1. ) CHAMPION GARMENT SDN. BHD. 2. ) NG KUAN YOONG 1. ) ONG CHIN JUN 2. ) ONG BEE HOON

PA-22NCvC-164-07/2019 Kand. 62 21/05/2022 23:49:31 DALAM MAHKAMAH TINGGI MALAYA DI PULAU PINANG DALAM NEGERI PULAU PINANG, MALAYSIA GUAMAN SIVIL NO. PA-22NCVC-164-07/2019 Antara 1. Champion Garment Sdn Bhd (No. Syarikat: 1216640-T) 2. Ng Kuan Yoong (No. K/P: 810720-07-5510) … Plaintif-Plaintif Dan 1. Ong Chin Jun (No. K/P: 850524-07-5873) (berniaga sebagai rakan kongsi di bawah nama dan gaya Asahi Global Enterprise (PG0363815-K) 2. Ong Bee Hoon (No. K/P: 741104-02-5578) (berniaga sebagai rakan kongsi di bawah nama dan gaya Asahi Global Enterprise (PG0363815-K) … Defendan-Defendan 1 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal JUDGMENT Introduction [1] This is a judgment after a full trial. The case concerned a claim for monies due and owing for goods sold and delivered, claim for losses in the form of “secret profits” as a result of breach of trust and/or breach of fiduciary duty by a director and the marketing manager of a company and a claim of the transfer of shareholding by one shareholder to another for “breach of an understanding”. [2] The 1st plaintiff, Champion Garment Sdn Bhd (“Champion Garment”) is a company carrying on the business of manufacturing and wholesale of clothing in Bukit Mertajam, Penang. It was incorporated on 20.1.2017 and has two shareholders – the 2nd plaintiff and the 1st defendant having 60% and 40% shareholding respectively. The 2nd plaintiff and the 1st defendant were also its only directors while the 2nd defendant was employed as its marketing manager. 2 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal [3] The 1st defendant and the 2nd defendant, or collectively “the defendants” are siblings and since 27.8.2009 had been carrying on a partnership business, amongst others, selling garments under the firm-name Asahi Global Enterprise. [4] On 14.5.2019, Champion Garment issued a letter dismissing the defendants as director and marketing manager respectively. The charges against the 1st defendant and 2nd defendant was for breach of trust and/or breach of fiduciary and/or fidelity for purchasing goods under Asahi Global Enterprise at a lower market price and re-selling the same at a higher price to third parties and thereby enriching themselves at the expense of Champion Garment. The defendants denied the charges giving their respective explanations. It suffices to say the dismissals were made by the 1st plaintiff who was the only other director managing Champion Garment. [5] On 16.7.2019, the plaintiffs filed the instant action. I made the following orders on the reliefs that were sought: (i) the defendants to pay Champion Garment RM658,150.04 as monies still due and owing from Asahi Global Enterprise; 3 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal (ii) the defendants to pay Champion Garment interest at 5% on the sum of RM658,150.04 from date of judgment until date of full settlement; (iii) dismissing the claim termed as “secret profits” amounting to RM379,709.50 made by the defendants; (iv) dismissing the claim for the transfer of the 1st defendant’s 40% shareholding in Champion Garment to the 2nd plaintiff; (v) the defendants to pay RM10,000.00 as costs to the 1st plaintiff subject to allocator; and (vi) the 2nd plaintiff to pay RM10,000.00 as costs to the 1st defendant subject to allocator. The amended statement of claim [6] The starting point would be to summarise the case of the plaintiffs as pleaded in the amended statement of claim. The 2nd plaintiff alleged that the 40% shares held by the 1st plaintiff was 4 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal based on the following “understanding”: that the 1st defendant held the shares as trustee and nominee of the 2nd plaintiff on the condition to make the business a successful one and that he works with trust and transparency (“the understanding”). [7] It was alleged that the defendants through Asahi Global Enterprise, from September 2017 to February 2019, purchased garments, also referred to interchangeably as “goods”, from Champion Garment and re-sold to third parties at a higher price, thereby enriching themselves by making “secret profits” at the expense of Champion Garment. [8] In carrying out the scheme the defendants also made use of Champion Garment’s manpower to transport the goods directly to the said third parties. Claim of RM788,150.04 [9] It was alleged that from September 2017 to February 2019 Champion Garment had delivered to third parties, who were customers of Asahi Global Enterprise, various garments according to purchase orders placed by Asahi Global Enterprise. 