Concrete Parade Sdn. Bhd v Apex Equity Holdings Berhad (W-02(IM)(NCC)-1551-08/2019)

JF APEX SECURITIES BERHAD (Company No.: 47680-X)

DATO’ AZIZAN BIN ABD RAHMAN (NRIC No.: 500405-02-5435)

LEE CHEOW FUI 30 (NRIC No.: 561119-06-5179)

CHITRA A/P GANESALINGAM (NRIC No.: 660223-08-5894) 35 6. TAN SRI AHMAD FUZI BIN HJ ABDUL RAZAK (NRIC No.: 490108-07-5085)

CHOONG CHEE MENG (NRIC No.: 610726-08-5743)

ZULAZMAN BIN ZULKIFLI (NRIC No.: 681128-71-5299)

TAY THIAM SONG 45 (Passport No.: E6888310C) 2

CHUA CHING SIANG 5 (NRIC No.: 471229-01-5325)

YEO SOO SIA @ YEO SOO SENG (NRIC No.: 430318-01-5211 10 12. TAY KIA HONG & SONS SDN. BHD. (Company No.: 2900-M)

LIM SEAT HOE (NRIC No.: 491031-07-5291)

ANDREW TAN JUN SUAN (NRIC No.: 800208-07-5323)

DATO’ ONG KING SENG 20 (NRIC No.: 721109-07-5605)

MERCURY SECURITIES SDN. BHD. (Company No.: 113193-W) … RESPONDENTS 25 [In the Matter of High Court of Malaya at Kuala Lumpur Originating Summons No. WA-24NCC-56-02/2019 30 In the matter of Apex Equity Holding Berhad (Company No. 208232-A) And 35 In the matter of Section 346 of the Company Act 2016 And 40 In the matter of Order 7 and Order 88 of the Rules of Court 2012 And 45 In the matter of Section 132(1), (1A), (2) of the Companies Act 1965 and/or 3 Section 218(1) of the Companies Act 5 2016 And In the matter of Section 67A(1) of the 10 Companies Act 1965 and/or Section 127(1) of the Companies Act 2016 And 15 In the matter of Section 223 and Section 85 of the Companies Act 2016 Between 20 Concrete Parade Sdn. Bhd. (Company No.: 987433-K) … Plaintiff 25 And

Apex Equity Holdings Berhad (Company No.: 208232-A)

JF Apex Securities Berhad (Company No.: 47680-X)

Dato’ Azizan bin Abd Rahman 35 (NRIC No.: 500405-02-5435)

Lee Cheow Fui (NRIC No.: 561119-06-5179) 40 5. Chitra a/p Ganesalingam (NRIC No.: 660223-08-5894)

Tan Sri Ahmad Fuzi bin Hj Abdul Razak (NRIC No.: 490108-07-5085) 45 4

Choong Chee Meng 5 (NRIC No.: 610726-08-5743)

Zulazman bin Zulkifli (NRIC No.: 681128-71-5299) 10 9. Tay Thiam Song (Passport No.: E6888310C)

Chua Ching Siang (NRIC No.: 471229-01-5325)

Yeo Soo Sia @ Yeo Soo Seng (NRIC No.: 430318-01-5211)

Tay Kia Hong & Sons Sdn. Bhd. 20 (Company No.: 2900-M)

Lim Seat Hoe (NRIC No.: 491031-07-5291) 25 14. Andrew Tan Jun Suan (NRIC No.: 800208-07-5323)

Dato’ Ong King Seng (NRIC No.: 721109-07-5605)

Mercury Securities Sdn. Bhd. (Company No.: 113193-W) … Defendants] 35 40 45 5 CORAM 5 YAACOB BIN HAJI MD. SAM, JCA SURAYA BINTI OTHMAN, JCA LAU BEE LAN, JCA JUDGMENT 10 Introduction [1] This is the Appellant’s appeal against the dismissal of the Appellant’s oppression suit under s.346 of the Companies Act 2016 Act 777) (‘CA 2016’) via an Amended Originating Summons dated 15 20/2/2019 (‘the OS’) with cumulative costs of RM415,000.00. [2] The Appellant’s complaints revolved around-

(a) the Proposed Merger Exercise pertaining to the acquisition and/or of the 16th Respondent (‘Mercury Securities’) with the 2nd 20 Respondent (‘JF Apex’) involving a contravention of s.85 and s.223 of the CA 2016; and

(b) the Validation Proceedings i.e. the proceedings commenced by the 1st Respondent (‘Apex Equity’) to validate previous share 25 buy-back transactions undertaken from 2005 to 2017 which are in contravention of s.67(1) and/or s.123 (1) of the CA 2016. [3] The relief sought in the OS includes declaratory reliefs and orders to- 30

(a) nullify all the agreements executed in respect of the Proposed Merger exercise; and 6

(b) reverse all the previous share buy-back transactions and the 5 purported validation exercise which were carried out in contravention of written laws. Salient Facts [4] The salient undisputed facts relevant to this appeal are gleaned 10 from the learned High Court Judge’s (‘the Judge’) Grounds of Judgment and the submissions. The 1st Respondent, Apex Equity is a public listed company. And is principally engaged in the business of investment holding and trading in marketable securities. The 2nd Respondent, JF Apex is a wholly owned subsidiary of Apex Equity. The 16th 15 Respondent, Mercury Securities is a private limited company and is principally engaged in the business of stockbroking and corporate advisory. The Appellant is a shareholder holding 10,000,000 ordinary shares in Apex Equity amounting to approximately 4.68% of the total shares (inclusive of treasury shares) of Apex Equity. 20 [5] The Appellant brought an action against the Respondents for minority oppression under s.346, CA 1965. To reiterate, the Appellant’s complaint of oppression stems from 2 sets of transactions, (i) certain share buy-back transactions that had been conducted by Apex Equity 25 between 2005 and 2017 and (ii) Proposed Merger Exercise between JF Apex and Mercury Securities carried out via the Merger Agreements comprising (i) the Heads of Agreement (‘HOA’) and the Business Merger Agreement (‘BMA’) and the Subscription Agreements. The HOA is the Heads of Agreement dated 21/9/2018 between Apex Equity and Mercury 30 Securities, for the merger and transfer of the business of Mercury Securities to JF Apex via the BMA and the Subscription Agreements. 7 [6] Apex Equity and JF Apex entered into the BMA with Mercury 5 Securities on 18/12/2018. The consideration for the business transfer is RM140 million which will be paid in the following manner:

(a) a sum of RM92 million shall be paid by the issuance of RM100 million new ordinary shares of Apex Equity to Mercury Securities at an issue price of RM0.92 per share;

(b) the balance of RM48million shall be paid in cash and partly funded by the Proposed Private Placement of 20,000,000 new ordinary shares of Apex Equity, which shall generate proceeds in the sum of RM18.8 million. 15 [7] The HOA, BMA and the Subscription Agreements are conditional agreements subject to the approval of the shareholders. It is common ground that these Agreements were executed without the prior approval of Apex Equity’s shareholders. 20 [8] On 20/2/2019 the OS was filed. [9] On 31/5/2019, Apex Equity issued a notice of Extraordinary General meeting to be held on 19/6/2019 (‘the Merger EGM’) to 25 deliberate on 2 resolutions i.e (i) the approval of the Proposed Merger exercise pursuant to the terms of the BMA (‘the Merger Resolution’) and (ii) the approval of the Proposed Private Placement (‘the Placement Resolution’). 30 [10] On 3/6/2019, Apex Equity issued a shareholder’ circular in respect of the Merger EGM. 8 [11] On 19/6/2019, the Merger Resolution and the Placement 5 Resolution were passed by a vote of 54.8% to 45.2%. [12] For the Proposed Private Placement, Apex Equity entered into a Subscription Agreement on 18/12/2018 with the 9th to 15th Respondents (‘the Placees’). The 3rd to 8th Respondents were the directors of Apex 10 Equity at the material time. [13] Between 2005 and 2007, Apex Equity had undertaken numerous share buy-back transactions pursuant to mandates and approvals given by its shareholders at the respective annual general meetings. 15 [14] It was the Appellant who had brought to the attention of the 1st to 8th Respondents as to the issue of lack of authority. On 22/5/2018, the Appellant through its solicitors Messrs. Bodipalar Ponnudurai De Silva had informed several of Apex Equity’s directors that there might be a 20 possible lack of authority under the Company’s M&A to carry out share buy-back. The Board of Directors of Apex Equity tabled resolutions at the Company’s AGM on 28/5/2018 to seek a further mandate to conduct share buy-back transactions. Based on the Minutes of the 2018 AGM, the shareholders voted against any mandate for further share buy-back 25 transactions and also rejected the resolution to authorise the directors to allot new shares not exceeding 10% of the Company’s issued share capital. [15] On 13/7/2018, Apex Equity filed the Validation Proceedings to 30 validate the previous share buy-back transactions conducted from 2005-

9 [16] On 29/8/2018, the High Court granted the Validation Order in 5 respect of the Validation Proceedings. [17] Apex Equity only made public announcement of the existence of the Validation Order on 26/9/2018 approximately 1 month after the Validation Order was obtained. 10 High Court Decision [18] The reasons for the dismissal of the OS as succinctly summarised by the learned Judge in his Grounds of Judgment are as follows: “(a) in relation to the share buy-back transaction: although I accept that the 15 plaintiff may have been deprived of an opportunity to raise its objections at the validation proceedings, I was of the view that, on the facts of this case, none of its substantive rights as a shareholder in Apex Equity had been materially prejudiced; 20

(b) in relation to the contention of breach of the shareholders’ statutory right or pre-emption under section 85 of the Companies Act 2016;

(i) there had not been any contravention of the rights of pre-emption, due to the fact that the proposed placement had been 25 approved by the shareholders of Apex Equity at its general meeting held on 20 June 2019: and

(c) on the proper construction of section 223(1), it suffices if either:

(a) The Merger Agreements are in breach of the CA 2016 namely-

(i) The Subscription Agreements are in breach of s.85 of 40 the CA 2016 which provides that the Appellant with a statutory pre-emptive right to be offered any new shares in Apex Equity; and 11

(b) The Validation Proceedings are in breach of s.67 (1) of the 10 CA 1965 and/or 123(1) of the CA 2016 which prohibits Apex Equity from purchasing its own shares without authorisation in the Memorandum and Articles of Association of Apex Equity (‘M&A’). Denial of Statutory and Contractual Pre-emptive Rights 15 [20] We are of the considered view that the Appellant has a statutory and contractual pre-emptive right to be offered new shares in Apex Equity premised on a reading of-

(i) s.85 (1) of CA 2016 which provides- “(1) Subject to the constitution, where a company issues shares 20 which rank equally to existing shares as to voting or distribution rights, those shares shall first be offered to the holders of existing shares in a manner which would, if the offer were accepted, maintain the relative voting and distribution rights of those shareholders.”; with 25

(a) the Placement Resolution passed at Apex Equity’s EGM on 19/6/2019 subsequent to the execution of the Subscription Agreements on 18/12/2018 constitutes a direction to the contrary; and 10

