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2024 MarsdenLR 1188
COURT OF APPEAL PUTRAJAYA
MOHAMED ZAINI MAZLAN, JCA
KATHRYN MA WAI FONG – Appellant
Versus
WONG KIE CHIE & ANOR AND OTHER APPEALS – Respondent
[Civil Appeal Nos: Q-02NCVC)(W)-42-01-2020 Q-02(NCVC)(W)-38-01-2020 Q-02(NCVC)(W)-39-01-2020 Q-02(NCVC)(W)-44-01-2020 Q-02(NCVC)(W)-41-01-2020 & Q-02(NCVC)(W)-43-01-2020]
The Duomatic principle allows for informal shareholder assent post-issuance of shares, contrary to the High Court's requirement for prior approval.
Headnote:(A) Companies Act 1965 - Sections 63, 132D(1), and 355 - Appeal regarding the validity of shares issued to deceased brother - High Court ruled that informal assent must precede issuance of shares - Court found that the Duomatic principle allows for informal assent post-issuance - Appeals allowed based on misapplication of law. (Paras 9, 10, 11, 21, 38)
(B) Duomatic Principle - The principle allows for informal assent to be considered valid if all shareholders agree, regardless of timing - The High Court erred in requiring prior assent for validity of share issuance. (Paras 19, 21, 36)
Facts of the case:
Disputes arose over shares issued to a deceased brother in family-owned companies, leading to claims of void issuance and validation by the widow. (Paras 2, 4, 6)
Findings of Court:
The High Court misapplied the Duomatic principle and failed to recognize informal assent by the shareholders. (Paras 11, 21, 38)
Issues: Whether informal assent can validate shares issued without prior approval and the application of the Duomatic principle. (Paras 10, 19)
Ratio Decidendi: The court held that the Duomatic principle applies regardless of when assent is given, emphasizing that informal assent can validate actions taken without formal approval. (Paras 21, 36)
Result: Appeals allowed; High Court's decisions set aside.
Introduction
[1] Six appeals came before us. All these six appeals were closely related as they pertained to disputes regarding family-owned entities, namely WTK Realty Sdn Bhd ('WTK Realty'), Southwind Plantation Sdn Bhd ('Southwind') and Ocarina Development Sdn Bhd ('Ocarina').
[2] These companies were primarily owned and run by three brothers. The dispute arose over shares issued to one who has since passed away. The remaining brothers claimed that the shares issued to the deceased brother were void and sought to nullify them. On the other hand, the deceased brother's widow had sought to validate the shares. The High Court had ruled in favour of the two brothers.
[3] The pivotal issues in these appeals are whether there were informal assent to the issued shares and, if there were, whether the assent must occur prior to the shares being issued. This will entail a discussion on the Duomatic principle derived from the case of Re Duomatic Ltd [1969] 2 Ch 365 .
Facts
[4] The late Wong Tuong Kwong ('Wong') was the patriarch of the Wong family and the founder of WTK Realty, which had expanded its subsidiaries and related companies over the years. Southwind and Ocarina were part of the WTK Realty conglomerate. The late Wong had three sons, Wong Kie Nai ('WKN'), Wong Kie Yik ('WKY') and Wong Kie Chie ('WKC'). As in most family-owned businesses, the affairs of WTK Realty and its related companies were managed by the three sons upon Wong's demise in 2004. WKC moved to Australia in the 80s to manage the siblings' businesses, while WKN and WKY remained here to manage WTK Realty and its related companies. WKN, WKY and WKC held equal shares in WTK Realty, Southwind and Ocarina. That was then, as the consternation now concerns the inequality of shares between the three brothers.
[5] The suits filed in the High Court were mainly concerned with the new shares issued to WKN in WTK Realty, Southwind and Ocarina as follows:
[6] WKN passed away in March 2013, leaving behind his widow, Kathryn Ma ('Kathryn'), a son and a daughter. Kathryn was appointed the personal representative, executrix and trustee of WKN's estate. She had requested that shares issued (set out in the table in the preceding paragraph) to WKN in these companies be registered in her name as the executrix of WKN's estate. WKC and WKY refused and commenced suits with respect to the issued shares in the same year of WKN's demise. In essence, they sought to nullify the issued shares because the issuances were in breach of s 132D(1) Companies Act 1965 (' CA 1965') as they were carried out without the shareholders' prior approval. In addition, WKC and WKY also alleged that some of the requirements under the companies' Articles of Association ('AA') were not complied with. The appellant reciprocated by filing her suits where she sought to validate the shares issued under s 63 and/or s 355 1965. Therefore, the flipside to the three suits commenced against her were her suits for validation. All six suits were tried jointly at the High Court . As these suits were commenced via Originating Summonses, some deponents testified orally and were subjected to cross-examinations.
[7] For convenience, these appeals shall be referred to as follows:
[8] The following orders were sought at the High Court against WKN in respect of the following appeals:
Appeal 42: WKC sought to nullify the issuance of 4,000,000 ordinary shares of WTK Realty allotted to WKN on 28 September 2007.
Appeal 38: Kathryn's application to validate the issuance of the 4,000,000 shares of WTK Realty to WKN under s 63 and/or s 355 CA 1965 and WTK Realty's AA.
Appeal 39: WKC and WKY sought to nullify the issuance of 3,000,000 ordinary shares of Southwind allotted to WKN on 5 July 2007.
Appeal 44: Kathryn's application to validate the issuance of the 3,000,000 ordinary shares in Southwind under s 63 and/ or s 355 CA 1965 and Southwind's AA
Appeal 43: WKC and WKY sought to nullify the issuance
