Conspiracy-to-Injure-Final.docx

Conspiracy to Injure: A. Short Introduction on Malaysian Law Article 160 of the Federal Constitution includes 'the common law in so far as it is in operation in the federation or any part thereof'. Section 3, Civil Law Act (CLA) 1956 (Revised 1972) ' the common law of England and the rules of equity and in prescribed circumstances, English statutes. The application of the English common law and rules of equity (and in Sabah and Sarawak, English statutes of general application) in Malaysia is conditional, i.e. it is subject to three conditions: a) absence of local statutes/legislation covering the same matter; b) cut off-dates; and c) suited to local circumstances. B. An overview of the concept of the tort of “Conspiracy to injure, by unlawful means”, and a detailed analysis of the matters which must be shown to establish this tort. The Tort of Conspiracy to Injure is plainly explained in the Court of Appeal of Kuwait Oil Tanker Co SAK & Anor v Al Bader & Ors [2000] 2 All ER (Comm) 271 in the Court of Appeal, at paragraphs 107-108: “…It is common ground that there are two types of actionable conspiracy, conspiracy to injure by lawful means and conspiracy to injure by unlawful means. The first is sometimes described simply as a conspiracy to injure and the second as a conspiracy to use unlawful means (see eg Clerk and Lindsell on Torts (17th edn, 1995) pp 1267–1268, paras 23–76). In our view they are both conspiracies to injure and their ingredients are the same, with one crucial difference. In both cases there must be conspiracy to injure the claimant, but in the first case (in which the means employed would otherwise be lawful) the predominant purpose of the conspiracy must be to injure the claimant whereas in the second case, although the defendant must intend to injure the claimant, injury to the claimant need not be his predominant purpose. We shall treat them as different torts, although, as it seems to us, they are better regarded as species of the same tort. It matters not. For present purposes we would define them as follows. (1) A conspiracy to injure by lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant. (2) A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so. We shall call them a ‘lawful means conspiracy’ and an ‘unlawful means conspiracy’ respectively.”

Requirement: An agreement/ combination/ understanding/ or concert to injure involving two or more persons. -Company may conspire with its directors being two or more legal persons. (Belmont Finance Corp. v. Williams Furniture Ltd (No.2) [1980] 1 All E.R. 393, CA) -The conspirators need not join in at the same time or exactly have the same aim in mind, but the possession of a separate aim may be evidence that the party concerned has not participated in the combination at all. (R. v. O’Brien [1955] 2 D.L.R 311 at 315) Lawful means conspiracy: • does not require any unlawful acts to be done by the parties to the agreement. • does require the parties' sole or predominant purpose to have been to cause injury to the target. • can make two or more individuals liable for an act which would be lawful if done by one. Unlawful means conspiracy: • requires the use of unlawful means in furtherance of the agreement, and an intention to cause injury to the target. • occurs where two or more people act together unlawfully, intending to damage a third party, and do so. The key feature of unlawful means conspiracy is the requirement that the conspirators use unlawful means to pursue their objective. It would appear from the decided cases that a wide approach should be adopted when considering what will constitute unlawful means for the purposes of a conspiracy claim. The distinction between the two was succinctly elucidated by Lord Bridge in Lonrho plc v Fayed & Others [1991] 3 All E R 303 as follows Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate purpose that the law, however anomalous it may now seem, finds a sufficient ground to condemn their action as illegal and tortious. But when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful. Malaysian cases: Cubic Electronic Sdn Bhd v MKC Corporate & Business Advisory Sdn Bhd and another appeal [2016] MLJU 88

