Yokohama Distribution Services Sdn Bhd & 1 lagi v Borneo Technical Co. (M) Sdn Bhd (W-02(NCVC)(W)-132 & 123-01/2018)

(No. Syarikat: 155552-M)

(No. Syarikat: 172022-U)

… RESPONDEN-RESPONDEN [Dalam Perkara Guaman Sivil No: WA-22NCVC-71-02/2016 Dalam Mahkamah Tinggi Malaya di Kuala Lumpur (Bahagian Sivil) (No. Syarikat: 24827-D) …

(No. Syarikat: 155552-M) 2

(No. Syarikat: 172022-U)

… DEFENDAN-DEFENDAN] Didengar bersama dengan DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO: W-02(NCVC)(W)-123-01/2018 (No. Syarikat: 155552-M) … PERAYU (No. Syarikat: 24827-D) … RESPONDEN-RESPONDEN [ Dalam Perkara Guaman Sivil No: WA-22NCVC-71-02/2016 Dalam Mahkamah Tinggi Malaya di Kuala Lumpur (No. Syarikat: 24827-D) …

(No. Syarikat: 155552-M)

3 (No. Syarikat: 172022-U)

… DEFENDAN-DEFENDAN] CORUM ZALEHA BINTI YUSOF, JCA YAACOB BIN HAJI MD SAM, JCA LAU BEE LAN, JCA GROUNDS OF JUDGMENT [1] These two appeals are against the order of the High Court at Kuala Lumpur dated 19.12.2017. The appellant in W-02(NCVC)(W)-123- 01/2018 (Appeal 123) was the 1st defendant at the High Court. It was aggrieved as its Counterclaim was dismissed with no order as to costs. While the appellant in appeal No: W-02(NCVC)(W)-132-01/2018 (Appeal 132) was the plaintiff at the High Court. Its claims against the 1st, 2nd and 3rd defendants were dismissed with no order as to costs. [2] For ease of reference, parties shall be referred to as they were in the High Court. [3] In Appeal 123, the 1st defendant appealed against part of the High Court order that it breached the Distribution Agreement (the said Agreement) by not renewing it and that it was not entitled to the reliefs under the Counterclaim. In Appeal 132, the plaintiff appealed against all the other parts of the High Court’s order which we will explain later. 4 The parties [4] The plaintiff is the former distributor and seller of Yokohama Batteries (the batteries). The 1st defendant is the manufacturer of the batteries and wholly-owned by Yokohama Industries Bhd (YIB). [5] The 2nd defendant is the new distributor and seller of the batteries and wholly-owned by Yokohama Holding Sdn Bhd (YHSB), which is in turn wholly-owned by YIB. [6] The first defendant, the 2nd defendant, YIB and YHSB are all part of the Yokohama Group of Companies (Yokohama Group). [7] The 3rd defendant was a Director and Chairman of the plaintiff until 27th February 2015 and 28th February 2015 respectively. He is currently a Director and the President of the 2nd defendant and also the Chairman of YIB. Brief Facts [8] The plaintiff and the 1st defendant entered into a Distribution Agreement (DA) on 11.5.2009 wherein the plaintiff was appointed by the 1st defendant as its exclusive third party distributor to market, sell and distribute the batteries in Malaysia. At that time, they were related companies, under the same ultimate parent company, Hup Soon Global Corporation Ltd. 5 [9] They also entered into tenancy agreements (TAs) for rental by the plaintiff of the 1st defendant’s warehouse, for the purpose of storing the batteries in the warehouses before sale and distribution. [10] Under the DA, the plaintiff would be supplied with the batteries by the 1st defendant at a marginal cost and both parties would share the profit from the sales of the batteries. The profit sharing was the sale income of the 1st defendant. [11] Sometimes between March to May 2014, the plaintiff underwent a change in shareholding. The new shareholder were Toyota Tsusho Corporation, Toyoto Tsusho (Malaysia) Sdn Bhd and Toyota Tsusho (Thailand) Co. Ltd. (collectively referred to as TTC). Hence the plaintiff and the 1st defendant stopped being related companies. [12] On 10th February 2015, the 3rd defendant resigned from the plaintiff followed by many other employees. By April 2015, a total of 119 employees had resigned from the plaintiff to join the 1st defendant or Yokohama Group. [13] By letters dated 23rd February 2015 and 6th March 2015, the 1st defendant terminated the TA on the ground that it had a shortage of storage space in its premises. [14] Between 2nd March 2015 and 10th May 2015, the plaintiff revised the selling price of the batteries and started selling the batteries at a 25% discount. The 1st defendant expressed concern as under the DA, it was entitled to a share of the gross profit. The 1st defendant alleged that the discount of 25% amounted to a breach of the DA. 6 [15] On 24.3.2015 the 1st defendant wrote to the plaintiff to state that the provision of annual renewal ceased to apply in view of the 25% discount. On 25.3.2015 the plaintiff replied that it had the right under the DA to establish the selling price. [16] On 26.3.2015, when the plaintiff ordered 40,000 batteries from the 1st defendant, the 1st defendant refused on the ground that it could not deliver the same before 10th May 2015, the date the DA would lapse. [17] In the meantime, the 3rd defendant became a Director and President of the 2nd defendant. [18] When the DA lapsed on 10.5.2015, the 1st defendant refused to renew it. [19] The 1st defendant alleged that around December 2014, the plaintiff started preparation to distribute the 1st defendant’s competitors’ batteries which is the Hitachi brand. [20] On 11.5.2015, the 2nd defendant started distributing the batteries. Around the same time, the plaintiff also started distributing Hitachi batteries. [21] What led to the present action was the non-renewal of the DA. The plaintiff’s causes of action against the defendants are as follows:

