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Between Boustead Rimba Nilai Sdn Bhd And Mohed Bin Suratman [2011] MYSSHC 359 (30 September 2011)

MALAYSIA

IN THE HIGH COURT IN SABAH AND SARAWAK

AT SANDAKAN

SUIT NO. S22-67 OF 2009

BETWEEN

BOUSTEAD RIMBA NILAI SDN BHD ... PLAINTIFF

[COMPANY NO. 6537-D]

AND

MOHED BIN SURATMAN ... DEFENDANT

[NRIC NO. 610322-01-5941]

GROUNDS OF DECISION

BACKGROUND

.

[I] The Plaintiff’s claim against the Defendant is for breach of

fiduciary duty alternatively for breach of trust (See para 9 of the

Statement of Claim).

[ii] The Plaintiff’s contention is that the Defendant was the Senior

Mill Manager and the Defendant committed breach of his service

of employment by falsifying the weights of Fresh Fruit Bunches

(‘FFB’) delivered to Ladang Segamaha Palm Oil Mill from and to

reducing the weight of scrap iron sold by the Plaintiff to Taliyan

Trading. The Plaintiff also claims for an account of all proceeds

received from Sun Tat Lee Sdn Bhd and Chong Shu Min between

February 2007 until June 2009.

[iii] In the course of the trial the Defendant had admitted that he

had rendered his services to Chong Shu Min and Ling Chee

Chong to manage their estate and was paid RM280.00 per ton of

the oil palm production.

[iv] The Defendant’s defence in essence, is one of a denial,

denying having instructed the weighbridge clerks to amend the

weighbridge tickets to falsify the weight of the FFB and scrap iron.

AGREED ISSUES

.

The parties have agreed to the following issues for trial which are

contained in the Agreed Issues For Trial (exhibit “AI”) which are as

follows:

[i] Did the Defendant from March 2007 to May 2009 instruct

the Plaintiff’s employees in charge of the weighbridge to

falsify the weight:

[a] by increasing the weight of the Fresh Fruit Bunches

[‘FFB’] delivered to Segamaha Palm Oil Mill from

March 2007 until May 2009 for purchase by the Plaintiff

[after this referred to as the ‘FFB Fraud’]; and

[b] by reducing the weight of scrap iron sold by the

Plaintiff to Taliyan Trading [after this referred to as the

‘Scrap Iron Fraud’]?

[ii] Did the Defendant own any estate?

[iii] Did the Defendant use the accounts and MPOB license of

Sun Tat Lee Sdn Bhd (STL) and Chong Shu Min (CSM) to

sell the FFB from his own estate to the Plaintiff?

[iv] Did the Plaintiff suffer a loss of approximately RM

642,443.14 due to the Defendant’s unauthorized improper

manipulation of the weight of FFB, and the unauthorized sale

of his own FFB under STL and CSM’s licenses?

[v] From May 2007 until May 2009, did the Defendant instruct

Rosnah and Hasnawati to amend the weighbridge tickets

issued to reduce the weight of scrap iron sold to a business

known as ‘Taliyan Trading’?

[vi] Did the Plaintiff suffer a loss of approximately RM

29,301.90 due to the Defendant’s manipulation of the weight,

improper purchase of the scrap iron and its sale thereafter to

Taliyan Trading?

[vii] Did the Defendant commit a breach of trust as an

employee of the Plaintiff and holds all proceeds and/or

monies made during his employ with the Plaintiff as a

constructive trustee.?

[viii] Was the Defendant in breach of his fiduciary duties as

the Senior Mill Manager of the Plaintiff?

AGREED FACTS

3. [i] The Agreed Facts [marked as exhibit “AF”] are as follows:

[a] The Plaintiff is a private limited company incorporated in

Malaysia with its place of business at P.O. Box 60856,

911117, Lahad Datu, Sabah and is the owner of Sungai

Segamaha Palm Oil Mill (after this referred to as ‘Ladang

Segamaha’).

[b] The Defendant was the Senior Mill Manager of the

Plaintiff until his resignation on 03.06.2009.

