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2024 MarsdenLR 2798
HIGH COURT MALAYA KUALA LUMPUR
Atan Mustaffa Yussof Ahmad, J
KENANGA INVESTORS BERHAD – Appellant
Versus
ZULRAFQ CAPITAL SDN BHD & ANOR – Respondent
[Suit No: WA-22NCC-489-07/2023]
Discovery applications must not shift the burden of proof to the opposing party; relevant documents may be denied if their disclosure improperly assists the requesting party's case.
Headnote:(A) Rules of 2012 - Order 24 - Application for discovery of documents - The court dismissed the application for discovery of documents sought by ZCSB and TSZ regarding payments made under Option Agreements, ruling that the documents were relevant but their disclosure would improperly shift the burden of proof. (Paras 12, 37)
(B) Fishing expedition - The court found that the discovery request was overly broad and constituted a fishing expedition, as it extended beyond specific cheque numbers to encompass all transaction details. (Paras 30, 36)
(C) Burden of proof - The court emphasized that ZCSB and TSZ must prove their allegations through independent evidence, not by compelling KIB to produce documents. (Paras 24, 28)
Facts of the case:
The dispute arose from two Put and Call Option Agreements between KIB and ZCSB, where ZCSB alleged that payments were made by a third party, Taqiuddin, and sought disclosure of documents to support their claims.
Findings of Court:
The court found the requested documents relevant but dismissed the application, citing improper shifting of the burden of proof and the fishing expedition nature of the request.
Issues: The main issues addressed were the relevance of the requested documents to the case and whether the discovery application would shift the burden of proof.
Ratio Decidendi: The court ruled that while the documents were relevant, compelling their production would shift the burden of proof to KIB, which is improper; ZCSB and TSZ must prove their case independently.
Result: Application for discovery dismissed with costs.
[1] Before the court is an application for discovery of documents and inspection under O 24 rr 3, 4 and 5 of the Rules of 2012, together with a prayer for an interim stay of proceedings pending disposal of the discovery application. The documents sought relate to payment records, receipts and transaction details concerning certain agreements between the parties, where payments were allegedly made through third parties. At the heart of the dispute is whether these documents should be disclosed, and whether such disclosure is relevant and necessary for the fair disposal of the substantive action between the parties, where the validity and enforceability of the underlying agreements are contested.
Brief Facts Of The Case
[2] On 22 October 2021, the 1st Defendant in the Counterclaim, Kenanga Investors Berhad ("KIB"), and the 1st Plaintiff in the Counterclaim, Zulrafq Capital Sdn Bhd ("ZCSB") entered into a Put and Call Option Agreement ("1st Option Agreement') relating to 190,476,190 shares in KNM Group Berhad worth RM40,000,000.00 ("Option Shares'). Under this agreement, ZCSB was granted a Call Option to buy back the Option Shares from KIB during specified periods, while KIB was granted a Put Option to sell the Option Shares to ZCSB. On the same date, the 2nd Plaintiff in the Counterclaim, Tan Sri Zulhasnan bin Rafique ("TSZ') executed a Personal Guarantee in favour of KIB to guarantee ZCSB's performance under the Option Agreement.
[3] The initial Call Option period was for 6 months from 5 November 2021 (Call Option 1), followed by another 3-month period (Call Option 2). The Put Option period was set at 9 months from 5 November 2021, with a maturity date of 4 August 2022.
[4] On 19 January 2022, KIB and ZCSB entered into a second Put and Call Option Agreement ("2nd Option Agreement'). Following this agreement, five Maybank cheques totalling RM1,979,418.00 were paid to KIB in January 2022.
[5] On 27 July 2022, ZCSB applied to KIB for an extension and rollover of both the Call Option and Put Option periods for a further 9 months from 4 August 2022. This led to the execution of a Supplemental Option Agreement dated 3 August 2022 ("Supplemental Option Agreement'). Under this agreement, ZCSB was required to pay a premium of RM4,800,000.00 by 15 September 2022 and a rollover fee of RM400,000.00 by 30 August 2022.
[6] Two sets of payments were made to KIB in relation to these agreements. The first set comprised six payments totalling RM2,600,000.00 through various Public Bank and Maybank cheques. The second set consisted of five Maybank cheques totalling RM1,979,418 made in January 2022.
[7] On 2 May 2023, KIB issued a notice requiring ZCSB to purchase the Option Shares for RM44,952,380.84. When this was not fulfilled, KIB issued a letter of demand dated 19 June 2023 to both ZCSB and TSZ.
[8] On 13 July 2023, KIB filed this action against ZCSB and TSZ seeking specific performance of the obligation to purchase the Option Shares or alternatively, damages of RM44,952,380.84.
[9] In their Counterclaim, ZCSB and TSZ allege that KIB (through its director Datuk Wira Ismitz Matthew ("Ismitz'), the 3rd Defendant in the Counterclaim, and Muhammad Taqiuddin Halim ("Taqiuddin"), the 2nd Defendant in the Counterclaim, conspired to injure them by inducing them to enter into the 1st Option Agreement, 2nd Option Agreement and the Supplemental Option Agreement (together, "Option Agreements") while concealing that Taqiuddin would make the payments, subsequently allowing Taqiuddin to default on payments and attempt to purchase the KNM Group Berhad shares at a reduced price.
[10] On 26 March 2024, ZCSB and TSZ, through their solicitors Messrs Jeeva Partnership, sent a letter to KIB's solicitors requesting disclosure of documents related to payments made by third parties pursuant to the Option Agreements. KIB refused this request.
[11] On 20 May 2024, ZCSB and TSZ filed an application (encl 134) seeking discovery of documents rela
