alia, restrained the first defendant from removing out of the jurisdiction or otherwise disposing of, in particular, the proceeds of sale of certain business assets belonging to a United Kingdom company in which he was the majority shareholder. On a further ex parte application by the plaintiff the court ordered, of its own motion, the addition of the United Kingdom company to the writ as second defendant under R.S.C., Ord. 15, r. 6(2)(b)(ii) and granted a Mareva injunction against it in similar 30 terms to the injunction made against the first defendant. On the second defendant’s application for the writ to be struck out as against it on the ground that no cause of action was disclosed and to set aside the Mareva injunction, it was held that although the court had no jurisdiction to grant an interlocutory injunction in favor of a plaintiff who had no good arguable cause of action against a sole defendant, it had power to grant the injunction against a co-defendant against whom no cause of action lay, provided that the claim for the injunction was ancillary and incidental to the plaintiff’s cause of action against the other co-defendant; and that, accordingly, since the injunction made against the first defendant alone was inadequate to protect the plaintiff, it was appropriate to grant the injunction against the second defendant in support of the existing legal right claimed by the plaintiff against the first defendant. (see also Linsen International Ltd and others v Hyumpuss Sea Transport Pte Ltd and others [2011] EWHC 2339 (Comm)). Summary Of Plaintiffs’ Reply 45. On the issue as to whether fraud has been pleaded, Learned Counsel for the Plaintiffs submitted that when they pleaded that the Defendants 31 have manipulated the accounts, this shows fraud. He admitted that in hindsight, the plea of fraud could have been better pleaded. Learned Counsel at this juncture admitted that only the claim for alleged overpayment is maintainable, not the other claims. He also clarified that the Plaintiffs did not do a physical stock take exercise; they only conducted a quality assessment exercise and even though the results were not exactly satisfactory, they did not make an issue of it because of the profit guarantee given. Adventa Capital had agreed to pay Top Glove for any shortfall in the forecasted PAT FY 2018 and forecasted PAT FY 2019 subject to a cap of RM100 million unless there is fraud in which event the cap will not apply. Findings Of The Court 46. All the parties are agreed that in order to obtain a mareva injunction against a defendant, the Plaintiffs are required to establish that: (i) They have a good arguable case against the defendant; (ii) The defendant has assets within the jurisdiction; and 32 (iii) There is a real risk of the defendant removing his assets from the jurisdiction before the judgment is satisfied. 47. A good arguable case is one which is more than barely capable of serious argument but not necessarily one which the judge considers would have a better than 50% chance of success. (see Ninemia Maritime Corporation v Trave Schiffahrtgesellschaft mbH and Co KG ( The Niedersachsen) [1984] 1 ALL E R 398.) 48. In this case, the Plaintiffs submit that their claims are for fraudulent misrepresentation and conspiracy to defraud. Although the Plaintiffs asserted 2 causes of action, they submitted mostly on fraudulent misrepresentation. 49. It is not in dispute that the necessary elements of an action in deceit which is the same as the tort of fraudulent misrepresentation, the following facts must be pleaded and proved, namely: (i) There must be a representation of fact made by words or by conduct and mere silence is not enough; 33 (ii) The representation must be made with knowledge that it is false i.e. it must be willfully false or at least made in the absence of any genuine belief that it is true or recklessly i.e. without caring whether his representation is true or false (Derry v Peek [1889] 14 App Cas 337); (iii) The representation must be made with the intention that it should be acted upon by the claimant, or by a class of persons which will include the claimant, in the manner which resulted in damage to him; (iv) It must be proved that the claimant acted upon the false statements; and (v) It must be proved that the claimant has sustained damage by so doing (see Bradford Third Equitable Benefit Building Society v Borders [1941] 2 ALL E R 205 at 211, per Viscount Maugham) 34 50. I am of the view that the Plaintiffs have shown a good, arguable case that there were misrepresentations made to them prior to the execution of the SPA. It should be noted that the Plaintiffs are not alleging that there has been breaches of the warranties or representations given in the SPA. They are relying on the misrepresentations made to them prior to the execution of the SPA. One of the misrepresentations is that there is an amount in excess of RM 50 million of inventories that is not reflected in the books and records of Aspion. The Plaintiffs also allege that there were non-existent or decommissioned machines which were reflected in the books and records of Aspion. However, in regards to the 10 production lines in Kota Bharu, the Defendants have shown that the Plaintiffs have been expressly informed that the 10 production lines are not in use for many years and have been depreciated 100%. There is no misrepresentation in relation to the 10 production lines. In any event, it should be noted that the Plaintiffs have dropped its claim for damages in relation to all those misrepresentations. What the Plaintiffs are saying is directed to the alleged write off of RM13.8 million of inventories that were represented to have been done in 2017. The Plaintiffs say that out of the said sum of RM13.8 million, they can show that at least RM7.89 million 35 (57%) adjustment was either not made, was made and subsequently reversed or was made and effectively negated by other related adjustments, as confirmed by the second BDO report. The Defendants have not been able to credibly dispute that. 51. The alleged write off of the RM13.8 million affected the adjusted PAT for FY 2017(the PAT for FY 2017 was adjusted by writing back the purported write off of RM13.8 million thus increasing the PAT for FY 2017) which in turn affected the forecasted PAT for FY 2018 of RM80.9 million on which the Plaintiffs have based their purchase price of RM1.37 billion. The RM1.37 billion is obtained by multiplying RM80.9 million by a PE Multiple of 16.93. 52. If the adjusted PAT for FY 2017 was lower, then the forecasted PAT for FY 2018 would have been lower which would have meant that the Plaintiffs would have offered a lower purchase price for the Aspion shares. In relation to this there is a potential difficulty as to whether Adventa Capital would have agreed to sell the Aspion shares for less than RM 1.37 billion since the Plaintiffs’ second offer of RM 1.35 billion was rejected by Adventa Capital. The Plaintiffs did not deal with this difficulty. 36 53. One could say that because RM7.9 million was not written off in 2017, the PAT for FY 2017 was inflated by RM7.9 million and therefore the purchase price was inflated by RM133.747 million (RM 7.9 million multiplied by 16.93) but that was not how the Plaintiffs and their advisors BDO calculated the overpayment of purchase price. They say because of the misrepresentations, the figures for 2017 are unreliable and could not be used. They used the actual PAT for 7MFY2018, made an adjustment for foreign exchange, and obtained an annualized PAT FY 2018 of RM43.1 million. The shortfall between that figure and the forecasted PAT FY 2018 of RM80.9 million is RM37.8 million and they multiplied that by 16.93 to get the alleged overpayment of RM640.47 million. 