WRP Asia Pacific Sdn Bhd & 1 Lg v Tael Tijari Partners Ltd & 3 Lg (WA-24NCC(ARB)-25-06/2018)

WRP Asia Pacific Sdn Bhd (Company No.: 147817-V)

Great Advance Investments Ltd (Company No.: 670759) … PLAINTIFFS 3

TAEL Tijari Partners Ltd (Company No. CT-25672)

TAEL Management Co. (Malaysian) Sdn Bhd (Company No. 790803-A)

TAEL Two Partners Ltd (Company No. CT-278987)

Healthcare Products (Labuan) Pte Ltd (Company No. LL10769) … DEFENDANTS

This is an application by the Plaintiffs for interim injunctions essentially to restrain the Defendants from proceeding with an Extraordinary General Meeting (“EGM”) of the 1st Plaintiff scheduled to be held on 18.6.2018, pending the final disposal of the Originating Summons. I declined to grant any injunction but ordered that the Defendants may only vote at the EGM in respect of 34.01% of the shares in the 1st Plaintiff registered in their names rather than all the shares registered in their names. These are the full reasons for my decision. 4

The directors of the 1st Plaintiff are Lee Son Hong (“Lee”) Madam Too Sooi Keng (“Too”) and Loong Mei Yin (“Loong”).

Sometime in or around 2013, the 1st Plaintiff was in need of funds for capital expenses. Lee was then introduced to a consortium of venture capitalists known as TAEL Management TAELCo (Cayman) Ltd (“TAEL Management (Cayman)”) which is the representative of a consortium of affiliated fund entities and investment vehicles. These fund entities and investment vehicles include the 1st and 2nd Defendants.

TAEL Management (Cayman) offered to provide a loan by injecting funds into the 1st Plaintiff by taking up an equity stake and providing funding with equity options to the 1st Plaintiff as shareholders.

Accordingly, various entities of TAEL Partners Ltd (“TAEL Partners”) invested in the 1st Plaintiff over a series of transactions taking place from October 2013 to March 2016. 5

In October 2013, the 1st Defendant TAEL Tijari Partners Ltd extended an Islamic facility with equity options to the 1st Plaintiff. The agreements for this facility include the Master Tawarruq Facility Agreement dated 11.10.2013 and the Amended and Restated Master Tawarruq Facility dated 11.10.2013.

Although the TAEL Tijari Facility carries equity options, the 1st Defendant has not exercised its equity options and none of the 1st Defendant’s present shareholding in the 1st Plaintiff was derived directly as a result of the TAEL Tijari Facility and/or the TAEL Tijari Facility agreements.

Under the terms of the Amended Tawarruq Facility Agreement, the 1st Defendant was to finance the purchase of commodity by the 1st Plaintiff. However, the Plaintiffs contend that the monies were credited straight to the 1st Plaintiff without there being any purchase of commodity by the 1st Plaintiff. At all material times, there was no commodity in existence. This is admitted by the Defendants.

On 29.10.2013, a Shareholders Agreement was entered into between TAEL Management (Cayman) and Loke Hook Beng to govern 6 the respective rights and obligations as limited partners of a limited partnership in respect of shares in the 1st Plaintiff (“the Shareholders Agreement”) in view of the impending purchase of shares in the 1st Plaintiff by the consortium that were represented by TAEL Management (Cayman).

10.

On 25.6.2014 a Deed of Novation was entered into amongst TAEL Management (Cayman), the 3rd Defendant, Loke Hook Beng and the 2nd Plaintiff. Under this, parties agreed that all rights, interest, title, liabilities and obligations of TAEL Management (Cayman) in the Shareholders Agreement be novated to the 3rd Defendant. At the same time, it was also agreed that all rights, interest, title, liabilities and obligations of Loke Hook Beng in the Shareholders Agreement be also novated to the 2nd Plaintiff. 7

By an Amended And Restated Limited Partnership Agreement dated 26.6.2014, the 3rd Defendant and the 2nd Plaintiff were then admitted as partners of TAEL Healthcare Products Funds L.P. At the same time, Loong retired from the partnership. Under the Restated Partnership Agreement, the 2nd Plaintiff contributed 108,887,542 shares which it owned in the 1st Plaintiff to the 4th Defendant. On the other hand, the 3rd Defendant contributed 105,511,542 shares which it owned in the 1st Plaintiff to the 4th Defendant. The Restated Partnership Agreement also provides for the respective partners’ indirect control over the shares in the 1st Plaintiff which are held by the 4th Defendant.

