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2023 MarsdenLR 3032
COURT OF APPEAL (PUTRAJAYA)
AZIMAH OMAR, JJCA, NANTHA BALA, J, AZIZAH NAWAWI, J
Ho Yau Hong & Ors – Plaintiff
Versus
How Yaw Ming and another – Defendant
RAYUAN SIVIL NO W-02(NCC)(A)-1801-09/2021 AND W-02(IM)(NCC)-1488-08/2021
Isa Aziz Ibrahim (with Wong Yun Loong) (Isa Aziz Ibrahim) for the appellants.
Mak Lin Kum (with Layyin Teh bt Hassan) (Syed Ibrahim & Co) for the respondent.
A minority shareholder cannot claim oppression when they are complicit in the company's mismanagement as a Director. They must prove that the actions specifically benefited the majority at the minority's expense.
Headnote:(A) Companies Act 2016 - Oppression Action - The appellate court addresses whether the failure to convene AGMs and file audited accounts constituted oppression against a minority shareholder when such shareholder was a complicit Director - The court found that the Plaintiff's actions contributed to the alleged oppression - The claim for oppression does not stand as the Plaintiff, being a Director, was complicit in the very statutory non-compliances he raised - The court stressed that a litigant should not benefit from their own wrongdoing. (Paras 16-31)
(B) Threshold for Oppression - To establish minority oppression, it must be shown that the actions specifically benefited the majority and oppressed the minority - In this case, the Plaintiff could not prove oppression given his complicity in the governance of the company. (Paras 26-30)
Facts of the case:
The Plaintiff, a Director and minority shareholder, filed an Oppression Action against his brother and co-Director, claiming statutory non-compliances and misappropriation of funds by the majority. The Appellants contended that the Plaintiff was not innocent as he was involved in the company's management and transactions. (Paras 1-5)
Findings of Court:
The learned Judicial Commissioner’s decision on oppression was flawed as the Plaintiff’s complicity was not adequately considered - The court set aside the prior decision due to inclusion of complicit actions as a basis for the claim. (Paras 44-45)
Issues: Whether the Plaintiff’s claim of oppression was valid despite his role as Director - The legitimacy of his cause of action in minority oppression versus derivative action was also contemplated. (Paras 15-30)
Ratio Decidendi: The court ruled that statutory non-compliance could not be construed as oppression when the Plaintiff himself was complicit in the wrongdoing, underscoring that a party cannot benefit from their own breaches. (Paras 19, 23, 31)
Result: Appeals allowed and prior orders set aside, with costs awarded to the Appellants. (Paras 44-46)
| Table of Content |
|---|
| 1. overview of appeals and allegations of oppression. (Para 1 , 2 , 3 , 4 , 5) |
| 2. background on parties and business operations. (Para 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13) |
| 3. high court's findings on oppression. (Para 14 , 15) |
| 4. court's observations on plaintiff's complicity. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 5. threshold for proving minority oppression. (Para 24 , 25 , 26 , 27) |
| 6. issues surrounding mismanagement and proper remedies. (Para 28 , 29 , 30 , 31 , 32) |
| 7. court's assessment of transactions and signatory responsibilities. (Para 33 , 34 , 35 , 36) |
| 8. court's reasoning on responsibility and assumptions by parties. (Para 37 , 38 , 39 , 40 , 41 , 42) |
| 9. final judgment and order. (Para 43 , 44 , 45 , 46) |
Azimah Omar JCA:
GROUNDS OF JUDGMENT
A. FACTUAL BACKGROUND OF THE APPEAL
[1]There are two related appeals before us namely; (i) Rayuan Sivil No: W 02(NCC)(A)-1801-09/2021(“Appeal 1801”) and (ii) Rayuan Sivil No: W- 02(IM)(NCC)-1488-08/2021 (“Appeal 1488”). Appeal 1801 is regarding the Respondent’s Oppression Action against the Appellants via Originating Summons (OS Action) which was allowed by the learned Judicial Commissioner (JC) mainly on the grounds of statutory non-compliances against the Companies Act 2016 and alleged misappropriation of monies to other companies within the same family group of companies.
[2]Appeal 1488 arises out of the Appellants’ application to convert the OS Action into a writ action which was dismissed by the learned JC.
[3]The Appellants (respondents in the OS Action) contested against the oppression OS Action on the basis that it was not at all based on a genuine complaint of minority oppression but was instead a mala fide attempt to fashion some corporate wrongs (which are admitted by the Appellants) as a facade to spite some of the Appellants for the Respondent’s inability to participate in one of the more lucrative corporate arms in the family group of companies.
[4]The Appellants also strenuously contend that the Respondent is not innocent as he was complicit (as a company Director) in the admitted statutory non-compliances and was also the signatory to all the alleged transactions which the Respondent now alleges to be misappropriation. The Appellants also alleged that the Respondent’s allegation of misappropriation of monies intentionally omits the consideration of the fact that far larger sum of monies have also been paid into the Respondent’s company from the other corporate arms of the family group of companies.
[5]For a better understanding of the matter at hand, it is necessary to set out the facts of the case that led to the OS Action being filed. The parties will be referred to as they were before in the High Court below.
[6]The Applicant in the OS Action is Ho Yaw Ming (“the Plaintiff”). The Plaintiff is the eldest brother to the Ho Yau Hong (“the 1st Defendant / D1”). The Plaintiff and D1 are co-Directors and co-Shareholders of the 3rd Defendant, MHW Industrial Automation Sdn Bhd (“MIASB”) as well as the 4th Defendant, MHW Computer Services Sdn Bhd (“MCSSB”) together with another brother by the name of Ho Yau Way (“Gary”).
[7]MIASB and MCSSB were both incorporated circa 1992. It is undisputed that the management and business of both MIASB and MCSSB was entrusted to the 1st Defendant, although the Plaintiff also sat in the Board of Directors of both MIASB and MCSSB. For many years there was nary a complaint from the Plaintiff as he himself (together with the entire family) were all paid and enjoyed the fruits of the businesses of MIASB and MCSSB. After almost 20 years of prosperous business of MIASB and MCSSB, the 1st Defendant and Gary felt that it was an opportune time to venture into a new business (although this time without the involvement of the Plaintiff). Thereafter, Ebook Keeping Outsource Sdn Bhd (“Ebook”) was incorporated circa 2011.
[8]Although the Plaintiff had no shareholding or interest whatsoever in Ebook, the 1st Defendant still out of his own generosity
