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HIGH COURT SABAH & SARAWAK KOTA KINABALU
CHIEW YEN LEONG – Appellant
Versus
AUTOMATA SYSTEMS SDN BHD & ANOR – Respondent
Key Points: - The court requires substantial evidence and visible signs of unfairness or disregard for minority interests to establish oppression under section 346. (!) - Mere disagreements with the majority do not amount to oppression; there must be clear evidence of oppression or unfair conduct affecting minority interests. (!) (!) - The plaintiff, a 35% minority shareholder, failed to prove oppressive conduct by the 2nd Defendant; the action was dismissed and costs awarded. (!) (!) - The court outlines potential remedies under section 346, including directions, regulation of future conduct, purchase of shares, capital reduction, or winding up. (!) (!) (!) (!) (!) - The standard of fairness in this context is objective and must be grounded in the conduct against the minority shareholder’s interests, considering the articles of association and fiduciary duties. (!) (!) (!) - There must be factual basis to show that the majority shareholder’s conduct was oppressive or unfairly prejudicial to the plaintiff’s interests as a member. (!) (!) - The court emphasizes that mismanagement alone does not automatically constitute oppression; facts must show a departure from fair dealing. (!) (!)
JUDGMENT
Introduction
[1] The Plaintiff is a minority shareholder holding 35% of the shares in Automata Systems Sdn. Bhd., the 1st Defendant (hereinafter called "the Company"). The 2nd Defendant is the majority shareholder holding 65% of the shares in the Company.
[2] The Plaintiff alleged that the affairs of the company are being conducted and the powers of the director is being exercised in a manner oppressive to the Plaintiff and in disregard to the Plaintiff's interest. By this Originating Summons, the Plaintiff claimed various reliefs under s 346 of the Companies Act, 2016 .
Brief Background
[3] The Company was incorporated on 10 January 2013. Initially, the Plaintiff and the 2nd Defendant held equal shares therein.
[4] After its incorporation, the Company first set out its business of an internet cafe at Lintas Plaza, Kota Kinabalu.
[5] It seems that the Companies relied mainly on the overdraft facilities secured by the 2nd Defendant for its funds to set up its business and for its operations.
[6] Subsequently, the 2nd Defendant became the majority shareholder holding 65% of the shares in the Companies and whereas the Plaintiff became the minority shareholder hold
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