Facts: The plaintiff and 1st defendant are private limited companies incorporated in Malaysia. The 1st defendant was a registered owner of a land situated at Mukim Bukit Katil, District of Melaka Tengah, Melaka ("the subject property"). The 2nd defendant is the director and the majority shareholder of the 1st defendant. The plaintiff and the 1st defendant entered into the Master Tenancy Agreement ("MTA") for a period of 3 years commencing from 12.8.2009 and expiring on 11.8.2012 where the 1st defendant was to let out the subject property to the plaintiff. Pursuant to the MTA, the plaintiff paid a security deposit of RM500,000.00 and utility deposit of RM50,000.00 to the 1st defendant. A monthly rental of the subject property was fixed at RM250,000.00. According to the plaintiff, whilst the MTA was still subsisting, the 1st defendant had entered in to a tenancy agreement dated 14.1.2011 with the 3rd defendant over the same subject property with monthly rental of RM116,099.25. Prior to that, the 3rd defendant had entered into a subtenancy agreement dated 3.1.2011 with the 4th defendant with monthly rental agreed at RM1,486,070.40, also over the same subject property. The plaintiff averred that the 1st and 2nd defendants together with the 3rd and 4th defendants had conspired to deprive the plaintiff of its right under the MTA. The plaintiff further averred that the 1st defendant had breached the MTA by failing to give vacant possession of the subject property to the plaintiff. Consequently, the plaintiff initiated this action. The defendants resisted the suit and filed their respective statements of defence. The 1st defendant alleged that the plaintiff had failed to pay the rental and refused to take vacant possession. Therefore, the 1st defendant by its solicitor's letter dated 31.3.2011, terminated the MTA. The 1st defendant filed a counter-claim against the plaintiff seeking, inter alia, for a declaration that the MTA dated 12.8.2009 between the 1st defendant and the plaintiffs was be deemed terminated and unenforceable. To appreciate the submissions advanced by learned counsel for the defendants, we think it is relevant to deal with the law of conspiracy which is part of what are known as the "economic torts". There are four elements to a conspiracy claim 1i)

a combination or agreement between two or more individuals;

1ii)

an intent to injure; - For lawful means conspiracy, it is necessary to prove that the conspirators had the sole or predominant intention of injuring the claimant. As it was put in Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435: If that predominant purpose is to damage another person and damage results, that is tortious conspiracy. If the predominant purpose is the lawful protection or promotion of any lawful interest of the combiners (no illegal means being employed), it is not a tortious conspiracy, even though it causes damage to another person. The mental element of intention to injure the claimant will be satisfied where the defendant intends to injure the claimant either as an end in itself or as a means to an end such as to enrich themselves or protect or promote their own economic

interests. It will not be satisfied where injury to the claimant is neither a desired end nor a means of attaining it but merely a foreseeable consequence of the defendants' actions. -For unlawful means conspiracy, in the House of Lords decision of Lorho plc v Fayed (1992), the Lords decided: it is sufficient to make their action tortious that the means used were unlawful. No need to establish “predominant purpose to injure”. 1iii) pursuant to which combination or agreement, and with that intention, certain acts were carried out; and 1iv) resulting loss and damage to the claimant. Held: 



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Tested on the backdrop of aforesaid enunciation of the legal principles, on the evidence available on record, we are not prepared to hold that there was a conspiracy between the defendants when they entered into the tenancy agreements. The predominant purpose of those tenancy agreements are the lawful promotion of their lawful interests. The plaintiff is never required to show the existence of the arrangements between the conspirators in the nature of an express agreement, whether formal or informal. Therefore, as is often the case, the agreement or combination is to be inferred from the evidence. We have painstakingly and carefully scrutinised the evidence on record and find no evidence to support the plaintiff's contention that the rental paid by 4th defendant was for 1st defendant's ultimate benefit or that the 1st, 2nd and 3rd defendants must have a share in the profits. With respect, the learned trial judge's finding is against the weight of the evidence presented at the trial and merely grounded on pure fanciful conjuncture.

Renault SA v Inokom Corp Sdn Bhd & other appeals [2010] 5 MLJ 394 F: Renault made a representation to Inokom and Quasar on an investment sum which resulted in the latter parties not participating in a project called the Kangoo project. They allege that Conspiracy between Renault, Tan Chong and TC Euro to injure and defraud Inokom and Quasar by their negotiations relating to the Kangoo project. Held: - It is trite law that the agreement to injure must come first (in other words the agreement should have crystallised), before the alleged unlawful acts are done in execution or pursuant to the agreement. - Inokom and Quasar have never denied the fact that the alleged representation was first made by Renault to them in the year 2000.

