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2025 MarsdenLR 4995
COURT OF APPEAL PUTRAJAYA
CJ POLYMERS SDN BHD – Appellant
Versus
SIM CHIN HU & ORS AND OTHER APPEALS – Respondent
[Civil Appeal Nos: W-02(NCC)(A)-2146-11-2022 W-02(NCC)(A)-2148-11- 2022 & W-02(IM)(NCC)-1631-09-2024]
The court affirmed that minority shareholders are entitled to equitable treatment, recognizing the oppressive exclusion of a co-founder from management grounds for relief under the Companies Act 2016.
Headnote:(A) Companies Act 2016 - Section 346 - Minority oppression - Whether removal from management constitutes oppression despite pending claims for breach of fiduciary duty - Existence of quasi-partnership upheld between co-founders, unjust removal acknowledged by the court - Claims for compensation and share buyout addressed - Conflicting interests of management and underlying fiduciary duties discussed. (Paras 1, 11, 20, 26, 32, 46, 62)
(B) Quasi-Partnership - Recognition of informal agreements between partners without formal documentation - Key issues include whether buyout or compensation for frozen shares sought appropriately addressed. (Paras 33, 45, 62)
(C)
Findings of Court:
High Court ruled that minority shareholder's exclusion was oppressive given the operational history of quasi-partnership. (Paras 20, 26, 51, 60)
(D)
Issues: Determination of existence and effects of quasi-partnership, parameters of minority oppression, and the legitimacy of compensation claims. (Paras 32, 46) (E)
Ratio Decidendi: Court concluded that dismissal of director’s privileges and unilateral withdrawal of benefits without fair compensation constituted oppression under the Companies Act, reinforcing equitable interests against strict legal rights. (Paras 24, 46, 51) (F)
Result: Appeals dismissed; cross-appeals allowed with findings to be revised in light of the ruling on share distribution. (Paras 73)
| Table of Content |
|---|
| 1. introduction to the appeals and parties involved. (Para 1 , 2 , 4) |
| 2. founders established a trading company. (Para 8 , 10 , 11) |
| 3. sim's complaints of oppression by co-founders. (Para 12 , 13) |
| 4. defendants deny allegations and present misconduct. (Para 14 , 15 , 16) |
| 5. high court's findings on quasi-partnership. (Para 20 , 21 , 23 , 24) |
| 6. court's ruling on financial claims. (Para 25 , 26 , 27) |
| 7. issues presented in the appeals. (Para 32 , 33 , 34 , 35) |
| 8. legal standards for oppression under the companies act. (Para 45 , 46) |
| 9. court's buyout order justification. (Para 62 , 63) |
Introduction
[1] There are three appeals before us. All the appeals arise from a minority oppression action filed by Sim Chin Hu (Sim). The main issue in the High Court was whether his removal from the management of the company that he co-founded constituted oppression, notwithstanding the fact that there was a pending claim by the company against him for breach of fiduciary duty. The second issue was whether the quasi-partnership arrangement between Sim and his co-founder (Kerk Han Meng) terminated upon the admission of new shareholders. Sim was successful in the Court below.
[2] In Appeal 2146, CJ Polymers Sdn Bhd (CJ Polymers), the company that was co-founded by Sim, is the appellant. It was the 4th defendant in the High Court. An order was made for the company to return some movable properties to Sim. The prayer for CJ Polymers to buy out Sim's shares was the alternative prayer in the oppression action. CJ Polymers was also ordered to buy-out the shares of Sim by the High Court because prior to the hearing, it had made the buyout offer subject to set-off from losses suffered by it due to the alleged misconduct of Sim. The separate suit of CJ Polymers Sdn Bhd v. Sim Chin Hu & Ors [2022] MLRHU 1220 (Civil Suit WA-22NCC-298-07-2020) against Sim for alleged breach of fiduciary duty and misconduct was then pending in another Court. CJ Polymers is appealing against the order to buy-out the shares of Sim.
[3] In Appeal 2148, Kerk Han Meng (Kerk) and Lee Yu Meng (Lee) are the appellants. Kerk holds 48.5 per cent of the shares, whereas Lee holds 3 per cent of the shares in CJ Polymers. They were the 1st and 2nd defendants in the High Court. But on 7 May 2024, Kerk withdrew himself from this appeal insofar as it related to him. Lee continued with her appeal against the decision of the High Court.
[4] In Appeal 1631, the appellant is CJ Polymers. The appeal is against the dismissal of the application of CJ Polymers on 13 September 2024 to make representations and conduct cross-examination in respect of the Deloitte Final Report. The Deloitte Report was prepared pursuant to the orders of the High Court dated 9 November 2022, 12 January 2023 and 8 November 2023, which were to facilitate the buyout order.
[5] The 3rd defendant in the High Court was Eric Kua Chin Wee (Eric Kua). He is not a director of CJ Polymers. But a finding of fact was made by the High Court that he purchased a one-third stake in the company from Sim and Kerk. He discontinued his own appeal (Appeal 2147) on 3 May 2024, and his counsel did not file any submissions. Nonetheless, he remains a respondent in the other appeals.
[6] Sim has filed a notice of cross-appeal in Appeals 2146 and 2148 to vary the reliefs granted to him, particularly in respect of the 1.5 per cent shares of CJ Polymers he had transferred to Lee Yu Meng (Lee). He is appealing for the 1.5 per cent shares to be included in his stake for the purpose of the buyout order.
[7] Pursuant to an order made on 31 January 2023, Appeal 2146 was consolidated with Appeal 2147 and Appeal 2148. However, as said earlier, Appeal 2147 was later withdrawn. Where the context requires, CJ Polymers, Kerk, Lee and Eric Kua are collectively referred to as the defendants. Otherwise, they are referred to individually by name.
Background Facts
[8] The basic background facts are gratefully extracted from the judgment of th
