Chong Kak Fang v Rokonma (M) Sdn Bhd (WA-24NCC-366-07/2025)

CHONG KAK FANG (NRIC No: 471229-10-5005)

CHEONG KOK PIAU (NRIC No: 391119-08-5269) ...PLAINTIFFS

ROKONMA (M) SDN BHD [Company No: 198401010820 (123360-A)]

HARMONY PARADE SDN BHD [Company No: 199501000846 (330040-D)]

NG SENG KONG (NRIC No.: 540512-10-5867)

NG SENG HUAT (NRIC No.: 550704-10-5609)

NG SIOW HWA @ NG KOK HWA (NRIC No.: 390903-05-5077)

ONG AH WAN (NRIC No.: 490122-08-5546)

HOH TSU SOON (NRIC No.: 710319-08-5699)

CHUNG SIEW LAN (NRIC No.: 630304-08-5004) …DEFENDANTS GROUNDS OF JUDGMENT (Enclosure 1)

This case raises a familiar question in company law: when does the lawful exercise of majority power become oppression? The answer depends not on labels, but on substance. This Court is called to examine the commercial setting, the parties’ bargain, and the manner in which power was exercised to determine if a case of oppression has been made out by the Plaintiffs.

I have, before me, an originating summons brought pursuant to Sections 345 and 346 of the Companies Act 2016 (“the Act”) concerning the affairs of Rokonma (M) Sdn Bhd (“the Company”), a private limited company incorporated in 1984. Section 346 of the Act deals with what is commonly known as oppression against members, shareholders and/or debenture holders and the remedy which the Court may grant where oppression is established.

The 1st Plaintiff, Chong Kak Fang (“KF”), joined the Company as a director on 15 March 1987. The 2nd Plaintiff, Cheong Kok Piau (“KP”), was a director of the Company from its incorporation and was appointed Managing Director on 9 May 1994. Both Plaintiffs have remained shareholders of the Company. Each presently holds 80,000 ordinary shares, representing 8% each of the issued share capital.

The 3rd to the 5th Defendants are corporate representatives of the 2nd Defendant company. The 3rd Defendant is also the chairman of the Board of the Company. The 6th Defendant is another minority shareholder while the 7th Defendant is a proxy of the 6th Defendant. The 8th Defendant is a director as well as the CEO of the Company. The 8th Defendant is also the common-law wife of the 3rd Defendant.

In December 1987, the Company’s issued share capital was increased to 250,000 shares, held equally among five shareholders, including the Plaintiffs. In 1994, the Company underwent a significant capital restructuring when the Plaintiffs invited UMS Corporation Sdn Bhd to invest in the Company. UMS Corporation Sdn Bhd, through related entities, acquired a controlling interest in the Company. By 1996, the 2nd Defendant (“Harmony Parade Sdn Bhd”), a UMS-related entity, became the holder of 600,000 shares, representing 60% of the issued share capital.

Following the 1994 investment (or Arrangement as I shall allude to in the later part of this judgment), it was agreed that the Board of Directors would comprise five members, three representing the UMS block and two representing the Plaintiffs. One Ng Geok Tian became Chairman, and KP continued as Managing Director. This board structure remained in place for many years.

As at the material time, the shareholding structure of the Company stood as follows: Harmony Parade Sdn Bhd held 60%; the 1st Plaintiff 8%; the 2nd Plaintiff 8%; and three other individual shareholders held 8% each. The majority control of the Company has therefore resided in the Harmony Parade block.

It is not disputed that KP functioned as Managing Director from 1994 until 6 August 2024. It is also not disputed that in 2023 the Board passed written resolutions declaring substantial interim dividends, which were paid to shareholders, including the Plaintiffs.

There also exists on the Companies Commission record a Form 49 dated 8 July 2000 indicating a cessation relating to KP’s position. The existence and filing of this document are not disputed, although its legal significance is contested.

Against this factual backdrop, namely a company incorporated in 1984, majority control vesting in the UMS block since 1994, a long-standing board structure of three-to-two representation, and the Plaintiffs’ decades-long involvement in management, the Plaintiffs now allege that the affairs of the Company have been conducted in a manner oppressive to them as minority shareholders.

The dispute appears to have crystallised during the years 2023– 2024 in the following sequence: i. In 2023, the Board passed written resolutions declaring substantial interim dividends. ii. Discussions took place concerning generational succession and the future management of the Company. iii. Concerns were raised within the majority block regarding operational and financial matters. iv. In mid-2024, steps were taken by the majority shareholder to restructure management. v. On 6 August 2024, KP ceased functioning as Managing Director. vi. On 7 August 2024, new directors were appointed. vii. The 8th Defendant assumed executive control as CEO.

The Plaintiffs contend that these steps constituted a deliberate exclusion from management in breach of legitimate expectations.

The Defendants, on the other hand, say that these actions were justified exercises of majority power, taken in the interests of the Company following breakdown of trust and governance concerns.

The Plaintiffs’ case is anchored on the proposition that the Company, although incorporated as a private limited company, has in substance operated as a quasi-partnership since the 1994 investment by the UMS-related entities. The Plaintiffs emphasise that the 2nd Plaintiff was a founder of the Company and that both Plaintiffs had been deeply involved in its management since the 1980s. Even after UMS acquired a 60% shareholding in 1994, it is said that a mutual understanding was reached whereby operational management remained with the Plaintiffs while financial oversight and strategic matters were handled by the UMS representatives. This understanding, according to the Plaintiffs, crystallised into a 3– 2 board composition which endured for decades.