-At para 38: We are unanimous that there cannot in law and in fact conceivably be an agreement or combination or conspiracy between Renault and Tan Chong to injure Inokom and Quasar when the alleged representation was pleaded to have been made in 2000 and the alleged conspiracy was pleaded to have occurred in 2001. Muniandy a/l Nadasan & Ors v Dato’ Prem Krishna Sahgal & Ors [2016] MLJU 207 (High Court) (1) the 3 elements of the tort of conspiracy to injure by unlawful means (3 Elements), are as follows: (a) there must be proof of (i) an agreement; and/or (ii) a combination of efforts of the conspirators to injure the plaintiff. Such an agreement or combination may be – (iii) (ai) formal or informal; or (iv) (aii) in writing or by word of mouth; (b) there are acts committed to execute the agreement or combination to injure the plaintiff; and (c) the plaintiff has suffered damage due to acts done in execution of the agreement or combination to injure the plaintiff; and (2) the tort of conspiracy to injure by lawful means has the 3 Elements and a fourth ingredient, namely there is a pre-dominant purpose or intention of the conspirators to injure the plaintiff. Khoo Teng Chye v Cekal Berjasa Sdn Bhd [2015] 6 CLJ 449 (CoA) F: The appellant/plaintiff obtained a judgment against the first respondent/first defendant. On the first respondent's failure to pay the judgment sum, the appellant served a statutory notice under s. 218(1)(e) of the Companies Act 1965to the first respondent. However, the first respondent, through its solicitors (third defendant), induced the appellant to withhold the enforcement of the judgment. The appellant alleged that it was subsequently discovered that the first respondent had transferred two plots of its land to the second respondent/second defendant and the appellant had thus suffered loss as the land, which ought to be a part of the assets of the first respondent available to the creditors of the first respondent including the appellant, were no longer available. The appellant alleged that a common director of the first and second respondents, Amir Hussain, had played a major role to deprive the appellant of its right to recover the judgment sum or part thereof against the first respondent. Amir Hussain and the second respondent had benefitted out of the land transaction to the detriment of the appellant. The appellant's claim against the

respondents, based on the tort of 'conspiracy to injure', was dismissed by the High Court and hence, the appeal. Held: - A judgment debtor, whether solvent or insolvent, can dispose of the judgment debtor's assets tobona fide purchaser if there is no restriction in law. A creditor cannot complain that the disposal has affected his rights per se. However, when such disposal is done to attract a complaint of conspiracy as well as tort of 'conspiracy to injure', the court is obliged to grant the relief based on established legal principles. -The Third Defendants through their letter dated 23.11.2007 informed the Plaintiff's solicitors that the Managing Director of the First Defendants was overseas and the Third Defendants will revert after the Managing Director returns on 12.12.2007. This was not true. - Oxford Advanced Learner's Dictionary - 7th edn, defines conspiracy as 'a secret plan by a group of people to do something harmful or illegal'. To support criminal or civil liability, the Evidence Act 1950 (EA 1950) recognises the issue of conspiracy as relevant and admissible evidence based on a low threshold of 'reasonable ground to believe that two or more persons have conspired'. Once evidence is introduced as to the nexus of the parties involved in the subject matter of the dispute, the court is obliged to consider the facts and relevant circumstances to ascertain whether it was a genuine transaction or whether it has element of civil or criminal wrong. (Refer to S.10 of the Evidence Act) -Janab’s Key to Law of Evidence: Section 10 deals relevancy of facts in relation to actions for conspiracy. Conspiracy is an agreement between two or more persons to do an unlawful act or to do a lawful act by unlawful means. It may be both a crime as well as tort. The principle on which section 10 is based is the theory of agency, which is based on the maxim, 'qui facit per alium facit per se' ie, he who does by another does it himself. Each conspirator is the agent as well as the principal of the other conspirators. Statement made in the absence of one conspirator will be taken in evidence as an exception to 'res inter alios acta principle ', ie, transaction that happened between strangers are inadmissible. We have read the appeal record and the able submissions of the parties. After much consideration to the submissions of the learned counsel for the respondents, we are of the considered view the appeal must be allowed. Our reasons inter alia are as follows: (1) It is not in dispute in the instant case: (i) Amir Hussain was the witness for the first respondent only, notwithstanding that he was the director of the first respondent as well as the second respondent; (ii) the second respondent took control of the first respondent;

