Goh Wei LIM v Muck Ho Wan (WA-24NCC-248-05/2024)

MUCK HO WAN (No. K/P: 621025-08-5111)

BARISAN PERFORMA SDN BHD (No. Syarikat : 200101020172(555929-D)) … DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT A. Introduction [1] The plaintiff sought reliefs under section 346 of the Companies Act 2016 (“CA 2016”) for acts of oppression alleged to have been committed by the defendants. [2] The court dismissed the originating summons, for the reasons set out below. B. Background Facts [3] The plaintiff and the 1st defendant are the shareholders and directors of the 2nd defendant. The plaintiff holds 40% of the shares in the 2nd defendant, while the 1st defendant holds the remaining 60%. [4] Since 2009, the plaintiff and the 1st defendant have been the only two directors of the 2nd defendant. However, on 6 June 2024, the 1st defendant’s wife, Siew Seow Kim (“SSK”) was appointed as an additional director. [5] It is not disputed that: a. The plaintiff had been the minority shareholder of the 2nd defendant since its inception; and b. The plaintiff had indicated his intention to sell his shares in the 2nd defendant to the 1st defendant and SSK, but negotiations between the parties did not culminate in an agreement for the purchase of those shares. [6] The plaintiff alleged that the 1st defendant had conducted the affairs of the 2nd defendant in a manner that is oppressive, unfairly prejudicial and discriminatory towards him. The plaintiff relied on four broad categories of oppressive conduct alleged to have been committed by the 1st defendant: a. Exclusion of the plaintiff from management and decision-making in the 2nd defendant; b. Financial mismanagement of the 2nd defendant; c. Denial of financial transparency; and d. Failure to offer a fair exit option to the plaintiff, thereby trapping the plaintiff in an oppressive corporate environment (collectively, the “Alleged Oppressive Acts”). [7] In the originating summons, the plaintiff sought a declaration that the 1st defendant, whether individually or jointly with the 2nd defendant, had exercised his powers in a manner oppressive to the plaintiff, or in disregard of the plaintiff’s interest as a shareholder of the 2nd defendant. The plaintiff also sought an order for the 1st defendant to purchase the plaintiff’s shares at a fair value to be assessed, or alternatively, an order that the 2nd defendant be wound up. [8] The defendants’ case is that the Alleged Oppressive Acts do not disclose any oppressive conduct within the meaning of section 346 of the CA 2016. The defendants argued that the present proceedings arose from failed negotiations for the sale of the plaintiff’s shares, and constitute an attempt to pressure the 1st defendant into purchasing those shares. C. The Law on Oppression [9] The plaintiff’s case is that the Alleged Oppressive Acts are oppressive conduct that would entitle him to remedies under section 346 of the CA 2016. Section 346 reads: “(1) 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 in disregard of his or their interests as members, shareholders or debenture holders of the company; or

that some act of the company has been done or is threatened or that some resolution of the members, debenture holders or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or debenture holders, including himself.” (emphasis added) [10] It is not in dispute that the plaintiff is a shareholder of the 2nd defendant. His right as a member of the 2nd defendant to apply to the court for an order under section 346 of the CA 2016 is therefore clear. [11] The main question before this court is whether the Alleged Oppressive Acts fall within the conduct contemplated under section 346(1)(a) or (b) of the CA 2016. In this regard, it is necessary for this court to consider whether the Alleged Oppressive Acts involve: a. a visible departure from the standards of fair dealing and a violation of the conditions of fair play which the plaintiff was entitled to expect; and b. unfairness in the commercial context. (see Re Kong Thai Sawmill (Miri) Sdn Bhd & Ors v Ling Beng Sung [1978] 2 MLJ 227 and Pan-Pacific Construction Holdings Sdn Bhd v Ngiu-Kee Corporation (M) Bhd & Anor [2010] 6 CLJ 721). [12] It is well established that section 346 is not intended to provide a remedy for every disagreement between shareholders. Commercial disputes, differences in management style or dissatisfaction with business decisions do not, without more, constitute oppression. The statutory provision may be invoked only where the conduct complained of amounts to commercial unfairness in the exercise of corporate power, resulting in a visible departure from the standards of fair dealing which a shareholder is entitled to expect in the conduct of a company’s affairs (see Re Kong Thai Sawmill (supra)). D. Considerations and Findings [13] The court considered the Alleged Oppressive Acts to determine whether they amount to oppression within the scope of section 346 of the CA 2016. The Alleged Oppressive Acts [14] The plaintiff first alleged that he was effectively excluded from the management of the 2nd defendant. He asserted that he and his wife, Lee Bee Sun (“LBS”) who is a shareholder of companies related to the 2nd defendant, were refused access to the premises of the 2nd defendant, preventing them from carrying out their duties in relation to the 2nd defendant. He also claimed that they were prevented from accessing the 2nd defendant’s financial and accounting systems. [15] The plaintiff further claimed that the appointment of SSK as a director of the 2nd defendant – which was done with one day’s notice and without the plaintiff’s consent – altered the structure of the 2nd defendant’s board of directors, from parity to a majority in favour of the 1st defendant. According to the plaintiff, this resulted in a two-to-one voting structure, which deprived him of meaningful participation in decision-making. [16] Second, the plaintiff alleged that the 1st defendant engaged in financial mismanagement, which is evident from the 1st defendant’s conduct, including: a. Making payments without consent, which includes payment in the amount of RM18,000 to Super Resources & Trading Sdn Bhd (“SRT”); b. Coercing the plaintiff into signing a credit facility application for the 2nd defendant with Public Bank Berhad, despite the plaintiff’s objection; and c. Using overdraft and invoice financing facilities from Hong Leong Bank Berhad, whilst failing to collect payments due to the 2nd defendant. [17] Third, the plaintiff claimed that the 1st defendant failed to provide the latest management accounts of the 2nd defendant to the plaintiff, despite formal requests and multiple reminders from the plaintiff. [18] Finally, the plaintiff argued that the relationship between the parties had irretrievably broken down. He claimed the 1st defendant imposed unfair conditions for the purchase of his shares. These include conditions on the purchase price, the timeline for his departure, and a requirement that he remains a guarantor for loans of the 2nd defendant for three years after his departure. The plaintiff claimed these conditions effectively denied him a fair exit from the 2nd defendant. Findings on the Alleged Oppressive Acts [19] In substance, the plaintiff’s main allegation appears to be that the plaintiff and the 1st defendant shared a long-standing business relationship built on trust and cooperation, within which the plaintiff had been actively involved in the management and decision-making of the 2nd defendant, and not just as a passive shareholder. The plaintiff argued that his extensive involvement in the business operations of the 2nd defendant was founded upon mutual trust and confidence between the shareholders of the 2nd defendant, which is said to be essential to the functioning of the 2nd defendant. [20] The plaintiff relied on Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, where the House of Lords acknowledged that there are circumstances in which the rights of shareholders are not enshrined within the company structure, such as the company’s constitution. In such circumstance, the rights of the parties may be subject to equitable considerations. Ebrahimi (supra) sets out (at page 379E) the circumstances in which equitable considerations may apply: “It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be "sleeping" members), of the shareholders shall participate in the conduct of the business;

(iii) restriction upon the transfer of the members' interest in the company - so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.” (emphasis added) [21] Malaysian courts have upheld the existence of equitable bargains in the manner of Ebrahimi (supra), although these bargains may not have been expressly set out in the constitution of a company (see Liew Teck Fook v Chan Yip Pooi & Ors [2005] 5 CLJ 20; Lew Siew Moi, Datin v Ann Loong Holdings Sdn Bhd & Ors [2012] 10 MLJ 734 and Gue See Sew & Ors v Heng Tang Hai & Ors [2020] MLJU 46). [22] The central theme of these cases is the existence of a personal relationship between the shareholders of the companies, based on mutual confidence. This is the first element highlighted in Ebrahimi (supra), which may give rise to equitable considerations in the relationship between shareholders, beyond their strict legal rights under a company’s constitution. [23] In the present case, the plaintiff has not established that there is a quasi-partnership between the plaintiff and the 1st defendant that would warrant the application of such equitable considerations. The evidence before the