1. See Eng Huat v 1. Ng Hat Poou (JA-26NCC-05-07/2017)

Ng Hat Poou (No. K/P: 650320-01-5813)

Loke Seu Foong (No. K/P: 710316-08-6100)

See Eng Huat (No. K/P: 640916-07-5009)

Chong Soi Hua (No. K/P: 650312-01-6154)

Lim King Eng (Singapore No. K/P S0983546F)

Jih Sheng Plantations Sdn Bhd (No. Syarikat 637835-U) Responden-Responden Page 2 of 14 JUDGMENT

4.3.2018 Page 3 of 14 Introduction [1] The petitioners are the minority shareholders and ex-directors of the 4th respondent company (hereinafter ‘the company’). They filed this Petition pursuant to s. 346 of the Companies Act 2016 (hereinafter the ‘Act’). They asserted that the conduct, actions and decisions undertaken by the 1st, 2nd and 3rd respondents (hereafter ‘the respondents’), who are the majority shareholders and directors of the company, had caused the petitioners’ minority rights to be oppressed. [2] On 31.12.2017, this Court allowed the Petition. In addition to the prayers sought by the petitioners, this Court also made several orders to facilitate the compliance of the Court’s alternative orders. [3] The reasons for the decision of this Court are set out as below. Background Facts [4] The company was incorporated on 23.12.2003, and the total paid-up capital was RM1,000,000. The shareholdings in the company are as follows: 1st petitioner 150,000 2nd petitioner 250,000 1st respondent 150,000 2nd respondent 250,000 3rd respondent 200,000 Page 4 of 14 [5] The nature of business of the company is oil palm cultivation and production and fish breeding. The company owns several pieces of oil palm land, and on them there are several fish ponds as well. The petitioners were and the respondents are the directors of the company, and the 1st petitioner was appointed as the chairman. [6] On 22.8.2013, the petitioners and the respondents passed a resolution (hereinafter ‘the 22.8.2013 resolution’) to state that the oil palm plantation will be rented to the 2nd petitioner by the company; and the fish ponds will be rented to the 1st and 3rd respondents by the company. Subsequent to the 22.8.2013 resolution, tenancy agreements were entered into to reflect the terms of the resolution passed. [7] The main object of letting the assets of the company to its own shareholders and directors was to ensure rentals were collected and be used to repay the bank loan which was taken by the company to part finance the purchase of its properties (the lands). The loan repayments had been outstanding for several months; and the petitioners and respondents unanimously agreed that it would be for the best interest of the company that its assets be rented to the named persons so that rentals collected be used to pay the loan instalments promptly. [8] The 2nd petitioner paid the rentals promptly (paid direct into the loan repayment account with Malayan Bank Berhad). However, the 1st and 2nd respondents did not fulfil their promises to pay the rentals promptly. [9] In September 2014, the 1st respondent denied the 1st petitioner, who was acting on behalf of the 2nd petitioner, entry into the plantation to harvest the oil palm. Since then, the 2nd petitioner and the 1st petitioner Page 5 of 14 were denied access to the plantation. Sometime in 2015, the respondents took control of the daily affairs of the company. [10] On 12.8.2015, the petitioners and respondents had a meeting. In the meeting, the respondents unanimously voted to renew the tenancies of the 1st respondent and 3rd respondent with the company, but refused to renew the tenancy between the 2nd petitioner and the company. In the meeting, the respondents also passed a resolution to alter the signatories to operate the company’s bank account by appointing the 2nd and 3rd respondents as the authorised signatories. The petitioners did not support the resolution dated 12.8.2015. The respondents contended that the they decided not to renew the 2nd petitioner’s tenancy with the company because she failed to pay arrears in rentals and did not take care of the plantation, as a result of which the company suffered losses. [11] The petitioners proposed to pass a resolution to the effect that after the expiry of the tenancies, all proceeds from the lands shall be wholly owned by the company and be deposited to the repayment loan account of the company, but the respondents rejected the proposed resolution by the petitioners. [12] In a nutshell, the respondents had used their majority shareholding rights to veto the proposals of the petitioners in the meeting; and they leveraged on their majority rights to pass all their own proposals. The respondents’ shareholdings together amount to 60% of the shareholding in the company. Page 6 of 14 [13] The petitioners and the respondents had blamed each other for the losses of the company, and both sides could not settle their differences in the board room. [14] The relationship between the petitioners and respondents deteriorated after the meeting on 12.8.2015. On 4.9.2015, the petitioners instructed their solicitors Messrs. Sing, Lim & Low to write to the company to notify the company that any arrangement and/or agreement made by the company through its shareholders/directors (referring the respondents who had full control of the operation of the company) without complying with a resolution passed on 24.7.2013 would be illegal and invalid. [15] Basically, the petitioners were challenging all the resolutions approved and passed by the respondents during the 12.8.2015 meeting, because the approval and passing of the resolution did not comply with the resolution dated 24.7.2013 which stated, inter alia, that at least 75% of the members must agree to the making of the decision of the company in all the meetings. [16] In view of the deadlock in the decision making of the company and the disagreements between the parties, several letters were exchanged between the parties’ solicitors. The parties attempted to settle their disputes, and eventually agreed on the terms of a settlement agreement. However, before the formal settlement agreement could be signed by the petitioners, the 1st respondent through his solicitors Messrs Lee & Partners wrote to the petitioners to inform that the company owed the 1st respondent the sum of RM88,471.75 being money advanced to the Page 7 of 14 company by the 1st respondent. The Petitioners vehemently denied the 1st respondent’s claim. [17] The tension between the petitioners and respondents heightened when an EGM was called on 6.3.2017 to discuss the removal of the petitioners as directors of the company. There were no written minutes of the resolution passed by the respondents for the removal of the petitioners as directors. However, there was a record of the EGM held on 6.3.2017 in CD form. The 2nd and 3rd respondents voted in favour of the resolution through their proxies. In the meeting, the 1st respondent informed the petitioners (present in person) that they were no longer required to attend any board meetings in the future as they have been removed as directors of the company. [18] In view of all the events leading to the removal of the petitioners as directors of the company, the petitioners felt their rights as minority shareholders and directors had been oppressed by the conduct, actions and