Chow Weng Kheong v Ws Weng Soon Electrical Sdn. Bhd. (BA-24NCC-91-08/2023)

An injunction to stop the second defendant (“the 2nd Defendant”) for acting as a director for the first defendant (“the Company”);

An order that the 2nd Defendant be removed as a director from the Company;

An injunction that the 2nd Defendant, the third defendant (“the 3rd Defendant”) or their proxies are not allowed to operate the business known as “WS Weng Soon

A declaration that the 2nd Defendant has breached his fiduciary duties as a director of the Company;

A declaration that the 2nd Defendant and the 3rd Defendant have conspired to defraud the Company;

An order that the Plaintiff purchase the 2nd Defendant’s shares in the Company at a price to be valued by an independent accountant or auditor;

General damages, exemplary damages and aggravated damages. [2] After perusal of the cause papers and upon hearing submissions by the counsels, I have dismissed Enclosure 1 based on the reasons which I shall explain hereafter. Background facts [3] The Plaintiff and the 2nd Defendant started the Company in Bhd”, carry both their names: “Weng” referring to the Plaintiff, and “Soon” referring to the 2nd Defendant. The Company sell electrical items. [4] Both the Plaintiff and the 2nd Defendant are directors of the Company. The issued capital of the company is RM 100,002.00. The shareholding is as follows: - Shareholder Number of Shares Percentage Plaintiff 50,001 50% 2nd Defendant 50,001 50% [5] It has been pre-agreed by both parties that the 2nd Defendant will manage the operations of the Company and the Plaintiff will be in charge of the sales and marketing. [6] The relationship between the Plaintiff and the 2nd Defendant deteriorated in 2023, when the 2nd Defendant accused the Plaintiff of wrongdoing. However, the matter was eventually resolved. 1st act of oppression [7] The Plaintiff found out that the 2nd Defendant had started spreading news to the Company’s customers and suppliers that the Plaintiff is no longer a director in the Company. [8] On 29.5.2023, a supplier informed the Plaintiff that they have received a notice from the Company, stating that the Plaintiff has been removed from the Company. On 30.5.2023, another supplier informed the Plaintiff that they have also received a similar notice. 2nd act of oppression [9] On 1.7.2023, a customer informed the Plaintiff that they had received a notice from the Company. The notice stated that the Company will be closing down, and that all outstanding payments are to be made directly into a new account. [10] The Plaintiff later found out that the 3rd Defendant (who is the 2nd Defendant’s wife), had started WS Weng Soon Electrical Supply. The 3rd Defendant was previously a staff in the Company. WS Weng Soon Electrical Supply was set up as a sole-proprietorship. [11] WS Weng Soon Electrical Supply was registered on 28.6.2023, after the 2nd Defendant issued the notices to the customers and suppliers. There was also a tenancy agreement entered into between the Company and WS Weng Soon Electrical Supply which the Plaintiff is not aware of. [12] The 2nd Defendant has also been circulating business cards using the name of WS Weng Soon Electrical Supply, but still retaining the address and the logo of the Company. 3rd act of oppression [13] The Plaintiff found out about transactions made between the Company and WS Weng Soon Electrical Supply. WS Weng Soon Electrical Supply had been purchasing goods from the Company. A lengthy credit period was then given to WS Weng Soon Electrical Supply to settle its payments. As of to-date, only RM 34,000.00 of the outstanding invoices has been paid by WS Weng Soon Electrical Supply. There is still an outstanding sum of RM 337,497.25 still owing to the Company. 4th act of oppression [14] The Plaintiff also found out that some of the Company’s invoices has been amended to that of WS Weng Soon Electrical Supply’s invoices. Deliveries were made to Company’s customers but payments were paid instead to WS Weng Soon Electrical

Invoice No 32596, which was issued to LKS Resources, but payment (in cash) was paid to WS Weng Soon

Invoice No 32592, which was issued to K Letter Electrical Engineering Sdn Bhd, but payment (in cash) was paid to

Invoice No 32590, which was issued to Hong Tai Hardware & Trading Sdn Bhd, but payment (in cash) was paid to WS Weng Soon Electrical Supply;

