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2025 MarsdenLR 936
HIGH COURT MALAYA KUALA LUMPUR
KENANGA INVESTORS BERHAD – Appellant
Versus
IMPIANA SDN BHD & ANOR – Respondent
[Guaman No: WA-22NCC-528-10/2022]
Contractual obligations related to redeemable preference shares remain enforceable despite claims of statutory violations, emphasizing the primacy of agreements over financial constraints.
Headnote:(A) Companies Act 2016 - Sections 72, 131, and 132 - Breach of subscription agreements - Plaintiff sought redemption of redeemable preference shares and payment of dividends - Defendants contended inability to comply due to contravention of CA 2016, which the court rejected, finding that the obligations were contractual and the defendants failed to prove lawful options for redemption - The plaintiff entitled to impose liquidated and ascertained damages per the agreements - No admissibility of letters marked 'without prejudice.' (Paras 11, 12, 39, 49, 55)
(B) Contractual Obligations - The contractual obligations defined in SA 1 and SA 2 are enforceable irrespective of the defendants' claims of non-compliance with statutory provisions, highlighting that such liabilities cannot be evaded by citing lack of profit or capital. (Paras 19, 21, 38)
Facts of the case:
The plaintiff entered into multiple subscription agreements with the defendants for the issuance of redeemable preference shares. The defendants failed to redeem these shares and pay dividends as required. Claims of statutory breaches were raised by the defendants to defend against obligations under the contracts.
Findings of Court:
The court found that the plaintiff established its claim for redemption and damages under the agreements. It ruled the defendants' arguments against redemption under the CA 2016 were unfounded and affirmed that the disputed correspondence was not admissible as evidence due to being marked without prejudice.
Issues: Key legal questions addressed include the interpretation of the Companies Act 2016 regarding redeemable preference shares and the admissibility of 'without prejudice' communications in determining liability for breaches of contract.
Ratio Decidendi: The court held that contractual obligations for redemption of shares supersede claims of contravention of statutory provisions, emphasizing the binding nature of agreements made between the parties despite the financial struggles claimed by the defendants.
Result: Plaintiff’s claim allowed, with costs awarded.
| Table of Content |
|---|
| 1. breach of subscription agreements established. (Para 1 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. undisputed facts and defenses identified. (Para 10 , 11) |
| 3. contractual obligations define redemption legality. (Para 19 , 20 , 21 , 22 , 23 , 26 , 29) |
| 4. plaintiff entitled to liquidated damages. (Para 39 , 40 , 41 , 43) |
| 5. correspondence deemed without prejudice and inadmissible. (Para 44 , 48 , 49 , 52) |
| 6. court rules in favor of the plaintiff. (Para 54) |
A. Introduction
[1] This plaintiff filed this action for breach of subscription agreements that it had entered with the defendants.
[2] After a full trial, the court allowed the plaintiff's claim. The reasons for the decision are set out below.
B. Background Facts
[3] The plaintiff and the defendants entered into a subscription agreement dated 5 March 2019 ("SA") and a supplemental subscription agreement dated 13 March 2019 ("First Supplemental SA"), pursuant to which the 1st defendant agreed to allot and issue to the plaintiff, and the plaintiff agreed to subscribe to 17,640,000 redeemable preference shares ("RPS 1") at an issue price of RM1.00 per RPS.
[4] The parties thereafter entered into the following supplemental agreements, to vary the terms of the SA and the First Supplemental SA:
a. A second supplemental subscription agreement dated 13 March 2020 ("Second Supplemental SA");
b. A third supplemental subscription agreement dated 23 April 2020 ("Third Supplemental SA"); and
c. A fourth supplemental subscription agreement dated 25 March 2021 ("Fourth Supplemental SA").
The SA, the First Supplemental SA, the Second Supplemental SA, the Third Supplemental SA and the Fourth Supplemental SA are collectively referred to as "SA 1".
[5] On 3 May 2021, the plaintiff and the defendants executed a further subscription agreement ("SA 2"), pursuant to which the 1st defendant agreed to allot and issue to the plaintiff, and the plaintiff agreed to subscribe to 2,360,000 redeemable preference shares ("RPS 2") at an issue price of RM1.00 per RPS.
[6] As security for their obligations under SA 1 and SA 2, the defendants executed various security documents, including letters of undertaking, a deed of subordination, a third party charge over land and a third party pledge over shares.
[7] The terms of SA 1 and SA 2 provide that the 1st defendant is required to redeem RPS 1 and RPS 2 together with dividends at a pre¬determined rate on 25 December 2021 ("Maturity Date"). The agreements also provide that liquidated and ascertained damages ("LAD") shall be imposed monthly on the outstanding RPS 1 and RPS 2 principal and accrued dividends, until the date of redemption of RPS 1 and RPS 2 with dividends.
[8] The 1st defendant failed to redeem RPS 1 and RPS 2 on the Maturity Date. The plaintiff's former solicitors, Messrs. Wei Chein & Partners ("WCP") issued letters demanding the defendants to remedy the breaches of SA 1 and SA 2. The 1st defendant responded through various letters, including letters dated 21 January 2022 and 18 February 2022 ("1st Defendant's Letters"), proposing payment terms to the plaintiff.
[9] The proposals were not accepted by the plaintiff, and this action was filed to seek an order for the defendants to perform their obligations under SA 1 and SA 2.
C. Issues
[10] The fact that the plaintiff and the defendants had entered into SA 1 and SA 2 is not in dispute. Neither is the fact that the 1st defendant had not redeemed RPS 1 and RPS 2 together with dividends, on the Maturity Date.
[11] The issues in dispute arise from the following defences raised by the defendants:
a. The defendants were unable to redeem RPS 1 and RPS 2 and pay dividends because this would contravene the provisions of the Companies Act 2016 (" CA 2016");
b. Following the first defence, the plaintiff would not be entitled to the LAD, which is imposed on outstanding RPS 1 and RPS 2 principal and accrued dividends; and
c. The 1st Defendant's Letters were issued on a without prejudice basis, and are therefore
