1. ) Chan Kok Thin @ Chan Kok Cheng v 1. ) Chan Yok Seng (JA-24NCC-27-10/2022)

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1 DALAM MAHKAMAH TINGGI MALAYA DI JOHOR BAHRU DALAM NEGERI JOHOR DARUL TAKZIM, MALAYSIA SAMAN PEMULA NO: JA-24NCC-27-10/2022 Dalam perkara berkenaan SON HUUT PLANTATION SDN BHD (No. Syarikat: 198801002492 (169848-V) Dan Dalam perkara berkenaan Seksyen 346 Akta Syarikat 2016 Dan Dalam perkara berkenaan Aturan 88 Kaedah 2 dan Aturan 92 Kaedah 4 Kaedah-Kaedah Mahkamah 2012

Lampiran

Lampiran 1, which was filed in 30.10.2022, is an action by PP under s.346(1) of the Companies Act 2016 (“CA”) or regularly known as minority oppression suit, against D1, D2 and D3, being directors and majority shareholders of D4. [3] Among the prayers, PP applied for D4’s Board of Directors Resolutions relating to the issuance and allotment of new shares of D4 and payment of D4’s dividends to D1, D2 and D3 be set aside and to be followed with other consequential orders consistent with s.346(1) CA. [4] Before Lampiran 1 is heard on the merits, there are two (2) interlocutory applications (Lampiran 3 and Lampiran 8) filed by the parties and were heard together by me. [5] On 08.08.2024, I had allowed Enclosure 3 and dismissed Enclosure 8, both with costs. [6] DD had since appealed to the Court of Appeal against both decisions. [7] Hence, these are my Grounds of Judgment for both Lampiran 3 and Lampiran 8. The applications [8] Lampiran 3 is an application by PP for an inter-parte interim injunction to restrain D1, D2 and D3 from using the money in D4 either for paying dividend or giving loans to themselves pending the disposal Lampiran 1. [9] Earlier, her Ladyship Judicial Commissioner Wong Mee Ling (now Judge) on 17.11.2022 had granted an ex-parte ad interim injunction for Lampiran 3 pending the disposal of Lampiran 3 by way of inter-parte. [10] Enclosure 8 on the other hand is an application by DD to set aside the said ex-parte ad interim injunction and if set aside for an inquiry for damages sustained by DD to be assessed. Salient facts [11] The facts that can be gathered from the cause papers and affidavits filed by the parties are as the following. [12] PP are the minority shareholders in D4. [13] D1, D2 and D3 are the directors and the majority shareholders in D4. [14] The parties are actually close relatives. P1 is a cousin to P2, P3, D1 and D2 which are among themselves siblings. D3 is the son of D1. [15] D4 was the registered proprietor of about 80 acres of land planted with oil palm trees and had no other business. [16] The total number of paid-up shares in the D4 was only 72,509 in June 2019. The breakdown of the shareholding at that time is as follows: (a) PP, as beneficial owners of 36,254 shares, own 49.999% of D4; and (b) D1, D2 and D3 together held the remaining 36,255 shares which were equal to 50.001% of the paid-up capital of the Company. [17] It is thus obvious that the difference in their shareholdings was only one (1) share and this was the original status quo. [18] The so-called oppressions as complaints by PP are the actions taken by D1, D2 and D3 to issue new shares of D4 which PP contended were for the purposes of diluting PP’s 49.999% shareholding in D4. [19] To put things into perspective, PP’s allegations are that D1, D2 and D3 had used their position as directors and their 0.002% majority in the shareholding of D4 to pass resolutions to issue new shares on two occasions, in 2019 and again in 2020. [20] For the first-round issuance of the said new shares in 2019, it is undisputed that PP had paid up the money required to take up the new shares allotted to them, to avoid having their 49.999% diluted. Hence, the 49.999% equity held by PP were maintained after the said first-round issuance. [21] For the second-round issuance in 2020, PP averred that while PP were ready to pay to take up the new shares allotted to them, they were misled by D1 into believing that the said second-round issuance would be cancelled. As a result, PP did not take up the allotted new shares. [22] In this regard, P1 alleged that D1 had agreed to cancel the second-round issuance because P1 had earlier agreed to D1’s proposal to sell all the lands belonging to D4 and also D1 to be paid commissions from such sales. On this, a handwritten letter dated 23.9.2020 (with translation by a former Court interpreter) sent by P1 to D1 after their discussion to cancel the second-round issuance and to sell off D4’s land, is exhibited by P1 in his affidavit (Lampiran 2, pg. 56-57). [23] P1 further stated firmly that PP would have taken up all the new shares allotted