[c] On 11/6/2009, the Defendant tendered his resignation

which would take effect on 3/6/2009 with a payment of 3

months of his monthly salary in lieu of the 3 months’ notice.

[d] The Defendant was to be transferred to the Plaintiff’s

other mills in Johor Baharu effective 01.06.2009.

[e] The Defendant as the Senior Mill Manager at the material time was responsible for the running, direction and

supervision of the Segamaha Palm Oil Mill.

CONSIDERATION OF THE AGREED ISSUES

.

[i] Did the Defendant from March 2007 to May 2009 instruct the

Plaintiff’s employees in charge of the weighbridge to falsify the

weight:

[1] by increasing the weight of the Fresh Fruit Bunches

[‘FFB’] delivered to Segamaha Palm Oil Mill from March

 until May 2009 for purchase by the Plaintiff [after this

referred to as the ‘FFB Fraud’]; and

[2] by reducing the weight of scrap iron sold by the Plaintiff to

Taliyan Trading [after this referred to as the ‘Scrap Iron

Fraud’]?

-----------------------------------------------------------------------------------------

[a] From the evidence adduced, I noted that that the amendment to

the weighbridge tickets was unchallenged or disputed. What was

disputed by the Defendant is that the Defendant did not instruct the

weighbridge clerks to do the amendments. It was also not disputed

nor challenged in cross-examination that when there is an asterisk

on the weighbridge tickets, it indicated that there was an

amendment made to the ticket and if there is an asterisk to the

gross weight (when additional weight is added) and tare weight

(when the weight is deducted). The bundle of documents enclosing

all the weighbridge tickets with the asterisk were not challenged at

all.

[b] From the evidence adduced, both the weighbridge clerks, PW6

and PW7, admitted to the amendments to the weighbridge tickets

to increase the weight between 1 to 3 tons for the FFB delivered to

the mill using the accounts of Chong Shu Min and Sun Tat Lee.

Both PW6 and PW7 admitted that they had done so under the

instruction of the Defendant.

[c] Investigation by PW2 and PW3, revealed that a person by the

name of Fandi Ahmad had delivered the FFB using tractor

registration number SD 2855A since March 2007 and of which

PW6 and PW7 were instructed to add additional weight when

Fandi Ahmad delivered the FFB. These deliveries were confirmed

by PW6 and PW7 in their testimonies both in court and in their

statutory declarations [pages 121 to 123 and pages 124 to 126

PBD1].

[d] PW2 and PW3 obtained a statement which was written by

Fandi Ahmad admitting to the delivery of the FFB and the

additional weight added. According to Fandi Ahmad, it was on the

instruction of the Defendant as he was working for him to deliver

his FFB. Fandi Ahmad apart from giving a hand written statement,

had also deposed a Surat Akuan [Statutory Declaration] admitting

to the delivery and amendment of the weighbridge tickets.

Although Fandi Ahmad was never called as a witness, I find that

his statement at page 25 of PBD1 and his Surat Akuan at pages

110 to 111 of PBD1 are admissible by virtue of sections 32 and

73A of the Evidence Act 1950.

[e] PW14 testified that he was instructed by the Plaintiff to look for

the witnesses for the trial in this case and that he could not locate

Fandi Ahmad and his men had also failed to find him. PW2

testified that he had a photocopy of Fandi Ahmad’s passport which

was in his report. Both the weighbridge clerks also confirmed the

existence of Fandi Ahmad and both confirmed he had delivered

the FFB for the Defendant.

[f] PW11 of Chong Shu Min Plantation Sdn Bhd testified that he

had given a surat akuan concerning the FFB delivered to the

Plaintiff. He confirmed what he had stated in the surat akuan is

correct. [See pages 105 to 106 PBD1] PW11 stated in the surat

akuan and in court that he had allowed the Defendant to

“tumpang” his licence to sell the Defendant’s FFB to the mill. After

the mill had paid him, he would issue a cheque for the Defendant’s

share. PW11 further confirmed that the cheques at pages 62 to 70

PBD1 were the cheques for which he had made payment to the

Defendant for the FFB.