decisions of the respondents. The petitioners have been deprived of their rights to access to all the books and accounts of the company since 12.8.2015. The petitioners complained that since the respondent took over the control of the company in 2015, no information was revealed as to the rental income of the company from the lands and fish ponds as well as the proceeds of the harvest from the oil palm. They also complained that no audited report was prepared for the years 2014, 2015 and 2017. The petitioners averred that they could no longer be in business venture with the respondents and sought assistance from the court to resolve their disagreements with the respondents. Page 8 of 14 Finding of this Court [19] There are two main grounds which a member may apply to the court under s.346 of the Act, namely: “that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or debenture holders including himself or in disregard of his or their interests as members, shareholders or debenture holders of the company”; or “that some act of the company has been done or is threatened or that some resolution of the members, debenture holders or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or debenture holders, including himself.” [20] This Court is of the considered view that the following actions that were carried out by the respondents had resulted in the circumstances as envisaged in the provisions of s. 346 of the Act. [21] Firstly, the failure of the 1st respondent and 3rd respondent to fulfill their obligations in the tenancy agreements to pay monthly rentals to the company which were to be used for the repayment of the company’s loan with the bank was detrimental to the interest of the company. The Page 9 of 14 whole object of allowing the assets of the company to be rented to the 2nd petitioner, 1st and 3rd respondents was to ensure repayments of the company’s loan would be settled. The failure of the 1st respondent and 3rd respondent to fulfil their contractual obligations to the company are in fact breaches of the tenancy agreement. By not taking any action on behalf of the company against themselves, and further by allowing the renewal of the tenancies with themselves, the 1st and 3rd respondents had, in the opinion of this Court, conducted the affairs of the company in a manner oppressive to the petitioners and had disregarded the petitioners’ minority interests in the company. Further, the respondents, being the majority shareholders, acting as directors, who refused to allow the 2nd respondent’s tenancy to be renewed, despite the fact that the 2nd petitioner had kept her contractual promise to pay rental promptly (which the respondents denied), had exercised their powers in a manner oppressive to the petitioners and disregarded their minority interests in the company. [22] Secondly, the passing of the resolutions in 12.8.2015 and 6.3.2017 (in an EGM) had, in the opinion of this Court, unfairly discriminated against the petitioners. The decisions of: (i) not renewing the 2nd respondent’s tenancy agreement with the company; (ii) the renewal of tenancy agreements between the 1st and 3rd respondents with the company; and (iii) the removal of the petitioners as directors; were made without basis and prejudicial to the petitioners’ interests. [23] Thirdly, by the respondents refusal to reveal the rental income of the company after 2015 and the denial of the petitioners’ right to access to the books and accounts of the company clearly go against the petitioners’ rights as shareholders and directors. Regardless of what the Page 10 of 14 respondents’ reasons and excuses were, the respondents’ actions had denied the petitioners’ rights of knowing the financial standing of the company from the time the respondents had taken over control of the company. The respondents’ actions had surely oppressed the rights of the petitioners as members of the company. [24] Fourthly, since 2015, the 1st and 3rd respondents had failed to pay rent for the rental of the fish ponds, and yet no action was taken by the respondents. The respondents’ inaction, in the opinion of this Court, clearly prejudiced the interest of the petitioners. [25] Lastly, all those resolutions passed on 12.8.2015 and 6.3.2017 were clearly inconsistent with the resolution passed on 24.7.2013 which stated, inter alia, that at least 75% of the members must agree to the making of the decisions of the company in all the meetings. [26] In view of the above conduct, actions and decisions made by the respondents, clearly, the petitioners’ rights have been oppressed, disregarded, unfairly discriminated and prejudiced within the circumstances as envisaged within the meaning of s.346 of the Act. [27] Sometime in 2016, the parties had reached a settlement, assisted by their respective solicitors. The crux of the proposed settlement was that either the respondents (as one party) were to buy over all the petitioners’ shares or the petitioners (as the other party) were to buy over all the respondents’ shares. The value of the shares would be based on an audited report to be prepared by an independent and qualified auditor. The price to be paid for the purchase of either party’s shares depends on who could offer a higher price. In the event no party was Page 11 of 14 willing to make an offer to buy over the other party’s shares, then the parties were given an option to purchase the company’s assets. In the event no offer was made to purchase the company’s assets, the company’s assets would be disposed by an open auction based on the current market value, and the proceeds from the sales would be shared among the parties based on the parties’ respective equity shareholdings. Thereafter, the company would be wound-up voluntarily. The respondents had signed the settlement agreement. Before the settlement agreement was released to the petitioners’ solicitors for their execution, the 1st respondent made a claim that he had advanced a sizable amount of money to the company. This demand triggered the collapse of the settlement and eventually led to the removal of the petitioners as directors of the company. [28] After considering the affidavits of the parties, this Court is satisfied that the parties cannot carry on with the business venture. The meticulous mechanism set out in the settlement agreement which the parties in principle had agreed to settle their grievances shows that the parties were ready to dissolve the company if neither party could take control of the company. In fact, the respondents’ counsel has submitted that the 1st respondent is willing to consider any offer made by the petitioners to purchase his shares based on market value. [29] Based on the above findings, this Court is satisfied that the grounds in s.346 of the Act have been established by the petitioners. As such, this Court made the orders below as it thought fit. [30] This Court has considered the preliminary objection raised by the petitioners’ counsel, but this Court is inclined to deal with the main issues Page 12 of 14 of the petitioners’ Petition, instead of disposing the petition on procedural grounds. Conclusion [31] Based on the above reasoning, this Court has allowed the petitioner’s Petition and granted the following orders:

That the resolution passed on 6.3.2017 be voided and set-aside;

(ii) The respondents to indemnify the company and the petitioners for the losses, if any (subject to the findings of the audited reports for the years 2015, 2016 and 2017), of the oil palm cultivation and rental income for the fish ponds (including the prawn farming) during the period within the control of the respondents;

(iii) Mr Steven Choong Shiau Yoon, a chartered accountant, be appointed to prepare a full set of accounts for the company for years 2015, 2016 and 2017 within 6 months from the date of the order; and all the parties are required to provide and release all books, accounts ledgers, bank statements and whatsoever documents in their possession to the appointed auditor;

(iv) The share value of the company shall be determined in the 2017 audited report and when the share value is determined, the petitioners are given an option within 14 days from the date of notification of the share value to purchase the shares of the respondents (in whole); in the event the petitioners do not want to exercise their option, then the respondents are given the option within 14 days after the expiration of the 14 days of the petitioners’ right to exercise their option to purchase the Page 13 of 14 petitioners’ shares (in whole) based on the share value in the 2017 audited report;

In the event neither side is willing to exercise their options, then prayer 33.3(iii) of the Petition shall be invoked; that is to say, the company shall be wound-up in accordance with the Act, and a liquidator shall be appointed for the liquidation exercise. All proceeds shall be distributed to the parties according to their respective shareholdings after deducting all debts (if any), necessary costs and expenses of the exercise;

(vi) It is also ordered that from the date of this order until the determination of the 2017 audited report, the respondents shall continue to manage and in-charge of the day to day affairs of the company, and all receivable incomes of the company shall be paid into the company’s bank account; and the petitioners are entitled to inspect the books and records of the company;

(vii) The costs, expenses and fees incurred for the appointment of the auditor shall be borne by the company;

(viii) Effective from 1.1.2018, the signatories of the company’s bank account shall be the 1st petitioner and 1st respondent jointly; and

(ix) Lastly, the respondents shall pay costs of RM8,000.00 to the petitioners jointly. -Signed- …………………………………….. (CHOO KAH SING) Judicial Commissioner High Court, Johor Bahru Page 14 of 14 Counsel for the petitioners : MY Lim Tetuan Sing, Lim & Low Counsel for the respondents : MC Chai Tetuan Lee & Partners