KUALA LUMPUR: The operator of Kelab Darul Ehsan (KDE) has been ordered to pay RM10,000 in legal costs to 30 club members for failing to disclose a separate application to wind up the club's interest scheme.
Shah Alam High Court judicial commissioner Datuk Donald Joseph Franklin ruled that KDE Recreation Berhad's failure to inform the members and the court had caused them to incur unnecessary legal expenses.
He said the company should have disclosed the winding-up proceedings as their outcome could affect the members' lawsuit.
Franklin said parties had a duty to disclose material information that could affect legal proceedings, even in the absence of a specific legal or contractual obligation.
"A basic duty of candour to the court and to the opposing parties arose from the conduct of the litigation itself.
"This duty of candour is independent of any duty under the Scheme documents," he said in grounds of judgment dated Oct 17.
The dispute began on May 21 last year, when 30 KDE members, led by Zaiton Ismail, sued KDE Recreation Berhad, seeking to compel the company to fulfil its obligations in managing the club's recreational and sporting facilities.
They alleged that the company had failed to maintain the facilities properly, allowed large parts of the club to remain closed and had not held general meetings since 2020.
They also claimed the company had failed to establish a committee to represent members and provide clear accounts of the scheme's finances.
However, the company had filed a separate application in April last year to wind up the club's interest scheme, without informing the members.
The application followed the rejection of its winding-up proposal by a majority of members attending an extraordinary general meeting on Dec 23, 2024.
The company only notified the members and the court of the separate proceedings on Sept 30 last year, the same day the High Court granted the winding-up order.
By then, the members had incurred expenses preparing affidavits and written submissions, as well as attending court proceedings.
The winding-up order also rendered their lawsuit, which sought to compel the company to fulfil its obligations under the scheme, practically redundant.
Franklin said the company knew the winding-up application could undermine the lawsuit but had failed to disclose it earlier.
"Its conduct in withholding the suit until Sept 30, 2025, was lacking in the frankness and candour expected of a litigant and was, in the circumstances, unreasonable," he said.
He said the members would have avoided the expenses, or incurred considerably less, had the company disclosed the application earlier.
However, Franklin rejected the members' request for indemnity costs, which are higher legal costs typically awarded in cases involving serious misconduct.
He said there was insufficient evidence to conclude that the company had acted in bad faith or deliberately withheld the information for an improper purpose.
Lawyer Ganesh Magenthiran represented the 30 members, while Chuar Kia Lin and Kelvin Seah appeared for KDE Recreation Berhad.
© New Straits Times Press (M) Bhd