The Plaintiffs contend that this long-standing structure gave rise to a legitimate expectation of continued participation in management. They submit that the relationship between the parties was founded upon mutual trust and confidence and that the majority could not, in equity, rely strictly on its legal rights to exclude them from management without engaging the oppression jurisdiction under Section 346 of the Companies Act 2016.

The Plaintiffs further submit that the events of 2023 and 2024 marked a deliberate departure from that understanding. They allege that the majority embarked on a calculated strategy to consolidate control and marginalise them. In particular, they characterise the appointment of additional directors in August 2024 as “board packing” designed to dilute the historical 3–2 structure and entrench majority dominance.

Central to their complaint is the reliance by the majority on a Form 49 dated 8 July 2000, which indicates that the 2nd Plaintiff ceased to hold the position of Managing Director. The Plaintiffs contend that they only became aware of this document in 2024 and that the 2nd Plaintiff never resigned. They submit that the document is suspicious and that it was improperly invoked to treat the 2nd Plaintiff as subject to retirement by rotation. According to the Plaintiffs, the Articles exempt a Managing Director from retirement by rotation, and the classification of the 2nd Plaintiff as retiring was therefore unlawful and oppressive.

The Plaintiffs also challenge the reappointment of SN Cheong and the appointment of the 8th Defendant as Chief Executive Officer. SN Cheong is the son of KP. He had held a senior executive role in the Company and was involved in the Company’s management. His position became contentious when the parties disputed whether his appointment or reappointment as Chief Executive Officer was a legitimate business decision or part of the wider restructuring complained of by the Plaintiffs. The Plaintiffs treat his reappointment and the subsequent declaration of the Plaintiffs’ retirement as part of the majority’s alleged scheme to marginalise them.

The 8th Defendant was appointed as a director of the Company on 7 August 2024 and later assumed the position of Chief Executive Officer. The Plaintiffs contest her appointment on the basis that she was aligned with the majority faction, lacked relevant experience in the Company’s manufacturing operations, and was installed as part of the alleged restructuring intended to displace the Plaintiffs from management. These steps, it is argued, formed part of a coordinated plan to subvert the established management structure.

Further, the Plaintiffs submit that the imposition of garden leave upon the 1st Plaintiff and the subsequent termination of both the Plaintiffs’ role were unjustified and formed part of the oppressive course of conduct. They maintain that the alleged financial irregularities cited by the Defendants are either misconceived or raised as a pretext to justify their removal.

Finally, the Plaintiffs contend that the Defendants’ control over financial information and corporate decision-making was weaponised to sideline them. The cumulative effect of these actions, it is said, demonstrates a visible departure from standards of commercial fairness and constitutes oppression within the meaning of Section 346.

The Defendants reject the Plaintiffs’ characterisation of the Company as a quasi-partnership. They submit that since 1994, when UMS-related entities acquired 60% of the issued shares, the Company has been a majority-controlled company in both law and practice. The Defendants argue that the 3–2 board structure reflected a commercial arrangement at the time of investment but did not entrench managerial rights or override the constitutional and statutory powers of the majority.

The Defendants deny that any legally binding agreement existed conferring immutable management rights upon the Plaintiffs. They submit that the Company has always operated through its Board and general meetings in accordance with majority rule, and that no equitable overlay displaces that structure.

In relation to the 1994 Arrangement, the Defendants advance two positions. First, they contend that even if such an arrangement existed, breach of a shareholders’ agreement does not automatically amount to oppression unless the Company is truly a quasi-partnership. Secondly, they submit that the Plaintiffs themselves fundamentally breached the 1994 Arrangement, thereby entitling the majority to treat it as discharged. In this regard, the Defendants rely on alleged resistance by the Plaintiffs to governance measures and raise concerns regarding financial management and trust.

With respect to the appointment of additional directors in 2024, the Defendants submit that these appointments were effected pursuant to the Company’s constitution and through properly convened meetings. They argue that appointment of directors is incidental to majority shareholding and that consolidation of control, without more, does not constitute oppression.

As to the “disputed” Form 49, the Defendants maintain that it was duly filed in 2000 and has remained on record with the Companies Commission for over two decades. They emphasise that the Plaintiffs did not promptly challenge its authenticity, did not lodge a police report, and did not commence rectification proceedings. The Defendants contend that corporate records must be treated as valid unless displaced by cogent evidence, and that the Plaintiffs’ belated challenge undermines their present objections.

The Defendants further submit that retirement by rotation and non-re-election are constitutional mechanisms applicable to directors and that the majority was entitled to vote against re-election. They argue that loss of office, even if unwelcome, does not constitute oppression.

On the appointment of SN Cheong, the Defendants contended that the reappointment was a corporate and employment decision made through proper governance channels and did not amount to oppression. Regarding the appointment of the 8th Defendant as CEO, the Defendants assert that this was a commercially justified decision taken in response to management uncertainty and governance concerns. They contend that the Court should not substitute its own assessment of managerial competence for that of the Board.

In relation to the garden leave and dismissal, the Defendants argue that these matters are properly characterised as employment disputes. Even if wrongful (which is denied), they submit that such matters do not automatically translate into oppression under Section 346 of the Act.

Finally, the Defendants contend that allegations concerning financial control and irregularities relate, at most, to potential wrongs to the Company. They submit that such complaints must be pursued, if at all, by derivative action rather than through the oppression jurisdiction.

