The court ruled that shareholders agreements that do not involve a change in beneficial ownership do not contravene the Companies Act.

JUDGMENT

See Mee Chun JCA:

Introduction

[1] This is an appeal against the decision of the learned Judicial Commissioner (JC) in dismissing the Originating Summons (OS) filed by the appellants/ Plaintiffs. The OS was essentially to seek a declaration that the Shareholders Agreement dated 16 January 2017 (SA) between the 1st respondent/1st defendant (TS Kam) and the 2nd respondent/2nd defendant (Andrew) is illegal, null and void and unenforceable. The basis for this is the contravention of s 228 Companies Act 2016 ( CA 2016). An injunction was also sought to restrain the 5th to 8th defendants from carrying into effect the SA.

[2] We dismissed the appeal and our reasons are as follows.

Parties

[3] Parties will be referred to as they were in the High Court except for the following specific assigned abbreviations.

[4] The plaintiffs are directors and/or shareholders of Raub Mining & Development Company Sdn Bhd (RMDC, 3rd defendant), Raub Oil Mill Sdn Bhd (ROM, 4th defendant), and other companies (5th to 9th defendants).

[5] RDMC wholly owns ROM. The 5th to 8 th defendants hold part of the shares in RMDC. The 9th defendant holds about half of the shares in RMDC.

[6] In para 5 of the plaintiffs' affidavit in support, there is a diagram to reflect the relationship between the companies as follows.

[7] TS Kam is the father of the plaintiffs and Andrew. He holds 7 shares in RMDC and is the majority shareholder in the 5th to 7th and 9th defendants.

[8] Andrew is the plaintiffs' brother. He holds 1 share in RMDC and is a shareholder of 5th to 7th and 9th defendants.

[9] Although named as the 1st defendant in the OS and the 1st respondent in this Appeal, TS Kam supported the plaintiffs in the OS and now supports the appellants in this Appeal.

Decision Of The High Court

[10] The learned JC's grounds dated 26 June 2020 are found in encl 28/35-74 (non pdf).

[11] It was found that judicial estoppel did not apply. This was because neither a litigant nor the Court was bound by statements of law or legal conclusions made by counsel to the Court, in particular when dealing with the construction of a contract. Director of Elementary Education, Odisha & Ors v. Pramod Kumar Sahoo [Civil Appeal No 7577 2019] and Silver Concept Sdn Bhd v. Brisdale Rasa Development Sdn Bhd, [2005] 4 MLJ 101 were referred to. Further, the context under which the statement or legal position was taken by counsel had to be understood where such are made in the course of submission to address a specific application. It had also not been established that Andrew succeeded in the striking out applications and the ad interim injunction due to the assertions made by him (Peguam Negara v. Nurul Izzah Anwar & Ors, [2017] 4 MLJ 656).

[12] The SA was found not to contravene s 228 CA 2016. Reference was made to a decision of this Court in Pioneer Haven Sdn Bhd v. Ho Hup Construction Company Bhd & Anor and Other Appeals, 2012 MarsdenLR 985 where there can only be a disposal if there is a transfer or change in beneficial ownership. There was no disposal of RMDC shares by the 5th to 8th defendants to Andrew nor an acquisition of RMDC shares by Andrew from the aforesaid defendants.

[13] A further reason why the OS was untenable was that it should have been made pursuant to s 132E of the Companies Act 1965 ( CA 1965) and not s 228 2016 as was done here. 1965 was the legislation in force at the time the SA was entered into. Section 619(4) 2016 was not relevant as it was merely to preserve proceedings commenced before the coming into force of 2016. The relevant provision would be s 620(4) 2016. Mak Siew Wei v. Yeoh Eng Kong & Other Appeals, [2020] 1 MLJ 258 was cited to support this finding.

Our Decision

Whether CA 2016 Or 1965 Applies?

[14] We will first deal with whether it is CA 2016 or 1965 which applies to this OS.

[15] The SA between TS Kam and Andrew was entered into on 16 January 2017 before CA 2016 came into force on 31 January 2017.

[16] The relevant provisions on arrangements or tran