1. Sega Lubricant Sdn Bhd v 1. Nanopac Innovation Limited (Guaman Sivil No: BA-22NCC-124-09/2019)

This is an application by the 3rd and 4th Plaintiffs for several 4 interlocutory injunctive reliefs against all the Defendants pursuant to Order 5 29 of the Rules of Court 2012. Enclosure 14 which holds the application for 6 injunctive reliefs states inter alia as follows :

An injunction against the 1st to 5th Defendants be it through their 8 agents, nominees, employees or representatives from taking 9 any steps outside of court to stifle the present legal 10 proceedings;

(ii) An injunction against the 1st to 5th Defendants be it through their 12 agents, nominees, employees or representatives from taking 13 any steps outside of court to interfere and/or disturb the control 14 and management of the 1st and 2nd Plaintiff companies pending 15 the disposal of this proceedings;

(iii) An injunction to prevent the 1st and 2nd Defendants be it by their 17 agents, nominees, employees or representatives from taking 18 any steps outside of court to conduct transactions or to enforce 19 any rights under the Confirmative Agreement dated 27.6.2016;

(iv) An injunction against the 1st and 2nd Defendants be it by their 21 agents, nominees, employees or representatives from taking 22 any steps outside of court to conduct transactions or enforce 23 any rights concerning the shares in the 1st and 2nd Plaintiff 24 company;

An injunction against the 1st and 2nd Defendants be it by their 26 agents, nominees, employees or representatives from taking 27 3 any steps to approve any resolution for the 1st and 2nd Plaintiffs 1 according to or following any position or share issued under the 2

(vi) An order that any resolution by the 1st and 2nd Plaintiff company 4 passed without the consent of the 3rd and 4th Plaintiffs are of no 5 legal effect pending the disposal of this proceedings; and 6

(vii) It will be in contempt of court by any party who breaches the 7 terms of the court order. 8 9

At the conclusion of the hearing, this Court dismissed the application. 10 The following are the grounds of judgement. 11 12 Cause Papers 13

There are only 3 affidavits which pertain to Enclosure 14, namely :

the 3rd Plaintiff’s Affidavit in Support affirmed on 1.11.2019 15 (Enclosure 15);

(ii) the 2nd Defendant’s Affidavit in Reply on behalf of all the 17 Defendants affirmed on 18.11.2019 (Enclosure 19); and 18

(iii) the 3rd Plaintiff’s Affidavit in Reply affirmed on 9.12.2019 19 (Enclosure 25). 20 21 Background of the Case 22

At the commencement of this suit, Sega Lubricant Sdn Bhd (Sega) 23 and DNA Petrochem Sdn Bhd (DNA Petrochem) were named 1st and 24 2nd Plaintiffs while the 3rd and 4th Plaintiffs presently remain the same 25 persons and litigants. On 13.5.2020, this court struck off the 1st and 26 4 2nd Plaintiffs from the Amended Writ and Amended Statement of 1 Claim and hence these two companies no longer parties to the suit. 2 3

The 3rd and 4th Plaintiffs have alleged in their Affidavits that they were 4 founders and shareholders of Sega since its incorporation in 2012. At the 5 present time the 3rd and 4th Plaintiffs each hold 159,250 units of shares in 6 Sega. They also each hold 75,600 and 32,200 units of shares respectively 7 in DNA Petrochem. 8 9

Parties entered into a Memorandum of Understanding dated 10 20.4.2016 and Confirmative Agreement dated 27.6.2016. 11 12