In summary, the Defendants’ case is that the impugned conduct represents lawful exercises of majority power, commercially justified restructuring decisions, or employment-related disputes. Thus, none of these meet the statutory threshold of oppression or unfair prejudice.

Having considered the affidavits and submissions of the parties, I summarise the following as issues arising for determination: i. Whether the Company was, in substance, a quasi-partnership; and ii. Whether the 1994 Arrangement subsisted at the material time.

As for instances of oppressive conduct, the following require the determination of this Court whether these amount to oppressive conduct: i. Oppressive Conduct No. 1 – Alleged Board Packing Whether the appointment of additional directors in August 2024 amounted to improper “board packing” such that they unfairly prejudiced the Plaintiffs’ position as minority shareholders. ii. Oppressive Conduct No. 2 – Removal of the 2nd Plaintiff as Managing Director and Director Whether reliance on the Form 49 to treat the 2nd Plaintiff as retired by rotation was improper iii. Oppressive Conduct No. 3 – Reappointment of SN Cheong Whether the reappointment was procedurally valid or whether it was carried out for a collateral purpose. iv. Oppressive Conduct No. 4 – Appointment of the 8th Defendant as CEO Whether the appointment of the 8th Defendant was within the Board’s powers and motivated by legitimate corporate considerations or whether the appointment was designed to marginalise the Plaintiffs. v. Oppressive Conduct No. 5 – Garden Leave and Termination Whether the imposition of garden leave on the 1st Plaintiff and his subsequent termination was contractually and legally justified. vi. Oppressive Conduct No. 6 – Alleged Abuse of Financial Control Whether financial decisions taken by the majority were improper.

In addressing the issues for determination, the overarching consideration remains an investigation on whether the affairs of the Company were conducted in a manner oppressive, unfairly prejudicial, or unfairly discriminatory against the Plaintiffs within the meaning of Section 346 of the Act.

In particular, the Court is tasked into an inquiry on whether the conduct complained of departs from standards of commercial fairness, whether there is lack of probity or fair dealing, whether the conduct complained of constitutes merely the lawful exercise of majority power and whether the alleged wrongs, if proven, are wrongs to the Company rather than oppression of minority shareholders.

The governing principles are well settled. In Re Kong Thai Sawmill (Miri) Sdn Bhd [1978] 2 MLJ 227, the Federal Court held that oppression requires a lack of probity or fair dealing in the affairs of a company to the prejudice of members. Mere dissatisfaction with majority decisions is insufficient.

In Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, the House of Lords recognised that equitable considerations may restrain strict legal rights where the company bears quasi-partnership characteristics. The usual indicia include mutual confidence, an understanding of participation in management, and restrictions on exit.

In O’Neill v Phillips [1999] 1 WLR 1092, Lord Hoffmann emphasised that unfairness must be applied judicially and must be rooted in an agreement or equitable understanding. The Court is not concerned with subjective disappointment or with rewriting the parties’ corporate bargain.

The authorities therefore require this Court to distinguish between the lawful exercise of majority power and the inequitable abuse of that power. Analysis and Decision Is the Company a Quasi Partnership?

The question whether a company is operated as a quasi-partnership is one that is inherently fact sensitive. In Ebrahimi v Westbourne (supra), the House of Lords considered what amounts to quasi-partnership by considering the following non-exhaustive elements: i. an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company; ii. an agreement, or understanding, that all, or some (for there may be ‘sleeping’ members), of the shareholders shall participate in the conduct of the business; iii. restriction upon the transfer of the members’ interest in the company - so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.

Having carefully considered the submissions of the parties and the applicable authorities, I am unable to conclude that the Company is a company in the nature of a quasi-partnership.

First, there is no evidence that the Company was formed out of a pre-existing partnership. The Defendants rely on WTK Realty Sdn Bhd v Kathryn Ma Wai Fong and another appeal [2025] 3 MLJ 401, for the proposition that whether a company was started as a partnership is a relevant consideration in determining whether it is properly characterised as a quasi-partnership. I accept that this is a relevant, though not a conclusive factor.

In the present case, the Company was incorporated from the outset as a private limited company and has operated as such for decades. It was not a partnership subsequently clothed with corporate form.

More importantly, its shareholding structure reflects a clear and enduring majority-minority divide. Harmony Parade holds 60% of the issued shares. The Plaintiffs each hold 8%. This is not a situation of equality, near-equality, or parity of control. It is a structured majority-controlled company. This distinguishes the present case from the classic quasi-partnership paradigm.

The existence of a dominant majority shareholder is not, in itself, fatal to a quasi-partnership finding. However, in the present case, it underscores that the commercial reality of the Company has always been one governed by majority rule.

Secondly, the evidence demonstrates that the Company has consistently operated through formal corporate governance mechanisms. Directors retire by rotation pursuant to the Articles. Re-election occurs at general meetings. Board resolutions determine policy and management. In addition, the undisputed affidavit evidence shows that the shareholding of the Company has changed no less than four times over the years. All these, to my mind, are inconsistent to the allegation that the Company was either established or continued as a partnership or quasi-partnership.

The Plaintiffs’ removal from the Board did not occur through clandestine manoeuvres or informal exclusion. It occurred through the constitutional process of retirement by rotation and subsequent failure to secure majority support for re-election.

In a quasi-partnership, equity may intervene where majority power is deployed to defeat a foundational understanding of joint management. However, there must first be proof of such understanding. In the present case, I find no sufficiently certain or binding agreement that the Plaintiffs were entitled to perpetual or entrenched participation in management.

