Daya Bersama Sdn. Bhd. v Kiron Chhotalal Doshi, 11-12-2010

• Judge: Y.A Tuan Lee Swee Seng
• Judgment Date: 11 December 2010
• Court: High Court (Malaysia)
• Record Number: S-22-731-2006

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(CIVIL DIVISION)

CIVIL SUIT NO. S-22-731-2006

BETWEEN

DAYA BERSAMA SDN BHD (In Liquidation) (Company No 12959-X) …PLAINTIFF

AND

1. KIRON CHHOTALAL DOSHI

2. NOR AZIMAN BIN SALLEH

3. NOR AZURA BINTI AHMAD

4. RAVICHANDRAN A/L VELLIAN

5. FIDALIS @ PAUL A/L VINCENT

6. CYNTHIA HOR MEI LAN …DEFENDANTS

Judgment of Judicial Commissioner

Y.A Tuan Lee Swee Seng

Judgment

Prologue

In less than a perfect world, there will be occasions when two or more innocent parties will suffer when a fraud is perpetrated by one or more parties in conspiracy to defraud others. The fraudsters are not around when legal action is taken and the Court would often have to decide which of two or more innocent parties should suffer. This case explores this dilemma in the context of a supposed sale of a property from the Plaintiff to the 1st Defendant who subsequently sold it to the 6th Defendant.

Parties

At all material times, prior to the disposal of the land held under GM 2928, Lot 35330, Mukim Kuala Lumpur, Daerah Kuala Lumpur (“the Property”), the Plaintiff was the registered proprietor of the Property. The Plaintiff had been wound up by the Government of Malaysia on 24.8.2000 and the Official Receiver was appointed as the Provisional Liquidator. Sometime in June 2003, the Plaintiff’s company was “stolen” by 3^rd and 4^th Defendant who became the directors and shareholders of the Plaintiff in place of the existing directors and shareholders.

On 11.11.2003, the rogue directors entered into a sale and purchase agreement with the 1^st Defendant to sell the Property to the 1^st Defendant (“D1’s SPA”). On 19.1.2004, the 1^st Defendant was registered as the registered proprietor of the Property. The instrument of transfer, namely Form 14A of the National Land Code 1965 (“the NLC”) was executed by the 3^rd and 4^th Defendant purportedly as directors/ secretary of the Plaintiff company.

On 17.10.2005, Lim Tian Huat was appointed as the Liquidator in place of the Official Receiver.

The 1^st Defendant entered into a sale and purchase agreement with the 6^th Defendant vide a sale and purchase agreement dated 20.10.2004 to sell the Property to the 6^th Defendant (“D6’s SPA”).

The 6^th Defendant has not been registered as the registered proprietor of the Property. The 6th Defendant became a party to this proceeding after she successfully applied to intervene in this suit. She has intervened on the basis that she has become the proprietor of the property having purchased the same from the 1^st Defendant. The Memorandum of Transfer in her favour and a charge in favour of her Bank has been presented to the Land Office and is awaiting registration. The delay in registration is due to the fact that a Registrar’s caveat has been filed against the property.

On 25.7.2006, the Plaintiff filed an action in this Honourable Court to inter alia recover the Property.

Prayer

By a Summons in Chambers dated 15.12.2009 (“the Applicant”) the Plaintiff filed an application pursuant to Order 14A of the Rules of the High Court 1980 (“the RHC”) to determine the issues stipulated thereunder. At paragraph 1.1 of the Application the issue was stated as such:

“As the Plaintiff was wound up by an order of the Court dated 24.8.2000 at Kuala Lumpur High Court Petition No: D2-21-70-2000 (“the Winding Up Court”), whether the disposal and/or conveyance of a property held under GM 2928, Lot 35330, Mukim Kuala Lumpur, Daerah Kuala Lumpur (“the Property”) to the 1^st Defendant by the Plaintiff on or about 19.1.2004, without the sanction of the Winding Up Court is void under section 223 of the Companies Act 1965 and by reason of section 340(4)(b) of the National Land Code 1965, the title of the 1^st Defendant is defeasible.” (“the Issue”).

