Teow Tek Soon V Koay Chin Teong


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CIVIL APPEAL NO. P-02(NCVC)(W)-1349-07/2016












(Dalam Mahkamah Tinggi Malaya Di Pulau Pinang Guaman No: 22NCVC-1-01/2015)




Koay Chin Teong






1. Teow Tek Soon


2. Ang Soon Lee … Defendants












[1] The appeal before us raised two main issues for determination. Firstly, whether there was a valid oral agreement to vary the purchase price of shares sold by the respondent/plaintiff (‘the plaintiff’) to the appellant/1st defendant (‘1st defendant’) and to the 2nd defendant, who is not a party to this appeal.


[2] It is not in dispute that there was no written sale of shares agreement executed between the parties. Therefore, the only documents adduced to support the sale of shares from the plaintiff to the 1st defendant and the 2nd defendant were the share transfer forms, Form 32A. The plaintiff argued that by virtue of an oral agreement, parties had agreed upon a purchase price for the shares far higher than that recorded in the share transfer forms, i.e. RM1-00 per unit. The High Court did not agree with the submission of the plaintiff that the parties had agreed upon the purchase price of RM10-71 per unit. However, the High Court found that parties had agreed upon the purchase price of RM3-67 per unit.


[3] The second issue raised was whether the 1st defendant and the 2nd defendant had paid the purchase price of the shares to the plaintiff.


[4] Learned counsel for the 1st defendant submitted that the price had been set off by a contra arrangement involving another debt owed by the plaintiff to the 1st defendant and the 2nd defendant. The High Court rejected this submission and held that the 1st defendant and the 2nd




defendant were liable to pay the plaintiff the purchase price of the shares, recalculated at RM3-67 per unit.


[5] We allowed the appeal and append the reasons for our decision below. The salient facts are also set out below. The parties will be referred to as they were in the High Court for ease of reference.


Salient Facts


[6] The parties are directors and shareholders of a company known as Champ Steel Sdn Bhd (‘Champ Steel’).


[7] Champ Steel was established on 30 April 1997 and has a total of 750,000 units of shares selling for RM1-00 each. It carries out the business of fabrication of steel structures.


[8] The plaintiff resigned as a director of Champ Steel on 30 April 2007.


[9] On 13 November 2007, the plaintiff transferred 147,500 Champ Steel shares to the 1st defendant and 132,501 Champ Steel shares to the 2nd defendant. This is evidenced in two Form 32A dated 13 November 2007, one for the transfer of shares to the 1st defendant for a consideration of RM147,500-00 and another for the transfer of shares to the 2nd defendant for a consideration of RM132,501 -00.


[10] However, the plaintiff claimed that the reason he sold his shares was to settle his debts to his creditors because he had been served with a Bankruptcy Notice No. 29-31-2007. He needed the sum of RM3 million to avoid being made a bankrupt. For this purpose, he claimed he entered




an oral agreement with the defendants for the sale of all his shares in Champ Steel to them for the total consideration of RM3 million. This would mean that each share of Champ Steel cost RM10-71.


[11] The plaintiff did not explain, either in his statement of claim or his witness statement, the reason why the transfer forms for the shares did not reflect the actual purchase price of the shares. He merely stated in the statement of claim that the alleged deliberate misstatement of the purchase price of the shares in the transfer forms was done by him upon the request of the defendants. During cross-examination, the plaintiff had no reasonable explanation for misstating the purchase price of the shares at RM1-00 per unit other than that alleging that the 1st defendant had instructed him to do so.


[12] The 1st defendant disputed this account by the plaintiff and submitted that the purchase price stated in the transfer forms was correct. Further, the 1st defendant denied not giving the plaintiff consideration for the shares. The 1st defendant submitted that the money owed to the plaintiff for the Champ Steel shares had been set off by a contra arrangement for the debts owed by the plaintiff to the defendants.


[13] The plaintiff was adjudged a bankrupt on 7 April 2010. On 10 October 2014, the Insolvency Department granted the plaintiff sanction to commence this action. Subsequently, the plaintiff appointed Messrs Aswar Simon & Azhar as his solicitors and upon his instructions, the said law firm issued a notice of demand dated 3 November 2014 to the defendants. Thereafter, the plaintiff filed the writ on 5 January 2015.




[14] The plaintiff admitted that before the writ was filed, he had not issued a notice of demand for the payment of the money he claimed the defendants owed to him. During cross-examination, the plaintiff alleged that he followed up on the debt by telephone because he was advised by a solicitor that as a bankrupt, he could not legally send the defendants a notice of demand for the debt allegedly owed by them. When pressed by the 1st defendant’s counsel to reveal the name of the solicitor who allegedly dispensed such advice, the plaintiff avoided answering the question put to him.