Both these agreements in essence caused a shift in the structure of 13 Sega and DNA Petrochem whereby it emerged with the signing of the two 14 agreements that the 2nd, 3rd and 5th Defendants became the majority 15 shareholders and directors of Sega and DNA Petrochem and the 3rd and 4th 16 Plaintiffs were relegated into minority shareholders and directors. The 3rd 17 Defendant as director of NanoPac Sdn Bhd (2nd Defendant) is now the 18 largest shareholder of Sega and DNA Petrochem. This information can be 19 seen from the searches done at the SSM. Hence at that point in time, these 20 were the 5 directors in Sega. The 3rd, 4th and 5th Defendants are the 21 majority shareholders and directors. The 2nd Defendant company holds 22 331,500 units of shares while the 3rd and 4th Plaintiffs both hold 318,500 23 shares in total. The 3rd and 4th Plaintiffs were therefore minority directors in 24 the Board of Directors for Sega and DNA Petrochem. 25 26 5

There were covenants and representations made in pursuance to the 1 signing of the two agreements. At first the relationships of all the directors 2 were good but it eventually deteriorated and the 3rd and 4th Plaintiffs have 3 subsequently alleged that the Defendants committed breaches of the terms 4 and conditions of the 2 agreements. This led to the 3rd and 4th Plaintiffs 5 filing this claim against all the Defendants. Not content with that the 3rd and 6 4th Plaintiffs included Sega and DNA Petrochem in the suit naming them as 7 1st and 2nd Plaintiffs respectively. 8 9

In response to the Plaintiffs’ actions, the Defendants issued a 10 director’s resolution on 29.10.2019 entitled “Withdrawal and Termination as 11 a Plaintiff” and “Nullification of the Legal Representation by Han & 12 Partners”. Han & Partners were appointed by the 3rd and 4th Plaintiffs and 13 they were the solicitors acting for all the Plaintiffs when this civil suit was 14 filed. 15 16

Pursuant to the director’s resolution passed on 29.10.2019, the 3rd 17 and 4th Plaintiffs were informed via email dated 30.10.2019of the fact that 18 they had been relieved of their roles as directors in both Sega and DNA 19 Petrochem with immediate effect. 20 21

As a consequence of that the 3rd and 4th Plaintiffs filed this application 22 for injunctive reliefs against all the Defendants on the grounds that there 23 existed serious bona fide issues to be tried. They also claim that the 24 balance of convenience favours an interim injunction be allowed against 25 the Defendants pending the disposal of this civil suit. The 3rd and 4th 26 6 Plaintiffs also claim that damages would not be an adequate remedy in the 1 circumstances of the case before this court. 2 3 Plaintiffs’ Contentions 4

In their submissions the 3rd and 4th Plaintiffs contended that there are 5 serious bona fide issues to be tried. The gist of the main issues are framed 6 as shown below :

whether the 1st Defendant had breached Clauses 2.2(a), 2.2(e), 8 2.2(f), 2.2(g) and Clause 4.3 of the Confirmative Agreement;

(ii) whether the 1st Defendant and/or the 3rd Defendant had 10 misrepresented and cheated the Plaintiffs in regard to the value 11 and qualification of the 1st Defendant’s shares that is listed on 12 the stock exchange;

(iii) whether the 2nd Defendant has been named on the Investor 14 Alert List of the Malaysian Security’s Commission for dealing in 15 the shares of the 1st Defendant to the public without prior 16 sanction;

(iv) whether the 3rd Defendant being the director and person in 18 charge of the 1st Defendant company is to be held accountable 19 for having misrepresented and cheated the Plaintiffs in regard 20 to the value and worthiness of the 1st Defendant’s shares in the 21 stock exchange which were subscribed with in exchange with 22 shares in the 1st and 2nd Plaintiff company; and 23

Whether Clause 2.2(c) of the Confirmative Agreement has been 24 breached causing the 4th Plaintiff’s shares in the 1st Defendant 25 company to be worthless. 26 27 7

The 3rd and 4th Plaintiffs have alleged in their claim that the terms of 1 the Confirmative Agreement dated 27.6.2016 should override the definitive 2 factor that the 3rd and 4th Plaintiffs who have instituted this suit as well as 3 the application in Enclosure 14 are in the minority in the two companies. 4 5