The fact that the Articles permit removal or non-re-election by ordinary resolution weighs strongly against any claim that management participation was immutable.

The Plaintiffs place significant reliance on the so-called 1994 Arrangement concerning board composition. Even assuming that such an arrangement existed, it was not incorporated into the company’s constitution. It did not override the Articles. It did not confer irrevocable or entrenched board representation.

A breach of a shareholders’ understanding, without more, does not convert a company into a quasi-partnership. Nor does it transform every departure from past practice into oppression.

In the absence of clear evidence that the 1994 Arrangement formed the equitable substratum of the association, such that the Company was continued solely on that basis, I am unable to elevate it into a quasi-partnership foundation.

The Ebrahimi indicators which I discussed in the earlier part of my judgment for the existence of a quasi-partnership are personal relationship involving mutual confidence, an understanding of joint participation in management, and restriction upon the transfer of the members’ interest in the company. None of the indicia has been sufficiently established in the case before me.

It bears emphasis that not every company with long-standing directors and familial ties is a quasi-partnership. To hold otherwise would risk eroding the fundamental principle of majority rule in company law.

The Plaintiffs’ complaint ultimately arises from their loss of managerial control following majority dissatisfaction with their conduct. That may give rise to personal disappointment or commercial grievance. It does not, without more, convert the Company into a quasi-partnership.

The constitutional framework always contemplated the possibility that a director might fail to secure re-election. The Plaintiffs participated in that framework for years. They cannot now disavow it merely because the majority has exercised rights long embedded in the Articles.

It is therefore my finding that having regard to the Company’s incorporation and structure, the clear majority shareholding, the operation of formal constitutional mechanisms, the absence of a binding and foundational understanding guaranteeing entrenched participation and the insufficiency of evidence satisfying the Ebrahimi elements, the Company is not a company in the nature of a quasi-partnership.

It follows that the Plaintiffs’ claim cannot be advanced on the footing that equitable considerations override the company’s constitution. Once I find that the Company is not a quasi-partnership, the Plaintiffs cannot elevate an alleged breach of the 1994 Arrangement into oppression merely by describing it as a legitimate expectation.

In Queensway Nominees (Asing) Sdn Bhd & Ors v ISM Sdn Bhd and another appeal [2025] 5 MLJ 467, the Court of Appeal held that where no quasi-partnership is at play, the company is governed by its constitution and the Companies Act, and breach of a shareholders’ agreement does not by itself sustain an oppression action (see also: Jet-Tech Materials Sdn Bhd & Anor v Yushiro Chemical Industry Co Ltd & Ors [2013] 2 MLJ 305).

The matter before me must therefore be analysed strictly within the framework of Section 346 of the Act, without the superimposition of quasi-partnership principles.

For completeness, and even assuming the 1994 Arrangement had sufficient legal and equitable force, I would nevertheless find that the Plaintiffs’ own conduct undermined reliance upon it. The 1994 Agreement, as relied upon by both parties, provided for a structured governance framework. There was a 3–2 Board composition, allocation of operational control to the Plaintiffs and financial oversight by UMS representatives.

The Defendants’ evidence demonstrates that following the demise of key UMS representatives, the Board was reduced, in 2022, to a 2–2 composition. UMS lost both a seat and Chairmanship of the Company. The majority then sought, at the Board meeting of 7 November 2023, to appoint a Chairman and an additional director in order to restore the historical 3–2 balance.

The Plaintiffs, surprisingly, and in full knowledge of the 1994 Arrangement which they trumpet now, opposed both resolutions, resulting in a deadlock. The Plaintiffs take the position that their opposition to the appointment was because the 3rd Defendant was inexperienced to hold the position of Chairman of the Board. I find that to be a feeble excuse because UMS is a majority shareholder. It was entitled to exercise its commercial judgment in nominating and having the 3rd Defendant appointed to the Board.

Now, if the 1994 Arrangement is properly characterised as embodying a continuing obligation to maintain the agreed 3–2 structure then, the Plaintiffs’ refusal to facilitate restoration of that structure may reasonably be construed as repudiatory. The veto was not a mere disagreement over operational detail. It prevented the reinstatement of the very governance equilibrium which the Plaintiffs themselves rely upon as foundational. It is therefore open to conclude that the Plaintiffs’ conduct evinced an intention no longer to adhere to the structural terms of the 1994 Arrangement.

On that alternative footing, I find that such conduct goes to the root of the agreement.

Where a fundamental breach is established, the innocent party is entitled to elect to treat the agreement as discharged. On the Defendants’ version of events, the Plaintiffs utilised the temporary parity on the Board to block restoration of majority representation. They thereby prevented implementation of the agreed governance framework. The majority thereafter exercised shareholder power at general meetings to restructure the Board. Such an exercise can hardly be faulted.

The sequence of events I have narrated supports an inference that the majority treated the 1994 Arrangement as no longer operative and acted on that basis. Once discharged, the arrangement no longer constrained the majority’s exercise of its statutory and constitutional powers. The Company reverted fully to governance under its constitution and the Companies Act 2016.

In that scenario, I hold that the majority was entitled to appoint additional directors at general meeting, decline to re-elect directors retiring by rotation and consolidate board representation in accordance with shareholding strength. Such exercise of majority power in accordance with the Articles, without more, does not, in my view, amount to oppression.