(a) As against the 1st defendant, for breach of the DA;

(b) As against all the defendants, tort of conspiracy; 7

(c) As against the 1st and 3rd defendants, tort of unlawful interference which the economic interest of the plaintiff;

(d) As against the 3rd defendant, breach of fiduciary duty and fidelity duty as a former director of the plaintiff. [22] Besides, the plaintiff also claims against the defendants jointly and severally for:

(a) The costs of warehouse relocation and renovation in the sum of RM3,548,568.86;

(b) The sum of RM13,031,160.00 for loss of profits;

(c) Exemplary damages; and

(d) interest and costs [23] The 1st defendant then filed a Counterclaim against the plaintiff for loss of profit in the sum of RM2,074,200.00 arising from the plaintiff’s conduct of selling the batteries in March and April 2015 at the additional discount of 25%. [24] Both the plaintiff’s main claim and the 1st defendant’s Counterclaim were dismissed by the High Court Judge; hence the appeal before us. Issues

(A) Whether the 1st defendant breached the DA by not renewing the DA;

(B) Whether the 3rd defendant breached his fiduciary duty and his duty of fidelity to the plaintiff;

(C)Whether the defendants unlawfully interfered with the economic interest of the plaintiff and conspired to injure the plaintiff by setting up a new distribution network for the batteries at the expense of the 8 plaintiff and for the 2nd defendant to replace the plaintiff as the distributor;

(D)Whether the 1st defendant’s entitled to its Counterclaim.

