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2022 MarsdenLR 2530
COURT OF APPEAL PUTRAJAYA
DETIK RIA SDN BHD & ANOR – Appellant
Versus
PRUDENTIAL CORPORATION HOLDINGS LIMITED & ANOR – Respondent
[Civil Appeal No: W-02(NCC)(A)-1100-08/2020]
A conditional contract remains valid until its conditions are fulfilled, and does not violate legal provisions if the transaction is executed only after obtaining necessary approvals.
Headnote:(A) Financial Services Act 2013 (Act 758) – Section 67 – Insurance Act 1996 (Act 553) – Share acquisition and put option – Dispute over the validity of agreements – Court found that the agreements were conditional and did not require prior approval from the Bank for execution. The approval was only required for carrying the agreements into effect – The condition was fulfilled upon receipt of approval on 10 June 2019. (Paras 9, 58, 121, 123, 170)
(B)
Conditional Contracts – A conditional agreement is valid until the condition precedent is fulfilled – The court's ruling specifies that the agreement was not illegal, as it was only enforceable after regulatory approval was obtained. (Paras 124, 170)
(C)
Illegality – The court established that entering into a conditional contract does not violate the sections of the Act if the transaction is not executed without the necessary approvals. (Paras 111, 172)
JUDGMENT
Introduction
[1] This dispute relates to the purchase of the shares of Sri Han Suria Sdn Bhd (SHS) which is the sole shareholder of Prudential Assurance Malaysia Berhad (PAMB). PAMB is a public limited company incorporated in Malaysia with a total issued capital of RM100,000,000.00 and is in the business of, inter alia, underwriting of insurance business. PAMB is a licensed insurer pursuant to the Financial Services Act 2013 (Act 758). The 2nd respondent and the 1st appellant held 51% and 49% respectively of the shareholding of SHS.
[2] The 2nd respondent and the 1st appellant entered into the Call/Put Option Agreement (CPOA) dated 27 February 2002 where the 1st appellant agreed to grant a call option to the 2nd respondent in respect of its shares in SHS. The CPOA also catered for a put option of the 1st appellant's shares in SHS. The CPOA was conditional upon the approval of the Foreign Investment Committee, (FIC), the Minister of Finance (MOF), Bank Negara Malaysia (Bank) and other relevant regulatory authorities in Malaysia.
[3] On 15 December 2008, the 1st appellant issued a Notice of Exercise of Option to Sell its 49,000 shareholding in SHS to the 2nd respondent. Thereafter, the parties executed the Memorandum of Deposit dated 12 April 2009 (MOA), the Supplemental Call/Put Option Agreement dated 9 September 2009 (SCPOA) and the Supplemental Memorandum of Deposit dated 9 September 2009 (SMOA) (collectively referred to as the said Agreements).
[4] By a letter dated 30 April 2018, the 1st appellant indicated its wishes to rescind its exercise of the put option and to maintain its 49% shareholding in SHS.
[5] The respondents filed an Originating Summons (OS) against the appellants for, inter alia, a declaration that the said Agreements were valid, subsisting and binding on the respondents and the 1st appellant, a declaration that the 1st appellant's Notice of Exercise of Option dated 15 December 2008 was irrevocable, valid, subsisting and binding on the 1st appellant, a mandatory injunction compelling the 1st appellant to execute the share transfer form in respect of the Option Shares and consequential orders and directions as set out in Annexure A to the OS. The respondents claimed that the 2nd respondent was entitled to compel the 1st appellant to complete the Put Option Exercise.
[6] The issue between the parties was whether prior approval of the Bank was required to enter into the CPOA.
[7] The respondents said that prior approval of the Bank was not required to enter into the CPOA, and that the approval was merely a condition to the enforceability of the CPOA.
[8] The appellants took the position that the true question on which the validity of the CPOA hinged was not whether it was conditional or not but whether the prior approval of the Bank was required before the parties could enter into it as required under s 67 of the Insurance Act 1996 (Act 553) which was the governing law at the material time.
[9] The High Court concluded that prior approval was not necessary for the parties to enter into the CPOA as approval was only required for the carrying into effect of the said Agreements when the Bank gave its approval.
The Background
[10] The parties in this Judgment shall be referred to as they were in the High Court, the respondents being the plaintiffs and the appellants being the defendants.
[11] The plaintiffs are foreign companies incorporated in England.
[12] The 1st defendant is an investment holding company.
[13] The 2nd defendant is a 50% shareholder and a director of the 1st defendant.
[14] The 2nd defendant is also the 1st defendant's nominee director on the board of SHS.
[15] The 2nd defendant, according to the plaintiffs, was named as a defendant to give effect to the relief sought for in the OS.
[16] On 15 December 2008, the 1st defendant issued a Notice of Exercise of Option to Sell their 49,000 ordinary shares of RM1.00 each in SHS to the 2nd plaintiff ("Put Option Notice") pursuant to clause 4
