Rand Worldwide Foreign Holdings Inc v Japri Bin Maming, 14-08-2014

• Judge: WONG KIAN KHEONG
• Judgment Date: 14 August 2014
• Court: High Court (Malaysia)
• Record Number: 22NCC-641-11/2013

54

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA

(COMMERCIAL DIVISION)

CIVIL SUIT NO: 22NCC-641-11/2013

BETWEEN

RAND WORLDWIDE FOREIGN HOLDINGS INC. ...PLAINTIFF

AND

1 JAPRI BIN MAMING

(No K/P: 721122-12-5507)

2 RAND TECHNOLOGIES (M) SDN. BHD.

(Company No.: 324032-P) ...DEFENDANTS

GROUNDS OF JUDGMENT

(Plaintiff’s summary judgment application)

A. Parties

1. The plaintiff company (Plaintiff) is a company incorporated in the United States of America.

2. The Plaintiff initially owned all the shares in Rand Technologies Asia-Pacific Holdings Pte. Ltd. (RTAPH), a company incorporated in Singapore. RTAPH owned all the shares in the following companies:

(a) the second defendant company (2^nd Defendant), a company incorporated pursuant to the Companies Act 1965 (CA); and

(b) Imaginit Technologies (Singapore) Pte. Ltd. (ITS), a company incorporated in Singapore.

3. The first defendant (1^st Defendant) was –

(a) the managing director of RTAPH; and

(b) a director of the 2^nd Defendant and ITS.

4. In this judgment the 1^st and 2^nd Defendants will be collectively referred to as the Defendants. The 2^nd Defendant and ITS will be collectively referred herein as the Subsidiaries.

B. Facts

5. On 7.6.2013 –

(a) by way of a “Stock Purchase Agreement” (SPA), the Plaintiff sold the Plaintiff’s “entire right, title and interests” in 1,458,003 shares of RTAPH (RTAPH’s Shares) to the 1^st Defendant; and

(b) the Defendants, RTAPH and ITS (Makers) agreed by way of a “Promissory Note” (PN) to pay to the Plaintiff a principal sum of Singapore Dollars (S$) 689,287 (Principal Sum).

6. The relevant terms of the SPA are as follows:

(a) clause 1(a) – at a closing held concurrently with the execution and delivery of the SPA (Closing), the Plaintiff shall transfer to the 1^st Defendant all of the Plaintiff’s right, title and interest in RTAPH’s Shares;

(b) clause 1(b) – the purchase price for RTAPH’s Shares shall be One United States Dollar (US$1);

(c) clause 2(a) – RTAPH shall make a stockholder distribution to the Plaintiff in an amount equal to the excess, if any, of

(i) the combined total of customer accounts receivable of the Subsidiaries and RTAPH (Total Receivables) as of the date of Closing (Closing Date), less an allowance of uncollectible accounts in the amount of S$50,000 over

(ii) the combined total of accounts payable of the Subsidiaries and RTPHA at the Closing Date.

This excess amount is called in the SPA as the “Distribution Amount” and the distribution to the Plaintiff shall be in the form of the PN. The 1^st Defendant “shall join in and execute the [PN] as a co-maker for purposes of establishing the [1^st Defendant’s] joint and several personal liability for the [PN]”; and

(d) clause 2(b) [Clause 2(b) SPA] – if the combined cash of RTAPH and the Subsidiaries at the Closing Date is greater than S$144,000, the excess shall be distributed to the Plaintiff in cash on the Closing Date as additional stockholder distribution (Additional Distribution) and if the combined cash of RTAPH and the Subsidiaries at the Closing Date is less than S$144,000, the Plaintiff shall contribute cash to RTAPH in an amount equal to the shortfall so that after such cash contribution by the Plaintiff, the combined cash of RTAPH and the Subsidiaries shall be equal to S$144,000.

7. The salient terms of the PN are as follows:

(a) paragraph (c) in the first page – notwithstanding anything to the contrary in the PN, the unpaid Principal Sum shall be payable in 90 days from the date of the PN, regardless of the status of the Total Receivables;

(b) clause 1 – time is of the essence of the PN;

(c) clause 2 – the Makers shall pay the Plaintiff all sums owing under the PN “without demand, deduction, offset or counterclaim” (Clause 2 PN);

(d) clause 4 – if the Plaintiff does not receive payment in full of any payment due under the PN within 7 days of the due date of such payment, a late charge of 5% of the unpaid amount shall be imposed (Clause 4 PN);

(e) clause 9 – the remedies of the Plaintiff “shall be cumulative and concurrent, and may be pursued singularly, successively or together, at the sole discretion of [the Plaintiff], and may be exercised as often as occasion thereof shall arise” (Clause 9 PN); and

(f) clause 10 – “The [PN] shall be governed by the laws of the State of Delaware [Delaware Law], without reference to the choice-of-law provisions in any jurisdiction … Nothing herein contained, however, shall prevent [the Plaintiff] from bringing any action or exercising any rights against Maker, personally, and against any asset of Maker, within any state or jurisdiction” (Clause 10 PN).