(iii) Amir Hussain had signed the redemption agreement as director of the first respondent notwithstanding the document does not set out his name below the signature; (iv) Amir Husain also has signed the sale and purchase agreement between the first and second respondent notwithstanding the document again does not set out his name below the signature; (v) statutory notice for winding up was served on 24 October 2007; (vi) on 31 October 2007 Amir Hussain as the Managing Director of the first respondent and a Director of the second respondent instructed the third defendant (action withdrawn) to respond to the statutory notice; (vii) the requested papers were served on 16 November 2007 and on 23 November 2007 the appellant was informed that DW1 was overseas until 12 December 2007 and response to the appellant's statutory notice would only be made after his return; (viii) the third defendant was the common solicitors and had completed the execution of transfer forms, Form 14A, etc. one day before DW1 was said to return from overseas. It was never established that DW1 was overseas. Yeohata Machineries Sdn Bhd v Coil Master Sdn Bhd & Ors [2015] MLJU 545 - The first appellant was at all material times the owner of a patent relating to an apparatus and process for the manufacture of mosquito coils (‘the patent’). The second and third respondents had incorporated the first respondent company to manufacture and sell a mosquito coil making machine by the trade name ‘Coilmaster MK-1’. The appellants claimed that the respondents’ decision to manufacture and sell the Coilmaster MK-1, without the appellants’ consent, constituted an infringement of the patent. According to the appellants the second and third respondents had acquired confidential information relating to the sale, marketing, manufacture, production and operation of the Yeohata, while in the employment of the second appellant and that the second and third respondents had breached their fiduciary duties when they used such confidential information to manufacture and sell the Coilmaster MK-1. The appellants’ further claimed that the respondents’ had conspired to defraud and injure the appellants in their business by inducing the second appellant’s customers to switch to the first respondent’s machines. The appellants thus filed an action to restrain the respondents from infringing the patent and using confidential information relating to the patent and sought damages and costs. The respondents counterclaimed for the invalidation of the patent on the grounds that there was prior art. The trial judge found that the appellants had failed to prove that the Coilmaster MK-1 had breached the patent. On the other hand, the trial judge found that the patent was based on prior art which was already in the market, such as Nakamura, Tickwell and Sri Dapat. As such, the High Court dismissed the appellants’ claim with costs and allowed the respondents’ counterclaim with costs. This was the appellants’ appeal against the decision of the High Court. The appellants argued that the trial judge had inter alia misdirected herself as to the evidence adduced by the

