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13 February 2020
In the recent case of Wrp Asia Pacific Sdn Bhd v Tael Tijari Partners Ltd,(1) the high court set aside interim injunctions which had been granted pursuant to Section 11 of the Arbitration Act 2005 following an inter partes hearing.
WRP Asia Pacific Sdn Bhd entered into various agreements with the TAEL Group for the latter to invest and acquire shares in WRP. The directors of WRP were Dato' Lee, his wife, Ms Too, and a nominated director of the TAEL Group, Ms Loong. Pursuant to concerns regarding the financial management of WRP, the TAEL Group wrote to the board of directors for the requisition of an extraordinary general meeting to appoint two additional directors as nominated by the TAEL Group.
WRP initiated arbitration proceedings in Singapore to challenge the legality of the agreements under which the TAEL Group had acquired its shares in WRP. In parallel with the arbitration proceedings, WRP sought injunctive reliefs from the Malaysian courts pursuant to Section 11 of the Arbitration Act to allow Lee and Too to maintain control of WRP's board. The injunctive reliefs were granted by the high court after an inter partes hearing, which prevented the additional directors nominated by the TAEL Group from acting.
The TAEL Group applied to discharge the injunctive reliefs.
The high court allowed the TAEL Group's application to discharge the injunctive reliefs.
High court's jurisdiction
The high court found support in its earlier decision in Bumi Armada Navigation v Mirza Marine Sdn Bhd(2) to determine that it has the power to vary or discharge interim injunctions that are granted pursuant to Section 11 of the Arbitration Act. The basis for such variation or discharge is premised on the Singapore High Court case of AAR v AAS (liquidator and trustee of B and others)(3) and the High Court of England and Wales' decision in London Underground Ltd v National Union of Railwaymen (No 2)(4) (ie, where there is a material change of circumstances justifying the making of such an order).
Basis for grant of interim injunctions
The high court noted that the interim injunctions had been granted based on the need to safeguard WRP's interests and maintain the status quo. The judge who had granted the interim injunctions had found that the then board of directors was less likely to act in a manner detrimental to WRP and that if WRP had prevailed in the arbitration, it may not have been adequately compensated by monetary payment.
However, the high court found that events subsequent to the interim injunctions showed that Lee and Too had schemed to have WRP wound up, which had precipitated a string of claims against WRP in excess of RM50million.
Suppression of material facts
The high court found that WRP had suppressed material facts when the interim injunctions were granted. Although Lee had caused WRP to admit to a statutory demand from Axis Megamilk Sdn Bhd for the winding-up of WRP, he had stated in his affidavit in support of the interim injunction application that WRP would dispute the debt in order to convince the court that all legal claims filed against WRP were under control and that WRP was completely solvent.
The high court found that the suppressed facts went against the issue of status quo (ie, WRP's continuing operation and management). The suppression justified the setting aside of the interim injunctions as it had led the court to make an order which was substantially different from that which it would otherwise have made had such disclosure taken place.
The high court rejected WRP's contention that it could not be faulted for non-disclosure of material facts as a previous order granted by the Federal Court provided for full and unrestricted access to the TAEL Group's representative director of all accounting and other records of the company. The high court drew a distinction between access to information and records and active suppression of material facts from the court. In this case, the deponent of WRP, Lee, had lied on affidavit, and WRP had taken steps to conceal Axis' claim from the TAEL Group. Therefore, the court held that WRP could not claim that if the TAEL Group had asked for the documents, the information would have been made available to it.
Change of circumstances
Following the granting of the injunctions, WRP's creditors filed further claims against it. In the creditors' suits, Lee appointed Han & Partners to represent WRP, despite the fact that it had represented Axis in filing a winding-up petition against WRP.
The high court found that the facts suggested some complicity between Lee, Han & Partners and Axis to act in a manner that could not be said to benefit WRP. Even taken at their highest, the facts suggested a lack of good and sound commercial judgment on Lee's part in his decisions affecting WRP's interests.
The high court concluded that if the composition of the WRP board were to be maintained, WRP's interests could not be safeguarded and there was a real risk that its existence would be threatened. On the other hand, the TAEL Group had shown determination to prevent WRP from being wound up.
With this decision, the high court has confirmed that interim injunctions granted pursuant to Section 11 of the Arbitration Act may be set aside on evidence of suppression of material facts leading to the grant of the interim injunctions and if there has been a material change of circumstances since such interim measures were granted.
For further information on this topic please contact K Shanti Mogan or Yiew de Quan at Shearn Delamore & Co by telephone (+60 320 272 727) or email (firstname.lastname@example.org or email@example.com). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.
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