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2016 MarsdenLR 1469
FEDERAL COURT (PUTRAJAYA)
SURIYADI HALIM OMAR, ABU SAMAH NORDIN, AZAHAR MOHAMED, BALIA YUSOF WAHI, AZIAH ALI, JJ
Zen Courts Sdn Bhd – Plaintiff
Versus
Bukit Jalil Development Sdn Bhd & Ors – Defendant
CIVIL APPEAL NO:02(f)-38-05/2015(W) & 02(f)-39-05/2015(W)
The phrase 'liberty to apply' in a buy-out order allows challenges to valuation procedures without altering the substantive agreement, reinforcing the importance of fair representation in determining share values.
Headnote:(A) Companies Act 1965 - Section 181 - Minority shareholder oppression - Petition filed seeking a buy-out of shares - Buy-out order detailed procedures for valuation and final determination by the court - Joint valuer appointed; dissatisfaction with valuation led to application for cross-examination - Court ruling emphasized that ‘liberty to apply’ refers only to procedures necessary to carry out the order, not to contest substantive valuation - Appeal granted, allowing cross-examination to determine final value. (Paras 1-27)
Facts of the case:
The appellant, as a minority shareholder, sought court intervention under Section 181 for an oppressive conduct claim. The buy-out order mandated the majority shareholder to purchase the appellant's shares based on an independent valuation. The appellant challenged the valuation provided by the joint valuer, calling for a higher assessment based on alternative appraisals. (Para 1)
Findings of Court:
Court allowed the appeal, ruling that the appellant could make representations regarding the valuation process and cross-examine the valuers, emphasizing this as a necessary aspect of ensuring a fair valuation process. (Paras 22-27)
Issues: Whether the phrase ‘liberty to apply’ in the buy-out order permits the cross-examination of the valuer and questions around the substantive nature of the buy-out order. (Paras 10-13)
Ratio Decidendi: The court held that ‘liberty to apply’ permits parties to seek further clarity or resolution on procedural aspects of the order without altering its substantive nature, thus permitting the appellant's challenge to the valuation. (Paras 12, 24-25)
Result: Appeal granted and High Court's orders set aside; matter remitted for further hearing. (Para 27)
| Table of Content |
|---|
| 1. buy-out order details for minority shareholder petition. (Para 1) |
| 2. joint valuer completed valuation for shares. (Para 2) |
| 3. dissatisfaction with valuation value and grounds for review. (Para 3 , 4 , 5) |
| 4. high court's decision and interpretation of 'liberty to apply'. (Para 6 , 7 , 8) |
| 5. questions of law accepted for determination regarding buy-out order. (Para 9 , 10 , 11 , 12 , 13) |
| 6. 'liberty to apply' concept and its restrictions in court orders. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 7. concerns regarding valuation methodology and its implications. (Para 21) |
| 8. court's final orders and maintaining essence of buy-out agreement. (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29) |
SURIYADI HALIM OMAR
JUDGMENT OF THE COURT
[1]The appellant, a minority shareholder of the 2nd respondent, had filed a petition under section 181Companies Act 1965nd respondent had acted in a manner oppressive in the affairs of the 1st respondent company. Vide order dated 27.3.2012 (the buy-out order) per exhibit YKT-1, the 2nd respondent as the majority shareholder, was ordered to buy-out the appellant’s 30% shareholding in the 1st respondent company. The buy-out order reads as follows:
i.That the 2nd Respondent shall buy-out all the 4,500,000 shares of the Petitioner in the 1st Respondent, at the price of those shares to be determined by an independent valuer on a ‘net tangible asset’ basis, such valuation to be as at the date of this Order.
ii.That the appointment of the independent valuer is to be mutually agreed by the Petitioner and the 2 nd Respondent and in the event these parties cannot agree to the independent valuer, either of those parties are at liberty to apply to Court to appoint a valuer.
iii.That the valuation is to be done within three (3) months from the date of this Order and the parties may make representations to the valuer as to the valuation.
iv.That the valuer shall file the valuation report into Court and the parties may apply.
v.That the Court will determine the final value of the shares and the terms of the buy-out order.
vi.That the costs of the valuation shall be borne and paid by the 1st Respondent.
vii.That should the 2nd Respondent be unable to proceed with the buy-out the Petitioner shall be at liberty to apply.
viii.That the costs of this Petition of RM50,000.00 which, includes all previous orders for costs in the cause, shall be paid by the 2nd and 3rd Respondents to the Petitioner.
ix.No order as to costs against the 1st Respondent.
x.That parties shall be at liberty to apply (emphasis supplied).
[2]Ferrier Hodgson MH Sdn Bhd (FHMH), which was appointed by both parties as the joint valuer, duly completed the valuation and subsequently filed the final valuation report into Court.
[3]However the appellant was not satisfied with the value of its 30% shareholding valued at RM35.97 million as assessed by FHMH. It claimed that the fair market value was RM262 million. Being dissatisfied, the appellant filed encl. 80 at the High Court to ‘make representations on the valuation report by way of cross-examination of the valuation experts’. The grounds of the application, inter alia, are as follows:
i.There are express provisions in the buy-out order that state that parties are at liberty to apply. In any case, the Court always retain the power to make further orders ancillary to or in relation to the valuation report.
ii.FHMH prepared a draft valuation report which invited parties to comment on it. The appellant specifically responded by counter offering a valuation done by Hartanah Consultants (Valuation) Sdn Bhd [Hartanah].
iii.The joint valuer (FHMH), applied the wrong considerations when it relied on the valuation report of Henry Butcher in respect of the value of the land. FHMH disregarded the higher valuation conducted by the appellant’s valuer i.e Hartanah, on the gross development value of the most priced asset of the 1st respondent’s company.
iv.The applicant averred that it would be just and reasonable that sufficient materi
