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INDUSTRIAL COURT OF MALAYSIA

CASE NO. : 16/4-159/15

BETWEEN

WAH KENG SEN

AND

LONDON BISCUITS BERHAD

AWARD NO: 1134 OF 2015

Before : Y. A. TUAN ROSLAN BIN MAT NOR


CHAIRMAN

Venue : Industrial Court of Malaysia


Johor Branch

Date of Reference : 09.01.2015.

Dates of Mention : 10.03.2015; 06.05.2015.

Dates of Mediation : 25.05.2015.

Dates of Hearing : 06.07.2015.

Representation : Mr. Pang Kong Seng dan Cik Chong Shi Bin
From Messrs K. S. Pang & Co.
Counsel for the Claimant.

Mr. Yeo Chun Ming


From Messrs C M Yeo & Associates
Counsel for the Respondent.

1
Reference :

This case is a reference under Section 20(3) of the Industrial Relations Act

1967, arising from the dismissal of Wah Keng Sen (hereinafter referred to as

the Claimant) by London Biscuits Berhad (hereinafter referred to as the

Company) on 06.05.2014. The Claimant's case is referred by the Honourable

Minister of Human Resources on 09.01.2015 and received by Industrial Court

on 19.01.2015.

AWARD

Facts

1. The Claimant commenced employment with London Biscuit Berhad (the

Company) on 01.10.1994 as the Assistant Manager. The Company has

appointed the Claimant as Chief Operation Officer on 01.01.2003.

2. The Company issued a show cause letter dated 01.04.2014 to the

Claimant as per page 22 COB1. The Claimant was asked to give a written

explanation on seven (7) allegations as follows :

Allegation No. 1
That on or around 19 November 2008 you had formed an
alliance and/or arrangement with one, Pang Siew Yen, My Kad

2
No. 810213-01-5180, the sole-proprietor of PN Recruitment &
Services [JM 0438681-P] with its business address at 128-02,
Jalan Ros Merah 2/17, Taman Johor Jaya, 81100 Johor Bahru,
Johor in supplying foreign workers to London Biscuits Berhad.

You failed to disclose your interest in PN Recruitment & Services


to your immediate superior thereby giving rise to a conflict of
interest situation disregarding the professional and ethical
dimensions of your work by not giving proper attention and/or
failed to comply with the values as contained in Articles 17 and 18
of the Code of Conduct.

You were also found to have verified and/or approved payments


to PN Recruitment & Services on various Remittance Vouchers
including but not limited to those dated 19 November 2008, 24
December 2008, 5 January 2009, 3 February 2009 and 12
February 2009 up to 15 December 2009 thus clearly affecting
your decisions and actions in the performance of your official
duties as the Chief Operating Officer of London Biscuits Berhad
which is a serious misconduct.

Allegation No. 2
That on or around 19 June 2009 you had appointed your sister-
in-law, Wong Lai Kuin, MyKad No. 640801-10-8114, who is
named as a Director of PN Recruitment Sdn. Bhd. [Company
Registration No. 861389-X] having its registered office at Bilik 201
Tingkat 2, No. 52-B, Jalan Sutera, Taman Sentosa, 80150 Johor

3
Bahru as a proxy with your ally or accomplice, Pang Siew Yen,
MyKad No. 810213-01-5180, the sole-proprietor of PN
Recruitment & Services [JM 0438681-P] w.e.f 19 th June 2009 that
was supplying foreign workers to London Biscuits Berhad.

You failed to disclose your involvement in PN Recruitment Sdn.


Bhd. to your immediate superior thereby giving rise to a conflict of
interest situation disregarding the professional and ethical
dimensions of your work by not giving proper attention to the
values as contained in Articles 17 and 18 of the Code of Conduct
that may have affected your decisions and actions in the
performance of your official duties as the Chief Operating Officer
of London Biscuits Berhad which is a serious misconduct.

Allegation No. 3
That on or around 4 May 2011 you have been found to have
replaced your sister-in-law, Wong Lain Kuin Mykad No. 640801-
10-8114 as a Director of PN Recruitment Sdn. Bhd. [Company
Registration No. 861389-X] having its registered office at Bilik 201
Tingkat 2, NO. 52-B, Jalan Sutera, Taman Sentosa, 80150 Johor
Bahru w.e.f 4th May 2011 and retaining, Pang Siew Yen, MyKad
No. 810213-01-5180 as a Director with whom you have formed an
alliance and/or arrangement as stated in Allegation 1.

You failed to disclose you Directorship in PN Recruitment Sdn.


Bhd. to your immediate superior thereby giving rise to a conflict of
interest situation disregarding the professional and ethical

4
dimensions of your work by not giving proper attention to the
values as contained in Articles 17 and 18 of the Code of Conduct
that may have continued to affect your decisions and actions in
the performance of your official duties as the Chief Operating
Officer of London Biscuits Berhad which is a serious misconduct.

Allegation No. 4
That on or around 23 February 2011 you, together with Pang
Siew Yen, MyKad No. 810213-01-5180, a Director of PN
Recruitment Sdn. Bhd. [Company Registration No. 861389-X]
having its registered office at Bilik 201 Tingkat 2, No. 52-B, Jalan
Sutera, Taman Sentosa, 80150 Johor Bahru with whom you have
formed an alliance and/or arrangement as stated in Allegation 1
were found to have purchased a semi detached house at No. 4,
Jalan Tegap 5, Taman Gaya, 81800 Ulu Tiram, Johor and jointly
obtained a loan (Loan Account No. 3000077037) from Citibank
Berhad, Menara Citibank, 165, Jalan Ampang, 59450 Kuala
Lumpur to finance the said purchase on or around the 23
February 2011 thus confirming your alliance and/or arrangement
with the said Director and in turn verifying the conflict of interest
situation disregarding the professional and ethical dimensions of
your work in not giving proper attention to the values as contained
in Articles 17 and 18 of the Code of Conduct thus confirming the
adverse effect of your decisions and actions whilst performing
your official duties as the Chief Operating Officer of London
Biscuits Berhad which is a serious misconduct.

5
Allegation No. 5
That on or around 16 December 2006 you have been alleged to
name one, Chan Kok Thiam, MyKad No. 601001-10-6477, a
Director of MTH Synergy Sdn. Bhd. [Company Registration No.
719358-D] having its registered office at Bilik 201 Tingkat 2, No.
52-B, Jalan Sutera, Taman Sentosa, 80150 Johor Bahru to be
your proxy in carrying out the business as a General Contractor
for the provision of services including but not limited to rubbish
disposal, rental of a 40' lorry and sales of OPP tape and pallet
stretch film to London Biscuits Berhad.

You were also found to have verified and or approved payments


to MTH Synergy Sdn. Bhd. on various Remittance Vouchers
including but not limited to those dated 15 May 2009, 31 August
2009, 31 January 2010, 30 April 2010, 30 September 2010, 28
February 2011 and up to 31 May 2011 without disclosing your
involvement to your immediate superior thus giving rise to a
conflict of interest situation disregarding the professional and
ethical dimensions of your work by not giving proper attention to
the values as contained in Articles 17 and 18 of the Code of
Conduct thus clearly affected your decisions and actions in
performance of your official duties as the Chief Operating Officer
of London Biscuits Berhad which is a serious misconduct.

