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DALAM MAHKAMAH RAYUAN, MALAYSIA (APPEAL JURISDICTION)

RAYUAN SIVIL/RAYUAN NO W-02(IM)(NCC)-2748-12/2013

BETWEEN

ILUSTRASI HIKMAT SDN BHD ………PERAYU

AND

TAN SRI DATO’ SERI SYED MOKHTAR SHAH BIN SYED NOR ….RESPONDEN

DALAM MAHKAMAH RAYUAN, MALAYSIA (APPEAL JURISDICTION)

RAYUAN SIVIL/RAYUAN NO W-02(IM)(NCC)-2749-12/2013

BETWEEN

ILUSTRASI HIKMAT SDN BHD ………PERAYU

AND

TRADEWINDS (M) BHD ….RESPONDEN

DALAM MAHKAMAH RAYUAN, MALAYSIA (APPEAL JURISDICTION)

RAYUAN SIVIL/RAYUAN NO W-02(IM)(NCC)-2750-12/2013

BETWEEN

ILUSTRASI HIKMAT SDN BHD ………PERAYU

AND

PADIBERAS NASIONAL BERHAD ….RESPONDEN

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(DALAM MAHKAMAH TINGGI DI KUALA LUMPUR) GUAMAN NO: 22NCC-331-04/2013

ANTARA

ILUSTRASI HIKMAT SDN BHD ………PLAINTIF

DAN

TAN SRI DATO’ SERI SYED MOKHTAR SHAH BIN SYED NOR

TRADEWINDS (M) BHD PADIBERAS NATIONAL BERHAD BUDAYA GENERASI SDN BHD .. DEFENDAN-DEFENDAN

CORAM:

Y.A DATO’ ALIZATUL KHAIR BINTI OSMAN KHAIRUDDIN, HMR Y.A. DATO’ ABDUL AZIZ BIN ABD. RAHIM, HMR

Y.A DATUK DAVID WONG DAK WAH, HMR

JUDGMENT OF THE COURT

Introduction:

1. Before us are three appeals against the decision of the High Court in

which the learned Judge allowed an application by the

Respondents/1st, 2nd and 3rd Defendants to strike out the statement of

claim of the Appellant/Plaintiff premised on Order 18 rule 19 of the

2012 Rules.

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2. We heard the appeals and after due consideration to respective

submissions of counsel, we allowed the appeals and now give our

reasons.

3. For the purpose of this Judgment, the parties shall be referred as

Plaintiff and Defendants as in the High Court.

Striking out principles:

4. The legal principles relating to striking out pleadings are settled and

there are numerous Judgments setting out those principles.

5. The Plaintiff has a right to access to Court and with it the right to have

his day in Court. Hence case laws dictate that Court should only

exercise its power to strike out only in exceptional circumstances. One

such circumstance is that on the pleadings themselves and assuming

that they are true, they do not disclose any cause of action. The Court

will also strike out an action which is clearly time-barred even if parties

do not dispute the existence of a cause of action and the date the

cause of action accrued. In both circumstances, there is no dispute as

to the factual matrix of the statement of claim. Hence when there is a

dispute as to the factual matrix of the case, the Court would not strike

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out the statement of claim and the Plaintiff is entitled to have his day

in Court to prove its claim.

6. Further it has also been held by the apex Court of the land that so long

as the statement of claim discloses a reasonable cause of action,

however weak the claim is, that claim cannot be struck off summarily

(see Bandar Builder Sdn Bhd v Unites Malayan Banking Corp,

Bhd (1993) 4 CLJ 7). The burden is on the Defendants here to show

to the Court that the claim is so plain and obviously unsustainable or

in other words, the Plaintiff’s claim is bound to fail at trial. It is with the

above principles at the forefront of our minds that we considered this

appeal.

Background:

7. According to the Plaintiff, the circumstances leading to his legal action

are these. Bernas (the 3rd Defendant) was incorporated on 14 April

1994 by the Federal Government for the purpose of dealing with the

distribution of rice in the country.

8. On 11 July 1995, seven parties entered into a Shareholder Agreement

to form a joint venture company called Budaya Generasi Sdn Bhd (4th

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Defendant) to purchase the shares from the Federal Government in

the 3rd Defendant. This transaction was for the purpose of allowing the

4th Defendant to take over the liabilities and rights of the 3rd Defendant.