(b) s.75 of the CA 2016 grants directors the power of allotment in respect of the Placement Shares. Direction to the contrary 15 [22] The learned Judge held the view that “the resolution passed by the company in general meeting approving the business (which included the proposed placement as part of it) amounted to a “direction to the contrary that may be given by the Company in general meeting” for the purposes and within the meaning of artice11.” (para 47 Grounds of 20 Judgment) and para 18 above. We respectfully disagree with this finding of the learned Judge for the reasons below. [23] The Appellant submits that the Placement Resolution passed at Apex Equity’s EGM cannot in law constitute a “direction to the contrary” 25 because the words “subject to any direction to the contrary” under s.85 of the CA 2016 does not entitle a full waiver of the shareholders ‘pre-emptive rights’. In support thereof the Appellant relies on Shanti Prasad Jain v. Kalinga Tubes Ltd and others [1952] 49 AIR 202 wherein the Indian High Court at p.208 held that the equivalent Indian 30 section of s.81 of the Companies Act 1956 “in the allotment of new shares does not contemplate total exclusion of the existing shareholders from participating; the clause “subject to any directions to the contrary” 13 can only refer to the manner and proportion in which the shares have to 5 be offered to the existing shareholders.” Thus we find there is merit in the submission of the Appellant that no resolution passed at a general meeting can completely displace the Appellant‘s pre-emptive rights in the new shares as was sought to be done via the Subscription Agreements. 10 [24] In any event we agree with the submission of the Appellant that-on the facts of the appeal before us, the Placement Resolution cannot constitute a “direction to the contrary” for the following reasons:

(a) A “direction to the contrary” must be obtained before any 15 shares are offered to outsiders. However, in the appeal before us, the undisputed fact is that the Placement Resolution was passed after the execution of Subscription Agreements where the offer of the Placement Shares to the 7 Placees (9th to 15th Respondents). Thus, the Placement Resolution cannot retrospectively allow the 20 issuance of new shares to outsiders in breach of s.85 of the CA

2016.

(b) For a “direction to the contrary” to be operative, the proposed resolution must set out all the requisite information regarding the 25 shareholders’ pre-emptive rights under s.85 (1) of CA 2016 i.e.-

(i) The existing shareholders had a statutory pre-emptive right to be offered any new shares which rank equally to existing shares issued by Apex Equity read together with Article 11 of the M&A. 30 14

(a) to allot shares in the company; 15 …

(d) to allot shares under an agreement or option or offer.

(a) an allotment of shares, or grant of shares, under an offer made to the members of the company in proportion to the members’ shareholdings;”. 25 [29] It is our respectful view that the Respondents’ contention is untenable in light of the reasons proffered by the Appellant that the general power of allotment under s.75 of the CA 2916 cannot be used by the Respondents to bypass the safeguards under s.85 of the CA 2016. Firstly, s.85 of the CA 2016 is not subjected to s.75 of the CA 2016 as 30 the former is only subjected to the constitution, which makes no reference to the latter. Secondly, the express wording of s.75 states that the directors “shall not exercise any power to allot shares in the company” unless the prior approval by way of resolution by the company has been obtained. Thirdly, the directors of Apex Equity have always 35 accepted that prior approval is required because in previous annual general meetings, shareholder approval was always sought to empower the directors to allot and issue new shares up to an amount not 17 exceeding 10% of Apex‘s issued share capital (AGM Minutes of 5 28/5/2018, item Resolution 11). [30] Therefore, with respect, we are of the view that the learned Judge erred when he found that none of the allegations of oppression had been made out in respect of the Appellant’s contention that there was a 10 contravention of s.85, CA 2016. In the circumstances, we find there is merit in the Appellant’s submission that the invalid offer and issuance of the Placement Shares under the Subscription Agreements constitute an unfairly prejudicial conduct within the meaning of s.346, CA 2016. In Re a company (No 005134 of 1986), ex parte Harries [1989] BCLC 383, 15 Peter Gibson J held at p.396 as follows: “It was conceded on behalf of Mr Rees that the allotment was invalid because of s.17 of the Companies Act 1980. In broad terms that section provides that (save for exceptions immaterial here) a company is prohibited from allotting new shares unless it has offered those shares to existing shareholders in 20 proportion to their holdings and on the same terms, and that the offer must be served on each shareholder. Counsel for the respondents submitted that a contravention of s.17 did not necessarily amount to unfairly prejudicial conduct. That may well be right in the case of a merely technical beach but it cannot be right in the case of a substantial contravention of the section, which 25 seems to me to embody in statutory form ordinary and basic notions of fairness as between shareholders inter se and governing those with the power to allot shares. There can be no doubt that in the present case there was a substantial contravention of s.17. I go further: it seems to me clear beyond argument that the allotment was invalid as being for an improper purpose, 30 namely to increase Mr Ree’s holding and to reduce Mr Harrie’s holding and with an improper motive, namely to reward himself.” [31] We are of the view that the Appellant has been oppressed given 35 our finding that that there has been an unjustified dilution of the Appellant’s shareholding in Apex Equity since the Placement Shares have been offered to outsiders. It has been held by this Court in Soo Boon Siong @ Saw Boon Siong v Saw Fatt Seong and Soo Hock Seang (as estate representative Soo Boon Kooi @ Saw Boon Kooy 40 18 (deceased)) [2008] 1 MLJ 27 at p.48 approving the commentary made 5 in Chan & Koh on Malaysian Law, Principle & Practice, (2nd Ed 2006) as follows: “[40] …Section 132D is inspired by the Jenkins report where it was recommended that the directors should not have the power to issue any shares in the original or any increased capital of a company without the prior 10 approval of the company in general meeting. The Jenkins report observed that the directors’ unfettered discretion to issue equity shares had not always worked to the advantage of the members. There were cases where shares were issued for cash below their market value to other than the existing members. The effect was to dilute the equity capital, ‘at the expense of 15 the existing shareholders, for the advantage of the newcomers.” (Emphasis added) [32] The Respondents argue that the Appellant did not dispute the fact 20 that capital was required to be raised to finance the Proposed Merger exercise. The Respondents relied on the case of Seah Eng Toh Daniel & Anor v Kingsley Khoo Hoi Leng & 3 Ors. [2015] MLJU 2353 at para [34] which cited with approval the case of Howard Smith Ltd v Ampol Petroleum Ltd And Others [1974] A.C. 821 at p.832 for the proposition 25 that (i) the raising of finance is a matter of management within the responsibility of the directors; and (ii) it would be wrong for the Court to substitute its opinion for that of the management or question the correctness of the management’s decision. Counsel for the Appellant in rebuttal submits that the management powers of directors to raise fund 30 cannot be extended to a breach of or override the statutory safeguard afforded under s.85, CA 2016. We have no reason to disagree with the Appellant’s submission and agree that the Respondents’ reliance on Seah Eng Toh Daniel (supra) and Howard Smith (supra) are of no relevance as these cases do not concern a denial of pre-emptive rights 35 to new shares. 19 Contravention of s. 223 of the CA 2016 5 [33] S.223 of the CA 2016 provides- “223. Approval of company require for disposal by directors of company’s undertaking or property.