Allegation No. 6
That on or around 7 April 2005 you have appointed one, Kuan Li
Lih, MyKad No. 770906-01-6908, a Director of Modern Apex Sdn.

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Bhd. [Company Registration No. 682930-M] having its registered
office at Bilik 201, Tingkat 2, 52-B, Jalan Sutera, Taman Sentosa,
80150 Johor Bahru as your proxy in carrying out the business of
supplying items such as polyolefin shrink film roll, forklift battery
and various repair or modification works for London Biscuits
Berhad.

It has been disclosed that you have verified and or approved


payments to Modern Apex Sdn. Bhd. on various Remittance
Vouchers including but not limited to those dated 30 June 2008,
31 July 2008, 31 March 2009, 31 May 2009, 31 October 2009, 30
November 2009, 15 April 2010 up to 30 June 2011 without
disclosing your immediate superior your involvement in Modern
Apex Sdn. Bhd. thus giving rise to a conflict of interest situation
disregarding the professional and ethical dimensions of your work
by giving proper attention to the values as contained in Articles 17
and 18 of the Code of Conduct that has clearly affected your
decisions and actions in the performance of your official duties as
the Chief Operating Officer of London Biscuits Berhad which is
serious misconduct.

Allegation No. 7
That on or around 7 April 2005 you have been alleged to name
one, Kuan Li lIh, MyKad No. 770906-01-6908, a Director of Acme
Focus Sdn. Bhd. [Company Registration No. 682931-M] having its
registered office at Bilik 201, Tingkat 2, 52-B, Jalan Sutera,
Taman Sentosa, 80150 Johor Bahru to be your proxy in carrying

7
out the business of cleaning services and general repairs of
premises and trading of cleaning equipment and chemicals with
London Biscuits Berhad. It has been disclosed that you have
verified and or approved payments to Acme Focus Sdn. Bhd. for
the above services without disclosing to your immediate superior
your involvement in Acme Focus Sdn. Bhd. thus giving rise to a
conflict of interest situation disregarding the professional and
ethical dimensions of your work by giving proper attention to the
values as contained in Articles 17 and 18 of the Code of Conduct
that has clearly affected your decisions and actions in the
performance of your official duties as the Chief Operating Officer
in London Biscuits Berhad which is serious misconduct.

3. The Claimant wrote to the Company on 06.04.2014 and answered all the
allegations as per page 26 COB1. Upon receiving the Claimant's letter of

explanation the Company did not satisfied with the Claimant's explanation and

issued a notice of inquiry on 14.04.2014. The Domestic Inquiry was held on

21.04.2014. The notes of proceeding of the said inquiry are as per page 29 to 34

COB1.

4. The Domestic Inquiry panels found the Claimant guilty of the first, second,

third and forth allegation. In their findings the panels stated inter alia :

8
The Company has proven Allegation 1 by inter-relating Allegations
2, 3 & 4 that the AE, being the Chief Operating Officer (COO) of
London Biscuits Berhad (LBB) had failed to disclose his interest
with the sole proprietor of PN Recruitment Services, one Pang
Siew Wen (C Ex 3) who was supplying foreign workers to LBB
with whom he is believed to have befriended and formed a close
relationship (an alliance and or arrangement) as alleged. We
thereby find the AE guilty as alleged in Allegations Nos 1, 2, 3 and
4.

The panels made a recommendation to the Company for the dismissal of the

Claimant. The panels recommended as follows :

Lord Esher in Pearce v Foster [1886] (71) OBO 536 said that :

The rule of law is that where a person has entered into the
position of servant, if he does anything incompatible with the due
and faithful discharge of his duty to his master, the latter has a
right to dismiss.

We find the AE, being the Chief Operating Officer, should not
have placed himself in a position where he may have to
compromise on his responsibilities to his employer that is very
prejudicial to the interest of the Company.

9
The Industrial Court too takes a serious view of instances of
conflict of interest and if it can be shown that the employees did
breach the trust, the dismissal of the employee is always upheld
With this in mind we find the AE guilty of gross misconduct of as
alleged in Allegation No. 1 and as such we recommend that he be
dismissed without notice.

Issues

5. The learned counsel for the Claimant and the Company narrowed down

the issues to be tried as follows :

1. Did the Claimant place himself in a conflict of interest


situation/s at the material time :

(a) in relation to the dealings of the Company with M/S


PN Recruitment & Services, and / or
(b) in relation to the Claimant's involvement in M/S PN
Recruitment Sdn. Bhd., thereby breaking the
Company's Code of Conduct?

2. Was the Claimant accorded due process prior to the


dismissal of the Claimant?

3. Was the Claimant duly dismissed with just cause and


excuse?

10
Company's Code of Conduct

6. The Company had introduced the Company Code of Conduct in 2006. It

was produced by Human Resource Department and approved by Chief

Operating Officer (the Claimant) and reviewed by Operation System Support

Department. The allegations to the Claimant was based on his action which

contravene Articles 17 ,18 and 19 of the said Code of Conduct. Article 18 and 19

are as follows :

18. Definition of conflict of interest


18.1. Real or perceived conflict of interest exist when it is
likely that a employee could be influenced or could be
perceived to be influenced by a personal interest when
performing their official duties. Conflicts of interest
may lead to biased decision making, which may
constitute corrupt conduct.

18.2. Some situations which may give rise to a conflict of


interest affecting performance of official duties
include :
Financial interests (of the employee, a friend or
relative) that could influence the impartiality of
the performance of duties;
Personal beliefs or attitudes not relevant to the
situation that influence the impartiality of the

11
advice given;
Personal relationships with fellow employees at
staff and management level;
Dealings with a family member, relative and
friend who is also in the food industry;
Representational duties where a employee who
is representing the interest of the company is
also asked to represent the interest of a
community group on the same instance.
Private employment which may conflict with
company duties.

Approval of expenditure which benefits self, a friend, a


relative or organisations associated with self. A person
may create a conflict of interest for another person.
For example, if a person with a conflict of interest
passes the decision making responsibility to a
subordinate, then a conflict of interest may be created
for the subordinate (i.e. should they try to please the
supervisor or make a fair decision).

18.4. To approve privileges or benefits to oneself (such as


leave, allowance, travel, training, private use of
resources and private employment) it would create a
conflict of interest and so not allowed.

12
19. Duties of staff with respect to conflict of interest
19.1. Employees are required to :
Avoid conflicts of interest if possible, and avoid
creating conflicts for others.
Disclose in writing to their supervisor or HOD any
perceived or actual conflict of interest as soon they
become aware that is or where there may be a
potential conflict. Where there is a change of
supervisor, to notify that person of the conflict and the
means being used to manage it.
(With their supervisor) resolve or otherwise manage
the conflict and document the method of resolution.

Company's Case

7. COW1 is the Company Group Managing Director and Chief Executive

Officer. In his witness statement (COWS1), he states that the Company is a

public listed company on the main Board of Bursa Malaysia. It was incorporated

in 1981 as a confectionary manufacturer. COW1 further affirmed that in order to

ensure the Company is properly manage, the Company operated on a strict

Code of Conduct. Every employees of the Company are bound by this code to

ensure that the Company is managed professionally and efficiently in the

interest of its shareholders.

