2010 MarsdenLR 2064

ABDUL MALIK ISHAK, SULONG MATJERAIE, KANG HWEE GEE
BON CHONG HING & ANOR – Appellant
Versus
GAMA TRADING COMPANY (HONG KONG) LTD – Respondent

The absence of a non-existent schedule does not negate the enforcement of a clear profit guarantee in a shareholders agreement, particularly when insolvency occurs.

Headnote:(A) Rules of the High Court 1980 - Order 14 - Summary judgment application - Determination of liability under a profit guarantee arising from the insolvency of Top Alloy Manufacturing when it did not achieve agreed cumulative profits - It was determined that the absence of the Seventh Schedule does not negate the profit guarantee, which remains enforceable as per Clause 4 of the shareholders agreement. Defendants' contentions regarding non-execution and alleged termination of the agreement were dismissed as misconceived and legally untenable. (Paras 10, 50, 68)

Facts of the case:
The respondent plaintiff, a company based in Hong Kong, entered a shareholders agreement with Malaysian individuals, guaranteeing a minimum cumulative profit for Top Alloy Manufacturing. The company became insolvent during the guarantee period and did not achieve the profits, prompting the plaintiff to seek payment of RM2.69 million based on the guarantee. Defendants denied liability, citing non-execution of a scheduled profit agreement, among other defenses.

Findings of Court:
The court found that the profit guarantee was clear and enforceable despite the absence of the Seventh Schedule, concluding the appellants were liable for the guaranteed amount due to Top Alloy's insolvency. The appeal was dismissed. (Para 70)

Issues: The main issues included the enforceability of the profit guarantee and whether the agreement was automatically terminated due to Top Alloy's insolvency.

Ratio Decidendi: The court upheld the principle that the absence of procedural documents like the Seventh Schedule cannot invalidate a clear contractual obligation. The guarantee was intended to protect the respondent's investment and was designed to come into effect precisely in scenarios of insolvency, confirming that such liabilities must exist regardless of the operational status of the company. (Paras 68, 70)

Result: Appeal dismissed with costs.