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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
SUIT NO. 22NCC-438-06/2013
PKNS HOLDINGS SDN. BHD.
v.
1. NUSA GAPURNA DEVELOPMENT SDN. BHD.
2. MALAYSIAN RESOURCES CORPORATION BHD.
GROUNDS OF JUDGMENT
The Plaintiff’s claim against the Defendants are as follows:(a)
a declaration that the 1st Defendant is in breach of Clauses 7.1
and 7.2 of the Shareholders’ Agreement dated 3.9.2010 (the
“SA”) entered into between the 1st Defendant, the Plaintiff and
PJ Sentral Development Sdn. Bdn., by entering into the
conditional Share Sale Agreement dated 8.2.2013 (the “SSA”)
with the 2nd Defendant, without first complying with the
provisions in Schedule 1 of the SA (i.e. the Plaintiff’s right of
pre-emption)
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(b)
a declaration that the 1st Defendant’s purported notice dated
22.4.2013 under Clause 8.1 of SA is not binding on the Plaintiff
and is of no legal effect.
(c)
a declaration that the 2nd Defendant has interfered with the SA
and has by unlawful means procured a breach thereof.
(d)
an injunction that the Defendants be restrained whether by
themselves, their servants, agents or otherwise howsoever until
such further Order from implementing or performing SSA or
from continuing to implement or perform the SSA or from taking
any action or steps with a view to implementing or performing
the SSA.
(e)
specific performance of the provisions in Schedule 1 of the SA
(i.e. the Plaintiff’s right of pre-emption).
(f)
an inquiry into the damages suffered by the Plaintiff by reason
of the Defendants’ breach of/unlawful interference with the
Plaintiff’s right of pre-emption under the SA.
(g)
such further or other relief as may be appropriate to safeguard
the rights and interests of the Plaintiff under the SA; and
(h)
costs.
The 1st Defendant’s Counterclaim
(i)
A declaration that, pursuant to the terms of the Shareholders
Agreement dated 3rd September 2010 entered into between
the Plaintiff and the 1st Defendant (“SA”) (and in particular
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Clause
7.2
thereof)
and/or
Article
26(a)
PJS
Articles
Association:
(a)
the 1st Defendant is entitled to sell its 135,910,600
ordinary shares of RM1 each and 195,251 redeemable
preference shares of RM1 each in PJS (“1st Defendant’s
Shares”) to the 2nd Defendant through the Share Sale
Agreement dated 8th February 2013 entered into between
the 1st Defendant and the 2nd Defendant (“NGD SSA”);
and
(b)
the rights of pre-emption in Schedule 1 of the SA shall
not apply to the sale of the 1st Defendant’s Shares to the
2nd Defendant through the NGD SSA.
(ii)
A declaration that the 1st Defendant’s letter to the Plaintiff dated
22nd April 2013 (“Drag Along Notice”) and the draft share sale
agreement are valid and binding on the Plaintiff pursuant to
Clause 8.1 of the SA.
(iii)
Consequently, a declaration that the Plaintiff is compelled to
execute the draft share sale agreement and sell its 58,247,400
ordinary shares of RM1 each and 83,679 redeemable
preference shares of RM1 each in PJS (“Plaintiff’s Shares”) to
the 2nd Defendant in accordance with Clause 8.1 of the SA and
the Drag Along Notice within 7 days from the date of this order.
(iv)
Specific performance of the SA and in particular Clause 8.1
thereof, to compel the Plaintiff to sell the Plaintiff’s Share to the
2nd Defendant in accordance with the Drag Along Notice and
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execute the draft share sale agreement within 7 days from the
date of this order.
(v)
A declaration that, in view of the issuance of the Drag Along
Notice by the 1st Defendant and pursuant to the terms of the SA
(and in particular Clauses 7.2 and 8.1 thereof) and/or Article
26(a) of the Articles;
(a)
the 1st Defendant is entitled to sell the 1st Defendant’s
Shares to the 2nd Defendant through the NGD SSA; and
(b)
the rights of pre-emption in Schedule 1 of the SA shall
not apply to the sale of the 1st Defendant’s Shares to the
2nd Defendant through the NGD SSA.
(iv)
An injunction to restrain the Plaintiff, whether by itself or
through
its
employees,
servants,
agents,
nominees
or
otherwise howsoever, from interfering with, hindering and/or
jeopardising in any manner whatsoever the sale of the 1st
Defendant’s Shares to the 2nd Defendant through the NGD
SSA and/or the performance and/or implementation thereof,
including but not limited to the registration of the transfer of
the 1st Defendant’s Shares to the 2nd Defendant.
(vii) An injunction to restrain the Plaintiff, whether by itself or
through
its
employees,
servants,
agents,
nominees
or
otherwise howsoever, from interfering with, hindering and/or
jeopardising in any manner whatsoever the sale of the Plaintiff’s
Shares to the 2nd Defendant, including but not limited to the
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registration of the transfer of the Plaintiff’s Shares to the 2nd
Defendant.
(viii) Costs.