13
8. As a Chief Operation Officer, the Claimant is fully in charge of operation of

the Company including the Human Resource Department, the claims

verification, approval of payments and answerable to the Chief Executive

Officer. COW1 did explained the Company position on reasons for dismissing

the Claimant in Q & A 13 of COWS1 as follows :

13. Q: What is the Company's position on the aforesaid


reasons for dismissing the Claimant?
A: The reasons stated were serious enough to be
deemed as misconducts on the part of the Claimant
which is compounded by the fact that the Claimant not
only did not avoid the conflict of interest situations but
denies the same which is further compounded by the
fact that the Claimant did not inform the Company of
the same to enable the Company to resolve or
manage the conflict of interest as provided for in the
Code of Conduct. (refer to page 153 and 154 of the
Company's Bundle of Documents)

9. During cross examination, COW1 agreed that as for the first allegation, it

was not stated that Pang Siew Yen is the Claimant's mistress. COW1 stated

inter alia :

14
Q: Allegation one (1), not stated Pang is the Claimant's
mistress?
A: Yes.
Q: No evidence, no allegation and no finding by the panel
that Pang is Claimant's girlfriend or mistress?
A: Yes.

COW1 also agreed in cross-examination that panel of domestic inquiry did not

make a finding that the Company incurred any cost as a result of Claimant's

misconduct in the first allegation.

It is also COW1 evidence that the Claimant did not benefited from the payment

to the PN Services Sdn. Bhd. by the Company. However COW1 averred that the

Claimant should adhere to the Company's Code of Conduct.

10. As for allegation number two (2), COW1 had surprisingly agreed with the

Claimant's counsel by saying this :

Q: No evidence to show that the Claimant's sister-in-law is the


Claimant's proxy?
A: Yes.

15
On allegation number three (3), COW1 testified that there was no business

dealing between the Company and PN Recruitment & Services in 2011. He also

confirmed that the Company has no business whatsoever with PN Recruitment

Sdn. Bhd. As far as allegation number four (4) is concerned, COW1 confirmed

that those allegation happened in 2011.

11. Nevertheless, COW1 insisted that the Claimant conduct was tantamount

to conflict of interest. The basis for such allegation was that the Claimant's

conduct were against the Code of Conduct of the Company. COW1 stated that

he knew about those allegations in 2008 to 2010. However, COW1 disagreed

that he condone the Claimant's conduct by not taking any action against him

since 2010 or 2011.

12. COW1 during re-examination testified that the Claimant did not inform the

Company of a conflict of interest situation on allegation number three (3). COW1

agreed that the Claimant was holding directorship position in other company.

13. COW2 was the Chairman of domestic inquiry panel. In his witness

statement COW2 narrated what transpired during the domestic inquiry. COW2

emphasized that the Claimant merely denied the allegations without providing

16
any evidence to rebut those allegation against him. COW2 in cross-examination

disagreed with the proposition of the Claimant that the panel had failed to apply

Clause 20 of the Code of Conduct. COW2 also disagreed that the finding of the

panel was unsafe, unfair and inaccurate.

Claimant's Case

14. The Claimant in his witness statement denied the allegations in the show

cause letter. As to the first allegation the Claimant said that the appointment of

the intermediary business entity, M/s PN Recruitment & Services to arrange for

the supply of foreign workers to the Company has been approved by the Chief

Executive Officer (COW1). As for second, third and fourth allegations, the

Claimant testified that there was no business dealing whatsoever between the

Company and PN Recruitment Sdn. Bhd. Therefore, there is no issue of conflict

of interest.

In his evidence before the court, COW1 confirmed that Liew Yet Lee, one of the

domestic inquiry panels was the COW1's youngest sister and one of the

Company Directors. Leslie Loo Meng who was also in the domestic inquiry

panel was the Independent Director of the Company.

17
15. The Claimant admitted in his evidence during cross-examination that he

had an intimate relationship with Miss Pang Siew Yen in 2011 to 2012. However,

the Claimant testified that all his denial as to the intimate relation with Miss Pang

asserted before is true. He said as follows :

Q: All your denial that you have no intimate relationship is not


true?
A: The denial is true.

16. The learned counsel for the Company shown page 24 and 25 of COB4 to

the Claimant. The Claimant denied those telephone calls were not non-business

related but the Claimant admitted that having known Miss Pang since June

2007, he still appointed PN Recruitment & Services which Miss Pang is the

owner of the said company, to supply foreign workers for the Company.

17. The Claimant explained why he did not disclose his relationship with Miss

Pang to the Company as follows :

Q: There is no written notification from you that Pang is your


friend?
A: I didn't notify in writing. I did inform Dato' Seri verbally.

18
18. The domestic inquiry note of proceeding demonstrates that the Claimant

did not disclose his relationship with Pang. It can be seen at page three (3)

COB1 where the Claimant said this :

Q: Did you ever inform the management of LBB that you are
having a relationship with Pang Siew Yen?
A: What kind of relationship? Everybody knows. How to inform
everyone of my friends? Dato' Seri also knows.

During the hearing, the Claimant explained his position by saying this :

Q: What you mean Dato' Seri also know at page 33 COB1?


A: Dato' Seri knew that Pang is an agent and my friend.

The Claimant also denied that Wong Lai Kuin was his proxy in the company PN

Recruitment & Services.

19. He also justifying his decision not to declare his interest in PN Recruitment

Sdn. Bhd. by saying this :

Q: In 2009 to 2011 did you disclose your position in PN


Recruitment Sdn. Bhd. to the Company?
A: No, because the nature of business is different.

19
The Law

20. Employees are expected to serve the employer faithfully. In particular, an

employee must not place himself in a position which his own interest conflict

with his duty to his employer. In Pearce v. Foster and Others [1886] 17 Q.B.D.

536 Lord Esher, M. R. explained the duty of the employee to his employer to

discharge his duty faithfully. The learned judged held inter alia as follows :

The rule of law is, that where a person has entered into the
position of servant, if he does anything incompatible with the due
or faithful discharge of his duty to his master, the latter has a right
to dismiss him. The relation of master and servant implies
necessarily that the servant shall be in a position to perform his
duty duly and faithfully, and if by his own act he prevents himself
from doing so, the master may dismiss him. It is not that the
servant warrants that he will duly and faithfully perform his duty;
because, if that were so, upon breach of his duty his master might
bring an action against him on the warranty. But the question is,
whether the breach of duty is a good ground for dismissal. I have
never hitherto heard any doubt that that is the true proposition of
law. What circumstances will put a servant into the position of not
being able to perform, in a due manner, his duties, or of not being
able to perform his duty in a faithful manner, it is impossible to
enumerate. Innumerable circumstances have actually occurred
which fall within that proposition, and innumerable other

20
circumstances which never have yet occurred, will occur, which
also will fall within the proposition. But if a servant is guilty of such
a crime outside his service as to make it unsafe for a master to
keep him in his employ, the servant may be dismissed by his
master; and if the servant's conduct is so grossly immoral that

all reasonable men would say that he cannot be trusted, the


master may dismiss him.