54. It should be noted that the Plaintiffs have a profit guarantee in respect of the forecasted PAT for FY 2018 and FY 2019. Initially in their negotiations, the Plaintiffs have asked the shortfall for the profit guarantee to be calculated by multiplying the shortfall by the multiple of 16.93 but the final agreement between the parties is merely that Adventa Capital will pay the profit shortfall subject to a cap of RM100 million. By relying on fraudulent misrepresentation, the Plaintiffs are claiming what they had 37 previously tried to obtain from Adventa Capital but were unable to namely to multiply the profit shortfall by 16.93. 55. Having found that the Plaintiffs have shown a good, arguable case of misrepresentations, I have to ascertain if the Plaintiffs have shown a good arguable case of “fraudulent” misrepresentations as that is the Plaintiffs’ claim. In ascertaining whether fraud has been properly pleaded by the Plaintiffs, the following passage of the judgment in Brendan McEneaney & Others v Ulster Bank Ireland Limited & 1 Anor [2015] EWCH 3173 (Comm) is pertinent: “64. However, I would also have accepted the defendants’ argument that permission for the amendments should be refused because they are not adequately pleaded. In view of my conclusion about limitation, I deal with this briefly. Allegations of fraud must always be properly particularized: in Three Rivers District Council v Governor and Company of the Bank of England (no 3) [2001] UKHL 16, Lord Hope observed ( at para 51) that “ The more serious the allegation of misconduct, the greater is the need for particulars to be given which explain the basis for the allegation”. More specifically, an allegation of fraud is not supported by an allegation that the defendant made a representation that he knew or ought to have known to be untrue. As May LJ put it in Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340, 1351H/1352A: 38 “…where fraud or dishonesty is material this must be clearly pleaded, if not explicitly, then in such terms that the reader of the pleading can be left in no reasonable doubt that this is being alleged…where an element in the alleged fraud or dishonesty relied on is the other party’s knowledge of a given fact or state of affairs, this must be explicitly pleaded. It is ambiguous and thus demurrable, if fraud is relied on, to use the common ‘rolled up plead’ that a defendant knew or ought to have known a given fact. If it is desired to allege and plead fraud and, in the alternative, negligence based on similar contentions, then the former must be pleaded first and clearly and the relevant part of the plea confined to fraud. The allegation in negligence can then be pleaded separately and as a true alternative contention.” 56. I turn now to a consideration of the Statement of Claim in the writ action which is against Low, Wong and ACPL. In paragraph 77, the Plaintiffs pleaded the discovery of the representations which were said to be false. In paragraph 78, the Plaintiffs pleaded thus: “The Plaintiffs contend that Adventa Capital, in particular, the directors (Low and Wong) manipulated Aspion’s financial statements by recognizing non-existing stocks and obsolete stocks as inventory in Aspion’s financial statements.” In paragraph 79 it is pleaded: “The Plaintiffs further contend that the intention of such manipulation was to artificially inflate Aspion’s assets and 39 thus profitability. Had there been no such manipulation, the projected PATs for FY 2018 and 2019 would in fact be far lower than represented.’ In paragraph 80 it is pleaded: “Thus such manipulation resulted in the Plaintiffs agreeing to pay a purchase consideration far higher that (sic) they would have had the truth being made known to them.” In paragraphs 81 and 82 it is pleaded: “The Plaintiffs contend that Aspion’s accounts would have been approved by the directors of Aspion and Adventa, in particular Low. Further, the Information Memorandum was information with regards to Aspion. The Plaintiffs further contend that it would have received the sanction of Aspion’s and Adventa’s directors in particular Low. Also the Plaintiffs contend that Wong, despite not being a director would also have sanctioned the Information Memorandum as he was very much involved in the negotiations.” 57. Learned Counsel for the Plaintiffs submitted that the use of the word “manipulation of the financial statements” in the relevant context was sufficient to amount to a plea of fraud. However, the manipulation of financial statements in paragraphs 78 and 79 of the Statement of Claim was limited to the recognition of non-existing stocks and obsolete stocks as inventory. There is no plea that the representation as to the write off of RM 40 13.8 million was false, to the knowledge of the Defendants which was the main misrepresentation the Plaintiffs had relied on. There was not even an averment that the Defendants knew the representation to be untrue when they made it, which was said in Brendan McEneaney to be insufficient in any event to amount to a proper plea of fraud. 58. The same averments were made in the Affidavit in support of the application for mareva injunction against Adventa Capital in the Originating Summons. To reiterate, the claim against Adventa Capital was to go for arbitration in Singapore and the application for mareva injunctions against Adventa Capital is made pursuant to section 11 of the Arbitration Act. 59. I am of the view that the Plaintiffs’ pleading does not amount to a proper plea of fraudulent misrepresentation against the Defendants. 60. It is important for the Plaintiffs to maintain a case of fraudulent misrepresentations because there are numerous disclaimers of liability and non-reliance clauses which had been made known to the Plaintiffs. For instance, the Information Memorandum expressly cautions that “no reliance should be placed on statements, estimates, projections and forward looking 41 statements provided by Aspion with respect to anticipated future performance and that such statements, estimates, projections and forward looking statements reflect various assumptions by Aspion concerning anticipated results, assumptions which may or may not prove to be correct.” 61. In the covering letter to the Information Memorandum, it is stated that prospective purchasers shall have no claim whatsoever against any of the vendor, the vendor’s affiliates or any of their directors, officers, employees, advisors or agents arising out of, or relating to, the Proposed Transaction, the sale process (other than a claim relating to the express terms agreed in definitive and duly executed agreements or in the case of fraud or fraudulent misrepresentation) 62. Otherwise, it is provided that : “Neither the Vendor, Credit Suisse nor any of their advisors (a) makes any representation or warranty, express, implied or tacit, as to the accuracy or completeness of the information in the Due Diligence Materials or any other information (whether communicated in written, oral, visual, electronic form or otherwise) transmitted or made available to any person, (b) accepts or assumes any 42 responsibility or liability as to the accuracy or completeness of such information, and (c) assumes any responsibility or obligation to inform any prospective purchaser of any change in such information or to correct any inaccuracy or incompleteness of such information. Only those representations and warranties expressly contained in any binding agreements ultimately entered into with you and the Vendor in connection with the Proposed Transaction shall have any legal effect”. 