BACKGROUND
PJ Sentral Development Sdn. Bhd.
The Plaintiff and the 1st Defendant are shareholders in a company
known as PJ Sentral Development Sdn. Bhd. (PJS). PJS is a private
limited company incorporated in Malaysia having its registered
address at Level 15, Wisma Amfirst Tower 2, Jalan SS7/15, 47301
Kelana Jaya, Selangor Darul Ehsan. PJS is a joint venture company
established pursuant to Clause 3.2 of the Memorandum of
Understanding dated 1.3.2010 (“the MOU”) entered between the
Plaintiff and Bisraya Construction Sdn. Bhd. (“Bisraya”) for the
purpose of implementing and giving effect to the joint venture for
the Development of the Land and the Federal Land as defined in
Clause 3.4 of the said MOU.
The Shareholders’ Agreement
The Plaintiff, the 1st Defendant and PJS subsequently entered into
the Shareholders’ Agreement (SA) dated 3.9.2010 to regulate the
relationship between the parties as shareholders inter se in PJS.
The Conditional Share Sale Agreement
On 8.2.2013, the 1st and 2nd Defendant entered into a Conditional
Share Sale Agreement (SSA) for the acquisition of the 1st
Defendant’s shares as well as the entire equity interest in the 1st
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Defendant’s subsidiaries i.e. Gapurna Builders Sdn. Bhd., Gapurna
Land Sdn. Bhd. and Puncak Wangi Sdn. Bhd. By the SSA, the 2nd
Defendant agreed to purchase the 1st Defendant’s shares for a total
purchase consideration of RM199 million. The obligations of the
Defendants under the SSA is subject to various condition precedents
being fulfilled within 9 months or such later date as the parties may
mutually agreed upon.
A public announcement was then made by RHB Investment Bank
Bhd. on 8.2.2013 on behalf of the Board of Directors of the 2nd
Defendant notifying of the SSA dated 8.2.2013 entered into between
the 1st Defendant and the 2nd Defendant involving the acquisition of
the 1st Defendant’s entire 70% shareholding in PJS.
The Plaintiff however, contended that they had no knowledge of the
SSA nor of the 1st Defendant’s intention to sell its entire shareholding
in PJS prior to the Public Announcement. It is further contended by
the Plaintiff that they only knew of the SSA and of the 1st Defendant’s
intention to sell its shareholding in PJS through other sources. It
is also the contention of the Plaintiff that prior to the public
announcement by RHB, the 1st Defendant had maintained the
position that the reports of the 1st Defendant’s intention to sell its
shareholding in PJS to the 2nd Defendant were baseless and were
mere rumours. The Plaintiff, through its solicitor’s letter dated
12.4.2013 wrote to the 1st and 2nd Defendants and put on record that
by entering into the SSA in the aforesaid circumstances:(a)
the 1st Defendant had contravened the SA; and
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(b)
the 2nd Defendant had procured a breach of the said SA.
The Plaintiff’s former solicitors demanded that the 1st and 2nd
Defendants immediately cease from proceeding with the SSA and
fulfill its obligations in Schedule 1 of the SA. However, by their
solicitors’ letter dated 17.4.2013, the 1st and 2nd Defendant denied the
alleged wrongdoing.
At a meeting of the Board of Directors of PJS on 4.3.2013, it is
contended by the Plaintiff that they had wanted to discuss the
subject of the SSA with the representatives of the 1st Defendant who
were present at the said meeting. However, the representatives of
the 1st Defendant declined to discuss the SSA as they were of the
view that the meeting of the Board of Directors of PJS was not
the proper forum to discuss such matter.
The
representatives
of
the Plaintiff
and the
1st
Defendant
subsequently met on two occasions i.e. 5.3.2013 and 8.4.2013 to
discuss the SSA. At both these meetings, the Plaintiff contended
that they had proposed that the 1st Defendant sell its shares in PJS
to the Plaintiff. However, the said proposal was rejected by the 1st
Defendant. The 1st Defendant also informed the Plaintiff that the 1st
Defendant will exercise its “Drag Along” right under the SSA if the
Plaintiff persist with its proposal to buy the 1st Defendant’s shares in
PJS. The Plaintiff’s representatives asked for more time to consider
the options available to the Plaintiff which was agreed by the 1st
Defendant. It is the contention of the Plaintiff that the 1st Defendant
knew or ought to have known that the Plaintiff’s representatives who
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were present at the meetings on 5.3.2013 and 8.4.2013 were not
authorized to make any decision affecting the Plaintiff’s rights and
that the final decision would lie with PKNS’s Board of Directors.
By a letter dated 22.4.2013, the 1st Defendant exercised its alleged
rights under Clause 8.1 of the SA and sought to compel the Plaintiff
to sell its entire 30% shareholding in PJS to the 2nd Defendant. The
Plaintiff responded through its former solicitors by another letter dated
30.4.2013 stating that the 1st Defendant’s purported notice under
Clause 8.1 of the SA is not binding on the Plaintiff and of no legal
effect. The Plaintiff stated that the 1st Defendant is only entitled to
exercise its alleged right under Clause 8.1 of the SA before the
Plaintiff’s right of pre-emption in Schedule 1 of the SA with respect to
the 1st Defendant’s shares in PJS was triggered.