(a) the acquisition of an undertaking or property of a substantial value; or

(b) the disposal of a substantial portion of the company’s 15 undertaking or property unless-

(i) the entering into the arrangement or transaction is made subject to the approval of the company by way of a resolution; or 20

(a) the HOA, being the entry of the Proposed Merger exercise, did not contain any provision subjecting it to shareholder approval; and 35

(b) the BMA, which carries into effect the Proposed Merger exercise, was executed without prior shareholder approval. 20 [35] The Respondents, however argue that was no breach of s.223, CA 5 2016 because-

(a) the HOA did not commit parties to enter into the BMA or the Proposed Merger exercise;

(b) the HOA provided for a condition precedent requiring for 10 shareholder approval to be obtained; and

(c) the passing of the Merger Resolution, subsequent to the execution of the HOA and the BMA is sufficient to comply with s.223, CA 2016. 15 [36] Upon a reading of s.223, CA 2016, the 2 separate and distinct restrictions on the directors under s.223, CA 2016 are-

(a) to enter into an arrangement or transaction which has to be made subject to and/or contain a condition precedent for 20 shareholder approval in in conformity with s.223(1)(b)(i); and

(b) to carry into effect an arrangement or transaction, of which prior shareholder approval must first be obtained in conformity with s.223(1)(b)(ii). 25 [37] There is force in the Appellant’s contention that the HOA, the BMA and the Subscription Agreements form one composite transaction as all 3 Agreements are required to implement the Proposed Merger exercise (see Sri Kelangkota-Rakan Engineering JV Sdn Bhd & Ors v Arab – 30 Malaysian Prima Realty & Ors [2001] 1 MLJ 324 (FC) at p.330 I); Paragon Union Bhd v Prestamewah Development Sdn Bhd & Anor and another appeal [2018] 4 MLJ 307 (CA) at p.326 F to 327 A-D). 21 [38] In amplification of para 34 above, we find a perusal of the following 5 relevant extracts from the HOA and the BMA undoubtedly-

(i) demonstrate that the HOA is the starting point of the Proposed Merger exercise: “[1] Background The parties are desirous of merging their respective business via 10 the transfer by [Mercury Securities] of the Business …as a going concern together with the Business Assets …and the Business Liabilities …to [the Company] …by executing a Business Merger Agreement (“Agreement’). … 15 Execution of the Agreement …

(b) The parties shall within three (3) months from the date of this HOA or 20 such other timeframe as may be mutually agreed in writing between the parties, execute the Business Merger Agreement upon the terms and conditions as set out herein and such 25 other terms to be mutually agreed upon.” (Emphasis added) All the salient terms of the Proposed Merger exercise, including the purchase consideration of RM140 million and the business to be 30 acquired (“Transfer Business”) are encapsulated in the HOA.

(a) the HOA (being the starting point and/or the entering into of the merger exercise) has to be made subject to and/or contain a condition precedent for the approval of the shareholders of the 20 Company (Apex Equity); and

(b) the implementation and/or the carrying into effect of the HOA (being the execution of the BMA) requires the prior approval of the shareholders of Company (Apex Equity). 25 [40] The rationale behind the construction that has been accorded above to s.223, CA 2016 is fortified by looking at the legislative change made to reintroduce a restriction to the “entering into” of an acquisition has to contain a condition precedent for shareholder approval in s.233, 30 CA 2016. This can be gleaned from a judgment of this Court in Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor and Other Appeals [2012] 3 MLJ 616 at paras 637 [113] to 638 [118] per Zainun Ali JCA (as she then was). Prior to 2007, s.132C CA 1965 contained a restriction which stipulated that the directors shall not “execute” any 35 23 acquisition without shareholder approval. The restriction on “executing” 5 an acquisition was removed via amendment Act A 1229/07 to CA 1965. The words “or execute” in s.132C(1), CA 1965 (prior to 2007 amendment) have been deleted as “the intention of the legislation is to restrict the operation of the section to a situation where the directors are carrying into effect the impugned transaction, as opposed to merely 10 entering into it by executing an agreement.” To reiterate, this restriction to the “entering into" of an acquisition was reintroduced in s.223, CA 2016 in the manner we have alluded above. [41] In Pioneer Haven (supra), the Court of Appeal had emphasised 15 on the mischief which s.132, CA 1965 seeks to avoid is as follows: “[118] One might ask: what is the mischief which s 132C seeks to avoid? Reading the said section as a whole, it is clear that the mischief which s 132C was enacted to prohibit, was the parting by the company of any of its substantial assets without approval of the shareholders at general meeting. 20 Section 132C makes it incumbent upon the directors and the company to inform the shareholders of any intention to carry into effect any transaction whereby any substantial assets of the company was to be taken out of the company. This duty is indirectly imposed by requiring shareholders’ approval before such transaction is carried into effect.” 25 [42] We are incline to agree with the submission of Counsel for the Appellant that with the reintroduction of the “entry” restriction, the analysis of Zainun Ali JCA in Pioneer Haven must necessarily be 30 extended to mean that the directors have an incumbent duty to inform shareholders of any intention to both “enter into” and “carry into effect” an acquisition of substantial assets. Support for such a construction is also drawn from the case of Smithton Ltd (formerly Hobart Capital Markets Ltd) v Naggar [2015 1 WLR 189 at p.206 where the English 35 Court of Appeal observed that the requirement under s.190, English Companies Act 2006, that the company “may not enter into an 24 arrangement …unless the arrangement has been approved by a 5 resolution of members.” is a question which must be asked on the basis of the arrangement at its inception. Although s.190 is not in para materia with s.223, CA 2016, but the words “may not enter” in s.190 is similar to s.223, CA 2016 which provides that the directors shall not “enter in” without being made subject to the approval of the company. 10 [43] In light of the explanation above of the construction of s.223 (1) CA 2016, we are therefore of the view that the Respondents’ contentions adopted by the learned Judge cannot be sustained, namely-

