Lau Choo Seng v Chong Wei Kee, 06-10-2010

• Judge: Hanipah binti Farikullah
• Judgment Date: 06 October 2010
• Court: High Court (Malaysia)
• Record Number: D3-22-1256-2004

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(COMMERCIAL DIVISION)

SUIT NO. D3-22-1256-2004

BETWEEN

LAU CHOO SENG … PLAINTIFF

AND

1. CHONG WEI KEE

2. MESSRS. SIM HAZLINA & CO. … DEFENDANTS

GROUNDS OF DECISION

1. The plaintiff claims against the second defendant for the sum of RM400,000.00 with interest at the rate of 8% per annum from the date of filing of this action. The plaintiff’s claim is based on negligence and breach of Agreement by the second defendant to advise the plaintiff on the Sale and Purchase Agreement (“the Agreement”) dated 20.3.1996 between the plaintiff and the first defendant, resulting in losses of RM400,000.00 to the plaintiff.

2. The plaintiff’s claim is disputed by the defendant. The defendant pleads that there has been no act of negligence committed by the second defendant or breach of Agreement to advise as the plaintiff himself has failed to comply with the terms of the Agreement.

Background Facts

3. The first defendant is the owner of 38,000 shares in the share capital of one company called Quality Coat Sdn Bhd (“the company”).

4. On or about February 1996, the first defendant agreed to sell and the plaintiff agreed to purchase that 38,000 ordinary shares of RM1.00 each representing 4% of the issued and paid-up capital in the company.

5. The plaintiff engaged the second defendant, a law firm, to advise and prepare the necessary documents to facilitate and complete the said sale.

6. On 6.2.1996, the second defendant issued the plaintiff an invoice no. 0054 (marked as Exhibit “P6” at page 13 of Bundle B), charging the plaintiff a sum of RM1,622.00 for the following work :

“Particulars

QUALITY COAT SDN BHD

Being our Professional charges for the above matter including preparing the following Agreements and attending to the execution of the abovementioned Agreement, by all parties, stamping, follow-up work in relation to the foregoing, telephone attendances and calls and other attendances not specifically mentioned herein :

1. Sale and Purchase Agreement between Chong Wei Kee and your goodself ;

2. Power of Attorney by Chong Wei Kee to Lau Choo Seng.

Disbursement

Stamping ; Sale and Agreement

A set of Power of Attorney

Registration Fee of Power of Attorney

Printing Charges and Binding Charges

Telephone, Postage charges, Courier and Fax Charges

Transportation/Delivery

Miscellaneous…”

7. On 12.2.1996, the plaintiff made full payment of RM1,622.00 (Exhibit “P7” at page 14 of Bundle B) to the second defendant, in respect of the said Invoice in Exhibit P6.

8. Subsequently, the second defendant prepared the following documents:

1. the Sale and Purchase Agreement of Shares between the plaintiff and the first defendant (the Agreement) (Exhibit “P1” at pg 1-12 of Bundle B); and

2. the Power of Attorney, to be executed by the plaintiff and the first defendant.

9. The Agreement between the plaintiff and the first defendant was executed on 20.3.1996 in the presence of the second defendant’s partner, one Miss Sim Tze Chui.

1. Amongst the salient terms of the Agreement are as follows:

1. the consideration for the shares is RM400,000.00.

2. Upon execution of the Agreement, and simultaneous with the plaintiff’s payment of first RM200,00.00, the first defendant shall deposit with the second defendant the original shares certificates for share transfer as the stakeholder for those documents (Clause 2.1(a) of the Agremeent).

3. upon full payment of the purchase price for the shares:

1. the first defendant shall continue to hold the shares as nominee and for plaintiff’s benefit upon trust to plaintiff and/or his heirs, personal representative(s) and estate [Clause 4.1(i) of the Agreement]; and

2. the second defendant shall either release the share certificates to the Purchaser and release the share transfer forms to the Purchaser upon the listing of the company on the KLSE (Second Board) or if the company fails to be listed, upon the parties hereto agreeing to nevertheless continue with this Agreement or to return the shares transfer documents to the first defendant in the event and upon the termination of this Agreement.” (Clause 2.1(a) (i), (ii) and (iii) of the Agreement)

(d) the Sale and Purchase Agreement of the shares was also conditional upon procurement of the company, of written approvals and consents of governmental and/or regulatory authorities for the listing of the company on the second Board of the then Kuala Lumpur Stock Exchange.