By their solicitors’ letters dated 3.5.2013, the 1st and 2nd Defendant
again denied the alleged wrongdoing. Immediately after, the Plaintiff
and the 1st Defendant had rounds of discussions through their
representatives with the purpose to explore an amicable settlement of
their dispute.
The representatives of the 1st Defendant met with the Chairman of
PKNS with regards to the matter. The 1st Defendant then issued a
letter dated 11.6.2013 to the Chairman of PKNS, confirming that the
parties have agreed to convene a shareholders’ meeting of PJS
to discuss issues of concern with the Plaintiff. In the meantime, by
their solicitors’ letters dated 11.6.2013 and 14.6.2013, the Plaintiff
reiterated its stand and offered to acquire the 1st Defendant’s 70%
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equity interest in PJS at a price of RM220,000,000.00 (Ringgit
Malaysia Two Hundred And Twenty Million). This is in excess of the
price which was offered by the 2nd Defendant. However, by their
solicitors’ letters dated 13.6.2013 and 17.6.2013, the 1st Defendants
reiterated its earlier stand rejecting the Plaintiff’s offer.
Evaluation of Evidence
By the SA the Plaintiff and the 1st Defendant owned all the shares in
PJS. The Plaintiff’s shares consist of 58,247,400 ordinary shares of
RM1 each and 83,679 redeemable preference shares of RM1 each
(30%). The 1st Defendant’s shares consist of 135,910,600 ordinary
shares of RM1 each and 195,251 redeemable preference shares of
RM1 each (70%). On 8.2.2013, the 1st Defendant and the 2nd
Defendant entered into a conditional SSA for the acquisition of the
1st Defendant is shares in Garpurna Builders Sdn. Bhd., Garpurna
Land Sdn. Bhd. and Puncak Wangi Sdn. Bhd.
Pursuant to the SSA, the 2nd Defendant agreed to purchase
the 1st Defendant shares for a total purchase consideration of
RM199,000,000 consisting of the following:(i)
Cash of RM30,348,584;
(ii)
Issuance of 108,807,365 shares in the 2nd Defendant
at an issue price of RM1.55 per share totaling
RM168,651,416; and
(iii)
Issuance of RM31,087,819.00 free detachable warrants
on the basis of 2 free detachable warrants for every 7
shares issued in respect of (ii) above.
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Othman bin Omar, PW1, the General Manager of the Plaintiff, during
examination-in-chief had testified that he had asked Dato’ Salim
(DW2) about the intended sale of the shares by the 1st Defendant to
the 2nd Defendant during a “Buka Puasa” function held at the Palace.
DW2 informed him it was just mere rumours.
However, when PW1 was cross-examined by the 1st Defendant’s
Counsel, he admitted that he was aware of reports of the intended
sale and that prompted him to raise the purported reports on the sale
with DW2 during the said Palace function. Did the Plaintiff take any
steps to enquire officially with the 1st Defendant? PW1 admitted that
the Plaintiff did not issue any letter to the 1st Defendant regarding
the alleged meeting that took place at the Palace or the alleged
representation made by DW2. DW2 testified denying that such a
conversation with PW1 at the Palace ever took place.
Despite the fact that the sale transaction would have an effect on
the Plaintiff’s pre-emption rights, strangely enough the Plaintiff did
not take any steps whatsoever to communicate officially with the
1st Defendant for clarification or confirmation. This omission clearly
has put the Plaintiff in an untenable position vis a vis, this claim.
Throughout the cross-examination, PW1 displayed various instances
of disinterest and ignorance. When he was questioned by the
Learned Counsel for the Plaintiff whether the Plaintiff had read
the public announcement issued by RHB he casually replied,
“ I’m sure somebody did.”
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When asked by the 1st Defendant’s Counsel whether the meeting on
the 4th March 2013 was the first time that the Plaintiff actually
discussed the issue of share sale agreement as stated by PW2 in her
Witness Statement PW1 replied,
“ I’m not sure.”
He was then asked whether there was any e-mail or letter issued by
the Plaintiff his response was,
“ I’m not sure.”
When the learned Defendant’s Counsel asked whether there was a
meeting prior to 4th March PW1 replied,
“ Not that I can recall.”
PW2, the Chairman of PKNS Holdings, testified that she reports to
PW1. Yet prior to attending such an important fact finding meeting
she did not discuss the SSA with PW1. PW1 testified that PW2 had
the mandate to make an offer for the Plaintiff to buy the shares but
could not remember when the mandate was given or by whom,
“ Q: She had a mandate to do this?
A: We discussed.
Q: Who discussed?
A: I think we discussed this at the board meeting.
Q: Which board meeting?
A: I can’t remember which board meeting we
discussed.
Q: Before 5th March?
A: I’m not sure..”.