Assuming discharge, the Plaintiffs can no longer rely on the 1994 Arrangement as the foundation of any legitimate expectation of entrenched participation in management. The case of O’Neill v Phillips (supra) is instructive in this regard. In O’Neill, Lord Hoffmann quoted his earlier decision in Re Saul D Harrison & Sons plc [1995] 1 BCLC 14 at 19 where His Lordship used the term 'legitimate expectation', borrowed from public law, as a label for the 'correlative right' to which “a relationship between company members may give rise in a case when, on equitable principles, it would be regarded as unfair for a majority to exercise a power conferred upon them by the articles to the prejudice of another member”.

However, in my view, a legitimate expectation is not founded merely on disappointment or past practice. It must arise from an agreement or understanding which equity would enforce. In this case, the Plaintiffs’ long involvement in management does not, without more, confer an entrenched right to remain directors or managers irrespective of the majority’s voting power.

Absent quasi-partnership or subsisting equitable understanding, the Company must be analysed as a conventional majority-controlled corporate entity. In such a structure, directors serve subject to re-election. Majority shareholders are entitled to determine board composition.

It follows that loss of managerial office does not per se constitute oppression. The Plaintiffs’ removal or non-re-election, even if abrupt or unwelcome, would therefore be a lawful consequence of majority rule.

Furthermore, if the majority’s actions were taken in response to bona fide concerns regarding alleged financial irregularities or loss of trust, the Court will not substitute its commercial judgment for that of the majority, provided the power was exercised for a proper purpose.

On this alternative footing, I find that the restructuring of the Board and the refusal to re-elect the Plaintiffs would be legally justifiable and not oppressive.

If the Company is not a quasi-partnership, and if the 1994 Arrangement has been discharged by fundamental breach, the legal analysis becomes straightforward in that the Company is governed strictly by its constitution. Shareholder voting power prevails and equitable constraints are significantly weakened.

In that event, the Plaintiffs’ complaint reduces to dissatisfaction with the outcome of a lawful shareholder vote which is a matter insufficient to ground relief under Section 346 of the Act.

Accordingly, even if I am wrong in my primary finding that the 1994 Arrangement did not create an entrenched equitable substratum, I would still find that the Plaintiffs’ veto amounted to conduct inconsistent with the continued operation of that Arrangement. It in fact amounts to a fundamental breach of the 1994 Arrangement.

The majority validly elected to treat the Arrangement as discharged. It follows then that the subsequent exercise of majority power to restructure the Board and refuse re-election of the Plaintiffs was legally justified and cannot, without additional inequitable features, amount to oppression. Have the Plaintiffs Made Out a Case for Oppression?

The Plaintiffs characterise the Defendants’ conduct as “board packing”, alleging that the majority deliberately appointed additional directors aligned to them in order to entrench control and marginalise the Plaintiffs. The factual foundation of this complaint centres on the appointment of a Chairman through an EGM, the appointment of additional directors aligned with the majority faction and the resulting shift in board composition following the non-re-election of the Plaintiffs.

The Plaintiffs contend that these actions disrupted the agreed 3–2 equilibrium established under the 1994 Arrangement and thereby constitute oppressive conduct.

I am unable to agree.

As analysed earlier in this judgment, the 1994 Arrangement cannot be relied upon by the Plaintiffs as a subsisting equitable foundation of governance.

On the evidence before me, the Plaintiffs themselves fundamentally breached the 1994 Arrangement by vetoing the restoration of the 3– 2 composition at the Board meeting of 7 November 2023 and refusing to facilitate the appointment of replacement directors to restore that structure.

Since the 1994 Arrangement was discharged by reason of that breach, it ceased to operate as a constraint upon the majority’s exercise of corporate powers. Once discharged, the governance of the Company reverted strictly to its constitution and the Act.

The Plaintiffs cannot simultaneously rely on the 1994 Arrangement as the basis of legitimate expectation while repudiating its operative structure when it no longer suited them. The Court abhors conduct which is Protean in nature with the Plaintiffs using the 1994 Arrangement when it suits them and discarding the same when it does not.

As for the exercise of majority power at General Meeting, the impugned appointments were effected through Resolutions passed at general meeting and voting based on shareholding strength. The majority shareholder holds 60% of the shares. The Plaintiffs collectively hold a minority stake.

It is a foundational principle of company law that majority shareholders are entitled to determine board composition through properly convened general meetings, provided that such power is exercised bona fide and within the constitution. The mere consolidation of control by a majority does not, without more, amount to oppression. If authority is needed for this trite proposition, one need only have recourse to Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549, where the Federal Court succinctly held: Jurisprudence followed the general path of non-interventionism in the internal management of company matters, given the existence of the twin corporate law principles of majority rule and the separate legal personality. Majority rule supports the position that it is legitimate for a majority of the shareholders to control the company through the appointment of directors, who in turn, have the responsibility of running the business of the company. If the majority are unhappy with the directors then they oust them. If they are prepared to overlook the wrong, then the majority principle dictates that it is not for the court to interfere with that decision of the majority (Foss v Harbottle (1843) 2 Hare 461; 67 ER 189).

The Court does not sit to equalise power between majority and minority shareholders. It intervenes only where the majority’s conduct is tainted by lack of probity, bad faith, or a visible departure from standards of fair dealing.

On the allegation of “board packing”, that label may be rhetorically forceful but legally neutral. Appointing additional directors aligned with the majority is not unlawful per se. It becomes problematic only where it is done to appropriate company assets, to perpetrate fraud, in breach of a subsisting equitable arrangement or it amounts to a diversion of corporate opportunity.

On the facts before me, the appointments were made through valid and operative shareholder resolutions. This change in board composition is a consequence of majority voting power, not evidence of commercial unfairness.

