Back
2024 MarsdenLR 2052
HIGH COURT MALAYA KUALA LUMPUR
VENKATESWARA RAO KRISHNAN – Appellant
Versus
FWG GLOBAL SDN BHD & ORS & ANOTHER CASE – Respondent
[Suit Nos: WA-24NCC-655-05-2022 & WA-22NCC-188-05-2022]
A registered shareholder acting as a bare trustee lacks standing to bring a minority oppression action under Section 346 of the Companies Act 2016 when they no longer hold beneficial interest in the shares.
Headnote:(A) Companies Act 2016 - Section 346 - Minority oppression action filed by a shareholder against the company and its directors seeking to enforce a share transfer agreement - The court examined the locus standi of a bare trustee to bring an action for oppression - The court found that the plaintiff, having transferred beneficial interest, lacked standing to sue for oppression - The plaintiff's claims of misappropriation were not substantiated. (Paras 71-88)
(B) Specific Relief Act 1950 - Section 18 - The court granted an order for specific performance of a share transfer agreement that the defendant had failed to execute despite fulfilling his obligations - Damages were also awarded for breach of contract. (Paras 66-70)
Facts of the case:
The plaintiff filed an oppression action after the defendant failed to transfer shares as per an agreement reached during a board meeting, despite the plaintiff fulfilling his obligations under the agreement. The defendant contended that the agreement was void due to alleged misappropriation of funds by the plaintiff. (Paras 1-38)
Findings of Court:
The court found that the defendant's refusal to execute the share transfer was unjustified and that the plaintiff had indeed performed all necessary conditions for the transfer. (Paras 63-66)
Issues: The main issues were the plaintiff's standing to sue for oppression as a bare trustee and whether the defendant's refusal to transfer shares constituted a breach of the agreement. (Paras 77-86)
Ratio Decidendi: The court ruled that a bare trustee lacks the standing to bring an oppression action when the beneficial interest has been transferred, and that the plaintiff had not established any oppressive conduct by the defendants. (Paras 84-88)
Result: The court allowed the specific performance of the share transfer and awarded damages, while dismissing the oppression action. (Paras 71, 88)
The part that indicates the shares transfer to the holding company is not considered oppression is found in the section discussing the transfer agreement and the conduct of the parties. It states that the defendant's refusal to transfer shares was unjustified, but ultimately, the court viewed the delay as waivable and not of the essence once the parties agreed to the removal of the caveat and the transfer. The court emphasized that the defendant had accepted the removal of the caveat and had the opportunity to perform the transfer but failed to do so, and that such delay could be treated as a waiver of the time condition. The court also found that the plaintiff had fulfilled all his obligations, and the only remaining act was for the defendant to perform his part, which was to transfer the shares. The court ordered specific performance, indicating that the transfer of shares was not inherently oppressive but rather a matter of contractual compliance that the defendant was obliged to fulfill.
JUDGMENT
Introduction
[1] On 11 May 2022, Dr Venkateswara Rao ("Dr Rao") filed a minority oppression action under s 346 of the Companies Act 2016vide the Originating Summons No WA-24NCC-655-05/2022 against FWG Global Sdn Bhd("FWG Global"), Datin Sri Sarasvathy a/p Gopalu ("Datin Sri Sarasvathy"), Datuk Chandrakumanan a/l Arumugam (" Datuk Chandrakumanan") and City Health Care Clinic Sdn Bhd ("CHC") seeking an order that FWG, Datin Sri Sarasvathy and Datuk Chandrakumanan do purchase all his 576,000 shares in CHC at the market value or alternatively for CHC to be wound up ("OS 655").
[2] OS 655 was in fact filed two days after Dato' Sri Gandhi a/l Muthusamy ("Dato Sri Gandhi"), FWG Global, Datin Sri Sarasvathy and Datuk Chandrakumanan had filed the civil suit WA-22NCC-188-05/2022 against Dr Rao for an order of specific performance of an agreement reached on 28 November 2020 where Dr Rao had agreed to transfer all his 576,000 shares in CHC to Dato' Sri Gandhi or his nominees for RM1 million ("Suit 188").
[3] As the defences raised by Dr Rao in Suit 188 are substantially the same as the issues raised by him in OS 655 as grounds for his oppression action, sometime on 27 July 2022, an order was made by the Court in OS 655 for the action to be consolidated with Suit 188 and for OS 655 to be heard together or heard after Suit 188.
[4] At the date of the trial of Suit 188 before this Court , counsel for the parties agreed for Suit 188 to be proceeded with and for counsel to put in their respective written submissions in respect of Suit 188 together with the written submissions for OS 665 (which would proceed based solely on affidavits filed without any cross-examination of the deponents) for this Court 's consideration. The determination of the issues in Suit 188, where relevant, will be binding on the parties in OS 655.
[5] After perusal of the relevant cause papers, written submissions filed and upon hearing the oral submissions by learned counsel for the parties, I allowed the claims in Suit 188 and dismissed OS 655 with costs.
[6] In this judgment, I shall first set out my grounds for Suit 188 and thereafter I shall deal with OS 655. The parties shall be referred to as the "Plaintiffs" and the "Defendants" in their original capacities as expressed in the respective legal proceedings.
[7] OS 655 has brought to the fore the novel legal question whether a bare trustee of shares, whilst being a registered shareholder of a company, has the locus standi to bring an action for oppression under s 346 of the Companies Act 2016 .
Suit No: WA-22NCC-188-05/2022 ("Suit 188")
Background Facts
[8] Sometime between March and June 2019, the Defendant (Dr Rao) held discussions with the 1st Plaintiff (Dato' Sri Gandhi) with the view for the 1st Plaintiff to invest and become a shareholder of City Health Care Sdn Bhd (No. Company: 201901008157 (1317485-W)) (CHC), which operates a medical clinic business at Lot 2-02, Level 2, Menara HLA No 3, Jalan Kia Peng, 50450 Kuala Lumpur.
[9] During the discussions, the Defendant had represented to the 1st Plaintiff that:
a) he owned 20 clinics out of which he had sold 17 clinics and he was still managing the remaining 3 clinics;
b) the clinics were managed by licensed doctors and his wife was also assisting in the management of the clinics;
c) CHC has a few existing panel clients; and
d) he would protect CHC's interest and would not place himself in a conflict of interest position although he is running other clinics as well.
[10] The Defendant further represented that CHC was worth around RM2.4 million, that CHC owned a lab worth around RM1.5 million, was fully equipped with, inter alia, X-ray, mammogram and stress test facilities.
[11] Pursuant to the aforesaid, an agreement dated 14 August 2019 between the following parties was entered:
a) FWG Global (2nd Plaintiff) and Datin Seri Sarasvathy (3rd Plaintiff) as Group A;
b) the Defendant as Group B; and
c) Datuk Chandrakumanan (4th Plaintiff) as Group C.
("the P
