Adenan Bin Ismail V Naluri Corporation Bhd (76466-X) & 11 Lagi

  

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IN THE HIGH COURT OF MALAYA IN KUALA LUMPUR

 

SUIT NO.D-22-1770-2008 (COMMERCIAL DIVISION)

 

Between

 

ADENAN BIN ISMAIL

 

…PLAINTIFF

 

And

 

1. NALURI CORPORATION BHD (76466-X)

 

2. DATO’ SERI ADAM SANI BIN ABDULLAH

 

3. JENERAL (B) DATO’ SERI ABDULLAH BIN AHMAD @ DOLLAH BIN AMAD

 

4. DATO’ KHALID BIN MOHAMAD JIWA

 

5. LEE SZE SIANG

 

6. KAN WENG HIN

 

7. WONG PENG YEW

 

8. HAJI MOHD RADZUAN BIN ABDULLAH

 

9. PETER MADHAVAN

 

10. TENGKU AZMAN IBNI SULTAN ABU BAKAR

 

11. ATLAN HOLDINGS BERHAD (173250-W)

 

12. DARUL METRO SDN BHD .DEFENDANTS

 

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GROUND OF JUDGMENT

 

1. Applications were made by the second to 12th defendants (in enclosure 8,18 and enclosure 21) to strike out the plaintiff Statements of Claim under O 18 r 19 and/or under Order 92 of the Rules of the High Court on the ground that it did not disclose a reasonable cause of action, was frivolous, vexation and otherwise an abuse of the process of the Court.

 

Facts and Chronology

 

2. The plaintiff is a minority shareholder of Naluri Corporation Bhd (1st defendant). He commenced an action against the defendant in his own and also on behalf of and for the benefit of the 1st defendant except the 2 to 12th defendant. The plaintiff in paragraph 6 of his statement of claim under the title ‘Derivative Action’, pleaded that he brings this action for the 1st defendants benefit and under the exceptions to the rule in Foss v Harbottle.

 

3. The 2nd to 10th defendants were Directors of the 1st defendant while the 11th defendant is a company that is listed on the Malaysia Securities

 

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Exchange Berhad. The 12th defendant is the 11th defendant’s wholly owned subsidiary.

 

4. The plaintiff claims that the circular dated 12.02.2007 issued by the 2nd to the 10th defendants for the approval of the sale of Naluri assets at RM 435,432,000.00 to the 11th defendant was false and misleading.

 

5. Hence the Plaintiff contended that the approval of the sales of the 1st defendant’s assets to the 11th defendant was invalid and void on the ground that the 1st defendants shareholders approved the sale of the said assets relying on the misrepresentations and false information by the defendants.

 

6. The reliefs asked by the plaintiff are substantially:

 

(i) declarations against the 2nd to 10th defendants for breach of fiduciary duties and breach of trust to Naluri.

 

(ii) declaration that the 11th and 12th defendants are liable to account to Naluri for the difference between the actual value of Naluri’s assets and the price for the assets.

 

(iii) rescission on the Business Agreement and subscription agreement.

 

(iv) Losses and damages.

 

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7. The defendants have filed an application under O 18 R 19 (1) and under the inherent jurisdiction of the Court. The defendants applications are based on the following grounds;

 

a. The derivative action by the plaintiff is defective as there is no express statement in the pleading that the action is being brought for the benefit of the company named as defendant.

 

b. Another shareholder of the 1st defendant has commenced Suit No.D2-22-486-07 (the Tajudin’s Suit) in the High Court at Kuala Lumpur on behalf of himself, the 1st defendant and all other shareholders of the 1st defendant over them. The cause of action is similar to the present claim. Therefore, the defendants contended that there is duplicity and multiplicity and an abuse of the court process to allow the defendants to commence multiple actions arising from the same transaction from its shareholders.

 

c. The plaintiff is estopped from challenging the transaction and seeking relief in this action on the ground of res judicata because the court in

 

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the Tajudin’s Suit has dismissed the application of another shareholder of the 1st defendant.

 

8. It is observed that in the Tajudin’s Suit, Tan Sri Dato’ Tajudin Ramli, one of the shareholders of the 1st defendant filed a claim against the 1st defendant alleging that the 2nd defendant to the 10th defendants had issued a false circular in relation to an Extraordinary General Meeting of the 1st defendant which was held on 08.03.2007 for the purpose of approving the disposal of the 1st defendant assets to the 11th defendant at RM 435,432,000.00.

