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2022 MarsdenLR 2999
COURT OF APPEAL PUTRAJAYA
WONG KIEN YIP & ANOR – Appellant
Versus
BYARD SPIRAL MILL SDN BHD & ANOTHER APPEAL – Respondent
[Civil Appeal Nos: B-02(IM)(NCC)-715-06-2020 & B-02(IM)(NCC)-716-06- 2020]
Claims under section 346 of the Companies Act 2016 can be maintained irrespective of a company's winding up when they are personal claims against directors rather than corporate claims.
Headnote:(A) Companies Act 2016 – Sections 346 and 471 – Originating Summons challenging oppressive acts of directors in a company – High Court struck out the Originating Summons on grounds that the company was in winding up – Appeals allowed, striking out reversed, and Originating Summons remitted for hearing – Court emphasized that the threshold for striking out must be 'obviously unsustainable' (Paras 57, 58, 60).
(B)
The decision of Hendrick International Hotels & Resorts Pte Ltd v. YTL Hotels & Properties Sdn Bhd & Ors [2003] 3 MLJ 742 was central to the High Court's ruling, being relied upon to argue that claims could not proceed following winding up.
(C)
The court clarified that the appellants' claims were personal and not against the company, and thus ought to be heard despite the winding up order (Paras 10, 25, 29).
(D)
The ruling distinguished between personal claims of shareholders and those claims that a liquidator could bring on behalf of the company (Paras 32, 36). (E) The court reiterated that a company's winding up does not negate the ability of a member to bring a personal action under s 346 (Paras 22, 39). (F) The relief sought was directly against the directors, making it maintainable despite the winding up of the company (Paras 54, 56). (G) The culmination of the findings led to a decision for the appeals to be allowed, and the Originating Summons to be remitted for full hearing before the High Court (Paras 62).
JUDGMENT
[1] These are two appeals before this Court, lodged by the two appellants who were the plaintiffs in the Originating Summons filed.
[2] The Originating Summons dated 18 February 2019 was commenced by the appellants against three respondents as defendants, namely the 1st defendant, Ting Chew Thai ('1st respondent'), the 2nd defendant, Goh Sew Hua (f) ('2nd respondent') and the 3rd defendant, Byard Spiral Mill Sdn Bhd ('Company').
[3] By way of a Notice of Application dated 30 December 2019 (Enclosure 8), the 1st and 2nd Respondents applied to strike out the Originating Summons pursuant to O 18 r 19(1)(a), (b) and/or (d) of the Rules of 2012 and/or the inherent jurisdiction of the Court.
[4] By way of a Notice of Application dated 6 January 2020 (encl 11) a similar application was made by the Company to strike out the Originating Summons pursuant to O 18 r 19(1)(a), (b) and/or (d) of the Rules of and/or the inherent jurisdiction of the Court.
[5] Both these applications were heard at the same time and on 4 June 2020, both the applications were allowed by the High Court. The Originating Summons was struck out. Hence the two appeals by the appellants against the decisions of the High Court in respect of the two separate applications made by the respondents.
[6] On 22 January 2021, both appeals were ordered to be heard together at the same time. This is the judgment of the Court.
Background Facts
[7] The Originating Summons was filed by the appellants invoking, primarily, s 346 of the Companies Act 2016 (' CA 2016'). The reliefs sought by the appellants set out in the Originating Summons were as follows:
"1. a declaration that:
1.1 the affairs of the 3rd defendant are being conducted or the powers of the directors are being exercised in a manner oppressive and/ or in disregard of the plaintiffs' interests as members and/or shareholders of the 3rd defendant;
1.2 the various acts of the 1st and 2nd defendants have been done or are threatened to be done which have and/or will unfairly discriminate against and/or which are and/or will be otherwise prejudicial to the plaintiffs;
2. a declaration that the 1st and/or 2nd plaintiffs are legal and/or beneficial owners of 50% (175,500 shares) of the paid-up share capital of the 3rd defendant;
3. an order that the 1st and/or 2nd defendants, whether jointly or severally, purchase the plaintiffs' 175,500 shares or 135,500 shares in the 3rd defendant at a price to be determined by this Honourable Court;
4. an order that the 1 st and 2nd defendants do cause the discharge and release of all the personal guarantees given by the plaintiffs for any facilities or transactions whatsoever of the 3rd defendant;
5. further or alternatively, an order for damages to be assessed and paid by the 1st and/or 2nd defendants, whether jointly or severally, to the plaintiffs or the 3rd defendant;
6. such directions or other orders be given as deemed fit and proper by this Honourable Court;
7. further or alternatively, such directions or orders as are required under s 346 of the Companies Act 2016 for the regulation of the affairs of the 3rd defendant;
8. the costs of this application be paid by the 1st and/or 2nd defendants, whether jointly or severally, to the plaintiffs; and
9. such further or other relief be given as deemed fit and proper by this Honourable Court."
[8] In the Originating Summons, the grounds for the appellants' application were stated to be as set out in their affidavits filed in support of their application and they were also briefly set out in the Originating Summons to be as follows:
"a) The plaintiffs did not take any active role in managing the 3rd defendant and left it to the 1st defendant who is the Managing Director and has full control of the 3rd defendant.
b) Sometime in December 2017, the plaintiffs discovered that the 1st defendant had been misusing funds of the 3rd defendant for his own personal interest, thereby dissipating the assets of the 3rd defendant.
c) All effort