In Pearce's case the fact shows the Claimant was a clerk in a mercantile service

who involved in enormously large gambling transaction on stock exchange. The

court found the Claimant's act was incompatible with the due and faithful

performance of his duty to the employer. Linley L.J. in this case held as follows :

Now the nature of the business carried on by the firm was


explained at the trial, and it appears that the defendants not only
carry on the ordinary business of merchants, but they are also
engaged for their customers and friends in very large dealings in
securities. The plaintiff had been in the employment of the
defendants for years, and had risen from a small salary to a large
one, and apparently he had so conducted himself as to rise
gradually and steadily not only in his position but in the
confidence of the firm to such an extent, that in February, 1882,
they engaged him for ten years at a salary of 2000l. a year as
their confidential clerk. The defendants had such confidence in

21
him that in that agreement there is no provision for giving him
notice of dismissal. Such a contingency seems not to have
occurred to any of them. It was shown that this gentleman was
frequently and often consulted by the members of the firm as to
securities in which money should be invested, and it was his duty
to give his employers, when consulting him upon such matters,
his disinterested advice. Now it appears to me that he had so
conducted himself as to make his interest conflict with his duty,
that is to say, that he had a personal interest in securities of
various kinds arising out of these gambling transactions. They
were pure gambling transactions; and he had such a personal
interest as to render his advice, when consulted by his employers
upon matters within the scope of his employment, not
disinterested, but, on the contrary, interested. He had deliberately
placed himself in that position, which rendered his interest
conflicting with his duty. I do not say that he yielded to temptation,
to which, in that difficult position, he was naturally exposed; but I
do say this, that he ought not to have put himself in that position.
Further than that, it appears to me to be perfectly obvious, that if
this kind of conduct had been known to the persons who were
accustomed to deal with this firm, that very knowledge would
damage the firm. I cannot conceive myself that anybody would
have the same faith in a firm such as this, who had as their
confidential clerk a person largely gambling on the Stock
Exchange, as they would have in a firm who had a confidential
clerk who abstained from such gambling transactions. It appears
to me, therefore, that the plaintiff having habitually conducted

22
himself in such a manner as would injure the business of his
employers if his conduct were known, they might dismiss him
upon discovery of such conduct. It is not necessary for them to
prove that they have in fact suffered by reason of his conduct.

The basis of misconduct on ground of conflict of interest is the duty of the

employee to serve faithfully to his employer. In Boston Deep Sea Fishing and

Ice Company v. Ansell [1888] 39 Q.B.D. 339 Cotton L.J. illustrates a position

where the employee act unfaithfully in performing his duty to his employer which

warrant him to be dismissed by his employer. Cotton L.J. at page 357 had this to

say :

What we have to consider first is this, had the company - although


they knew it not at the time when they dismissed the Defendant in
October - a good ground of dismissal? In my opinion, they had. I
have stated that he was engaged not only by the Plaintiff Mr.
Garfit, but that he agreed with the company to be their general
manager, and had authority given to him with reference to the
contract to be entered into with the Earle's Shipbuilding Company.
Then when he was engaged in that contract, in respect of the
matters of that very contract, he in one instance got a percentage
of 1 per cent. from the Shipbuilding Company, and, in the other
case, he insisted on getting that is the evidence and did get, a
lump sum of 50. It is suggested that we should be laying down
new rules of morality and equity if we were to so hold. In my

23
opinion if people have got an idea that such transactions can be
properly entered into by an agent, the sooner they are disabused
of that idea the better. If a servant, or a managing director, or any
person who is authorized to act, and is acting, for another in the
matter of any contract, receives, as regards the contract, any
sum, whether by way of percentage or otherwise, from the person
with whom he is dealing on behalf of his principal, he is
committing a breach of duty. It is not an honest act, and, in my
opinion, it is a sufficient act to shew that he cannot be trusted to
perform the duties which he has undertaken as servant or agent.
He puts himself in such a position that he has a temptation not
faithfully to perform his duty to his employer. He has a temptation,
especially where he is getting a percentage on expenditure, not to
cut down the expenditure, but to let it be increased, so that his
percentage may be larger. I do not, however, rely on that, but
what I say is this, that where an agent entering into a contract on
behalf of his principal, and without the knowledge or assent of
that principal, receives money from the person with whom he is
dealing, he is doing a wrongful act, he is misconducting himself as
regards his agency, and, in my opinion, that gives to his employer,
whether a company or an individual, and whether the agent be a
servant, or a managing director, power and authority to dismiss
him from his employment as a person who by that act is shewn to
be incompetent of faithfully discharging his duty to his principal. It
was said by Mr. Justice Kekewich that this was an isolated
transaction, and, therefore, in his opinion, it did not give legal
authority or power to the company to dismiss him. But I cannot

24
accede to that view. As far as we know it may have been an
isolated transaction, but if we find at the very beginning of the
employment that this agent, whose duty it was not to receive
anything from the persons with whom he was dealing, did in fact
do so, and in fact kept the receipt secret for months after the
money was received, I am not satisfied that he did not do other
things equally inconsistent with his duty to his principals; and in
my opinion the discovery of that fact - even if it was an isolated
transaction, shewing that he would put himself in a position not
faithfully to discharge his duty, that he would put himself in a
position to regard the interest of someone else rather than that of
his employer - did justify his employers in discharging him from
the office which he held.

The same sentiment has been shared by the Industrial Court as to the basis of

the conflict of interest of the employer and objective of conflict of interest rules.

In Cellular Communications Network (M) Sdn. Bhd. v. Johari Tahar [2001] 1

ILR 387 the Industrial Court Chairman had this to say :

The court finds that the concerns expressed by the company's


witnesses though awkwardly and ineptly put are perfectly valid
and legitimate in the context of identifying conflict of interests
situations. The underlying object of conflict of interest rules and
the obligations of good faith and fidelity implied by law is the
avoidance of conflicts which will or may arise, between an

25
employee's and his employer's interests. Such actual or potential
conflicts of interest may be direct or indirect.

Upon perusing Johari Tahar's case, it is clear that the fact of that case suit the

finding by Industrial Court that the Claimant had committed a breach of

company's code of conduct with regard to the activities in conflict with his

employment. The learned chairman in Johari's case summarize the fact of the

case at page 396 as follows :

JTV is the authorised representative of Mega TV. Mega TV is a


corporate client of the company. Two other companies were also
appointed as Mega TV's representatives for providing such
services. The company had dealings with Mega TV who is one of
its corporate clients although not with JTV. As manager of
technical support of the company and at the same time being a
director as well as a substantial shareholder of JTV which is the
authorised representative of Mega TV, the claimant has put
himself in a potential conflict of interest situation. The claimant
owes duties and obligations of good faith and fidelity to the
company. Likewise, JTV is beholden vide art. 14.1 of its
agreement with Mega TV to "act loyally and faithfully in the pursuit
of the parties' (JTV's and Mega TV's) common objectives". The
same article goes on to stipulate that "in the absence of any such
orders or instructions from CVS (Mega TV) JTV must act in such

26
manner as it reasonably considers to be most beneficial to CVS'
(Mega TV's) interests" (CLB-B13). Quite plainly, the claimant will
find himself put in some difficulty when he is placed in position
where he, in the capacity of director of JTV, has to choose
between serving the interests of Mega TV and those of the
company in a manner consistent with his concurrent duties of
good faith and fidelity owed to both the company and Mega TV.

