Vigna Raj A/L Sithamparanathan v Metro Eldercare Sdn Bhd (BA-22NCvC-469-11/2023)

Dan Metro Eldercare Sdn. Bhd.

Ramesh Sivaraj a/l Rajasingam Chelliah …Defendan-Defendan GROUNDS OF JUDGMENT Introduction [1] The 1st Defendant and 2nd Defendant filed applications to strike out Plaintiff's Statement of Claim (SOC) pursuant to Order 18 Rule 19 of the Rules of Court 2012 (the ROC) as in enclosures 11 and 14. [2] Subsequent to both the applications above, Plaintiff then filed an application to amend the SOC via enclosure 19. 20/02/2025 16:09:29 BA-22NCvC-469-11/2023 Kand. 56 [3] All applications are heard together, and after hearing all parties, I allowed both the Defendant's application with cost and the Plaintiff's case to be struck out. [4] Following the above decision, Plaintiff's application to amend is dismissed with no order as to cost. [5] The Plaintiff has now appealed to the Court of Appeal, and my reasons are below. Brief Background [6] The 1st Defendant, Metro Elder Care Sdn. Bhd. (MEC) is a company incorporated on 9.8.2018, and its principal business is to provide homes for the elderly and disabled, as well as nursing care and physiotherapy. [7] Plaintiff owns 10,000 shares in the 1st Defendant since his appointment and was the company's sole managing director until his resignation on 31.7.2019. [8] 2nd Defendant and his wife, Ushadewi a/p Velayutham (Ushadevi), are the other shareholders of MEC, and they own 300,000 and 150,000 shares, respectively. [9] MEC increased its share capital and, on 10.10.2019 offered shares to its shareholders. At the material time, Plaintiff did not subscribe to any additional shares offered. [10] On 1.6.2020, Plaintiff filed an Originating Summons at the Shah Alam High Court via BA-24NCVC-448-06/2020 (OS 448) seeking leave to initiate a derivative action against Defendants. [11] Ushadevi applied and got an order to intervene in OS 448 on 22.6.2021. [12] After hearing all parties, the learned Judge refused the Plaintiff's application for leave to initiate derivative action and OS 448 was dismissed on 30.11.2021. [13] The Plaintiff appealed to the Court of Appeal. [14] On 13.10.2023, the Court of Appeal allowed the appeal, reversed the High Court decision and granted leave to the Plaintiff to initiate the derivative action against the 2nd Defendant. [15] Pursuant to that, Plaintiff now filed this alleged derivative action (Suit 469) under his own name as Plaintiff and named MEC as the 1st Defendant, being nominal Defendant, in order to be bound by any orders made by the Court. [16] This Suit 469 was filed on 10.11.2023, and both Defendants on 29.11.2023 entered their appearance. [17] On 15.1.2024 and 24.1.2024, 1st and 2nd Defendants filed their respective applications to strike out Plaintiff's Writ and Statement of Claim pursuant to Order 18 rule 19 (enclosures 11 and 14) on the basis, primarily that the action was brought under the Plaintiff's own name and not in the name of the 1st Defendant as required under section 347(1) and (2) of the Companies Act 2016 (the CA). [18] Realizing this mistake, Plaintiff then filed an application to amend the SOC via enclosure 19. Order 18 Rule 19 and Order 20 Rule 5 of the ROC [19] There is no necessity to reiterate or reprise the trite principle of law on striking out of an action under O18 R19 as it was well established by clear decisions of the Supreme Court in Bandar Builders Sdn Bhd v United Malayan Banking Corporation Bhd (1993) 4 CLJ 7 on the test for striking out applications. As a reminder, the tests are as follows: "(a) it is only in plain and obvious cases that recourse should be had to the summary process under the rule;

this summary procedure can only be adopted when it can be clearly seen that a claim or answer is, on the face of it obviously unsustainable;

it cannot be exercised by a minute examination of the documents and facts of the case in order to see whether the party has a cause of action or a defence;