63. In both the Overview and the Commentary, it is provided inter alia : “Credit Suisse has not independently verified any of the information contained herein, and the Company and Credit Suisse expressly disclaim any and all liability for any errors and/or omissions, which are contained in these materials or any other written or oral information and make no representations or warranties, whether express or implied, as to the accuracy or completeness of the materials or any other written or oral information. In particular, no representation or warranty is made as to the achievement, accuracy or reasonableness of, and no reliance should be placed on, future projections, management targets, estimates, prospects or returns, if any.” 43 64. On or about 11.7.2017, Credit Suisse sent the first draft of a Confidentiality undertaking to interested buyers including Top Glove. At paragraph 13 of the confidentiality undertaking, Top Glove expressly agreed that: “(a) except as expressly agreed in the Agreement referred to in paragraph 13(d) below, any Confidential Information made available to us or our Representatives at any time shall not constitute or be taken as recommendation, advice or inducement or form part of an offer or representation by you, the Company or any of its related companies or associated companies, to sell and solicit an offer to buy any securities or business assets, nor shall the Confidential Information contained therein form the basis or be relied on in connection with any contract; (b) you reserve the right, in your sole discretion, to change the procedures relating to the consideration of the Transaction at any time without prior notice to us, to reject any and all proposals made by us or our Representatives with regard to the Transaction and to terminate discussions and negotiations with us at any time and for any reason or for no reason; (c) you, the Company, its related companies and associated companies, and their respective shareholders, officers, directors, employees, representatives and its advisers (i) do not accept responsibility for, or make any warranty or representation, express or implied, with respect to the accuracy or completeness 44 of the Confidential information; and (ii) shall not have any liability whatsoever and howsoever arising in connection with the Confidential Information or the use, supply or disclosure thereof, other than expressly agreed in the Agreement referred to in paragraph 13(d) below; and (d) we shall be responsible for making our own assessment and decision on the Confidential Information and that we shall in the execution of any agreement relating to the Transaction (the “Agreement”) acknowledge that we have not relied on or been induced to enter into the Agreement by any representation or warranty other than expressly set forth in the Agreement subject to such limitations and restrictions as may be specified therein”. 65. The Bid Letter and the Information Memorandum contained the following caveats and statements to the effect that: (i) only those representations and warranties expressly contained in any binding agreement ultimately entered into with the buyer and Adventa Capital in connection with the Aspion Sale shall have any legal effect, and no representations or warranties were made as to the accuracy or completeness of the information provided (whether communicated in written, oral, 45 visual, electronic form or otherwise) transmitted or made available to any person: (a) paragraph 3 (Other Matters) of the Bid Letter: “Neither the Vendor, Credit Suisse nor any of their advisors (a) makes any representation or warranty, express, implied or tacit, as to the accuracy or completeness of the information in the Due Diligence Materials or any other information (whether communicated in written, oral, visual, electronic form or otherwise) transmitted or made available to any person, (b) accepts or assumes any responsibility or liability as to the accuracy or completeness of such information, and (c) assumes any responsibility or obligation to inform any prospective purchaser of any change in such information or to correct any inaccuracy or incompleteness of such information. Only those representations and warranties expressly contained in any binding agreement ultimately entered into with you and the Vendor in connection with the Proposed Transaction shall have any legal effect”. (b) paragraph 3 of the VDR Rules: 46 “Except as may be otherwise expressly provided in the final agreement relating to the Proposed Transaction, no representation or warranty, express or implied, is made or given as to the adequacy, accuracy, reliability or completeness of the information or as to the reasonableness of any assumptions on which any of it is based.”; and (ii) The information was provided for informational purposes only and that interested buyers should, with advisors, conduct their own investigation and analysis of Aspion and the materials provided: (a) paragraph 3 of the VDR Rules: “…The sole purpose of making the Information available is to provide potential bidders and their Authorized Representatives with information in connection with the Proposed Transaction. Potential bidders must make their own independent assessment of the Information after making such investigation and taking such professional advice as they decide is necessary”. 47 (b) the “Important notice” section on page 30 of the Overview and on page 16 of the Commentary: “These materials have been prepared by the Company solely for informational purposes. They are being made available on a confidential basis and is being furnished through Credit Suisse (Singapore) Limited (“Credit Suisse”) to interested parties solely for information purposes to assist the recipient in determining whether they would like to proceed with a further investigation of a transaction involving the Company…” “You should not construe the contents of these materials as legal, tax or investment advice. You should consult your own accounting, legal, tax or investment counsel or other advisor regarding the legality or suitability of your investment in the Transaction under applicable legal, investment or similar laws and regulations. Neither the Company nor Credit Suisse make any representation regarding the transaction herein under any legal, investment or similar law, regulations or fiduciary standards”. 66. In Schedule 5 of the SPA it is provided that notwithstanding anything to the contrary therein, the Seller’s Warranties therein are the sole and 48 exclusive representations and warranties made by the Seller with respect to any matters relating the SPA. It should be noted that the Plaintiffs are not saying that there was a breach of any of the warranties and representations given by Adventa Capital in the SPA. 67. The relevance of a claim for fraudulent misrepresentation, as opposed to a claim for negligent misrepresentation is that fraud would apparently vitiate all such disclaimers of liability. 