Syed Agil Barakbah SCJ:

This was an appeal against the decision of the learned Judge of the High Court, Kuala Lumpur; dismissing the appellants'/ plaintiffs' application under O. 81 of the Rules of the High Court for specific performance of a contract for the sale of shares of a company known as Forex Enterprise Sdn. Bhd., incorporated in the states of Malaya and having its registered office at 2nd floor, Ming Building, Jalan Bukit Nanas, Kuala Lumpur ("the company"). Earlier the learned Judge heard the application in chambers and allowed it but subsequently after hearing in open Court, he dismissed it with costs.

The respondents also filed a cross-appeal but a preliminary objection was raised on the ground that it was served on the appellants out of time. The objection was dismissed since in our view there were reasonable grounds for exercising our discretion to grant them leave under r. 52(3) Supreme Court Rules 1980. The cross-appeal was allowed to stand.

Briefly the uncontroverted facts were that the appellants and the respondents were shareholders of the company. The former owned 32% of the shares and the latter had a total of 51% of the shares. The respondents authorised the first respondent to negotiate the sale of all their shares in the company to the highest bidder. The first respondent in turn authorised the secretary of the company to make offers to the existing shareholders to purchase all the said shares. The secretary accordingly sent out letters of offer. The appellants received a letter dated 30 October 1981 from the secretary to the effect that the respondents had decided to sell their 51% shares at RM17 per share. The appellants accepted the offer to purchase all the said shares by letters dated 18 and 19 November 1981 sent to the secretary who in turn communicated it to the respondents. The latter subsequently refused to effect the sale of their 51% shares. After protracted negotiations the appellants filed a writ claiming against the respondents for specific performance of the agreements reached between the parties, for damages of breach of contract in addition or in lieu of the above, injunction, further and other reliefs and costs. The respondents had filed their statement of defence.

Before us, there were three issues to be considered, viz:

(1) Whether there was a valid and enforceable contract between the parties for the purchase of the respondents' 51% shares.

(2) Whether there was notice of transfer of the shares as required under Article 34 of the company's articles of association, and

(3) Whether the secretary was acting on his own or in the name of the company in offering the said shares for sale.

All the three issues are inter-related and the answer to the first depended on the answers to the other two issues.

The learned Judge in dealing with the second issue held that the letter dated 28 October 1981 written by the first respondent to the secretary of the company was a transfer notice as required by Article 34(b) of the company's articles of association and with that notice the company became his agent for the sale of the shares. With respect, we agree with the learned Judge.

Article 34 is a restrictive clause which is intended to prevent shares of the company from going outside the hands of existing members. It allows a member to transfer his shares to another member but disallows any such transfer to a non-member unless it is first offered to all the other members. Under para. (b) which is material to the present appeal, the proposing transferor is required to give notice in writing to the company of his intention to transfer. The transfer notice is required to specify the sum he fixes as the fair value of his shares and shall constitute the company his agent for the sale of the shares to any member of the company willing to purchase them at the price fixed. A transfer notice may include several shares and shall not be revocable except with the sanction of the board. Under para. (c)