8. Both the SPA and PN were signed by the Plaintiff, Defendants and the Subsidiaries. Besides the 1^st Defendant’s signature on the SPA and PN, one Mr. Lawrence Rychlak (Lawrence) signed on behalf of the Plaintiff, 2^nd Defendant and the Subsidiaries on both the SPA and PN.

9. As at 27.9.2013, the Plaintiff received a sum of S$231,307.48 in respect of the PN (Payment under PN).

10. The Plaintiff sent an email dated 10.9.2013 to the 1^st Defendant informing the 1^st Defendant that 1^st Defendant had defaulted in the payment of the unpaid Principal Sum and the Plaintiff was entitled to, among others, charge a late fee of 5% on the unpaid Principal Sum.

11. On 1.10.2013, the Plaintiff’s solicitors sent separate demands to 1^st and 2^nd Defendants claiming for the unpaid Principal Sum of S$457,979.52 as of 27.9.2013 (Unpaid Principal Sum) together with a late charge of 5% on the Unpaid Principal Sum.

12. On 25.10.2013, solicitors for the 1^st Defendant replied to the Plaintiff’s solicitors as follows:

(a) no sum was due or owing by the 1^st Defendant to the Plaintiff under the PN;

(b) on 12.6.2013 ITS had paid S$389,114.32 to the Plaintiff in respect of the PN (ITS’s Alleged Payment); and

(c) the Plaintiff had caused the cancellation of “Autodesk training” by the 2^nd Defendant’s clients and this had caused a loss of S$68,865.20 to the 2^nd Defendant. Accordingly, the Defendants averred that this sum should be set off from the Unpaid Principal Sum (2^nd Defendant’s Alleged Set-off).

13. On 28.11.2013 both Defendants sent separate letters to the Plaintiff, RTAPH and ITS alleging that the SPA and PN contravened s 67(1) CA.

C. Litigation

14. The Plaintiff filed this suit against the Defendants (This Suit) to claim for the Unpaid Principal Sum together with a late charge of 5% per annum on the Unpaid Principal Sum.

15. The Defendants filed a defence denying the Plaintiff’s claim in This Suit (Defence) and counterclaimed, among others –

(a) that the SPA and PN contravened s 67(1) CA;

(b) that the SPA and PN were ultra vires the 2^nd Defendant’s memorandum (MA) and articles of association (AA);

(c) that the 2^nd Defendant’s shareholders did not approve the SPA or the PN in a general meeting as required by s 132C(1) CA;

(d) that the 2^nd Defendant’s directors and shareholders did not authorise Lawrence to sign the SPA and PN on the 2^nd Defendant’s behalf;

(e) a declaration that the SPA and PN are null and void;

(f) that the Plaintiff held a total payment of S$620,421.48 (total of Payment under PN and ITS’s Alleged Payment) (Alleged Sum Received by Plaintiff) as a constructive trustee;

(g) the Alleged Sum Received by Plaintiff to be refunded by the Plaintiff to the Defendants; and

(h) interest at the rate of 5% per annum on the Alleged Sum Received by Plaintiff from 27.9.2013 until date of full refund by the Plaintiff

(Counterclaim).

16. The Plaintiff filed an application under Order 14 rule 1 of the Rules of Court 2012 (RC) for summary judgment to compel the Defendants to pay the Unpaid Principal Sum with late charges of 5% per annum on the Unpaid Principal Sum from 28.9.2013 until full payment of the Unpaid Principal Sum (This Application).

17. The Plaintiff also filed a civil suit in the Singapore High Court against RTAPH and ITS in respect of the PN (Singapore Suit).

D. Defendants’ contentions

18. To resist This Application, the Defendants’ learned counsel submitted that the following issues merit a trial of This Suit:

(a) assuming the SPA and PN were valid in law -

(i) the Defendants did not owe any sum of money to the Plaintiff under the PN;

(ii) based on the second sentence in Clause 2(b) SPA and an email dated 7.6.2013 from Lawrence to the 1^st Defendant (Lawrence’s Email dated 7.6.2013), there was no sum due from the Defendants to the Plaintiff under the PN;

(iii) there...