(i) for the purpose of satisfying proviso (i) of s.223(1), CA 2016, 15 it is sufficient that the entering into of the arrangement or transaction is “made subject to the approval of the company by way of resolution.” The learned Judge adopted the phrase to mean that shareholders’ approval must be specified as a condition precedent to any arrangement or transaction of substantial value 20 (para 54 Grounds of Judgment); and

(a) The HOA was expressly stated to be legally binding and enforceable in the beginning (clause 1.2), “Pending the execution of the Agreement [BMA], the parties agree that the [HOA] shall be legally binding on them and shall be enforceable in accordance 25 with the terms therein.” and at the last para of the HOA (clause 2), which again repeated that “the parties hereby agree that the terms and conditions herein shall be legally binding on them.”

(b) The primary terms of the HOA obligated the parties to 30 execute the BMA within 3 months from the date of the HOA. Its express terms provide that “the parties shall within 3 months from 26 the date of the HOA …execute the [BMA] upon the terms and 5 conditions set out herein.” [46] There was a suggestion from the Respondents that there was no finality in the HOA because there were additional terms, including the totality of business assets/liabilities of Mercury Securities, which still 10 needed to be worked out during the exclusivity period in the HOA. In our judgment there is no merit in such a submission of the Respondents given the time honoured principle that where parties have entered into a contract to acquire or purchase and have agreed to the principal terms, such obligation is enforceable irrespective whether further terms will be 15 incorporated in a subsequent agreement. In Daiman Development Sdn Bhd v Mathew Lui Chin Teck & Anor Appeal [1981] 1 MLJ 56 wherein the Privy Council recognised that a simple “booking proforma” for the purchase of a property (which identifies the parties and specifics of the property to be bought and its price) can be enforced even when a 20 further agreement with additional terms has yet to be executed. At p.61, the Privy Council, among others, opined as follows: “Once it is decided that the promise to purchase was not subject to contract the obligation of Clause 1 is to sign a contract of sale which implements a sale for which agreement has already been made. But the question of what may 25 properly be included in the contract of sale can be left for judicial decision, if occasion should arise. In the result, therefore, in their Lordships’ view the pro forma cannot be construed so as to treat its terms as contractually ineffective until some further 30 agreement had been made by the parties. Nor can it properly be said that the agreement contained in the pro forma was inchoate for want of consensual definition of the terms and conditions to be inserted in the contract of sale.” The principles on the formation of contract propounded in Daiman case 35 was affirmed and approved by the Federal Court in PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor And Other Appeals [2021] 2 CLJ 441. 27 [47] On the facts of the present appeal, we observed all the salient 5 terms of the BMA have been agreed as per clause 2 of the HOA, including the purchase consideration of RM140million, the business to be acquired and the duration and term of the HOA. In our judgment, upon the terms of the HOA, it has been expressly intended by the parties there was to be a legally binding and enforceable agreement and 10 the Respondents’ argument on the additional terms, if any which may be negotiated during the exclusivity period, it is but a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through, and it is not a condition or term of the bargain whereby there is no enforceable contract because the 15 condition is unfulfilled (per Abdul Hamid FJ (as he then was) at p.48 C-E right column in Lim Keng Siong & Anor v Yeo Ah Tee [1983] 2 MLJ 39 with reference to an exposition by Mr. Justice Parker in Von Hatzfeldt-Wildenburg v. Alexander [1912] 1 Ch 284 at pp.288-289). 20 [48] On this note, we agree with the submission of the Appellant that the issue of the totality of the business assets and liability is but a red herring given that even in the BMA, the final quantum of the business assets and/or liabilities is still subject to qualifications and has yet to be fully ascertained. However, since this issue does not impact the 25 enforceability and finality of the BMA, the Respondents, rightly so cannot now claim that the finality of the HOA is somehow affected. [49] With respect to the learned Judge, in our opinion, the “commercial reality” interpretation cannot be sustained for the following reasons. 30 Contrary to His Lordship’s findings that prior shareholders’ approval cannot be realistically obtained due to the requisite secrecy and confidentiality of the Proposed Merger exercise, we find on the facts of 28 this present appeal, (i) there was no secrecy and/or confidentiality to the 5 transaction as all the principal terms of the Proposed Merger were extensively canvassed in the HOA and was announced to Bursa Malaysia (21/9/2018) about 3 months prior to the execution of the BMA (18/12/2018); and (ii) there was no impediment be it, by reason of secrecy, confidentiality or otherwise, for the Company (Apex Equity) 10 and/or its directors to seek the approval of its shareholders prior to the execution of the BMA. Whether HOA contains a condition precedent for shareholder approval 15 [50] The Respondents argue that s.223 (1), CA 2016 would be satisfied if the entering into of the HOA was made subject to the shareholders’ approval as required under s.223 (1) (b) (i) which was satisfied by referring to clause 2 of the HOA under the heading “Conditions Precedent” that “The obligations of the parties to complete all 20 transactions contemplated herein i.e., the Proposed Merger and proposed Private Placement were conditional upon, inter alia, the approval of shareholders of [Apex Equity] for the transaction contemplated in the BMA being obtained (including, without limitation) for the Proposed Private Placement (“PLC Shareholders Approval”). 25 [51] We cannot but agree with the Appellant’s submission that the aforesaid submission is factually incorrect because the “condition precedent” referred to by the Respondents does not form part of the terms but is instead one of the salient terms of the Proposed Merger 30 exercise which is to be inserted in the BMA. Further, the Respondents and in fact the learned Judge were cognisant of the fact that there was no condition precedent in the HOA because the HOA has since been 29 carried into effect by the execution of the BMA, the terms and conditions 5 of which upon execution supersedes the terms of the HOA, prior to the passing of the Merger Resolution. Whether the passing of the Merger Resolution cures the contravention of s.223, CA 2016 10 [52] It bears repeating that the Appellant’s complaint is that there are 2 separate and distinct restrictions in s.223, CA 2016 namely-

