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2023 MarsdenLR 1075
HIGH COURT MALAYA KUALA LUMPUR
DATO CHANG JONG YU – Appellant
Versus
DATO SERI YONG TU SANG & ORS – Respondent
[Originating Summons No: WA-24NCC-44-01-2022]
Oppressive conduct by directors violating shareholder agreements can be remedied under the Companies Act, emphasizing the need for fair dealing and unanimous consent in corporate governance.
Headnote:(A) Companies Act 2016 - Section 346 - Oppressive conduct of directors - Shareholder's right to seek remedies for oppression - Allegations of oppressive acts include removal of company records and diversion of assets - Court finds acts constituted oppression under the Act. (Paras 11, 24, 41, 52)
(B) Shareholders' Agreement - Requirement for unanimous approval for resolutions - Breach of agreement constitutes oppression - Court ruled that resolutions passed without plaintiff's consent were oppressive. (Paras 27, 38)
Facts of the case:
The plaintiff, a shareholder and former director of the 4th defendant, alleged oppressive conduct by the 1st to 3rd defendants, including the removal of company records and exclusion from management. The plaintiff sought declarations and payment for advances made to the company. (Paras 1-10)
Findings of Court:
The court found that the removal of company documents and the passing of resolutions without the plaintiff's consent amounted to oppressive conduct, violating the Companies Act and the Shareholders' Agreement. (Paras 24, 41)
Issues: The main issues were whether the defendants' actions constituted oppression under the Companies Act and if the resolutions were valid given the Shareholders' Agreement. (Paras 11, 24)
Ratio Decidendi: The court held that the acts of the defendants were oppressive as they disregarded the plaintiff's interests and violated the requirement for unanimous consent in the Shareholders' Agreement. (Paras 11, 27, 38)
Result: Originating summons allowed, with costs, and the appointment of an independent valuer ordered. (Paras 56, 57)
| Table of Content |
|---|
| 1. shareholder and director status. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. claims of oppressive conduct. (Para 8 , 9 , 10) |
| 3. law on oppression under companies act. (Para 11 , 12 , 13 , 14) |
| 4. removal of company documents as oppression. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 5. resolutions passed in breach of agreement. (Para 24 , 25 , 26 , 27 , 28 , 29 , 30) |
| 6. quasi-partnership considerations. (Para 32 , 33 , 34 , 35 , 36 , 37) |
| 7. breach of fiduciary duties and oppression. (Para 38 , 39 , 40 , 41) |
| 8. execution of jdas as oppressive conduct. (Para 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49) |
| 9. diversion of assets and oppression. (Para 50 , 51 , 52) |
| 10. distinct causes of action in related suits. (Para 53 , 54 , 55) |
| 11. court's decision and orders. (Para 56) |
A. Introduction
[1] The plaintiff filed an originating summons seeking a declaration that the 1st to 3rd defendants had conducted the affairs of the 4th defendant in a manner that is oppressive to the plaintiff. The plaintiff also sought, inter alia, the following orders:
a. that the 1st, 2nd and/or 3rd defendants purchase the plaintiff's 1,462,500 ordinary shares in the 4th defendant based on the fair value of the 4th defendant as at 19 February 2019; and
b. that the total advances made by the plaintiff to the 4th defendant and its subsidiaries in the sum of RM13,221,590.13 be paid by the 1st, 2nd and/or 3rd defendants.
B. Background Facts
The Parties
[2] The plaintiff is a shareholder of the 4th defendant, with 1,462,500 shares, which are equivalent to 48.75% of the shareholding of the 4th defendant. The plaintiff was also a director of the 4th defendant, until he was removed on 19 February 2019.
[3] The 1st defendant is the father of the 2nd and 3rd defendants. The 1st and 3rd defendants hold 1,537,500 shares in the 4th defendant, which are equivalent to 51.25% of the shareholding of the 4th defendant.
[4] The 1st defendant is the executive chairman and a director of the 4th defendant. The 2nd defendant is also a director of the 4th defendant.
The Business Of The 4th Defendant
[5] The 4th defendant was established in 1993, to carry on business in investment holding and management of properties, including the construction and management of golf courses and clubhouses. The business was carried out through its wholly-owned subsidiaries, namely Ibaimas Sdn Bhd ("Ibaimas"), Ibai Leisure Sdn Bhd ("Ibai Leisure"), Ibai Ria Sdn Bhd and Ibai Golf and Country Club (collectively, the "KID Group").
[6] At its inception, there were three shareholders of the 4th defendant, namely the plaintiff, the 1st defendant and one Yusof Dato' Biji Sura @ Mohamad ("Dato' Seri Yusof"). The 4th defendant subsequently faced financial difficulties, resulting in Yusof's exit from the KID Group in 2012. His shares in the 4th defendant were acquired equally by the plaintiff and the 1st defendant.
[7] The relationship between the plaintiff and the 1st defendant as shareholders of the 4th defendant is governed by a shareholders' agreement dated 4 February 2009 ("Shareholders" Agreement").
The Alleged Oppressive Acts
[8] The plaintiff claimed he advanced in excess of RM13.2 million into the KID Group, to assist the group to overcome its financial difficulties. He further claimed that there was no corresponding injection of funds by the 1st defendant.
[9] In 2017, he informed the 1st defendant that he would not be able to contribute further and would require the 1st defendant to jointly contribute. He claimed the 1st defendant refused to contribute or inject any funds to sustain the operations of the KID Group.
[10] It is the plaintiff's case that there after, various oppressive conducts were carried out against him. This judgment focuses on the following allegations of oppressive conducts:
a. The removal of accounts and records of the 4th defendant from its business premises;
b. The passing of resolutions to remove the accounts and records of the 4th defendant and to remove the plaintiff as a di