The Plaintiffs’ grievance, at its core, is that the Board no longer reflects the historic 3–2 balance and that they have been excluded from management. However, once the 1994 Arrangement is no longer operative, there is no entrenched right to continued board representation. Neither is there an immutable governance equilibrium nor equitable guarantee of managerial participation. The Act does not protect a minority from losing influence. It protects against unfair prejudice.

In this case, the majority’s actions reflect an exercise of voting power consistent with their shareholding position. Absent proof of bad faith or improper purpose, such exercise falls squarely within the doctrine of majority rule.

Thus, having regard to the discharge of the 1994 Arrangement by the Plaintiffs’ own conduct, the constitutional framework governing appointment and removal of directors, the lawful exercise of majority voting power at general meeting and the absence of cogent evidence of lack of probity or improper purpose, I find that the alleged “board packing” is, in substance, an instance of majority rule in operation.

My analysis in this regard is consonant with the Federal Court’s decision in Jet-Tech Materials Sdn Bhd & Anor (supra). There, as here, the complaint included the use of majority power to affect board composition contrary to an alleged shareholders’ arrangement. The case demonstrates that the use of majority voting power, even where it alters control of the board, is not without more oppression. The Court must still be satisfied that there is conduct relating to the affairs of the company which is lacking in probity or commercially unfair.

Here, the appointments were effected through shareholder resolutions. The 1994 Arrangement did not prohibit additional appointments, nor was it incorporated into the constitution. Once I find that the Company is not a quasi-partnership, it continues to be governed by its constitution and the Act. The alleged “board packing” is therefore, in substance, the operation of majority rule. It may have reduced the Plaintiffs’ influence, no doubt, but that does not amount to oppression.

It follows that Oppressive Conduct No. 1 has not been made out. Oppressive Conduct No. 2: Unfair Removal of the 2nd Plaintiff as

The Plaintiffs contend that the authenticity of Form 49 is in doubt and that reliance upon it is therefore improper. With respect, this contention is unsustainable on the evidence before the Court.

An irregular filing does not, without more, amount to oppressive conduct directed at a minority shareholder. Oppression is concerned with substantive unfairness in the exercise of corporate power; not mere documentary irregularities.

Even assuming that there are questions regarding the form’s provenance or filing history, the complaint concerns compliance with statutory filing requirements and corporate records. Such matters, if irregular, are wrongs to the Company, capable of rectification through statutory mechanisms and/or remediable through derivative proceedings or regulatory enforcement.

First, the Plaintiffs have not pleaded, nor seriously pursued, an allegation that the Form 49 was forged, fabricated, or fraudulently filed. No forensic challenge was mounted. No police report was lodged. No rectification proceedings were commenced. No application was made under the Act to expunge or correct the register.

A party who genuinely alleges falsification of statutory records is expected to take prompt and decisive steps. The absence of any such action is telling.

Secondly, the Defendants have produced contemporaneous corporate records demonstrating that the Form 49 was duly lodged and reflected in the company’s filings. The Plaintiffs’ challenge, as framed, is speculative rather than evidential.

Thirdly, a statutory filing made to the Registrar of Companies carries presumptive regularity unless displaced by cogent evidence. Bare doubt is insufficient. The Plaintiffs have not discharged the evidential burden necessary to displace that presumption.

Fourthly, even if procedural irregularities in filing were assumed for the sake of argument, such irregularities would constitute a matter of corporate compliance, a potential wrong to the Company, rather than personal oppression of the Plaintiffs as shareholders.

Oppression requires conduct that is commercially unfair or lacking in probity. A documentary filing dispute, unaccompanied by proof of fraud or dishonesty, does not meet that threshold.

In this case, the Plaintiffs’ failure to seriously impugn the Form 49, whether through regulatory complaint, rectification application, or forensic challenge, undermines the weight of their present assertion. The Court cannot treat a speculative doubt as evidence of oppressive manipulation.

Accordingly, I reject the contention that the existence or reliance upon Form 49 constitutes oppressive conduct.

The Plaintiffs further complain that the majority shareholders used the Form 49 and constitutional provisions to treat the 2nd Plaintiff as retiring by rotation.

Retirement by rotation is expressly provided for in the Articles. Directors are subject to re-election at general meeting. In a conventional company governed by majority rule, non-re-election is a lawful incident of corporate governance. Loss of office does not per se constitute oppression.

Absent proof that the process was a sham, fabricated, or exercised for an ulterior purpose wholly unrelated to corporate governance, the application of retirement-by-rotation provisions is not oppressive. Even if harsh in consequence, it is a mechanism long embedded in the constitution.

In the final analysis, my reading of the authorities do not support the Plaintiffs’ contention that the 2nd Plaintiff possessed an entrenched right in any event to remain in management irrespective of the Company’s constitutional mechanisms. O’Neill v Phillips (supra) makes clear that unfair prejudice does not arise merely because a shareholder loses managerial office. There must be breach of an agreement or equitable understanding making it unfair for the majority to insist upon strict legal rights. Here, the Articles of the Company expressly contemplated retirement by rotation and shareholder voting.

In view of the reasons I have given, I find that Oppressive Conduct No. 2 has not been made out.

In Re Kong Thai Sawmill (supra), the Court held that in oppression cases, the complaint must identify and prove "oppression" or "disregard". The mere fact that one or more of those managing the company possessed a majority of the voting power and, in reliance upon that power, made policy or executive decisions, with which the complainant did not agree, was not enough. There must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder was entitled to expect before a case of oppression could be made out. Similarly, "disregard" involved something more than a failure to take account of the minority's interest: there must be awareness of that interest and an evident decision to override it or brush it aside or to set at naught the proper company procedure.

The Plaintiffs characterise the reappointment of SN Cheong and declaration of their retirement as “deliberate” and calculated. However, board composition is determined either at Board level in accordance with constitutional authority; or at general meeting by shareholder vote.

On the facts and evidence before me, the re-appointment and retirement were exercises of majority voting power. The reappointment of SN Cheong, viewed objectively, was a corporate management decision. Even if the Plaintiffs disagreed with the wisdom of that decision, disagreement over management appointments does not, without more, establish oppression.

The Court does not intervene merely because the majority consolidates its control. The principle of majority rule is foundational. Oppression arises not from dominance per se, but from abuse of dominance.

If the appointments were made pursuant to constitutional powers and approved by shareholders in general meeting, they cannot be impugned as oppressive absent additional inequitable features. The Plaintiffs’ grievance here is, in substance, dissatisfaction with the outcome of majority voting. That does not suffice.

I therefore find that Oppressive Conduct No. 3 has not been made out. Oppressive Conduct No. 4: Appointment of the 8th Defendant as

The Plaintiffs contend that the 8th Defendant was unqualified and that her appointment subverted management. The Plaintiffs say the 8th Defendant’s poor leadership “negatively impact the value and stability of our shareholding”.

Questions of suitability and commercial competence fall squarely within the domain of business judgment. The Court is not a supervisory board of directors. It does not evaluate whether a particular CEO is commercially wise or commercially optimal.

Even if the appointment were unwise, or even nepotistic, that does not automatically translate into oppression. Unless it is shown that the appointment was a sham, it was intended to siphon company assets or it constituted a clear departure from standards of probity, the Court will not second-guess board-level managerial decisions.

At most, such matters may constitute alleged breaches of fiduciary duty. Complaints of leadership infirmity affecting the value of shareholding, as admitted by the Plaintiffs, visits harm, if any, upon the Company. In such instance, it amounts to wrongs to the Company, not personal oppression. If the harm is to the Company alone, a derivative action is the appropriate cause of action [see: Low Cheng Teik & Ors v Low Ean Nee [2024] MLJU 2174 (FC)].

I therefore find that Oppressive Conduct No. 4 has not been made out.

The placement of the 1st Plaintiff on garden leave is framed as unjustified and humiliating.

However, the Defendants submit that this occurred in the context of serious concerns regarding governance and alleged financial irregularities. Certain Indian expatriates working for the Company were not paid their contractual salaries. It was subsequently found that overtime payments were fabricated to compensate the overdue salaries. Subsequent investigations revealed a scheme where salaries of the expatriates were deducted and paid into a joint bank account held under the, among others the names of the Plaintiffs. The fact that the monies went into this bank account was admitted by KF. KF’s subsequent explanation to the Board of the Company contained serious discrepancies. KF then volunteered to be placed on garden leave while the Company undertook an investigation of this incident.

The evidence with regard to the issue leading to the garden leave shows that these did not arise in a vacuum. The Board had expressed concerns regarding governance and expatriate salary issues, legal advice was sought, and management restructuring discussions were already underway. In that context, the decision to place the 1st Plaintiff on garden leave cannot automatically be characterised as lacking in probity merely because the Plaintiffs dispute the underlying allegations.

An employer company is entitled, in appropriate circumstances, to suspend or place an executive on garden leave pending investigation or restructuring. Such action, even if contested, is an employment or management decision.

Oppression is not established merely because an executive shareholder is removed from active management. The Court must distinguish between Employment rights and Shareholder rights. Garden leave affects the former, not the latter.

The Plaintiffs further complain of wrongful dismissal. Even assuming wrongful termination, that claim lies in contract or employment law. A breach of an employment contract, without more, does not amount to oppression unless it is part of a broader scheme to unfairly prejudice a shareholder’s proprietary interest.

The Defendants contend that the removal was justified and commercially necessary. At its highest, therefore, and without descending into the merits of the contention, this dispute concerns whether there was cause for the removal and whether procedures for removal were followed. Such matters do not automatically cross the threshold into oppression.

In my judgment, Oppressive Conduct No. 5 is fundamentally an employment and management dispute rather than shareholder oppression. Unfair prejudice is not established merely because a shareholder loses managerial office or employment (O’Neill v Phillips – supra). There must be breach of an enforceable equitable understanding making it unfair for the majority to insist upon strict legal rights.

Once I have found that the Plaintiffs possessed no entrenched equitable entitlement to perpetual management participation, the imposition of garden leave and subsequent dismissal fall primarily within the sphere of employment and corporate governance. Further, applying Re Kong Thai Sawmill (Miri) Sdn Bhd (supra), I am unable to identify lack of probity or unfair dealing in the conduct complained of. The evidence demonstrates that the Board’s actions arose in the context of governance concerns and restructuring discussions. Whether those concerns ultimately justify dismissal is not the issue before this Court. The oppression jurisdiction is not a substitute for employment remedies. Disputes concerning management control and executive removal do not automatically constitute oppression merely because the affected individuals are also shareholders (see: Jet-Tech Materials Sdn Bhd v Yushiro Chemical Industry Co Ltd [2013] 2 MLJ 305).

I therefore find that Oppressive Conduct No. 5 has not been made out.

