Tuan Mat Bin Tuan Ismail v Tan Ah Hin & 4 Others (BA-24NCC-22-02/2021)

TAN AH HIN

TE SOH PENG

TAN YI MUN

KHO AH TEE

SKKPJ (TM) SDN BHD (NO. SYARIKAT : 199801011325 (467453-H) …DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT Factual background

The facts preceding the instant dispute, in so far as they are not contested, are as follows.

On 15.8.1998, a company known as SKKPJ (TM) Sdn Bhd, the 5th Defendant (“D5”) in this action, was incorporated. The Plaintiff together with his son, one Tuan Zainal Abidin bin Tuan Mat were 3 the promoters, founders, directors and shareholders of D5. On incorporation, D5 had a paid-up capital of RM 2.00. The share capital was subsequently increased to RM 5 million on 14.5.2001, with the Plaintiff holding 4.995 million shares and his son, 5,000 shares of RM 1 per share.

In October 2001, the Trengganu State Government (“State Government”) awarded a timber concession in Empangan Kedua, Hutan Simpan Tembat and Petuan, District of Hulu Trengganu of about 41,000 acres to D5.

A sum of RM 5.3 million was required to be paid as premium for the timber concession. The 1st Defendant (“D1”) agreed to pay the premium in consideration of which his nominee was to be alloted 5 million shares in D5. On 31.10.2001, the paid-up capital of D5 was increased to RM 10 million to cater for this agreement.

On 15.1.2002, an agreement titled “Perjanjian Mengambil Hasil Hutan” was executed between D5 and the State Government giving effect to the award of the timber concession.

6.

On 15.8.2002, the State Government terminated the timber concession, which led to Trengganu High Court Civil Suit No:.22- 4 06-2003 (“Trengganu Suit”) being filed against the State Government by D5.

The Plaintiff then entered into an agreement titled Settlement Agreement (“S/A”) on 22.2.2010 with D1 and the 2nd Defendant (“D2”). Prior to the date of the S/A, the Plaintiff did not own any shares in D5. As a result of the share restructuring commenced in 2002, the Plaintiff’s shares had been divested, and the shares were held by the other Defendants instead. This position was changed under the terms of the S/A.

The S/A contained inter alia, the following salient terms:

that the Plaintiff shall be appointed to negotiate and propose a settlement plan for D5 with the State Government in respect of the Trengganu Suit;

in consideration, D1 and D2 shall transfer 4.9 million shares in D5 to the Plaintiff;

the purpose of the transfer of the 4.9 million shares to the Plaintiff was to secure the Final Settlement Account with the State Government either by way of entering a consent judgment or by way of a final judgment obtained from the court;

the Plaintiff shall re transfer the 4.9 million shares to D1 and D2 only after a consent judgment was entered into or after a final judgment had been obtained from the court; 5

the Plaintiff shall be entitled to receive an amount equivalent to 50% of the Final Settlement Amount subject to deductions as stipulated; and

the Final Settlement Amount shall be paid directly to D5.

In performance of the terms of the S/A, 4.9 million shares were transferred to the Plaintiff sometime in September 2011.

The Trengganu Suit was not settled, but was determined after a full trial on 2.12.2011. The State Government was found liable to D5. The High Court also directed for damages to be assessed by the Senior Assistant Registrar, and paid to D5. Following the decision of the Trengganu Suit, the shares of the Plaintiff in D5 were re-transferred to the Defendants.

In August 2014, D1 as the director of D5, issued two letters of undertaking (“L/U”) to the Plaintiff stating inter alia, that Messrs Thayalan & Associates had been appointed by D5 to act in respect of the assessment of damages and that the same firm is authorised to disburse the monies received in equal proportion to D1 and the Plaintiff. These L/U are now heavily relied on in support of the Plaintiff’s claim. I shall return to the matter of the L/U later.

In 2015, the Plaintiff filed an action in the Shah Alam High Court vide Civil Suit No:. BA-22NCVC-262-05/2015 (“the Shah Alam Suit”) seeking for inter alia, a declaration that the S/A entered into was valid and binding on D1 and D2. The Plaintiff also challenged 6 his removal as director of D5 and also the re-transfer of the 4.9 million shares from his name to the other defendants in the suit.

At the conclusion of the trial in 2017, the Shah Alam High Court dismissed the claim on the ground that the Plaintiff had himself breached the terms of the S/A by failing to fulfil his obligations under the agreement. The High Court also held that the Defendants had rightly terminated the S/A following the Plaintiff’s own breach. On appeal to the Court of Appeal, the decision of the Shah Alam High Court was affirmed. Leave to appeal to the Federal Court was refused.