(A) Whether the 1st defendant breached the DA by not renewing the DA [25] The Learned High Court Judge in paragraphs 19 to 37 of His Lordship’s ground of judgment found that under the DA, there is an automatic renewal clause for the benefit of the plaintiff, unless it was terminated in accordance with Clause 15 in the event of a breach by the plaintiff. If the plaintiff had breached this Clause 15, His Lordship opined that the 1st defendant must send a written notice with immediate effect to terminate the DA. But in this case, it was not sent, hence His Lordship found there was no termination. His Lordship further stated, it was not true to say the plaintiff had breached the DA. Even when the 1st defendant issued a letter dated 22 August 2014 to the plaintiff, this letter did not terminate the DA but merely stated that the 1st defendant reserved its rights in respect of the change in ownership of the plaintiff without any mention of terminating the DA. [26] The Learned High Court Judge also found that the giving of additional 25% discount by the plaintiff did not breach the DA as the DA, under Clause 4-6, gave the plaintiff the discretion to set the batteries’ price. [27] As the plaintiff did not breach the DA, the Learned High Court Judge held that the plaintiff should be allowed to continue with the DA. Hence the 1st defendant had breached the DA by not renewing the DA. 9 [28] In their written submissions before us, the 1st defendant argued that the plaintiff and the 1st defendant ceased to be related companies after the plaintiff underwent the change in shareholding. As related parties or related companies, they shared a common commercial interest. However the plaintiff’s change of the shareholding now posed a commercial risks which was prejudicial to the 1st defendant because the plaintiff intended to distribute the 1st defendant’s competitors’ batteries. Further the 1st defendant and its ultimate holding company will have absolutely no control over how the plaintiff or its new shareholder would distribute the batteries under the DA and will not be able to ensure that the plaintiff will set the price of the batteries which will be favourable to both the plaintiff and the 1st defendant. [29] In his oral submissions before us, learned counsel for the 1st defendant contended that there was no breach of the DA by the 1st defendant. He insisted that the 1st defendant can terminate the DA under clause 15-1(e) when there is a change in shareholding. The 1st defendant relied on their letter of 22nd August 2014. Learned counsel for the 1st defendant submitted that with this letter, the plaintiff knew that the 1st defendant did not intend to renew the DA. [30] In fact, the 1st defendant submitted, it was the plaintiff who had breached the DA by selling the batteries at a 25% discount. The first defendant submitted that the High Court Judge erred when His Lordship took a literal approach and found that clause 4-6 of DA gave the plaintiff the discretion to determine the price of the batteries. It was the 1st defendant’s submission that the plaintiff’s right to revise the batteries’ price under clause 4-6 were subject to implied terms; such as a duty to 10 sell the batteries at market price reflecting market conditions and yielding reasonable profit margins. Based on the rationale of the profit sharing in the DA, it was reasonable to imply the terms as such implied terms were necessary to give business efficacy to the DA as setting the price so low would deprive the 1st defendant of the profit sharing. The 1st defendant relied, inter alia, on the case of Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151 and See Leong Chye @ Sze Leong Chye & Anor v United Overseas Bank Bhd and another appeal [2019] 1 MLJ 25. [31] The plaintiff on the other hand argued that unless the plaintiff commits any breach of the DA, the DA provides for automatic renewal of the DA on a yearly basis. The plaintiff submitted that there was no breach on its part. [32] Learned Counsel for the plaintiff further submitted that the 1st defendant had also not issued any written notice to terminate the DA on the ground of the plaintiff’s change in shareholding. Even the 1st defendant’s letter dated 22 August 2014 did not actually mention of termination but reserving the 1st defendant’s right to terminate. [33] Further, learned counsel for the plaintiff argued, for the change of shareholding to be a reason for termination, the change has to be prejudicial to the 1st defendant. However, the conduct of the 1st defendant did not show that the 1st defendant viewed the change as prejudicial as there was no protest that it would be prejudicial and no action taken by the 1st defendant’s Board of Directors against the plaintiff. 11 [34] In fact, after knowing the change in March 2014, on 10 April 2014 the 1st defendant wrote to the plaintiff to congratulate the successful acquisition of the plaintiff by Toyota Tsusho Corporation and that the 1st defendant wished “to continue this mutually beneficial engagement in accordance with the [DA]” between the 1st defendant and the plaintiff. [35] The plaintiff referred to the case of Ng Yee Fong & Anor v E.W. Talalla [1986] 1 MLJ 25 at 27 and Johor Coastal Development Sdn Bhd v Constrajaya Sdn Bhd [2009] 3 MLJ 349 at 358 to support its argument that in the circumstances, the 1st defendant was therefore estopped from relaying on the change in shareholding of the plaintiff as a ground of termination. [36] On the sale of the batteries at a 25% discount, the plaintiff argued it was entitled to do so pursuant to the express terms of the DA as found in clause 4-6 and also clause 5-1 of the DA. The plaintiff relied on the decision of this court in Parbadanan Kemajuan Negeri Selangor v Selangor Country Club Sdn Bhd [2016] 8 CLJ 211 to support their argument. [37] We had carefully considered the submissions of the parties on this issue, written as well as oral. To understand the arguments put forth by the parties, we reproduce the relevant provisions of the DA as follows: “4-6. Selling prices for the sale of the Products in the Territory by the Distributor shall be established and revised from time to time by the Distributor.” 12 “5-1. For the duration of this agreement, TK shall for the sale of the Products be entitled to a profit sharing based on the gross profit margin of the Products (hereinafter referred to as the “Entitlement”) Gross Profit Margin (A) Entitlement of TK (B) 20% and above 20% of (A) 19% 15% of (A) 18% 10% of (A) 17% 5% of (A) Below 17% Nil ” “15 TERMINATION 15-1 Either party may by written notice with immediate effect terminate this Agreement at any time and cancel any unfulfilled orders already accepted by TK without any liability to pay compensation or damages in the event that:

(a) the other party is in breach of any material term in Clause 4-4, 4-7 or 4-10 of this Agreement and has not remedied such breach within ten (10) days of the date of the written notice requesting it to do so;

(b) the other party have a receiver or manager appointed over the whole or any substantial part of its assets;

(c) any winding-up order shall be made by the Court or resolution passed where the company of the other party is being wound up voluntary (except for the purposes of amalgamation or reconstruction); 13

(d) the other party shall become insolvent, commit any act of bankruptcy or shall enter into any composition or arrangement with its creditors or shall cease or threaten to cease to carry on business;

(e) except for a transfer of shares to a Related Corporation of the Distributor pursuant to a bonafide restructuring the control or ownership of the Distributor changes from that in effect at the date of this Agreement and, in the reasonable opinion of TK, is prejudicial to TK; or

