The court held that contractual obligations must be strictly interpreted, limiting the Defendant's liability to dividends received, and justified the Plaintiff's rejection of onerous funding proposals.

JUDGMENT

Mohd Arief Emran Ariffin J:

A. Background Facts

[1] The Plaintiff and the Defendant had entered into the following agreements:

1.1 Share Sale Agreement dated 19 August 2014.

1.2 Shareholders Agreement dated 19 August 2014.

[2] The other parties to the Shareholders Agreement are Datuk Dr Ahmad Tasir bin Lope Pihie and Anthony Stephen Bedborough. The other shareholders are not party to this suit.

[3] The material terms of the Share Sale Agreement are as follows:

3.1 The Plaintiff agreed to purchase 300,000 shares in the company known Strand Aerospace Malaysia Sdn Bhd for the consideration of RM33,000,000.00.

3.2 The Defendant warrants and represents to the Plaintiff that the profit after tax of the said company for the financial year 31 May 2014 shall be no less than RM21,000,000. In the event, there is a shortfall in the said profit, then the Defendant shall "make payment of the 2104 shortfall by way of an assignment of his entitlement to dividends of the company in favour" of the Plaintiff. (clause 6.1 (b))

3.3 The Defendant warrants and represents to the Plaintiff that the profit after tax of the said company for the financial year 31 May 2015 shall be no less than RM21,300,000. In the event, there is a shortfall in the said profit, then the Defendant shall "make payment of the 2015 shortfall by way of an assignment of his entitlement to dividends of the company in favour" of the Plaintiff. (clause 6.2 (b))

3.4 Upon the occurrence of the shortfall the Defendant shall execute and deliver to the Plaintiff a dividend payment instruction in the form provided in Annexure 1.

3.5. The parties agreed that notwithstanding the total sum of the shortfall for both years, the liability of the Defendant shall not exceed RM6.6 million.

[4] Strand Aerospace Malaysia Sdn Bhd did not achieve the said profit in accordance with cl 6 of the said Share Agreement. Profit for the year ending 31 May 2014 was only to the sum of RM1,819,481 and for the year ending 31 May 2015, the profit achieved was only to the sum of RM1,909,998.00.

[5] The Defendant had issued a dividend payment instruction to the company dated 30 January 2015 instructing the company to issue payment of dividends payable to him to be made to the Plaintiff. This was made due to the failure to achieve the promised profits of the company for the year ending 31 May 2014. In the said notice the Defendant had stated that the dividend to the sum of RM4.95 million should be paid to the Plaintiff.

[6] This instruction was later cancelled and recalled by the Defendant as seen in answer 6 of his witness statement and replaced with a new instruction to the said company for RM6.6 million undated but was received by the company secretary on 13 May 2015.

[7] No dividends were paid by the company to the shareholders in 2014 and 2015 and this continues to this day. The accounts as disclosed to this Court shows that the company suffered losses to the sum of RM1,267,623 as of 31 December 2015 and a profit of RM48,491.00 for the year ending 31 December 2016. I note that the accounts do disclose a retained profit of RM9,225,826.00 that was carried forward from previous years as at 31 December 2016.

[8] The minutes of the board meeting held on 28 June 2018 shows a profit of RM123, 340.00 for year ending 31 December 2017. This was followed with a profit for the year ending 31 December 2018 to the sum of RM396, 018.00. However, the company search report undertaken and produced shows that the company suffered losses to the sum of RM3,077,572.00 as of 31 December 2019.

[9] The Plaintiff had also issued a loan to the said company that was guaranteed by the Defendant to the sum of RM5,000,000.00 as seen in the letter of offer dated 2 October 2017. The said facility was to be repaid by way of monthly payments to the sum of RM50,000.00. The said company has failed to make payments and has only made periodic payments as and when the company is financially able to do so. This is admitted by the Defendant.

[10] Strand Aerosp