[g] PW12 of Sun Tat Lee also confirmed what he had stated in his

surat akuan are true and correct. It was the same modus operandi

as that stated by PW11, Chong Shu Min. PW12 also confirmed the

payment made to the Defendant as shown in the payment

vouchers [pages 115 to 120 PBD1].

[h] Apart from the FFB, PW2 also discovered that the amended

weighbridge tickets also concern the scrap iron sold by the Plaintiff

to Taliyan Trading. The Defendant this time round, reduced the

weight in the weighbridge ticket for the scrap iron sold to Taliyan.

From the evidence the Defendant would amend the weighbridge

ticket for the scrap iron to reflect a lower weight for the scrap iron

sold to Taliyan when in fact, the weight should be higher. Taliyan

would pay a lower price for the scrap iron and pay the Defendant

for difference between the “amended” lower weight and the actual

weight of the scrap iron which would be higher, if not for the

amendment.

[i] PW2 in support of his findings had gathered the documentary

evidence from Taliyan Trading, that is, the Receiving Slip of

Taliyan which show a higher amount of scrap iron received by

Taliyan but when the Defendant issued the receipt for the scrap

iron on behalf of the Plaintiff, the receipt show a lower amount.

These documentary evidence can be found at pages 72 to 77 of

PBD1 which are Taliyan’s payment vouchers, receiving slip and

the Plaintiff’s official receipts.

[j] I noted that PW13's evidence on the scrap iron was never

challenged at all by the Defendant which means all of PW13's

evidence are true.

[k] The weighbridge clerks and the suppliers of the FFB [Chong

Shu Min and Sun Tat Lee] and the buyer of the scrap iron, all

confirmed the additional weight [for Chong Shu Min and Sun Tat

Lee] and reduced weight [for Taliyan]. This reduced weight would

show less scrap iron was sold by the Plaintiff to Taliyan when in

fact it was more.

[l] I noted and find that the Defendant’s defence is a bare denial.

DW1, the Defendant merely denied having given such instruction

to the weighbridge clerk and further stated that it was the duty of

the weighbridge clerks to check and he was not always in the

weighbridge office. When the Defendant was not around his

assistant manager would see to them.

[m] I further noted that the increase of weights in the weighbridge

tickets was over a prolonged period of time that is from March

2007 to May 2009. The Defendant had during cross-examination

testified that the weighbridge tickets, at the end of the day, would

be delivered to his office for his inspection. The Defendant gave no

explanation at all why he did not detect the addition of weight to

the tickets. His only explanation was ‘I did not check them”.

[n] The Defendant in cross-examination admitted that in the event

there is any amendments made to the weighbridge tickets the

weighbridge clerks must inform the management. As such, I find

that it is impossible that the Defendant did not know nor notice the

amendments to the weighbridge tickets. I find that the Defendant

was not able to explain why he could not detect the increases in

the weighbridge tickets instead of passing the blame to the

weighbridge clerks by saying that the checking “was the

responsibility of the weighbridge clerks.”

[o] From the evidence adduced I find that the Defendant knew and

was the person who instructed the weighbridge clerks to do the

amendments as admitted by PW6 and PW7. It was the Defendant

who benefitted from the payments made by Sun Tat Lee and

Chong Shu Min to him, evidenced in the form of the cheques and

payment vouchers.

[p] In the premises I find that the Plaintiff had proved on a balance

of probabilities that the amendment to the weighbridge tickets by

the weighbridge clerks were on the instructions of the Defendant.

[ii] Did the Defendant own any estate?

-----------------------------------------------------------------------------------------

[a] I agree with the Plaintiff’s contention that there was no

documentary evidence of the Defendant having owned an estate

but there is clear evidence of the sale of FFB to the Plaintiff’s mill

which did not belong to Chong Shu Min and Sun Tat Lee and

utilizing Chong Shu Min’s and Sun Tat Lee’s accounts and MPOB

license to sell FFB to the Plaintiff. I further noted that the payment

for these additional FFB sold through Chong Shu Min’s and Sun

Tat Lee’s accounts and MPOB license went directly to the

Defendant. It proved that the FFB belonged to the Defendant. I

also find that this is a clear breach of the Defendant’s fiduciary

duty owed to the Plaintiff.