(f) the Distributor shall fail to pay in full on due date for any Products supplied to it under this Agreement.” [38] “TK” in the DA refers to the 1st defendant while “Distributor” refers to the plaintiff. [39] Clause 15 of the DA has clearly set out how the termination of the DA is to take place. What is relevant for our purpose is paragraph 15-1(e) of the DA. It requires any party who wishes to terminate the DA, in this case, the 1st defendant, to give the other party, in this case, the plaintiff, a written notice with immediate effect to terminate the DA on the ground of the change of shareholding in the plaintiff. Paragraph 15-1(e) of the DA also provides a condition that to enable the termination, the change of the shareholding alone is not sufficient. It has to be prejudicial to the 1st defendant. [40] Now, was there a written notice from the 1st defendant to terminate the DA as required by the DA? The 1st defendant relied on its letter dated 14 22 August 2014, found at page 124 of the Common Core Bundle Volume 1 of 1 (CCB 1/1). It says, inter alia as follows: “..This is to place on record that following change in shareholding in your company, we are entitled to terminate the Distribution Agreement. Our rights in this respect are reserved. However in view of our long standing relationship, we are happy to continue with our distributorship on terms to be mutually agreed. In this respect, please be informed that the Board of Yokohama has resolved that we would, independent of your distributorship, undertake our own distribution. The Board has also agreed in principle to appoint your company as the sole third party distributor. We look forward to concluding the terms of the revised distributorship as soon as possible.” (emphasis added) [41] With due respect, we agree with the learned High Court Judge that the letter did not terminate the DA but merely stated that the 1st defendant reserved its rights in respect of the change in the plaintiff’s ownership. In fact it emphasised the fact that in view of their long standing relationship, the 1st defendant was happy to continue with the distributorship on terms to be mutually agreed by the parties. There was also no mention in the said letter that the change of shareholding in the plaintiff was prejudicial to the 1st defendant. Anyway, how could it be prejudicial when the 1st defendant was happy to continue with the then existing arrangement? Hence we were of the considered view that this letter had not only failed to give immediate effect of termination but also it was not a notice of termination at all as envisaged by clause 15-1 of the DA. Reserving its right to terminate and actual termination are two different acts. The 1st defendant’s conduct or words to “happily 15 continue”with the distributorship despite the change in the plaintiff’s shareholding shows the 1st defendant had actually acquiesced to the change. Hence we opined the 1st defendant must now be estopped from raising this. The plaintiff had the right to raise estoppel against the 1st defendant as the 1st defendant, knowing its right under the DA, had kept silent and allowed the plaintiff to proceed as it did. See Vol 16 Halsbury’s Laws of England, 4th Edition, paragraph 1474 on the subject of “Elements in the Estoppel”. See also Ng Yee Fong, supra, and Johor Coastal Development, supra as cited by the learned High Court Judge and learned counsel for the plaintiff. In fact even the 3rd defendant in his evidence as shown at page 557 of Record of Appeal Vol 2(2) agreed that at no time did the 1st defendant issue a letter terminating the DA on the basis of the change in the plaintiff’s shareholding. [42] On 24th March 2015, the 1st defendant had written another letter as shown at page 160 of the CCB 1/1 expressing their displeasure on the revised selling price of the batteries by the plaintiff. This letter in our opinion, gave credence that the letter of 22 August 2014 was not a Termination Letter and the DA was still continuing even on 24th March

Again this letter of 24th March 2015 merely stated that the 1st defendant “reserves our rights to take such actions as we may be advised”. [43] As has been alluded to earlier, the revision of the selling price of the batteries fell under Clause 4-6 of the DA. [44] It was the 1st defendant’s contention that this court should not take a literal approach in reading clause 4-6 of the DA but must read the 16 clause with an implied terms as the Federal Court did in Sababumi, supra, and See Leong Chye, supra. We accepted the decisions of the Federal Court in the two cases and in fact we were bound by the decisions. However, with due respect, each case has to be looked at and decided upon according to its facts. [45] In this instant case, the provision of the DA especially the said clause 4-6 is very clear. It gives the plaintiff and only the plaintiff the discretion to establish and revise the selling price of the batteries. The court cannot simply change the meaning of the provision when its express term is so clear. In fact, when the words are clear there is very little that the court has to do. It is court’s function to give effect to the terms of the contract when the terms are so clear and not to allow any extrinsic evidence to determine the intention of the partners. See this Court’s decision in Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 357. In construing any written instrument or contract, it is trite that one has to adhere to its ordinary sense of the words unless to do so would lead to inconsistency with the rest of the instrument. See the Federal Court in H Rubber Estates Bhd v Director of Inland Revenue [1979] 1 MLJ 115 at 118. As submitted by learned counsel for the plaintiff, and we agreed, pursuant to clause 5-1 of the DA, the 1st defendant was entitled to “nil” profits when the gross margin falls below 17%. This only shows that the 1st defendant’s entitlement to profits was dependent and conditional upon the plaintiff’s gross profit margin. The DA clearly allowed for the situations where the 1st defendant would not be entitled to any profit whatsoever. 17 [46] Vernon Ong JCA (as he then was) had stated the following in Perbadanan Kemajuan Negeri Selangor v Selangor Country Club Sdn Bhd [2016] 8 CLJ 211 at 221: “[33] As a general rule, the words of an instrument must be construed according to their natural meaning. Where the language of a document is plain and unambiguous and applies accurately to existing facts then the intention of the parties to the document should be gathered from the language of the document itself. No amount of acting by the parties can alter or qualify words which are plain and unambiguous: see s.94 of the Evidence Act 1950; North Eastern Railway Company v Hastings [1900] AC 260 (PC). [34] Accordingly, when a court is called upon to interpret a document, it looks at the language. If the language is clear and unambiguous and applies accurately to existing facts, it shall accept the ordinary meaning, for the duty of the court is not to delve into the intricacies of the human mind to disclose one’s undisclosed intention, but only to take the meaning of the words used by him, that is to say his expressed intentions: see Kamla Devi v Takhatmal AIR 1964 vol. 51 a Supreme Court of India decision at p. 386.” [47] On this, we were also fortified by clause 17-1 of the DA which reads as follows :

17.