to them in the second-round issuance in 2020 if not for the said misleading act by D1. [24] PP alleged that D1 had subsequently taken up all those shares behind PP’s back. PP also alleged that D1 had failed to follow the necessary procedure relating to the filling of forms to apply for “Excess Shares”. [25] According to PP, the effect is serious to PP since D1 had thereby increased D1’s shareholding in D4 which stood at that time from below 50% to more than 80%, and had diluted PP’s shareholding in D4 from 49.999% to below 17%. [26] PP further alleged that the money raised by D4 through the first and second round of issuance was not for the purpose of D4’s business, but was laid kept in D4’s Fixed Deposit Accounts to earn interest. This fact can be obtained from the bank statements exhibited in D2’s affidavit dated 21.09.2023 (Enclosure 52) which was filed pursuant to a Discovery Order issued by Justice Wong Mee Ling on 11.09.2023. [27] On this, PP alleged that the money was not raised for D4’s business purposes but for ulterior motive to oppress PP by way of diluting PP’s shareholding. [28] PP also pointed out that within weeks after the second-round issuance, D1, D2 and D3 were actively trying to sell all D4’s lands. This, according to PP was intentionally done by D1, D2 and D3 and had prejudiced PP. [29] PP further averred that before the first-round of issuance of new shares in August 2019, P1 had 1,000 shares registered in his own name and the beneficial owner of 31,630 shares that he purchased from his late father Chan Teong Peng. In P1’s affidavit (page 27, Lampiran 2) P1 had furnished a Deed of Assignment cum Irrevocable Power of Attorney dated 05.04.2010 duly registered at the High Court Johor Bahru as proof for such purchase and P1’s beneficial ownership of the shares. [30] It is also alleged that by combining the number of shares, registered and beneficial, the total number of shares held by P1 is 32,630 shares which is equivalent to 43.622% shareholding in D4. In fact, one of the complaints by P1 is that DD have acted oppressively in delaying the registration for transfer of P1’s late father’s shares to P1’s name. [31] In defence, DD deny that they had passed the resolutions for the issuance of the new shares to dilute PP’s shares. DD maintain that as majority shareholder, DD have the right to issue the new shares. DD also challenge P1’s rights to sue them based on the said Deed of Assignment cum Irrevocable Power of Attorney. Analysis and decision [32] At the outset, it is firstly necessary to state the Court’s jurisdiction to grant an interim injunction, being preventive relief, as provided in s.51(1) of the Specific Relief Act 1950, which reads as follows: - “Temporary injunctions are such as are to continue until a specified time, or until the further order of the court. They may be granted at any period of a suit, and are regulated by the law relating to civil procedure.”. [33] The relevant civil procedure for an application for injunction can be found in Order 29 Rule 1(1) of the Rules of Court 2012 which provides as follows: - “(1) An application for the grant of an injunction may be made by any party to a cause or matter before or after trial of the cause or matter, whether or not a claim for the injunction was included in that party’s originating process, counterclaim or thirty party notice, as the case may be.”. [34] The principles upon which an interim injunction may be granted or otherwise can be distilled from the guidelines laid down by the English House of Lords in American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504 (“American Cyanamid”), where it was held that the applicant for an application of such must satisfy the court that: - (a) there are serious issues to be tried; (b) damages would not be an adequate remedy if the plaintiff succeeds at trial; and (c) the balance of convenience lies in granting the injunction sought. [35] The aforementioned principles have been applied in our courts in numerous cases, suffice to restate what the Court of Appeal had summed up in Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193 (pages 206-207) as follows: - “To summarise, a judge hearing an application for an interlocutory injunction should undertake an inquiry along the following lines: (1) he must ask himself whether the totality of the facts presented before him discloses a bona fide serious issue to be tried. He must, when considering this question, bear in mind that the pleadings and evidence are incomplete at that stage. Above all, he must refrain from making any determination on the merits of the claim or any