The 3rd and 4th Plaintiffs also contended that the balance of 6 convenience lay on the side of the Plaintiffs as they claim that if an 7 injunction to maintain the status quo was not allowed then they would lose 8 their right to prove their case in court and they will be without access to 9 justice. They contended that the matter could not be remedied with 10 monetary compensation were the application to be dismissed. 11 12 Defendants’ Contention 13

The Defendants’ main contention is that the application in Enclosure 14 14 is null and void as what the 3rd and 4th Plaintiffs are seeking is an order 15 to prevent the majority directors and majority shareholders in Sega and 16 DNA Petrochem from exercising their rights as the controlling majority in 17 favour of the 3rd and 4th Plaintiffs who are individuals and minority directors 18 on the Board of Directors and minority shareholders in both companies. 19 The Defendants contended that it is trite law that the Courts do not concern 20 themselves with agreements between shareholders or individuals or other 21 entities. The Courts must look only at the provisions of the Companies’ Act 22 and the Memorandum and Articles of Association which prevail over any 23 private agreement or arrangement between the shareholders. The 24 Defendants relied on the case of Beh Chun Chuan v Paloh Medical 25 Centre Sdn Bhd & Ors[1999] 3 MLJ 262 to support their claim that the 26 Memorandum and Articles of Association reigned supreme to spell out the 27 8 respective rights, powers and liabilities of the companies. Therefore it was 1 the contention of the Defendants that the 3rd and 4th Plaintiffs could not rely 2 on the terms of the Confirmative Agreement to override the fact they are 3 the minority directors and shareholders in both Sega and DNA Petrochem. 4 5

It was also the contention of the Defendants that while the 3rd and 4th 6 Plaintiffs have argued that they had terminated the Confirmative Agreement 7 yet they relied on its terms as justification for the application for injunctive 8 reliefs. Thus they should be prevented from approbating and reprobating by 9 saying that they had terminated the Confirmative Agreement but yet at the 10 same time they sought to enforce the terms and conditions of the same 11 Confirmative Agreement not related to termination. 12 13 Findings of this Court 14

In this case a careful perusal of the SSM searches and the 15 documents exhibited in the affidavits filed by the Plaintiffs as well as the 16 Defendants will reveal a number of matters that are relevant and pertinent 17 to this application. 18 19

It has to be noted that there are 5 directors in Sega, two out of them 20 are Lai Yin Ting and Yong Voon Kien, the 3rd and 4th Plaintiffs respectively. 21 The remaining other 3 directors are the 3rd to 5th Defendants. This shows 22 that the 3rd and 4th Plaintiffs are the minority in the Board of Directors while 23 the Defendants form the majority of the board in the ratio of 3 to 2. 24 25

The shareholders list at Page 13 of the Plaintiffs’ Affidavit in support 26 shows that the 3rd and 4thPlaintiffs hold 49% of the shares while Nanopac 27 9 (M) Sdn Bhd, the 2nd Defendant holds 51% of Sega. The 2nd Defendant is 1 thus the majority shareholder of Sega. 2 3

As for DNA Petrochem, the undisputed SSM report shows the same 4 list of directors and shareholders. The make up of the board of directors is 5 the same as for Sega i.e. 2 minority directors who are the 3rd and 4th 6 Plaintiffs and the Defendants who are the majority directors. The 7 shareholders list shows the 3rd and 4th Plaintiffs as holding only 49% shares 8 while Nanopac (M) Sdn Bhd, the 2nd Defendant holds 51% of the shares 9 and is thus the majority shareholder of DNA Petrochem. It is worthwhile to 10 note too that the 3rd Defendant is a director of the 2nd Defendant. The 3rd 11 and 4th Plaintiffs are not directors of Nanopac (M) Sdn Bhd. 12 13

In any company its affairs are managed and run by its board of 14 directors. This is encapsulated in Section 211 of the Companies Act. 15 16

Section 211 of the Companies Act 2016 states :

The business and affairs of a company shall be managed 18 by, or under the direction of the Board;