17.1 This Agreement, any agreement entered into pursuant to the Appendices, and any order placed and accepted by TK hereunder shall constitute the entire agreement between TK and the Distributor and 18 shall supersede any and all prior agreements between TK and the Distributor.” [48] It was our view, clause 17 of the DA clearly wiped out any introduction of any implied terms into the DA. It was never the intention of the parties to interpret the DA other than in accordance to its express terms. We found support in the provision of section 94 of the Evidence Act 1950 which inter alia provides as follows: “94 When language used in a document is plain in itself and when it applies accurately to existing facts, evidence may not be given to show that it was not meant to apply to such facts.” [49] In the circumstances, we found no reason to depart from the learned High Court Judge’s finding on this first issue. We therefore answered the 1st issue in the affirmative. B. Whether the 3rd defendant breached his fiduciary duty and his duty of fidelity to the plaintiff. [50] It was the plaintiff’s contention that the 3rd defendant had breached his fiduciary duty and his duty of fidelity to the plaintiff by engaging in a directly competing business and inducing the employees of the plaintiff to join a competing company. [51] However, the learned High Court Judge found that the plaintiff had failed to adduce any evidence to show that the 3rd defendant was engaging in a directly competing business. His Lordship also held that the 3rd defendant did not in his own initiate the meeting with the plaintiff’s employee or sought to meet them or actively encouraged them to resign. 19 His Lordship further held that the 3rd defendant had every right to resign from the plaintiff and there was no obligation on the part of the 3rd defendant to serve the plaintiff in any manner. [52] The plaintiff had relied on the draft minutes of YIB’s Board Meeting held on 25th February 2015 to show the intensive work and preparation the 3rd defendant had done for the competing company, prior to the said meeting. Learned Counsel for the 3rd defendant submitted that the Learned High Court Judge was correct in not accepting the draft as it was not a finalized minute and contained inaccurate statement. [53] According to item (c) of the said draft minutes, the 3rd defendant had identified the location of the branches, formalized the budget both capital and operating of the new company as well as the organisation structure. According to the Notes of Evidence at page 749 of the Record of Appeal Volume 2(3) and 565 of the Record of Appeal Volume 2(2), the 3rd defendant admitted that he had been asked in January 2015 by the new owners of the 1st defendant to lead the new distribution network. This can also be seen in item (c) of the draft minutes where it was stated that the 3rd defendant informed the meeting that he had been advised by the representative of the major shareholder that he would be the President of the new entity and be responsible for its overall operations. Hence it cannot be denied that the 3rd defendant was actually the key figure in the new distribution network; namely the 2nd defendant. Five days after the said YIB’s Board Meeting, the 3rd defendant officially became the President of the 2nd defendant. This can be seen in the Contract of Employment at page 161 of the CCB Vol. 1 (1) of 1; clause A which inter alia states that the duration of the contract was for a period of 18 months effective from March 1, 2015 through August 31, 2016. According to 20 clause B, his scope of work as President included “organisation” which was described as “Separate Entity”, Organisation Chart Structure and Pro-forma P&L. Hence, although the said minutes of the meeting dated 25th February 2015 was only a draft the evidence showed that 3rd defendant’s scope of work was entirely consistent with the details of his efforts as recorded in the draft minutes. Bear in mind that on 25th February 2015, the 3rd defendant was still a Director and Chairman of the plaintiff. All these had not been properly considered by the learned High Court Judge. [54] Also we found there was evidence, in the form of an email by one Sylvia Leyu of YIB dated also on 25th February 2015, sent to the 3rd defendant, attaching the revised artwork of the 3rd defendant’s business card containing the 2nd defendant’s name and address and the 3rd defendant’s new telephone, fax, mobile and email address. The learned High Court Judge held that the plaintiff could not rely on the name card as it was still in draft form. His Lordship also found there was no evidence that the 3rd defendant had used the name card at the expense of the plaintiff’s business. [55] With due respect to the learned High Court Judge and learned Counsel for the 3rd defendant who submitted that the learned High Court Judge was correct in his decision, it was our view that, the point here was that when there was a revised version, it follows that there must be an earlier version of the business card that was created before 25th February