On 22.3.3016 the 2nd Plaintiff and Lee entered into an Investment Partnership Agreement with the 2nd and 3rd Defendants under which the 3rd Defendant agreed to part finance them in subscribing the shares offered by the 1st Plaintiff in a rights issue (“the Investment Partnership Agreement”). A total of 130,129,363 shares in the 1st Plaintiff owned by the 2nd Plaintiff and Lee collectively were then charged to the 2nd Defendant as the security agent.

It is the Plaintiffs’ case that they were recently advised by solicitors that the Tawarruq Facility Agreement, the Amended Tawarruq Facility 8 Agreement, the Shareholders Agreement, the Limited Partnership Agreement, the Restated Partnership Agreement and the Investment Partnership Agreement (“the said Agreements”) are sham agreements to cloak illegal money lending transactions. Amongst others, the shares in the 1st Plaintiff which were at the material time transferred to the 4th Defendant are in truth and substance security for the loan given to the 1st Plaintiff.

Accordingly, the Plaintiffs contended that the said Agreements are null and void and unenforceable in law. The 1st and 4th Defendants are therefore not entitled to exercise any rights which accrue from those shares.

On 30.4.2018, the 1st and 4th Defendants requisitioned for an EGM to propose the appointment of 2 additional directors to the board of the 1st Plaintiff.

Since the directors of the 1st Plaintiff did not convene the EGM, the 1st and 4th Defendants proceeded on 29.5.2018 to issue a notice to convene an EGM of the 1st Plaintiff on 18.6.2018 for the purpose of appointed the 2 additional directors. 9

On 12.6.2018, the Plaintiffs and Lee made a request to the Singapore International Arbitration Centre to have the legality of the said Agreements determined by an arbitrator. This request is made pursuant to the arbitration clause in the respective agreements.

On 12.6.2018, the Plaintiffs filed the Originating Summons herein pursuant to section 11 of the Arbitration Act 2005 for injunctions to restrain the Defendants from proceeding with the EGM scheduled to be held on 18.6.2018 and the Plaintiffs filed an ex parte application for the interim injunctions which was fixed for hearing on Wednesday 13.6.2018. The solicitors for the Defendants were served with a copy of the application (without exhibits) on 12.6.2018 and appeared before me on 13.6.2018. For obvious reasons they were unable to participate in the proceedings.

I held that I could not restrain the EGM on Monday at 10 am by way of an ex parte injunction and at that point, counsel for the Plaintiffs requested that the application be converted into an inter partes application. I agreed and fixed the application for hearing at 8.30 am on 18.6.2018. The Defendants filed an Affidavit in reply in the morning of 18.6.2018. Incidentally the first day of Hari Raya fell on Friday 10

15.6.2018 so the Defendants really did not have much time to prepare for the hearing.

In its Affidavit in reply, the Defendants stated that in April 2014, the 1st and 3rd Defendants acquired shares in the 1st Plaintiff from various other minority shareholders. Pursuant to these transactions, the 1st Defendant acquired 2,732,302 shares in the 1st Plaintiff while the 3rd Defendant acquired 11,1991,094 (sic) shares in the 1st Plaintiff.

These transactions have not been discussed within or included as part of the Plaintiffs’ Affidavit. The Defendants contended that clearly the Plaintiffs recognise that these other transactions are unrelated to the agreements that are claimed to be illegal.