defence to it. It is sufficient if he identifies with precision the issues raised on the joinder and decides whether these are serious enough to merit a trial. If he finds, upon a consideration of all the relevant material before him, including submissions of counsel, that no serious question is disclosed, that is an end of the matter and the relief is refused. On the other hand if he does find that there are serious questions to be tried, he should move on to the next step of his inquiry; (2) having found that an issue has been disclosed that requires further investigation, he must consider where the justice of the case lies. In making his assessment, he must take into account all relevant matters, including the practical realities of the case before him. He must weigh the harm that the injunction would produce by its grant against the harm that would result from its refusal. He is entitled to take into account, inter alia, the relative financial standing of the litigants before him. If after weighing all matters, he comes to the conclusion that the plaintiff would suffer greater injustice if relief is withheld, then he would be entitled to grant the injunction especially if he is satisfied that the plaintiff is in a financial position to meet his undertaking in damages. Similarly, if he concludes that the defendant would suffer the greater injustice by the grant of an injunction, he would be entitled to refuse relief. Of course, cases may arise where the injustice to the plaintiff is so manifest that the judge would be entitled to dispense with the usual undertaking as to damages (see Cheng Hang Guan & Ors v Perumahan Farlim (Penang) Sdn Bhd & Ors [1988] 3 MLJ 90). Apart from such cases, the judge is entitled to take into account the plaintiff’s ability to meet his undertaking in damages should the suit fail, and, in appropriate cases, may require the plaintiff to secure his undertaking, for example, by providing a bank guarantee; and (3) the judge must have in the forefront of his mind that the remedy that he is asked to administer is discretionary, intended to produce a just result for the period between the date of the application and the trial proper and intended to maintain the status quo, an expression explained by Lord Diplock in Garden Cottage Foods Ltd v Milk Marketing Board [1984] AC 130; [1983] 2 All ER 770; [1983] 3 WLR 143 and applied in Cheng Hang Guan. It is a judicial discretion capable of correction on appeal. Accordingly, the judge would be entitled to take into account all discretionary considerations, such as delay in the making of the application or any adequate alternative remedy that would satisfy the plaintiffs equity, such as an award of monetary compensation in the event that he succeeds in establishing his claim at the trial. Any question going to the public interest may, and in appropriate cases should, be taken into account. A judge should briefly set out in his judgement the several factors that weighed in his mind when arriving at his conclusion.”. [36] Next, this Court observes as trite principles that a company may issue new shares particularly for the purpose of raising the company’s capital. It is usually done by first passing a resolution to issue new shares to its existing shareholders proportion to the existing shareholdings. The basis for having such proportion fixed is to ensure fairness among the shareholders. Under normal circumstances, it is usually wise to take up new shares because the value of the company’s assets will increase over time resulting the shares in the company will be worth more than at the time when they were first incorporated. [37] Reverting to the present matter, it is undisputed that D4 owned lands that are of substantial value. In paragraph 5.9 of the submissions filed by the Plaintiffs’ counsel (Enclosure 32), it was pointed out that since the market price of D4’s 80 acres of land stood at RM180,000.00 per acre. Thus, D4 by that calculation should worth around RM14,400,000.00. [38] The fact that the value of D1’s shares are substantial now more than before can be inferred from the action by D1, D2 and D3 to pass out dividends of RM3.00 per share in October 2022. This means D4 is able to pay out RM3.00 for every RM1.00 share held by the shareholders, with surplus residues still in its coffers. [39] Further, from the documents discovered pursuant to the Discovery Order issued by Justice Wong Mee Ling, it would appear that some of D4’s land had been sold by D4 in 2022 for more than RM9 million. This means that by paying RM1.00 per share for the new shares, any shareholder in D4 can be expecting