On 15.12.2019, the Registrar of the High Court of Trengganu assessed damages of RM 12,017,108.78 to be paid by the State Government in the Trengganu Suit to the 5th Defendant. At the date of the instant proceedings, the appeal against the award of damages is still pending in the Court of Appeal. The reliefs sought in the Originating Summons

The Original Summons filed by the Plaintiff in this action seeks the following principal reliefs:-

a declaration that the Plaintiff is entitled to 50% of the judgment sum in the Trengganu Suit, payable by the State Government to D5; 7

an order that the Defendants be prohibited from dissipating the award of damages in the Trengganu Suit which will prejudice the Plaintiff’s rights to the monies;

the Defendants be directed to disclose to the Plaintiff the status of the appeal in the Trengganu Suit and to forward a copy of the appeal records including the submissions of parties;

the Defendants be directed to instruct the State Government to pay the Plaintiff 50% of the judgment sum in the Trengganu Suit, which monies are to be paid to Tetuan Palani Aishah & Co, to be held on behalf of the Plaintiff; and

an order that in the event more than 50% of the judgment sum has been paid to the Defendants, such sums are to be refunded. Plaintiff’s contention

The Plaintiff’s case for the above declarations is essentially to secure his interest in the final judgment sum awarded in the Trengganu Suit. He claims that during the restructuring of D5, there was in existence a scheme of arrangement between D1 and him where parties had agreed that his rights and interest in the timber concession agreement would be retained, notwithstanding the fact that his shares had been transferred to the nominees of D1. (See: paragraph 9 of his Affidavit in Support). These rights were also subsequently provided for in the S/A entered into between D1, D2 and him on 22.2.2010. 8

The Plaintiff also contends that both the L/U constitute an independent contract and is hence binding on the parties. Both these letters confirm and acknowledge the Plaintiff’s entitlement to 50% of the judgment sum.

In addition, the existence of the scheme of arrangement was expressly recognised by the Court of Appeal in its judgment, the relevant portion of which is reproduced below: “46. In any event, there is nothing to stop the appellant from claiming his 50% share of the Final Settlement Amount from the fourth respondent after damages had been assessed, subject to deductions due from him. That after all, was the scheme of arrangement between the parties.”

Premised on the judgment of the Court of Appeal, the Plaintiff contends his interest has been endorsed by what he claims is a judicial admission of the Court of Appeal.

In the light of the above evidence adduced, the Plaintiff alleges that his right to 50% of the judgment sum has been clearly spelt out in the Letters of Undertaking and acknowledged by the judgment of the Court of Appeal. He is thus entitled to the reliefs prayed for. Defendants’ contention

The Plaintiff’s claim is strenuously denied by the Defendants. Their reasons for disputing are summarised as follows. Firstly, the mode of commencement of the current proceedings is unsuitable to 9 resolve the competing issues as there are disputed facts. Secondly, the Plaintiff’s claim is barred by the application of the res judicata principle. His rights and entitlement to judgment sum if at all, can only arise from the S/A which the Shah Alam Suit has decided to be no longer valid and binding between the parties. Further, he ought to have intervened in the Trengganu Suit instead to claim his interest in the judgment sum. Lastly, both the L/U and the judgment of the Court of Appeal cannot give rise to any rights as claimed by the Plaintiff. The portion of the judgment relied on is not an acknowledgement of the Plaintiff’s rights to 50% of the judgment sum and ought not to be read in isolation. Analysis and finding of this court

At the outset, after perusing the affidavits filed by parties, I asked the Plaintiff’s counsel if his case ought to have commenced by filing an Originating Summons, in view of numerous contested facts. Amongst others is the alleged existence of the scheme of arrangement between parties and relied on by the Plaintiff to claim his entitlement to 50% of the judgment sum. This scheme of arrangement is crucial to the Plaintiff’s claim. Although the Plaintiff no longer own any share in D5, the Plaintiff contends that his interest in the judgment sum remains independent of the share ownership in D5.

Counsel for the Plaintiff responded that the facts are not in dispute as the Plaintiff is relying on the Agreed Facts reproduced in the judgment of the Court of Appeal in the Shah Alam Suit and this case would only turn on a construction of a few documents. In view 10 of the Plaintiff’s stand, I allowed the matter to proceed on the merits.

The principal prayer of the Plaintiff in this Originating Summons is the declaration that he is entitled to 50% of the judgment sum. The other reliefs are consequential, and only if he succeeds in this declaration.

The jurisdiction of the court to grant declarations is found in section 41 of the Specific Relief Act 1950 [Act 137]. However, as the relief is a discretionary remedy, the court must be satisfied that the relief ought to be granted in favour of the Plaintiff. (See: Salijah bte Ab Lateh v Mohd Irwan bin Abdullah [1996] 2 SLR 201, AmGeneral Insurance Bhd v Iskandar bin Mohd Nuli [2016] 1 MLJ 818). Basis of the Plaintiff’s claim

The basis of the Plaintiff’s claim to 50% of the judgment sum is stated in paragraphs 9, 10 and 11 of the Affidavit in Support affirmed on 8.2.2021, which states,

Atas cadangan Defendan Pertama tersebut, satu skim pengaturan (“scheme of arrangement”) pegangan saham di Defendan Kelima telah dicadangkan oleh Defendan Pertama di mana melalui penstrukturan semula syarikat Defendan Kelima saham milikan saya telah dipindah kepada penama-penama (“nominees”) Defendan Pertama dan sebagai balasan untuk saya memindahkan saham milikan saya tersebut, saya akan memiliki 50% hak kepentingan dalam 11 Perjanjian tersebut pada setiap masa material. (Selepas ini dirujuk sebagai “Hak saya tersebut”).

Saya sesungguhnya percaya dan menyatakan bahawa pada setiap masa yang material, saya sentiasa mempunyai Hak saya tersebut.

Saya sesungguhnya percaya dan menyatakan bahawa atas persefahaman tersebut, Hak saya sentiasa dimiliki saya dan justeru itu pihak Defendan Pertama dan Kedua telah juga termaktubkan persefahaman tersebut di satu Perjanjian Penyelesaian 22.2.2010.

As suggested by the above averments, the Plaintiff asserts there was a scheme of arrangement agreed to between D1 and the Plaintiff to allow the latter a 50% interest in the concession agreement. As the Plaintiff is now claiming for 50% of the judgment sum, I therefore surmise that he equates his 50% interest in the concession agreement to 50% entitlement to the judgment sum.

This contention is, to say the least, preposterous. Firstly, there is no document evidencing this alleged scheme of arrangement and his alleged 50% interest in the concession agreement. Secondly, I fail to see how an alleged 50% interest in the concession agreement translates to a 50% interest in the judgment sum.

In paragraph 11 above, the Plaintiff contends that this alleged scheme of arrangement was also provided and acknowledged in the “Perjanjian Penyelesaian 22.2.2020”. The Plaintiff was 12 however quick to disavow any reliance on the S/A as the basis of his claim in these proceedings. His reasons are obvious, as hereinafter mentioned.

Clause 4 of the S/A provided that the Plaintiff was to be entitled to a sum equivalent to 50% of the Final Settlement Amount in consideration of the Plaintiff being appointed to liaise, negotiate and to propose a settlement plan for D5 with the State Government in respect of the Trengganu suit.

However, the enforceability of the S/A has now been determined in the Shah Alam Suit. The relevant portion of the High Court judgment reads, [12] Secondly, PW1 had clearly failed to perform his obligations under clause 2 of the S/A and was, thus, in breach of the trust set out in this clause. PW1 had not in any way participated in securing settlement of the Trengganu case whether through final judgment and/or out of Court settlement. PW1’s assertion that he had taken various steps in this regard was shown to be nothing but a bare assertion not supported by any evidence and plainly untrue based on the events that transpired. …… [21] For the foregoing reasons, I concluded that the Plaintiff himself was in breach of contract when he failed to discharge his obligations under the S/A and failed to comply with the fundamental terms as per the Clauses adverted to above of which he was patently and indisputably in breach. On account of this, I upheld the defence contention that D1 and D2 had the right to terminate the S/A for failure of consideration and redeem the 4.9 million shares transferred to him. 13

As matters stand, the rights of the Plaintiff under the S/A have now been conclusively determined in the Shah Alam Suit. The Plaintiff failed to have it declared still valid and binding. The High Court held that the Plaintiff had breached the terms of the S/A by not fulfilling his obligations therein and the Defendants had validly terminated it.

Consequent upon such termination, the Plaintiff no longer had any rights to the Final Settlement Amount as provided for in the S/A, which would include the rights to the judgment sum. The decision of the High Court has been affirmed by the Court of Appeal. The Plaintiff’s attempt to appeal further to the Federal Court failed when he could not obtain leave to appeal.