[b] Further I noted that the Plaintiff’s witnesses were only told that

the Defendant owned an estate and that it was the Defendant

himself who told them. However, one particular witness namely

PW8 when cross-examined how he knew that the Defendant has

an estate, his answer was “saya pernah pergi”.

[c] I find that the evidence revealed that there were deliveries of

FFB using Chong Shu Min and Sun Tat Lee’s accounts and these

FFB did not belonged to both of them. Both Chong Shu Min and

Sun Tat Lee testified that they would then make payment back to

the Defendant for the payment made by the Plaintiff to both of

them for the FFB delivered under their accounts. I noted that this

part of the evidence was never challenged in cross-examination

and therefore must again be accepted as true.

[iii] Did the Defendant use the accounts and MPOB license of Sun

Tat Lee Sdn Bhd (STL) and Chong Shu Min (CSM) to sell the FFB

from his own estate to the Plaintiff?

-----------------------------------------------------------------------------------------

[a] From the testimonies of PW11 and PW12 who confirmed the

use of their respective accounts and licences and whose

testimonies, I find, are credible, I find that the Defendant did use

their respective accounts and licences. Further I noted that the

Defendant did not challenge their evidences at all in this respect.

[iv] Did the Plaintiff suffer a loss of approximately RM 642,443.14

due to the Defendant’s unauthorized improper manipulation of the

weight of FFB, and the unauthorized sale of his own FFB under

STL and CSM’s licenses?

-----------------------------------------------------------------------------------------

[a] In the light of finding in Agreed Issues [i], I find that there were

unauthorized improper manipulation of the weight of FFB. I would

agree with the unchallenged findings of PW2 that the Plaintiff has

suffered this loss of RM642,443.14, due to the Defendant’s

unauthorized improper manipulation of the weight of FFB, and the

unauthorized sale of his own FFB under STL and CSM’s licenses.

[v] From May 2007 until May 2009, did the Defendant instruct

Rosnah and Hasnawati to amend the weighbridge tickets issued to

reduce the weight of scrap iron sold to a business known as

‘Taliyan Trading’?

-----------------------------------------------------------------------------------------

[a] in the light of my finding in Agreed Issue [i] above, I find that the

Defendant did instruct Rosnah and Hasnawati to amend the

weighbridge tickets issued to reduce the weight of scrap iron sold

to a business known as ‘Taliyan Trading’?

[vi] Did the Plaintiff suffer a loss of approximately RM 29,301.90

due to the Defendant’s manipulation of the weight, improper

purchase of the scrap iron and its sale thereafter to Taliyan

Trading?

-----------------------------------------------------------------------------------------

[a] I agree with the contention of the Plaintiff that the Defendant did

not cross-examine at all PW13's evidence as to the scrap iron and

the sum of RM29,301.90. In the premises I find that this claim is

deemed admitted by the defendant.

[vii] Did the Defendant commit a breach of trust as an employee of

the Plaintiff and holds all proceeds and/or monies made during his

employ with the Plaintiff as a constructive trustee.?

-----------------------------------------------------------------------------------------

[a] I noted that the Defendant had admitted that he was bound by

the Plaintiff’s Code of Conduct and Letter of Undertaking which he

had signed [see pages 2 to 6 PBD3]. The Defendant agreed and

undertook that during his tenure of service he shall devote the

whole of his time, attention and skill to the company (Clause 1(a))

and shall not directly or indirectly or to be engaged or concerned or

interested in any business competing or associated in any respect

with the business of the Plaintiff [Clause 1(b)].