5 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal [10] The particulars of the delivery orders numbers issued by Asahi Global Enterprise and the name of the third-party clients were set out in a table format at paragraph 12 of the amended statement of claim. This was followed by a second table showing particulars of Champion Garment’s delivery order numbers, invoice number, invoice dates and amounts to Asahi Global Enterprise at paragraph 13 of the amended statement of claim. [11] It was alleged that Champion Garment and Asahi Global Enterprise had a running account from 28.9.2018 until 14.2.2019. The invoices issued by Champion Garment were recorded as debit transactions and Asahi Global Enterprise would make periodic payments. It was alleged that at the date of filing the instant action the outstanding amount due and owing by Asahi Global Enterprise stood at RM788,154.04. Claim of RM379,709.50 [12] It was alleged that from 28.9.2017 to 14.2.2019, Asahi Global Enterprise had re-sold the garments purchased from Champion Garment to third parties at a higher price. The 6 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal difference between the purchase price from Champion Garment and the selling price to the third parties was ascertained at the amount of RM379,709.50. [13] Particulars of Asahi Global Enterprise invoices and third- party customers with the corresponding purchase price from Champion Garment and the re-selling price to the third-parties were given in a table format at paragraph 16 of the amended statement of claim Claim of the 40% shareholding [14] It was further alleged that the actions of the 1st defendant breached the understanding made with the 2nd plaintiff regarding the 40% shareholding and such breach had rendered the holding of the shares by the 1st defendant as trustee and nominee invalid. The plea was made in the following words (paragraph 21 of the amended statement of claim): Akibat kelakuan pecah amanah dan/atau kemungkiran kewajipan fidusiari oleh Defendan Pertama terhadap Plaintiff Pertama dan/atau tindakan mala fide oleh 7 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Defendan Pertama yang mengakibatkan kerugian kepada Plaintif Pertama dan/atau bertindak untuk mengaut keuntungan rahsia untuk manfaat Defendan Pertama sendiri (dan/atau Asahi Global Enterprise) lantas mengakibatkan kerugian kepada Plaintif Pertama, maka Defendan Pertama telah memungkiri persefahaman antara Defendan Pertama dan Defendan Kedua dan pegaangan saham 40% tersebut sebagai nomini dan pemegang amanag adalah tidak sah dan terbatal. [15] Alternatively, it was alleged that since there was no consideration for the transfer of shares to the 1st defendant, the shareholding of the 1st defendant is void ab initio for the failure of satisfying the element of consideration for the formation of a valid contract. Reliefs claimed [16] As a result of the said breaches, Champion Garment sought for the following reliefs from the defendants: 8 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal (i) RM788,150.04 which was the outstanding amount owed by Asahi Global Enterprise for goods sold and delivered; (ii) the “secret profits” amounting to RM379,709.50 from the goods purchased from Champion Garment and sold to third parties; and (iii) interest at the rate of 5% per annum on the above said amounts from 16.7.2019 until full settlement. [17] While the 2nd plaintiff claimed an order that the 40% shares held by the 1st defendant in Champion Garment be transferred to him within 7 days from the date the order is made by this Court and consequential reliefs thereof. The amended defence [18] The defendants admitted that they were partners under the firm-name Asahi Global Enterprise and claimed that since 2015 carried on a business relationship with Champion Enterprise which was the 2nd plaintiff’s family business. The defendants alleged that Champion Garment was incorporated to take the 9 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal place of Champion Enterprise and as such the plaintiffs had full knowledge of the defendants’ interest in Asahi Global Enterprise. [19] The 1st defendant pleaded that the 2nd plaintiff’s father, since deceased, had invited the 1st defendant to be a shareholder and director of Champion Garment so that the company could benefit from the 1st defendant’s expertise and increase sales and marketing through the existing and any new customers of Asahi Global Enterprise. The arrangement was for Asahi Global Enterprise to purchase goods from Champion Garment and to re-sell the same to its existing customers and new customers. The arrangement was for the benefit of both parties. [20] It was further alleged that the claim made by Champion Garment was excessive. No particulars were given as to why the amount was excessive. The defendants claimed that Asahi Global Enterprise had paid RM80,000.00 on 18.6.2019 and RM30,000.00 on 31.7.2019 for monies owed by Champion Garment to Lam Sin Enterprise (M) Sdn Bhd. It was pleaded 10 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal that this amount totalling RM130,000.00 ought to be deducted from the RM788,150.04 claimed by Champion Garment. [21] The defendants denied the claim for “secret profits” and the claim for the transfer of 40% shareholding of Champion Garment held by the 1st defendant to the 2nd plaintiff. It was pleaded that there was no such arrangement as pleaded by the 2nd plaintiff. The arrangement was for defendants through Asahi Global Enterprise to purchase garments only from Champion Garment and to use of their marketing network for the benefit of Champion Garment. In return for this arrangement the 1st plaintiff was given 40% of the shares in Champion Garment. The issues for determination [22] The main issues for determination, based on the dispute between the parties, can be summarised as follows: (i) whether from the amount of RM788,150.04 for goods sold and delivered between the parties an amount is to be deducted for goods that were rejected and returned to Champion Garment; 11 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal (ii) whether Champion Garment is entitled to the amount of RM379,709.50 which is the profit made by the defendnts through Asahi Global Enterprise on re-selling goods purchased from Champion Garment; and (iii) whether an order transferring the 1st defendant’s 40% shareholding in Champion Garment to the 2nd plaintiff ought to be made. Analysis and decision [23] Parties are on common ground that the defendants would be jointly liable for all debts and obligations incurred by Asahi Global Enterprise to champion Garment under established principles of partnership law. [24] It is not in dispute that the defendants are partners of Asahi Global Enterprise and had been carrying on the business of buying and selling garments prior to the incorporation of Champion Garment. It is also established by evidence that Asahi Global Enterprise had since 2015 a business relationship 12 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal with Champion Enterprise whose principle place of business is at No. 1, Jalan Industri Cherok Tokun, Bukit Mertajam. The evidence establishes that Asahi Global Enterprise had placed orders and purchased garments from Champion Enterprise. [25] It is also not in dispute that on 20.1.2017, Champion Garment was incorporated and began carrying on the business of making and selling garments previously undertaken by Champion Enterprise at the same address, namely, No. 1, Jalan Industri Cherok Tokun, Bukit Mertajam. One of the two shareholders and directors of Champion Garment on its incorporation was the 1st defendant. [26] The evidence establishes that Asahi Global Enterprise since the incorporation of Champion Garment had begun placing orders for garments from Champion Garment. [27] The 2nd plaintiff who testified on his own behalf and on behalf of Champion Garment said that the plaintiffs had no knowledge, until February 2019, that the defendants were partners of Asahi Global Enterprise. The 1st defendant testified that the plaintiffs had all along the knowledge that the 13 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal defendants were partners of Asahi Global Enterprise. The other crucial dispute was between the 2nd plaintiff and 1st plaintiff as to how the 1st defendant came to hold 40% shareholding in Champion Garment and the capacity in which the shares were held. Outstanding balance of RM788,150.04 [28] The first issue is whether the amount of RM788,150.04 is owed by Asahi Global Enterprise to Champion Garment for goods sold and delivered. In this regard there is no dispute that delivery orders were issued by Champion Garment for the goods purchased by Asahi Global Enterprise and that the latter would settle the amounts stated in the invoices issued by the former. The goods purchased by Asahi Global Enterprise were however delivered directly to third parties who are customers of Asahi Global Enterprise. The said third parties would then pay Asahi Global Enterprise based on invoices issued by Asahi Global Enterprise for the same goods. [29] Champion Garment claims that the amount of RM788,150.04 was due and owing from Asahi Global 14 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Enterprise for goods that were delivered. The proof to establish this amount was the testimony of the 2nd plaintiff supported by documentary evidence. The 2nd plaintiff testified that from September 2017 to February 2019, Asahi Global Enterprise had through purchase orders placed orders for various garments and the said garments were delivered according to the delivery orders listed in the table at paragraph 12 of the amended statement of claim. The total value of the delivery orders was RM2,351,933.17 based on the list of invoices listed in the table at paragraph 13 of the amended statement of claim. The 2nd plaintiff said that Asahi Global Enterprise and Champion Garment maintained a running account for the transactions and Asahi Global Enterprise had made payments from time to time leaving an outstanding amount of RM788,150.04. [30] The defendants, in the amended defence, merely pleaded that the amount sought was excessive and put the plaintiffs to strict proof. Notwithstanding such a plea, in cross-examination of the 2nd plaintiff, the defendants attempted to show that the amount of RM788,150.04 was excessive for not taking into account defective or returned goods. I allowed the cross- 15 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal examination over the objection of counsel that particulars of such excessiveness were not pleaded. [31] The 2nd plaintiff in cross-examination, in general, agreed with counsel that the amount claimed in the invoices should be deducted for goods that were rejected. But the 2nd plaintiff disagreed with the questions put by counsel on the following facts: (i) the invoices that were not chopped nor signed by Asahi Global Enterprise because they were not issued to the customer due to the goods rejected by the customer; and (ii) the goods returned by the customers amounted to the sum of 516,445.31 and as such should be deducted from the claim of RM788,150.04. [32] I found it most unreasonable to expect the 2nd plaintiff to comment on these questions as counsel was referring to invoices of Asahi Global Enterprise issued to its own customers. In my judgment, the first main issue above is to be determined based on the burden of proof. The law is trite and it suffices to 16 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal refer to the Court of Appeal decision in Yeohata Machineries Sdn Bhd & Anor v. Coil Master Sdn Bhd & Ors [2015] 6 MLJ 810 at 818 where His Lordship Vernon Ong JCA instructively said: [17] In law, the party who desires the court to give judgment in its favour as to any legal right or liability bears the burden of proof (s. 101(1) of the Evidence Act 1950). The burden of proof on that party is twofold: (i) the burden of establishing a case; and (ii) the burden of introducing evidence. The burden of proof lies on the party throughout the trial. The standard of proof required of the plaintiff is on the balance of probabilities. The evidential burden of proof is only shifted to the other party once that party has discharged its burden of proof. If that party fails to discharge the original burden of proof, then the adverse party does not need to adduce any evidence... [33] Where the party with whom the burden of introducing evidence lies whether initially or subsequently as a result of its shifting does not give any or further evidence or gives evidence which is not sufficient, such party must fail. This is the result of 17 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal sections 102 and 103 of the Evidence Act 1950 (see International Times & Ors v. Leong Ho Yuen [1980] 2 MLJ 86 at 87). [34] The burden of proof is on Champion Garment. It has through the testimony of the 2nd plaintiff and documentary evidence discharged the burden of producing evidence to establish the amount claimed as due and owing. The evidential burden had at this point shifted on the defendants. The 1st defendant, on behalf of the defendants, merely stated in his witness statement that he disagreed with the amount claimed for the reason that Champion Garment ought to have deducted from the said sum of 516,445.31 stated in the several invoices where the goods were rejected and returned by Asahi Global Enterprise’s customers. The invoices referred to by the 1st defendant were Asahi Global Enterprise’s invoices to its own customers. I find that only Asahi Global Enterprise would know which of its delivery orders were affected by rejection of the goods, if any, and that Asahi Global Enterprise ought to have brought such fact of rejection to Champion Garment. 18 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal [35] I find that the defendants have not produced any evidence that such rejected goods were returned to Champion Garment or that Champion Garment was informed of such rejection. There is no evidence that goods were returned or that Asahi Global Enterprise had objected or queried the invoices of Champion Garment throughout the period from September 2018 to February 2019. This is supported by the following cross-examination of the 1st defendant where he agreed that there is no such evidence: Q: Mr Ong di dalam Mahkamah hari ini, tiada apa- apa bukti menunjukkan bahawa pelanggan- pelanggan Asahi Global Enterprise telah memulangkan apa-apa barang produk kepada Asahi Global Enterprise? A: Memulangkan produk-produk kepada Asahi? Q: Yes, there is nothing to show in this repot. A: Saya setuju, tak ada bukti. [36] Further, it is not disputed that Asahi Global Enterprise had made part payments totalling RM1,538,462.54 to the 1st plaintiff 19 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal without any question or query in relation to rejected goods or in relation to delivery orders and/or invoices that were not signed. [37] Having considered the evidence before me, I was satisfied that the defendants have failed to discharge the evidential burden of that there were rejected goods. Thus, on the balance of probabilities I found that that Champion Garment had proved its claim of RM788,150.04. However, I deducted from this claim the amount of RM130,000.00 paid by Asahi Global Enterprise for monies owed by Champion Garment to Lam Sin Enterprise (M) Sdn Bhd. It was admitted by the 2nd plaintiff in cross- examination that Lam Sin Enterprise (M) Sdn Bhd is one of Champion Garment’s suppliers. Counsel submitted that the defendants ought to have called a director of Lam Sin Enterprise (M) Sdn Bhd. The purpose of which was to cross- examine the witness as to whether the defendants have made the payment of RM130,000.00 for the benefit of Champion Garment and not that the amount was in fact owed. 20 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Secret profits and transfer of shares [38] The remaining two main issues are taken together in view of the overlapping facts. The second issue was whether the 1st defendant had breached his fiduciary duty and/or trust as a director of Champion Garment and the 2nd defendant had committed breach of fidelity by re-selling goods purchased from Champion Garment through Asahi Global Enterprise and making a profit (or secret profits as termed by the plaintiffs) of RM379,709.50. The third main issue was whether an order transferring the 40% Champion Garment shares held by the 1st defendant to the 2nd defendant ought to be made. [39] To prove Champion Garment’s case for the “secret” profits made by the defendants, the 2nd plaintiff testified that the defendants concealed their interest in Asahi Global Enterprise and in the process enriched themselves at the expense of Champion Garment. The profits made were RM379,709.50 between 28.9.2017 to 14.2.2019 and were established through the delivery orders and invoices for goods issued by Asahi Global Enterprise to its customers. It is not in dispute that Asahi Global Enterprise sold the goods purchased from Champion 21 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Garment to its customers. The 2nd plaintiff said that Asahi Global Enterprise was a competitor of Champion Garment. The 2nd plaintiff further testified that the making of the profits by re- selling goods purchased caused losses to Champion Garment. As a result of this action of enriching himself the 2nd plaintiff said that the 1st defendant breached the understanding between them. He further testified that the actions of the 1st defendant was only discovered after an investigation was carried out by him sometime in early 2019. Counsel submitted that the actions of the defendants amounted to breach of fiduciary duty and/or breach of fidelity on part of the defendants. [40] In law the position of the fiduciary and his obligation have been succinctly stated by Millet LJ in Bristol and West Building Society v. Mothew [1998] Ch 1 to be as follows: A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. 22 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. [41] The above often quoted statement has been adopted by our Federal Court in The Board of Trustees of the Sabah Foundation & Ors v. Datuk Syed Kechik Syed Mohamed & Anor [2008] 3 CLJ 221. Similarly, it is well established in the common law that in a contract of employment there is an implied duty of good faith and fidelity owed by an employee to an employer at common law. It is trite law that there is an implied term in the employer's favour that the employee will serve the employer with good faith and fidelity, and that the employee will also use reasonable care and skill in the performance of his or her duties pursuant to the employment contract (see Robb v. Green [1895] 2 QB 315 and Hivac 23 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Limited v. Park Royal Scientific Instruments Limited [1946] Ch 169). [42] The question that arose for determination was whether the defendants had breached their duty as director and employee respectively. Generally, concealing interest in a business that is a competitor with his or her principal and making profit therefrom is evidence of breach of fiduciary duty and/or fidelity. However, there can be exceptions when there is an arrangement which shows that the principal knew of such interest or where such interest was the reason behind the relationship with the principal. Whether there is such knowledge or relationship would depend on the facts of the case. [43] I found that the testimony of the 2nd plaintiff hanging with a massive unexplained gap. The testimony was such that the 2nd plaintiff and the 1st defendant suddenly came together with no history of any prior relationship and incorporated Champion Garment. On the other hand, I found the testimony of the 1st defendant on the incorporation of Champion Garment more probable. The 1st defendant testified that he and the 2nd defendant were partners and in business of wholesalers of 24 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal garment products since 2009 using the firm-name Asahi Global Enterprise. From 2015 until 2017 Asahi Global Enterprise had been in a business relationship with a firm named Champion Enterprise where decisions were made by the 2nd plaintiff’ father. The 2nd plaintiff admitted that his father made the decisions concerning Champion Enterprise. In its dealings with Champion Enterprise, purchase orders would be placed by Asahi Global Enterprise for garments ordered by its customers. [44] The 1st defendant testified that the 2nd plaintiff father proposed setting up a company where Asahi Global Enterprise would place orders and purchase goods from that company only and re-sell the same to its existing customers and any new customers in the future. In consideration of the arrangement and the use of Asahi Global Enterprise existing network the 1st defendant was offered 40% shares in the proposed company upon incorporation. The 1st defendant testified that he agreed to the proposal and was made shareholder with the 2nd plaintiff on Champion Garment’s incorporation. I am satisfied on this evidence that the 1st defendant was owner of the 40% shares on his own right. 25 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal [45] In this regard I found the arrangement as testified by the 2nd plaintiff in itself incredulous, in that, the 1st defendant was made a shareholder merely as trustee and nominee of the 2nd plaintiff on condition to make the business a successful one and that he works with trust and transparency. This arrangement appeared to have come out of thin air. There is no prior relationship between the 2nd plaintiff and the 1st plaintiff shown for such an arrangement to exist. The converse evidence is compelling. The 1st defendant has a long-standing business in form of Asahi Global Enterprise and existing customers. I found that it was for the benefit of Champion Garment to receive purchase orders from the customers of Asahi Global Enterprise which was admitted to be a large part of Champion Garment’s business. It was in the interest to make the 1st defendant a shareholder of Champion Garment and receive a steady flow of purchase orders from Asahi Global Enterprise’s customers. [46] In cross-examination, the 2nd plaintiff said that he did not know of any arrangement made by his father and the 1st plaintiff. I found this answer against the weight of evidence. The evidence established that Asahi Global Enterprise purchased garments to be re-sold to its customers from Champion 26 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Garment since 2017 until the fall out with the 2nd plaintiff in February 2019. The evidence shows that the garments were transported using Champion Garment’s lorries and sent directly to Asahi Global Enterprise’s customers. The 2nd plaintiff admitted in cross-examination that the Champion Garment did not produce its own brand for the garments but were making garments for existing established brand names. The evidence established that the customers of these established brand names were that of Asahi Global Enterprise. The following was elicited from the 2nd plaintiff in cross-examination which established that the plaintiff knew of the arrangement as testified by the 1st defendant: Q: As the goods were sent directly to the customer, you and the Plaintiff has the knowledge that who are the real customer of the goods? A: Yes. [47] I found equally telling was the evidence of the Suruhanjaya Syarikat Malaysia search which shows that the 2nd plaintiff was one of two partners in Champion Enterprise from 21.2.2015 until he pulled out on 13.2.2017. This was just after Champion 27 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Garment was incorporated on 20.1.2017 at the very address Champion Enterprise was doing business. The 2nd plaintiff being a partner would be in the know of the dealings with the 1st defendant and 2nd defendant who were the only partners of Asahi Global Enterprise. I found it incredible that the 2nd plaintiff being a partner of Champion Enterprise for two years when Asahi Global Enterprise was doing business and later the only other director together with the 1st defendant did not know of the defendants’ interest in Asahi Global Enterprise. It was further admitted by the 2nd plaintiff in cross-examination that there were many businesses in Bukit Mertajam that were doing the same business as Champion Garment, that is to say, making garments with brand names for third parties. The customers of Asahi Global Enterprise were therefore crucial for Champion Garment’s business. The following answers elicited from the 2nd plaintiff in cross-examination fortifies my finding, demolishes the “arrangement” sought to be put forward by the 2nd plaintiff and the claim