68. In the House of Lords case of S. Pearson & Son Limited v Lord Mayor & C. of Dublin [1907] AC 351 a contractor sued the other party to the contract (a public authority) in an action of deceit for damages for fraudulent misrepresentation made by the agent of the public authority as to the nature of the works to be executed. One defence was that by a provision in the contract the plaintiff must verify all representations for himself and not rely on their accuracy. In the contract, it was stipulated that the contractor should satisfy himself as to the dimensions, levels and nature of all existing works and other things connected with the contract works; that the corporation did not hold itself responsible for the accuracy of the information as to the sections or foundations of existing walls and 49 works; and that no charges for extra work or otherwise would be allowed in consequence of incorrect information or inaccuracies in the drawings or specifications. Lord Loreburn LC said this in his judgment: “The contract contained clauses which I need not cite at length, to the effect that the contractors must not rely on any representation made in plans or elsewhere, but must ascertain and judge of the facts for themselves. And therefore, the Chief Baron withdrew the case from the jury. As I understand it, the view he held, in substance confirmed by the Court of Appeal, was that the plaintiffs, so forewarned, had no right to rely on any representation, and could not be heard to say they were induced by statements on which by contract they were not to rely…Now it seems clear that no one can escape liability for his own fraudulent statements by inserting in a contract a clause that the other party shall not rely upon them.” 69. In Foodco UK LLP (t/a Muffin Break) v Henry Boot Developments Limited [2010] EWHC 358 the agreement contained a clause saying this: “This Agreement constitutes the entire agreement between the parties hereto and the Tenant acknowledges that it is entering into this Agreement on the basis of the terms hereof and not in reliance upon any representation or warranty whatsoever whether written or oral expressed or implied made by or on behalf of 50 [Henry Boot] (save for written replies given by [Henry Boot’s] solicitors to the enquiries raised by the Tenant’s solicitors”. 70. About the effect of such a clause, the court held: “The second component of the clause is the non-reliance clause. Precisely what statements are covered by a non-reliance clause is a question of construction of the clause. But this is subject to the important principles that, as a matter of public policy, a contracting party cannot exclude liability for his own fraud; and that if he wishes to exclude liability for the fraud of his agent he must do so in clear and unmistakable terms on the face of the contract: HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] 2 Lloyd’s Rep 61. The clause in the present case contains no clear words acknowledging non-reliance on fraudulent misrepresentations. In my judgment, therefore, the clause covers innocent and negligent misrepresentations but not fraudulent ones.” 71. In the case of HIH Casualty, the House of Lords (Lord Bingham) had this to say at page 68 of the report: “It is true that the ratio of the leading authority on the point, S Pearson & Son… despite the distinction and numerical strength of the House which decided it is 51 not easy to discern. I do not however think that that question need be finally resolved in this case. For it is, in my opinion, plain beyond argument that if a party seeks to exclude the ordinary consequences of fraudulent or dishonest misrepresentation or deceit by his agent, acting as such, inducing the making of the contract, such intention must be expressed in clear and unmistakable term on the face of the contract.” “The decision of the House in Pearson…does at least make plain that general language will not be construed to relieve a principal for the fraud of an agent…” 72. I am of the view that the various disclaimers and non-reliance clauses do not expressly exclude liability in the case of fraud but since I am of the view that the Plaintiffs have not properly pleaded a claim for fraudulent misrepresentation in relation to the writing off of the RM13.8 million and the inventory that cannot be found in the books and records, the Plaintiffs would be precluded by the numerous disclaimers of liability and non-reliance clauses from saying that they have been induced by the representations made by the Defendants. Accordingly, I find that the Plaintiffs have not shown a good arguable case for fraudulent misrepresentation. 52 73. As to whether the Plaintiffs have shown a good, arguable case for negligent or innocent misrepresentation in the light of the numerous disclaimers of liability and non-reliance clauses, as well as the entire agreement clause in the SPA, Learned Counsel for the Plaintiffs have referred me to a case after the parties have finished with the hearing and the matter is awaiting my decision. It is the case of Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All E R 573. In that case the plaintiff sued for fraudulent or negligent misrepresentation and the court found that there was no fraudulent misrepresentation but there was negligent misrepresentation. Then the court considered whether the action can be maintained in the light of a provision in the contract which said this : “ This Agreement sets forth the entire agreement and understanding between the parties or any of them in connection with the Business and the sale and purchase described herein. In particular, but without prejudice to the generality of the foregoing, the Purchaser acknowledges that it has not been induced to enter into this Agreement by any representation or warranty other than the statements contained or referred to in Schedule 6.” It was argued that this precludes a claim in misrepresentation but the Judge disagreed. This is what he said : “ The first thing to do is to construe the clause. As in the Alman case, in my judgment the first sentence does 53 not operate to exclude remedies for pre-contractual misrepresentations. It simply does not say it does. If it said, for instance, “ The vendor agrees that he will have no remedy in respect of any untrue statement made to him upon which he relied in entering into this contract and that his only remedies can be for breach of contract” the clause would probably have done the job. Then, if he is sold a pup, he will have no remedy unless it is a contractually warranted pup…Unless it is manifestly made clear that a purchaser has agreed only to have a remedy for breach of warranty I am not disposed to think that a contractual term said to have this effect by a roundabout route does indeed do so. In other words, if a clause is to have the effect of excluding or reducing remedies for damaging untrue statements then the party seeking that protection cannot be mealy mouthed in his clause. He must bring it home that he is limiting his liability for falsehoods he may have told…Again, the point of exclusion of liability is not made explicit. It is perfectly possible to read the clause as doing no more than attempting to set out such representations as the purchaser thinks he was relying on at the time. He may have difficulty later in proof of any further representation, but if he can prove one, then his acknowledgement that there was no other may amount to no more than an acknowledgment of what he thought was the position at the time.” This case suggests that 54 the court will construe all disclaimers of liability and non-reliance clauses very strictly. This case also seems to be inconsistent with the case of Foodco UK. However, I am inclined to the view that in this case, considering all the numerous disclaimer of liability and non-reliance clauses, with the saving that they do not apply in the case of fraud or fraudulent misrepresentation, the intention is that they apply in the case of negligent or innocent misrepresentation. The intention seems to be that Adventa Capital will only be liable to the Plaintiffs either for breach of the SPA or in fraud or for fraudulent misrepresentation. I am of the view that whilst the Plaintiffs may have shown an issue to be tried as to whether they can rely on negligent or innocent misrepresentation, they have not shown a good, arguable case which is a higher threshold than an issue to be tried. 