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This Court would have expected a General Manager to take
extraordinary interest into matters which has great financial
consequences and impact on the company. However, PW1 could not
even remember whether any e-mails or letters were exchanged with
regards to the transaction. PW1 is the Plaintiff’s key witness and yet
failed to play a pivotal role in establishing the case for the Plaintiff.
PW1’s evidence was more damning to the Plaintiff’s cause. To my
mind, it is akin to sending a disinterested knight to fight a battle royal
that would surely end in a doomed ‘crusade’.
Datin Paduka Norazlina (PW2) the Chairman of PKNS Holdings,
confirmed during cross-examination that the Plaintiff was in fact fully
aware from 8th February about the SSA as set out in the public
announcements. PW1 had testified that no legal advice was sought
by the Plaintiff as all the Plaintiff wanted was much more detailed
information on the transaction. PW2, however, gave evidence that the
Plaintiff had the advantage of legal counsel once they became aware
of the SSA as set out in the public announcement.
The Plaintiff contended that 4th March 2013 Board Meeting of PJS
was not a special board meeting but a regular board meeting. When
PW2 was asked to confirmed that it was not a board meeting
specially convened to discuss the SSA PW2 replied as follows,
“ A: My expectation was different.
Q: Agree or disagree?
A: I don’t want to answer that.
How to answer….Because I was expecting them to
discuss the SSA.”.
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PW2 confirmed in evidence that the Plaintiff did not discuss the SSA
at the Board level despite having knowledge of the SSA and having
taken legal advice in the matter.
PW1 gave evidence that PW2 had the mandate to make the offer but
PW2 testified that she did not have the mandate,
“ Q: You walked into a meeting on 5th March and made an
offer to buy shares worth RM199m…surely you had a
mandate?
A: Not really, no.
Q: You didn’t have the mandate?
A: No”.
“Q: Did Encik Othman have a mandate to make the offer
on 8th April…
A: No officially.
Q: So 2 senior officer of PKNS and yourself being a
director of the Plaintiff, go in 5 weeks apart and
make an offer to buy shares worth RM200m without a
mandate..?
A: Yes”.
The right of pre-emption under the SA
It is the submission of the Learned Counsel for the Plaintiff that the
Plaintiff’s right of pre-emption under the SA was triggered when the
1st Defendant entered into the SSA. By entering into the SSA without
first complying with the Plaintiff’s right of pre-emption in Schedule 1
of the SA, the 1st Defendant, according to the Plaintiff had committed
a breach of Clauses 7.1 and 7.2 of the SA.
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The pre-emption rights and the exceptions are governed by the SA
and the Article of Association (AA) of PJS. Article 26(a) of the AA
provides that,
“ In the event of a proposed sale by any Shareholder (Proposed Seller) of
all its shares, the rights of pre-emption set out in Article 27 shall apply,
except in relation to –
(a) A sale by NGSB at a price per share which is not less than the
Minimum Drag Along Price…”.
Minimum Drag Along Price is defined in Clause 1.1 of the SA as,
“ …the price as per Share that is no less than –
(i)
In respect of any Ordinary Share, the purchase price per share
based on Fair Market Value; and/or
(ii)
In respect of any RPS, the original subscription price paid by each
Party per RPS;”.
Clause 7.1 of the SA provides,
“ Other than pursuant to Clauses 7.2,7.3 and 12, a Party shall not without
the prior consent of the other Party:
7.1.1…
7.1.2 sell, transfer or otherwise dispose of any shares (or any legal and
beneficial interest there in) except in accordance with the preemption
procedure set out in Schedule 1 of this Agreement.”.
Clause 7.2.1 of the same Agreement further provides that,
“ In the event of a proposed sale by any party (“Proposed Seller”) of all of
his shares, the right of pre-emption in Schedule 1 of this Agreement and
the Articles of Association of the Company shall apply, except in relation
to the following:7.2.1.1to a sale by NGSB at a price per share which is not less than the
Minimum Drag Along Price pursuant to clause 8.1 below;….”.
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It is stipulated in Clause 8.1 of the SA that,
“ Notwithstanding any other provision of this Agreement and whether
PKNS has issued any Transfer Notice pursuant to Schedule 1, NGSB
shall be entitled to compel PKNS to participate in the sale of all the
shares to a third party....provided that –
8.1.1.1 NGSB has served a notice on PKNS and has stated that the
Third Party wishes to purchase the Shares;…”.
Schedule 1 of the SA reads as follows,
“ (i) A Party (the “Vendor”) who desires to sell or transfer all its Shares
registered in its name shall give to the Company Secretary a notice in
writing ….”.
The right of pre-emption as stipulated in Schedule 1 of the SA shall
be triggered in the event of a proposed sale except the following
circumstances:i.
a sale by the 1st Defendant at a price per share less than
the Minimum Drag Along Price pursuant to Clause 8.1;
ii.
any sale made pursuant to Clause 8.2;
iii.
any sale made pursuant to Clause 8.3; or
iv.
any sale permitted pursuant to Clause 7.3.