[15] When asked why he waited for so long before pursuing his claim against the defendants, the plaintiff alleged that in the telephone calls between him and the defendants, the defendants repeatedly put off the date of payment of the purchase price for the shares with the excuse that they were waiting for the preparation of a share valuation report.


[16] The ‘report’ was prepared by Messrs Ooi & Associates, Chartered Accountants in a letter dated 31 January 2010. This report valued the shares based on the audited accounts as at 31 May 2010 at RM3-67 per unit. The plaintiff alleged that the delay in obtaining a valuation report was due to the fact that he had repeatedly asked the defendants to expedite payment. However, the 1st defendant submitted that the valuation report was prepared for the 2nd defendant who intended to sell his shares to the 1st defendant. However, since the 2nd defendant refused to attend court, the High Court judge drew an adverse inference against the 1st defendant on this issue.




Findings of the High Court


[17] The High Court stated that the 2nd defendant was unco-operative and refused to attend court to testify despite being subpoenaed. On the first hearing date, the 2nd defendant’s solicitors informed the court that on the Friday of the preceding week, they had filed an application to be discharged from acting for him on the basis that he did not give them instructions for the conduct of the matter. The High Court allowed the discharge application and proceeded with the hearing in the absence of the 2nd defendant. Therefore, the High Court held that the 2nd defendant had no defence to the plaintiff’s claim and based on the 2nd defendant’s absence in court, drew an adverse inference against the 1st defendant.


[18] Significantly, the learned High Court judge stated in the grounds of judgment that he found that the plaintiff had failed to prove the existence of an oral agreement between the parties for the sale of shares at the purchase price of RM3 million. However, the learned High Court judge went on to hold that the finding on the existence of the oral agreement did not preclude the court from deciding on the plaintiff’s claim because the court had the duty to determine the actual agreed price of the shares.


[19] After undertaking a consideration of the evidence, the High Court held the price of RM10-71 per share as per the plaintiff’s claim was too exorbitant. However, the learned High Court judge accepted the submission of the plaintiff’s counsel that the plaintiff had, in order to avoid suffering further losses, acquiesced to the price of RM3-67 per share as per the share valuation report dated 31 January 2010, which valued each share at RM3-67 in the year 2010. Therefore, the High Court recalculated the price of the shares and held that the 1st defendant owed the plaintiff




the sum of RM541,325-00 while the 2nd defendant owed the plaintiff the sum of RM486,278-67.


[20] The High Court found that the 1st defendant was not honest in claiming that the full purchase price for the shares had been set off by a contra arrangement. The defendants claimed that the plaintiff owed the 1st defendant the sum of RM147,500-00 and owed the 2nd defendant the sum of RM132,501-00.


[21] In relation to the 2nd defendant’s claim, the High Court held that since the 2nd defendant did not testify, and that the 1st defendant was not qualified to testify on behalf of the 2nd defendant, the claim by the 2nd defendant had not been proven.


[22] In relation to the 1st defendant, the High Court held that it was improbable that the plaintiff was indebted to the defendants for exactly the same sum as the purchase price of the shares, and there was no admissible evidence to prove that the plaintiff did in fact owe the defendants that sum.


[23] On the issue of limitation, the High Court was of the view that the cause of action only accrued on 31 January 2010, i.e. the date of the share valuation report. From this report, which valued the shares at RM3-67 per unit, the plaintiff realised that the defendants were not going to pay him the sum of RM3 million. The writ was filed on 5 January 2015, i.e. slightly less than 5 years from the date the cause of action accrued. Therefore, the plaintiff was not time-barred from filing this claim.




[24] The High Court allowed the plaintiff’s claim and entered judgment in terms of paragraphs 14(a) and (b) of the plaintiff’s statement of claim, ordering the 1st defendant to pay the plaintiff the recalculated sum of RM541,325-00 (instead of the plaintiff’s claim for RM1,580,351-50) and the 2nd defendant to pay the plaintiff the sum of RM486,278-67 (instead of the plaintiff’s claim for RM1,419,648-50). Both sums were stipulated to be subject to interest at 5% per annum calculated from the date of filing of the writ until full realisation.


[25] The High Court dismissed the plaintiff’s claim for general damages, holding that the plaintiff failed to prove this claim. The High Court also ordered the defendants to pay costs of RM30,000 to the plaintiff.


[26] Dissatisfied, the 1st defendant appealed. The 2nd defendant did not appeal.


Decision of the Court of Appeal


[27] Having perused the appeal records and after hearing the submissions of learned counsel, we find that there are merits in the appeal. Our reasons are appended below.