74. The other cause of action relied upon by the Plaintiffs is conspiracy by Low, Wong and/or Adventa Capital to defraud the Plaintiffs. 75. In regard to the tort of conspiracy, the following need to be satisfied at the interlocutory stage: a) An agreement between two or more persons; 55 b) An agreement for the purpose of injuring the Plaintiffs; c) That acts done in execution of that agreement resulted in damage to the Plaintiffs; d) Damage is an essential element and where damage is not pleaded the statement of claim may be struck out ( see Renault SA v Inokom Corporation Sdn Bhd & Anor and other applications [2010] 5 CLJ 32) 76. This is how the Plaintiffs pleaded this cause of action: a) By reason of the matters averred in Part K above, in particular, paragraphs 75 and 77 above, the Plaintiffs contend that Adventa Capital and/or Wong and/or Low has artificially inflated Aspion’s financial performance (i.e assets and profitability). b) Thereafter, on or about May 2017 and definitely before the start of the bidding process as averred in Part E(i) above, the Plaintiffs aver that Adventa Capital, Wong and Low (or any two or more together) wrongfully and with intent to injure the 56 Plaintiffs by unlawful means conspired and combined together to defraud the Plaintiffs. c) Pursuant to and in furtherance of the conspiracy averred in the foregoing paragraph, Adventa Capital and/or Wong and/or Low carried out the unlawful acts and means by which the Plaintiffs were injured. d) Artificially inflating Aspion’s financial performance, i.e., its assets and profitability. (i) In respect of the Inventories, (a) non-existing inventories were recognized in Aspion’s accounts and stock listing; (b) obsolete stocks were recognized in Aspion’s accounts and stock listing; (c) ascribing a much higher value to inventory listed in the aging list when in fact the value was much lower. 57 (ii) In respect of the Fixed Assets of Aspion, (a) recognized 10 production lines in Kota Bharu (although they were decommissioned since 2012) at a net book value of RM14,500,921.00 in the fixed asset listing as at 30.4.2017 provided in the VDR; and (b) recognized a non-existent machinery at Kluang at a net book value of RM99,575.00 in the fixed asset listing as at 30.4.2017 provided in the VDR. (hereinafter referred to as “the Inflated Accounting Information”) (iii) Included Aspion’s Inflated Accounting Information despite knowing its inaccuracy in inter alia: i) The VDR; and ii) The Information Memorandum. (iv) Made the representation to the Plaintiffs to induce the Plaintiffs and/or lead them to believe that a target PAT of RM80.9 million FY2018 and RM108.3 million in FY 2019 were achievable 58 despite knowing that these targets PAT were not achievable. The Representations included the representation that Adventa Capital would adjust the purchase consideration to reimburse the Plaintiffs should there be a shortfall in the target PAT of RM80.9 million in FY2018 and RM108.3 million in FY2019. (v) After the SPA was executed, issued the Responsibility Statements and made the 14.2.2018 Representations so that the SPA could be completed. (vi) By reason of the fraud and/or deceit practiced on the Plaintiffs, i) Adventa Capital received the sum of RM1.233 billion; ii) ACPL received the sum of RM72.3 million; and iii) Adventa Capital was allotted 20,505,000 shares in Top Glove. 59 77. I have already found that in respect of the 10 production lines in Kota Bharu, there was no misrepresentation. 78. As for the target PAT for FY 2018 and FY 2019, the Plaintiffs have not shown that there was any representation made that the targets are achievable. The Plaintiffs pleaded that the representations included the representation that Adventa Capital would adjust the purchase consideration to reimburse the Plaintiffs should there be a shortfall in the target PAT of RM80.9 in FY 2018 and RM108.3 million in FY 2019. There is no misrepresentation. Adventa Capital has agreed to adjust the purchase price in the event there is a shortfall in the target PAT for FY 2018 and FY 2019 subject to a cap of RM100 million which cap is not applicable if there is fraud. It is also significant to note that the alleged misrepresentation regarding the write off of RM13.8 million in FY 2017 is not pleaded to be an overt act carried out pursuant to the alleged conspiracy. 79. In respect of the allegations that non-existent inventories were recognized in Aspion’s accounts and stock listing, obsolete stocks were 60 recognized in Aspion’s accounts and stock listing and ascribing a much higher value to inventory listed in the aging list when in fact the value was much lower, the Plaintiff had made a claim for non-existent stocks in the sum of RM57,483,007.00. However, the Plaintiff had subsequently abandoned that claim. I find that there is no causal link between the alleged conspiracy to defraud the Plaintiffs and the loss of RM640.47 million claimed by the Plaintiffs. If there is a shortfall in the target PAT for FY 2018 and 2019, Adventa Capital will compensate the Plaintiffs for the shortfall. 80. In Columbia Asia Healthcare Sdn Bhd v Hong Hin Kit Edward and another and another appeal [2015] 2 SLR 395 the Singapore Court of Appeal said this in relation to a breach of warranty which affected the price of shares: [37] The value as is of the shares would be what a willing buyer would have paid a willing seller at the date of the transaction, knowing the true state of affairs. This issue was considered at some length in Sycamore, the facts of which are somewhat similar to the present case. The claimant had purchased shares from the defendants and discovered accounting errors in the company’s profit and loss accounts after completion. Specifically, the turnover figure stated in the said 61 accounts had been inflated by reason of the improper recording of certain compensation amounts as turnover. The purchaser claimed damages flowing from the breach of warranty that the company’s profit and loss accounts were accurate. In his judgment, Mann J observed (at [405]), as follows: … The purpose of the valuation is to find what a willing purchaser would pay to a willing seller. There are various ways of conducting this investigation. In the absence of an apparent market from which a price can be derived, other techniques have to be used. Assuming a purchaser who would use a model like [the actual purchaser’s] is one technique … But the views of the actual purchaser and of another potential purchaser are not irrelevant. If the purchaser would have paid the