THE OFFICIAL REPOSITORY OF
MALAYSIAN JUDGMENTS & RULINGS

[2018] MYCA 45 ENGLISH

Ng Chin Tai and Another v Ananda Kumar A/L Krishnan
Suit Number: Civil Appeal No. P-02(W)-1576-09/2015 

Contracts & commercial – Privity of contract – Validity of contract – Termination of contract

Corporate law – Lifting of corporate veil

JUDGMENT

Introduction:

[1] This is an appeal by the Appellants/ Defendants against the decision of the High Court in which the learned Judge sustained the Respondent/ Plaintiff’s claim for RM19,000,000.00 for services rendered to the Appellants in securing contracts of supply of fishes to Tesco which is a one of the biggest supermarkets in this country.

[2] We heard the appeal and after giving due consideration to the evidence adduced in the trial Court and submissions by respective counsel, we dismissed the appeal. We now give our grounds for that decision.

Background facts:

[3] The factual matrix had been set out in detail by the learned Judge. However, for this appeal, we shall set out the salient facts. The Respondent had sued the Appellants under a brokerage contract for services rendered in securing supply of seafood on behalf of the Appellants to Tesco Stores (M) Sdn Bhd (Tesco). As to how this arrangement eventuated, there was not much of a common ground in that both had their version of events which were in stark contrast.

Respondent’s case

[4] The Respondent’s version of events was this. Sometime in early February 2004, the Respondent met up with one Ng Tee Keat (DW7) who is the son of the 1st Appellant. DW7 had sought the help of the Respondent to secure a contract of supply of seafood with Tesco in return of a consultancy fees of 5% of the total sales to Tesco.

[5] Pursuant to that request, the Respondent met up with one Miss Patricia of Tesco and gave her quotations from the 1st Appellant for the supply of seafood. Those quotations were not accepted by Tesco. However, in December 2004, the Respondent came to be aware that Tesco was still looking for supply of seafood and contacted DW7 to enquire whether the 1st Appellant was still interested. DW7 confirmed in the affirmative and upon which the Respondent contacted one Lee Yan Seng (PW3) who was then the marketing manager of Tesco. PW3 then introduced the Respondent and DW7 to one Ng Shek Chan (DW5) who was the manager of the Fresh and Frozen Food Department of Tesco. DW5 after several meetings requested certain information on the 1st Appellant which was then supplied.

[6] The Respondent then sought confirmation from the 1st Appellant regarding his consultancy fees of 5% of the total sales of seafood to Tesco. This resulted in a letter dated 6.2.2005 signed by DW7 on behalf of the 1st Appellant. A copy of that letter is produced herein:

[7] The circumstance in which the letter was obtained was pursuant to a telephone conference between the Respondent and 1st Appellant in the presence of Ng Tee Huat (DW3), who is also a son of the 1st Appellant, DW7 and the Plaintiff’s manager, Vasantha Kumari a/p K Erusan @ Krishnan (PW5). The telephone conference emanated from DW7 who made the telephone call from the office of the Respondent. Of crucial importance was the appointment by the 1st Appellant of DW7 to be the person having his authority to sign the letter of appointment of the Respondent on his behalf.

[8] The Respondent’s cause of action against the 1st Appellant was simply premised on the letter dated 6.2.2005. As for the 2nd Appellant, it was set up from the Respondent’s point of view as a sham to defraud the Respondent to avoid the payment of the 5% consultancy fees.

Appellant’s case

[9] From the 1st Appellant’s stand point, it was a complete denial by him in that he had never seen the letter dated 6.2.2005 and had never appointed DW7 to sign such a letter.

[10] As for DW7, his evidence was such that he had never approached the Respondent in regard to the supply of fish to Tesco. DW7 and the Respondent were only in partnership and had set up a company known as Esteem Farm Sdn Bhd on 19.5.2003 to rear fish.

[11] What had happened was that the Respondent had suggested to DW7 to use the supply of fish by the 1st Appellant to Tesco as a way of generating income for Esteem Farm Sdn Bhd. Pursuant to that suggestion, several meetings were held between one Lee Yan Sang (PW3) from Tesco and other relevant personalities. This eventuated in a supply of fish arrangement between Tesco and the 1st Appellant starting from April 2005 until middle of 2006.

[12] DW7 denied having been involved in the telephone conference with the 1st Appellant at the office of the Respondent. As for the letter dated 6.2.2005 DW7 had signed it for the tax purposes and was drafted by the Respondent. DW7 further testified that he did not understand English and hence did not understand the contents of the aforesaid letter.

[13] As for the alleged 5% consultancy fees due to the Respondent, there was no such arrangement. He was informed by the Respondent and PW3 that 3% of the sale price of the fish supply to Tesco was meant to be for one Simon Ng (DW5) with 2% to be paid to Esteem Farm Sdn Bhd.