In respect of the Issue, the Plaintiff's counsel made an amendment to the same to read as follows:

“As the Plaintiff was wound up by an order of the Court dated 24.8.2000 at Kuala Lumpur High Court Petition No: D2-21-70-2000 (“the Winding Up Court), whether the disposal and/or conveyance of property held under GM 2928, Lot 35330, Mukim Kuala Lumpur, Daerah Kuala Lumpur (“the Property”) to the 1^st Defendant by the Plaintiff on or about 19.1.2004, without the sanction of the Winding Up Court is void under section 223 of the Companies Act 1965 and by reason of section 340(4)(b) of the National Land Code 1965, the title of the 1^st Defendant is defeasible or the registration in favour of the 1^st Defendant was obtained by means of an insufficient or void instrument and is therefore defeasible by reason of section 340(2)(b) of the National Land Code1965.” (“the 1^st Issue”)

(the highlighted part is the proposed amendment to the question) and if the answer to the above question is in the affirmative, then

1.2 Whether the Plaintiff could give a good title to the 6^th Defendant.

The Plaintiff prayed that if the questions above are answered, in favour of the Plaintiff, that the following orders be entered:

Against the 1^st Defendant

3.1 A declaration that transfer of the piece of land held under GM 2928, Lot 35530, Mukim Kuala Lumpur, Daerah Kuala Lumpur (“the

Property”) in favour of the 1^st Defendant is null and void;

3.2 An Order that the 1^st Defendant deliver up the issue document of title in respect of the Property to the Plaintiff within 8 days from the date of receipt of this Order;

3.3 An Order that the Registrar Of Land Titles do cancel the entries or memorial in the register of land title in favour of the 1^st Defendant and restore the Plaintiff’s name as the registered proprietor of the Property within 14 days from the date of receipt of this Order.

Against 6^th Defendant

3.4 A declaration that the 6^th Defendant does not have and / or obtain any right and / or any interest in the Property vide the Sale and Purchase Agreement dated 20.10.2004 which was entered between the 1^st Defendant and the 6^th Defendant.

3.5 An Order that the 6^th Defendant delivers vacant possession of the

Property to the Plaintiff within the period of 14 days from the date of

this order.

4.0 Costs of this application to be borne by the 1^st Defendant; and

5.0 Any further or other relief that this Honourable Court deems fit and proper.

It is submitted that in view of the legal and equitable interest acquired by the said 6^th Defendant Cynthia Hor Mei Lan in the property, the Plaintiff’s application under Order 14A against the 1^st Defendant is untenable and misconceived.

It is also submitted that even if the legal and equitable interest in the property remained with the 1^st Defendant, the dispute as to facts and the issue of fraud puts the case outside the ambit of Order 14A.

Principles

Whether O14A RHC procedure is appropriate

The Plaintiff has pleaded inter alia mainly two causes of action in the Statement of Claim (SOC). The 1^st cause of action is against the 1^st Defendant on grounds that the conveyance or transfer of the Property to the 1^st Defendant is void under section 223 of the Companies Act (“the Act”) or that the transfer of the Property by the Plaintiff to the 1^st Defendant is defeasible under section 340(2) (b) of the NLC as the conveyance or transfer was obtained through void and/or insufficient instrument (paragraph 14 and 15 of the SOC);

The 2^nd cause of action is against the 2^nd to the 5^th Defendant for inter alia fraud and/or conspiracy to defraud (paragraphs 16-20 of the SOC).

The basis of this application is premised on the 1^st cause of action only. The Plaintiff is not relying at all on the 2^nd cause of action. Therefore, the facts pleaded in relation to the 2^nd cause of action against the 2^nd to the 5^th Defendants are not applicable herein.

The ambit of Order 14A is trite. Plaintiff's counsel referred to the decision of the Court of Appeal in Seloga Jaya Sdn Bhd v UEM Genisys Sdn Bhd [2008] 2 CLJ 686 (at pp 709-713).

Plaintiff's counsel submitted that the facts as set out so far are not disputed. The above facts are sufficient to dispose of this matter and to answer the issues to be determined as framed in the application. In the circumstances, Order 14A is clearly applicable. The issues for determination, if determined, will dispose of a major part of this case. This Court is in agreement with the approach taken by way of O14A RHC.

Counsel for the 1st Defendant submitted that the Plaintiff’s allegation that a bogus board of directors had “stolen” the company and sold the property to the 1^st Defendant is an issue which is related to fraud. It is trite law that fraud is an issue which cannot be tried by affidavit evidence or by way of determination of issues. Hence it is submitted that Order 14A cannot be resorted to when a transaction which is the subject matter of the suit is tainted by fraud or illegality on the part of one party which in this case is the alleged bogus board of directors. However, the Plaintiff is not proceeding with their second cause of action against the 2^nd to 5^th Defendants for fraud in this O14A application.

The requirements under Order 14A are as follows:

(a) the question of law or construction is suitable for determination without the full trial of the action.

(b) Such determination will be final as to the entire cause or matter or any claim or issue therein.

(c) The parties have had an opportunity of being heard on the question.

Counsel for the 1st Defendant further argued that a full trial is...