[b] I find that the Defendant had committed a breach of trust as an

employee of the Plaintiff and held all proceeds and/or monies

made during his employment with the Plaintiff as a constructive

trustee in the light of my various findings as follows:

[1] The Defendant instructed PW6 and PW7 to amend the

various weighbridge tickets for the FFB delivered by Chong

Shu Min and Sun Tat Lee to the Segamaha Palm Oil Mill and

Sun Tat Lee and Chong Shu Min would the pay the

Defendant for the additional FFB which did not belong to

them but to the Defendant;

[2] The payment made by Taliyan for the scrap iron

purchased from the Plaintiff which was for a higher tonnage

but the official receipts issued to Taliyan was for a lower

price, payment was then made directly to the Defendant,

which is confirmed by PW13;

[3] The Defendant had acted as a consultant for the estates

of Chong Shu Min and Ling Chee Chong, a fact admitted by

the Defendant himself, without the knowledge and consent of

the Plaintiff;

[4] The Defendant was paid RM280.00 per ton for managing

or acting as a consultant for the estates for Chong Shu Min

and Ling Chee Chong, which fact admitted by the Defendant.

[c] In the present case, the Defendant was the Senior Mill Manager

of the Plaintiff and I find that he had breached his contract of

employment with the Plaintiff, by failing to act responsibly, with

care and skill and acted in conflict of interest and taking advantage

of his position to make secret profits as well as equitable fraud on

the Plaintiff by the wrongfully amendment to the weighbridge

tickets and for making secret profits.

[d] In coming to my above finding, I am guided by the following

principles as laid in the following cases:

[1] In the case of KFH Ijarah House (M) Sdn Bhd vs Aamir

Nordin Bin Ariffin [2010] 1 LNS 394, the Court held as

follows:

‘As an employee, the defendant’s relationship with

the plaintiff is of a fiduciary character. In his book

Misconduct in Employment, B.R. Ghaiye states that

the relationship between an employer and an

employee is of a fiduciary character and if the

employee does an act which is inconsistent with

the fiduciary relationship then it will be an act of

bad faith for which his services can be terminated.

In the case of Stamford College v. Loi Fook Seng

[1994] 2 ILR 679 (Award No. 357 of 1994), the court

succinctly stated as follows:

It is well established that a contract of

employment is a contract of confidence and

trust. Sometimes it is called a contract of

fidelity. What it means is that the employee

must not place himself in a position where his

interest conflict with the interest of his

employer. Some contracts make such

provisions.”

[Emphasis is mine]

20 [2] In the case of Attorney General v. Blake [1998 w WLR

805], the English Court of appeal held:

“There is more than one category of fiduciary

relationship, and the different categories possess

different characteristics and attract different kinds of

fiduciary obligation. The most important of these is

the relationship of trust and confidence, which

arises whenever one party undertakes to act in the

interests of another or places himself in a position

where he is obliged to act in the interests of

another. The relationship between employer and

employee is of this character. The core obligation

of a fiduciary of this kind is the obligation of

loyalty. The employee 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 my conflict; he may not act for his own

benefit or the benefit of a third party without the

informed consent of his employer.”

[Emphasis is mine]

[3] The New South Wales Supreme Court in Digital Plus

Pty. Limited v. Christopher Hamis & Ors [2002] NSWSC

33, speaking on an employee’s obligation to act with good

faith and fidelity stated:

“An employee has a duty to act in the interests of

the employer with good faith and fidelity. That duty

is implied in every contract of employment if it is

not otherwise imposed by an express term. In

addition, the duty is imposed upon every employee

by the law of fiduciaries, the relationship of

employer and employee being recognizes as a

paradigmatic fiduciary relationship.

The obligations imposed by the duty are not

coterminous with the employee’s normal working

hours: they govern all the activities of the

employee, whenever undertaken, which are within

the sphere of the employer’s business operations

and which could materially affect the employer’s

business interests. Whether a particular activity

could materially affect the employer’s business

interests is a question of fact and degree.

The duty of loyalty requires that an employee not

place himself or herself in a position in which the

employee’s own interest in a transaction within the

sphere of the employer’s business operations

conflicts with the employee’s duty to act solely in

the employer’s interest in relation to that

transaction. A fortiori, an employee may not take for

himself or herself an opportunity within the sphere of

the employee’s business operations without the

employer’s fully informed consent.”

[Emphasis is mine]

[viii] Was the Defendant in breach of his fiduciary duties as the

Senior Mill Manager of the Plaintiff?