Invoice No 32574, which was issued to Dension Automation (M) Sdn Bhd, but payment (in cash) was paid to WS Weng Soon Electrical Supply; and

Invoice No 32511, which was issued to K Letter Electrical Engineering Sdn Bhd, but payment (in cash) was paid to WS Weng Soon Electrical Supply. Conspiracy to defraud and injure [15] The Plaintiff alleged that the 2nd Defendant has breached his fiduciary duties and has committed criminal breach of trust as follows: -

By spreading news and issuing notices to the Company’s customers and suppliers that the Plaintiff is no longer a director in the Company (“1st Act of Oppression”);

By conspiring with the 3rd Defendant to start WS Weng Soon Electrical Supply (“2nd Act of Oppression”);

By allowing WS Weng Soon Electrical Supply to purchase goods from the Company with a lengthy credit period (“3rd

By amending the Company’s invoices to that of WS Weng Soon Electrical Supply’s invoices and to divert payments to WS Weng Soon Electrical Supply (“4th Act of Oppression”). Summary of the Plaintiff’s case (in supporting Enclosure 1) [16] The Plaintiff states the 2nd Defendant has committed the 1st Act of Oppression, 2nd Act of Oppression, 3rd Act of Oppression and 4th Act of Oppression. The Plaintiff also claims that the 2nd Defendant and the 3rd Defendant are also guilty of conspiracy to defraud and injure. [17] In support of the Plaintiff’s contention, the Plaintiff relies on the following legal authorities: - Auspicious Capital Sdn Bhd v Ebony Ritz Sdn Bhd [2021] 3 MLJ 549; Kong Thai Sawmill (Miri) Sdn Bhd v Ling Beng Sung [1978] 2 MLJ 227; Pan-Pacific Construction Holdings Sdn Bhd v Ngiu-Kee Corporation (M) Sdn Bhd [2010] MLJU 269; Lee Yee Wuen v Lee Kai Wuen [2020] MLJU 1902. Summary of the Defendant’s case (in opposing Enclosure 1) [18] The Defendants argue that the proper plaintiff to bring this action is the Company itself. The Plaintiff should not be allowed to bring this action in his personal capacity. This is because the purported acts were not directed at the Plaintiff individually. Any harm caused would be suffered by all the shareholders collectively. [19] In this respect, the Defendants rely on the legal authority of Low Cheng Teik v Low Ean Nee [2024] 5 MLJ 580, where the Federal Court has decided that if harm is done to a company, it is up to the company to seek redress. [20] The Defendants argue that it would be the Company’s asset or funds that would be affected or stripped away. It has got nothing to do with the Plaintiff’s personal assets. Therefore, the correct recourse is for the Plaintiff to commence a derivative action. [21] The Defendants point out that the Plaintiff himself is aware that his remedy lies in a derivative action. This is because the Plaintiff had applied for leave to issue a derivative action in the Shah Alam High Court via Originating Summons No BA- 24NCC-108-09/2024 on 19.9.2024. After obtaining leave, the Plaintiff filed a fresh suit against the 2nd Defendant and the 3rd Defendant in the Shah Alam High Court via Writ Summons No BA-22NCvC-54-02/2025. The derivative action by the Plaintiff is essentially the same as in the present case. [22] On the 1st Act of Oppression, the Defendants explain that the notices were issued following a previous incident whereby the Plaintiff was found to have fabricated the Company’s invoices. A police report was lodged by the 2nd Defendant. [23] On the 2nd Act of Oppression, the Defendants explain that following the incident, the Plaintiff and the 2nd Defendant had reached to an understanding that the Company will be voluntary wound up. That was why WS Weng Soon Electrical Supply was set up. [24] On the 3rd Act of Oppression, the Defendants state that the 3rd Defendant had already made payments to the Company in the sum of RM 34,000.00. Therefore, there cannot be any misappropriation when there are actually ongoing payments to the Company. [25] On the 4th Act of Oppression, the Defendants state that the purported amendment to the said invoices did not benefit the 2nd Defendant and the 3rd Defendant, as ultimately the amount paid by the 3rd Defendant was way higher than the original invoices. [26] The Defendants also state the Plaintiff’s claim are actually reflective loss. As the cause of action vests in the Company, the Defendants argue that the present case should not have been brought by way of an oppression action. Findings by the Court [27] Section 346(1) of the Companies Act 2016 states that any member or debenture holder of a company may apply to the Court for an order under this section on the ground: -

