Perbadanan Nasional Berhad V Yip Yee Foo & Anor

  

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THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION)

 

SUIT NO: D-22-1511-2008

 

PERBADANAN NASIONAL BERHAD

 

V

 

YIP YEE FOO & ANOR

 

GROUNDS OF JUDGMENT

 

The application in Enclosure 9 is an application for Summary Judgment pursuant to Order 14 of the Rules of the High Court 1980 by the Plaintiff against the Defendants. For the following:-

 

i. the sum of RM1,800,000.00 as at 30.6.2008 for payment of Fixed non Cumulative Preferential dividend at a rate of 10% per annum on the Preferential Shares which are payable half yearly;

 

ii. the sum of RM900,000.00 due and owing under the Trade Finance Facility together with interest thereon at the rate of 1.5 % per annum above the BLR calculated on a daily basis monthly rest from 1.3.2009 to date of full payment; and

 

The Application is supported by an Affidavit affirmed on 18 .8.2009.

 

Brief facts

 

The Plaintiff entered into an Agreement with one HK-Movie Entertainment Sdn. Bhd. (“the Company”) whereby the Plaintiff agreed to

 

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provide financial assistance by subscribing the Ordinary and Preference Shares the Company offered. A Subscription Shares agreement was executed between the Plaintiff, the Company, Amernodin bin Osman (Director and Shareholder of the Company and also was the Proponent), Focal House Holding Sdn. Bhd. and the 2nd Defendant as the existing Shareholders of the Company.

 

Under the Agreement the Plaintiff agreed to subscribe 2,000,000 units of Ordinary shares from the Company at the price of RM1 each and 18,000,000 Preference Shares of RM1 each. The Company was also to pay to the Plaintiff a fixed non cumulative Preferential dividend at the rate of 10% per annum, 10% net dividend of enlarged share capital during the tenure of the Plaintiff’s investment and to redeem the entire preference shares of the Plaintiff in the event within 2 years from the Plaintiff’s subscription.

 

The Proponent irrevocably agreed to provide an undertaking of Put Option to purchase the entire Plaintiff’s Call Shares amounting to 1,500,000 at a buy Back price of 9% per annum over the investment period.

 

The Terms of the Guarantee Agreement between the Plaintiff and the Defendants are as follows:-

 

a) to pay and satisfy the Plaintiff on demand as Principal debtor and not merely as surety foe all every and any part of the monies payable to the Plaintiff by the Company and/or the proponent as stipulated under the Agreement;

 

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b) the obligations of the Guarantors shall not be discharged except by performance and then only to the extent of the such performance;

 

Despite demands from the Plaintiff the defendants failed to rectify the breaches therefore the Plaintiff initiated this action against the Defendants.

 

It is the Plaintiff’s submission that the Guarantee is clear and unequivocal and therefore there are no triable issues.

 

The Defendant submits that there are triable issues namely,

 

1) whether the Plaintiff invested in the Company by subscribing for the Shares and that the Subscription Agreement was not a Loan Agreement ;

 

2) the Subscription Agreement was frustrated due to the termination of the License;

 

3) whether there was any profit or dividend due and payable to the Plaintiff for the year ended 31.12.2002 and 31.12.2002;

 

4) the Defendants have not breached the Subscription Agreement;

 

5) no proper demand made to the 1st Defendant in 2002;

 

6) whether the actions taken by the Plaintiff in exercising its Put Option to the Proponent and call upon the Company to redeem the Preference Shares were premature;

 

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7) whether the appointment of the Receiver and Manager for the Company was invalid; and

 

8) whether the amount claimed by the Plaintiff if due( which is denied by the Defendants) should be set-off against the monies received by the Receiver and manager.

 

The Defendant submits that the purpose of the Subscription Agreement was not to provide financial assistance to the Company but instead was an investment by the Plaintiff. The investment was to allow bumi and non- bumi parties to work together to carry out a business. The Defendant further submits that the provision in the Subscription agreement clearly described the intention of the parties. They referred to the some of the provisions of the Agreement such as Clause 14 Clause 1(v) section 7.01 and Clause 4 section 8.01. The Defendant submits that being an investment the Plaintiff took a risk as such the Plaintiff ought Subscription Agreement not claim from the Guarantors when the Plaintiff was unable to gain profit from the investment.

 

The 1st Defendant also submitted that the Company’s sole business was to distribute television programmes produced or distributed by Hong Kong TVBI (TVBI) in Mandarin, Cantonese and Bahasa Malaysia in video cassette tapes and video compact discs for rental in Malaysia and Brunei (the business). In order to operate the business the Company had to obtain a license from the main distributor, i.e. Original Ideas Enterprises Ltd (OIE) which is a company incorporated under the laws of British Virgin Islands. Vide a Sub-License Agreement dated 12.3.2001 between the Company and OIE, TVBI granted to the Company an exclusive sub-license for a period of 3 years from 1.1.2001 until

 

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31.12.2003. However the sub-license was terminated with effect from 19.8.2002 as there was change in the ownership and/or control of the Company due to substantial allotment of shares by the Company to the Proponent and the Plaintiff without the prior consent of OIE. The Company was therefore unable to carry on with its business activities. Therefore the Defendant submits since the Subscription agreement was frustrated the Parties to that Agreement need not perform its contractual obligation there under.

 

As for the payment of dividend it is the contention of the Defendant that the Company did not declare any dividend payable on the Preference Shares in 2001. There is therefore no dividend due or payable to the Plaintiff in 2001 and 2002.

 

The Plaintiff alleged that the Company and/or the Proponent breached the Subscription Agreement by giving a loan of RM3 million to Dat Lee Credit Sdn. Bhd. According to the 1st defendant the Loan was for a short term period pending negotiations between the Company and its creditors. The loan was a secured Loan and the plaintiff was aware of it.

 

In respect of the Put Option the defendant submits that under the Agreement the Plaintiff was entitled to exercise the Put Option at any time in the event of default by the by the Company and/or the Proponent. As at 17.12.2002 no dividend was declared payable to the Plaintiff as well there was no breach of the Agreement and therefore the Put Option Call was premature.

 

In National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300, the Federal Court has stated as follows,

 

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“…We think it appropriate to remind ourselves once again that in every application under O14, the first considerations are (a) whether the case comes within the order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under O 14. For the purposes of an application under O 14, the preliminary requirements –

 

(i) the defendant must have entered an appearance;

 

(ii) the statement of claim must have been served on the Defendant;

 

(iii) the affidavit in support of the application must comply with the requirements of r 2 of the O 14.

 

.. If the Plaintiff fails to satisfy either of these considerations, the

 

summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. This burden then shifts to the defendant to satisfy the court why judgment should not be given against him…”

 

The Plaintiff have satisfied the preliminary requirements as laid down in the Kayu Raya’s case that is,

 

1) the Defendants have entered appearance;

 

2) the Statement of Claim have been served on been served on the Defendants; and

 

3) the Affidavit in Support is in compliance with O14 r 2 Rules of the High Court (RHC).

 

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The burden is now shifted to the Defendants to satisfy the Court why Judgment should not be entered against them.

 

In Bank Negara Malaysia v. Mohd Ismail [1992] 1 CLJ 627 the

 

Supreme Court held that the duty of a Judge does not end as soon as the fact is asserted by one party, or denied or disputed by the other on affidavit. The Judge has a duty to reject such assertion or denial if such assertion or denial is equivocal or lacking in precision or is inconsistent with undisputed contemporary documents or is inherently improbable.

 

“…Under an O. 14 application, the duty of a Judge does not end as

 

soon as a fact is asserted by one party, and denied or disputed by the other on affidavit. Where such assertion, denial or dispute is equivocal or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable in itself, then the Judge has a duty to reject such assertion or denial, thereby rendering the issue as not triable. In our opinion, unless this principle is adhered to, a Judge is in no position to exercise his discretion judicially under an O. 14 application. Thus, apart from identifying the issues of fact or law, the Court must go one step further and determine whether they are triable. This principle is sometimes expressed by the statement that a complete defence need not be shown. The defence set up need only show that there is a triable issue. ”

 

The Subscriptions Agreement made on 10.5.2001 was between the following:-

 

1) the Plaintiff;

 

2) HK- Movie Entertainment Sdn. Bhd. (the Company);

 

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3) Amernodin bin Osman; and

 

4) Focal House Holding Sdn. Bhd.

 

Under the Agreement the Company agreed to issue and the Plaintiff agreed to subscribe 2 million Ordinary Shares at RM1 each and 18 million 10% non-cumulative redeemable no-convertible preference shares in the Company at the price of RM1 each. The assistance extended by the Plaintiff to the Company was to be utilized for specific purpose as outline on pg 2 of the agreement. The disbursements of the funds were in here Tranches. The Guarantors are as described under Article 2 Section 2.01 (19) i.e. the Defendants. Section 4.01 sets out the Conditions precedent. There was a Debenture and a Guarantee and Indemnity executed (MK-2 and MK-3). Under the Guarantee and Indemnity the Guarantors agreed to the following:-

 

1) the payment of the Buy-back of the ordinary shares by the Proponent,

 

2) the redemption of the Preference Shares from the Plaintiff by the Company within 2 years commencing from the date of the 1st disbursement by the Plaintiff

 

3) the Company is to achieve profit forecast during the tenure of the Plaintiff’s investment the profit is to be calculated as set out in the Indemnity;

 

4) the payment of the dividend on the Ordinary Shares of 10% on the enlarged share capital of the Company; and

 

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5) the payment by the Company of fixed dividend of 10% on the Preference Shares during the tenure of the Plaintiff’s investment.

 

The Defendant had contended that it was not a Loan but it was an investment. The Plaintiff on the other hand contends that it was in fact a financial assistance to the Company. In the Subscription Agreement reference was made to ‘assistance’ and ‘investment’. The period of two years commencing from the date of the subscription of the Subscription Shares by the Plaintiff with the option to extend is defined as “Investment Period’. In the Subscription Agreement there are also references to profit forecast indicating that there must be profit to trigger an obligation by the Parties to the agreement. As to the Guarantee whether it is a “on demand guarantee must be determined. There are issues which need to be determined by way of a full trial.

 

Guided by the principles enunciated in the cases above and after considering the Affidavits filed and submissions of the Counsels as well as the authorities cited it is my considered opinion that this case merits trial.

 

(HASNAH BINTI DATO’ MOHAMMED HASHIM)

 

Judicial Commissioner High Court of Malaya Kuala Lumpur.

 

15 July 2010

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