The Court Cannot Consider Issues Which Were Not Pleaded


[28] It is trite that the court cannot consider issues which were not pleaded. The oft-cited case on this issue is that of Janagi v Ong Boon Kiat [1971] 1 LNS 42; [1971] 2 MLJ 196 where Sharma J, relying on the judgment of Scrutton LJ in the case of Blay v. Pollard & Morris [1930] 1 KB 628, had this to say:




“A statement of claim and the defence (together with the reply, if any) constitute the pleadings in a civil action. It is on the examination of the pleadings that the Court notices the differences which exist between the contentions of the parties to the action. In the words the matters on which the parties are at issue are determinable by an examination of the pleadings. An issue arises when a material proposition of law or fact is affirmed by one party and denied by the other. The Court is not entitled to decide a ‘suit on a matter on which no issue has been raised by the parties. It is not the duty of the Court to make out a case for one of the parties when the party concerned does not raise or wish to raise the point. In disposing of a suit or matter involving a disputed question of fact it is not proper for the Court to displace the case made by a party in its pleadings and give effect to an entirely new case which the party had not made out in its own pleadings. The trial of a suit should be confined to the pleads on which the parties are at variance. If the parties agree to a factual position then it is hardly open to the Court to come to a find into, different from such agreed facts. The only purpose in requiring pleadings and issues is to ascertain the real difference between the parties and to narrow the area of conflict and to see just where the two


sides differ……………………………………………….


A judgment should be based upon the issues which arise in the suit and if such a judgment does not dispose of the questions as presented by the parties it renders itself liable not only to grave criticism but also to a miscarriage of justice. It becomes worse and is unsustainable if it goes outside the issues. Such a judgment cannot be said to be in accordance with the law and the rules of procedure. It is the duty of the Courts to follow the rules of procedure and practice to ensure that justice is done. These rules are meant to be observed and respected. The faith and the confidence of the public in the law, the Constitution and the Government depends to a fairly large extent on the way the machinery of justice functions and it is the duty of those who man that machinery to realise that what they do does not in any way tend to diminish that faith.” (emphasis ours)




[29] The decision of Sharma J has been approved by and relied upon by the highest court in the land, most recently the Federal Court in the cases of Saiman Umar v Lembaga Pertubuhan Peladang [2015] 6 MLJ 492, [2015] 9 CLJ 153 and SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464, [2016] 1 CLJ 177.


[30] Therefore, it appeared to us that in granting judgment for the plaintiff based on the unpleaded share purchase price of RM3-67, the High Court had erred.


Principles of Appellate Intervention


[31] The principles of appellate intervention are trite. The Court of Appeal will very rarely reverse a trial judge’s findings of primary fact and then only if it is satisfied that the trial judge was plainly wrong (see for example Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, Gan Yook Chin v Lee Ing Chin [2004] 4 CLJ 309, UEM Group Bhd v. Genisys Integrated Engineers Pte Ltd & Anor [2010] 2 MLRA 668, the old English cases of Yuill v Yuill [1945] P 15, 19 per Lord Greene MR and Thomas v Thomas [1947] AC 484 per Lord Thankerton, and more recently in the United Kingdom, In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] 1 WLR 1911, Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 [2014] ETMR 26, Henderson v Foxworth Investments Limited [2014] UKSC 41, Carlyle v Royal Bank of Scotland plc [2015] UKSC 13, Watson Farley and Wiliams v Ostrovizky [2015] EWCA Civ 457, and Elliston v Glencore Services (UK) Ltd [2016] EWC CIV 407).




[32] However, this is one of the rare cases where we are constrained to interfere with the decision of the learned judge. We find that the learned High Court judge erred in law and in fact when, having found that the plaintiff had failed to prove his claim for the purchase price of the shares at RM10-71 per unit, she went on to hold that the court was entitled and indeed, duty bound to make a decision on the actual purchase price of the shares. The High Court erred in finding that the actual purchase price of the shares was RM3-67 per unit, despite the fact that this price was not pleaded by the plaintiff and was only raised by his counsel during submissions.


[33] Further, if the High Court had conducted a thorough evaluation of the evidence, a red flag would have surely been raised from the fact that the plaintiff could not logically explain the reason for recording in Form 32A that the shares cost RM1-00 each, but alleged that there was an oral agreement between the parties that the shares would cost RM10-71 each.


[34] The learned High Court judge found that the price of RM10-71 per unit was unreasonably high to pay for the shares, considering the fact that from a valuation of the shares between the years 2006 – 2010, the value per unit only fluctuated slightly, increasing slightly each passing year. At its lowest, the shares sold at RM2-40 per unit in 2006, while at its highest, the shares sold at RM3-67 in 2010.


[35] Even if there had been an agreement between the parties to falsify the consideration sum in Form 32A (which would have been an illegality), the learned High Court judge should not have awarded the plaintiff the price of the shares as computed in 2010 by the accountants. The transfer of the shares took place on 13 November 2007. Therefore, if at all the




plaintiff is entitled to judgment, the High Court should have given judgment on the basis of the share price as at 2007, which the accountant found to be RM2-67 per unit.


