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2024 MarsdenLR 1620
HIGH COURT MALAYA PULAU PINANG
GOH CHOON KIM & ORS – Appellant
Versus
NATURAL TRANSFORMS SDN BHD & ORS – Respondent
[Originating Summons No: PA-24NCVC-957-12/2020]
Shareholders' Agreements were found valid as they governed the sale of existing shares, not subscription for new shares, with judicial estoppel preventing inconsistent claims.
Headnote:(A) Contracts – Shareholders' Agreements – Declaration sought for invalidity due to failure of consideration – Plaintiffs argued that agreements required subscription for new shares – Court found agreements governed sale and transfer of existing shares, not subscription – Judicial estoppel applied against Plaintiffs for inconsistent positions in prior litigation – Court dismissed the Originating Summons with costs. (Paras 21, 34, 66)
(B) Construction of Contracts – Principles established in Investor Compensation Scheme Ltd v. West Bromwich Building Society and SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor – Interpretation must consider the matrix of fact and the reasonable man's understanding – Contracts should be interpreted as a whole, not in isolation. (Paras 29, 30)
Facts of the case: The Plaintiffs sought declarations that two Shareholders' Agreements were invalid due to lack of subscription for new shares. The Defendants contended that the agreements were for the sale of existing shares. (Paras 3, 6)
Findings of Court: The court found that the agreements were for the sale and transfer of existing shares, and not for subscription of new shares, dismissing the Plaintiffs' claims. (Paras 66)
Issues: Whether the Shareholders' Agreements were void for want of consideration or performance. (Para 21)
Ratio Decidendi: The court ruled that the agreements were valid as they governed the sale of existing shares, and the Plaintiffs' failure to perform their obligations invalidated their claims. (Paras 34, 66)
Result: Originating Summons dismissed with costs. (Para 67)
JUDGMENT
(Declaration That Contract Is Void And Unenforceable)
Prelusion
[1] The Plaintiffs and the Defendants entered into two sets of agreements. The first set of agreements is the Share Sale Agreement to sell and transfer a batch of existing shares in the subject company, and the corresponding Shareholders Agreement to contractually regulate the relationship between the existing shareholders and the new shareholders.
[2] The second set of agreements is the Share Sale Agreement to sell and transfer another batch of existing shares in the same subject company, and the corresponding Shareholders' Agreement to similarly regulate the relationship between the existing shareholders and the new shareholders.
[3] The issue in dispute between the parties is that both the Shareholders' Agreements provide for the subscription for new shares, which is distinct from a sale and transfer of existing shares. The Plaintiffs filed this Originating Summons (and seven other Originating Summonses like it) to declare the Shareholders' Agreements invalid and unenforceable for "want or failure of consideration or performance", for the reason that there was no subscription exercise for the Defendants to acquire the subject shares.
[4] Should the Shareholders' Agreements be declared void and unenforceable?
Preliminary And Consequential Matters
[5] I will use the following abbreviations for the parties:
(1) this Originating Summons No PA-24NCVC-957-12/2020 is "OS957";
(2) the 1st Plaintiff is "Goh";
(3) the 2nd Plaintiff is "Ong". Ong is Goh's wife;
(4) the 3rd Plaintiff is "GCSeang"; GCSeang is Goh's brother.
(5) the 1st Defendant company is "Natural Transforms";
(6) the 2nd Defendant is "Chan";
(7) the 3rd Defendant is "Chong".
[6] In this OS957, the Plaintiffs pray for these reliefs:
(1) a declaration that the Shareholders' Agreement dated 7 August 2019 between the Plaintiffs as existing shareholders, and Natural Transforms as new shareholder (SHA1), is "invalid or unenforceable for want or failure of consideration or performance";
(2) a declaration that the Shareholders' Agreement dated 7 August 2019 between the Plaintiffs and Natural Transforms as existing shareholders, and Chan and Chong as new shareholders (SHA2), is "invalid or unenforceable for failure of consideration or performance";
(3) an Order that SHA1 and SHA2 be set aside.
[7] The Plaintiffs (Goh and Ong) filed eight Originating Summonses (OSs) relating to eight sets of Shareholders' Agreements. OS957 is one of the eight OSs. OS957 is used as the lead OS to determine the eight OSs because OS957 relates to the shares of the main company: Global Tobacco Manufacturers (International) Sdn Bhd (Global).
[8] All the parties in the eight OSs agree that only one of the eight OSs needs to be heard and determined — OS957 — and that the Judgment in OS957 will correspondingly and respectively bind all the parties in the other seven OSs. In other words, all the parties in the eight OSs (who are respectively represented by the same solicitors and counsel) agree that they will take one Judgment — the Judgment in OS957 — to apply to the other seven OSs too.
[9] The parties agree to this because the terms of the Shareholders' Agreements in all eight OSs are identical, mutatis mutandis. (Mutatis mutandis means: with the necessary changes in pertinent particulars). The rights and obligations of the contracting parties in all the Shareholders' Agreements are the same. Thus the issues arising between the two competing sides are also the same.
[10] As such, this Judgment also applies to the other seven OSs, which are:
(1) OS No PA-24NCVC-950-12/2020 (OS950);
(2) OS No PA-24NCVC-951 -12/2020 (OS951);
(3) OS No PA-24NCVC-952-12/2020 (OS952);
(4) OS No PA-24NCVC-953-12/2020 (OS953);
(5) OS No PA-24NCVC-954-12/2020 (OS954);
(6) OS No PA-24NCVC-955-12/2020 (OS955);
(7) OS No PA-24NCVC-956-12/2020 (OS956).
The Main Suit — Suit 8
[11] There are multiple suits (I was told: more than 20 suits) between Goh and Ong (and their re
