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2022 MarsdenLR 1236
HIGH COURT MALAYA KUALA LUMPUR
HARVINDER SINGH SANTA SINGH – Appellant
Versus
PU SAY CHIANG & ANOR – Respondent
[Civil Suit No: WA-22NCvC-466-07/2019]
The inability to tie personal repayment obligations to a corporate entity led to the dismissal of claims for reimbursement under allegations of fraud.
Headnote:(A) Evidence Act 1950 – Sections 101 and 102 – Claims for reimbursement of advances based on allegations of fraud – The Plaintiff's claim for return of USD 1.5 million for fraudulent misrepresentation was dismissed as he failed to demonstrate the existence of an agreement for D1 to personally repay the Plaintiff – The Plaintiff lacked the necessary locus standi to initiate the case as the advances were made on behalf of Tootpay Sdn Bhd. (Paras 36-81)
(B)
Fraud – Distinction between common law and equitable fraud – The Plaintiff failed to prove any intention to deceive, hence the claim of common law fraud was unsuccessful. (Paras 68-74)
Facts of the case:
The Plaintiff advanced a total of USD 1.5 million to Watchdata, seeking reimbursement from D1 based on alleged fraud relating to the novation of a contract with Bank Islam. (Paras 1-29)
Findings of Court:
The Court found that the Plaintiff had not proven a personal liability on the part of D1 and that there was no enforceable agreement to repay the advances made. (Paras 36-81)
Issues
: Whether D1 was obligated to novate the contract and repay the Plaintiff due to the unsuccessful novation process. (Paras 35)
Ratio Decidendi:
The court ruled that the Plaintiff had failed to establish any legal obligation for D1 to repay the advances as there was no binding agreement, nor any proving of a fraudulent act. (Paras 76-79)
Result:
Plaintiff's claim dismissed with costs.
JUDGMENT
[After Full Trial]
Introduction
[1] This is the Plaintiff's claim ('this Case') against D1, who is also known as William Pu, and D2, for the return of USD 1.5 million or its equivalent in Malaysian Ringgit, and general damages for fraud.
[2] Notably, before the commencement of the trial, the Plaintiff had obtained a judgment-in-default of appearance on 2 October 2019 against D2 for a sum of RM6,203,250.00 with interest. No application has been filed by D2 to set aside the said judgment-in-default.
[3] This is my judgment and my reasons in dismissing the Plaintiff's claim against D1 after a full trial conducted.
Background Facts
[4] The Plaintiff is a businessman and investor with experience in managing and investing in businesses relating to networking technology. Meanwhile, D1 is a director of D2, a company limited by shares and incorporated pursuant to the Companies Act 1965.
[5] On 23 September 2010, D2 entered into an agreement with Bank Islam Malaysia Berhad ("BIMB") to supply a product known as Mobile Subscriber Identity Module ("MPODs") and its related services. This arrangement was reduced to a written agreement on the said date ("the BIMB Contract").
[6] As part of D2's obligations under the BIMB Contract, D2 was to source 150,000 units of the MPODs, which were valued at USD 1.5 million, from a Singaporean company called Watchdata Technologies Pte Ltd ("Watchdata") and to deliver the same to BIMB. This order was placed by BIMB through a purchase order dated 11 October 2010.
[7] The initial arrangement between D2 and BIMB was for D2 to procure and deliver the MPODs utilizing the letters of credit ("the LCs") issued by BIMB. The MPODs would then be leased to BIMB for 36 months and BIMB would pay D2 monthly lease rental into a collection account. However, D2 later experienced financial difficulties to complete the order of 150,000 units of the MPODs.
[8] The Plaintiff then came into the picture. The Plaintiff was introduced to D1. Upon perusing D2's profile, the Plaintiff was not happy with the financial situation of D2 for him to invest in directly because it was encumbered by multiple trading debts.
[9] The Plaintiff then proposed to acquire all of D2's assets and liabilities, and intellectual property rights relating to its business including the BIMB Contract for RM4 million. This was done through a shell company in Singapore known as Tootpay Pte Ltd where the Plaintiff held 30% of the shares together with an individual by the name of Balvinder Singh (DW3) who held the remaining 70% of the shares. Tootpay Pte Ltd then acquired 100% shares of a Malaysian company known as Langkah VIP Sdn Bhd ("Langkah VIP") (later renamed to Tootpay Sdn Bhd ("Tootpay")).
[10] This arrangement was to insulate the Plaintiff from the historical financial liabilities of D2 and any probable future claims which would affect the profitability of the BIMB Contract.
[11] This acquisition or purchase of D2's assets and IP rights was then reduced into writing in the form of an asset purchase agreement dated 1 January 2011 between Langkah VIP Sdn Bhd and D2 ("the APA").
[12] The APA outlined several rights, duties, and liabilities but most importantly, the heart of this dispute: Clause 5a 01. Pursuant to cl 5a 01, D2 was required to novate the BIMB Contract in favour of Tootpay. Clause 5a 01 says:
"On or before the Completion Date, the Seller shall procure a novation of the following in favour of the Buyer or its nominees, such novation to be effective from the Completion Date:
(a) the Bank Islam Agreements (as defined in Schedule 1 annexed hereto); and
(b) the OEM Contract (as defined in Schedule 1 annexed hereto). collectively, the "Novated Agreements."
[13] The above were undisputed and forms part of the agreed facts of both parties.
The Dispute
[14] The dispute arose when the novation arrangement for the BIMB contract with BIMB did not come into fruition quickly enough. The Plaintiff, in fear that the financial constr
