CALEY OTOTO WORLDWIDE SDN BHD v. SUN WEN LONG

2010] 1 CLJ 725 [2009] 1 LNS 1107

CALEY OTOTO WORLDWIDE SDN BHD v. SUN WEN LONG
HIGH COURT MALAYA, KUALA LUMPUR
ABDUL MALIK ISHAK J
[CIVIL SUIT NO: S3-22-496-2001]
3 JULY 2009

COMPANY LAW: Directors – Fiduciary duties – Breach – Allegation of – Receiving monies under various contracts and depriving plaintiff of the benefit of various orders for supply of goods – Whether allegations against defendant collapsed for failure of calling material witness to testify – Whether plaintiff’s claims based on mere conjectures

EVIDENCE: Witness – Failure to call material witness to testify – Claim against director for breach of fiduciary duties – Hearsay – Whether admissible – Evidence Act 1950, s. 114(g) – Whether invoked – Whether allegations against defendant collapsed for failure of calling material witness to testify – Whether plaintiff’s claims based on mere conjectures

The plaintiff, a private limited company, claimed that the defendant, while holding the position of a managing director of the plaintiff, had personally received monies from PT International Corporation (‘PTIC’), a Singapore company, under various contracts for the supply of goods which were meant for the plaintiff amounting to RM802,521.24. The plaintiff also advanced another claim that the defendant had, after the defendant resigned as a managing director of the plaintiff, deprived the plaintiff of the benefit of various orders for the supply of goods to PTIC and that the defendant had personally received the sum of RM1,489,313.67. The defendant, a Taiwanese national and a shareholder of the plaintiff, denied the plaintiff’s claim and placed the plaintiff to strict proof thereto. The defendant disputed that PTIC had allegedly ordered certain goods from the defendant as the managing director of the plaintiff and intending to contract with the plaintiff. The defendant also disputed that the goods were delivered by the defendant personally and that the monies transmitted by PTIC to the defendant’s wife’s bank account were allegedly meant as payment for the purchase of such goods delivered by the defendant. The plaintiff disputed the defendant’s explanation that the monies paid by PTIC to the defendant’s wife’s bank account were part of the purchase price for goods sold to PTIC by one Liu Jin Shu and were meant for the benefit of the said Liu Jin Shu. The plaintiff had called only one witness to prove its claim, one Mr Ong Aik Lay (PW1) who gave a witness statement marked as Bundle ‘G’ and he relied entirely on it. In PW1’s witness statement, he said that he had been informed by one ‘Mr Pishu’ of PTIC that PTIC had placed orders with the defendant intending to order them from the plaintiff and that the defendant had delivered the goods to PTIC. Under cross examination, PW1 admitted that he had no personal knowledge of what had transpired and that he only knew what this ‘Mr Pishu’ of PTIC had allegedly informed him. However, no explanation was advanced by PW1 as to why ‘Mr Pishu’ or for that matter any other officer of PTIC with personal knowledge of the alleged matters were not called as the plaintiff’s witness. The whole of PW1’s evidence hinged on ‘Mr Pishu’. The issue that arose was whether the plaintiff was able to prove its alleged claim against the defendant.

Held (dismissing plaintiff’s claim with costs):

 

(1) Hearsay is used to describe statements that one hears but does not know it to be true. The purpose of PW1 in referring to what ‘Mr Pishu’ had told him was to establish the truth of what ‘Mr Pishu’ had said orally to him, and this would be hearsay and inadmissible. Mr Pishu’s testimony would make or break the plaintiff’s case. Yet, Mr Pishu was not called as a witness for the plaintiff by the plaintiff. No explanation at all was given as to why Mr Pishu was not called. Had Mr Pishu been called, he would certainly shed some light to the whole case. He too would be cross examined by the defendant in regard to the alleged orders by PTIC and the alleged deliveries thereto including the necessity of producing copies of the shipping documents. Section 114(g) of the Evidence Act 1950 allowed the court to presume that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it. The court was entitled to have the best evidence before it. The defendant was justified in imploring this court to invoke s. 114(g) of the Evidence Act 1950 in the absence of Mr Pishu bearing in mind that the burden to prove the case rested all along with the plaintiff. (paras 14, 20, 26, 28 & 29)

 

(2) The allegations against the defendant about contracting with PTIC without the plaintiff’s knowledge, consent or authorization and retaining the proceeds of those contracts to himself together with the arguments that the defendant held the proceeds of those contracts by way of an implied trust for the benefit of the plaintiff and further that the defendant had made secret profits arising from those contracts and must be held accountable to the plaintiff collapsed to the ground like a deck of cards because Mr Pishu did not come forward to testify and the evidence of PW1 was hearsay and inadmissible. (para 48)

 

(3) The plaintiff’s statement of claim pleaded and alleged that the defendant had received monies from PTIC. The plaintiff’s statement of claim did not plead by way of an alternative that the monies had been received by the defendant’s nominee or the defendant’s wife. From the available evidence adduced before this court there was nothing to show that the defendant received any monies. The evidence showed that the monies paid by PTIC were received by the defendant’s wife. That being the case, the plaintiff had failed to prove its case based on the pleadings. (para 57)

 

(4) A director owes a fiduciary duty to his principal and he must prefer his principal’s interest to that of his own. If the director secretly makes a profit behind the back of his principal he must be accountable for it and he may be liable in damages for deceit. But in the present case at hand, the plaintiff was only conjecturing that the defendant had secretly made a profit for himself. The plaintiff’s submissions were based on mere conjectures. The ‘must be’ and ‘must have’ basis could be dismissed in one single word as ‘hearsay’. (para 66)

 

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