There is also another aspect of this matter to be considered.


JTV's only business was installing Mega TV at subscribers'
premises and maintenance work after installation for which JTV
will be paid by Mega TV. A conflict of interest situation can also
arise when the claimant in his capacity as technical support
manager has to handle matters arising between the company and
Mega TV in the course of their business relationship, in particular
when the same impacted on the interests of JTV. Although the
company's witnesses concede that no situation has yet arisen
where the claimant has used his position to specially favour Mega
TV, the claimant is in the position to do so. This potential conflict
is sharpened when one considers that JTV's pecuniary interests
and business were wholly dependent upon Mega TV.
Furthermore, JTV does not have an exclusive appointment as
representative of Mega TV but is one out of three such
appointments thus giving leverage to Mega TV which it may
choose to exercise upon the claimant.

27
Furthermore, in Shell (M) Trading Sdn. Bhd. v. Tuan Syed Azauddin B. Syed

Bahaldin Al Jumlud [1994] 2 ILR 956 the issue of conflict of interest was

raised. The matrix facts of that case clearly show that there was a conflict of

interest of the Claimant. The Industrial Court had ruled that the failure of the

Claimant to declare the conflict of interest was a gross misconduct which

justified his dismissal by the Company. In this case, the facts of the case which

suggested that there was a conflict of interest situation were as follows :

5. Family Interests

Employees whose families have interests (whether this be in the


form of directorships, partnerships, shareholdings or through
agencies) in entities, which are on the Company's list of
authorised contractors or which have contractual or supply
arrangements with the Company, and who are involved in any
decisions regarding or dealings (whether directly or indirectly) with
such entities in the course of their duties with the Company,
should inform the managing director/chairman in writing of such
interests prior to entering into any such decision/dealings. The
managing director/chairman will then consult with the employee
concerned as to the best possible way to prevent a conflict of
interest.

It is clear from the above provisions especially under Clauses 4.2


and 5 that it was imperative that the Claimant declare his mother-

28
in-law's interest in the said Jas-Cus. COW1 had confirmed in
Court, and this had been admitted by the Claimant at the inquiry,
that he had never made a declaration of his mother-in-laws
interest in the said Jas-Cus, in the standard form as required by
the Company. In fact appendix SMT2 dated 30 June 1981 is the
only declaration ever made by him where he had written "NIL"
under the heading "Family Interest". It is also in evidence that he
had approved Jas-Cus as an authorised contractor of the
Company. Having failed to declare this state of affairs to the
Company, in the light of the surrounding circumstances it is my
considered opinion that the Claimant had committed a breach of
the Company's policy on conflict of interest by the non-disclosure
of his mother-in-law's interest in Jas-Cus.

Whereas, in Malaysia Shipyard Engineering Sdn. Bhd., Johor v. Ismail bin

Wanjor [1993] 2 ILR 258 the failure of the Claimant to declare to the

management that his close family's business were given jobs in the company

which place himself in the position where his personal interest came into conflict

with the interest of the Company was held as just cause and excuse for the

company to dismiss the Claimant.

In short, it is the facts of the case that determine whether there is a conflict of

interest which entitled the employer to dismiss its employee. It is not a general

29
principal for the court to accept the dismissal of an employee mainly due to the

fact that the employee fails to declare his interest to his employer. The basis for

the employee to declare his conflict of interest to the Company and its

connection with his position in the Company was explained by the Canada

Supreme Court in Bank of Montreal v. Philippe Kuet Leong Ng [1989] 2

R.C.S. 429 as follows :

Les obligations des administrateurs et des cadres suprieurs leur


sont imposes non parce qu'ils sont de vritables mandataires de
leur socit ou des actionnaires, mais en raison de la nature du
contrle qu'ils exercent sur les affaires de la socit. Ce contrle
ressemble bien des gards au contrle que peut exercer le
mandataire sur les affaires de son mandant, et ainsi donc les
responsabilits et les obligations imposes aux cadres suprieurs
correspondent celles que le Code civil prescrit dans le cas des
mandataires.

cet gard, on a considr que les principes du droit civil ne


diffraient pas de ceux de la common law: N.F.B.C. National
Financial Brokerage Center Inc. v. Investors Syndicate Ltd., [1986]
R.D.J. 164 (C.A.),Resfab Manufacturier de Ressort Inc. v.
Archambault, [1986] R.D.J. 32 (C.A.) L'obligation de fiduciaire que
lacommon law reconnat dans ces circonstances trouve son
quivalent en droit civil dans la bonne foi et la loyaut que doit
tmoigner l'employ son employeur, et dans les efforts qu'il doit

30
dployer pour viter les conflits d'intrts, notamment pour viter
de rechercher des avantages incompatibles avec les conditions de
son emploi. L'incompatibilit et les conflits en question s'apprcient
en fonction des conditions d'emploi et des autres rapports qui
existent entre les parties.

Which was translated into English as follows :

The obligations of directors and senior officers are imposed upon


them not because they are true mandataries of their corporation or
of the shareholders, but because of the nature of the control they
exercise over the affairs of the corporation. This control resembles
in many aspects the control a mandatary may have over the affairs
of his mandator, and thus the responsibilities and obligations
imposed on senior officers and directors correspond to those fixed
by the Civil Code for mandataries.

In this, the principles of civil law have been found no different


from those of the common law: N.F.B.C. National Financial
Brokerage Center Inc. v. Investors Syndicate Ltd., [1986] R.D.J.
164 (C.A.), Resfab Manufacturier de Ressort Inc. v. Archambault,
[1986] R.D.J. 32 (C.A.) The fiduciary obligation recognized in these
circumstances in the common law translates in the civil law into
terms of good faith and loyalty of the employee to the employer and
the avoidance of conflict of interest including seeking an advantage
which is incompatible with the terms of employment. Such

31
incompatibility and conflict must be measured by the terms of the
employment or other relationship between the parties.

Therefore, the court must recognize the duty of an employee to declare his

conflict of interest to the Company. The failure of this court to accept the duty of

the employee to do so will encourage the employee to conceal their conflict of

interest from the Company. This may prejudice the interest of the employer.

Furthermore, it will go against the duty of the employee to be faithful to his

employer.

In this case, the requirement for the Respondent's employees to declare their

conflict of interest is stated in Article 18 and 19 of Code of Conduct. The

Claimant did not deny that he failed to declare his interest in PN Recruitment

Sdn. Bhd. and his relation with Miss Pang. This is the indisputable facts before

the Court. It is beyond a shadow of doubt that the Claimant failure to declare his

interest to the Company is against Article 18 and 19 of the Code of Conduct.

21. However, the Court must also take into account the Claimant's evidence

as to the reason of his failure to declare. He claimed that he did inform his

relationship with Miss Pang to COW1. There was no written declaration by the

Claimant to the Company because COW1 relationship with Claimant was so

32
close since secondary school. Therefore, it is sufficient for the Claimant to

inform his relationship with Miss Pang to COW1 verbally.

However, the Code of Conduct of the Company required a written declaration of

its employees interest. This is crystal clear in Article 19.1 as follows :

Employees are required to


Avoid conflicts of interest if possible and avoid creating
conflicts for others.
- Disclose in writing to their superior of HOD any perceived or
actual conflict of interest as soon they become aware that is
or where there may be a potential conflict. Where there is a
conflict and the means being used to manage it.

Based on the evidence adduced before this court it is without any doubt that the

failure of the Claimant to declare his relationship with Miss Pang to the

Company is against Article 19.1 of the Company's Code of Conduct.

Generally, the purpose of disclosure is to ensure that the employer is informed

about the nature and extent or the conflict of interest of his employee. The

employee has a moral duty to disclose his interest. Concealing a conflict of

interest from his employer is way of misleading or deceiving the employer and

33
may cause harm to third party. Ethically, the Claimant who is at risk of finding

himself in a conflict of interest must take the matter seriously because of its

implications and have non-trivial consequences for the employer.

Therefore, the Court must consider the issue of conflict of interest between the

employer and the employee seriously. If the Court fails to do so, it will open a

floodgate for the employee choose not to declare their interest to the employer

and it will prejudice the employer.

Later, when the employer find out that his employee fails to notify the interest to

the employer, it may create a disharmonious relation between them. But, in this

case the Court has to bear in mind the difference between mere non-compliance

of Article 18 and 19 and the reason for that non-compliance stated by the

Claimant. Who should decide whether the Claimant must declare his interest or

otherwise? Article 19 gives some example of conflict of interest which requires

the employee to make decision. The Company is not in the position to know

whether the Claimant had any conflict of interest to be declared to the Company.

According to the Claimant he is not oblige to declare his position in PN

Recruitment Sdn. Bhd. because the Company has no business dealing with PN

34
Recruitment Sdn. Bhd. So, there is no conflict of interest involving the Claimant.

Furthermore, the evidence also shown that Claimant had relationship with Miss

Pang prior to the appointment of PN Recruitment Sdn. Bhd. to handle

Respondent's foreign workers permits. Eventhough COW1 in his evidence

confirmed that there was no other company appointed by the Respondent to

handle foreign workers before. Nevertheless, COW1 also testified that the PN

Recruitment Sdn. Bhd. handling of company foreign workers was proper and did

not cause any financial loss to Respondent.

22. It is crystal clear from the evidence of the Claimant that he believes he is

not obliged to declare his interest to the Company. On the other hand, the

Company claimed that the Claimant had failed to comply with Company's Code

of Conduct. It is also the Company's submission that the Claimant has not tell

the truth as to his relationship with Miss Pang during the domestic inquiry and

his answers to the company's show cause letter.

In his letter to the Company on 6th April 2014 as per page 26 COB1, the

Claimant said that he had no interest in PN Recruitment & Services as per

allegation one (1). He also clarified his relationship with Pang Siew Yen in the

35
domestic inquiry by saying this at page 33 of COB1.

Q4: Can you explain your relationship with Pang Siew Yen?
A4: Friendship. There is rumours she is my mistress.

During the cross-examination in this hearing, the Respondent's Counsel was

able to establish the intimate relationship between the Claimant and Pang Siew

Yen. The learned counsel argued that the Claimant evidence are unreliable.

Therefore, all his statement regarding his relationship with Pang Siew Yen prior

to the evidence in Court exemplified that he is not telling the truth during the

domestic inquiry.

23. It is the Court considered view that this hearing focus on whether the

Claimant dismissal is with just cause and excuse. It is not a trial of Claimant's

morality as to his relationship with Pang Siew Yen. Instead, the main issue is

whether the failure of the Claimant to declare his interest to the Company is

tantamount to misconduct which warrant his dismissal.

24. It is indisputable fact that the Claimant failed to declare his interest in PN

Recruitment & Services and PN Recruitment Sdn. Bhd. The Company's learned

counsel in his written submission explained the corporate position and

36
responsibilities of the Respondent as a public listed company on the main Board

of Bursa Malaysia. He submitted as follows :-

1.3 As such, the Company's funds/capitals are raised from the


general public who in turn holds the shares of the Company.

1.4 That being the case, the Company is bound to adhere to the
strict rules and regulations imposed by the Securities
Commission Malaysia in the proper management and
operations of the Company.

1.5 The Company is also strictly audited by internal and


external auditors to avoid any mismanagement and
discrepancies in the operations of the Company.

1.6 Therefore, an impeccable conduct and a high degree of


professionalism and also trustworthiness are expected of
the Company's employees, in particular the employees in
the higher management bracket, in order to safeguard the
investment of the general public and ensure the compliance
by the Company of the rules and regulations imposed by the
relevant authorities, in order for the Company to continue its
operations, without being jeopardised by any unnecessary
impediments.

37
Furthermore, the Company's learned counsel submitted that the Claimant is

therefore subjected to higher degree of accountability to the Company.

Therefore, the failure of the Claimant to declare his conflict of interest to the

Company is essential and cannot be taken likely.

25. Even though, the Company is unable to show actual loss suffered by the

Company due to the Claimant failure to declare his interest, it will not prejudice

the Company case. But the Claimant's counsel referred to Malaysian Oxygen

Berhad v. Soh Tong Wah & Mahkamah Perusahaan Malaysia [2011] 1 LNS

790 which suggest that for there to be a conflict of interest, the employee

concerned must have gained financially in his personal capacity or obtained

substantial advantage. The learned claimant's counsel quoted in extensio the

learned judge views on this issue as follows :

[59] In the celebrated book entitled "Misconduct in Employment "

2nd Edition by B.R. Ghaiye, the Learned author quoting from


various authorities wrote as follows at page 658 of the book:

"The nature of interest which an employee is required to disclose


will include interest of his close relations, ie, son, wife, etc. In this
connection the Madras High Court was pleased to observe as
under:

38
"What then is the nature of the interest of which the law will
compel disclosure - In Costa Rica Rly. Co. Ltd. v. Forwood, the
general principle - may generally be summed up in the rule of
equity that the interest which a director of a company -is bound to
disclose is any interest which conflicts with his duty to the
Company. In Narman v. Municipal Corporation of Bombay, it has
been held that interest-shall not be merely parental interest which
a father may take in his son's welfare but the interest must
involve some reasonable expectation of pecuniary advantage
or must at least material that is, presumably bringing some
substantial advantage to the party..." (emphasis is added)

[60] The position in Malaysia is not different. In Halsbury's Laws


of Malaysia (2007 reissue) - Volume 8, the Learned Authors wrote
as follows on the subject at page 112 of the book:

"An employee must not make secret profits; and, if he is found


doing so, he may be made to account to the employer for them
and must not place himself in a position where his interest
conflicts with his duties".

[61] One of the authorities quoted by Halsbury's Laws of


Malaysia in the footnote is the Industrial Court case of MBf
Management Sdn. Bhd. v. Huong Hai Kuong [1995] 2 ILR 871. In
that case the Learned Chairman decided at page 882 of the
report as follows:

"In the instant case it is abundantly clear that the Claimant had

39
made profits by the siphoning off, of money from the Company's
transaction with Verifone to his own Company V-fone.... in breach
of his fiduciary duty to the Company, he made this profits for
himself and went to extremely elaborate lengths to conceal the
profits".

[62] It can be deduced from the above cited authorities that for
there to be a conflict of interest, the employee concerned must
have gain financially in his personal capacity or obtained
substantial advantage. However, on the facts of this instant case,
there was no evidence whatsoever adduced by the Employer
before the Industrial Court that the Employee had gained
financially or obtained material advantage to himself when
introducing his cousin to Chou Tai Long and not disclosing that
fact to his employer nor the fact that the employee's brother was
employed by Just Brilliant Sdn. Bhd.

[63] Although the Industrial Court found the Employee to have


placed himself in a conflict of interest situation, there was no
evidence of the Employee gaining financially in the circumstances
or obtaining material advantage to himself.

The decision of High Court in Malaysian Oxygen Bhd v. Soh Tong Wah and

another appeal [2011] 1 LNS 790 was confirmed by the Court of Appeal in

Malaysian Oxygen Bhd. v. Soh Tong Wah [2015] 3 MLJ 730 where the Court

40
of Appeal held as follows :

[25] A finding on a secondary fact involves a conclusion drawn


from the evidence. A finding of a primary fact involves a
conclusion drawn from other facts. Likewise the decision at the
end of a case is a conclusion drawn from the application of law to
the facts. Conclusions themselves are drawn by a process of
reasoning. This is no different in judicial review as from an appeal.
The test applied however differs. In an appeal, the test is for
intervention is governed by s. 72 of the Courts of Judicature Act
1964 (Act 91), that no judgment or order of the High Court, or of
any judge, shall be reversed or substantially varied on appeal, nor
a new trial ordered by the Court of Appeal, on account of any
error, defect, or irregularity, whether in the decision or otherwise
not affecting the merits or the jurisdiction of the court. Whereas in
judicial review, it is whether there was abuse of the power or
unfair treatment by the Industrial Court for example illegality,
procedural impropriety, unreasonableness or possibly
proportionality.

[26] The grounds of judgment of the High Court and the record of
appeal by the appellant before this court, demonstrate that the
High Court addressed the law at some length to guide it and
conducted a thorough scrutiny of the findings of fact and the
reasoning by the Industrial Court in arriving at its award, before
making its own decision to dismiss the appellant's application for
judicial review. The Industrial Court is set up for the purposes of

41
Act 177, an Act to promote and maintain industrial harmony and to

provide for the regulation of the relations between employers and


workmen and their trade unions and the prevention and
settlement of any differences or disputes arising from their
relationship and generally to deal with trade disputes and matters
arising therefrom. This court finds nothing in the nature of
illegality, irrationality or procedural impropriety in the assessment
of the appellant's case by the Industrial Court. Summed up in one
sentence, the appellant's case in its application for judicial review
and in this appeal is that it disagrees with the Industrial Court that
the breach was insufficient to justify dismissal. Disagreement is
no basis for judicial review.

26. In order to understand the learned High Court judge findings on this issue,

it is useful for the Court to look into the Award of the Industrial Court in Soh

Tong Hwa v. Malaysian Oxygen Berhad [2008] 2 LNS 0469. In that case,

there were eight (8) charges against the Claimant which were as follows :

"Charge 1

That you, as General manager - PGS, a senior member of the top


management team, have without the knowledge of or declaration
to the Company, formed a company called Empire Gallery Sdn
Bhd with your wife, Mdm Kong Foong Ming, which act is in conflict
with the expressed requirements that you have to devote your

42
whole time and attention to the service of the Company and not
(without the Company's written consent) to engage or become
interested in any other gainful trade or business.

Charge 2

That you, as General Manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that your wife, Mdm
Kong Foong Ming, is a cheque signatory for Corporate
Commander Sdn Bhd which holds a 40% share-holding in
Kelington Engineering Sdn Bhd, a supplier and engineering
contractor to our Company that was awarded substantial
contracts in the years 2001 and 2002 by our Company, which act
tantamounts to a breach of your fiduciary duty to the Company
and a conflict of interest.

Charge 3

That you, as General Manger - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that Wong Kong Meng,
the company secretary to your company, Empire Gallery Sdn Bhd
is a shareholder, director and company secretary of Proline
Management Services Sdn Bhd and Proline Tax Management
Sdn Bhd, which your company uses their services is also a

43
shareholder (directly or indirectly), director and company
secretary of Kelington Engineering Sdn Bhd, that was awarded
substantial contracts in the years 2001 and 2002 by our
Company, which act tantamounts to a breach of your fiduciary
duty to the Company and a conflict of interest.

Charge 4

That you, as General manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that Wong Kong Meng,
the company secretary to your company, Empire Gallery Sdn Bhd
is a shareholder, director and company secretary of Corporate
Commander Sdn Bhd and Palace Star Sdn Bhd, which are
shareholders of Kelington Engineering Sdn Bhd, that was
awarded substantial contracts in the years 2001 and 2002 by our
Company, which act tantamount to a reach of your fiduciary duty
to the Company and a conflict of interest.

Charge 5

That you, as General Manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that Wong Kong Meng,
the company secretary to your company, Empire Gallery Sdn Bhd
is the company secretary of R G Enterprise, which is a

44
shareholder of Kelington Engineering Sdn Bhd, that was awarded
substantial contracts in the years 2001 and 2002 by our
Company, which act tantamounts to a breach of your fiduciary
duty to the Company and a conflict of interest.

Charge 6

That you, as General Manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that Wong Kong Meng,
the company secretary to your company, Empire Gallery Sdn Bhd
is the company secretary of Just Brilliant Sdn Bhd, that was
awarded substantial purchases in the years 2001 and 2002 by the
Company, which act tantamounts to a breach of your fiduciary
duty to the Company and a conflict of interest.

Charge 7

That you, as General Manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that your cousin, Sow
Chin Tiam, was employed by a supplier to our Company, Just
Brilliant Sdn Bhd, in February 1999 and currently is its manager,
which company became a supplier to our Company in June 1999
and was awarded substantial purchases in the years 2001 and
2002 by our Company, which act tantamounts to a breach of your

45
fiduciary duty to the Company and a conflict of interest.

Charge 8

That you, as General Manager - PGS, a senior member of the top


management team, with duties and responsibilities including
procurement and award of tenders, contracts or purchases, have
failed to inform or declare to the Company that your brother, Soh
Chin Leh, has joined the employment of a supplier to our
Company, Just Brilliant Sdn Bhd, in January 2003 that was
awarded substantial purchases in the years 2001 and 2002 by our
Company, which act tantamounts to a breach of your fiduciary
duty to the Company and a conflict of interest".

The learned Chairman held that the Company failed to prove that the Claimant

were guilty of second, third, forth, fifth and sixth charges. But, held that the

Company on balance of probabilities had proven that the Claimant was guilty for

failing to disclose his cousin was a manager of Just Brilliant Sdn. Bhd. and his

brother was an employee of the said Company. Therefore, the decision of the

High Court as regard to the failure of the employer to adduce evidence that the

employee gaining financially was in the context of seventh and eighth charges.

So, it is inaccurate to say that by mere fact that the employer unable to adduce

evidence of the employee financial gain for not declaring his conflict of interest

46
will automatically caused the employer case to fail. It is pertinently important for

the Court to examine peculiar facts in this case before come into conclusion

whether the Claimant was dismissed with just cause and excuse or otherwise.

The Court must take into consideration these factors in deciding whether the

failure of the employee to declare his conflict of interest to the Company is a

misconduct :

a) Is it a duty of the employee to serve the employer faithfully;

b) Is it a duty of the employee to disclose his interest to the


employer;

c) Is it reasonable for the employee to be expected by the


employer to declare his conflict of interest to the Company?;
and

d) Is it reasonable to expect a reasonable employee to


declare his interest to the employer?

It is a question of fact based on evidence adduce during the trial. The Court

must apply a reasonable employer and employee test in determining whether it

is reasonable for the employee to declare his interest to his employer. At the

same time, the Court must also determine whether as a reasonable employer, is

that reasonable for the employer to expect his employee to declare his interest

47
to the Company. In other words, the Court must take into consideration the

interest of the employer and employee in deciding whether it is reasonable for

the employee to declare his interest to the employer. It is due to the fact that

there are some interests that is not reasonable to expect the employee to

declare interest to the company because there is no relationship between the

interest of the Company and his personal interest. Even though, the employer

may want his employee to declare that interest but the facts and circumstances

of the case may not be reasonable for the employee to do so. There also

scenario whereby the employee may refuse to declare his interest to the

Company even though, as a reasonable employer, he would want to know his

employee interest with the Company because it will affect the Company dealings

with third party or will prejudice the interest of the Company. In short, that is the

question of facts and related to the principal of the reasonableness.

27. For completeness, the Court, in deciding whether a dismissal of the

employee by the Company is with just cause or excuse on the failure of

employee to declare his interest to the Company, must also take into

consideration these factors :

48
a) The position of the claimant in the company;
b) Is there any prejudice to the company?;
c) Did the Claimant gain any financial benefit for his failure to
declare his interest?;
d) Did the Company suffer any loss as a result of the
employee failure to declare his interest?; and
e) The Court must recognize that faithful and trust is essential
to the employer and employee relationship.

Finding

28. As to the first charge, the evidence shows that the Claimant knew one

Miss Pang Siew Yen prior the appointment of PN Recruitment to handle foreign

workers on behalf of the company. The Claimant admitted he recommended PN

Recruitment to handle the Company's foreign workers because he knew the

sole proprietor of the Company Pang Siew Yen. The Company produced

Claimant's handphone calls record marked as COB2. This record shows that the

Claimant knows Pang Siew Yen prior to the decision of the Company to appoint

PN Recruitment to handle foreign workers for the company. Is there any

evidence to suggest that the Claimant had financially gain for recommending PN

Recruitment to handle Respondent's foreign workers? No doubt, by engaging

PN Recruitment Sdn. Bhd., the Respondent will have to pay to PN Recruitment

for their service rendered to the Company. As the sole proprietor, Pang Siew Yen

49
will have a financial gain from this business dealing. But, is there any evidence

to show that the Claimant had any financial gain from that transaction? There

was no iota of evidence before this court to support that proposition.

Nevertheless, the Company alleged that the Claimant failure to declare his

relationship with Pang Siew Yen had in fact affected his decision and action in

approving payment on various remittance vouchers to PN Recruitment &

Services. COW1 admitted he signed those vouchers for payment but he only did

so after the Claimant verified on those vouchers. The evidence suggest that PN

Recruitment had done the work assigned to them by the Company. There is no

evidence to show that the PN Recruitment has failed to complete any work

assigned to them before the payment was made by the Company.

Therefore, on balance of probabilities the Company has failed to prove that the

Claimant's failure to declare his relationship with Pang Siew Yen giving rise a

conflict of interest situation which affecting his decision and action in performing

his function as the Chief Operation Officer of the Company. The Company is

unable to prove that the Claimant's action had prejudice the interest of the

Company or cause them financial loss.

50
29. As to second allegation, the Court satisfied that the Respondent has failed

to prove on balance of probabilities that the Claimant has any involvement in

appointing his sister-in-law as the Director of PN Recruitment Sdn. Bhd.

Therefore, there is no issue of conflict of interest which requires the Claimant to

declare it to the Company. As to the third allegation, the Court found there is no

evidence to show the appointment of Claimant as one of the Directors in PN

Recruitment Sdn. Bhd. has any conflict of interest against the Company. It is due

to the fact that PN Recruitment Sdn. Bhd. has no business dealing with the

Company. Furthermore, PN Recruitment nature of business is not similar with

the Company. So, the involvement of Claimant in PN Recruitment Sdn. Bhd. did

not caused any prejudice to the Company. It will be totally different if PN

Recruitment Sdn. Bhd. involves in the same industry with the Company which

clearly will create a conflict of interest on the Claimant.

30. Finally but not least, the fourth allegation had nothing to do with the

Company. This is a private arrangement between the Claimant and Pang Siew

Yen to buy a property as a co-owner. There is no evidence to substantiate that

such arrangement will prejudice the Company and caused conflict of interest of

the Claimant with the Company. It is the Court considered view that on balance

probabilities the Respondent has failed to prove allegation number one (1), two

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(2), three (3) and four (4). Therefore, the Court found that the dismissal of the

Claimant is without just cause and excuse.

Remedy

31. The Claimant commenced employment with the Company since

01.10.1994. His last position with the Company was Chief Operation Officer. The

Claimant was terminated by the Company on 06.05.2014. His last drawn salary

was RM50,000.00 per month as per page 17 of CLB1 which was the notice of

salary increment for Claimant. The basic salary was clearly stated as

RM50,000.00 per month. The Court will rely on this notice of increment in

determining the basic salary because there is no other evidence as to the basic

salary of the Claimant. The Court found that it is not suitable for the Claimant to

be reinstated to his former position with the Company. It will create disharmony

to the Company because the Claimant was the Chief Operation Officer. By

reinstating Claimant as the Chief Operation Officer of the Company will not give

any benefit to the Company as well as to the Claimant. Therefore, the

appropriate remedy for this case is back wages and compensation in lieu of

reinstatement.

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The Claimant in this evidence which has not been rebutted by the Company

stated that he is still unemployed after the termination. Therefore, the amount of

back wages and compensation in lieu of reinstatement are as follows :

a) back wages

RM50,000.00 x 17 = RM850,000.00

b) compensation in lieu of reinstatement

RM50,000.00 x 19 = RM950,000.00

Total remedy is RM1,800,000.00.

The payment shall be made within 60 days from the date of this Award.

HANDED DOWN AND DATED THIS 28th SEPTEMBER 2015.

t.t.

( ROSLAN BIN MAT NOR )


CHAIRMAN
INDUSTRIAL COURT OF MALAYSIA
JOHOR

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