If the proposed sale falls within the exception as stipulated, then
the right of pre-emption will not be triggered. For the exception of the
pre-emption rights to apply as stipulated in Schedule 1 of the SA,
i.
there must be a proposed sale by the 1st Defendant of all
the shares; and
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ii.
the sale price should not be less than the Minimum Drag
Along price.
In the instant case, based on the terms and conditions of the SA
and the facts as well as evidence mentioned above, the proposed
sale of shares transaction by the 1st Defendant falls squarely within
the exception as stipulated under Clause 7.2. of the SA. Firstly, there
is evidence of a proposed sale of all of the 1st Defendant shares as
indicated through the public announcement made by RHB Investment
Bank Bhd. with regards to the 1st Defendant’s intention. There were
also extensive media coverage of the proposed sale.
The 1st Defendant’s (DW3) and one Miss Ann Wan Tee had a
meeting on 5.3.2013 with the Plaintiff’s representatives, PW2, and
one Noor Hisham Mohd Ghouth. At that meeting DW3 explained to
the Plaintiff’s representatives the terms of the SSA and informed
them that the Defendant was in the process of complying with the
condition precedents. Subsequently, at a second meeting held on
8.4.2013 DW3 met PW1 and PW2. Parties discussed the sale of
Plaintiff’s shares to the 2nd Defendant as well as the possibility of the
Plaintiff exercising its tag along rights.
By a letter dated 12.4.2013, the Plaintiff through its solicitor alleged
that the 1st Defendant had breached Clause 7.2 of the SA by entering
into the SSA. The Plaintiff demanded that the 1st Defendant do not
proceed with the sale of the shares to the 2nd Defendant. However,
the 2nd Defendant notified the 1st Defendant that they were prepared
to acquire the Plaintiff’s shares on the same terms for the acquisition
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of the 1st Defendant’s shares. The 1st Defendant then issued a drag
along notice dated 22.4.2013 on the Plaintiff requiring the Plaintiff
to participate in the sale of the entire equity interest in PJS to the
2nd Defendant.
The Plaintiff does not have any pre-emption rights where the 1st
Defendant sells its shares above the Minimum Drag Along Price.
The proposed purchase price of the shares of RM199million is
not less than the Minimum Drag Along Price as defined in Clause
8.1. The Minimum Drag Along Price is in actual fact premised on
the fair market value of the shares based on the net tangible
assets (NTA) value of PJS. According to the Financial Statements
of PJS for the financial year ended 31 December 2012, the NTA
of PJS is RM216,674,365. The Plaintiff’s shares is 70% which is
RM151,672,055.50. The purchase consideration by the 2nd Defendant
is approximately 30% higher.
Pursuant to the terms of the SA, the 1st Defendant had served the
drag along notice dated 22.4.2013 on the Plaintiff requiring the
Plaintiff to participate in the sale of the entire equity interest of PJS.
Pursuant to Clause 8.1, once the drag along notice is issued the
Plaintiff has no pre-emption rights. It is stipulated in Clause 8.1 of
the SA that,
“ Notwithstanding any other provision of this Agreement and whether
PKNS has issued any Transfer Notice pursuant to Schedule 1, NGSB
shall be entitled to compel PKNS to participate in the sale of all the
shares to a third party….provided that –
8.1.1.1 NGSB has served a notice on PKNS and has stated that the
Third Party wishes to purchase the Shares;…”.
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It is clear from the plain reading of Clause 7.2.1.1, the preemption
rights given to the 1st Defendant constitutes an express condition to
the Plaintiff’s pre-emption rights,
“ In the event of a proposed sale by any party (Proposed Seller”) of all of
his shares, the right of preemption in Schedule 1 of this Agreement and
the Articles of Association of the Company shall apply, except in relation
to the following:7.2.1.1 to a sale by NGSB at a price per share which is not less
than the Minimum Drag Along Price pursuant to clause 8.1
below;….”.
Furthermore, Article 26(a) of the AA provides that,
“ In the event of a proposed sale by any Shareholder (Proposed Seller) of
all its shares, the rights of pre-emption set out in Article 27 shall apply,
except in relation to –
(a) A sale by NGSB at a price per share which is not less than the
Minimum Drag Along Price…”.
The Court shall not under any circumstances rewrite any commercial
terms or contract agreed upon by the parties (Re: Tindok Besar
Estate Sdn. Bhd. v. Tinjar Co [1979] 1 LNS 119; [1979] 2 MLJ 229,
Ayer Hitam Tin Dredging Malaysia Bhd. v. YC Chin Enterprises
Sdn. Bhd. [1994] 3 CLJ 133; [1994] 2 MLJ 754, and Berjaya Times
Squares Sdn. Bhd. (formerly known as Berjaya Ditan Sdn. Bhd.)
v. M Concept Sdn. Bhd. [2010] 1 CLJ 269 [2009] 1 LNS 1143;
[2010] 1 MLJ 597). The parties to an agreement must respect and
uphold the sanctity of the terms of the agreement that they had
agreed upon.