to make a gain of RM3.00 per share. [40] There also seems to be an undisputed fact that DD had started to sell D4’s lands within weeks after the second-round issuance in 2020. This to my mind would raise or infer some possibilities that D4 was attempting to make profits from the sale. Whilst making profits is the objective of most companies, but the alleged act by D1 which had misled P1 resulting to PP’s shares become diluted would certainly need to be further investigated to uncover DD’s overall motives for D4’s issuance of the new shares. [41] On the locus standi to sue, the said Irrevocable Power of Attorney appears to empower P1 to bring any action or other proceedings in respect of or affecting the shares registered under the name of Chan Teong Peng who was P1’s late father. Reference is made at Clause 4 of the said instrument (page 25 of Enclosure 2) which reads: - “4. The First Party (Chan Teong Peng) hereby appoints the Second Party CHANKOK THIN @ CHAN KOK CHENG and the lawful daughter of the Second Party CHAN LEE CHIN CHRISTINA and each of them (hereinafter called “The Attorney” and “Attorneys”) the attorney and attorneys for the First Party … to do and execute all acts following namely: (a) In the name of the First Party to sign and execute any contracts conveyances assignments transfers and instruments whatsoever pertaining to the Sale shares; to transfer the Sale shares to the Attorneys or either of them or to any other third party; (b) To bring or defend any action or other proceedings in respect of or affecting the Sale shares or any part thereof and to enforce any Court Order or judgment granted under such action or other proceedings.”. [42] Thus, in my view, although dilution of shares is neither illegal not unusual, the manner in which it was done under the circumstances had led to a serious issue to be tried in the main suit. i.e. Lampiran 1. [43] To recapitulate, it is undisputed that originally, the difference in the shareholding of PP and D1, D2 and D3 was only 0.002% (50.001% held collectively by D1, D2 and D3 versus 49.999% held collectively by PP). After the completion of the second-round issuance of the new shares, D1, D2 and D3 have increased their total shareholding to more than 83% while PP’s shareholdings have been diluted to below 17%. [44] Applying the principles laid out by the Court of Appeal in Keet Gerald Francis Noel John cited above, I find that the scale of balance must tilt in favour of PP so as to preserve the status quo until Lampiran 1 is heard and disposed of on its merits. [45] Thus, it is my judgment that the interim injunction as sought by PP I Lampiran 3 must be allowed to restrain D4 from paying out dividends or giving any loans to D1, D2 and D3 until the disposal of Lampiran 1. [46] It is further my finding that the need to preserve the status quo far outweighs the issue of adequacy of damages where more complications are foreseeable should the interim injunction not allowed. [47] As for PP’s undertaking to pay damages if it turns out that Lampiran 1 is not decided in PP’s favour, I find that the expressions as averred in para 3.1 of P1’s affidavit (Enclosure 2) would be sufficient to cover DD particularly when the interim injunction would have the overall effect of maintaining the monies in DD accounts. [48] On that score, I find the PP have passed the thresholds that had been laid down in Keet Noel (supra) for the purpose of Lampiran 3. In view thereof, I also do not find any merits in the application by DD to set aside the ex-parte ad interim injunction, save to say that all issues raised are more suited for Lampiran 1. Conclusion [49] In the upshot, I allowed Enclosure 3 for an interim injunction be issued as per the terms pleaded therein until the disposal of Lampiran 1 with usual undertaking by PP for damages. I also dismissed Lampiran 8 which is the application by DD to set aside the ex-parte ad interim injunction. Both orders are with costs. Dated: 10th FEBRUARY 2025 …………………………………………. (NOOR HISHAM BIN ISMAIL) Judge High Court, Johor Bahru Solicitors for the Plaintiffs/Applicants: Wong Wan Ting & Sin Jia Jing Messrs Gan & Lim 39, Jalan Tan Hiok Nee 80000 Johor Bahru Johor Solicitors for the Defendants/Respondents: Lay Zubin & Tan Hik Tao Messrs Zubin, Tao & Partners No 28A, Jalan Kundang 3, Taman Bukit Pasir, 83000 Batu Pahat, Johor. Cases referred to: 1. American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504; 2. Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193. Legislation referred to: 1. s.51(1) of the Specific Relief Act 1950; 2. Order 29 Rule 1(1) of the Rules of Court 2012.