if there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under Order 33 r. 3 of the ROC; and

the Court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable." (see the Federal Court case of Tan Wei Hong (A Minor Suing Through Guardian Ad Litem And Next Friend Chuang Yin E) & Ors v. Malaysia Airlines Bhd And Other Appeals [2018] 9 CLJ 425). [20] It is also to be noted when a striking out order is not suitable, as pointed out by the Court of Appeal, in Sivarasa Rasiah & Ors v. Che Hamzah Che Ismail & Ors [2012] 1 CLJ 75, in the following passage: "A striking out order should not be made summarily by the Court if there is issue of law that requires lengthy argument and mature consideration. It should also not be made if there is issue of fact that is capable of resolution only after taking viva voce evidence during trial (see: Lai Yoke Ngan & Anor v. Chin Teck Kwee & Anor [1997] 3 CLJ 305; [1997] 2 MLJ 565 (FC))." [21] Under Order 20 r 5 of the ROC, the Court may, at any stage of the proceedings, allow parties to amend their pleading on such terms as to costs or otherwise as may be just and in such a manner, if any, as it may direct. [22] The Federal Court in Yamaha Motors Co. Ltd. v. Yamaha (M) Sdn. Bhd. & Ors [1983] CLJ Rep 428 outlined the following core considerations for an application to amend: "Three basic questions should be considered to determine whether injustice would or would not result,

whether the application is bona fide;

whether the prejudice caused to the other side can be compensated by costs and

whether the amendments would not in effect turn the suit from one character into a suit of another and inconsistent character. [See Mallal's Supreme Court Practice page 342]. If the answers are in the affirmative, an application for amendment should be allowed at any stage of the proceedings particularly before trial, even if the effect of the amendment would be to add or substitute a new cause of action, provided the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the original statement of claim." [23] With the introduction of the pre-trial case management in the year 2000 under Order 34 of the Rules, the following question of law was deliberated by the Federal in Hong Leong Finance Bhd v. Low Thiam Hoe and Another Appeal [2015] 8 CLJ 1:

Whether the principles in Yamaha Motor Co Ltd v. Yamaha Malaysia Sdn Bhd & Ors (supra) are the sole consideration in deciding an application made on the eve of the trial, to amend pleadings to introduce a new case.

If the answer to Question 1(a) is in the negative, what are the principles a court should properly apply, in deciding such an application in lieu of the Yamaha Motor principles? Emphasis added [24] In the case of Hong Leong Finance, based on Yamaha Motor's test, the High Court's decision to dismiss Defendant's amendment was reversed by the Court of Appeal. The Federal Court overturned the Court of Appeal's decision and affirmed the High Court's dismissal of the amendment application. In answering the question of law (Question 1(a)&(b)), the Federal Court in Hong Leong Finance ruled as follows: "[33] Having considered the facts and the circumstances of the present case, our views are as follows:

when dealing with an application to amend the pleadings, which introduce a new case in the claim or Defence, on the eve of the trial, the principles in Yamaha Motor are not the sole considerations;

the principles in Yamaha Motor applies to cases where the application to amend the pleadings is made at an early stage of the proceedings;

that there has to be a cogent and reasonable explanation in the applicant's affidavit as to why the application was filed late;

that the application to amend the pleadings is not a tactical manoeuvre;

that the proposed amendment must disclose full particulars for the Court to ascertain if there is a real prospect of success in proving the same; and

that lateness in the application to amend the pleadings cannot necessarily be compensated by payment of costs. Analysis and Findings [25] The Plaintiff states that though admitted that there was a mistake in naming the parties, this Court has the power to rectify it and therefore seeks amendments to allow the names of the parties to be changed

Plaintiff's action was against s.347(1) and (2) of the CA and should be struck out in limine as being defective. It was not on behalf of the company and not brought in the company's name.

The nature of the Plaintiff's claim is for personal interest and not for the company's benefit; therefore, it is not in good faith and in the company's interest as required under s.347 and s.348 of the CA.