(a) the “entering into” of the acquisition via the HOA was not subjected to shareholder approval: and 15

(b) the “carrying into effect” of the acquisition via the BMA was executed without prior shareholders’ approval. [53] The Appellant submits that the passing of the Merger Resolution on19/6/2019 after the event and subsequent to the breaches of s.223, 20 CA 2016 cannot cure such breaches. We have stated the reasons for finding that there are breaches of s.223 (1), CA 2016 above. In the circumstances we find there is merit in the Appellant’s submission for the following reasons:

(a) the HOA which has been completed on 18/12 2018 did not 25 contain a condition precedent for shareholder approval as held by this Court. Therefore, the Merger Resolution cannot ex post facto allow for the inclusion of such condition precedent after the completion of the HOA; and 30

(b) the BMA required prior shareholder approval before it was executed on 18/12/2018. Therefore, a shareholder approval via 30 the Merger Resolution obtained 6 months later on 19/6/2019 5 cannot cure this transgression which had already occurred. Whether there is abandonment of contention on Reverse Take-Over [54] The Respondents submit that the Appellant had abandoned its contention that the Proposed Merger exercise was designed to facilitate 10 a covert reverse take-over of Apex Equity and its subsidiaries by Mercury Securities by relying on para 8 of the Grounds of Judgment. The learned Judge had in para 8 stated, “The plaintiff also initially raised the contention that the proposed acquisition of the business of Mercury was a means by which Mercury together with the places would acquire control over Apex Equity, 15 which would trigger the mandatory offer obligation under the Malaysian Code on Take-overs and Mergers 2016. This argument was however abandoned in the course of oral submissions.”. The Respondents argue that the Appellant is estopped from raising this ground before this Court as it was never ventilated before the High Court and to raise the same would be an 20 abuse of process on the part of the Appellant. [55] With respect, in our view the Respondent’s submission is flawed as the High Court’s finding on abandonment is misconceived. Based on the relevant portion of the Notes of Proceedings submitted by the 25 Appellant, we agree that the Appellant Counsel sought to make the following points at the High Court:

(a) the Appellant did not need to show that parties are acting in concert in order to demonstrate that there was unfair prejudice; 30

(b) the prejudicial effect to the Appellant is that it was Mercury Securities who identified and selected the Placees; and 31

(c) the Appellant was not seeking orders to compel a mandatory 5 general offer pursuant to the Capital Markets and Services Act

[56] The above points coupled with the fact that the said issue was pleaded in para 17 of the Amended Memorandum of Appeal dated 10 21/11/2020 to our mind are indicative that there is no abandonment of the said issue by the Appellant. Denial of Statutory Right to Vote [57] The Respondents in submission state that even assuming that 15 s.223 (1) requires prior shareholders’ approval to be obtained before the entering of the BMA, it is evident that Apex Equity would have arrived at exactly the same position had it sought the shareholders’ approval prior to the entering into the HOA or BMA and there cannot conceivably be any prejudice to the Appellant. The learned Judge made the same 20 finding (para 58(d), Grounds of Judgment). [58] The Appellant submits the contravention of s.223, CA 2016 falls within the category of unfair prejudicial conduct and/or disregard of interests as elucidated by the Federal Court in Pan-Pacific 25 Construction Holdings Sdn Bhd v. Ngiu-Kee Corporation (M) Sdn Bhd & Anor [2010] 6 MLJ 721 at 735 [26]. The Appellant’s position is it has been denied of its statutory right to vote and to approve the Proposed Merger exercise prior to the execution of the BMA. 30 [59] Contrary to the position held by the Respondents and agreed to by the learned Judge, we say His Lordship has erred for the following reasons found in the Appellant’s submission which we find no reason to 32 disagree with. The said denial of the Appellant’s fundamental statutory 5 right to vote provided in s.223, CA 2016 constitutes an oppression on the minority irrespective of whether such vote would have changed the outcome of the Merger Resolution (see Lim Hean Pin v Thean Seng Co Sdn Bhd & Ors [1992] 2 MLJ 10 at p.34 B per Edgar Joseph Jr. J (as he then was)). We observed that the oppressive conduct of the 10 denial of the Appellant’s right to vote assumes greater significance when the Proposed Merger exercise although framed as acquisition of Mercury Securities, is instead designed to facilitate a covert reverse take-over of Apex Equity and its subsidiaries, including JF Apex by Mr Chew Sing Guan and Mercury Securities. The ultimate result of the 15 Proposed Merger exercise is that Mercury Securities (i) will be the single largest shareholder in Apex Equity holding about 31% of the Company’s enlarged share capital; (ii) if taken in conjunction with the Proposed Placement to the 9th to 15th Respondents (constituting about 6.2% of the Company’s enlarged share capital), who were identified by Mercury 20 securities for the Proposed Merger exercise will have control of about 37.2% of Apex Equity’s enlarged share capital; and (iii) will have complete control over the 1st Respondent’s group of companies as it will through its MD, Mr. Chew Sing Guan, have the sole discretion to appoint the entire board of directors of the Company’s subsidiaries, including JF 25 Apex. [60] When viewed in totality, the Proposed Merger exercise although couched as an ordinary merger with a private limited company (Mercury Securities) has consequences in that- 30