The Plaintiff however contends that his claim is not dependent on the S/A, but the L/U. He claims that these letters of undertaking clearly establish his contractual right to half of the judgment sum. As the contents are material, I propose to set out the L/U in full. The first was dated 5.8.2014, and the second, 26.8.2014. As the latter is a slightly longer version of the earlier, it is hereby reproduced as follows:- Tan Ah Hin NRIC No: 570328-10-6189 No. 15, Jalan Anggerik Oncidium 31/78, Kota Kemuning, Seksyen 31, 40460 Shah Alam, Selangor Darul Ehsan 14 Date: 26 August 2014 Tuan Mat Bin Tuan Ismail (NRIC No.441121-03-5183) No. 16, Green Street Home S2/1A, Seremban 2, 70000 Seremban Negeri Sembilan Darul Khusus Tuan, Re: Letter of Confirmation and Undertaking in Respect Of Application For Assessment of Damages Pursuant To Judgment & Order In Kuala Trengganu High Court Civil Suit No:. 22-6-2003 With reference to the above I hereby confirm and undertake as follows:-

I agree for SKKPJ (TM) Sdn Bhd (“the Company”) to appoint and authorize Messrs Thayalan & Associates of No. 24 (First Floor), Penang Street, 10200 Penang to act as solicitors for the Company in the application by the Company for assessment of damages pursuant to the judgment and order made by Kuala Trengganu High Court on 2/12/2011 in Civil Suit No:.22-6-2003.

(ii) That Messrs Thayalan & Associates be authorized to receive and hold the judgment sum pursuant to the assessment of damages in the Court or the out of court settlement sum agreed upon by the parties.

(iii) That Messrs Thayalan & Associates be authorised to disburse the monies received in equal proportion (50:50 basis) to Tan Ah Hin and Tuan Mat Bin Tuan Ismail. 15

(iv) Tuan Mat Bin Tuan Ismail’s 50% shall include all professional fee, including but not limited to lawyers, valuer, forester and etc and political fund, if any.

Further that Messrs Thayalan & Associates shall disburse from Tuan Mat Bin Tuan Ismail’s entitlement less all deductions as instructed by Tuan Mat Bin Tuan Ismail. Yours faithfully, Sgd …….

The Plaintiff is obviously relying on paragraphs (iii), (iv) and (v) of the L/U to assert that a contractual right to the judgment sum has been created. Contrary to the contention of the Plaintiff, I fail to see how the contents of both L/U in themselves can create an independent contract upon which the Plaintiff can enforce. On the other hand, the L/U must be construed in the light of the preceding events.

Both the L/U were issued in 2014, after the S/A was entered into in

The S/A was entered into after the Trengganu suit was filed, but before the issue of liability in the Trengganu Suit was determined. The S/A was to provide for the Plaintiff’s obligations to negotiate a settlement in D5’s favour. Upon the Plaintiff fulfilling his obligations, the Plaintiff would have been entitled to 50% of the Final Settlement Amount, which inter alia, comprise the judgment sum. The issue of liability in the Trengganu Suit was decided in

However, damages had still to be assessed. The L/U was 16 issued after the determination of liability but before the assessment of damages.

To my mind, the L/U was merely to confirm the appointment of Messrs Thayalan & Associates who was also authorised to hold the judgment sum when paid, and to disburse the judgment sum in equal proportion to D1 and the Plaintiff as agreed in the S/A. The contents of the L/U are in fact consistent with Clause 4 of the S/A spelling out the Plaintiff’s entitlement to an amount equal to 50% from the Final Settlement Amount. They supplement Clause 4 by providing for the mechanism to pay the Final Settlement Amount. However, as borne out by subsequent events, the S/A was held by the Shah Alam High Court to be unenforceable on account of the Plaintiff’s breach.

To contend that the L/U constituted an independent contract is wholly misconceived and devoid of merit. It would be stretching the meaning of the L/U to find that by themselves, contractual rights were created for the Plaintiff. These documents are not stand-alone documents. They ought to be read together with the S/A which is the crucial document upon which the Plaintiff could claim his rights to the judgment sum against the Defendants.

As the validity of the S/A has now been finally determined, the L/U which was to put in place post judgment actions, is of no effect and unenforceable. 17 Res judicata

In view of the Shah Alam Suit, the Defendants have also raised the application of the principle of res judicata, a contention which to my mind has merits. The Plaintiff’s rights to the judgment sum can only arise from the S/A which has now been held to be validly terminated. By filing the present suit, the Plaintiff is attempting to re-litigate his rights under the S/A.