This manifested significant preparatory work had been carried out by the 3rd defendant, even though he was still in the employment of the plaintiff. As such, we agreed with the plaintiff that whether or not the name card was in draft was irrelevant, as it strengthened the argument that the 21 3rd defendant had been actively involved in a competing business long before his resignation from the plaintiff. [56] According to the Notes of Evidence at pages 568 to 569 of the Record of Appeal Volume 2(2) the third defendant had admitted that he had met with a few employees of the plaintiff including 10 senior officers, even before he tendered his resignation letter and informed them that he had been offered a lead position in the 2nd defendant, that the plaintiff would not be distributing the batteries anymore once the 2nd defendant was running and that the employees could liaise with YIB HR if they were interested about getting new jobs. Bear in mind that all these happened about three months before the actual non-renewal of the DA. This also would indicate that the 3rd defendant then had already contemplated the fate of the DA. It showed the important role he played in the competing company. The 3rd defendant agreed that all these employees had indeed resigned and joined the Yokohama Group. By April 2015, 119 employees had resigned from the plaintiff. [57] Based on the evidence, we were of the considered view that the learned High Court Judge had failed to judicially appreciate the evidence before him and had erred in finding that the 3rd defendant merely replied to questions from the plaintiff’s employees and did not actively encourage them to resign. His Lordship erred when he said the plaintiff had failed to prove its contention as those employees were not called to give evidence. We were of the considered view the sequence and timing of the resignation of those employees from the plaintiff would only lead to one conclusion: that it was a scheme engineered by the 3rd defendant. The learned High Court Judge, in our view, erred, when His Lordship did not consider the timing of the departures of those employees of the plaintiff, 22 especially the senior employees. His Lordship, in our opinion, had also failed to address his mind as to how those employees knew the exact date on which the 3rd defendant would be resigning, if not for the fact that he, the 3rd defendant, himself had told them so. [58] In Zaharen Hj Zakaria v Redmax Sdn Bhd & Other Appeals [2016] 7 CLJ 380, Abang Iskandar JCA (as His Lordship then was) had at page 391 stated the following with regard to the duty of fiduciary and fidelity: “[38] At the outset, it must be made clear that as a director of the plaintiff, the second defendant owed a fiduciary duty to the company and the shareholders. Decided cases abound had made the relationship between a director and his company as being trite. As an employee of the plaintiff, the second defendant also had the duty of fidelity towards the company. Basically that would mean a duty to be loyal to the interest of the company and its shareholders. Both duties presuppose the need to ensure that a director and an employee must act and discharge their responsibilities in a manner that is in the best interest of the company and not act in a manner that may be detrimental to the interest of the company.” [59] His Lordship continued at paragraph 44 at page 392 of the case: “[44] Under the law, an employee of a company has a duty of fidelity to be observed at all times during his employment with the company. What is this duty of fidelity? Every employment contract contains an implied term that an employee will serve his employer with good faith and fidelity (the duty of fidelity). The duty of fidelity is owed by all employees and is to be distinguished from a fiduciary duty. A fiduciary duty requires an employee to act in the interests of his employer, whereas the duty of fidelity requires an employee to have regard to his employer’s interests. Inherent in that duty to have regards to his employer’s interest must be a 23 duty not to act in a manner which would be to disregard his employer’s interests. Such acts must include acts that are inherently detrimental to his company’s interests.” [60] From the evidence adduced, we were of the considered view that the 3rd defendant had indeed started preparation for the new distribution network the moment he tendered his resignation letter on 10.2.2015, while he was still in the employment of the plaintiff. The taking over of the plaintiff’s personnel especially senior and experienced sales personnel was of course the easiest and quickest way for the 3rd defendant to set up the 2nd defendant. [61] Being the Chairman and a Director of the plaintiff, the 3rd defendant obviously owed fiduciary obligations towards the plaintiff. His position in the plaintiff gave rise to a relationship of trust and confidence. As decided by the Federal Court in the Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik Syed Mohamed & Anor [2008] 5 MLJ 469, a fiduciary must act in good faith; he must not make a profit out of his trust, he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. [62] In Avel Consultants Sdn Bhd & Anor v Mohd. Zain Yusof & Ors [1985] CLJ (Rep) 37 at page 39, Salleh Abas LP (as he then was) had stated the following: “The law is clear that a director of a company is in fiduciary relationship with his company and as such he is precluded from acting in a manner which will bring his personal interest into conflict with that of his company. Clearly the formation of Perunding AJZ was carefully planned. The firm 24 is not only a rival of AVEL and ELMEC of which at the material time the respondents were the directors. It obtained the very job which was AVEL’s job. Not only that, the firm canvassed for the work from Avel’s and Elmec’s established clients, Kontena Nasional Sdn Bhd and there is even evidence to show that the Respondents engineered the registrations of the key personnel on Channel Three project”. [63] Just like