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 to disregard of his or their interest 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. [28] The Plaintiff had relied heavily on the authority of Auspicious Capital Sdn Bhd v Ebony Ritz Sdn Bhd [2021] 3 MLJ 549, where it was decided that the Court had wide powers to make any order as it thinks fit to bring an end to, or remedy, the matter complained of. The powers of the Court are not restrictive and the Court was at liberty to order the remedy in accordance with the factual matrix of the case. Liability can also be imposed on directors and third parties. [29] In this respect, the Federal Court in Auspicious Capital Sdn Bhd v Ebony Ritz Sdn Bhd had laid down the legal test as follows: - “[128] To that extent I restate the legal test applicable as follows:

firstly, there should be evidence of deliberate involvement or participation in, or a sufficiently close nexus to the oppressive or detrimental or prejudicial conduct that the minority complains of, to warrant the attribution of liability to a director or third party;

the imposition of liability should be fair or just in all the circumstances of the particular case;

in assessing whether the imposition of such liability is fair or just, the court should be satisfied that the remedy results in fairness to the parties concerned as a whole. In this context, liability may well be more easily assessed and imposed where a director has breached his duties, acquired personal benefit or where his acts or omission will result in prejudice to other shareholders. However, the foregoing examples do not comprise conditions without which liability will not be imposed. Ultimately the facts and factual matrix of each particular case will determine whether or not the imposition of liability on directors and/or third parties is justified. Such an assessment is undertaken on an objective basis;

the attribution or imposition of liability should be circumspect, going no further than is necessary to remedy the breach complained of or to stop the oppressive or prejudicial conduct;

such imposition of liability must be reasonable, and serve to alleviate the legitimate concerns of the shareholders of the company in question;

in exercising its powers under s 181 of the CA 1965 (now s 346 of the CA 2016) the court should bear in mind general corporate law principles, such that director liability does not become a substitute for other statutory relief or under the common law; and

in summary, the question for the court is whether in the context of s 181 of the CA 1965 the defendant was so connected to the oppressive, detrimental or prejudicial conduct that it would be fair and just to impose liability against him for such conduct.” [30] The Plaintiff had also relied on the case of Kong Thai Sawmill (Miri) Sdn Bhd v Ling Beng Sung [1978] 2 MLJ 227, where in finding and establishing an oppression, there must be a visible departure from the standard fair dealing and a violation of the conditions of fair play which a shareholder was entitled to expect. [31] However, I cannot accept that liability can be imposed solely on the principles of Auspicious Capital Sdn Bhd v Ebony Ritz Sdn Bhd and Kong Thai Sawmill (Miri) Sdn Bhd v Ling Beng Sung. The Plaintiff is currently pursuing two completely different causes of action, namely minority oppression under Section 346 and derivative proceedings under Section 347. The Plaintiff appears to be double-claiming for himself as a shareholder under the oppression action and also for the Company under derivative proceedings. [32] Section 347 of the Companies Act 2016 states that: - “Derivative proceedings A complainant may, with the leave of the Court initiate, intervene in or defend a proceeding on behalf of the company.

Proceedings brought under this section shall be brought in the company’s name.