-----------------------------------------------------------------------------------------

[a] In the light of my above finding and for the reasons given, in

respect of Agreed Issue [vii], I find that the Defendant in breach of

his fiduciary duties as the Senior Mill Manager of the Plaintiff.

ORDER

.

In the premises, since I find that the Plaintiff has proved its case

against the Defendant has proved its case and I grant an order in

terms of the Statement of Claim.

.

[a] I noted one of prayers in the Statement of Claim herein, is for

damages inclusive of punitive and exemplary damages and/or

compensation for breach of fiduciary duty. The reason why I

awarded this form of damages is because of the Defendant’s

conduct and blatant breach of his fiduciary duty to his employer,

the Plaintiff herein. I find that this is a proper case for punitive and

exemplary damages to be awarded as the Defendant's conduct

has been calculated by him to make a profit for himself which may

well exceed the compensation payable to the plaintiff for the FFB

delivered and additional weight added. The Defendant was paid

RM280.00 per ton of the FFB produced by Chong Shu Min and

Ling Chee Chong.

[b] I find that the Plaintiff had proven during period from the month

of March 2007 to the month of May 2009, the total tonnage

delivered by Chong Shu Min is found at pages 12 and 13 of

Bundle PBD1 and the summary at pages 37 to 48 of Bundle

PBD1. The documents in support of these summary were also

produced in the said bundle. When PW2 testified that these are

the deliveries for the FFB by Chong Shu Min, this evidence was

never challenged by the Defendant’s learned counsel nor was any

cross-examination done on this issue. This again must be taken as

admitted.

[c] From the said summary, the total FFB delivered was 3,510.26

tons and as such the total amount of commission or secret profit

earned by the defendant from the management of Chong Shu

Ming’s estates would amount to RM982,872.80 [RM280.00 per ton

x 3,510.26 tons].

[d] In awarding the above damages, I am persuaded by what

Datuk David Wong J said in Mohamad Rambli Bin Kawi vs

Superintendant of Lands Kuching & Anor [2010] 1 LNS 115

held:

“The circumstances in which a court would award exemplary

and aggravated damages are as set out in the Supreme

Court decision in Cheng Hang Guan & Ors v. Perumahan

Farlim (Penang) Sdn. Bhd & Ors [1994] 1 CLJ 19 at 62d

[right column] where the court states:

In a famous passage in his judgment in Rookes v.

Barnard [1964] AC 1129 Lord Devlin, with the

unanimous approval of fall his brethren reviewed the

law and laid down that exemplary damages could only

be awarded in three categories of cases, namely,

oppressive action by officers of the Crown; secondly,

cases where “a defendant with a cynical disregard for a

plaintiff’s rights has calculated that the money to be

made out of his wrongdoing will probably exceed the

damages all risk”, and thirdly, where statute expressly

authorized it.

…

12 In Cassel & Co. v. Brooms [<<1972] 1 ALL ER 801>> Lord

Morris explained the ambit of the expression

“calculated to make a profit” used by Lord Devlin in

Rookes v. Barnard. This is how he put it at p. 843:

There may be exemplary damages if a defendant has

formed and be guided by the view that, though he may

have to pay some damages or compensation because

of what he intends to do, yet he will in some way gain

(for the category is not confined to money making in

the strict sense) or may make money out of it, to an

extent which he hopes and expects will be worth his

while. I do not think that the word ‘calculated’ was used

to denote some precise balancing process. The

situation contemplated is where someone faces up to

the possibility of having to pay damages for doing

something which may be held to have been wrong but

where nevertheless he deliberately carries out his plan

because he thinks that it will work out satisfactorily for

him.”

7 Dated this 7th day of September, 2011

……………………………………….

Y. A. Tuan Lee Heng Cheong

Judicial Commissioner

Sandakan, Sabah

Plaintiff’s Counsel : Mr. Francis Wong

Of Messrs William Liaw Chan & Co

Sandakan

Defendant’s Counsel : Mr. Abdul Salim Maringan

Of Messrs V.K. Liew & Partners

Sandakan.

Notice: This copy of the Court’s Grounds of Decision is subject to

formal revision.

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