Ali FJ (read by Raja Azlan Shah FJ):

This is an appeal from the dismissal of an action by the appellant, representing the minority shareholders of a private company, the first respondent. The claim in the action is for a declaration that a resolution passed at the Extraordinary General Meeting of the company held on 22 December 1971 is null and void on the ground that it is ultra vires, illegal and a fraud on the minority. The resolution was in the following terms:

(i) "that the proceedings for the attachment of nine ordinary shares of $100 each in the Lower Perak Motor Service Company Limited standing in the name of K Krishnan (i.e. the second defendant) be stayed;

(ii)that the proceedings for the attachment of 45 ordinary shares of $100 each and 40 ordinary shares of $100 each in the Lower Perak Syndicate Sendirian Berhad (i.e. the first defendant company) standing in the names of K Krishnan (i.e. the second defendant) and v. Thangavelu (i.e. the third defendant) respectively be stayed; and

(iii) that K Krishnan and v. Thangavelu be allowed to settle the judgment sum of $10,345.05 and the sum of $3,063.39 taxed costs in Ipoh High Court Civil Suit No. 187 of 1970 in the sum of $6,704.22 within three months of passing this resolution.

It was passed by the majority votes of shareholders, present or by proxies. In terms of the resolution Krishnan and Thangavelu, the second and third respondents respectively, against whom judgment was obtained for a wrong done to the company, are to be relieved of the liability to pay half of the judgment debt and taxed costs.

The evidence at the trial consisted of documents in the agreed bundle and the oral testimony of the Secretary of the company who gave evidence for the appellant. The respondent elected not to adduce any evidence. Except for the Memorandum and Articles of Association nothing else seems to have any material bearing on the issue or issues in this case.

The issues, (a) that the resolution is ultra vires, illegal, and (b) that it is a fraud on the minority, are based on two exceptions to the rule in Foss v. Harbottle [1843] 2 Hare 461. The rule was aptly stated by Jenkins LJ in Edwards & Anor. v. Halliwell & Ors. [1950] 2 All ER 1064, 1066 in these words:

The rule in Foss v. Harbottle [1843] 2 Hare 461 as I understand it, comes to no more than this. First, the proper plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that, if a mere majority of the members of the company or association is in favour of what has been done, then cadit quaestio."

In terms stated the appellant cannot maintain the action unless his case falls within either of two exceptions which were referred to by Jenkins LJ in his judgment on p. 1067 as follows:

Where the act complained of is wholly ultra vires the company or association the rule has no application because there is no question of the transaction being confirmed by any majority. It has been further pointed out that where what has been done amounts to what is generally called in these cases a fraud on the minority and the wrongdoers are themselves in control of the company, the rule is relaxed in favour of the aggrieved minority who are allowed to bring what is known as a minority shareholders' action on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could never reach the Court because the wrongdoers themselves, being in control, would not allow the company to sue."

The appellant's case so far as it is based on the first exception was argued on the basis that the amount