The right of any person to bring, intervene in, defend or discontinue any proceedings on behalf of a company at common law is abrogated.” [33] Oppression is for personal harm to a shareholder. Derivative action is for harm done to the company, allowing a shareholder to sue on behalf of the company. In Low Cheng Teik & Ors v Low Ean Nee [2024] 5 MLJ 580, the Federal Court has since clarified the key difference between an oppression action (Section 346) and a derivative action (Section 347): - “The distinction between oppression and derivative action [79] In summary, the central distinction between the oppression action and the derivative action lies in the nature of the claim. An oppression claim premised on the circumstances set out in s 346(1) is a personal claim made by the minority shareholder who suffers a distinct and personal loss, while a derivative action is brought on behalf of the company by the shareholder in a representative capacity. Therefore, the question to be asked when deciding on which action to pursue is this: against whom has the alleged harm been caused? If the harm has caused injury to one or more shareholders, then the oppression action is proper. If the harm is to the company alone, a derivative action is the appropriate cause of action.” [34] Low Cheng Teik & Ors v Low Ean Nee has also stated that the purpose of the oppression action is to enable a minority shareholder to seek a remedy. This means that the oppressive conduct must result in a separate and distinct harm to the shareholder. Oppression cannot be established merely by showing that the company itself has suffered damage: - “[85] The existence of the two distinct statutory provisions warrants the conclusion that each section creates a different cause of action. It is self-evident that only the person in whom a cause of action is vested may enforce the relevant claim. If the cause of action is vested in the company, then it is the company itself that should take action. If, on the other hand, it is vested in the shareholder, then he must take action (see: Paul Davies, Sarah Worthington and Chris Hare, Gower’s Principles of Modern Company Law (11th Ed, Sweet & Maxwell, 2021) at para 14–001).” [35] In this respect, the Federal Court in Low Cheng Teik v Low Ean Nee had formulated the legal test to ascertain whether a shareholder’s complaint is actionable under Section 346 or more properly on behalf of the company under Section 347: -

What is the act or omission that one or more of the shareholders complain of? In short, identify the act, series of acts or omissions;

Can the act(s) or omission(s) be characterised as being:

oppressive to;

(ii) in disregard of the interests of;

(iii) unfairly discriminatory against; or

(iv) otherwise prejudicial to one or more of the shareholders?

Does the cause of action vest in the shareholder or in the company?

Who has suffered loss or damage from the wrong done? The shareholder in his capacity as a shareholder or the company?

Is the loss suffered by the shareholder as plaintiff separate and distinct to the plaintiff in his capacity as a shareholder, or is it a loss suffered by all the shareholders? [36] Applying the legal test, the Federal Court has stated that: - “[95] In summary, the legal ‘test’ provides that where the nature of the act, omission or misconduct is oppressive or unfairly prejudicial to a shareholder, and the resulting injury and loss may be classified as having been suffered directly and specially or separately and distinct by the shareholder in such capacity, as opposed to loss or injury suffered by the company or all the other shareholders, then oppression is made out and the cause of action vests in the shareholder. In such an instance, s 346 provides the remedies available. [96] If, however, the act, omission or misconduct is an injury done to the company, resulting in a loss to the company, then the cause of action vests in the company and s 347 is the proper remedy to be utilised. This situation arises commonly where the injury causes loss to all shareholders alike such that it cannot be said that the loss is suffered distinctly, separately or uniquely by any single shareholder. …. [98] Where all the shareholders are affected equally by the wrongful conduct, it follows that the shareholder has not suffered distinct or special harm by reason of the wrongful conduct. In such an instance, the derivative action is most likely the proper cause of action.” [37] At this juncture, it would be pertinent to re-examine the acts of oppression: -

1st Act of Oppression: The 2nd Defendant started spreading news and issuing notice to the Company’s customers and suppliers that the Plaintiff is no longer a director of the Company;

2nd Act of Oppression: The 3rd Defendant had started WS Weng Soon Electrical Supply as a sole-proprietorship;

3rd Act of Oppression: The transaction involving WS Weng Soon Electrical Supply purchasing goods from the Company, whereby RM 34,000.00 has been paid, and leaving an outstanding sum of RM 337,497.25;

4th Act of Oppression: Amending the Company’s invoices to that of WS Weng Soon Electrical Supply’s invoices and to divert payments to WS Weng Soon Electrical Supply; and

