The company may exercise a lien over fully paid shares as long as it is provided for in the company's constitution.

A. Introduction

[1] By the originating summons, the Plaintiff sought to restrain the Defendants from exercising a lien that the 1st Defendant claimed to exercise over shares held by the Plaintiff in the 1st Defendant.

[2] After considering the evidence before the court and hearing counsel's submissions, the court dismissed the originating summons, for the reasons set out below.

B. Background Facts

[3] The Plaintiff owns the following shares in the Defendants:

a. One share in the 1st Defendant ("Plaintiff's Share in the 1st Defendant");

b. One share in the 3rd Defendant;

c. 18,750 shares in the 4th Defendant;

d. One share (jointly held with three other individuals) in the 5th Defendant; and

e. One share (jointly held with three other individuals) in the 6th Defendant,

(collectively, the "Plaintiff's Shares in the Defendants").

[4] The 2nd Defendant is a wholly owned subsidiary of the 1st Defendant. The 6th Defendant is a shareholder of United Raub Oil Palms Sdn Bhd ("UROP"). The 3rd, 4th and 5th Defendants and UROP are shareholding vehicles in the 1st Defendant.

[5] The dispute that is the subject matter of this action began when the 1st Defendant issued a letter dated 21 June 2023, demanding the amount of RM20,800.00 due by the Plaintiff to the 1st Defendant. The amount is due pursuant to an order of court for the payment of costs by the Plaintiff. The 1st Defendant notified the Plaintiff that it would forfeit the Plaintiff's Share in the 1st Defendant, under arts 21 and 22 of the 1st Defendant's articles of association ("1st Defendant's AA"), if the said amount is not paid by the Plaintiff.

[6] The Plaintiff responded by a letter dated 4 July 2023, denying some of the allegations made in the 1st Defendant's letter dated 21 June 2023. However, the Plaintiff proceeded to pay RM20,800.00 to the 1st Defendant, on a without prejudice basis.

[7] The Plaintiff then received another letter, dated 10 July 2023, this time from the 2nd Defendant notifying the Plaintiff of costs amounting to RM41,600.00 which was awarded in favour of the 2nd Defendant against the Plaintiff in various court proceedings. The 2nd Defendant informed the Plaintiff that the amount due to the 2nd Defendant had been assigned to the 2nd Defendant's parent company, the 1st Defendant, with immediate effect.

[8] Subsequently, by a letter dated 12 July 2023, the 1st Defendant informed the Plaintiff that he owed the 1st Defendant RM67,600.00 (including the RM41,600.00 assigned by the 2nd Defendant to the 1st Defendant) (collectively, the "Plaintiff's Debt"), being costs awarded in various court proceedings. The 1st Defendant notified the Plaintiff that it had a lien over the Plaintiff's Share in the 1st Defendant, and it would forfeit and sell the share, if the Plaintiff's Debt is not settled by 26 July 2023. The 1st Defendant claimed that it has the power to enforce its right in this manner, pursuant to arts 21 and 22 of the 1st Defendant's AA.

[9] The Plaintiff argued that it is unlawful for the 1st Defendant and/or the other Defendants to forfeit and sell the Plaintiff's Share in the 1st Defendant on the basis of a lien arising from the non-payment of the Plaintiff's Debt. The Plaintiff filed the originating summons to prevent the Defendants from enforcing their rights over the Plaintiff's Share in the 1st Defendant.

C. Considerations And Findings

[10] The main issue considered by the court is whether the 1st Defendant can exercise a lien over the Plaintiff's Share in the 1st Defendant.

[11] Before going into the main issue, I will first address the Plaintiff's argument that it is not legally permissible for the 2nd Defendant to assign to the 1st Defendant, the costs ordered by the court to be paid by t