Over the period from April to June 2014, the 3rd Defendant also acquired shares in the 1st Plaintiff from the family members of one Tan Sri Ibrahim Mohamed. The 3rd Defendant then proceeded to implement a structure with the 2nd Plaintiff under which the 3rd Defendant transferred 105,511,542 shares in the 1st Plaintiff and the 2nd Plaintiff transferred 108,887,542 shares in the 1st Plaintiff to the 4th Defendant. This transaction was discussed in the Plaintiffs’ Affidavit. 11

In December 2014, the 3rd Defendant and the 1st Defendant respectively acquired additional 876,777 and 199,142 shares in the 1st Plaintiff from a shareholder known as Leong Wai Leong. Leong Wai Leong is not named in the application of the Plaintiffs. The acquisitions were carried out at arms’ length and for valuable consideration. This transaction has not been discussed within or included as part of the Plaintiffs’ Affidavit.

The Defendants contended (and this was not disputed by the Plaintiffs who for obvious reasons were not able to file any affidavit in reply to the Defendants’ Affidavit, although this is not due to any fault of the Defendants but due to the Plaintiffs’ own fault for approaching the Court late) that even if the Plaintiffs were correct, it is only the rights in shares linked to the said Agreements which cannot be exercised. However, the 1st, 3rd and 4th Defendants all hold shares in the 1st Plaintiff which are unrelated to the said Agreements. The Plaintiffs should not be seeking to prevent the said Defendants from exercising the rights associated with such shares.

As an example, these shares include the shares acquired on arms’ length basis by the 3rd Defendant and the 1st Defendant for valuable 12 consideration from third parties who are not party to the Plaintiffs’ application. In total, the 3rd Defendant and the 1st Defendant respectively acquired 12,867,871 (approximately 2%) and 2,922,444 (approximately 0.5%) shares in the 1st Plaintiff through such transactions with third parties.

Also included are the shares in the 1st Plaintiff acquired by the 3rd Defendant from Tan Sri Ibrahim Mohamed’s family members which had also been acquired through arms’ length transactions for valuable consideration. These 105,511,542 (approximately 16.6%) shares were subsequently transferred by the 3rd Defendant to the 4th Defendant and the 4th Defendant subscribed for a further 52,755,771 (approximately 8.3%) shares pursuant to the shares received from the 3rd Defendant. The Defendants contend that there is a total of 34.01% shares in the 1st Plaintiff held by the 1st and 4th Defendants which are not affected by the legality of the said Agreements.

This is an application by the Plaintiffs for interim injunctions to restrain the Defendants from proceeding with the EGM requisitioned by the 1st and 4th Defendants as shareholders of the 1st Plaintiff, which was 13 scheduled for 18.6.2018, pending the disposal of the Originating Summons filed. As stated earlier, the Originating Summons was filed pursuant to section 11 of the Arbitration Act 2005 which provides inter alia that a party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make orders including an interim injunction or another other interim measure.

The Plaintiffs’ stand was very simple. It is simply that the issue of the legality of the said Agreements is to be determined in the arbitration proceedings and not by this Court. The injunctions must be granted to preserve status quo pending the hearing of the Originating Summons and the arbitration.

The Defendants explained the purpose of the intention to appoint additional directors to the board of the 1st Plaintiff. The directors or some of them are suspected to have committed breaches of fiduciary duties and the Defendants wished to take over control of the board in order to commence investigation into the suspected breaches of fiduciary duties. At that juncture, only 1 representative of the Defendants is on the board of the 1st Plaintiff, namely, Loong. 14

The Defendants argued that the Plaintiffs have not shown a serious issue to be tried, having only made a bare assertion that they were advised by solicitors that the said Agreements were illegal money lending transactions, not having made such an allegation prior to receipt of the requisition for EGM and despite the legal advisors of the Plaintiffs and the Defendants having given opinions as to the validity and enforceability of the said Agreements during the formation of the agreements. The Defendants also contended that they were venture capitalists who invested in the 1st Plaintiff and were not in the business of money lending.

