James Foong JCA

(delivering judgment fo the court):

INTRODUCTION

This is an appeal against the decision of the High Court at Sandakan which dismissed the appellant’s originating petition in the matter of s 181Companies Act 1965

BACKGROUND AND COMPLAINTS OF THE APPELLANT

In order to understand the appellant’s grievances, it is necessary to set out the facts of this case in detail.

The appellant is 40 years of age and holds 600,000 fully paid up shares in a company known as Aerial Product Industries Sdn Bhd (API), the third respondent. This number of shares represents 40% of the total shareholding in API.

The first and second respondents are also shareholders of API each holding 300,000 and 600,000 fully paid up shares respectively. These represent 20% and 40% respectively of the total shareholding of API.

Formation and operation of API

API was incorporated in 1987 born out of an idea conceived at an informal tea session between the appellant’s father, Hoy Egg Sun (Hoy), the first and second respondents and another called Tan Chan Piao (who subsequently sold his shareholding in API to the second respondent and therefore is not involved in this dispute). The objective of API was to set up a plant to manufacture industrial gas in Sandakan to cater to Sabah’s needs.

Aside from Tan Chan Piao (who is no longer relevant) a little insight into the background of the parties behind the formation of API is necessary.

The first respondent was 60 years of age around the time of the trial. He was educated in England with a mechanical engineering degree. Before venturing out on his own, he had extensive experience in operating palm oil mills.

The second respondent around the time of trial was 68 years of age and is a mechanic with a comprehensive understanding of machines. He has set up a business called Malaysia Workshop to fabricate tanks, vessels and boilers as well as to undertake repairs on all sorts of engines.

The first respondent after leaving his salaried job in 1983 joined the second respondent as a partner in Malaysia Workshop. Hoy, in the meantime, was a steel supplier who came to know the first and second respondents in the course of his trade.

After forming API, these three business associates ‘in the time-honoured Chinese tradition of trust and mutual benefit and voluntary contribution for the well being of the Company which typified their relationship and conduct of the affairs of the Company’ proceeded to set up a factory for their enterprise.

At the beginning, the first respondent was assigned the task of securing relevant licences and permits for construction and operation of the plant. Hoy’s duty was to supply building materials for the plant and source relevant machinery from China. The second respondent with his knowledge of mechanics was entrusted with installing the machines and ensuring that they function properly at all times.

Once the factory was in production, the first respondent managed the day-today affairs of the company without remuneration and the second respondent looked after the operations of the factory. For this, he was paid a salary of RM3,500 per month. All major decisions of API were made by these three through informal consultation either over tea or by telephone. And to ensure mutual benefits be extended to family members of the parties, Hoy recommended his son-in-law’s accounting firm to handle API’s secretarial and accounting duties and this was duly accepted by the other two members.

Appointment of dealers

Since API’s core business was restricted to production, the retailing of its manufactured products was left to appointed dealers. But some of these dealers are closely associated with these three business associates. For example, Malaysia Workshop owned by the first and second respondents was appointed a dealer. Then there was the appointment of Palucky where Hoy was the proprietor. This was followed by the appointment of Perusahaan Kejuruteraan Am Sdn Bhd, a company where the first and second respondents and H