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The Court of Appeal in Glamour Green Sdn. Bhd. v. Ambank Bhd.
& Ors. & Another Appeal [2007] 3 CLJ 413 held that when
interpreting private contracts, the Courts need to look at the factual
matrix which forms the background transaction. Such matrix includes
all material fact that was reasonably available to the parties.
Both the Plaintiff’s witnesses, PW1 and PW2, gave conflicting and
contradicting evidence and their evidence are unreliable. However, in
the case of Guan Teik Sdn. Bhd. v. Haji Mohd Noor Bin Haji
Yakob [2000] 4 CLJ 324; [2000] 4 MLJ 433, 439, the Court of
Appeal inter alia said:
“ In cases where conflicting evidence are presented before a court, it is
the duty of the court not only to weigh such evidence on a balance of
probabilities but it is also incumbent upon the court to look at all the
surrounding factors and to weigh and evaluate contemporaneous
documents that may tend to establish the truth or otherwise of a given
fact.”.
In Bank of Credit and Commerce International SA v. Ali [2002] 1
AC 251, Lord Bingham of Cornhill said at p. 259:
“ In construing a contractual provision, the object of the court is to give
effect to what the contracting parties intended. To ascertain the intention
of the parties, the court reads the terms of the contract as a whole,
giving the words used in their natural and ordinary meaning in the
context of the agreement, the parties’ relationship and all the relevant
facts surrounding transaction so far as known to the parties. To ascertain
the parties’ intentions the court does not of course inquire into the
parties’ subjective states of mind but makes an objective judgment
based on the materials already identified. (see also Investors
Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1
WLR 896 at p. 912 - 913).”.
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In Eastern & Oriental Hotel (1951) Sdn. Bhd. v. Ellarious George
Fernandez [1988] 1 CLJ Rep 50; [1988] 2 CLJ 734; [1988] 1 LNS
161; [1989] 1 MLJ 35, 37, the Supreme Court inter alia held:
“ We would respectfully agree with the soundness of the observation
made in Armagas Ltd v. Mundogas SA (The ‘Ocean Frost’) [1985] 1
Lloyd's Rep 1 which reads:
“ It is frequently very difficult to tell whether a witness is telling the truth
or not; and where there is a conflict of evidence such as there was in
the present case, reference to the objective facts and documents to
the witnesses’ motives, and to the overall probabilities can be of very
great assistance to a judge in ascertaining the truth.
In commercial cases there is usually a substantial body of
contemporarydocumentary evidence. This is not strictly speaking a
commercial case, but the relevancy of contemporaneous documents
nevertheless holds true.”.
The relationship between the Plaintiff and the Defendant is based on
the said agreements and the parties are bound by the express terms
of the said agreements. The sanctity of the terms of the agreement
must be respected and upheld by the Parties. Therefore, it is only
within the four corners of the SA that the Parties must stay and
prevail. The Court of Appeal in Pinsia Development Sdn. Bhd. v. Hj
Abdul Hadi bin Ahmad [2005] 1 CLJ 416; [2004] 1 LNS 646;
[2005] 2 MLJ 32, at p35, held:
“ We accept that it is settled law that an agreement may not be interpreted
by reference to the subsequent conduct of the parties there to (see
Wickman Tools v. Schuler A.G. [1974] AC 235). But it is equally well
settled that parties may by their subsequent conduct give a term in an
agreement a particular meaning. See, American Surety Co of New York
v. Calgary Mining Co Ltd [1919] 48 DLR 295, a decision of the Privy
21
Council. In such an event it is that meaning which binds the court and
the court is not then entitled to discover some other meaning in the
exercise of its interpretive jurisdiction.”.
Lord Denning in the case of Amalgamated Investment & Property
Co Ltd (In liquidation) v. Texas Commerce Bank [1982] QB 84
said:
“ If parties to a contract, by their course of dealing, put a particular
interpretation on the terms of it - on the faith of which each of them - to
the knowledge of the other - acts and conducts their mutual affairs - they
are bound by that interpretation just as much as if they had written it
down as being a variation of the contract. There is no need to inquire
whether their particular interpretation is correct or not - or whether they
were mistaken or not - or whether they had in mind the original terms or
not. Suffice it that they have, by the course of dealing, put their own
interpretation on their contract, and cannot be allowed to go back on it. ”.
The Federal Court in Berjaya Times Square Sdn. Bhd. v. MConcept Sdn. Bhd. [2010] 1 CLJ 309; [2009] 1 LNS 1146; [2010]
1 MLJ 597, at pg 620 listed down the following guidelines regarding
the relevancy of the factual matrix of a case:
“Here it is important to bear in mind that a contract is to be interpreted in
accordance with the following guidelines. First, a court interpreting a
private contract is not confined to the four corners of the document. It is
entitled to look at the factual matrix forming the background to the
transaction. Second, the factual matrix which forms the background to the
transaction includes all material that was reasonably available to the
parties. Third, the interpreting court must disregard any part of the
background that is declaratory of subjective intent only. Lastly, the court
should adopt an objective approach when interpreting a private contract .”.
