High Court: Shareholders 'forced' into agreements with proxy of political leader

 

Shareholders of three companies were forced to enter into several agreements with a man alleged to be a proxy of a political leader in the pre-2018 BN government, the High Court in Kuala Lumpur ruled.

In a 115-page judgment of the verdict issued last week, judicial commissioner Ong Chee Kwan made the scathing summation when ruling in favour of the three shareholder plaintiffs lawsuits against the man’s wife, defendant Norhana Sharkhan.

Online news portal Free Malaysia Today reported that the three companies were given contracts to develop systems to vet entries of foreigners into Malaysia. It also reported the man’s name as Mohamad Nizam Mohamad.

Ong reportedly ruled that Nizam had threatened to take away the contracts worth millions of ringgit unless the plaintiffs transferred shares to the defendant’s company.

The judicial commissioner reportedly found the man’s conduct to be “so intolerable” that the court ordered the defendant to pay exemplary damages of RM500,000 each to the three shareholders.

“I do agree that this is indeed a proper case where exemplary damages ought to be imposed. Nizam’s main objective was to extract money to be derived by the plaintiffs from the scheme. He contributed nothing to the scheme but wanted the benefits from the efforts put in by the plaintiffs.

“In carrying out his objective, Nizam blatantly blackmailed the companies into giving him exorbitant amounts and substantial control over the companies.

“His actions had inflicted fear, distress and hopelessness upon Amin (or Aminul Islam Abdul Nor, a prime mover of the various platforms and is the controlling mind behind the companies) and the plaintiffs.

“Such actions also would have a crippling effect on the ability of meritorious companies dealing with the government of Malaysia.

“If exemplary damages are not awarded, Nizam would come out of this episode no worse off as he never had the shares of the companies, to begin with,” Ong ruled in the written judgment.

The judicial commissioner ordered the shares to be transferred back to the companies as soon as possible and also declared the agreements void.

Noting that there had been economic duress and illegality due to influence-peddling, the judicial commissioner said there would be unjust enrichment if Nizam or Norhana is allowed to hold the shares.

“Thus, to permit the plaintiffs to claim for the shares based on a cause of action for unjust enrichment will not diminish the underlying reasons for prohibiting such influence-peddling contracts. The contrary is in fact the case.

“I am also of the opinion that there are no other relevant public policies which may be rendered ineffective or less effective if this court were to allow the plaintiffs’ said claim for unjust enrichment.

“On the contrary, if the plaintiffs’ claims are denied, it would make a mockery of the court’s condemnation of influence-peddling contracts as the perpetrator would end up in this case with the very thing that he had sought for in exchange for exercising his influence,” the judicial commissioner said.

Ong also ordered the defendant to pay RM360,000 in costs to the three plaintiffs, namely JR Joint Resources Holdings Sdn Bhd, Mohd Zaki Jaafar, and SH Yahya SH Mohamed.

JR Joint Resources, Zaki and SH Yahya are the shareholders of the three corporate entities, namely Bestinet Sdn Bhd, Tass Tech Sdn Bhd, and Synerflux Sdn Bhd.

The court also dismissed the defendant’s counterclaim, which had sought among others that the termination of the agreements was improper, that the agreements were valid and enforceable, and for the payments of the profit guarantee due thereunder.

In the written judgment, Norhana was regarded as merely an agent of Nizam.

Through several agreements, Norhana received 49 percent of the share capital of Bestinet, and 70 percent shareholdings in both Tass Tech and Synerflux.

The companies were developing and implementing proprietary software solutions to assist the home ministry in the area of recruitment of migrant foreign workers by Malaysian employers, as well as to screen passengers entering or exiting the country.

The said systems involved are:

i) the Foreign Workers Centralised Management Scheme (FWCMS) consisting of 15 different modules, which included the Bio-Medical module (BMM) and the ‘Visa Dengan Rujukan’ or e-VDR module (e-VDR). For convenience, the remaining modules are referred to as the Residual Modules (RM). All of them were developed by Bestinet, which was substantially owned by JR Joint Resources;

(ii) the Advance Passenger Screening System (APSS) developed by Tass Tech, which was substantially owned by Zaki; and

(iii) the Sistem Pengurusan Pekerja Asing (SPPA) developed by Synerflux, which was substantially owned by SH Yahya.

Via the lawsuits filed in late 2018, the three plaintiffs claimed that the defendant had, by illegitimate means, exerted undue pressure and had coerced the transfer of their respective shares in the companies that developed the software.

This was allegedly done by threatening to interfere with the plaintiffs’ negotiations and contracts with the government by using the defendant’s close connection and influence with “powerful persons” within the administration.

The plaintiffs claimed that the agreements, signed with the defendant, came about due to economic duress, coercion, illegality, failure of consideration, breach of condition and unjust enrichment.

They had also sought declarations that the agreements are legally bad and must be nullified and that the shares must be returned. The High Court allowed all of the relief sought.

The plaintiffs were represented by counsel Tommy Thomas, K Shanmuga, V Jeya Kumar and Jonas Lee Fook Khong.

Lawyers P Porres Royan, C Vijaya Kumar, S Shaarvin and Roobini Stephanie Sittampalam appeared for Norhana. - Mkini