Gopal Sri Ram JCA:

This appeal was originally argued before a differently constituted Bench comprising PS Gill, Rahmah Hussein JJCA and me. Since the argument could not be completed, the appeal was adjourned to a date to be fixed. In the interim, due to supervening events the Bench that originally heard the appeal could no longer complete the hearing. Accordingly, a hearing de novo was ordered. It is pursuant to the order that the appeal has now come to be heard before us.

The facts of this case are uncomplicated. In their narration I shall, for convenience, refer to the parties according to their titles in the court below. The plaintiffs are two private limited companies. The evidence in the court below was that they are under the control of a man by the name of Mohamed Aly Rangoonwala, (";Rangoonwala";) a British subject of Pakistani origin. I am not entirely sure how this element of control is relevant to the issues at hand. Rangoonwala was a close friend and business associate of one Raja Dato' Haji Zainal Abidin (";Raja Zainal";), now deceased. He wanted to go into business with Raja Zainal. This is the way in which they went about it.

A joint venture agreement dated 22 August 1979 was entered into between three parties. One of them was the 1st defendant, Perman Sdn Bhd. I had better say something about it straightaway. It is private limited company whose shareholding was held equally by Raja Zainal and his wife, Tengku Zaidah. It was incorporated on 26 February 1981, that is to say, about 18 months after the joint venture agreement. So, it was not in existence when the joint venture agreement was executed. The effect of that is spelt out in s. 35 of the Companies Act 1965 which says:

(1) Any contract or other transaction purporting to be entered into by a company prior to its formation or by any person on behalf of a company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it had been in existence at the date of the contract or other transaction and had been a party thereto.

(2) Prior to ratification by the company the person or persons who purported to act in the name or on behalf of the company shall in the absence of express agreement to the contrary be personally bound by the contract or other transaction and entitled to the benefit thereof.

There is nothing to show that the 1st defendant had ratified the joint venture agreement. Neither is there any evidence to suggest the contrary express agreement required by subsection (2). It follows, in accordance with the terms of s. 35, that the joint venture agreement is to be treated as binding Raja Zainal personally as its executant.

The other two parties to the joint venture agreement were the 2nd plaintiff and a company called Kumpulan Fima Sdn Bhd, the 9th defendant in the court below. But it is not a party to the present appeal. Consequent upon the joint venture agreement, a company called Fimaly Bulking Services Sdn Bhd (";Fimaly";) was incorporated. It was the 8th defendant in the court below but is also not a party to this appeal. 51% of the shares of Fimaly were held by the 9th defendant whilst the 2nd plaintiff and the 1st defendant held 46% and 3% respectively. The 1st defendant's 3% stake amounted 149,999 shares. The remaining 1 share was held by Raja Zainal. It is common ground that Raja Zainal had no money to subscribe for the shares in Fimaly. Rangoonwalla's evidence is that it was he, through the plaintiffs, who provided Raja Zainal with RM150,000 to pay Fimaly for the 150,000 shares. Raja Zainal paid this RM150,000 into the 1st defendant's account. The 1st defendant then paid for the shares and became, the registered shareholder of the 149,000 shares of Fimaly.

Later, on 1 September 1986, Raja Zainal executed a document which says this:

Memorandum of Agreement Between European Commodities Limited/ European Commodities Sdn Bhd (referred