Mohd Ghazali Bin Mohd Yusoff JC:

The respondent, a private limited company, was incorporated under the Companies Act 1965 on 27 August 1988. The main object of the respondent is to establish and run in Johor Bahru a medical specialist centre and to equip and to provide it with every facility for persons requiring medical, surgical, dental, nursing and/or such other care and attention as can be obtained in a medical specialist centre. The medical centre commenced its operations on 31 August 1989. The appellant, a doctor, was a director and a shareholder of the respondent.

The authorised capital of the respondent is RM500,000 divided into 500,000 shares of RM1 each. The respondent has eight directors and all of them are the only shareholders. The eight directors cum shareholders are medically qualified doctors and are specialists in their respective fields. It seems to be a policy of the respondent that only medically qualified doctors are allowed to be shareholders and each shareholder is required to hold at least a block of shares amounting to 50,000 shares. The appellant is the only director and shareholder holding two blocks of shares.

For the purpose of running the medical centre, the respondent rented a building called Wisma Maria, located in Jalan Ngee Heng, Johor Bahru. Each director cum shareholder entered into an agreement with the respondent for a licence to use a lot in the said premises for the purpose of running his own clinic and was required to make monthly payments to the respondent for the licence, calculated according to the size of the area of floor space required for his clinic. The appellant entered into such an agreement with the respondent on 11 September 1989. Other medical doctors who were non-shareholders were also allowed to enter into similar agreements with the respondent if they wished to run their clinics within the respondent's premises.

The paid-up capital of the respondent was utilised to renovate the said premises and for leasing of equipment. Each director cum shareholder kept his professional charges for services rendered within his own clinic and is only required to pay to the respondent what has been agreed upon under the said licence. They were not required to pay any other expenses towards the running of the medical centre. This arrangement however resulted in the respondent running the medical centre at a loss. According to the evidence adduced at the trial in the Sessions Court, every director cum shareholder was making money but this was not the case with the respondent.

As the paid up capital was found to be insufficient to meet the overheads of running the medical centre, the board of directors, at a meeting held on 12 January 1990 decided that all shareholders pay a monthly surcharge of RM2,000 to the respondent until further notice. It was the appellant who suggested that each shareholder pay a monthly 'surcharge' and this was agreed to by the board. According to the evidence the intention of collecting surcharge was for the purpose of meeting the monthly overheads of running the medical centre.

However at a meeting of the board held on 9 March 1990, the appellant requested for a review of his surcharge payments since he had been asked to pay twice the amount of surcharge as he is holding two blocks of shares. He felt that as a single practitioner he should only pay a single surcharge like the rest of the shareholders. The board did not however make any decision on the appellant's request for a review. At another meeting of the board held on 13 April 1990 the appellant once again put forward his request for a review but it was turned down by the board.

At another board meeting held on 17 May 1990, the appellant informed the board that the present practice of paying surcharge was not right and suggested that the surcharge payments be classified as capital investment. He also suggested that the directors should meet with the company auditors to clarify the matter. At