The Defendants also contended that if the said Agreements were illegal, then the parties are in pari delicto and the loss must lie where it falls and the court will not assist the Plaintiffs (see Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur bin Hussain [2016] MLJU 1251).

The Defendants also contended that even if the said Agreements were to proceed onto a full hearing, any determination by the arbitrator as regards the impugned shares would not affect the 1st and 4th Defendants’ right to requisition the EGM. 15

Article 53 of the 1st Plaintiff’s Articles of Association allows members owning more than 10% of shares to requisition an EGM of the members. Assuming the said Agreements were in fact a sham intended to cloak illegal moneylending, the impugned shares form 17.16% of the shareholding by the 1st Defendant and the 4th Defendant. This leaves an unaffected shareholding of 34.01% on the part of the 1st and 4th Defendants. The 1st and 4th Defendants are entitled to requisition the EGM irrespective of the outcome of the arbitration.

It is submitted that the injunctions sought by the Plaintiffs would have overreached as the rights of all the members to attend and vote at the EGM would be affected although the shares affected by the said Agreements are but a portion of that.

The Defendants submitted that the Plaintiffs had failed to demonstrate that damages would not be an adequate remedy. First, it is unclear how the management and affairs of the 1st Plaintiff would be adversely affected. No particulars and/or evidence were provided by the Plaintiffs. On the contrary, the Defendants have taken steps to assist in improving the financial performance of the 1st Plaintiff. The Defendants’ initiatives include introducing a team from Ernst & Young Solutions LLP 16 to advice on cost control and improvements on financial performance. The EGM is but another initiative to appoint additional directors to improve the management of the 1st Plaintiff.

Second, the Plaintiffs’ Affidavit disclosed no particulars as to how harm would be occasioned upon the Plaintiffs beyond a bare assertion. There are insufficient particulars for the Court to consider and as such do not support the Plaintiffs’ contentions of irreparable harm.

Third, it is unclear what interest Lee has in the Originating Summons and application and if the EGM proceeds, Lee is not a party to the Plaintiffs’ application.

Fourth, it is also unclear how the EGM would render the arbitration proceedings nugatory. The EGM has no bearing on the outcome of the arbitration proceedings, and the issues arising in the arbitration proceedings would be adjudicated independently of how the EGM proceeds.

Fifth, even assuming there may be losses they are purely monetary in nature and could be recovered through an appropriate award for monetary damages. As such no injunctive relief should be 17 granted. (see CCA Holdings Ltd v Palm Resort Bhd [1998] 4 MLJ 143 at page 150; American Cynamid v Ethicon Ltd [1975] AC 396 at page 510; Superintendent of Lands and Surveys v Kuching Waterfront Development [2009] 5 MLJ 607 at pages 621-622.)

The Defendants also submit that the balance of convenience is not in favour of the Plaintiffs. The Defendants submit that the status quo refers to the current shareholding of the 1st, 2nd and 4th Defendants in the 1st Plaintiff. By reason of the Plaintiffs’ application and the Originating Summons, the Plaintiffs are trying to subvert the status quo.

Lastly, the Defendants submit that the Plaintiffs have not come to court with clean hands. The Defendants submit that the following factors are relevant: i) The Plaintiffs are fully aware of the nature of the said Agreements, having been independently advised by lawyers on their legality. There was no explanation as to why recent legal advice was sought as to their legality when the Plaintiffs had already been advised on the legality of the said Agreements at the formation stage of the agreements; 18 ii) The Plaintiffs had represented and warranted within the said Agreements that the agreements were valid and binding; iii) Yet the Plaintiffs are now trying to invalidate the said Agreements 6 days before the EGM; iv) This smacks of bad faith and using the application purely for a collateral purpose of preventing the Defendants from proceeding with the EGM; v) The Plaintiffs have failed to disclose in their ex parte application and have continued to disclose that: vi) The Defendants have shares of their own, sufficient to requisition the EGM; vii) The Plaintiffs were independently advised on the nature and legality of the said Agreements during the formation and negotiation stage; 19 viii) The Plaintiffs have represented and warranted to the Defendants that the said Agreements were valid and binding; and ix) The background facts leading to the Defendants’ requisition of the EGM and appointment of additional directors.

