Directors may be personally liable under s 181 for oppressive conduct, but circumstances must justify such liability, dependent on specific case facts.

Nallini Pathmanathan FCJ:

Introduction

[2] Historically, minority shareholders were relegated to the sole remedy of winding up a company under the just and equitable principle. But this single remedy was found to be both insufficient and drastic, resulting in the intervention of the legislature through the enactment of provisions in our company law statutes of various remedies. Therefore minority shareholders may resort to claims for oppression, discriminatory conduct, prejudice and mismanagement to redress the balance of power where majority rule takes on authoritarian or tyrannical hues.

[3] Section 181 of our then Companies Act 1965 ( CA 1965) and that is now s 346 of the Companies Act 2016 ( 2016) are both identical in form. This statutory provision comprises one of the broadest and most comprehensive statutory shareholder remedies available in the common law world. Section 181 (now s 346) provides for the broad involvement of the courts in fashioning a wide-ranging series of remedies for the beleaguered shareholder/s who are able to establish oppression, prejudice or discriminatory acts or omissions by those in control, generally the majority.

[4] Traditionally the court by way of redress, censures or regulates the majority so as to bring the matters complained of to an end, or provides a remedy to the grievance. Can such remedies be extended so as to devolve liability onto parties other than the majority (or the minority if they are in control), such as directors or third parties? That is the question and central issue before us in this appeal.

[5] More specifically, this appeal raises the issue of whether a director or a third party may be made liable in proceedings brought under s 181 CA 1965 (now s 346 of the 2016) where the directors (and third parties) of the company in issue are found to have acted in a manner detrimental to the minority shareholder.

[6] In the High court, the judge found that liability under s 181 CA 1965 was established against the majority shareholder alone, and dismissed the claim against the other defendants, who were directors and third parties. In other words, liability against the directors and third parties under s 181 1965 was dismissed. The court of Appeal upheld the findings of the High court. The basis for the refusal to extend liability to the directors, in essence, was that a director is an agent of a company and could not therefore be personally liable for the breaches or acts of the company, even in an oppression claim under s 181 1965 (and thereby s 346 2016). The appellant sought leave to appeal.

[7] Pursuant to leave granted 13 March 2019, the following questions of law arose for consideration before us:

Question 1

Whether the principle in Abdul Manaf Mohd Ghows & Ors v. Nusantara Timur Sdn Bhd, 1997 MarsdenLR 1670 (to the effect that a director is an agent of a company and is thereby not personally liable for the breaches or acts of the company) applies to proceedings under s 181 of the Companies Act 1965 (now s 346 of the Companies Act 2016 ) where the shareholder is itself a company and the acts of oppression and unfair dealings are derived from the mind and acts of the pr