The court affirmed that contemporaneous documentary evidence is paramount in establishing payment obligations under a shareholders agreement, and defendants are liable for profit shortfalls guaranteed therein.

Ahmad Fairuz Zainol Abidin J:

Introduction

[1] This is my judgment in respect of the Plaintiff's claim against the Defendants for a sum under the profit guarantee in a Shareholders Agreement dated 24 December 2017 ("the SHA").

[2] The Plaintiff, M9 Complete Technology Sdn Bhd (formerly known as M7 Complete Technology Sdn Bhd), claims against the Defendants, jointly and severally, for the sum of RM4,457,934.40 representing shortfalls in profit guarantees for the years 2018, 2019 and 2020.

[3] At the conclusion of the trial, I allowed the Plaintiff's claim.

Issues For Determination

[4] The key issues for determination are:

i. Whether the Plaintiff paid for the purchase of the initial 20% block of shares in Petrosahabat Engineering Sdn Bhd (PESB) in accordance with the SHA;

ii. Whether the Plaintiff paid for the purchase of the additional 20% block of shares in PESB in accordance with the SHA;

iii. Whether the Defendants are liable to the Plaintiff for the profit guarantee under the SHA; and

iv. Whether the 2nd Defendant's (Solumie Binti Odiah) remaining shares in PESB were unlawfully transferred to Cheung Tai Yin and M9 Agric Mac Sdn Bhd.

Background Facts

[5] The Defendants were the original shareholders of PESB. On or around 24 December 2017, the Plaintiff and the Defendants entered into the SHA. The salient terms of the SHA included:

a. The Plaintiff agreed to inject RM2,500,000.00 into PESB to acquire 20% of the shares;

b. The Plaintiff had the option to purchase an additional 20% block of shares within 2 years from May 2018 at the fixed price of RM3,500,000.00;

c. The Defendants guaranteed an annual profit of RM5,000,000.00 (before taxation) for each financial year for 5 years commencing from 2018;

d. For security of the profit guarantee, the Defendants pledged all their shares; and

e. In the event the profit guarantee was not achieved, the Defendants agreed to pay the shortfall to the Plaintiff in accordance with the proportion of the Plaintiff's shareholdings.

[6] The Plaintiff exercised its option to acquire the additional 20% shares, bringing its total shareholding in PESB to 40%.

[7] PESB failed to achieve the guaranteed profit of RM5,000,000.00 for each of the financial years 2018, 2019, and 2020. The Plaintiff is therefore claiming the shortfall based on its 40% shareholding in PESB.

Analysis And Findings

Issue 1: Payment For Initial 20% Block Of Shares

[8] The Plaintiff adduced evidence that it had injected RM2,612,513.42 into PESB, comprising RM1,058,520.00 in cash and RM1,431,750.00 for operational expenses such as salaries, EPF, and SOCSO. This was supported by the testimony of PW1 (Ahmad Saifullah Bin Abdullah), whose evidence remained largely unchallenged.

[9] Crucially, a Statement of Account dated 10 October 2018 (p 86, Bundle B1) signed by all Defendants acknowledged this injection of funds. During cross-examination, DW1 (Kum Meng Wai) admitted to signing this document and confirmed that the funds were paid by the Plaintiff.

[10] DW1 further admitted that neither he nor any of the other Defendants made any payments toward the increased paid-up capital. The admission by DW1 clearly reinforces the Plaintiff's claim that there was payment by the Plaintiff to PESB.

[11] There is also a letter to the company secretary dated 10 October 2018 (pp 88-89, Bundle B1), signed by DW1, DW2, and the Plaintiff, authorizing an increase in the paid-up capital of PESB by RM2,490,000.00. This increase directly corresponds with the Plaintiff's injection of funds.

[12] It is my finding that the said company secretarial document represents the best evidence to support the Plaintiff's claim for the payment made. It is a contemporaneous document which can be considered by the court. The Federal court in Tindok Besar Estate Sdn Bhd v. Tinjar Co ; , commented on the reliability of contemporaneous documentary evidence over conflicting oral testimony. The court held:

"For myself, I would with respect feel somewhat safer to refer to and rely on the acts a