in Avel, supra, the formation of the 2nd defendant was carefully planned with the involvement of the 3rd defendant. The 2nd defendant obtained the very job which was the plaintiff’s job. We had earlier found that there was ample evidence to show that it was the 3rd defendant who engineered the registration of the personnel including the key personnel of the plaintiff. The 3rd defendant had therefore breached his fiduciary duty when he had engaged himself in a business which was in competition with the plaintiff to gain, directly or indirectly, a benefit for himself and the 1st and the 2nd defendants. He had failed to devote his time, energy, efforts and attention and skill solely to the business of the plaintiff and as such failed to act honestly and with reasonable diligence in the discharge of his duties. He had therefore in our view failed to exercise his powers as a Director of the plaintiff for a proper purpose and in good faith in the best interests of the plaintiff as also required by section 132 of the Companies Act 1965, which we felt was the relevant Act for the purpose of this case. [64] The same can also be said in respect of the breach of the 3rd defendant’s duty of fidelity. The 3rd defendant had failed to remain loyal to the plaintiff and act in a good faith in the best interests of the plaintiff. As has been alluded to earlier, he had acted to the detriment of the plaintiff and for the benefit of the competing company, the 2nd defendant. 25 [65] It is trite that the appellate court will normally not intervene with the decision of a trial court unless it finds that the trial court has been plainly wrong in arriving at its decision. A plainly wrong decision happens when the trial court is guilty of not giving or insufficient judicial appreciation of evidence. See the Federal Court in UEM Group Berhad v Genisyss Integrated Ptd Ltd [2010] 9 CLJ 785. In this issue, we opined that it was only proper for us to intervene as the learned High Court Judge, the trial court herein, had fallen into error in reaching into his decision as such. In conclusion, with respect to the learned High Court Judge, we answered the 2nd issue in the affirmative. C. Whether the defendants unlawfully interfered with the economic interest of the plaintiff and conspired to injure the plaintiff by setting up a new distribution network for the batteries at the expense of the plaintiff and for the 2nd defendant to replace the plaintiff as a distributor [66] On the issue of unlawful interference with the economic interest of the plaintiff, the learned High Court Judge was of the view that the plaintiff needs to prove a wrongful interference with the action of a third party in which the plaintiff has an economic interest, and an intention by the defendants to cause loss to the plaintiff. His Lordship held that in the present case, there was no third party in which the plaintiff had an economic interest. He further was of the view that as manufacturer of the batteries, the 1st defendant had the right to choose the 2nd defendant to be the new distributor and seller of the batteries so as to maximise its own profit. As such His Lordship held that the 1st defendant could not be said to intend to cause loss to the plaintiff. 26 [67] On whether the defendants had conspired to injure the plaintiff by setting up a new distribution network and for the 2nd defendant to replace the plaintiff as distributor, the learned High Court Judge was of the view that it was a norm for business associates to form a pack and pact to challenge their business rivals. An important aspect of conspiracy in his view was secrecy and His Lordship found there was no secrecy in the conduct of the defendants to frustrate the plaintiff. He stated that the plaintiff knew when informed by the 1st defendant by the letter dated 22nd August 2014 that the DA was not going to be renewed. Hence the element of secrecy needed in a tort of conspiracy was not present in this case. Also he said that in a tort of conspiracy, there must be an agreement to injure the plaintiff by the defendants, he found there was no such an agreement. What the 1st defendant was doing was merely to protect its interest as manufacturer of the batteries by collaborating with the 2nd and 3rd defendants. This, in His Lordship’s view, was a normal business arrangement and there was nothing sinister about the wishes of the defendants to foster their mutual legitimate interest. There was no obligation on any of them to include the plaintiff in their business plans since the DA had been terminated. [68] We had carefully considered this issue. With due respect to the learned High Court Judge and learned counsel for the defendants who had submitted in line with the learned High Court Judge’s decision, we were not able to agree that unlawful interference with the plaintiff’s economic interest requires interference with the actions of a 3rd party. The words “economic interest” itself connotes one’s right to share amongst others in the income, gains, losses, credit or similar items of the company. The tort of unlawful interference arises when a person using unlawful means with the object of causing damages to another. 