same sum anyway, then that goes to value. If another purchaser is in the wind, so that the actual purchaser’s price has to be beaten to secure the transaction, then that goes to value too. [38] As can be seen from the above passage, the valuation exercise is a multi-faceted and fact-centric one that does not give rise to the application of a uniform approach. An inquiry into how the actual purchaser valued the shares or would have valued the shares (had it known of the inaccuracies in the accounts) could, in the proper circumstances, be relevant to the question of value. Indeed, in the English Court of Appeal decision of Senate Electrical Wholesalers v Alcatel Submarine Networks [1999] 2 Lloyd’s Rep 423 (“Senate”), the court emphasised that the evidential starting point of the inquiry was how the actual purchaser had 62 valued the shares and that the expert evidence on the appropriate valuation method cannot stand alone if it is significantly at variance with evidence of what actually happened (see Senate at [34] approving the decision of the judge below as cited at [27]). Therefore, in working out the value as is of the shares, the court will often look at the way the claimant purchaser valued the company as evidence of the way the market would value the property or business (see generally Senate at [34]). 81. Accordingly, the Plaintiffs in this case must determine the effect on the PAT for FY 2017 which the alleged non-existing inventories has, in order to determine how much the adjusted PAT for FY 2018 would have been, in the light of the adjusted PAT for FY 2017. There is no basis for the Plaintiffs to use the actual profits for 7MFY 2018 and then extrapolate from there the shortfall in the PAT of FY 2018 and take that as the loss suffered as a result of the conspiracy to defraud. I therefore find that the Plaintiffs have not shown a good arguable case to support the claim for RM640.47 million in respect of the claim in conspiracy to defraud. To reiterate, there is no causal link between the alleged conspiracy to defraud and the claim of RM 640.47 million. 63 82. In the event I am wrong in finding that the Plaintiffs have not shown a good arguable case to claim the sum of RM640.47 million for fraudulent misrepresentation and conspiracy to defraud, I will go on to ascertain whether the Plaintiffs have demonstrated a risk of dissipation on the part of the Defendants. The parties did not submit on the element that the Defendants must have assets within the jurisdiction because it is not in dispute that the Defendants all have assets within the jurisdiction although it can be anticipated that Wong and Low are unlikely to have assets amounting to as much as RM 640.47 million. 83. In the case of Bouvier and another v Accent Delight International and another; and another appeal [2016] 1 LRC 60 the Singapore Court of Appeal said this: “[93] It is time to round off this extended review of the authorities with some observations, and we begin with the last of the cases we have reviewed, namely, Media World. In our judgment, if there is a unifying principle that can adequately rationalize and explain the circumstances in which a court may legitimately infer a real risk of dissipation from nothing more than a good arguable case of dishonesty, it is this - the alleged dishonesty must be of such a 64 nature that it has a real and material bearing on the risk of dissipation. It will be evident from our analysis of the cases that it is in such circumstances that the courts have been willing to draw the necessary inference. This is sensible because whether or not such an inference may be drawn is ultimately a question of fact. In assessing whether the inference is warranted as a matter of fact, it is appropriate, in our judgment, for the court to segregate the two questions (ie, whether there is a good arguable case on the merits of the plaintiff's claim and whether it has been shown that there is a real risk of dissipation) and answer them separately. We accept that the evidence relied on to answer the first question may be the same as that relied on to answer the second. But, once the inquiries are segregated, it will be clear that whether the evidence pertinent to the first stage of the inquiry is sufficient also for the purposes of the second stage is an assessment that cannot - and emphatically must not - be made mechanistically; and in that context, if an allegation of dishonesty is all that is relied on, that allegation must be such as to say enough about a real risk of dissipation in the circumstances. [94] In our judgment, a well-substantiated allegation that a defendant has acted dishonestly can and often will, as we have said, be relevant to whether there is a real risk that the defendant may dissipate his assets. But, we reiterate that in each case, it is incumbent on the court to examine the precise nature of the dishonesty that is alleged and the strength of the evidence relied on in support of the allegation, keeping fully in mind that the proceedings are only at an 65 interlocutory stage and assessing, in that light, whether there is sufficient basis to find a real risk of dissipation. That alone is the justification which lies at the heart of the court's jurisdiction to grant Mareva injunctions. An allegation of dishonesty does not in itself form a substitute for an examination of the degree of risk of dissipation unless, as we have said, that allegation is of a nature or characteristic that sufficiently bears upon the risk of dissipation. In this regard, we endorse the views of Choo Han Teck J in PT Sariwiguna Binasentosa v Sindo Damai Shipping Ltd and others [2015] SGHC 195 where he made observations to a similar effect at [10]-[14]. That judgment was handed down shortly after we heard the oral arguments in these appeals. [95] On the facts before us, we do not consider that the allegations of dishonesty levelled at Mr Bouvier have a real and material bearing upon the risk of dissipation. This is not a case where Mr Bouvier misappropriated the respondents' assets through a series of fictitious or illusory transactions. Nor is this case akin to Patterson v BTR Engineering, where a former senior employee of the plaintiff company exploited his position to procure the plaintiff to purchase equipment from him at a mark-up by interposing an entity that he was thought to indirectly control, thus enabling him to make a secret profit by the "diversion of money from its proper channels". In the present case, the respondents, which are controlled by Mr Rybolovlev, are independent entities that received what they bargained for and at the price they were willing to pay. They knew that they were dealing with Mr Bouvier, and that he was sourcing the artworks concerned from 66 others. The real issue is as to the legal nature of the respondents' relationship with Mr Bouvier. [96] The fraud or dishonesty that is alleged in this case is not in the nature of a complex machination or an elaborate scheme. The ploy in this case, if proved, was deceptively simple: Mr Bouvier exploited the asymmetries of information inherent in an opaque market to turn a profit. As we have already observed, the ultimate outcome in this case turns on the true characterization of the relationship between Mr Bouvier and the respondents. On one view, there will be no fraud at all: Mr Bouvier can be seen as a wily businessman who employed a questionable (and perhaps barely legal), although ultimately