 

9. The other defendants in the Tajudin’s Suit were RHB Investment Bank Berhad and Aseanbankers Malaysia Berhad. However these two defendants were not cited as defendants in the present suit before this court.

 

10. RHB Investment Bank Berhad and AseanBankers Malaysia Berhad were appointed to advise the 1st defendant and its shareholders with regard to the sale of the 1st defendant assets to the 11th defendant. The plaintiff in the Tajudin’s Suit contended that AseanBankers has failed to advise the 1st

 

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defendant and its shareholders properly and hence has breach its contractual /statutory duties.

 

11. The relief sought by the plaintiff in the Tajudin’s Suit substantively relates to the following:

 

i) A declaration that the Resolutions passed and approval given at the Extraordinary General Meeting (EGM) pursuant to the false circular are void and of no effect.

 

ii) An order to restrain the 1st defendant from completing the proposed disposal of the assets to Darul Metro Sdn.Bhd (the 12th defendant).

 

iii) Damages.

 

12. Upon an application made by the defendants in the Tajudin’s Suit to strike out the plaintiff s amended Statement of Claim under O 18 R 19, the learned Judge allowed the defendants’ application. I have perused the decision of the learned Judge and it is observed that he allowed the defendants application on the ground that the circular was discussed at the EGM and the shareholders therefore cannot be said to have been misled.

 

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The shareholders present and voting could have voted otherwise if they disagreed with the proposal, for the sale of the 1st defendant’s assets.

 

Derivative Action

 

13. The Plaintiff in the present suit in its amended Writ of Summons stated that he is suing on behalf and for the benefit of the 1st defendant (except 2nd to 12th defendants).In his Statement of Claim the plaintiff pleaded that he is bringing this action for the 1st defendant’s benefit and under the exceptions to the rule in Foss v Harbottle. The defendants submitted that the plaintiff claim is not a derivative action because it lacked the elements of such an action as in the rule Foss v Harbottle (1843) 67 ER 189 and hence should be struck off.

 

14. The rule in Foss v Harbottle was referred to and explain by Gopal Sri Ram JCA (as he then was) in the case of Tang Kwor Ham & Ors v Pengurusan Danaharta Nasional Berhad & Ors (2006) 5 MLJ as

 

follows:

 

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There are several exceptions to the rule in Foss v Harbottle. In the case

 

of Tan Guan Eng & Anor v. Ng Kweng Hee & Ors (1992) 1 MLJ 487, the exceptions referred to by Justice Edgar Joseph are as follows:

 

i) Ultra Vires Acts : ‘in cases where the acts complained of are wholly Ultra Vires the company or association the rule has no application because there is no question of the transaction being confirmed by any majority’.

 

ii) Fraud on the minority: ‘Where what has been done amounts to what is generally called in these cases as a fraud on the minority and the wrongdoers are themselves in control of the company. The rule is relaxed in favor of the aggrieved minority who are allowed to bring what is known as ‘a minority shareholders’ action on behalf of themselves and all others’.

 

iii) Special majorities: an individual member (is not) prevented from suing if the matter is one which could validly be done or sanctioned, not by a simple majority of the member but only by some special majority’.

 

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iv) Personal rights: where ‘the personal and individual rights of members of (the plaintiffs) have been invaded’. The rule ‘has no application at all.

 

v) When the justice of the case requires it, though this has been doubted by the English Court of Appeal in Prudential Assurance Co. Ltd v Newman Industries (No.2).

 

15. I am unable to agree with the submission by the learned counsel for the defendants that the statement of claim should be struck out on the ground that the plaintiff has omitted to state the representative nature of the action on the title to the writ.

 

16. In this respect as I have mentioned above, the plaintiff has cited the company (1st defendant) and the other wrongdoers as the defendants. The pleadings also disclosed that the action is a derivative action and there is an express statement in the pleading that the action is being brought for the benefit of the company named as the 1st defendant.

 

17. In the instant case, the plaintiff has met with the requirements laid down in the case of Abdul Rahim bin Aki v Krubong Industrial Park

 

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(Melaka) Sdn. Bhd. & Ors [1995] 3 MLJ 417 save for the omission of the

 

words “representative nature” to the title of the action. I am of the opinion that this omission is not fatal and it can be cured.

 

18. In the case of Tang Kwor Ham v Pengurusan Danaharta Nasional

 

Berhad & Ors [2006] 5 MLJ 60, Gopal Sri Ram JCA (as he then was) said that there is really no magic in the expression ‘derivative action’. It is merely a procedural device introduced by the Court of Chancery as a variation of another rule of procedure.

 

Abuse of the Court Process/Res Judicata

 

19. I now go to take the second argument on which the defendant’s application is based. One of the main grounds for striking out the plaintiff s claim is that the plaintiffs present action would constitute a multiple of proceedings as another shareholder of the 1st defendant, Tan Sri Dato’ Tajudin Ramli had filed similar proceedings in the Tajudin’s Suit. The other ground is that the Court in Tajudin’s Suit has dismissed the action and hence the present suit should not have been heard by this Court on the ground of Res Judicata.

 

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20. I have perused carefully the cause of actions in this present suit and the Tajudin’s Suit and found that the present suit substantially arose out of the same facts as to the cause of action and relief sought in the earlier suit. The cause of action in both suits relates to the alleged breach of duties by the 2nd to the 10th defendants by issuing a false/misled circular dated 12.02.2007 to the shareholders resulting in the approval of the sale of the 1st defendant assets at RM 435,432,000.00 to the 11th defendant through the 12th defendant. The primary question for the court is whether the approval of the sale of the 1st defendant assets to the 11th defendant at the EGM is valid.

 

21. Although the prayers in this action may appear different from the Tajudin’s Suit, the relief claimed was substantially the same as the relief obtained in the Tajudin’s Suit. As the relevant relief had already been dismissed in the said suit it is an abuse of the process of the court and in the public interest that there should be end to this litigation.

 

22. A lucid exposition on the doctrine of res judicata, that is to say, doctrine of estoppel per rem judicatum can be found in Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn.Bhd (1995) 3 MLJ 189.

 

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Peh Swee Chin FCJ, having distilled from a host of authorities on the doctrine of res judicata stated :

 

“What is res judicata? It simply means a matter adjudged, and its significance lies in its effect of creating an estoppel per rem judicatum. When a matter between two parties has been adjudicated by a court of competent jurisdiction, the parties and their privies are not permitted to litigate once more the res judicata, because the judgment becomes the truth between such parties, or in other words, the parties should accept it as the truth; res judicata pro veritate accipitur. The public policy of the law is that, it is in the public interest that there should be finality in litigation — interest rei publicae ut sit finis litium. It is only just that no one ought to be vexed twice for the same cause of action — nemo debet bis vexari pro eadam cause. Both maxims are the rationales for the doctrine of res judicata, but the earlier maxim has the further elevated status of a question ofpublic policy.

 

Since a res judicata creates an estoppel per rem judicatum, the doctrine of res judicata is really the doctrine of estoppel per rem judicatum, the latter being described sometimes in a rather archaic way as estoppel by record. Since the two doctrines are the same, it is no longer of any practical

 

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importance to say the resjudicata is a rule of procedure and that an estoppel per rem judicatum is that of evidence. Such dichotomy is apt to give rise to confusion.

 

… there are in fact two kinds of estoppel per rem judicatum. The first type relates to cause of action estoppel and the second, to issue estoppel, which is a development from the first type.

 

The cause of action estoppel arises when rights or liabilities involving a particular right to take a particular action in court of a particular remedy are determined in a final judgment and such right of action in the cause of action, merges into the said final judgment; in laymen’s language, the cause of action has turned into the said final judgment. The said cause of action may not re-litigated between the same parties because it is res judicata.

 

In order to prevent multiplicity of actions and also in order to protect the underlying rationales of estoppel per rem judicatum and not to act against them, such estoppel of cause of action has been extended to all other causes of action (based on the same facts or issues) which should have been litigated or asserted in the original earlier action resulting in the final judgment, and which were not, either deliberately or due to inadvertence.

 

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On the other hand, the issue estoppel literally means simply an issue which a party is estopped from raising in a subsequent proceeding. However, the issue estoppel, in a nutshell, from a consideration of case law, means in law a lot more, ie that neither of the same parties or their privies in a subsequent proceeding is entitled to challenge the correctness of the decision of a previous final judgment in which they, or their privies, were parties.