The board has all the powers necessary for managing 20 and for direction and supervising the management of the 21 business and affairs of the company subject to any 22 modification, exception or limitation contained in this Act 23 or in the constitution of the company. 24 25 10

If the affairs of the company are being conducted or exercised 1 oppressively then there are remedies within the scope of the Companies 2 Act 2016 available to the aggrieved party. 3 4

I unconditionally agree with the submissions of counsel for the 5 Defendants that as far as the legal position is under company law, courts 6 should be slow to grant injunctions against the majority shareholders and 7 directors of the company by the minority. The majority rules. 8 9

In Tung Ah Leek & Anor v Perunding DJA Sdn Bhd & Ors [2005] 10 3 MLJ 667 the Court held : 11 12 “The M&A is considered as “common law” of the company and one 13 of the most fundamental principle is that ‘the majority rules’. Where 14 the parties have agreed to abide by the terms contained in the 15 M&A, the minority cannot complain on the majority rule.” 16 17

The memorandum and Articles of Association of Sega and DNA 18 Petrochem are similar in content. Article 5 of the said Memorandum and 19 Articles of Association state as follows :- 20 21 “A resolution in writing signed by a majority of the Directors for the 22 time being or their alternates not being less than two Directors shall 23 be valid and effectual as if it had been passed by a Meeting of 24 Directors duly called and instituted.” 25 26

Based on the above it is clear that the 3rd and 4th Plaintiffs have no 27 authority to complain about the terms of the Memorandum of 28 11 Understanding and the Confirmative Agreement as no resolution was 1 tabled for this purpose. The 3rd and 4th Defendants cannot act on behalf of 2 Sega and DNA Petrochem to apply for injunctive reliefs. Nowhere in the 3 Affidavit In Reply by the 3rd Plaintiff has there been shown any resolution or 4 appointment by Sega and DNA Petrochem appointing her or authorizing 5 her to file this application to seek injunctive reliefs in matters involving the 6 two companies. 7 8

This court is in agreement with Defence counsel’s submission that 9 the 3rd and 4th Plaintiffs cannot seek legal redress for their grievances on 10 behalf of the two companies without arming themselves with a resolution 11 obtained first. 12 13

In the case of UEM Genisys Sdn Bhd v Shimizu Corporation & 14 Anor [2003] MLJU YA Abdul Malik Ishak J held as follows : 15 16 “It is the Board of Directors of a company that will manage the 17 company. Put in another way, the management of the company lies 18 with the Board of Directors……..Acting alone, a director cannot 19 bind the company. Here, Seow seemed to have acted alone and 20 there was no power specifically delegated to him. There is a 21 passage appearing in Gore-Browne on Companies, 43rd edition 22 which merits reproduction. There, at paragraph 26-3, the learned 23 author wrote: 24 “Each director has not alone power to bind the company unless 25 he had this power specially delegated to him….” 26 Here a challenge was mounted on the appointment of GTRZ by 27 Seow. A challenge was also mounted as to their authority to act on 28 12 behalf of the plaintiff – UEMG. Sadly neither GTRZ nor Seow, in 1 particular, have been able to produce a resolution of the Board of 2 Directors of the plaintiff authorizing the appointment of GTRZ by 3 Seow and the institution of this civil suit in the plaintiff’s name. And 4 so the burden of proving that this civil suit had been instituted by 5 GTRZ with proper authority rests on the plaintiff company. Echoing 6 the same sentiments, this was what VC George J as he then was) 7 said in Syawal Enterprise Sdn Bhd & Anor v Dayadiri Sdn Bhd.” 8 9

In this case the 3rd and 4th Plaintiffs are seeking reliefs which in actual 10 fact is to prevent all the Defendants from taking part in the running of Sega 11 and DNA Petrochem. The 3rd and 4th Plaintiffs justify their actions by falling 12 back on the Confirmative Agreement. This however does not detract from 13 the fact that it is nothing more than an attempt to go behind the 14 requirements of the Companies Act as well as the Memorandum and 15 Articles of Association of the two companies to suit their own intents and 16 purposes. 17 18

