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2025 MarsdenLR 1413
HIGH COURT MALAYA KUALA LUMPUR
MYCREATIVE VENTURES SDN BHD – Appellant
Versus
VISION ANIMATION SDN BHD & ANOR – Respondent
[Civil Suit No: WA-22NCC-459-07/2024]
The contractual terms of the Share Subscription Agreement and Letter of Undertaking impose immediate payment obligations on the guarantor upon default, without requiring further preconditions or notifications.
Headnote:(A) Contracts Act 1950 - Share Subscription Agreement - Letter of Undertaking - Failure to redeem Redeemable Convertible Preference Shares (RCPS) - Plaintiff sought summary judgment for RM7,032,910.96 after Defendants failed to redeem RCPS by due date - Obligations under SSA and Letter of Undertaking established direct liability for payment upon default. (Paras 3, 5, 31, 53)
(B) Summary Judgment - No triable issues - Court found no sustainable defense against Plaintiff's claim based on contractual obligations - Second Defendant's application to strike out the claim dismissed. (Paras 12, 53)
Facts of the case:
The case arose from a financial arrangement where the Plaintiff subscribed to RCPS under an SSA, which required the First Defendant to redeem the shares after five years. The First Defendant failed to redeem by the due date, prompting the Plaintiff to seek payment from both Defendants.
Findings of Court:
The court found that the Second Defendant had a clear obligation to pay the Redemption Amount upon the First Defendant's default and that the Plaintiff's claim was properly pleaded.
Issues: The main issues included whether the contractual terms created an enforceable payment obligation against the Second Defendant, and if the Second Defendant's obligations were discharged due to the lack of notice of redemption.
Ratio Decidendi: The court concluded that the contractual provisions imposed immediate payment obligations on the Second Defendant upon the First Defendant's failure to redeem, and that the Plaintiff's reliance on the Letter of Undertaking and SSA was justified.
Result: Summary Judgment application allowed; Striking Out application dismissed.
| Table of Content |
|---|
| 1. overview of share subscription and obligations (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. plaintiff's claim and arguments for summary judgment (Para 11 , 12 , 13 , 14) |
| 3. defendant's application to strike out claim (Para 16 , 17) |
| 4. court's analysis of obligations and liability (Para 18 , 19 , 20 , 21 , 22 , 24 , 26 , 27 , 28 , 30 , 31) |
| 5. defendant's arguments on notice and consent (Para 32 , 33 , 34 , 35 , 36 , 37) |
| 6. co-surety status and its implications (Para 38 , 39 , 40 , 41 , 42) |
| 7. operational sufficiency vs. payment obligation (Para 43 , 44 , 45 , 46) |
| 8. distinction of relevant case law (Para 48 , 49 , 50 , 51) |
| 9. conclusion on enforceability of obligations (Para 53) |
(Enclosures 13 and 15)
[1] Before the court are two applications arising from a share subscription arrangement, one seeking summary judgment for a claimed redemption amount and the other aiming to strike out the claim as unsustainable. The key issue is whether the contractual obligations have been effectively triggered, justifying summary relief, or if the case should be dismissed without a full trial.
Background Facts
[2] This case concerns a financial and contractual arrangement involving a Share Subscription Agreement dated 10 April 2015 ("SSA"), executed between the Plaintiff, MyCreative Ventures Sdn Bhd, the First Defendant, Vision Animation Sdn Bhd, the Second Defendant, Low Huoi Seong, and another entity, Double Vision Sdn Bhd ("Double Vision") The SSA governed the subscription by the Plaintiff to 5,000,000 Redeemable Convertible Preference Shares (" RCPS") in the First Defendant, amounting to a total value of RM5,000,000.00. The subscription was carried out in eight tranches.
[3] Under the SSA, the First Defendant was obligated to redeem the RCPS at the "Redemption Amount" after five years from the date of issuance of the first tranche, setting the redemption date as 31 December 2020. In the event of failure to redeem, Item H(iv)(c) of the SSA specified that the First Defendant would incur a separate and independent obligation to immediately pay the Redemption Amount to the Plaintiff as a debt due and owing.
[4] Further, Item M(i) of the Third Schedule to the SSA identified circumstances constituting an "Event of Default." These included the failure of the First Defendant to redeem the RCPS when due or the failure of any ordinary shareholder of the company, such as the Second Defendant, to procure or guarantee the redemption.
[5] On the same date as the SSA, a Letter of Undertaking was executed by the Second Defendant and Double Vision. In the Letter of Undertaking, the Second Defendant provided an irrevocable and unconditional commitment to ensure that the First Defendant had sufficient funds to address any cash shortfalls or cost overruns. Paragraph 4 of the Letter of Undertaking also stipulated that upon a request for redemption of the RCPS, the Second Defendant was required to "immediately pay, repay, settle and discharge in full all monies due and payable" under the SSA.
[6] Despite these obligations, the First Defendant failed to redeem the RCPS on the redemption date of 31 December 2020. The Plaintiff subsequently issued notices of redemption on 11 January 2021 and 1 June 2023 to inform the Defendants of the redemption obligations. Both notices specified a Redemption Amount of RM7,032,910.96. However, the First Defendant failed to comply with these notices.
[7] On 24 November 2023, the Plaintiff's solicitors issued a demand letter to the Defendants, reiterating their failure to redeem the RCPS and demanding payment of the outstanding amount. Despite this demand, neither defendant fulfilled the obligations to procure or guarantee redemption, nor did they make any payment toward the Redemption Amount.
[8] As a result, the Plaintiff initiated legal proceedings by filing a Writ and Statement of Claim on 12 July 2024. The First Defendant did not enter an appearance, leading to a Judgment in Default of