The Plaintiffs allege abuse of financial control. Allegedly, the 8th Defendant’s remuneration package was not discussed in any meeting and details of certain payments made by the Company were not disclosed to the Plaintiffs.

In my view, financial management decisions, including control of accounts, signatories, remuneration, and expenditure, are matters entrusted to directors under the Articles. If mismanagement or misappropriation is alleged, that is quintessentially a wrong to the Company. The proper claimant rule will then apply as such claims belong to the Company and are ordinarily pursued via derivative action.

Oppression requires more than mismanagement. It requires unfair prejudice to the shareholder qua shareholder.

No clear evidence has been shown that financial control was exercised to expropriate the Plaintiffs’ proprietary interests or to divert assets for personal gain in a manner amounting to unfair prejudice.

In my judgment, Oppressive Conduct No. 6 does not establish oppression within Section 346 of the Act. The Court must identify lack of probity or fair dealing directed at members in their capacity as members. The Plaintiffs’ complaints concerning financial control, expatriate salary payments, and management of company funds do not demonstrate diversion of assets, expropriation of shareholder value, or unequal treatment of shareholders. At their highest, the allegations concern internal management and potential corporate wrongs for which the proper claimant would ordinarily be the Company. The Court must guard against converting the oppression jurisdiction into a general supervisory review of business conduct.

In any event, the evidence before this Court also demonstrates that substantial dividends were declared and paid to all shareholders, including the Plaintiffs, in 2023. The Plaintiffs have therefore failed to demonstrate unfair prejudice to their proprietary interests as shareholders.

I therefore find that Oppressive Conduct No. 6 has not been made out.

Even if the Plaintiffs’ allegations are assumed to be true at their highest, many of the complaints concern alleged breaches of duty owed to the company. Others concern employment disputes. The remainder arise from the lawful exercise of majority voting power.

Oppression under Section 346 is not established merely because long-standing directors are removed, majority shareholders consolidate control, management decisions are altered or employment relationships are terminated.

Absent proof of bad faith, lack of probity, or visible departure from standards of fair dealing in the shareholder relationship, the threshold for oppression is not met.

In the case before me, each pleaded head of Oppressive Conduct No. 2 to No. 6, even if proven, either constitutes a wrong to the company, falls within the legitimate exercise of majority power or sounds in employment law rather than shareholder oppression.

For these reasons, the claim for relief under Section 346 of the Act fails on all pleaded grounds. Even if the 1994 Arrangement Subsisted

For completeness, even if I am wrong in holding that the 1994 Arrangement was discharged and it is assumed that it continued to subsist, I would nevertheless arrive at the same conclusion where conduct complained of involved corporate decision of the Company.

The 1994 Arrangement, as pleaded, provided for a 3–2 board composition. It did not, however, entrench specific individuals in office, nor did it displace the operation of the Company’s constitution governing appointment and retirement of directors. The impugned appointments were effected through general meeting resolutions passed by the majority shareholder pursuant to the Articles.

In the absence of an express prohibition against the appointment of additional directors or recourse to general meeting voting, the exercise of majority power cannot be characterised as illegitimate merely because it alters the practical balance of the Board.

At its highest, the complaint concerns deviation from a historical practice. Deviation from past practice, without proof of bad faith or lack of probity, does not amount to oppression.

Accordingly, even if the 1994 Arrangement subsisted, the Plaintiffs have not demonstrated that the majority’s conduct in appointing additional directors and restructuring the Board crossed the threshold into unfair prejudice within the meaning of Section 346.

Having given careful consideration to the facts of the case as gleaned from the parties’ respective cause papers and submissions, it is my finding that the Plaintiffs have not established oppression within the ambit of Section 346 of the Act.

In the final analysis, this is a case of a breakdown in trust and a shift in managerial control. It is not, on the evidence before me, a case of oppression. The Plaintiffs have not shown fraud, diversion of assets, expropriation of shareholder value, lack of probity, or a visible departure from standards of fair dealing. What has occurred is the exercise of majority power within the Company’s constitutional framework. Section 346 protects the minority from unfair prejudice. It does not protect the minority from every consequence of majority rule.

Consequently, the Plaintiffs’ Originating Summons was dismissed with costs. Dated the 18th day of May 2026 -sgd- ……………………………………………………………………… MUHAMMAD ADAM @ EDWARD BIN ABDULLAH Judicial Commissioner (Commercial Division NCC 4) High Court of Malaya In the Federal Territory of Kuala Lumpur, Malaysia Counsel for the Plaintiffs : Eunice Kwong Sook Wen together with Fong Yin Kee Messrs. Ricky Tan & Co Counsel for the Defendants : Tan Jun Yu Messrs.

Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549 2. Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 3. Jet-Tech Materials Sdn Bhd & Anor v Yushiro Chemical Industry Co Ltd & Ors [2013] 2 MLJ 305 4. Low Cheng Teik & Ors v Low Ean Nee [2024] MLJU 2174 (FC)

O’Neill v Phillips [1999] 1 WLR 1092 6. Re Kong Thai Sawmill (Miri) Sdn Bhd [1978] 2 MLJ 227 7. Re Saul D Harrison & Sons plc [1995] 1 BCLC 14 8. Queensway Nominees (Asing) Sdn Bhd & Ors v ISM Sdn Bhd and another appeal [2025] 5 MLJ 467 9. WTK Realty Sdn Bhd v Kathryn Ma Wai Fong and another appeal [2025] 3 MLJ 401

Sections 345 and 346 of the Companies Act 2016