This court agreed with the contention of counsel for the Defendants 19 that courts generally will not concern itself with agreements made between 20 shareholders or individuals or other entities in the realm of company law. 21 The provisions of the Companies Act as well as the Memorandum and 22 Article of Association serves as the cornerstone from which all rights, 23 powers and liabilities of the companies derive itself from. 24 25

In this case the complains of the 3rd and 4th Plaintiffs are anchored on 26 the alleged breach of the terms and conditions of the Memorandum of 27 Understanding and Confirmative Agreement. Before this can be considered 28 13 the court would first have to see whether the Memorandum and Articles of 1 Association can be ignored in favour of relying on the alleged breach of the 2 two agreements. The case of Beh Chun Chuan v Paloh Medical Centre 3 Sdn Bhd & Ors (supra) provide authority for the principle that a company 4 is governed by its Memorandum and Articles of Association. It was held : 5 6 “the submission that the shareholders agreement governed the 7 conduct of the company and prevailed over its articles of 8 association was untenable. In the event, it follows that all the 9 complaints put forth by the petitioner which were anchored on the 10 breach of the agreement must fail.” 11 12

As far as the general principle for the governance of companies is 13 concerned it is the majority that rule. Minority cannot usurp the rights and 14 the decisions made by the majority. In the words of Ramly Ali J (as he then 15 was) in the case of Tung Ah Leek & Anor v Perunding DJA Sdn Bhd & 16 Ors [2005] 3 MLJ 667 : 17 18 “[1] The M&A is considered as “common law” of the company and 19 one of the most fundamental principles is that ‘the majority rules’. 20 Where the parties have agreed to abide by the terms contained in 21 the M&A the minority cannot complain on the majority rule. The 3rd 22 and 4thPlaintiffs have not argued that they are an oppressed 23 minority and hence they have no other recourse than to accept the 24 decisions of the majority shareholders and directors in the running 25 of the affairs of the company. 26 Mainly based on the reasons stated above this court is of the view 27 that the application for reliefs filed by the 3rd and 4th Plaintiffs must 28 necessarily fail. 29 14 Before leaving this judgment it would perhaps be in order to 1 comment that the prayers sought by the 3rd and 4th Plaintiffs are 2 intentionally vague, ambiguous, wide and open ended. 3 The first prayer sought is for an injunction against the 1st to 5th 4 Defendants be it through their agents, nominees, employees or 5 representatives from taking any steps outside of court to stifle the 6 present legal proceedings. There is no explanation or 7 particularization of what is meant by “taking steps outside court to 8 stifle the present legal proceedings”. 9 10

The second prayer is no better. It is for an injunction against all the 11 Defendants from taking any steps outside of court to interfere and/or 12 disturb the control and management of Sega and DNA Petrochem. Again it 13 is not explained what or how there will be interference or disturbances in 14 exercising the control and management of the two companies. 15 16

The third prayer of Enclosure 14 is for an injunction to prevent the 1st 17 and 2nd Defendants from taking any steps outside of court to transact or 18 enforce any rights under the Confirmative Agreement. There is no 19 elaboration of what the rights are and how they are to be enforced. 20 21

The 4th prayer is to prevent the 1st and 2nd Defendants from making 22 out of court transactions or to enforce the rights under any shares issued 23 under the Confirmative Agreement. It has been pointed out by counsel that 24 the 1st Defendant does not own any shares in Sega or DNA Petrochem and 25 therefore the question that arose was how could this court allow an order 26 for an injunction against the 1st Defendant from taking any steps outside of 27 15 court to enforce any rights or make any transaction concerning shares in 1 the two companies which they did not have in the first place. 2 3