The seven shareholders and their shareholdings were as follows:

(a) Permatang Jaya Sdn Bhd (PJSB).. 38.89%

(b) Pertubuhan Peladang Kebangsaan (NAFAS).. 11.111%

(c) Persatuan Nelayan Kebangsaan (NEKMAT) … 11.111%

(d) ZAW Ventures Sdn Bhd (ZAW) …..11.111%

(e) Simpletech Sdn Bhd (Simpletech) … 11.111%

(f) Syarikat Perniagaan Peladang (MADA) Sdn Bhd (SPPM).

11.111 %

(g) Syarikat Perniagaan Peladang (KADA) Sdn Bhd

(SPPK)..5.555 %.

9. On 2 January 1996, a supplementary shareholders agreement was

entered into between the Plaintiff and the aforesaid 7 shareholders and

one Sebiro Holdings Sdn Bhd (Sebiro) in which both the Plaintiff and

Sebiro became 5% shareholders in the 4th Defendant, resulting in a

reduction of the shareholdings of ZAW and SSB.

10. It is not in dispute that the 3rd Defendant held a monopoly as the sole

importer of rice in Malaysia. And hence according to the Plaintiff, the

5% shareholding in the 4th Defendant was a valuable investment.

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11. However according to the Plaintiff, the worth of the Plaintiff’s

shareholding in the 4th Defendant was rendered valueless when

through a series of corporate exercises involving the 1st Defendant,

the 2nd Defendant (Tradewinds (M) Bhd) and the 3rd Defendant in

2003, 2009 and 2013, the 4th Defendant ceased to hold any shares

in the 3rd Defendant and the 2nd Defendant became a shareholder in

the 3rd Defendant to the extent of 83% by 2013. By a novation

agreement in December 2009, the rice import business of the 4th

Defendant contained in the Privatisation Agreement with the

Government was novated to the 2nd Defendant. Through these series

of exercises, the Plaintiff’s interest in the 4th Defendant according to

the Plaintiff became virtually valueless.

12. According to the Plaintiff, they were assured by the 1st Defendant in

2003 that when the corporate exercises first began that their value in

the 4th Defendant would not be rendered valueless. This is how the

Plaintiff said in paragraphs 21-22 of the statement of claim:

(a) SM had been instructed by the then Prime Minister of

Malaysia to assume control of Bernas to provide better

efficiency to its affairs and the entry of SM through the SM

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2003 Nominee would advance the commercial interest of all

shareholders of the Original Private Promoter (including the

Plaintiff).

(b) SM intended the investment in Bernas to be a long term

investment (which he desired to pursue with the Plaintiff) and

his plans would ensure significant benefit to the Plaintiff and

the adherence of the underlying objective of Bernas in terms

of the Privatization Agreement and Bernas Agreement.

(c) SM will conduct himself in a transparent manner in his future

dealings within the Original Private Promoter and Bernas so

as to allay concerns of the Plaintiff that there would be any

further activities undertaken in stealth.

(d) The shareholders agreement and the Supplemental

Shareholders Agreement will be honoured in its original form

and spirit.

13. It is the contention of the Plaintiff that the 1st Defendant breached the

above assurances which the Plaintiff in his statement of claim

describes as follows:

(a) The spirit of the pre-emption under the Shareholder

Agreement was again being breached by SM and SM 2003

nominee by essentially allowing control of Bernas to be again

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hived off to another remote nominee of SM namely

Tradewinds.

(b) The objective of the dividend in specie exercise that was

being formulated on a parallel basis with the 2009 General

Offer was such that the premium that was had by the Original

Private Promoter in Bernas was removed away from each of

the minority shareholders of the Original Private Promoter and

housed entirely with SM.

(c) The dividend in specie exercise was effected on or about

5.11.2009 through a positive controlling vote of

representatives of SM on the Board of the Original Private

Promoter without declaring their ultimate interest in the

exercise.

(d) The said dividend in specie exercise undermine the very

purpose and existence of the Original Private Promoter which

was then rendered dormant with no further business activity.

(e) The Bernas Agreement was subsequently novated to

Tradewinds without any formal; meeting of the Board or

shareholder of the Original Private Promoter.

Our grounds of decision:

14. In dealing with an application to strike out a statement of claim, the

Courts in our view must first assume the allegations of the Plaintiff

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to be true and then ask the question whether the allegations

disclose a reasonable cause of action. To recapitulate, the Plaintiff,

according to the submission of their counsel had pleaded two

causes of action:

(a) Oral assurances from the 1st Defendant that the Shareholders

Agreement and Supplemental Agreement thereto would be

honoured and that his entry into the 3rd Defendant would be

for the benefit of the Plaintiff.