 

This sounds like explaining a truism, but it is the corollary from that statement that is all important and that could have given birth to the controversies alluded to above; the corollary being that neither of such parties will be allowed to adduce evidence or advance any argument to contradict such decision.

 

It is important to bear in mind the manner in which the issue estoppels operates in preventing such contradiction of the previous judgment.

 

There is one school of thought that issue estoppel applies only to issues actually decided by the court in the previous proceedings and NOT to issues which might have been and which were not brought forward, either deliberately or due to negligence or inadvertence, while another school of

 

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thought holds the contrary view that such issues which might have been and which were not brought forward as described, though not actually decided by the court, are still covered by the doctrine of res judicata ie doctrine of estoppel per remjudicatum.

 

We are of the opinion that the aforesaid contrary view is to be preferred; it represents for one thing, a correct even though broader approach to the scope of issue estoppel. It is warranted by the weight of authorities to be illustrated later. It is completely in accord or resonant with the rationales behind the doctrine of res judicata, in other words, with the doctrine of estoppel per rem judicatum. It is particularly important to bear in mind the question of the public policy that there should be finality in litigation in conjunction with the exploding population; the increasing sophistication of the populace with the law and with the expanding resources of the courts being found always one step behind the resulting increase in litigation ”.

 

23. In Lesco Development Corp.Sdn.Bhd v Malaysia Building Society (1988) 2 MLJ the Supreme Court held that it is undesirable to allow a situation where two different courts would try and determine the same issues arising between the same parties relating to the same subject. In this respect,

 

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both the plaintiffs in the instant case and the Tajudin’s Suit are minority shareholders of the 1st defendant’s.

 

24. Learned counsel for the plaintiff submitted that this court must satisfy that the parties in the Tajudin’s Suit and this instant case are the same parties.

 

25. Even if the plaintiffs in the instant case and in the Tajudin’s Suit are not the same parties, Abdul Malek Ahmad J (as the late President of the Court of Appeal) held in Wong Peng Yan Benjamin v Genting Bhd & Anor [1993]) 3 MLJ 713 that for Res Judicata to apply, the parties need not be the same. He further stated that :

 

“Where an issue had for all practical purposes been decided in a court of competent jurisdiction the court would not allow that issue to be raised in separate proceedings between different parties arising out of identical facts and dependent on the same evidence, since not only was the party seeking to relitigate the issue prevented from doing so by issue estoppel but it would also be an abuse of process to allow the issue to be retiligated”.

 

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26. In conclusion, the decision in the Tajudin’s Suit relates substantively and fundamentally with the same facts and issues in the instant case. Hence the plaintiff is estopped from raising the issues sought to be raised in this court as the same issues were or could have been raised in the Tajudin’s Suit. In any event, whether the plaintiff agrees or not he was deemed a party to the earlier suit. The question now raised has already been heard and decided.

 

27. For the reasons given, the defendants application is allowed with costs. Costs fixed at RM10,000.00 for encl. 8 and RM5,000.00 each for encl. 18 and encl. 21.

 

Dated : 18.05.2010

 

(DATUK HANIPAH BINTI FARIKULLAH)

 

JUDICIAL COMMISSIONER HIGH COURT KUALA LUMPUR (COMMERCIAL DIVISION)

 

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Solicitors :

 

1. En. Joseph Yeo for Defendant

 

Tetuan Joseph Yeo Advocates & Solicitors 11th Floor, Menara Atlan, 161B,

 

Jalan Ampang, 50450 Kuala Lumpur

 

2. En. Kiru & Yong for Defendant Tetuan Kiru & Yong Damansara Intan E-Business Park,

 

Pintu masuk No. 6,

 

Suite 1230, Aras 12, Blok A,

 

No. 1 Jalan SS20/27,

 

47400 Petaling Jaya, selangor

 

3. En. Chew Chang Min bersama Cik Sia Siew Mun Tetuan Sia Siew Mun & Co.

 

Unit 29-4A, Jalan Loke Yew 55200 Kuala Lumpur

 

Aini/Alasan Penghakiman/D-22-1770-2008/Words : 3,145

 

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