[14] As for the status of the 2nd Appellant, it was an independent entity to the 1st Appellant according to Ng Tee Huat (DW3), another son of the 1st Appellant. As far as the DW3 was concerned, the 1st Appellant was involved with wholesale business to local fishmongers while the 2nd Appellant conducts fish trading to established companies. It was denied that the 2nd Appellant was set up to avoid the 1st Appellant’s obligation under the letter dated 6.2.2005.

[15] Premised on the above, the 1st Appellant had counterclaimed against the Respondent for the return of the 5% of the total sale price of seafood to Tesco which had been paid to the Respondent from1.1.2005 to 24.12.2005 in the sum of RM421,706.32, a sum of RM23,000.00 being excess payment of transportation costs and general damages.

High Court decision:

[16] The learned Judge in substance found that the version of events of the Respondent to be more credible to that of the version of the Appellants. Having made that decision, the learned Judge found that the letter dated 6.2.2005 had created a binding contract between the Respondent and the 1st Appellant.

[17] The letter dated 6.2.2005 was a product of the telephone conference between the Respondent and 1st Appellant and witnessed by DW7, DW3 and PW5. It was the contention of the Appellants that no such telephone conversation had taken place.

[18] Both the 1st Appellant and DW7 flatly denied such conversation while DW3 testified that at the material time he was in Dubai and tendered his passport as proof of his assertion. The learned Judge found as a fact that DW3’s contention was not proven as it had been neutralized by the evidence of PW7 who was an immigration officer and had testified that the records from the Immigration Department did not show that DW3 was in fact out of the country between 22.10.2004-2.4.2005. Further the exit endorsement of the United Arab Emirates on DW3’s passport was suspicious as the samples of the United Arab Emirates immigration’s exit endorsement was different to that shown in the DW3’s passport.

[19] The learned Judge also rejected the flat denial of the 1st Appellant and DW7.

[20] As for the plea of illegality of the 5% payment as a tax evasion exercise, the learned Judge rejected the same for the simple reason that on the face of the letter dated 6.2.2005, there was nothing to indicate the allegation that it was a so called under counter payment of 3% to one Simon Ng (DW5).

[21] In regard to the status of the 2nd Appellant as facade for the 1st Appellant to evade its liability under the letter dated 6.2.2005, the learned Judge found that as a fact premised on the 2nd Appellant’s incorporation was effected some 3 months after the commencement of this suit and the admission of DW3 that the 2nd Appellant was formed for the purpose of supplying fish products to Tesco.

Our grounds of decision:

[22] Before us learned counsel for the Appellant had correctly listed five issues for our consideration and they were as follows:

1. Whether there is a contract between the 1st Appellant and the Respondent (‘The privity issue') [Memorandum of Appeal: Grounds 1-7];

2. If there is a contract between the 1st Appellant and the Respondent, whether the contract is valid (‘The illegality issue') [Memorandum of Appeal: No. 2, 8-9];

3. If the contract is valid, whether the contract has been terminated (‘The perpetuity issue’) [Memorandum of Appeal: No. 10-14];

4. If the contract has not been terminated, whether the Respondent is entitled to payment of RM19million (‘The effective cause issue’) [Memorandum of Appeal: No. 15]; and

5. Whether the Court was entitled to lift the corporate veil of between the Appellants (‘The corporate veil issue’) [Memorandum of Appeal: No. 16-22].

[23] In our deliberation, we started with the letter dated 6.2.2005 as this was the only documentary evidence before the trial Court and most importantly there is no allegation that the letter was a fabrication or that DW7’s signature on the letter was a forgery. The case of the Respondent, so to speak, was on the front foot from the start of the case and hence incumbent on the Appellants to neutralize it. The question then was whether the Appellants had done so such that the letter dated 6.2.2005 had been rendered a useless piece of evidence. It is trite law or for use of a better phrase common sense that in adjudicating or resolving any dispute of facts that where there was a written document, any oral evidence to the contrary must be treated with some suspicion.

[24] In the context of this case, the letter dated 6.2.2005 was a commercial document in a form of an agreement made between two parties well versed with the intricacy of the business world. There was no evidence that DW7 is a naive business person in that he had no idea of the significance of a written document which had set out the business relationship between the Respondent and the parties which DW7 represented. The only evidence of DW7 was that he did not understand English and was not aware of the meaning of the contents of the letter. Even taking that evidence to its highest, it did not explain the fact that why DW7, being someone who is a businessman and represented his father, the 1st Appellant did not see fit to seek advice, legal or otherwise before he signed that document. In any event, the learned Judge had remarked in his ground that from his observation of DW7 in Court, DW7 can read and understand the English language.