(b) The 2009 2nd Defendant’s takeover of the 4th Defendant,

apart from being a breach of the assurances was unlawful in

the following respect:

(i) The dividend-in-specie exercise for the 2nd

Defendant’s takeover was undertaken in the Board

of the 4th Defendant without Gandingan Bersepadu’s

directors (5 out of 8) declaring their interest in the

exercise.

(ii) The 3rd Defendant’s Privatisation Agreement was

novated without formal approval of the Board and or

shareholders of the 4th Defendant.

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15. From a cursory look at the contents of the statement of claim, we

have no hesitation in concluding that they disclose a reasonable

cause or causes of action.

16. Having found that, we must then determine whether the aforesaid

causes of action can exist in light of the affidavit evidence before the

Court. The learned Judge premised her decision, in our view, mainly

on the following:

(a) That the Plaintiff’s locus in filing this suit is suspect in

that the 1st Defendant, 2nd Defendant and 3rd Defendant were

not parties to the Shareholders Agreement and the

Supplementary Agreement.

(b) That the Plaintiff had surrendered its right to

challenge the privatization in view of the Deed of Waiver.

(c) That the Plaintiff had received a large dividend of

RM15 million pursuant to the privatization exercise.

(d) That to sustain the Plaintiff’s claim would create

“commercial chaos”.

17. Reading the statement of claim and the affidavit evidence, one can

safely say that the Plaintiff’s main complaint is simply the breach of

the oral assurances given by the 1st Defendant which is linked to

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the signing of the Deed of Waiver, a fact relied on by the learned

Judge. It is the contention of the Plaintiff that they only signed the

Deed of Waiver premised on the 1st Defendant’s oral assurances.

Now whether that is true or not, cannot, in our view be determined

by affidavit evidence. Oral evidence must be called and be

subjected to cross examination. Only in this manner can the Court

determine whether the allegations by the Plaintiff is true or not.

18. Further there appears to be some dispute as to whether the Plaintiff

did suffer any loss from the privatization exercise. The learned

Judge found that the Plaintiff had received RM15 million in cash

dividend which the Plaintiff denied receiving and referred the Court

to Tab 7 of the Core Bundle page 1870. This document shows that

the Plaintiff had only received a sum of RM252,775.00. This is a

major dispute of fact which again can only be resolved in a full trial.

19. It is also our view that the learned Judge may have misconstrued the

Plaintiff’s locus to sue. The learned Judge questioned the Plaintiff’s

right to sue under the Shareholders agreement and Supplementary

Shareholders Agreement when the 1st, 2nd and 3rd Defendants are

not party to those agreements. It is of course the Plaintiff’s

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contention that it is not suing pursuant to those two agreements. Its

cause of action is premised on the oral assurances given by the 1st

Defendant. In our view this is an issue which should also be resolved

at the trial.

20. The Plaintiff needs only to show that there is a triable issue to the

Court and when shown the Court is duty bound to order a full trial.

From our analysis above, we have shown that there are disputes as

to the factual matrix leading to the privatization exercise. The

question of “commercial chaos”, with respect, cannot be a ground to

rely on to strike out a claim.

Conclusion:

21. The whole foundation of the Plaintiff’s claim is the oral assurance of

the 1st Defendant. And when on the face of the evidence, it shows

that the Plaintiff did suffer substantial loss by the implementation of

the privatization exercise, can we say that there is no reasonable

cause of action? The answer for reasons stated above is in the

negative. It is not the duty of the Court at this stage of the

proceedings to delve into an arduous exercise of determining what

is alleged by the Plaintiff is true or not. That would be at the trial

stage.

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22. Accordingly we allowed the appeal with costs in the cause. We also

ordered that the deposit be refunded to the Appellant.

t.t Dated : 8th July 2015 (DAVID WONG DAK WAH)

Judge Court of Appeal Malaysia

For the Appellant : Cyrus Das with him Mohd Rizal Bahari Tetuan Bahari & Bahari

For the 1st Respondent : M. Pathmanathan with him Shanti Pathmanathan Tetuan M. Pathmanathan & Co. For the 2nd Respondent : Kalearasu Veloo Messrs SF Chan & Co.

For the 2nd Respondent : Eric Clement Messrs Abdul Halim Ushah & Associates

Notice: This copy of the Court's Reasons for Judgment is subject to

formal revision.