profitable, approach to business. On another, Mr Bouvier can be seen as an errant agent who is liable to the respondents for fraudulent misrepresentation or breach of fiduciary duties. [97] We also consider it significant that there was, in this case, no use of a complex web of companies to conceal the dealings in question. Mr Bouvier made no attempt to conceal his identity or mask his connection with the transactions through which the 38 artworks were acquired by the respondents. He always dealt in person, acting through MEI Invest. The payments from the respondents were made over the course of a decade or so into the same bank accounts held by MEI Invest at the Geneva branches of Banque SCS Alliance and Compagnie Bancaire Helvétique. Mr Bouvier may be wealthy, well-advised and sophisticated; he may also be experienced in international financial transactions 67 and corporate structures. But, to infer a real risk of dissipation from these factors alone would be to penalize him for what some may say are no more than the ordinary concomitants of his good fortune or his success in plying his craft. In Art Trend Ltd v Blue Dolphin (Pte) Ltd and others [1981-1982] SLR® 633 ("Art Trend"), Lai Kew Chai J frowned on a similar argument, stating at [37] that experience or "knowledge of the practice of international finance and transfers of funds is not evidence of a predisposition to remove assets to frustrate any judgment". His decision was upheld on appeal: Art Trend Ltd v Blue Dolphin (Pte) Ltd and others [1983-1984] SLR(R) 105. In our view, Mr Bouvier has not misused his international financial expertise in the commission or furtherance of the allegedly deceitful behavior, nor is there any solid evidence which suggests a real risk of dissipation on his part.” 84. I am of the view that the nature of the claims against the Defendants do not show that there is a real risk of dissipation of assets on their part. Like in the Bouvier case, the fraud or dishonesty that is alleged is not in the nature of a complex machination or an elaborate scheme. There is no use of a complex web of companies to conceal the dealings in question. 85. The court in Bouvier held that at most, Mr Bouvier can be seen as an errant agent who is liable to the respondents for fraudulent 68 misrepresentation or breach of fiduciary duties and the court in that case did not find there to be a real risk of dissipation of assets. 86. The present case is somewhat similar to the case of Media World Communications Ltd (Administrator Appointed) v Clark [2004] FCA 1609. The plaintiffs in that case had, in a series of transactions, purchased what was referred to as “the AP Technology” from the first defendant Adam Clark, and his associated companies, which were the corporate defendants. The plaintiffs’ suspicions were subsequently aroused and confirmed when they discovered that the AP Technology was sub-optimal and did not perform as represented. The plaintiffs argued that there was a strong case of serious dishonesty and fraud against Mr Clark and the corporate defendants. Mr Clark had made representations to the plaintiffs about the performance of the AP Technology knowing that those representations were false. The plaintiffs argued that the court could ‘infer a risk of dissipation from the nature of the cause of action raised against the defendants. 87. Goldberg J rejected the argument and refused to grant the mareva injunction sought. He said that cases where the courts had been prepared 69 to draw an inference of a real risk of dissipation based on substantiated allegations of dishonesty and nothing more, were those that ‘ involved causes of action which had a characteristic bearing upon dissipation’. Goldberg J thought that although the case before him included appellations such as “fraud” and “serious dishonesty”, the case was essentially one of misrepresentation. In the absence of other evidence pointing to a real risk of dissipation Goldberg J dismissed the application for a mareva injunction against the defendants. Similarly, in this case, the claim is essentially one for misrepresentation and the Plaintiffs cannot show a real risk of dissipation of assets merely by relying on the nature of their causes of action against the defendants. 88. In addition to relying on the nature of the claims against the Defendants, the Plaintiffs also relied on various other facts in their attempt to show real risk of dissipation of assets. The Plaintiffs submitted that the Defendants had lied on oath and had doctored evidence. The Plaintiffs alleged that Wong had tendered 3 commercial invoices which were purportedly of 2nd grade gloves but which the Plaintiffs say were of 1st grade gloves. The Plaintiffs also say that to aid the Defendants’ case, on 70 or about 11.7.2018, a staff of Aspion, Ms Suhaila, had changed the product code to reflect a 1st grade stock as a 2nd grade stock. 89. I note that the lies and doctored evidence alleged by the Plaintiffs were made in affidavits filed just one day before the hearing and the Defendants did not have the opportunity before the hearing of responding to the said allegations. The Defendants did file affidavits before the continued hearing but said they will not rely on the said affidavits in the face of objection by Learned Counsel for the Plaintiffs. In the circumstances, I do not place much weight on the allegations of lies and doctored evidence. In any event, as far as the incident of an employee trying to change the product code of the gloves without any basis to do so (the doctored evidence) is concerned, I note that the incident happened on 11.7.2018 and Adventa Capital no longer had a stake in Aspion by then. Furthermore, Low was removed as Managing Director of Aspion on 6.7.2018 and Wong never held any executive position in Aspion. 90. The Plaintiffs also say that there was an elaborate scheme to deceive them. They say that the Defendants used a false 11MFY2017 to lead the Plaintiffs to believe that the forecasted PAT 2018 and PAT 2019 of RM80.9 71 million and RM108.3 million respectively were achievable despite knowing that these targets were simply not achievable. From the 31.10.2017 email which Wong sent to the Plaintiffs, it was evident that the numbers read out to the Plaintiffs included the number that RM13.8 million of inventories had been written off. However, the RM13.8 million was not in fact written off. The Plaintiff had been able to show a case to say that at least RM7.89 million of the RM13.8 million had not been written off. I do not agree that there was an elaborate scheme to deceive the Plaintiffs. If the write off of RM13.8 million was so crucial to the Plaintiffs, it is surprising that they did not even plead that when the Defendants made the representation that RM13.8 million was written off, they knew that it was false. Neither did the Plaintiffs refer to the said representation of the RM13.8 million write off as an overt act which was carried out by the Defendants pursuant to the alleged conspiracy to defraud. The Plaintiffs’ case is essentially one of misrepresentations and in the absence of other cogent evidence that the Defendants are likely to dissipate their assets in order to avoid satisfying any judgment against them, there is no basis to find that there is a real risk of dissipation. 