A company may be wound up on just and equitable grounds when there is a functional deadlock and irretrievable breakdown of trust between shareholders.

Introduction

[1] The Petitioner filed this Petition to wind-up the Respondent on just and equitable grounds pursuant to ss 465(1)(f) and 465(1)(h) of the Companies Act 2016 (" CA 2016").

[2] The Respondent was incorporated as a Joint Venture (JV) between the Petitioner and Loh Soo Wah and Ang Siew Cheng (Loh and Ang). The parties entered a shareholders Agreement dated 2 February 2018 to formalize the basic terms of the JV.

[3] The shareholding in the Respondent is as follows:

a) Ang Siew Cheng - 25,000 shares

b) Loh Soon Wah - 25,000 shares

c) Tellus Resources Sdn Bhd (the Petitioner) - 50,000 shares

[4] The Board of Directors of the Respondent company comprise 2 directors nominated by the Petitioner and 2 directors nominated by Loh and Ang.

Grounds To Wind-Up The Respondent

[5] The Petition avers that Loh and Ang are directors and shareholders of Iotacs Technology Sdn Bhd ("ITSB") and UAT Air-Conditioning Sdn Bhd ("UAT").

[6] On or around mid 2019, the Petitioner questioned the unilateral escalation in costs and prices invoiced by Loh and Ang's companies mentioned above to the Respondent, where the costs could have been made much lower resulting in better profitability for the Respondent.

[7] Thereafter both Loh and Ang caused their companies to issue letters of demand and commence legal actions against the Respondent.

[8] The Petitioner submits that on 21 December 2021 and 22 December 2021, the legal actions by ITSB and UAT were filed respectively against the Respondent. The Sessions Court Suit No: WA-B52-82-12/2021 and the Sessions Court Suit No: WA-B52NCC-766-12/2021 were both commenced as debt recovery legal actions. The obvious defiance and total disregard to the interest of the Petitioner and the Respondent company is further confirmed by a letter from Loh and Ang dated 4 January 2022. It is undisputed that Loh and Ang in their capacity as shareholders of the Respondent deliberately refrained from defending the Respondent as they are the same people who instructed the filing of the said legal actions against the Respondent. [Page 142 of Encl 1 and p 30 of Encl 35].

[9] The Petitioner further submits that in Loh and Ang's letter dated 4 January 2022, they had enclosed the Writ of Summons and Statement of claim by ITSB and UAT and in the notable part of their letter had stated "We take the position that these amounts are due and owing to ITSB and UAT and had previously sought for approval for payments due to ITSB and UAT. But Mr Tan Kok Hwee and Mr Ong Wann Yi (nominees of the Petitioner on the board of the Respondent) have taken the position that these amounts are not due and owing to ITSB and UAT and have refused to approve payments. In the foregoing, Mr Tan Kok Hwee and Mr Ong Wann Yi as directors are required to take necessary actions regarding these legal suits from ITSB and UAT". [Page 142 of Encl 1 and p 30 of Encl 35].

[10] When Mr Tan Kok Hwee ("Tan") the Petitioner's nominee went on to defend the legal sits filed under the instructions of Loh and Ang through their companies, they (Loh and Ang and their companies) filed multiple applications to strike out the Respondent's counterclaim on the ground that the Respondent company is in deadlock and did not pass any directors' resolution to initiate the counterclaim.

[11] Without going into the merits of the cases filed by Loh and Ang's companies against the Respondent, it is clear that the relationship between the shareholders holding 50% each are already acrimonious. It is very apparent that the two sides no longer have trust and confidence in each other.

[12] I am persuaded by the decision of the Court of Appeal ("COA") in Cheah Chee