Conspiracy to defraud and injure. [38] As to the 1st Act of Oppression, I am of the opinion that the act of informing that the Plaintiff is no longer with the Company is tied up with the other acts of oppressions, in particular the setting up WS Weng Soon Electrical Supply. The 1st Act of Oppression is not intended to injure the Plaintiff personally or to remove the Plaintiff as a director. The setting up of WS Weng Soon Electrical Supply is to compete with the Company, and to divert all of the Company’s customers to Weng Soon Electrical Supply. [39] The relationship between the Plaintiff and the 2nd Defendant had already deteriorated in 2023, when the 2nd Defendant accused the Plaintiff of fabricating the Company’s invoices. Although the matter was eventually resolved, the 2nd Defendant asserts that the parties have reached an understanding that the Company will be voluntary wound up. That was why WS Weng Soon Electrical Supply was set up. It is clear that the 1st Act of Oppression was intended to have WS Weng Soon Electrical Supply take over the business of the Company. [40] The 2nd Act of Oppression was merely a continuation of the 1st Act of Oppression. The 3rd Defendant’s act of setting up WS Weng Soon Electrical Supply would only have one outcome, that is to compete with the Company, and to, presumably and eventually, divert all of the Company’s customers to WS Weng Soon Electrical Supply. The similar names of WS Weng Soon Electrical Supply and the Company supports this contention. [41] As to the 3rd Act of Oppression, the transactions involving WS Weng Soon Electrical Supply purchasing goods from the Company, may injure the Company, only if there is a failure by WS Weng Soon Electrical Supply to pay for the goods or, alternatively, the transactions were not conducted at arm’s length. As to the 4th Act of Oppression, the fabrication of invoices, as correctly pointed out by the Defendants, would amount to harm directed solely to the Company. [42] Therefore, I have applied the elements of the legal test set out in Low Cheng Teik v Low Ean Nee to the facts of this case and have made the following conclusion as follows: -

The wrong or infraction complained of is the 1st Act of Oppression, 2nd Act of Oppression, 3rd Act of Oppression and 4th Act of Oppression;

The wrongful acts cannot be said to be oppressive or unfairly discriminatory or otherwise prejudicial to the Plaintiff alone in his capacity as shareholder. Rather, it is a wrong that affects all the shareholders;

The cause of action vests in the Company and not the

The loss or damage arising as a consequence of the 1st Act of Oppression, 2nd Act of Oppression, 3rd Act of Oppression and 4th Act of Oppression is suffered by the Company and not by the Plaintiff alone in his capacity as a shareholder; and

The loss is suffered by both the Plaintiff and the 2nd Defendant, and not by the Plaintiff alone. [43] It follows that the Plaintiff is entitled to seek leave to commence a derivative action on behalf of the Company under Section 347. The Plaintiff has already done so. This in turn means that the Plaintiff’s claim in respect of the 1st Act of Oppression, 2nd Act of Oppression, 3rd Act of Oppression and 4th Act of Oppression cannot be properly pursued by way of an oppression action. [44] The proper Plaintiff is the Company. Any loss suffered by the Plaintiff would be loss in either the capital / value of his shareholding or a loss in the dividends distributable. This has been clearly explained in Low Cheng Teik v Low Ean Nee as follows: “[132] The proper plaintiff in this case is the company. Any loss suffered by the respondent as a result of the assignment of the SNE Trademarks would be a loss in either the capital value of her shareholding or a loss in the dividends distributable to her. This is reflective loss in that it reflects the loss sustained by the company to the extent of her shareholding in the company. It cannot constitute a separate and distinct injury resulting in a loss to the respondent in her capacity as a shareholder. As all other shareholders suffer the same loss as a consequence of this wrongful act, it cannot be said that the loss or injury suffered by the respondent is singular and distinct. As the wrongful act was found to be that of the first appellant, it cannot also be said that the respondent has been unfairly prejudiced by the conduct of the majority shareholders.” [45] In reaching my decision, I have also taken cognisance of the Plaintiff’s argument to distinguish Low Cheng Teik v Low Ean Nee. The Plaintiff had submitted that the factual matrix in Low Cheng Teik v Low Ean Nee differs from the facts of the current matter. In this current case, there are multiple acts of oppression which links into a single devious scheme that involved causing losses and damage to both the Plaintiff and the Company;

Auspicious Capital Sdn Bhd v Ebony Ritz Sdn Bhd [2021] 3 MLJ

549.

Kong Thai Sawmill (Miri) Sdn Bhd v Ling Beng Sung [1978] 2

Low Cheng Teik & Ors v Low Ean Nee [2024] 5 MLJ 580.

Section 346(1) of the Companies Act 2016.

Section 347 of the Companies Act 2016.