For all the above reasons, the Defendants submitted that the Plaintiffs’ application should be dismissed.

In reply, the Plaintiffs submit that the Court should not even consider whether serious issues have been raised. The Court should not go into the merits of the dispute.

In support of the contention that the Court should not even decide whether a serious issue has been raised, the Plaintiffs relied on the case of Bumi Armada Navigation Sdn Bhd v Mirza Marine Sdn Bhd [2015] 5 CLJ 652 where Wong Kian Kheong JC ( as he then was) set out the 5 20 matters to be satisfied by an applicant for interim relief under section 11(1) Arbitration Act (“AA”) as follows (at para 47): “a) the applicant must have a cause of action against the party whom interim relief is sought… b) there must be an “arbitration agreement” as understood in sections 2(1) and 9(1) to (5) AA; c) the relief sought must be interim in nature and cannot be permanent in effect… d) the interim relief must support, assist, aid and/or facilitate the proposed arbitral proceedings… e) arbitral proceedings should be commenced within a reasonable time. Any unreasonable delay in the commencement and/or conduct of arbitral proceedings may:

constitute an abuse of court process; and/or

(ii) oppress the party who is the subject matter of the interim relief. The applicant for interim relief from Court should adduce evidence to show reasons: 21 Why arbitral proceedings cannot be commenced within a reasonable time and hence the need to apply to Court for interim relief under s. 11(1) AA; or If arbitral proceedings have already been instituted, why the applicant is not able to apply for interim relief from the arbitral tribunal and needs to apply to court for such relief.”

The Court held that: “If the five matters are fulfilled by an applicant, in deciding an application for interim relief under section 11(1) AA, the court should not decide on the merits of the dispute which should be decided solely by the arbitral tribunal as agreed by the parties in question. In Jayapadu Oil & Gas Sdn Bhd v Chersonese Oil Sdn Bhd [2014] 1 LNS 972 at para 23 Mary Lim Thiam Suan J held in the High Court as follows:- [23] The Court must also bear in mind that it is to refrain from making any determination on the merits of the claim or the defence when determining whether any bona fide serious issue has been disclosed. That is a matter for substantive and not interlocutory determination. As pointed out earlier, in an application under section 11 AA that is not even for the Court, but for the Arbitral Tribunal to determine. The Court must therefore be careful in ensuring that it does not stray into; or worse, interfere in that arbitral process and resolution. All that the 22 Court is required to do is to identify with precision the related issues and decide whether these issues are serious enough to merit a trial. The interim measures are granted with a view to supporting and reinforcing the arbitration and not to encroach or supplant the process or render ineffective any award that the Arbitral Tribunal may eventually make. (emphasis added)

The court’s ‘restraint’ in not deciding on the merits of the dispute when the court is hearing an application for interim relief under s 11(1) AA is supported by the fact that such an application is decided solely on affidavit evidence. Section 50 AA provides that any application to the High Court under AA shall be made by OS as provided in the Rules of the High Court 1980 (Now replaced by RC) Order 69 RC does not provide for applications under s 11 AA. And such paras (1) to (4) of O. 28 r, 3C RC apply and allow affidavit evidence to be filed and considered in respect of applications under s 11 AA. It is trite law that the court cannot and should not decide on any conflict in affidavit evidence.

However, the Bumi Armada case is not authority for the proposition that I should not even consider whether there is a serious issue to be tried. I am not persuaded that the usual principles governing 23 the grant of interim injunctions such as those set out in the American Cynamid case and Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193 are not applicable. In fact, the very passage in the Bumi Armada case cited by counsel for the Plaintiffs show that the Court when considering an application for interim relief must still consider whether a serious issue has been raised. Also the aforesaid cases on the grant of interlocutory injunctions are also contained in the Plaintiffs’ Bundle of Authorities although the Plaintiffs did not refer to them in submission. I am therefore of the view that the Plaintiffs still have to show a serious issue to be tried.