Although the Shah Alam Suit was to declare the S/A binding for the purpose of procuring an order for the return of his shares and to restore his position as a director in D5, these are rights which arose from the S/A, similar to his alleged entitlement to the judgment sum. It could have been raised there but was not. The Plaintiff cannot be allowed to bring his suit in a piece meal fashion or in instalments.

The judgment of the Federal Court in Orchard Circle Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat & Ors [2021] 1 CLJ 1 is particularly instructive on the application of the res judicata principle. The Federal Court held, [80] The thrust of the doctrine is to prevent a party from re-litigating an issue or a defence which has already been determined (known as cause of action estoppel or issue estoppel) or which could have previously been litigated. The latter principle had been established in the case of Henderson v Henderson (1843) 3 Hare 100) and ensured, as a matter of important public policy, the finality of judgments so as to prevent a party from being vexed twice and a waste of judicial resources. As it is not always easy to identify where one concept begins and another ends, Lord Sumption (in delivering the unanimous judgment of the Supreme 18 Court) in the Virgin Atlantic case gave some clarification to the term with identifying the six principles which make up the doctrine, which are:

a party is prevented from bringing subsequent proceedings to challenge an outcome that has already been decided (cause of action estoppel);

if a claimant succeeds in the first action and does not appeal the outcome, he may not bring a subsequent action on the same cause of action (ie to recover further damages);

the doctrine of merger treats a cause of action as having been extinguished once judgment has been provided and accordingly the claimant’s only right is the judgment itself;

a party may not bring subsequent proceedings on an issue that has already been determined (issue estoppel);

(e)

(e)a party may not bring subsequent proceedings which should and could have been dealt with in earlier proceedings (the ‘Henderson v Henderson principle’); and

there is a general procedural rule against abusive proceedings.

The Plaintiff however argues that his right to the judgment sum is not premised on the S/A; but is instead independent of it. It is based on the L/U. This stance is obviously to overcome any res judicata point raised by the Defendants. In any event, having considered the contents of the L/U (which has been dealt with in the preceding paragraphs), I fail to see any validity in his assertion. 19

Apart from the L/U, the Plaintiff also relies on the judgment of the Court of Appeal, as set out above. The portion of the judgment cannot be read in isolation. It ought to be viewed in its proper context. The statement made by the Court of Appeal was not the ratio of the case as the Court of Appeal was not called upon to decide the Plaintiff’s claim for his 50% share of the Final Settlement Amount or any alleged scheme of arrangement between the parties recognising the Plaintiff’s right in this respect. The issue for the determination of the court pertained to the breach of the S/A.

For the Plaintiff to take this portion of the judgment in isolation particularly the comment “That, after all, was the scheme of arrangement between the parties” and to use it to found its claim here, is absurd. At best it was only a comment in passing by the Court of Appeal. It was not a finding as it was not warranted by the issues for its determination.

Having considered all the evidence adduced, I do not find the Plaintiff’s case to be based on any convincing evidence to support the existence of his rights to the judgment sum, independent of the S/A. The validity of the S/A having been determined, ipso facto the Plaintiff’s rights to the judgment sum ceases.

For the sake of completeness, I would also deal with the other prayers sought. The Plaintiff seeks to be given information pertaining to the status of the Trengganu Suit now pending appeal in the Court of Appeal, against the assessment of damages. He 20 also seeks to be furnished the appeal record and submissions filed for purposes of the appeal.

To my mind, it would be more appropriate for the Plaintiff to have intervened in the Trengganu Suit which decided on the judgment sum he is staking a claim on. After all, the rights he seeks to enforce all arose from the facts giving rise to the Trengganu Suit. Instead, he chose to file the instant suit in the Shah Alam Court, seeking for declarations which will have an effect on the judgment in the Trengganu suit. This course of action is perplexing. It would have been more expedient to have the same court deal with the prayers sought in these proceedings.

For the foregoing reasons, the Plaintiff’s claim is dismissed. I also order that costs of RM 5,000 be paid to the Defendants. Dated : 15th day of November 2021 -sgd- ……………..………. Alice Loke Yee Ching Judicial Commissioner High Court of Malaya at Shah Alam 21 Counsel for the Plaintiff : Mr. Palanivel A/LKV Sathasivam (Mr. Ooi Onn Kit with him) Messrs Palani Aishah & Co Counsel for the Defendants : Mr. M. Thayalan