(e) In the event such approvals or consents are not obtained within a period of 12 months from the date of the Agreement:

1. the first defendant and the plaintiff shall be entitled to terminate the Agreement; or

2. The plaintiff shall have the right to nevertheless continue with the Agreement and purchase the shares in the company.

10. A year later, the company could not procure the approval and consent of governmental authorities for listing purposes. By way of a letter dated 17.3.1997 (Exhibit “P2” at page 15 of Bundle B) the plaintiff opted to continue with the Agreement.

The plaintiff’s case

11. The plaintiff, Lau Choo Seng (PW1) testified that on 20.3.1996 the plaintiff entered into a Sale and Purchase Agreement with the defendant. The Agreement was prepared and witnessed by the second defendant. PW1 referred the court to the invoice in Exhibit “P6” (pg 1-2 of Bundle B) which sets out a client-solicitors relationship when the plaintiff was invoiced by the second defendant. The plaintiff paid the full amount required in the invoice in Exhibit “P7”. According to PW1, the scope of the second defendant’s duty was clearly spelled out as including preparing the Agreement, attending the execution of the Agreement and follow up work with regards to the share purchase transaction under the Agreement.

12. With regards to the purchase price of the shares, PW1 said that the second defendant was fully aware of RM400,000.00 being paid by the plaintiff to the first defendant. According to PW1, vide a letter dated 28.8.1998 (Exhibit “P4” at page 16 of Bundle B), the second defendant states that :

“We understand from the Purchaser that you have at his request agreed to transfer or cause the transfer of shares from yourselves_and/or your nominee or nominees to the Purchaser pursuant to clause 4.1 (i) of the Agreement.”

13. Reference was made by PW1 to clause 4.1 (i) of the Agreement which states as follows :

“At the request of the Purchaser, the Vendor hereby agrees that upon full payment of the Purchase Price for the Shares the Vendor shall continue to hold the Shares in the Vendor’s names as nominee and for the benefit of the Purchaser until at least such time when the Company shall have been listed onto the KLSE (Second Board) and unless otherwise instructed by the Purchaser and the Shares shall have been transferred to the Purchaser…”

14. It is the plaintiff’s position that the defendant was aware that the full payment of the purchase price of RM400,000.00 (the Purchase Price) was paid by the plaintiff to the defendant. Otherwise, the second defendant, being the solicitor who prepares the Agreement, would not have made reference to clause 4.1(i) of the Agreement in Exhibit P4. However PW1 testified that the second defendant did not follow up on the transaction and failed to advise the plaintiff on the needful action. As the result, the plaintiff now could not have the transfer of that 4% of shares in the company, and also could not recover the RM400,000.00 paid, now that the first defendant was made a bankrupt.

15. Further, PW1 gave evidence to the court that the second defendant act of negligence are as follows :

1. Pursuant to 2.1(a) of the Agreement, the second defendant should have inquired from the first defendant to deposit the original share certificates with them as stakeholders to the share transfer forms upon the first payment of RM200,000.00 (as in Exhibit “P3” at page 24 of Bundle B) by the plaintiff. The second defendant did not do so.

2. Upon the full Purchase Price made for the purchase of shares, coupled with the plaintiff’s opting to continue with the Agreement despite the non-listing of the said company on KLSE (Second Board), Clause 2.1(a)(i) and (ii) of the Agreement provides that the second defendant shall release the shares certificates and the share transfer forms to the plaintiff and the second defendant did not follow up on that thus not comply with the said clause.

3. The third paragraph in the second defendant’s letter dated 28.8.1998 itself (Exhibit “P4” at page 16 of Bundle B) also suggest that the plaintiff was supposed to be informed of the progress of the transaction, but nothing of that sort was done by the second defendant.

4. The second defendant had received on 18.3.1997 the plaintiff’s letter dated 17.3.1997 to both the first defendant and the second defendant, electing to opt to continue with the Agreement despite the non-listing of the said company (Exhibit “P2” at page 15 of Bundle B). yet there is nothing to show the second defendant further advised the plaintiff for...