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2025 MarsdenLR 4990
HIGH COURT MALAYA SHAH ALAM
LEE CHIAP HAN – Appellant
Versus
NG WAH LEONG – Respondent
[Suit No: BA-22NCC-132-10/2022]
A shareholder lacks standing to individually claim for company losses, which must be pursued by the company; personal property claims require a recognized cause of action.
Headnote:(A) Companies Act - Doctrine of separate legal personality - Breach of fiduciary duty - Claim sought for damages and liquidated damages by a shareholder against fellow director for company losses - Court found that damages should be pursued by the company and not individually. (Paras 4, 5, 6, 15)
(B) Fiduciary duties - Shareholders lack legal standing to sue for company wrongs - Claims for personal property loss found insufficient due to lack of recognizable cause of action. (Paras 5, 13, 18)
(C) Written submissions - Failure to comply with procedural directions affects the claim and counterclaim - Court dismissed claims without cost order due to non-compliance. (Paras 2, 19)
Facts of the case:
The Plaintiff and Defendant were directors and shareholders of a company. Allegations involved the Defendant shutting down the company and failing to sign payment cheques, leading to the Plaintiff incurring business and personal losses. (Para 7)
Findings of Court:
The court ruled no individual claims could be upheld as they were to be pursued at the company level; thus, both claims and counterclaims were dismissed. (Para 19)
Issues: Whether claims and counterclaims were appropriately advanced by and against the company.
Ratio Decidendi: Claims for individual damages relating to company loss must be pursued derivatively on behalf of the company, aligning with established principles in corporate law. (Paras 5, 11, 12)
Result: Claims and counterclaims dismissed.
| Table of Content |
|---|
| 1. case management and submissions timeline (Para 1 , 2 , 3) |
| 2. principles of company law and shareholder rights (Para 4 , 5 , 6) |
| 3. plaintiff's claims and actions recounted (Para 7 , 8) |
| 4. fiduciary duties and their application examined (Para 9 , 10 , 11 , 12 , 13 , 14 , 15) |
| 5. counterclaims and their grounding in alleged misappropriation (Para 16 , 17) |
| 6. court’s dismissal of claims and order (Para 18) |
[1] This suit was filed on 16 October 2022. It came up for case management before me on 8 November 2024. Upon a review of the pleadings, this Court of its own motion, asked counsel to submit on the following question under O 14A of the Rules of Court 2012 ("Question"):
"Whether the parties' pleaded claims and counterclaims for relief in this action are entirely those that can only be properly advanced (a) by the Company against the wrongdoer as it relates to losses to the Company and (b) against the Company as it relates to salaries and other emoluments due to the parties"
The Company referred to in the Question is Epros Engineering Sdn Bhd (in liquidation) ("Company") who is not a party in the proceedings.
[2] I gave counsel two months to file written submissions and fixed 8 January 2025 for hearing. Written submissions were not filed as directed. Based on letters from the solicitors to this Court, the parties indicated that they were declining to do so. Shortly before the case was called up for hearing on 8 January 2025, solicitors for the Plaintiff filed a set of written submissions. Counsel sought an adjournment to apply for leave to sue the wound up Company and amend the claim. The written submissions were not served on the Defendant's solicitors.
[3] I declined to adjourn the case and dismissed both the claim and counterclaim with no order as to costs. These are my broad grounds.
Analysis And Findings
[4] The basic tenets of company law derived from Saloman v. A Saloman & Co Ltd [1897] AC 22 and Foss v. Harbottle [1843] 2 Hare 461 apply in this case. This is the doctrine on the separate legal personality of a company and the rule that shareholders have no locus standi to sue directors and others for wrongs done to the company.
[5] Other principles that follow are that a shareholder of a company has no interest, legal or beneficial, over the assets of a company (Macaura v. Northern Assurance Co Ltd & Ors [1925] AC 619) and that no action lies at the suit of a member to make good a diminution in the value of his shareholding where it is merely a reflection of the loss suffered by the company ( Marex Financial Ltd v. Sevilleja (All Party Parliamentary Group on Fair Business Banking intervening) [2021] AC 39).
[6] The above principles have been endorsed by the highest Court in Malaysia and are similarly so entrenched in Malaysian company law that this Court would regard it too trite to require further restatement. They form the basis for the Question which can be determined based on a review of pleadings alone.
[7] The material facts in the Plaintiff's pleaded case are as follows:
(a) The Plaintiff and Defendant were shareholders and directors of the Company.
(b) The Company was managed by the Plaintiff. The Defendant allegedly shut down the Company forcibly by asking the Plaintiff and all employees to leave, and changed the locks at the premises.
(c) Consequently, the Plaintiff had to make various payments to suppliers and customers on behalf of the Company, and presented his claims to the Company's accountant, but the Defendant refused to sign any Company cheques for it.
(d) The Plaintiff also claims his belongings valued at RM297,450.00 were left at the Company's premises, that he lost his salary and directors' fees and that the Company premises were trespassed upon by intruders and thieves resulting in loss and damage to machinery and assets belonging to the Company.
(e) Following this, the Plaintiff successfully petitioned to wind up the Company on 3 September 2019 vide Shah Alam High Court (Compa
