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2018 MarsdenLR 666
COURT OF APPEAL PUTRAJAYA
MAK SIEW WEI – Appellant
Versus
YEOH ENG KONG & OTHER APPEALS – Respondent
[Civil Appeal Nos: W-02(IM)(NCC)-1582-08-2017 W-02(IM)(NCC)-1586-08-2017 W-02(IM)(NCC)-1587-08-2017 W-02(IM)(NCC)-1801-09-2017]
The court rules that derivative actions and personal shareholder actions cannot be joined due to the reflective loss principle, ensuring distinct claims and avoiding double recovery.
Headnote:Statute Analysis: The judgment primarily examines the viability of the plaintiff's proposed amendments to include a derivative action following the principles outlined in s 347(3) of the Companies Act 2016, which abrogates common law derivative actions. Facts: The plaintiff, a director at SCAN, appeals against the High Court's allowance of amendments enabling him to assert claims both as a shareholder and in a derivative capacity on behalf of SCAN.
Findings of Court:
The court noted the learned High Court Judge's reasoning that the amendment did not prejudice the defendants and aligned with s 620(4) of the 2016 Act preserving rights acquired before its enactment.
Issues: The key questions addressed include whether a derivate action can coexist with personal claims and how statutory provisions influence such amendments.
Ratio Decidendi: The court concluded the attempts to amend were inconsistent with the rights afforded by the new Companies Act, emphasizing the essential nature of personal versus derivative claims.
Result: The appeals against the subsequent events re-amendments are dismissed; however, the appeals regarding the derivative action are allowed.
| Table of Content |
|---|
| 1. overview of appeals and initial claims. (Para 1 , 4 , 6 , 7) |
| 2. nature of the appeals and the plaintiff's right to amend. (Para 3 , 5 , 11) |
| 3. context and significance of amendment objections. (Para 12 , 15 , 16) |
| 4. legal arguments surrounding the nature of derivative actions. (Para 17) |
| 5. evaluation of derivative actions and reflective loss. (Para 20 , 21 , 38 , 39) |
| 6. considerations regarding reflective loss in personal and derivative actions. (Para 37 , 44) |
| 7. judicial discretion and principles affecting re-amendments. (Para 40 , 42 , 43) |
[1] There are four (4) appeals before us. The appellants, who comprise various defendants in the court below, appeal against the grant by the High court of leave to the respondent, who was the plaintiff in the court below, to re-amend its amended statement of claim pursuant to O 20 of the Rules of 2012.
[2] (Appeal No. 1586 is brought by the 1st, 2nd , 6th, 7th, 8th and 9th defendants while Appeal No 1582 is brought by the 3rd and 4th defendants, Appeal No 1801 by the 5th defendant and Appeal No 1587 by the 10th defendant. The four appeals were heard together.)
[3] The central issue that arises for consideration in these appeals relates to whether, on the factual matrix of the present case, the plaintiff may amend his claim to continue the action in all the following capacities jointly:
(a) As a shareholder in his personal capacity, as originally pleaded;
(b) By way of a derivative action for and on behalf of Scan Associates Berhad (SCAN) vide the proposed re-amendments; and
(c) On behalf of all the shareholders of SCAN.
[4] By virtue of this amendment application, the plaintiff also seeks to plead the events that transpired between 8 September 2016 and 22 April 2017 when SCAN was de-listed.
Brief Background Facts
[5] The background facts may be gleaned from the statement of claim, the judgment of the learned High court Judge and the submissions of the parties.
[6] The plaintiff is a director and shareholder of SCAN. At all material times, the 1st to 8th defendants were directors of SCAN, which is the 9th defendant in the suit. The 10th defendant was the auditor of SCAN.
[7] The plaintiffs claim against the individual defendants is premised on misrepresentation and deceit. Essentially, the plaintiff claims that in their individual capacities as directors of SCAN (and as auditor), these individuals and the firm of auditors, had actively concealed the actual financial status of SCAN from the plaintiff as well as all the shareholders of SCAN.
[8] The plaintiff levelled these allegations primarily at the 4th defendant who, it is claimed, exercised considerable influence over the other directors. Alternatively, the plaintiff contends that these other directors were aligned with the 4th defendant.
[9] The plaintiff relied upon these representations made by the 4th defendant and the other defendants, to purchase a substantial stake/shareholding in SCAN in or around June 2015 and thereafter. (At the time of the filing of the suit the plaintiff was a director and a substantial shareholder in SCAN, holding approximately 7.791% of the company.)
[10] With effect from 18 May 2015, SCAN was classified a GN3 company pursuant to Guidance Note 3 (GN3) of the ACE Market Listing Requirements of Bursa Securities ("ACE LR"). On 28 April 2017, SCANs shares were delisted and removed from the Official List of Bursa Malaysia.
[11] In essence, the plaintiff claims to have suffered considerable loss in investing or purchasing the shareholding in SCAN, as a consequence of the representations of the defendants.
[12] The plaintiff also claimed that the individual defendants had violated their statutory and fiduciary duties and that the director defendants together with the 10th defendant who were the auditors, conspired to defraud the plaintiff and the shareholders and thereby caused loss to them.
[13] In his claim prior to the re-amendments comprising the subject matter of these appeals, the plaintiff made claim against t
