A company may be wound up if directors act in self-interest, creating a conflict, which undermines trust and effective management, as per Sections 465(1)(f) and (h) of the Companies Act 2016.

JUDGMENT

Gunalan Muniandy JCA:

Introduction

[1] The appellant's appeal herein is against the whole of the decision of the Learned High Court Judge ('LJ') given at the Shah Alam High Court ('SAHC') where the LJ dismissed the appellant's Petition to wind up the 2nd respondent company ('r 2') pursuant to s 465(1)(f) and (h) of the Companies Act 2016 (' CA 2016').

[2] As summarised for our easy reference by the appellant, his challenge against the LJ's decision consists of two parts: the 1st part being that the appeal should be allowed on 2 grounds; and the 2nd part being that the LJ had erred in applying 4 wrong grounds in dismissing the instant Petition.

[3] In regard to the 1st part, the 2 grounds relied upon are as follows:

1) r 2 should be wound up on the just and equitable ground under s 465(1)(h), CA 2016; and

2) The 1st respondent ('r 1') had acted in his own interest rather than the interest of the r 2 as a whole ('1st Limb') or acted in any other manner which appears to be unfair or unjust to members ('2nd Limb') (under s 465(1)(f) of CA 2016).

Factual Background

[4] The appellant/petitioner and r 1 met when they were consultants in a high- rise development project. The petitioner's expertise was in civil and structural work while the 1st respondent's expertise was in geotechnical and foundation work.

[5] In 2000, the appellant and r 1 had discussions with a view to working together and both of them concluded that it would be ideal if they were to combine their expertise and set up a practice that provides integrated geotechnical, civil and structural consultancy services.

[6] As a result of discussions, r 2 was incorporated on 25 February 2002. The nature of business of r 2 is engineering consultancy.

[7] At the material time, the appellant was aware that r 1, was the Managing Director of Geo Management Sdn Bhd ("GMSB") which provides Geotechnical and Foundation Consultancy, r 2 and GMSB share a similar business address and r 2 pays rental to GMSB in respect of a lease for part of the first and second floors of a three-storey building owned by GMSB and r 1.

[8] The appellant and r 1 are aware of the potential conflict of interest between r 2 and GMSB in respect of geotechnical and foundation consultancy work, thus, they agreed as follows:

(a) If the appellant sourced any geotechnical and structural work, that work will be carried out by r 2;

(b) If r 1 sourced any work that involved civil, structural, geotechnical and foundation consultancy, that work will be carried out by r 2;

(c) If r 1 secured only geotechnical and foundation consultancy, that work will be carried out by GMSB.

[9] Many issues arose between the parties that led to the breakdown of the relationship of trust and confidence between them. The appellant believed that the relationship between the parties had reached a deadlock and there was no prospect of the deadlock being broken.

[10] On 8 July 2020, the appellant filed a petition for a winding-up order against r 2 pursuant to s 465(1)(f) and/or (h) of the Companies Act, 2016.

[11] The appellant contended that r 2 should be wound up on the basis that r 1 had acted in his own interest rather than in the interests of the members as a whole or acted in any other manner which appears to be unfair or unjust to members and that it is just and equitable that r 2 be wound up.

[12] On 24 May 2021, the High Court dismissed the petitioner's Petition with costs of RM3,000.00.

[13] The High Court decided that it was not just and equitable to wind up r 2 on the following grounds:

(a) There was no breakdown in trust and confidence between the appellant and the 1st respondent as the disagreements that arose between the parties had been resolved by the parties.

(b) There was no actual deadlock in the management as the appellant has knowledge of the 2nd respondent's operations and is involved in the management of the 2nd respondent.

(c) It would cause great injustice to the 2nd respondent as there are still on-going works to be completed