(a) on the one hand, Mercury Securities would (as a purported seller) have received a purchase consideration of RM140 million; and 33

(b) however, although having received substantial consideration 5 (instead of paying), Mercury Securities would have gained absolute control over the operations of the Apex Equity’s group companies and control of approximately 37% without having to comply with Rule 4.01 of the Rules on Take-Overs, Mergers and Compulsory Acquisitions. 10 [61] The above consequences would unfairly prejudice the interests of the Appellant as a member because the value of its investments in Apex Equity would have diminished substantially by (a) the loss of the purchase consideration of RM140 million to Mercury Securities; and (b) 15 the ceding of control of Apex Equity to Mercury Securities where the Company’s shareholders will no longer be in a position to manage and structure the Company and its group (See Re Little Olympian Each Ways (No.3) Ltd [1995] 1 BCLC 636). 20 Share Buy-Back Transaction and Validation Order [62] As highlighted by the Appellant, the Appellant’s complaint is in respect of the directors’ conduct in filing an application (OS 382 on 29/8/2018) pursuant to s.582 (3), CA 2016 to validate previous share buy-back transactions undertaken by Apex Equity, which continue to be 25 unauthorised and illegal due to the contravention of s.67, CA 1965 and/or s.123, CA 2016 which prohibits a company from purchasing its own shares. The Appellant contends that the validation of these share buy-back transactions is and continues to be unlawful. 30 [63] The Respondents’ arguments in response are essentially the following: 34

(a) S.582, CA 2016 allows for the validation of breaches of the 5 Companies Act and therefore the illegality surrounding the share buy-back back transactions have been rectified by the Validation Order. In addition, there is no necessity to amend the Company’s M&A to allow share buy–back prior to obtaining the Validation Order because such amendment takes place prospectively.

(b) There is acquiescence and/or delay by the Appellant in seeking to nullify the Validation Order.

(c) The relief formulated by the Appellant in respect of share 15 buy-back is unsuitable and is commercially impractical. [64] S.67, CA 1965 and/or s.123 CA 2016 specifically prohibits a company from purchasing its own shares; the only exception to this restriction is if express authority is provided by the company according to 20 s.67A, CA 1965 and/or s.127 CA 2016. It is not in dispute that the Company M&A did not contain any authorisation for the conduct of share buy-back transactions. Thus, all the share buy-back transactions carried out by Apex Equity between 2005 to 2017 were unlawful and in contravention of CA 1965 and /or CA 2016. This was acknowledged by 25 the learned Judge. [65] The M&A remained unamended to date because the directors’ subsequent proposal to adopt a constitution which authorises share buy-back was rejected by the shareholders during the EGM on 19/6/2019. 30 S.582, CA 2016 only caters for orders to validate “defect, irregularity or deficiency”. As such, the previous share buy-back transactions continue 35 to be illegal notwithstanding the Validation Order due to its contravention 5 of s.67 CA 1965 and/or 123 CA 2016. [66] In submission the Appellant ventilates that the conduct of the Directors in obtaining the Validation Order on behalf of the Company is unlawful and constitutes an act which is unfairly prejudicial to the 10 Appellant and the other shareholders of the Company. In this regard we refer to the case of the Australian Securities Commission v The Multiple Sclerosis of Tasmania [1993] 10 ACSR 489 where at p.507 lines 25 to 30, the Supreme Court of Tasmania ruled- “…An act which is otherwise prejudicial to a member may more readily be 15 described as being unfairly so if it is an unlawful act. An act which is discriminatory against a member may more readily be said to be unfairly so if it is an unlawful act. An act may more readily be said to be contrary to the interests of the members as a whole if it is an unlawful act. Unlawfulness may more readily justify intervention under s 346. 20 Instead, the circumstances surrounding this issue show that the Directors’ act of filing of the Validation Proceedings, without first amending the M&A, is a blatant disobedience of the M&A and is oppressive of the Appellant.” 25 (Emphasis added) S. 260 of the Corporations Law in the case of Australian Securities Commission v The Multiple Sclerosis of Tasmania is similar to s.346, CA 2016. 30 [67] We find there in merit in the submission of the Appellant that the learned Judge fell into error when His Lordship stated that, “There was no suggestion at all that the share buy-back transactions were undertake in wilful disobedience of the memorandum and articles of association.” 35 To our mind, it is but otherwise because the circumstances show as acknowledged by the learned Judge that, “It was the [Appellant] who discovered the memorandum and articles of association of Apex Equity 36 did not permit share buy-back transactions. The [Appellant] brought this 5 to the attention of the management of Apex Equity.” Unfortunately, the learned Judge stopped short of that in failing to find that it was the Directors’ act of filing the Validation Proceedings without first amending the M&A is a blatant disregard of the M&A and is oppressive of the Appellant. 10 [68] Further, at the time the Validation Proceedings were filed (30/7/2018) there is contemporaneous evidence as in the Minutes of the 2018 AGM (28/5/2018) that the shareholders of Apex Equity refused to authorise the Company to carry out further share buy-back transactions 15 after being appraised of the illegality surrounding the same. As such we agree with the submission of the Appellant that having regard to the wishes of the shareholders, the Directors ought to have obtained the consent and authority of the shareholders prior to the filing of the Validation proceedings instead of filing without the prior knowledge or 20 approval of the shareholders. This in our view has resulted in unfair prejudice to the Appellant as its’ substantive rights were impinged in the following manner:

(a) It was denied the opportunity to participate in the Validation Proceedings and to inform the Court that- 25

(i) the M&A was not amended to incorporate the necessary authorisation for the Company and the relevant Board of Directors to carry out share buy-back transactions and that the transactions sought to be validated continue to be unlawful and/or illegal. The resulting impact would mean 30 that the Court has no jurisdiction to rectify and/or validate such continuing unlawful and/or illegal transactions. A case 37 in point is Holman v. Johnson (1775) 98 ER 1120 at 5 p.1121, when the Court stated- “If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise es turpi causa, or the transgression of a positive law of this country, there the court says that he has no right to be assisted.” 10

(b) It continues to be a shareholder in a company in contravention of written law i.e., of s.67, CA 1965 and/or s.123, CA

This in turn shows that the “affairs of the company” have 15 and/or continue to be conducted in a manner in disregard of and/or is unfairly prejudicial to the interests of the Appellant as a member of the Company. A case which is of relevance is Fowler v Gruber [2010] 1 BCLC 563 at 619 [136]. 20 [69] We agree with the submission of the Appellant that there is no acquiescence by the Appellant in seeking to set aside the Validation Order for the following reasons:

(a) there cannot be any acquiescence against a breach of statute or an illegal act which in effect is the substance of the 25 Validation Order. A case in point is Joan Fung @ Joan Fun Nyuk Lee v Allianz General Insurance Co(M) Bhd [2011] 6 MLJ 805 at 822 [36] where the High Court held that estoppel, waiver or acquiescence cannot prevail against a statute of public policy or to protect against an illegality. The principle was ruled in the context 30 of s.9 of the Employees Provident Fund Act 1951 and/or s.47 of the EPF Act 1991 whereby it is expressly provided that a breach of the provisions is illegal and a punishable offence. We are of the view that by analogy, the said principle can apply to the issue at hand in the present appeal; and 35 38

(b) The Appellant’s conduct in seeking to nullify the Validation 5 Order in this OS is a clear demonstration that there is no acquiescence as alleged. [70] We also find there is no delay by the Appellant in seeking to nullify the Validation Order because the OS was filed on 2/2/2019, a few 10 months after the Validation Order was granted on 29/8/2018. We are of the view that it cannot be said to be inordinate delay given that the relevant cause papers were not served on the Appellant and that there was about 1 month delay of the public announcement of the Validation Order. 15 [71] The Respondents argue that the order sought in respect of the Validation ought not to be granted by reason of the fact that it is practically impracticable. This was the finding of the learned Judge after having acknowledged that “there had been a deprivation of the plaintiff 20 of its right to object to the application for validation” (para 36 of the Grounds of Judgment). With respect, such an argument is untenable because-

(i) this Court cannot stand and allow wrongful acts to go unpunished since the Court finds the Respondents are guilty of 25 oppressive acts; and

(a) the appeal is allowed. In respect of the OS (Bahasa 15 Malaysia version), we make the following order as follows:

(i) prayer 1 is allowed subject to the deletion of the words “(“Pengarah-Pengarah Semasa” tersebut)”;

(v) prayer 5 is allowed subject to the modification that the 25 words “Pengarah-Pengarah Semasa” be substituted with “Defendan-Defendan Ketiga hingga Kelapan”;

(x) prayer 10, no order is made (it is not required); 40

(b) in relation to prayer 11, the Order in respect of costs is as follows:

(i) costs of RM415,000.00 ordered by the High Court is to refunded by the respective Respondents to the Appellant’s solicitors within two (2) months from this Order;

(v) costs of RM 10,000.00 here and below is to be paid by each set of solicitors for 9th and 12th, 10th, 11th, 13th, 14th and 15th Respondents;

(c) the Order of the High Court dated 7/8/2019 is hereby set 25 aside; and

(d) costs is subject to payment of allocatur. 30 41 Date: 18/8/2021 5 -sgd-LAU BEE LAN Judge 10 Court of Appeal Malaysia Putrajaya COUNSEL: Appellant 15 Cyrus Das together with Alvin Tang, Khor Heng How, Fiona Bodipalar and Abigail Nimbalker [Messrs. Bodipalar Ponnudurai De Silva (Kuala Lumpur)] Respondents 1,2 and 16 20 Rabindra S. Nathan together with Mak Lin Kum, R Himahlini and Lyness Lim Wei Xeng [Messrs. Himahlini & Loh (Kuala Lumpur)] Respondents 3,4 and 5 25 Kennie Ang Joo Koon together with Yin Yin [Messrs. Ivan Lau & Xuen] Respondents 6 and 7 Wong Kah Hui together with Ong Jian Nee 30 [Messrs. Kh Wong & Co.] Respondent 8 Richard W.G. Lee together with Elizabeth Goh Huay Ling and Soon Jia Yee 35 [Messrs. Jeff Leong, Poon & Wong] Respondent 9 and 12 Shim De Zhen together with Hazwan Lee Bin Haris Lee [Messrs. Yeoh Shim Siow & Lay Kuan] 40 Respondent 10 Yuvaraj Sugapathy [Messrs. Sugapathy & Partners] 42 Respondent 11 5 Tan Eng Keat [Messrs. Gan, Lee & Tan] Respondent 13 Yee Jun Hong together with Frederick Teng Siaw Chuing 10 [Messrs. Jh Yee & Co.] Respondent 14 N. Nathan together with Shahman [Messrs. Kumar Jaspal Quah & Aishah] 15 Respondent 15 Jasvinder Singh [Messrs. Asyraf, Vivek & Wee]