And in the evaluation of affidavit evidence, the Privy Council in the case of Eng Mee Yong & Ors v Letchumanan [1979] 2 MLJ 212 at page 217 said this: “In the face of these vague, self-contradictory and implausible assertions on the part of the caveator, the learned judge accepted the sworn denial of the caveatees that they had ever agreed to any extension of the time of payment beyond September 28, 1974. Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary 24 documents or other statements by the same deponent, or inherently improbable in itself it may be. In making such order on the application as he ‘may think just’ the judge is vested with a discretion which he must exercise judicially. It is for him to determine in the first instance whether statements contained in affidavits that are relied upon as raising a conflict of evidence upon a relevant fact have sufficient prima facie plausibility to merit further investigation as to their truth.’’

The Defendants’ submission as to why the Plaintiffs have not shown a serious issue to be tried, beyond making a bare assertion that the said Agreements are a sham for illegal money lending transactions is very persuasive. However, I am not inclined to come to the conclusion that the Plaintiffs have not shown a serious issue to be tried save as a last resort, because if I were to make that finding, it would be binding on the arbitral tribunal and that would adversely affect the arbitration proceedings.

The Plaintiffs have alleged and this is not disputed by the Defendants that although the Tawarruq Facility Agreement refers to the trading of commodities, there is in existence no commodity. The Defendants submit that the parties agreed to the non existence of any commodity but there is an issue as to whether that makes the Tawarruq Facility Agreement a sham. So there is an issue to be tried. In any 25 event, as I have stated earlier, because the legality of the said Agreements is to be determined by the arbitrator and not by the Court it is not appropriate for me to hold that there are no serious issues to be tried.

I find that if the Defendants were to take over the board of the 1st Plaintiff, one does not know what direction the new board will take the 1st Plaintiff to and what transactions will be entered into by the 1st Plaintiff. It could be a case where damages may not be an adequate remedy. It would be prudent to maintain the status quo and status quo means a board which is controlled by Lee and Too which means the Defendants are not currently in control of the board of the 1st Plaintiff. A change in the board will result in a change of status quo.

At the same time, I agree with the Defendants that, if the Defendants have sufficient shares which are unrelated to the said Agreements to enable them to requisition and proceed with an EGM, then there is no reason why they should not exercise their rights in respect of those shares, since those shares are not tainted by the said Agreements and are not affected by any illegality of the said Agreements. Since the Defendants have 34.01% of the shareholding of the 1st Plaintiff which is untainted by the said Agreements, I hold that the 26 Defendants may proceed with the EGM as scheduled but should only be permitted to vote up to 34.01% of their shares in the 1st Plaintiff. The Plaintiffs have no evidence to disprove that 34.01% of the shares held by the Defendants are untainted by the purportedly illegal agreements. I so held accordingly.

In the premises, I declined to grant the injunctions sought by the Plaintiffs but ordered that at the EGM the Defendants could only vote up to their 34.01% shareholding in the 1st Defendant. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Dated: 21st June 2018 27 Solicitors For The Plaintiff Datuk Sri Ram, Dato’ Lim Chan Khim, Chin Yan Leng, David Yii, Daniel Chan & M Kumar Messrs Chooi, Saw & Lim Advocates & Solicitors Unit 9-C, Level 9, Wisma Boon Siew 1, Penang Road, 10000 Georgetown Penang Tel: 04-2613999, 04-2623999 Fax: 04-2621999 Solicitors For The Defendants Chong Yee Leong & Chai Phing Zhou & Isaac Chee Messrs Rahmat Lim & Partners Advocates & Solicitors Suite 33.01, Level 33 The Gardens North Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur