Karunamoorthy a/l Ramasamy 1. Hariharan a/l Subramaniam (NRIC No: 780316-10-6347) 2. Asokan a/l Palaniandy (NRIC No: 791211-08-5563) 3. Ezy Group Berhad [formally known as EZYFX Berhad Registration No: 201601042792 (1213734-P)]

0IN THE HIGH COURT OF MALAYA AT PENANG CIVIL ACTION NO. PA-22NCvC-25-01/2020 Between Karunamoorthy a/l Ramasamy [trading as Era Hemas Trading Registration No: 201303309534 (PG0334112-A)] ...Plaintiff And 1. Hariharan a/l Subramaniam (NRIC No: 780316-10-6347) 2. Asokan a/l Palaniandy (NRIC No: 791211-08-5563) 3. Ezy Group Berhad [formally known as EZYFX Berhad Registration No: 201601042792 (1213734-P)] ...Defendants [in original action] Between 1. Hariharan a/l Subramaniam (NRIC No: 780316-10-6347) 2. Ezy Group Berhad [formally known as EZYFX Berhad Registration No: 201601042792 (1213734-P)] ...Plaintiffs in Counter Claim And 1 1. Karunamoorthy a/l Ramasamy (NRIC No: 730303-07-5849) 2. Aravanthan a/l Subramaniam (NRIC No: 770427-02-5831) 3. Muhammad Denial Dass bin Abdullah (NRIC No: 810418-14-5157) 4. Mathialagan a/l Maniam (NRIC No: 791021-02-5375) 5. Reeta a/p Jaya (NRIC No: 860802-5158) ...Defendants in Counter Claim JUDGMENT Introduction [1] On 5.10.2020 I dismissed the plaintiff’s notice of application seeking an order for the preservation of property under Order 29 rule 2 of the Rules of Court 2012 (“enclosure 8”). The order that was sought was framed in the alternative as follows: An order that the defendants pay into this Court RM14.81 million or otherwise secure the said sum until the disposal of this action or until any further order of 2 this Court; or alternatively, an order that the defendants pay into this Court a sum of RM4.8 million or otherwise secure the said sum until the disposal of this action or until any further order of this Court; Background [2] The subject matter of the instant application are monies claimed due and owing to the plaintiff from the defendants made up of the principal sum he had invested in a company by the name of Ezy Group Berhad formally known as EZYFX Berhad (“EGB”) and the monthly guaranteed returns at the rate of 10% on the said principal sum. The 1st and 2nd defendants are directors of the 3rd defendant. The plaintiff’s cause of action for the amount claimed is premised on fraud, misrepresentation and breach of warranty. [3] In his affidavit in support the plaintiff averred that sometime in January 2016 the 1st defendant approached and persuaded him to invest money in a fund known as “EZYYFX42 Financial Freedom 4U Program” (“the fund”) managed by EGB. The plaintiff said that it was represented to him that if he invests in 3 “The Passive Income Account” of the said fund through his business styled Era Hemas Trading he would receive a 10% guaranteed monthly return of investment on the principal invested sum. He was further assured by the 1st defendant that he was entitled at any time to demand the return the principal investment. The plaintiff further averred that it was represented to him that the fund was legal and that EGB was in possession of the necessary licence to operate the fund from the authorities. [4] The plaintiff said that as a result of the 1st defendant’s representations, he had on 1.4.2016 deposited RM500,000.00 in the said fund and on 22.4.2016 entered into an investment agreement with the 3rd defendant. Thereafter, from time to time until March 2018 the plaintiff averred that he had invested a total of RM4.8 million in the said fund. The plaintiff produced bank statements of the monies he paid as the principal investment and of the monthly returns he had received on his investment. However the guaranteed payments were no longer forthcoming after April 2018. The plaintiff’s alleged that his queries in respect of the stoppage of the monthly returns had gone unheeded by the 1st defendant. It was only in a meeting with the 1st defendant on 16.8.2018, upon the plaintiff and some other persons 4 including the 2nd, 3rd and 4th defendants in the counterclaim who had also invested in the said fund converging at EGB’s premises, that the plaintiff was informed that the investment was “lost”. This revelation caused an altercation to break out between the plaintiff and the 1st defendant. The 1st defendant alleged that he was threatened and intimidated into issuing cheques amounting to RM7,000,000.00 to the plaintiff. The next day the 1st defendant lodged a police report on the alleged intimidation and in response a counter police report was lodged by the plaintiff against the defendants. Police investigations concluded with no action being taken against either of the parties. [5] On 21.1.2020 the plaintiff eventually filed this action seeking to recover RM14.81 million made up of the principal investment and the arrears of the monthly interest or alternatively the sum of RM4.8 million which is the principal investment and in addition general and exemplary damages. [6] The plaintiff then followed up with this instant application filed on 20.2.2020 wherein the he seeks an order for the preservation of either the RM14.81 million or RM4.8 million by 5 directing the defendants to deposit the same in this Court pending the disposal of his action. Plaintiff’s grounds for preservation of the monies [7] The plaintiff’s grounds seeking the preservation order is stated in paragraph 10 of the Plaintiff’s Written Submissions as follows: (i) The subject matter of the instant application is either the principal investment and the arrears of the monthly interest or alternatively only the principal investment. It is therefore imperative that either of the monies is preserved by a preservation order so as to ensure that the money exits and is not affected in any way pending trial. (ii) In the event the preservation order is not granted, there is a real risk that the plaintiff would be left with a barren sucess at the end of the trial as the defendants are at liberty to deal with the monies which is the subject matter of this suit. 6 (iii) There is no prejudice to the defendants as the preservation order sought is for money to be paid into court pending trial. (iv) There are serious bona fide questions to be tried in this suit and hence a preservation order ought to be granted. Defendants’ opposition to the application [8] The defendants opposed enclosure 8 on the ground that the transaction between the plaintiff and the defendants is in reality a money-lending transaction wherein the monies were a loan given by the plaintiff for the purpose of running the plaintiff’s business. It is claimed that the plaintiff is not a licenced money lender and by imposing interest on the loan is in breach of the Moneylenders Act 1951. The illegality of the transaction was cloaked to make it look like an investment venture. The defendants further claimed that the loan has been repaid with a sum of RM5,374,380.00 inclusive of interest and that there are no monies due and owing to the plaintiff or have in their possession or control any monies belonging to the plaintiff as alleged. 7 Decision of the Court [9] The plaintiff in seeking the order moved this Court under Order 29 rule 2 of the Rules of Court 2012 which reads as follows: (1) On the application of any party to a cause or matter, the Court may make an order for the detention, custody or preservation of any property which is the subject matter of the cause or matter, or as to which any question may arise therein, or for the inspection of any such property in the possession of a party to the cause or matter. (2) For the purpose of enabling any order under paragraph (1) to be carried out, the Court may by the order authorize any person to enter upon any immovable property in the possession of any party to the cause or matter. (3) Where the right of any party to a specific fund is in dispute in a cause or matter, the Court may, on 8 the application of a party to the cause or matter, order the fund to be paid into Court or otherwise secured. (4) An order under this rule may be made on such terms, if any, as the Court thinks just. (5) An application for an order under this rule shall be made by way of a notice of application. The requirements of Order 29 rule 2 [10] It is established law that an order for interim preservation of property is a temporary and discretionary remedy. It is to preserve the property which is the subject matter of an action pending the disposal of the said action. To consider whether to grant it or to refuse it the Court is not concerned with the chances of success or failure of the plaintiff in proving his civil suit at the forthcoming trial, neither is the Court’s function to evaluate the evidence and materials before it for that purpose. The Court is simply concerned with what it has to do in the meantime in order to protect the right of the parties so that no irreparable injury would be caused to either of them. Further whilst the Court is not 9 concerned with such questions the Court must however, be satisfied that there are serious questions to be gone into in that action lest an application for preservation of property should be made on frivolous and vexatious grounds. (Lian Keow Sdn Bhd v Overseas Credit Finance Bhd [1982] 2 MLJ 162; Tan Chong Keat Sdn Bhd v Pintar Pintas Sdn Bhd [2005] 4 MLJ 201; Telic Corp Sdn Bhd lwn Majlis Bandaraya Melaka Bandaraya Bersejarah Dan Satu Lagi [2009] 9 MLJ 703) [11] It is clear from the cases cited above that the principles applicable for granting an interlocutory injunction under Order 29 rule 1 applies with equal force to applications for the preservation of property under Order 29 rule 2 of the Rules of Court 2012. Thus, the approach stated in the often quoted case of Keet Gerald Francis Noel John v Mohd Noor bin Abdullah [1995] 1 CLJ 293 for the granting of an interlocutory injunction would apply in determining an application for interim preservation of property, namely: (1) whether there is a serious question to be tried in the sense that the claim was not frivolous or vexatious; (2) if question (1) is answered in the affirmative, this Court must determine where the balance of convenience lies; and (3) whether the court’s judicial discretion ought to be exercised in 10 favour of allowing or refusing the order. In considering the instant application this Court is mindful not to embark on resolving disputed facts upon conflicting affidavits as that is a matter for determination at the trial. [12] The court is also conferred with discretion, if arriving to the conclusion that the monies ought to be secured or preserved, to decide the manner in which the monies is to be secured or preserved. The courts have almost in all cases where monies are to be preserved pending the disposal of the action made an order directing that the monies be paid into a joint bank account opened in the names of the solicitors of both parties or paid into court. In Teknik Cekap Sdn Bhd v Villa Genting Development Sdn Bhd [2000] 7 CLJ 385 Abdul Malik Ishak J said that for an order directing preservation of monies under Order 29 rule 2(1) the sum of monies must be identifiable in the following passage in the judgment: If the sum of money is identifiable, then the process of preservation under this rule may be resorted to. Indeed this rule may be invoked to preserve an identifiable sum of money that arises from any criminal 11 activity (West Mercia Constabulary v Wagener [1981] 3 All ER 378 and Chief Constable of Kent v V & Anor [1982] 3 All ER 36). So long as the money can be preserved, this rule may be vigorously resorted to (Polini v Gray (1879) 12 Ch D 438). Case-law on Order 29 rule 2 [13] Case-law shows that only in appropriate cases money can be subject matter of a preservation order under the rule and that the exercise of the court’s discretion is very much influenced by the peculiar facts and circumstances of each case. [14] Generally the court does not grant an interim preservation order in a debt recovery action. Teknik Cekap Sdn Bhd is an example where this principle was applied. In that case the defendant appointed the plaintiff as the main contractor and entered into an agreement for the construction of the defendant’s resort building. Disputes arose between the parties which led to the plaintiff commencing an action claiming payment for work done. An application was made for an order that the deposit of RM1,706,001.50 by the defendant as the first moiety of the 12 retention sum under the agreement be paid into a separate bank account until the conclusion of the trial. The defendant claimed, inter alia, that the plaintiff procured the contract by fraud, as a result of which there was no obligation to put aside any retention moneys into a separate identifiable account. Abdul Malik Ishak J held that the plaintiff’s claim for the first moiety is an action for a debt and that since the first moiety had no priority or privilege over the other debts that were due and payable to the plaintiff under the architect’s interim certificates the same was not capable of being preserved in a separate account until the conclusion of the trial. [15] However where the facts are such that some monies in a debt recovery action will inevitably be paid to the plaintiff on the taking of an account an interim order of preservation may be made. Sebaya Sdn Bhd v Syarikat Bekerjasama Ladang Kelapa Sawit Pegawai-Pegawai Negeri Pahang Berhad [1980] 2 MLJ 23 is an example of a debt recovery action where a preservation order was made. There the plaintiff co-operative were the owners of an oil palm plantation and had appointed the defendant to manage the same. The plaintiff did not receive any returns from the sale of oil palm fruit for over two years as the 13 same were taken by the defendant. The plaintiff commenced an action against the defendant to recover the net profits realised from the sale of oil palm fruit. This was followed with an application seeking for the “net proceeds from the sale of oil palm fruit” that had been received by the defendant estimated at RM1.66 million until December 1976 and an estimated sum of RM83,350.00 received each month thereafter be paid into court pending the conclusion of the trial. The High Court ordered the defendant to pay RM1 million into court and also ordered that a sum of RM50,000.00 be paid on the first day of each month commencing July 1978 into court. The Federal Court, on appeal, confirmed the order of the High Court. The debt owed in the form of net profits could be made the subject of an interim preservation order because the payment of net profits was not disputed only the actual amount due was disputed. In its reasoning the Federal Court adopted the following principle stated in Wanklyn v Wilson (1887) 35 Ch D 180: Upon these authorities it seems to me that the Court is now at liberty, when it has before it the parties to an account, to look at the account and the facts of the case, and to use the words of the late Master of the Rolls, ‘in 14 the fair exercise of its judicial discretion’, to order a sum of money to be paid into Court when it has been sufficiently ascertained that such a sum will be due on the taking of the account. [16] In Tan Sri Datuk Dr Mohan Swami & Anor v MISL & Associates Sdn Bhd (No 3) [2003] 7 CLJ 482 the defendant was obliged to sell shares under buy back agreements to the plaintiffs. The defendant was therefore not entitled to deal with the said shares unless and until the plaintiffs fail to buy back within the time stipulated. In this regard the defendant was also obliged to keep the shares in escrow for a stipulated period of time in order to facilitate the purchase of those shares by the plaintiffs. The defendant reneged on the promise and sold a portion of the said shares to a third party. The plaintiffs sued the defendant for breach of contract and pending the conclusion of the action applied for an interim preservation order to preserve the proceeds of sale. It is not disputed that the shares were sold. Abdul Malik Ishak J allowed the application holding that in such circumstances the purchaser acquires equitable rights and the vendor holds the proceeds of such sale as a constructive trustee in the following passage: 15 Now, where one party has pledged to sell property or, in this case, a block of shares to another party, the purchaser acquires equitable rights over the shares. If the vendor proceeds to dispose off that same block of shares to a third party, he has violated the equity of the purchaser and any proceeds he holds from the proceeds of the sale he holds it as a constructive trustee. It is as simple as that. It is this fund that was created by the unlawful sale that the plaintiffs are seeking to preserve by way of an interim protection. It is, in fact, the very subject matter of the writ. [17] Tan Chong Keat Sdn Bhd was an action for damages in lieu of specific performance of a sale and purchase agreement. There the donee of a power of attorney entered into a sale and purchase agreement with the defendant in respect of a property owned by the plaintiff, the donor of the power of attorney. However, at the same time the property, which was charged by the donor to a bank, was sold pursuant to an order of sale. The plaintiff filed an action against the donee and the defendant seeking a declaration that the power of attorney was invalid in order to defeat the sale and purchase agreement. The defendant 16 in response filed a counterclaim, among others, seeking a declaration that the power of attorney was valid and sought damages in lieu of specific performance of the agreement. The counterclaim was followed by an application by the defendant seeking an interim order of preservation to preserve the balance sum from the proceeds of sale which the bank was legally bound to pay the plaintiff. The Court of Appeal upheld the High Court holding as follows: [47] We are of the view that there exist several questions to be tried … Further, the conduct of the appellant seems to support the respondent’s stand that there is a real risk that the appellant may dissipate or remove the balance of the proceeds of sale of the said property due from Public Bank Berhad. Under the circumstances, the balance of convenience clearly lies in favour of granting the order for the preservation of the balance of the proceeds of sale of the said property. … We cannot see how the appellant can be prejudiced by such an order. 17 On the facts and circumstances of the case the court was of the view that there were damages due to the defendant but in view of the conduct of the plaintiff there was a real risk that the plaintiff may dissipate or remove the balance of the proceeds of sale of the said property due from the chargee bank. The court was also of the view that in the circumstances of the case the plaintiff would not be prejudiced by such an order. [18] In Tan Sri Dato’ Dr Awang Had Salleh & Anor v Dato’ Dr Hj Mohamed Haniffa Hj Abdullah [2007] 5 CLJ 565 the defendants were acting as the 2nd plaintiff’s agents in negotiating the sale of the 2nd plaintiff’s shares to a company. Unknown to the 2nd plaintiff, the defendants had received shares and a cash sum as gratification or bribe in negotiating the sale which was kept secret from the 2nd plaintiff. The 2nd plaintiff’s application under Order 29 rule 2(3) for the preservation of the shares and the said cash sum was dismissed by the trial judge. After the dismissal of the application and pending the appeal against the decision the said shares were sold off. The 2nd plaintiff while the appeal was pending moved the Court of Appeal under section 44 of the Courts of Judicature Act 1964 for the value of the sale of the said shares and the said cash sum be deposited in the High 18 Court. The Court of Appeal held that as agent of the 2nd plaintiff the 1st defendant was in a position of a fiduciary and therefore had a duty to account for the said shares and the said cash sum which he received as it having something to do with the sale of the 2nd plaintiff’s shares. In my judgment although the Court of Appeal was moved under section 44 of the Courts of Judicature Act 1964 the principles of the preservation of the property pending disposal of the appeal was the same as the principles as if the court was moved under Order 29 rule 2(1). [19] I now move to Order 29 rule 2(3) where the subject matter for an interim preservation order is a specific fund. The rule provides that where the right of any party to a specific fund is in dispute the court is conferred discretion to secure the fund or order that the fund be paid into court. It was established in Ng Seng Kiok & Lagi lwn Chooi Mun Sou & Lagi [1993] 2 CLJ 431 that the court should only make an order under this rule if an identified fund is in dispute. Abdul Aziz J held that the meaning of “fund” in the rule is as stated in the Concise Oxford Dictionary, ie “a stock of money, esp. one set apart for a purpose”. Thus the fund must be an identifiable fund and that fund must be the subject of the dispute between the parties. It is clear from the 19 facts and circumstances of the case that the sums claimed do not constitute a fund within the meaning of Order 29 rule 2(3). It is for that reason the plaintiff has not moved this court under the said rule but only under Order 29 rule 2(1). Applying the law to the facts [20] I now come to the application of the law to the facts and circumstances of the instant application. Firstly, the issue before this Court is whether pending the conclusion of the trial an interim order to preserve the principal invested sum or the principal invested sum together with the unpaid monthly returns sought in enclosure 8 ought to be made. [21] Secondly, I note that much effort and industry was expended by counsel in establishing the merits of the parties’ respective claims. However, as pointed out above, this Court for the purposes of this application need only determine whether the monies are of the type that ought to be preserved by an order of preservation and if they are, whether this Court ought to exercise its discretion in favour of granting the order sought in enclosure 8. 20 [22] The plaintiff has contended that he has a proprietary claim over the monies by virtue of the investment agreement dated 22.4.2016. He relied on the bank slips and statements exhibited in the affidavit in support. The defendants have on the other hand vehemently denied the allegation and claimed that the transaction was an illegal money lending transaction cloaked as an investment agreement. [23] After having considered the statement of claim and the conflicting affidavits filed by the parties, I am satisfied that there are serious questions to be tried. It suffices to state the main question that arises: whether the defendants are liable for the amounts prayed for as compensation and/or damages premised on fraud, misrepresentation and breach of warranty or whether the transaction is an “illegality” cloaked as a money lending transaction to circumvent the provisions of the Moneylenders Act 1951 and whether, if it was a loan whether the loan has been repaid with interest. [24] At the outset, there is a matter raised by the plaintiff which should be cleared so that the application is kept in context of the circumstances of the plaintiff’s case. The plaintiff claims that the 21 defendants are custodians of the plaintiff’s monies and knows what happened to the monies but have concealed what happened to the plaintiff’s monies. The defendants’ affidavits are silent on this matter and they have not provided any explanation as to the whereabouts of the plaintiff’s monies. The case of Tan Sri Datuk Dr Mohan Swami was relied for the following proposition: failure of the defendants to provide an explanation as to the whereabouts of the plaintiff’s monies must result in an order for the payment of the monies into court pending trial. [25] With respect, the proposition stated by the plaintiff was not what was decided in Tan Sri Datuk Dr Mohan Swami. The principle established in that case has been stated in paragraph [16] above and bears repetition. The principle is as follows: if a vendor has reneged on an agreement to sell property to the purchaser and instead sells the same to a third party, the vendor in such circumstances have violated the equity of the purchaser and any proceeds the vendor holds from the proceeds of the sale he holds as a constructive trustee. [26] In my view the confusion arose because in Tan Sri Datuk Dr Mohan Swami together with the prayer for the interim order 22 of preservation of the monies thereof there was sought the following prayer, “that the defendant file in court an affidavit to disclose full particulars of all its transactions of and in Sitt Tatt Bhd shares between 3.6.03 and 16.6.03”. It is to be noted that the plaintiff has not prayed for such an order in enclosure 8. Thus, the order was a prayer in the nature of discovery very apart from the order of preservation of the monies. In that case both prayers were granted meaning that the failure to provide an explanation as to the whereabouts and the actual amount of the plaintiff’s monies was not the reason to grant the order of preservation of the monies. The decision to grant the order of preservation of the monies in that case was solely based on the principles governing Order 29 rule 2(1). [27] In my judgment Order 29 rule 2 only provides for interim preservation of property and nothing else. There are however exceptions. If the whereabouts and the amount of the monies are not known but received by agents or by constructive trustees the court has in these circumstances the power to make an order of preservation of the estimated amount by ordering the same to be deposited in a joint account in the name of the solicitors as was done in the cases of Sebaya Sdn Bhd, Tan Sri Datuk Dr Mohan 23 Swami and Tan Sri Dato’ Dr Awang Had Salleh. Thus, in my view the prayer ordering the defendant file in court an affidavit to disclose full particulars of all its transactions of the sale including the amount of proceeds received is an order independent and separate from of the interim order of preservation provided by the said rule. [28] In my considered opinion in the instant case the claim for the investment sum or the investment sum together with the unpaid monthly returns is a debt due and owing to the plaintiff by the defendants. The plaintiff and the 3rd defendant have entered into an investment agreement wherein in respect of the money invested the plaintiff will receive monthly returns amounting to 10% of the principal sum. The failure to live up to the promise to pay the principal sum and/or the principal sum together with the monthly interest is an allegation of breach of contract and/or fraud and/or misrepresentation. On the facts and circumstances of this case the defendants are clearly not agents or constructive trustees or standing in a fiduciary position to the plaintiff. They are investors aggrieved with the failure to keep a promise pursuant to an agreement or deceived by fraud or misrepresentation. 24 [29] In my mind to make an interim preservation order on the facts and circumstances of this case coupled with an allegation of illegality if granted will cause irreparable harm to the defendants and cause them injustice. The plaintiff on the facts before this Court has to prove that the monies are in fact owed to him and is not an illegal transaction which is against public policy. If the defendants are required to produce monies pursuant to an interim preservation order such an order will certainly be oppressive, having regard to the consequences which must ensue if the defendant fails to obey the order or produces the sum to avoid such consequences. Undue hardship will be caused to the defendant if such an order is made. Conclusion [30] For the above reasons enclosure 8 was dismissed. …………………Sgd……………………… AMARJEET SINGH SERJIT SINGH JUDICIAL COMMISSIONER HIGH COURT OF PENANG Dated: 21st December 2020 25 Counsel for the Plaintiff: Rajivan Nambiar [ GEETHAN RAM (PETALING JAYA) ] Counsel for the Defendant: Muniandy Vestanathan [ ANDY & CO. (PETALING JAYA) ] Cases referred to: 1. Lian Keow Sdn Bhd v Overseas Credit Finance Bhd [1982] 2 MLJ 162. 2. Tan Chong Keat Sdn Bhd v Pintar Pintas Sdn Bhd [2005] 4 MLJ 201. 3. Telic Corp Sdn Bhd lwn Majlis Bandaraya Melaka Bandaraya Bersejarah Dan Satu Lagi [2009] 9 MLJ 703. 4. Keet Gerald Francis Noel John v Mohd Noor bin Abdullah [1995] 1 CLJ 293. 5. Teknik Cekap Sdn Bhd v Villa Genting Development Sdn Bhd [2000] 7 CLJ 385. 6. Sebaya Sdn Bhd v Syarikat Bekerjasama Ladang Kelapa Sawit Pegawai-Pegawai Negeri Pahang Berhad [1980] 2 MLJ 23. 7. Wanklyn v Wilson (1887) 35 Ch D 180. 8. Tan Sri Datuk Dr Mohan Swami & Anor v MISL & Associates Sdn Bhd (No 3) [2003] 7 CLJ 482. 26 9. Tan Sri Dato’ Dr Awang Had Salleh & Anor v Dato’ Dr Hj Mohamed Haniffa Hj Abdullah [2007] 5 CLJ 565. 10. Ng Seng Kiok & Lagi lwn Chooi Mun Sou & Lagi [1993] 2 CLJ 431. 27