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2022 MarsdenLR 125
HIGH COURT MALAYA KUALA LUMPUR
GREAT PARTNERS INDUSTRIES LTD & ORS – Appellant
Versus
KEE HIN VENTURES SDN BHD – Respondent
[Suit No: WA-22NCC-630-11/2019]
Shareholders have no unconditional right to dividends; entitlement to dividends confirmed under arbitration award.
Headnote:(A) Companies Act – Shareholders' Rights – Limitation Act 1953 – Claim for dividends declared – Plaintiffs entitled to dividends for 2013 to 2016; Second Head of Claim for dividends for 2008 to 2012 and 2017 dismissed – Lien claimed by defendant invalidated due to dismissal of related claim – Interest of 8% per annum imposed on outstanding dividends. (Paras 1, 2, 3, 6, 15, 22, 48, 54)
(B) Company Obligations – The court finds no obligation on a company to declare dividends to its shareholders unless a proper legal basis exists for such a claim. (Paras 51, 52)
Facts of the case: Plaintiffs sought dividends declared by the defendant for 2013-2016 and distribution for 2008-2012 and 2017; the court found plaintiffs entitled to dividends based on shareholding and an arbitration award, while the defendant asserted it had a lien over such dividends due to a debt.
Findings of Court: The court affirmed the plaintiffs' entitlement to dividends for 2013-2016, underpinned by prior arbitration and related documents; the claim for 2008-2012 and 2017 was dismissed.
Issues: 1) Whether plaintiffs were entitled to dividends for 2013-2016; 2) Whether claim for the 2013 Dividend is time-barred; 3) Whether the defendant is obligated to declare dividends for 2008-2012 and 2017.
Ratio Decidendi: Quantum of entitlement established through arbitration ruling, while lien claimed by the defendant was invalid post a related claim's dismissal. Court maintains shareholders do not have an unconditional right to dividends.
Result: First Head of Claim allowed; Second Head of Claim dismissed.
A. Introduction
[1] The plaintiffs filed this claim for dividends they alleged to be payable to them. There are two parts to this claim:
a. On the first part, the plaintiffs claimed the apportionment of the dividends declared by the defendant for 2013 to 2016 ("First Head of Claim").
b. On the second part, the plaintiffs sought the declaration and distribution of dividends by the defendant, for 2008 to 2012 and 2017 ("Second Head of Claim").
[2] I allowed the First Head of Claim, and dismissed the Second Head of Claim.
[3] The First Head of Claim was allowed, as I found that the plaintiffs were entitled to the dividends declared, being shareholders of the defendant. Further, by way of an arbitration award dated 11 October 2016 ("Award"), the arbitral tribunal ordered dividends to be paid to the plaintiffs.
[4] I dismissed the Second Head of Claim as I found there to be no obligation on the defendant to declare dividends. This is a matter for the internal management of the defendant, which this court should be slow to interfere with.
B. Facts
The Parties
[5] The defendant is an investment holding company with substantial shareholding in Khind Holdings Berhad ("Khind"), a public listed company. These shares are the only assets of the defendant.
[6] The current shareholders of the defendant are Cheng Ping Keat ("CPK"), Cheng King Fa ("CKF") and the plaintiffs.
[7] CPK and CKF are the directors and majority shareholders of the defendant. They collectively hold 51% of the share of the defendant. The plaintiffs collectively hold 49% of the shares of the defendant.
[8] The relationship between the defendant's shareholders is governed by a shareholders' agreement dated 5 July 2003.
[9] It is important to set out the background of the relationship between the parties, to fully understand the dispute between them. The shares of the defendant were initially wholly owned by the Cheng family, namely CPK, CKF and Dato' Cheng Hup ("CH"). CH held 50% of the shares of the defendant, while CPK and CKF held the remaining 50%.
[10] On 5 July 2003, CH sold off his entire shareholding in the defendant to CPK, CKF and the plaintiffs. CPK and CKF acquired 1% of the shares for RM2,000,000.
[11] The plaintiffs acquired 49% of the shares for RM13,500,000. It is not in dispute that the defendant obtained a loan of RM5,000,000 from Ambank (M) Berhad to part-finance the plaintiffs' acquisition of the shares ("Financial Assistance"). The shares in Khind were pledged as security for the loan ("Khind Shares"). There was a default in the repayment of the loan and Ambank took steps to realise its security, and sold off the Khind Shares.
The Arbitration Award
[12] Disputes arose between the parties, which led to CPK and CKF commencing arbitration proceedings against the plaintiffs. CPK and CKF sought, inter alia, the following against the plaintiffs:
a. For the plaintiffs to buy back the Khind Shares that had been forced-sold by Ambank;
b. For the enforcement of a put option under the shareholders' agreement, which would enable CPK and CKF to own 100% of the shares of the defendant; and
c. For the forfeiture of the plaintiffs' entitlement to dividends.
[13] On 11 October 2016, the Award was granted. CPK and CKF's claims were dismissed, and a prayer in the plaintiffs' counterclaim, namely that the plaintiffs are to be paid their dividends, was allowed.
[14] On 25 April 2018, the High court granted an order to register and enforce the Award in the same manner as a judgment or order ("Enforcement Order"). CPK and CKF's application to set aside the Enforcement Order was dismissed.
Declaration Of Dividends
[15] It is undisputed that the defendant declared dividends amounting to RM7,358,891 for 2013 to 2016, and that CPK and CKF were paid their entitlements to the dividends in full. However, the defendant did not pay the plaintiffs. The defendant claimed to have a lien over the plaintiffs' shares and dividends, arising from the debt of RM5,000,000 pursuant to the