22
Applying the principles enunciated in the cases mentioned above and
upon perusal of the terms of the SA, I am of the view that the
provisions as set out in the said SA is very clear. Clause 8.1 is crystal
clear that once a drag along notice is issued pursuant to the said
clause, then no pre-emption rights can arise,
“ 8.1.1
Notwithstanding any other provision of this Agreement and
whether PKNS has issued
any Transfer Notice
pursuant to
Schedule 1, NGSB shall be entitled to compel PKNS to
participate in the sale of all the Shares to a third party…provided
that8.1.1.1
NGSB has served a notice to PKNS and has stated
that the Third Party wishes to purchase the shares; and
8.1.1.2
the terms and timing, mode of payment and price
payable per share for and to all the Parties are identical
and comply with Clause 8.1.2.
8.1.2
PKNS hereby irrevocably and unconditionally agrees and
undertakes as follows:
8.1.2.1
to complete the sale of the Shares;
8.1.2.2
to not delay or hinder the sale of the Shares;
8.1.2.3
to execute all documents necessary for the purposes
of completing and perfecting the sale of the Shares;
8.1.2.4
that NGSB (or NGSB’s duly nominated representatives
as NGSB may, at its sole discretion, nominate) is duly
appointed and authorized to negotiate with the Third
Party on the terms and conditions of all documents
necessary for the purposes of completing and perfecting
the sale of the Shares; and
8.1.2.5
to be bound and abide by the terms and conditions
of the all documents necessary for the purposes of
completing and perfecting the sale of the Shares;
on condition that:-
23
8.1.2.6
the Third Party settles the payment for the Shares upon
such terms as may be mutually agreed between NGSB
and the Third Party;
8.1.2.7
the price payable per Share is not less than the
Minimum Drag Along Price; and
8.1.2.8
the sale is not to a Connected Person.”
(emphasis added).”.
In the instant case, the 2nd Defendant notified the 1st Defendant
on 22 April 2013 of the Board’s decision to acquire the Plaintiff’s
shares and the 1st Defendant had issued the Drag Along Notice
on the Plaintiff as required under Clause 8.1. The Plaintiff is,
therefore, bound to comply with the Drag Along Notice and sell
its shares to the 2nd Defendant.
There is an unequivocal intention to create a situation where
the right of pre-emption is not automatic. The right of pre-emption is
not available to the Plaintiff as the proposed sale transaction falls
within the exception as prescribed under Clause 7.2.1 as well as
Schedule 1 of the same Agreement. The Plaintiff’s pre-emption rights
therefore, do not apply. The 1st Defendant has not in any manner
breached the SA. By the terms of the SA the 1st Defendant is entitled
to sell its shares to the 2nd Defendant.
Delay
From the evidence, the Plaintiff knew of the proposed sale of
shares by 1st Defendant even before the Public Announcement was
made in February 2013. At the first meeting held on 5.3.2013, the
Plaintiff had proposed that the 1st Defendant sells its shares to
24
the Plaintiff which was rejected. Plaintiff had asked for more time and
waited until April 2013 to allege that its pre-emption rights have
been breached.
The Plaintiff had submitted that they had absolutely no knowledge
of the SSA of the 1st Defendant’s intention to sell its entire
shareholding in PJS prior to the Public Announcement. The Plaintiff
was not informed by the 1st Defendant of the SSA or of the 1st
Defendant’s intention to sell its entire shareholding in PJS to the
2nd Defendant and only came to know of the SSA and of the 1st
Defendant’s intention to sell its shareholding in PJS through other
sources.
It is also contended by the Plaintiff that prior to the public
announcement, the 1st Defendant had maintained the position that
the reports of the 1st Defendant’s intention to sell its shareholding
in PJS to the 2nd Defendant were based on mere rumours.
In her Witness Statement, PW2 said that at the meeting of the Board
of Directors, the Plaintiff representatives had sought to discuss the
subject of the SSA with the representatives of the 1st Defendant who
were present at the said meeting. According to the evidence of PW2,
the representatives of the 1st Defendant declined to discuss the SSA
on the pretext that the meeting of the Board of Directors of PJS was
not the proper forum to discuss the SSA. However, there was no
mention of any breach of the Plaintiff’s pre-emption. The Plaintiff did
not issue any letter or notice of the breach to the 1st Defendant. This
was confirmed by PW1 and PW2 during cross-examination.
25
PW2 said in evidence that she had made an offer to the Plaintiff to
buy the shares during the aforesaid 1st meeting but the offer was
rejected by DW3. However, the Plaintiff did not offer any evidence
to support this allegation. PW1 and PW2 also confirmed that the
Plaintiff has pledged the shares to HSBC Amanah.
