Kamalanathan Ratnam J

This is an application to set aside a JUDGMENT dated 18 May 1998. The judgment was obtained by the plaintiff pursuant to O 19 r 7(1) of the Rules of the HIGH COURT ['RHC'] made by way of a summons in chambers dated 29 April 1998 (encl 9). Order 19 r 7(1) of the RHC reads as follows:

Default of defence: Other claims

(1) Where the plaintiff makes against a defendant or defendants a claim of a description not mentioned in r 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or fail to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the COURT for judgment, and on hearing of the application the COURT shall give such judgment as the plaintiff appears entitled to on his statement of claim.

In its affidavit in support of encl 9 affirmed on 27 April 1998, the plaintiff's solicitors deposed that the amended writ and statement of claim had been served on the defendant on 2 April 1998 and that to date, no appearance had been entered on behalf of the defendant. The plaintiff had also on 5 March 1998 obtained an ex parte injunction restraining the defendant, its agent or servant from receiving any payments from its debtors until after the hearing of its inter partes application for a mandatory injunction.

The basis of the plaintiff's claim against the defendant as stated in its statement of claim is that there was a shareholders' agreement dated 5 November 1996 between the plaintiff and the defendant ('shareholders' agreement'). In that shareholders' agreement the plaintiff alleges that both parties had agreed to set up another company named Evergreen United Industries Sdn Bhd ('EUI') to take over the business and assets of the defendant. The plaintiff further alleges that EUI has bought over from the defendant its goodwill and all existing orders and contracts at the nominal sum of RM1 only. Further, at paras 6 and 7 of its statement of claim, the plaintiff alleges that the defendant had, in breach of the terms of the shareholders' agreement, continued to issue out invoices and to collect monies due from its debtors up to a sum of RM4,125,669.49. The plaintiff is now seeking a declaration from this COURT that the defendant is indebted to EUI for the sum of RM4,125,669.49 which the defendant had collected from its debtors. It is also seeking a declaration that the uncollected balance of RM1,463,829.70 due to the defendant is a debt owing to EUI, together with various other related orders. The plaintiff completely left out of its pleading the other two relevant sub-clauses in the shareholders' agreement. Clause 3(v) of the shareholders' agreement states as follows:

The purchase by the Company (EUI) from EFI (defendant) of its ——

(a) fixed assets as shown in the Schedule hereto annexed at the price of RM2m;

(b) its stock-in-trade valued at RM865,256; and

(c) goodwill and all existing orders and contracts at the nominal sum of Ringgit One (RM1) only.

The purchase price of the fixed assets shall be paid over a period of sixty (60) months by equal monthly instalments, the first to commence one (1) month after the date of execution of this agreement. The stock-in-trade shall be purchased subject to written confirmation of acceptance by the company (EUI) of stocks upon each transfer as and when requested by the company (EUI).

The defendant's marketing director had in her affidavit affirmed on 13 November 1998 stated that there was another company, that is, Falcrest Pte Ltd ('FPL'), that had entered into an agreement with the defendant to purchase the defendant company. She exhibited an agreement dated 1 March 1996 (the 1 March 1996 agreement) to support her averment. She alleges that one Hu Chang Pee owned FPL and that the same Hu Chang Pee is a director of the plaintiff. She further avers that on 16 October 1996, the paid-up capital of EUI was increased to RM100,000 and that FPL had requested