Hashim Yeop A Sani J:

The plaintiff company began as a partnership business dealing in textiles under the name and style of Kim Guan & Co. with its registered office at No. 65, Hugh Low Street, lpoh, the partners being Yap Fook Sen and Tan Phang Nam, i.e. PW1 and PW2 respectively. In early 1955, the company was converted into a limited company on incorporation under the name and style of Kim Guan & Co. Sdn. Bhd. and has since then been having its registered office at No. 26, Hugh Low Street, lpoh. The first directors of the new company were PW1, PW2 and one Yong Nyee Fan (since deceased). What will shortly be unfolding is the story of these three business associates.

In 1949 a social club for Chinese businessmen of the town of lpoh was formed for social as well as for business purposes. There is evidence from PW1 and PW2 that they frequently met at the club during the early part of 1950s. PW1, PW2 and the said Yong Nyee Fan were obviously close business associates throughout the period of the 1950s. This must be so for it is in their evidence that both PW1, Yap Fook Sen and PW2, Tan Phang Nam had been associated with the said Yong Nyee Fan in another mining company called Yong Nyee Fan Mining Company which they formed in 1950.

It would appear from the evidence of PW1 and PW2 that the incorporation of the plaintiff company was preceded by several informal meetings between these three persons. According to their version the said Yong Nyee Fan became interested in the textile business because he himself said that there was good prospect in that business due to the Korean war. This was said to be sometime in 1954. Although Yong Nyee Fan first showed interest around 1950 it was only in 1954 that something materialised from their meetings at the social club. It would also appear that another company of the said Yong Nyee Fan had also been formed by then and this was Yong Nyee Fan & Sons Co. Ltd, the defendant company, which is an investment company. PW1 said he discussed with PW2 who at first did not seem to be interested to have another partner in their textile business but after a further discussion at the club the said Yong Nyee Fan told them that premises No. 26, Hugh Low Street, lpoh, was being offered for sale at $35,000 and that the shop would be a good site for the proposed company. It was then that the said Yong Nyee Fan told them that if the new company was formed he himself would bring out the $35,000, to purchase the premises. Apparently PW2 had by then already accepted the idea of taking in a new partner. According to the evidence of PW1 and PW2 it was further agreed between them that PW1 and PW2 would be responsible for vacant possession of the premises (which in effect meant paying "tea money" to induce the tenant to vacate the premises) and all these monies were to be expended on behalf of the proposed company. The version of the plaintiff can best be expressed in the testimony of PW1 which was as follows:

There was a second discussion between three of us at the club. During the discussion Tan told us that the Chop was prepared to vacate the premises for $30,000. After haggling we managed to bring it down $19,000. Then Yong suggested that the deal could be completed as the figure was acceptable. Then Tan and I raised the amount of $19,000 on behalf of the new company. Yong agreed to advance $35,000 for the purchase of the premises. The three of us agreed that the two sums were advanced to the new company. The purchase of the shophouse was to be made on behalf of the new company. Tan and I advanced the $19,000. After obtaining vacant possession we had the third discussion at the same club to form the new company. Yong suggested to

convert Kim Guan & Co. into Kim Guan & Co. Ltd. The capital was $500,000. The subscribed capital was $299,000. Out of that I was to be allotted $100,000. Tan $100,000. Yong and his nominees $99,000. This was so because Yong told Tan and I that $1,000 was for registration fee if