The 2nd Defendant
The cause of action against the 2nd Defendant is for the procurement
of a breach of a contract. A public announcement was made by RHB
for the BOD of the 2nd Defendant on 8.2.2013 that the SSA had
been entered into between the 1st and 2nd Defendant involving the
1st Defendant’s entire 70% shareholding in PJ Sentral. It is the
contention of the Plaintiff that the 2nd Defendant had knowingly or
recklessly procured a breach of the SA due to the plain meaning or
inference that can be drawn from the contents of Section 2.10.9 of
the public announcement that:
(i)
the 2nd Defendant was aware of the provisions of the SA
(in particular Clauses 7.1, and 7.2 and Schedule 1);
(ii)
the 2nd Defendant was aware of the right of pre-emption
of the Plaintiff with respect to the shares in PJ Sentral
held by the 1st Defendant; and
(iii)
despite that knowledge the 2nd Defendant had entered
into the SSA knowing that the pre-emption procedure in
Schedule 1 of the SA had not been complied with; or
alternatively had recklessly entered into the SSA with the
1st Defendant without making any reasonable inquiries to
26
satisfy itself that the pre-emption procedure in Schedule 1
of the SA had been satisfied and that such recklessness
may be equated with a conscious or deliberate negation
of the contractual rights of the Plaintiff under the SA (in
particular Clauses 7.1 and 7.2 and Schedule 1).
It is contended by the Plaintiff that the 2nd Defendant has interfered
with the SA and has by unlawful means procured a breach thereof.
To succeed in its claim for an inducement to breach/interference of
a contract, the Plaintiff must establish the following:
(a)
‘direct interference’ or ‘indirect interference’ coupled with
the use of unlawful means;
(b)
knowledge of the contract which was breached; and
(c)
an intent to interfere with the contract.
The burden of proving this case rests on the Plaintiff throughout
the course of the trial of this action and the Plaintiff is under a duty
to adduce sufficient and credible evidence to prove its case. No such
evidence that there direct or indirect interference or intent to interfere
was offered by the Plaintiff and this Court must therefore rule the
inevitable.
Whether the 2nd Defendant was reckless which may be equated
with a conscious or deliberate negation of the contractual rights
of the Plaintiff under the SA in entering into the SSA with the
27
2nd Defendant thereby inducing a breach of the SA by unlawful
means
‘Recklessness’ is an act of utter irresponsibility without any
consideration of the consequences thereof. From the facts and
evidence the 2nd Defendant had taken all the necessary steps
and precautions such as being advised by its team of legal advisors,
financial advisors, tax advisors and accountants before proceeding
to enter into the SSA. The 2nd Defendant had heeded legal counsel
advice in relation to the pre-emption rights, ‘Drag-Along’ and TagAlong rights under the SA. Based on the evidence, the 2nd Defendant
duly considered the advice and recommendations of its advisors
and obtained the appropriate advice from all the relevant advisors
before proceeding with the proposed Acquisition. The 2nd Defendant
had proceeded with the proposed Acquisition and/or the entering
into of, inter-alia, the SSA with the 1st Defendant based on the
representations made by the 1st Defendant pursuant to Clause 6.3
of the SSA which are believed to be true. The 2nd Defendant had
also sought approval of its shareholders in respect of the proposed
Acquisition at an EGM held on 26.6.2013.
The Plaintiff has failed to adduce evidence that the 2nd Defendant had
knowingly or recklessly procured a breach of the SA. Based on the
oral and documentary evidence presented at the trial, this Court is of
the considered view that the 2nd Defendant was not in any way
reckless and had made reasonable inquiries before entering into
the SSA. The 2nd Defendant did not enter into the SSA in deliberate
negation of the contractual rights of the Plaintiff. PW1 confirmed that
28
there is no evidence of any inducement to cause of a breach of the
SA on the part of the 2nd Defendant.
Accordingly, based on the reasons mentioned above the Plaintiff has
failed to prove its case against the 2nd Defendant vis-à-vis, the claim
that the 2nd Defendant induced a breach of the SA between the
Plaintiff and the 1st Defendant.
Conclusion
In summation this Court finds that the totality of both the oral
and documentary evidence were insufficient to justify the Plaintiff’s
case against the 1st and 2nd Defendants. In the premises, it is only
just that the Plaintiff’s claims against the 1st and the 2nd Defendant be
dismissed with cost. The Counterclaim of the 1st Defendant is hereby
allowed with cost. After hearing submission of Counsels, cost of
RM100,000.00 to be paid to the 1st Defendant and RM50,000.00 to
be paid to the 2nd Defendant by the Plaintiff.
sgd.
( HASNAH BINTI DATO’ MOHAMMED HASHIM )
Judge
High Court of Malaya
Kuala Lumpur.
14th April 2014
29
Counsels:
For the Plaintiff/Appellant:
Messrs. Shook Lin & Bok
- Porres P. Royan
- T.Sudharsanan
- Y.M. Low
For the Defendant/Respondent:
Messrs. Shearn Delamore & Co. for 1st Defendant
- Dinesh Baskaran
- Denise Tan
Messrs. Zul Rafique & Partners for 2nd Defendant
- Tan Sri Dato’ Cecil WM Abraham
- Sunil Abraham
- Idza Hajar Ahmad Idzam
- Grace Khoo Mei Yen