[25] DW7’s evidence relating as to how the 5% amount was to be shared with DW5 in our view confirmed that the existence of the 5% fees in the letter dated 6.2.2005 was not a figment of anyone’s imagination. It thus also confirmed the existence and genuineness of the same.

[26] As for the evidence of DW3 in regard to him being out of the country during the material time of the signing of the letter dated 6.2.2005, the learned Judge had made a finding of fact which we were not willing to disturb as it was made premised on established evidence.

[27] The aforesaid evidence hence made by the allegation of the 1st Appellant that he knew nothing about the letter dated 6.2.2005 was bereft of any substance. Actually the 1st Appellant had in his testimony confirmed that DW7 was his representative when dealing with Tesco. This was his evidence:

AGK: I put to you that Ng Tee Keat is your representative. Sorry my Lord, I put to you that Ng Tee Keat is your agent and representative of the first Defendant in all matters relating to Tesco.

NCT: Saya Setuju, Yang Arif..

AGK: I put to you that you also gave the authority to Ng Tee Keat to deal with Tesco on behalf of the first Defendant.

NCT: Ya, Yang Arif.

[28] Further in coming to our view on the status of the letter dated 6.2.2005, we applied certain established trite principles of law. The first of which is that an appellate Court will always be slow in disturbing any finding of facts by the trial Court for the obvious reason that the trial Court had the advantage and benefit of seeing and observing the mannerism in which evidence was offered by the relevant witnesses. This benefit should never be underestimated by the appellate Court. The only time in which an appellate Court should intervene is when the trial Court had not subjected the totality of evidence to judicial appreciation and had reached a decision which was perverse or devoid of any reasons or plainly wrong. This was not the case here as the learned Judge had studiously evaluated the totality of the evidence before reaching a well-reasoned decision supported by established evidence.

[29] Another principle of law is what was stated by this Court in Guan Teik Sdn Bhd v Hj Mohd Noor Hj Yakob & Ors [2000] 4 CLJ 324 at p330:

“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 encumbent 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.

We say that this evaluation exercise is most crucial for it must be remembered that the respondents were testifying to events that happened eighteen years ago whilst the contemporaneous documents speak of matters then existing at the time such documents, were issued.”

[30] Premised on the above we answer issue 1 as set out by the learned counsel for the Appellant in the affirmative. We now move to issue 2.

[31] We agree with the manner in which the learned Judge had dealt with the illegality plea. Mere allegations of “under counter” payment in respect of the 5% fees to various persons cannot amount to evidence. As pointed by the learned Judge, DW5 who was supposed to receive 3% of the 5% commission had denied that he had asked for the under-counter payment. Accordingly, we answered issue 2 in the affirmative.

[32] As for issue 3 and 4 relating to the perpetual nature of the contract between the Respondent and 1st Appellant, we agreed with learned counsel for the Respondent that the contract had been terminated on 25.10.2015 when Tesco and the 2nd Defendant had mutually terminated their relationship. The Respondent’s entitlement was simply 5% of the total sale to Tesco by the 1st Appellant. If there were no more relationship between the 1st Appellant and Tesco, there was no more entitlement by the Respondent. That we said was the long and short of the contents of the letter dated 6.2.2005.

[33] As for the amount awarded by the learned Judge, firstly as pointed by counsel for the Respondent there was no appeal as to the quantum of the award by the trial Court. Secondly we thought that was perfectly correct as the evidence of PW2 being the financial controller of Tesco and in our view an independent witness was not challenged seriously and for good reason.

[34] In regard to issue 5, we fully agreed with the learned Judge’s finding that this was a proper case to lift the corporate veil as there was a blatant attempt by the 1st Appellant to avoid its obligation to the Respondent. The law is crystal clear. The court has the power to lift the corporate veil of any corporation if it had been established that there are elements of fraud in the conducts of parties. Here the learned judge, in our view, had made correct findings of fact that the 2nd Appellant was set up as an engine of fraud to undermine the Respondent’s contractual rights.

Conclusion:

[35] For reasons stated above, the appeal was dismissed with costs in the sum of RM20,000.00 subject to allocator fees. We also ordered that the deposit to be refunded to the Appellant.

Dated: 2 February 2018

Sgd

DAVID WONG DAK WAH
Judge
Court of Appeal Malaysia

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision.

COUNSEL

For the Appellant: Ram Karpal Singh, With him On Yvonne How, Sangeet Kaur Deo & Harshaan, Messrs Yew Huoi & Associates

For the Respondent: A. G. Kalidas, With him Doris Meyappan, Messrs. K Nadarajah & Partners

Judgments referred to:

Guan Teik Sdn Bhd v Hj Mohd Noor Hj Yakob & Ors [2000] 4 CLJ 324

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