1. ) RHB TRUSTEES BERHAD 2. ) SUNWAY REIT MANAGEMENT SDN BHD 3. ) SUNWAY EDUCATION GROUP SDN BHD v 1. ) TROPICANA EDUCATION MANAGEMENT SDN BHD 2. ) TROPICANA CORPORATION BHD

Case Significance

Illustrates the limits on amendment and joinder where proposed parties have not been served and where the amendments would fundamentally recast the legal and factual character of the claim.

This High Court decision at Kuala Lumpur concerns an application by the plaintiffs to amend their writ and statement of claim and to join two further companies as defendants. The underlying action sought to enforce a 'Conduct Agreement' said to regulate how the Sunway group and the Tropicana group would conduct a due diligence exercise leading up to a proposed transaction for the sale and purchase of a school property and the shares in an education company. By a letter of offer, as amended, the parties had agreed a due diligence review period and a period within which definitive agreements were to be executed. The defendants contended that the proposed transaction was automatically aborted under the terms of the letter of offer because no definitive agreements were executed within the prescribed period, while the plaintiffs disagreed and commenced the action. In this application the plaintiffs sought leave to amend and to join the two proposed defendants. The defendants raised a preliminary objection that the application was procedurally irregular because it had not been served on the proposed defendants, and the court agreed that, in the absence of the proposed parties, it would be irregular to grant the application, as doing so would deprive them of the opportunity to object. Beyond the service point, the court examined the substance of the proposed amendments and found that they introduced entirely new causes of action, parties, declaratory reliefs, orders and damages that were never part of the original pleading, and that they did not merely strengthen the existing claim but altered its whole legal and factual character, transforming the case from one of negotiation and incomplete due diligence into one asserting a concluded and enforceable transaction. Concluding that the application was not bona fide but a tactical manoeuvre, that it would turn the suit into one of a different and inconsistent character, and that it would prejudice the defendants, the court dismissed the application with costs. The judgment is a useful illustration of the limits on amendment and joinder where the proposed parties have not been served and where the amendments would fundamentally recast the nature of the claim.