respondents, failed to consider the evidence adduced by the appellants and had misinterpreted the nature of the patent. Held: -Para25: In order to sustain an action in conspiracy, the plaintiffs must plead and prove four essential ingredients. They are: (i) a combination or agreement between two or more individuals, (ii) an intent to injure, (iii) pursuant to which combination or agreement and with that intention certain acts were carried out, and (iv) resulting in loss and damage to the plaintiffs. The learned trial judge found that the evidence produced by the plaintiffs was not sufficient to establish the tort of conspiracy to injure. The first defendant company was not operational while the third defendant was a director of the first plaintiff. The defendants did not take any confidential information from the plaintiffs. There was no agreement to prevent the defendants from incorporating a new company. We have considered the evidence in totality and find that there is nothing to justify us in disturbing the findings of fact of the learned trial judge. Deepak Jaikishan a/l Jaikishhan Rewachand & Anor v Intrared Sdn Bhd (previously known as Reetaj City Centre Sdn Bhd and formerly known as KFH Reetaj Sdn Bhd) & Anor [2013] 7 MLJ 437 F: The plaintiffs were shareholders and directors of the 2 nd defendant company which entered into a sale and purchase agreement (‘SPA’) to buy a building owned by Glomac. The 2nd Defendant obtained financing from KFH which provided the funds on condition it had equity participation in the acquisition of the building. Later, as the plaintffs wanted to sell their shares in the 2nd Defendant and KFH wanted to buy the building for itself, KFH incorporated the 1st defendant to buy the plaintiffs’ shares. However, the purchase price was not paid even though the 1st defendant was made the owner of both the 2nd defendant and the shares. The plaintiffs assigned the debt to Bank rakyat and the 1st defendant undertook to repay the debt. However, 1st defendant and 2nd defendant stopped making payments after they found that there was a restriction of use of the building. As a result the plaintiffs were blacklisted by Bank Negara in the default list and penalty charges were imposed against them. The 1st defendant denied that it had conspired with 2 nd defendant to hurt the plaintiffs. Intrared denied it had conspired to injure the plaintiffs and said such a claim was in any case unmaintainable as KFH was no longer a party to the action, the claim against it having been discontinued following a settlement agreement. Intrared said it had no option but to cease making payments under the SSPA for its own protection because if it had terminated the agreement the plaintiffs would not have been able to repay the substantial sums that had already been paid thereunder. Intrared also contended that even if it was guilty of committing a breach, Deepak had, by his involvement in trying to resolve the issue of cl 47, waived the breach. Held: -As stated at the outset in relation to the law, the first element that has to be established is the existence of an agreement between the conspirators, namely Intrared and KFH, or a combination of action or concerted action between Intrared and another person or persons to injure the plaintiffs (see Kuwait Oil Tanker Company SAK v Al-Bader and others). As also stated in that case, it is not necessary to show anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or that they deliberately combine, albeit tacitly to achieve a

common end. How then is this to be ascertained? As stated in R v Siracusa the existence of such an agreement or combination of action with a common purpose can only be inferred from overt acts. -1st D's act of suspending payment indefinitely was wrong and breached the agreement to pay for the purchase of shares. The gravity of the breach was borne out by the fact it was aware the payment of the balance purchase price went towards meeting the plaintiffs' repayment obligations to Bank Rakyat. -Prior to the entry into the SSPA, 1st D's solicitors had undertaken a due diligence exercise which made express reference to the Development Order. As its solicitors had full knowledge of the subsistence of the DO, Intrared was presumed to have had knowledge not only of the subsistence of the DO but also of its contents. Its stance that it only became aware of the existence of cl 47 in the DO much later was untenable and less than credible -1st D's contention that it could not terminate either the SSPA or the SPA was untenable. The recourse of terminating the agreement with the plaintiffs was available to it and it was no excuse to contend the plaintiffs were 'unlikely to be able to repay the monies'. That would have been the correct legal position to adopt rather than effecting a breach of the SSPA which provided no remedy in relation to the SPA between Prestige Scale and Glomac: The starting point must be the fact of Intrared and KFH acting in combination or jointly to halt or cease all payments due under separate contractual obligations to third parties (Bank Rakyat) which directly affected the plaintiffs. In other words, I refer to the fact that Intrared took a decision not to honour its obligations under the Share sale and purchase agreement in January 2011. KFH, in terms of timing, also took a decision not to honour its obligations under the separate irrevocable letter of undertaking issued to the plaintiffs. The fact that both entities determined at the same time not to honour their separate obligations under two different contracts evidences to my mind, concerted action or an agreement or a combination of action by two parties. The fact that their actions affected one common 'target' namely the economic interests of the plaintiffs also cannot be denied. When viewed in totality therefore the acts of Intrared and KFH, to cease payments under their separate contracts amount to overt acts from which it may be inferred that: (a) the two entities acted together pursuant to an agreement or in combination or in concert; and (b) with the common purpose of giving rise to a breach or default in two separate contracts with the plaintiffs, the net effect of which would be to cause detriment to the plaintiffs. -The only inference that could be drawn was that Intrared and KFH intended to injure the plaintiffs' economic interests. Even if it was accepted that Intrared deliberately ceased to honour its contractual obligations to protect or promote its own economic interests, that was sufficient to satisfy the mental ingredient or 'intention' required for the tort of conspiracy to injure.