The claim was for outstanding monies due to Plaintiff personally and a purported loan by Plaintiff's father to the 2nd Defendant and not furthering any interest of the 1st Defendant as required in a derivative action.

Plaintiff's action contravenes s.348 of the CA as the Court of Appeal granted leave for him to initiate the proceeding in Court within thirty days from the grant of leave.

On the facts alleged in the SOC, the Defendants submitted that the Plaintiff was the wrongdoer.

The filing of this claim is a collateral purpose to further the Plaintiff's personal vendetta against the 2nd Defendant.

Plaintiff failed to exhaust the internal mechanism process in the company prior to coming to Court.

Plaintiff's action was wrongly filed, therefore, cannot be amended as the proposed amendment would be prejudicial to the Defendants. [32] A derivative action, from the provisions of s. 347, the Plaintiff may, with leave of the Court, commence proceedings in the company's name against the other shareholders for any issues arising or alleged wrongdoing. However, there is a fixed time frame within which the action must be brought once permission has been granted, i.e. the action must be brought within thirty days (see s. 348(3) of CA). [33] The above provisions are mandatory requirements. The Plaintiff filed this action wrongly named himself, claiming against the company. Mistakenly or otherwise, this surely prejudiced the Defendants in their defence against the allegations. [34] To allow the amendment would be tantamount to this Court prejudicially rectifying the legal position available to Defendants, which would be a complete defence of non-compliance to the Court of Appeal condition in allowing the leave to initiate the derivative action. [35] It is not a simple position of a party to suggest a change of name to the pleading if it affects the character of the suit from a personal action to a derivative action, which indicates an action on behalf of a company regulated specifically by the provision of an Act. More so, the initiation was restricted by a time frame in which Plaintiff herein exceeded the period allowed and, therefore, is no longer entitled to proceed. [36] Be that as it may, I am convinced that due to solely on the issue above, I need not go any further to the inadept factual background of the matter as this claim was not correctly brought as a derivative action and, hence, as it stands, constitute an abuse of court process. [37] However, for completeness, upon perusing the affidavit filed, I agree with Defendants that Plaintiff, Vigna Raj a/l Sithamparanathan, was clearly pursuing his own personal interest claiming monies overdue to him personally and to recover loans by his father to the 2nd Defendant. However, I will not comment on this fact further as the same would have been brought before the Court of Appeal at the leave stage, and as leave was granted then, perhaps there were arguable issues that should be litigated through a proper procedure. [38] My concern was only on the fact that this action was based on a wrong footing, procedurally and clearly in contravention of the mandatory provisions of the Act. I also agree with Defendant's contention that the proposed amendments initiated are not merely accidental mistakes or technical errors but a change in capacity of a party or "vertical amendments to substitute a party's capacity", which is not allowed by law. [39] It was also brought to my attention by the Defendants in their submission that there is an ongoing matter before the Shah Alam Session Court, which is now pending appeal between the Plaintiff and the 2nd Defendant regarding the alleged loan referred to. As a similar transaction was being litigated at a different Court, Plaintiff is estopped from raising the same or pursuing similar relief here. This, too, amounts to an abuse of court process. Conclusion [40] As plain as it should be in any striking-out application, if the Plaintiff's claim were wrongly initiated, contrary to a mandatory provision of the Act (the CA), and based on the reasoned mention above, I find that this claim is a clear abuse of court process and suitable to be struck out summarily under O18 R19 of the ROC. [41] Therefore, enclosures 11 and 14 are allowed with cost of RM5000 each (subject to the allocator) and enclosure 19 is dismissed with no order as to cost. Dated this: 18th February 2025 ~signed~ (NOOR HAYATI BINTI HAJI MAT) Judge Shah Alam High Court NCVC 9 Counsels: For the Plaintiffs: David Timothy Kanagaratnam Messrs Jayadeep Hari & Jamil For the First Defendant: Maurice Ernest Scully M Scully For the Second Defedant Ng Sai Yeang together with Tan Shey Min Messrs Raja, Darryl & Loh