for “secret” profits: Q: So, the arrangements was like this. The arrangement is for Asahi Global Enterprise to buy goods from Champion Garment Sdn Bhd and 28 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal then they sell the goods to the customer of Asahi Global Enterprise. The arrangement, the arrangement was Asahi Global Enterprise, buy the goods from Champion Garment Sdn Bhd and then Asahi Global Enterprise resell the goods to the customer. Do you agree? A: Yes Q: You agree. And goods were delivered directly from the warehouse of Champion Garment Sdn Bhd to the customer? A: Come again the question? Q: The goods were directly, were delivered directly from the warehouse of Champion Garment Sdn Bhd to the customer? A: Yes. Q: And all these were done by the 1st Plaintiff lorry and workers? A: Yes. 29 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Q: As such Mr Ng, I put it to you that there is no secret profit at all as you have knowledge from the beginning of this arrangement? A: I don’t know. Q: I put it to you that there is no secret profit made by the Defendant because from the beginning your father has agreed to it and you have knowledge to it? A: But I don’t know. … Q: You form the company with the Defendants. A: The 40% share is if the Defendants arrange the business with benefit, then we can give the 40% shares to the Defendant. That’s why we give the 40%. Q: The Defendants arrange the business? The business for the Plaintiff. A: Yes, the Defendant is – 30 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Q: Actually, you are using the Defendant’s contact. The Defendants got the contact, so you use the Defendant’s contact and then you gave the Defendant 40% for that. A: Yes. … Q: You have knowledge of all the arrangement, correct? You have knowledge of the arrangement, correct or not, tell the Court? A: Yes. Q: So, as you have the knowledge, I put it to you that you are not entitled to claim the secret profit of 375 – So, there is no word ‘secret’ there. That means he has knowledge. So, I put it to him My Lord that he is not entitled to claim secret profit of, the alleged secret profit of 375,709.50. I put it to you that you are not entitled to claim that sum? A: Disagree. 31 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Q: You have knowledge to it and yet you still want to claim it as a secret profit, Mr Ng? A: Yes. [48] Apart from the breach of “arrangement” the 2nd plaintiff also submitted that since there was no monetary consideration for the shares held by the 1st defendant the shareholding should be terminated ab initio for the failure to meet the requirements of the elements of a valid contract. The submission was supported by the following answer given in cross-examination by the 1st defendant: Q: … Mr Ong, maybe I tukar. Ada apa-apa wang dibayar oleh kamu supaya kamu mendapatkan 40% share di dalam Plaintif Pertama? Ada apa- apa wang telah dibayar oleh kamu? A: Tidak, saya tidak bayar wang untuk mendapatkan 40% saham ataupun share dalam syarikat Plaintif Pertama. 32 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal [49] I was unable to agree with this submission for the reason that the facts on which the submissions were made were not proven and were also against the findings of fact already made, as shown above, by me. Take the submission of terminating the shareholding ab initio, even assuming that, this Court could do so on the basis that there was no consideration. The evidence shows that there was consideration, not monetary, but the promise to purchase goods for the 1st defendant’s existing customers only by using Asahi Global Enterprise’s existing network. The submission is therefore devoid of merit. [50] Having considered the totality of the evidence I found that the plaintiffs had failed to discharge the burden of proof on the balance of probabilities. I therefore dismissed the claim for “secret” profits made by Champion Garment and the claim for the transfer of shares made by the 2nd plaintiff. ……………sgd………………… Amarjeet Singh Serjit Singh Judge High Court Penang Dated: 21st May 2022 33 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal Counsel for the Plaintiff: Benjamin Tan, Kalvin Lee [ LIM TAN & CO. (BUKIT MERTAJAM) ] Counsel for the Defendant: Siau Suen Miin, Nur Diana Azmi [ SIAU SUEN MIIN & TAN (KULIM) ] Cases referred to the : 1. Yeohata Machineries Sdn Bhd & Anor v. Coil Master Sdn Bhd & Ors [2015] 6 MLJ 810 at 818 2. International Times & Ors v. Leong Ho Yuen [1980] 2 MLJ 86 at 87 3. Bristol and West Building Society v. Mothew [1998] Ch 1 4. The Board of Trustees of the Sabah Foundation & Ors v. Datuk Syed Kechik Syed Mohamed & Anor [2008] 3 CLJ 221 5. Robb v. Green [1895] 2 QB 315 6. Hivac Limited v. Park Royal Scientific Instruments Limited [1946] Ch 169 34 S/N 4sxMRQX8EUyCnBDPP57dnw **Note : Serial number will be used to verify the originality of this document via eFILING portal