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2024 MarsdenLR 2953
HIGH COURT MALAYA KUALA LUMPUR
TAY KUAN TEA @ TAY SWEE SENG – Appellant
Versus
PHOON YUH JIUN – Respondent
[Suit No: WA-22NCC-761-10/2023]
A director's breach of duty resulting in company losses cannot be claimed personally by a shareholder; such claims must be pursued by the company or through a derivative action.
Headnote:(A) Limitation Act 1953 – Section 6 – Striking out application – The Plaintiff's claim against the Defendant was struck out as it was found to be time-barred, lacking reasonable cause of action, and an abuse of the court process. The Plaintiff failed to provide sufficient evidence to substantiate his claims, which were essentially for the Companies' losses rather than personal losses. (Paras 38, 86)
(B) Corporate Law – Directors' Duties – The court held that the Plaintiff's claims were based on losses incurred by the Companies, which should have been pursued by the Companies themselves or through a derivative action. The Plaintiff's allegations of mismanagement and breach of duty by the Defendant as a director did not establish a personal claim. (Paras 54, 60)
Facts of the case: The Plaintiff, a former director and shareholder of two companies, claimed losses due to the Defendant's alleged mismanagement. The Defendant argued that the claim was time-barred and that the losses were those of the Companies, not the Plaintiff personally.
Findings of Court: The court found that the Plaintiff's claim was time-barred and disclosed no reasonable cause of action, as the losses claimed were identical to the Companies' accumulated losses.
Issues: Whether the Plaintiff's claim was time-barred, whether he had standing to sue personally, and whether the claim disclosed a reasonable cause of action.
Ratio Decidendi: The court ruled that the Plaintiff's action was improperly instituted in his personal capacity, as the losses claimed were those of the Companies, and the claim was thus unsustainable. The Defendant's failure to plead limitation was also a critical factor in the decision. (Paras 38, 54, 86)
Result: The Plaintiff's action was struck out with costs of RM3,000.00.
JUDGMENT
[1] This judgment concerns an application by the Defendant, Phoon Yuh Jiun, to strike out the claim of the Plaintiff, Tay Kuan Tea @ Tay Swee Seng, filed against her in this action. The Plaintiff and the Defendant are former directors and shareholders of two companies in which the Plaintiff claims to have made substantial financial investments. The Plaintiff alleges that due to the Defendant's mismanagement and breaches of duties in her capacity as a director of the Companies, the Plaintiff suffered losses which he now seeks to recover from the Defendant personally. The key issues to be determined in this application are whether the Plaintiff's claim is time-barred by limitation, whether the Plaintiff has the legal standing to bring this action in his personal capacity instead of in the name of the Companies, and whether the Plaintiff's claim discloses a reasonable cause of action or is otherwise frivolous, vexatious, and an abuse of the court process.
Background Facts
[2] The Plaintiff and the Defendant were at all material times the Directors and shareholders of two companies, namely Beutech Sdn Bhd ("Beutech") and Biosinga Sdn Bhd ("Biosinga") (collectively referred to as "the Companies").
[3] Biosinga was established on 31 July 2009. The Plaintiff became a director of Biosinga on 30 December 2010, while the Defendant was appointed as a director on 21 July 2011. Prior to the Defendant's directorship, a person named Ling Tau Chuin was a director alongside the Plaintiff, and Tay Fung Soon worked as a director with the Plaintiff from 21 May 2010.
[4] Beutech was established on 8 October 2009 (formerly known as Lagusto Sdn Bhd). The Plaintiff became a director of Beutech since 8 October 2009, while the Defendant became a director on 14 November 2012. During the same period, Roderick Wong Yew Hoong was a director of Beutech from 14 November 2012 to 1 September 2013, Chew Lih Lune was a director from 8 October 209 to 21 January 2011, and Tay Fung Soon was a director from 21 January 2011 to 14 November 2012.
[5] The Defendant submitted a resignation letter dated 5 February 2013, resigning as a director of both Biosinga and Beutech.
[6] As of 31 October 2014, Beutech had accumulated losses of RM1,361,696.00 while Biosinga had accumulated losses of RM2,334,927.00, as per the Companies' 2014 financial statements. The Plaintiff and the Defendant each owned 1 share in the respective companies.
[7] The Plaintiff's brother, Tay Kuan Choon, held the position of operations manager in the Companies.
[8] On 7 February 2023, the Plaintiff issued a letter of demand to the Defendant for the sum of RM1,848,311.50, representing the Plaintiff's alleged losses in the Companies.
[9] On 23 October 2023, the Plaintiff commenced a legal action against the Defendant in this action. The Plaintiff is claiming for the sum of RM1,848,311.50 from the Defendant as special damages for his alleged losses, along with other damages, interests and costs.
[10] On 22 November 2023, the Defendant filed her Defence to the Plaintiff's claim.
[11] On 4 December 2023, the Plaintiff filed his Reply to the Defendant's Defence.
[12] On 20 December 2023, the Defendant filed an application to strike out the Plaintiff's Writ and Statement of Claim both dated 23 October 2024 pursuant to O 18 r 19(1) of the Rules of 2012 ("ROC 2012") in encl 7.
The Plaintiff's Pleaded Case
[13] The Plaintiff's pleaded case is as follows.
[14] The Plaintiff and the Defendant were at all material times directors and shareholders of Beutech and Biosinga, the Companies.
[15] The Defendant had full control over the business operations of the Companies, including their management, administration, finances, and cash flow.
[16] At the Defendant's request and based on the Defendant's representations, the Plaintiff made financial investments in the Companies amounting to RM680,848.00 in Beutech and RM1,167,463.50 in Biosinga.
[17] The Plaintiff invested in the Companies based on the Def