72 91. Low has affirmed an affidavit setting out his standing in society and this is not controverted by the Plaintiffs. This is what he says, to quote: (a) my association with the glove manufacturing business goes back to around 1988, when I founded various companies and manufacturing facilities involved in the glove making business. It all started most notable through Terang Nusa Sdn Bhd (“Terang Nusa”), which began operations as a manufacturer of examination gloves in Kuala Lumpur with a single production line and 45 employees. Terang Nusa then gradually expanded its operations and production to include the manufacturing of surgical gloves. This saw Terang Nusa setting up a glove manufacturing facility in Kota Bharu in 1992, which is today the second largest private employer in Kelantan. In November 2004, another plant in Kluang, Johor was acquired to increase the overall production capacity and that had allowed the business to offer a wider range of gloves to include the specialization in dental gloves. In 2005, the business continued its expansion program to increase the production capacity 73 further by setting up a new manufacturing plant in Uruguay, South America. (b) in 2003, I formed a company known as Adventa Berhad (“the Company”) as a holding company, to hold those various companies and manufacturing facilities under a single group management. Adventa Berhad was listed on the Kuala Lumpur Stock Exchange in 2004. The Company started off focusing on manufacturing and distributing surgical and medical gloves and later became a global leader in the industry. Today, Aspion Sdn Bhd, the former arm of its glove business, is the largest manufacturer of surgical gloves in the world. (c) to further strengthen its national and international distribution network and capabilities, in 2007 the Company invested in Sun Healthcare (M) Sdn Bhd (“Sun Healthcare”). Sun Healthcare had a long history of supplying medical and healthcare single use products and equipment (i.e. woundcare, needles, syringes to name a few) to hospitals, and managed to significantly expand on its product portfolio and its international businesses 74 after the acquisition by the Company. Sun Healthcare is now the national and international distribution arm of the Company, with presence in all regions of Malaysia focusing on Principal Management, Medical Pharmaceutical distribution and Supply Chain Solutions. (d) in 2012, Adventa Berhad decided to divest its glove business and it ventured into health care businesses by acquiring Electron Beam Sdn Bhd (“Electron Beam”) and by starting Lucenxia (M) Sdn Bhd (“Lucenxia”). Electron Beam is in the business of providing specialized large scale electron beam radiation sterilization for medical devices and other services. Lucenxia on the other hand is a company that offers home kidney dialysis treatments, which are approved by the Ministry of Health Malaysia. (e) Sun Healthcare, Electron Beam and Lucenxia are wholly owned subsidiaries of the Company and are collectively part of the Adventa Group. 75 (f) it is fair to say that I am of the driving force behind the Adventa Group. As the Managing Director and largest shareholder of the Company, I remain responsible for leading the Adventa Group and in the areas of strategic planning, business development, investment and acquisitions. I also remain actively involved in product development, particularly in technological directions. In 2017, the Adventa Group posted an annual revenue in excess of RM44 million. I am committed to see to the continued growth and success of Adventa Berhad. (g) being a director of a public listed company, I am accountable to not just the relevant regulatory authorities but more importantly also to the public shareholders. To date, I have never been censured or reprimanded by any of the regulatory authorities. I am also not aware of any complaints being made against me by any of the shareholders of the Company. (h) whilst I am advised by my solicitors that it is for the Plaintiffs to demonstrate with solid evidence that there is a risk that I would 76 dissipate my assets to defeat a judgment that may be granted by the court, I verily believe that I have not conducted myself in any way nor have I given any reason for such inference to be drawn against me. 92. The majority shareholder of Adventa Capital is a company known as Safe Hands Investments Pte Ltd which is in turn owned by Safety First Investments Pte Ltd (“Safety First”), Axiom Asia Private Capital Associates Ltd (“Axiom”) and Co-Invest Master Fund 2B Limited (“Co-Invest Master Fund”). Axiom and Co-Invest Master Fund are companies incorporated in Cayman Islands whilst Safety First is wholly owned by Southern Capital Master Fund, a company incorporated in Cayman Islands. 93. In JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd [2018] SDCA 27 the Singapore Court of Appeal said that if the defendant is a local company but is controlled by an offshore company which has the “ability to create complex mechanisms which are not transparent”, the inference that there is a real risk that a judgment or award may go unsatisfied may be more readily drawn. 77 94. However, it should be noted that that is only one of the many factors which are relevant. In JTrust Asia, the court had already found that Mr Konoshita has demonstrated dishonest conduct which suggests a real risk that he will dissipate his assets to frustrate any judgment which may eventually be obtained against him and the issue of his domicile is only yet another factor against him. In the present case, there are insufficient facts to demonstrate a real risk of dissipation against the Defendants and the fact that the indirect shareholders of Adventa Capital are incorporated in the Cayman Islands is not sufficient to show a real risk of dissipation. 95. Based on the principles set out in Bouvier and the other cases I have referred to, I would find that the Plaintiff has not shown a real risk that Low, Wong, ACPL and/or Adventa Capital are persons who would dissipate their assets in order to frustrate any judgment that may be obtained against them. In other words, I am not satisfied that the Defendants are persons who would “bury their spoils”. 96. Since I have found that the Plaintiffs have not shown a good arguable case for the claim of RM640.47 million either for fraudulent 78 misrepresentation or in the tort of conspiracy to defraud, and, even if I am wrong on that, since I have found that the Plaintiffs have not shown a real risk that the Defendants are likely to dissipate their assets to frustrate any judgment against them, I dismiss the Plaintiffs’ applications with costs of RM15,000.00 each to Low and Wong. Adventa Capital and ACPL will be awarded only one set of costs of RM15,000.00 as they are represented by the same firm of solicitors. All costs are subject to allocator. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Commercial Division Dated: 1st August, 2018 79 Solicitors for the Plaintiff Datuk Seri Gopal Sri Ram, Azhar Azizan & CK Yeoh Messrs Ranjit Singh & Yeoh Advocates & Solicitors D3-U5-12 Solaris Dutamas No. 1 Jalan Dutamas 1 50480 Kuala Lumpur Tel : 03-6205 4128 Fax: 03-6205 4109 Solicitors for the 1st Defendant Messrs Feroz & Co Advocates & Solicitors No. 15, Persiaran Damansara Endah Bukit Damansara 50490 Kuala Lumpur Tel : 03-2095 4115 Fax: 03-2095 6115 80 Solicitors for the 3rd Defendant Chong Boon Leong, Yap Yeow Han & Lilian Saw Messrs Rahmat Lim & Partners Advocates & Solicitors Suite 33.01, Level 33, The Gardens North Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Tel : 03-2299 3888 Fax: 03-2287 1278