[36] In any case, the learned High Court judge herself acknowledged in her grounds that the purchaser and the seller are free to agree to fix the contract price at any price (“Sebenarnya, harga saham boleh ditetapkan atas persetujuan pembeli dan penjual.”). Barring any convincing evidence to the contrary, the purchase price of the shares must be taken to be RM1-00 as per the Form 32A.




[37] Having decided that the High Court had erred in giving judgment for the plaintiff on a claim which was not pleaded, it is not necessary for us to consider the issue of limitation as it is a moot point, as well as the issue of whether there was a contra arrangement. However, suffice for us to remark upon the lax attitude of the plaintiff in neglecting to issue a notice of demand to the defendants until after nearly 7 years had passed from the date of transfer of the shares.


[38] Even if it was true that a solicitor had advised the plaintiff that he had no legal capacity to issue a notice of demand to the defendants, a consideration of the relevant dates would show that this argument is a mere afterthought. The plaintiff was only adjudged a bankrupt on 7 April 2010. Between the date of the transfer of the shares into the names of the defendants on 13 November 2007 and the date the plaintiff was adjudged bankrupt, nearly 2 years and 5 months elapsed. It is unreasonable for the plaintiff not to have engaged solicitors to issue a notice of demand to the




defendants during this time period. This is especially the case since the plaintiff claimed that he needed the alleged purchase price of the shares in the sum of RM3 million to be paid by the defendants in order to avoid bankruptcy.


[39] The court should not countenance the laxity on the part of litigants in pursuing their claims. It is for this reason the doctrine of limitation exists. In Malaysia, the legislation providing for the limitation of actions was enacted as the Limitation Act 1953 (revised 1981) [Act 254]. Section 6 of the Limitation Act provides that for actions such as the present which is premised on a breach of contract, that there is a time-bar after the expiry of 6 years from the date of accrual of the cause of action.


[40] In the renowned Supreme Court case of Credit Corp (M) Bhd v. Fong Tak Sin [1991] 2 CLJ 871; [1991] 1 CLJ (Rep) 69, Hashim Yeop Sani CJ (M) stated the rationale for the doctrine of limitation as follows:


“The doctrine of limitation is said to be based on two broad considerations. Firstly there is a presumption that a right not exercised for a long time is non-existent. The other consideration is that it is necessary that matters of right in general should not be left too long in a state of uncertainty or doubt or suspense.


The limitation law is promulgated for the primary object of discouraging plaintiffs from sleeping on their actions and more importantly, to have a definite end to litigation. This is in accord with the maxim interest reipublicae ut sit finis litium that in the interest of the State there must be an end to litigation. The rationale of the limitation law should be appreciated and enforced by the Courts.”




[41] Recently, this court in Husli Mok v. Superintendent of Lands & Survey & Anor [2013] 3 MLJ 666, [2012] 1 LNS 969 referred to and applied the case above.


[42] Therefore, even if the plaintiff applied to amend his pleadings or if for some other reason such as estoppel or admission, the defendants are barred from objecting to the share valuation at RM3-67, we find that the plaintiff has been “sleeping on his rights” for nearly 7 years and is not entitled to pursue this action, as it is barred by limitation.




[43] For the reasons stated above, we find that the learned High Court judge had erred in law and fact in allowing the plaintiff’s claim on a basis that was never pleaded. The decision of the High Court is also inconsistent with the rejection of the plaintiff’s claim for the sale of shares at RM10-71 per share. The court should have either accepted the case put forward by the plaintiff or rejected the same. Having decided to reject the plaintiff’s claim for the share price at RM10-71, it was not open to the court, with the utmost respect, to formulate and make out a case for the plaintiff by finding that the plaintiff was entitled to the sale price of the subject shares at RM3-67 per unit. This latter claim was never pleaded and only sought as a compromise recourse by the plaintiff’s counsel in the course of submissions well after trial. This comprises the primary reason for our allowing the appeal. Therefore, we set aside the decision of the High Court.




[44] We ordered costs of RM7,000-00 be paid by the plaintiff to the 1st defendant. The deposit is refunded to the 1st defendant.




Nallini Pathmanathan




Court of Appeal Malaysia


Dated: 10 August 2017


For the Appellants : Kanesh Sundrum Messrs Kanesh Sundrum & Co. Advocates & Solicitors No. 1-1 -A, 1st Floor NB Plaza, 3000 Jalan Baru 13700 Prai


For the Respondent : Simon Tan Hong Jin (Ooi Chin Zin with him) Messrs Aswar Simon & Azhar Advocates & Solicitors 41-5-4, 5th Floor Wisma Prudential Cantonment Road 10250 Georgetown



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