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2021 MarsdenLR 1344
HIGH COURT MALAYA KUALA LUMPUR
MERCURY SECURITIES SDN BHD & ANOR – Appellant
Versus
CONCRETE PARADE SDN BHD & ANOR (ENCL 152) – Respondent
[Originating Summons No: WA-24NCC-345-06/2019]
Legal fees as damages require sufficient proof of losses directly linked to the claim and cannot be awarded as a matter of right.
Headnote:(A) Capital Markets and Services Act 2007 – Section 139 – Nominal damages – Assessment of damages due to failure of disclosure in merger agreement – Court confirmed that incurred legal fees cannot be compensated as losses without sufficient proof of damages – Court awarded nominal damages of RM5,000. (Paras 9-19)
(B) Damages for breach of contract – The general principle that the party should be in the same financial situation as if the contract was performed – Damages are not an automatic right; proof of losses required. (Paras 10-12)
(C) Legal fees – Must be linked to the claim; not justifications for incurred costs without separation or breakdown. (Paras 13-17)
Facts of the case: Pinerains claims RM1,076,326.32 in damages for legal fees due to Apex Equity's insufficient shareholder disclosure leading to the invalidation of business merger Resolutions. (Paras 3-8)
Findings of Court: Court emphasized that Pinerains has not shown sufficient proof of losses, only awarding nominal damages. (Paras 16-19)
Issues: The main issues include whether legal fees incurred can be regarded as losses and if sufficiently detailed proof of damages existed. (Paras 10, 16)
Ratio Decidendi: The court ruled that legal fees as damages require detailed proof and cannot be awarded without a clear connection to the underlying action or resolution. (Paras 12, 19)
Result: Nominal damages of RM5,000 awarded.
JUDGMENT
(Enclosure 152)
A. Introduction
[1] This is an application ("Assessment Application") by Pinerains Sdn Bhd (the Applicant in the Counterclaim) to seek directions for an assessment of damages pursuant to an order dated 18 September 2019, granted by Azizul Azmi Adnan J ("Order").
[2] I awarded nominal damages of RM5,000 to Pinerains. The reasons for my decision are as set out below.
B. Background Facts
[3] The parties are referred to in the following manner:
a. The Applicant in the Counterclaim (Pinerains Sdn Bhd) is referred to as "Pinerains";
b. The 2nd and 3rd Respondents in the Counterclaim (JF Apex Securities Berhad and Apex Equity Holdings Berhad) are referred to respectively as "JF Apex" and "Apex Equity", and collectively as "Apex"; and
c. The 1st Respondent in the Counterclaim (Mercury Securities Sdn Bhd) is referred to as "Mercury".
[4] The dispute giving rise to the Order originated from a business merger agreement entered into between Mercury, JF Apex and Apex Equity. Pursuant to the agreement, Mercury agreed to transfer its business and assets to JF Apex ("Proposed Merger").
[5] The consideration for the Proposed Merger is RM140 million, to be paid through the issuance of shares of Apex Equity, funding through a private placement and payment via cash reserves of Apex Equity.
[6] An Extraordinary General Meeting of Apex Equity was held on 19 June 2019 ("EGM") to obtain shareholders' approval for the Proposed Merger. Prior to the EGM, a circular dated 3 June 2019 was issued to Apex Equity's shareholders ("Circular") to provide particulars on resolutions sought to be passed at the EGM ("Resolutions"). During the meeting, the majority of the shareholders of Apex Equity approved the Proposed Merger.
[7] Premised on the approval, Mercury and JF Apex filed an originating summons in this court, seeking a vesting order pursuant to s 139 of the Capital Markets and Services Act 2007. Pinerains applied to intervene and filed its counterclaim to invalidate the Resolutions. It is to be noted that a separate action was also filed by Pinerains, but the action was withdrawn when Azizul Azmi Adnan J allowed Pinerain's application to intervene in the action before this court. The learned Judge granted the Order, and set aside the Resolutions, on the basis that the Circular did not contain certain information and was considered to be opaque. In the Order, the learned Judge further ordered that:
a. Damages are to be assessed by the court; and
b. Costs of RM100,000 are to be paid by JF Apex and Apex Equity to Pinerains.
[8] The Assessment Application was thus filed by Pinerains to seek directions on the assessment of damages, as ordered.
C. Assessment And Findings
[9] Pinerains is seeking damages in the form of legal fees amounting to RM1,076,326.32 ("Legal Fees"), which it claimed that it had paid in the course of invalidating the Resolutions. It also argued that these damages are a direct consequence of Apex Equity's failure to provide sufficient disclosure to its shareholders. The contention is that if there had been adequate disclosure in the Circular, there would have been no need for Pinerains to intervene in this action or commence legal proceedings.
[10] The guiding principles on assessment of damages are set out clearly by the Federal court in Tan Sri Khoo Teck Puat & Anor v. Plenitude Holdings Sdn Bhd, :
"At common law, the general principle which constitutes the starting point in the assessment of damages for breach of contract is, in the words of Parke R in Robinson v. Harman [1843-60] All ER Rep 383 at p 385; (1848) 1 Ex 850 at p 855; 154 ER 363 at p 365, 'where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed'. This was cited with approval by the court of Appeal in Koufos v. C Czarnikow Ltd [1969] 1 AC 350 at pp 414 and 420; [1967] 3 All ER 686 at pp 710 and 714; [1967] 3 WL