In Prayer 5 the 3rd and 4th Plaintiffs have applied for an injunction 4 against all the Defendants to prevent them from taking any steps to 5 approve any resolution for Sega and DNA Petrochem according to or 6 following any position or share issued under the Confirmative Agreement. 7 The Defendants are askance at the audacity of the Plaintiffs in seeking this 8 relief bearing in mind they are minority shareholders. The Defendants are 9 not wrong when they state that it is the 3rd and 4th Plaintiffs who should be 10 injuncted against for having the audacity to interfere in the management 11 and control of the two companies. 12 13

In Prayer 6 the 3rd and 4th Plaintiffs are seeking an order that any 14 resolution passed by the companies without the consent of the 3rd and 4th 15 Plaintiffs is of no legal effect. This flies in the face of the law that they had 16 no authority to do so. 17 18

Prayer 7 is the threat of contempt of court if the orders of the court 19 are not adhered to. In answer to this, counsel for the Defendants referred 20 the court to the case of Mah Siew Keong v Bayu Gamitan Sdn Bhd & 21 Ors [2002] 2 MLJ 107 on a similar issue. The Court of Appeal took to task 22 the order obtained with a stinging rebuke : 23 24 “If an exparte injunction was drafted in wide and ambiguous terms, 25 it was, difficult, if not impossible, to identify particular acts of 26 contempt. Further it was not appropriate in the present case to 27 16 require the appellants as directors or their company to seek 1 clarification from the court as this would place an intolerable burden 2 on the parties. It would mean that at every turn of an event, the 3 director and the company would have to rush into court to find out if 4 the acts they propose to do would offend the terms of the order. Put 5 in that fashion, one could plainly see the ambiguity in the order.” 6 7

It has been pointed out that the 3rd and 4th Plaintiffs while they aver 8 that the Confirmative Agreement has been terminated by them, yet they still 9 fall back on the terms of the said Agreement as justification for the 10 application in Enclosure 14. The short answer to that is they cannot 11 approbate and reprobate by claiming that they have terminated the 12 confirmative agreement but yet at the same time seek an order from the 13 court to enforce the terms and conditions of the same said agreement not 14 related to the termination. 15 16

Based on the reasons above this court is of the view that the 3rd and 17 4th Plaintiffs have no legal standing to seek the reliefs that they are claiming 18 in the Notice of Application. As minority shareholders it is a bitter pill to 19 swallow but it is the considered view of this court that the application for 20 injunctive reliefs are flawed and must necessarily fail. 21 22

Even if the issues are considered to be triable issues, this court is 23 satisfied that the injunctive reliefs should not be granted on the ground that 24 damages are an adequate remedy for the 3rd and 4th Plaintiffs. It is noted 25 that some of the prayers in the Amended Writ and Notice of Application 26 included prayers for damages to be awarded. 27 28 17

In American Cyanamid Co v Ethicon Ltd [1975] AC 369 it was held 1 that : 2 “the court should first consider, whether, if the plaintiff were to 3 succeed at the trial in establishing his right to a permanent 4 injunction, he would be adequately compensated by an award of 5 damages for the loss he would have sustained as a result of the 6 defendant’s continuing to do what was sought to be enjoined 7 between the time of the application and the time of the trial. If 8 damages is the measure recoverable at common law would be 9 adequate remedy and the defendant would be in a financial position 10 to pay them, no interlocutory injunction should be normally granted, 11 however strong the plaintiff’s claim appeared to be at that stage.” 12 13

Consequently this court is of the view that this is not an appropriate 14 case for the injunctions to be granted. Hence the application in Enclosure 15 14 is therefore dismissed with costs. 16 17 Dated 30 July 2020. 18 19 20 21 (DATO’ JULIE LACK) 22 Judicial Commissioner 23 High Court of Malaya 24 Shah Alam, Selangor Darul Ehsan 25 26 27 28 18 Counsel 1 For the Plaintiff : 2 Chew Chun Wei 3 (MESSRS HAN & PARTNERS) 4 5 For the Defendant : 6 Fredric Kong 7 (MESSRS. SP NG & ASSOCIATES) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27