27 See House of Lords in Merkur Island Shipping Cord v Laughton [1983] 2 AC 570. [69] In OBG Ltd v Allan [2007] UKHL 21, the House of Lords held that the gist of this tort of unlawful interference is intentionally damaging another’s business by unlawful means. Although it recognised that “competition between business regularly involves such business taking steps to promote itself at the expense of the other”, but the House of Lords through the judgment of Lord Nicholls of Birkenhead also stated at page 53 of the Report, the following: “143. This is not so say that in this field of economic rivalry anything goes. Business people are not free to promote their own businesses at the expense of others by whatever means they may choose. There are limits. The common law has long recognised that some forms of conduct, intentionally damaging other traders, are not acceptable”. [70] Coming back to the instant appeal, let us examine the acts or conduct of the defendants to see whether such tort had been committed by them. The plaintiff had been granted the exclusive distributorship of the batteries by the 1st defendant, but unobtrusively, the 1st defendant set up the new distributions network and identified the 2nd defendant as the new distributor while the DA was still in force. The 1st defendant then committed a breach of contract by not renewing the DA. [71] The 2nd defendant had started preparation for business even while the DA was still in force. Not only did the 2nd defendant take over the role of the plaintiff as the exclusive distributor of the batteries, it also took over most of the employees of the plaintiff including the senior and experienced ones, with the effect of paralysing the plaintiff. 28 [72] The 3rd defendant while he was still the Chairman and Director of the plaintiff, had spearheaded the 2nd defendant’s business: getting himself involved in the preparation for the new distributor network. He had also, found by us earlier, induced the employees of the plaintiff to leave the plaintiff and to join the 2nd defendant. He did this while he was still in the employment of the plaintiff. [73] We were of the considered view that the acts of the defendants as stated above amount to unlawful interference with the economic interest of the plaintiff. At the risk of being repetitious, we reemphasise that the non-renewal of the DA was for the purpose of enabling the 2nd defendant to take over the distribution of the batteries. This action of the 1st and 2nd defendants together with the breach of fiduciary and fidelity duties committed by the 3rd defendant, plus the pinching of the employees of the plaintiff by the 2nd defendant, in our considered view constitute the unlawful interference of the economic loss of the plaintiff. Their intention could be inferred from their actions. The batteries contributed the plaintiff’s main business. As admitted by DW1, a director of both the 1st and 2nd defendants, in his evidence at page 462 and 463 of the Record of Appeal Volume 2(2), the batteries are the most prominent brand in Malaysia and command a premium price. On top of that the plaintiff’s employees were critical to the plaintiff’s business and operations. Hence it cannot be gainsaid the impact of the defendant’s action would obviously result in significant losses to the plaintiff and destroy its operations. [74] The learned High Court Judge had held that there was no conspiracy to injure the plaintiff as the teaming up of the defendants was 29 normal business necessity and there was no conspiracy and no agreement to conspire. There was also no obligation on any of the defendants to include the plaintiff in their business plans since the DA, according to His Lordship had already been terminated. [75] With due respect, we were of the view there was no requirement to show express admission of conspiracy. Agreement to conspire can be proved by circumstantial evidence including the parties’ acts, omissions or conduct. See the Supreme Court of India in State of Tamil Nadu v Nalini AIR 1999 SC 2640, wherein at paragraph 655 at page 2842, Shah Mohammed Quadri, J had stated the following: “The agreement, sine qua non of conspiracy, may be proved either by direct evidence which is rarely available in such cases or it may be inferred from utterances, writings, acts, omissions and conduct of the parties to the conspiracy which is usually done……...” [76] As had been shown earlier, there was a deliberate plan to unlawfully terminate the DA, appointing the 2nd defendant as the new distributor and snatching the employees of the plaintiff. It was our view, there was ample evidence to support the existence of an agreement to conspire between the defendants. They had started implementing plans to set-up the new distribution network without plaintiff’s knowledge, while the DA was still in force and while the 3rd defendant was still the Chairman and a Director of the plaintiff. The learned High Court Judge had erred when His Lordship found that there was no obligation on any of the defendants to include the plaintiff in their business plans since the DA had been terminated. This was obviously wrong because when they did all the preparations and embarked on their plans, the DA was not 30 yet terminated and the 3rd defendant was still the Chairman and a Director of the plaintiff. [77] Looking at all the evidence in its entirety, our answer to the 3rd issue was in the affirmative. D. Whether the 1st defendant entitled to its Counterclaim [78] The 1st defendant’s Counterclaim for loss and profit or RM2, 074,200.00 was premised on the allegation that the plaintiff had breached the terms of the DA in particular on the selling and distributing the batteries at a 25% discount without consulting the 1st defendant. This issue had already been dealt with when we discussed the 1st issue. We had found the plaintiff had every right under the DA to establish and revise the selling price. We had found there was no breach on the part of the plaintiff, instead it was the 1st defendant who had committed the breach of the DA. We were of the view that the learned High Court Judge was correct when His Lordship dismissed the 1st defendant’s Counter claim as he also found that the plaintiff was entitled to give the 25% discount under the terms of the DA. [79] As such, we answered the 4th issue in the negative. Conclusion [80] We had found that the 1st defendant had breached the contract with the plaintiff and as a result, the plaintiff had to relocate to a new warehouse. We found there was no breach of the DA on the part of the 31 plaintiff. We were satisfied from the evidence shown to us in the Records of Appeal that the plaintiff had proved that it had incurred a sum of RM3,548,568.86 consisting of the following:

(i) RM2,832,036.86, being the cost of relocating the batteries and other products from the warehouses, and renovating the new warehouse.