court does not demonstrate that the 2nd defendant was formed on the basis of a personal relationship akin to a partnership, or that there existed a binding understanding that the plaintiff would participate indefinitely in the management of the 2nd defendant. [24] In the absence of such evidence, the relationship between the parties must be regarded as a commercial association governed primarily by the company’s constitutional structure and the statutory framework of the CA 2016. Accordingly, the plaintiff cannot rely on a legitimate expectation that he would always participate in the management of the 2nd defendant. [25] Further and in any event, I find that the plaintiff failed to prove that the Alleged Oppressive Acts are conduct that extends beyond ordinary business decisions and disagreements, so as to amount to oppression against the plaintiff. [26] In respect of the first allegation of oppressive conduct, that the plaintiff was excluded from the management of the 2nd defendant, I find there to be no clear or cogent evidence to support this allegation. The plaintiff’s claim that he had been denied access to the 2nd defendant’s premises was merely supported by audio recordings of the 1st defendant enquiring on the plaintiff’s access card being reset. Such evidence, without more, does not establish that the 1st defendant had taken deliberate steps to exclude the plaintiff from the company’s premises. [27] Further, the evidence shows that the plaintiff remained a co-signatory for the company’s financial transactions and continued to have access to the company’s financial and accounting systems. [28] It is important to highlight that certain changes to the structure of the 2nd defendant (such as the appointment of SSK as a director and restrictions imposed on the plaintiff and LBS on access to the financial and accounting systems of the 2nd defendant) were made after and in response to the commencement of these proceedings. In such circumstance, the appointment cannot reasonably be characterised as a conduct intended to oppress the plaintiff. [29] In respect of the allegation of financial mismanagement and unauthorised fund transfers, the defendants have provided evidence to show that: a. The payment of RM18,000 to SRT represented the settlement of an outstanding liability incurred in the ordinary course of the 2nd defendant’s business. There is no credible evidence adduced by the plaintiff to prove that the payment was unauthorised or improper; b. It is common practice for the 2nd defendant to use overdraft and invoice financing facilities when making payments to contractors, in order to benefit from improved cash flow management and favourable interest rates; c. At the material time, the 2nd defendant’s secure pass tokens used to approve its online transactions were in the possession of LBS. This suggests that the online transactions carried out by the 2nd defendant would have required, or at the very least involved, the plaintiff’s knowledge or approval; and d. The financial facilities obtained by the 2nd defendant were obtained for legitimate business purposes and in accordance with common commercial practice. The 2nd defendant was in the process of tendering for various projects, necessitating financing facilities for the implementation of the projects. It is therefore untenable for the plaintiff, as both shareholder and director, to contend that the utilisation of such facilities constituted financial mismanagement or oppressive conduct against him. [30] As such, the evidence before the court does not support the allegation of financial mismanagement and unauthorised fund transfer, as alleged by the plaintiff. [31] After considering the Alleged Oppressive Acts as a whole, I find that although they are individually articulated, they span a range of disparate matters which do not disclose any coherent pattern of oppressive conduct. Rather, they appear to consist of isolated grievances relating to different aspects of the management and operations of the 2nd defendant. When viewed in totality, the allegations give the impression of having been pieced together in an attempt to construct a cause of action under section 346 of the CA 2016, rather than demonstrating a sustained course of conduct that is oppressive, unfairly prejudicial or discriminatory towards the plaintiff. [32] It is also apparent that the allegations essentially concern disagreements relating to the management and business decisions of the 2nd defendant. The plaintiff either disagreed with those decisions or alleged procedural irregularities in their implementation. [33] Disagreements of this nature do not necessarily invoke the statutory protection afforded to minority shareholders unless they affect the plaintiff’s rights as a shareholder in a manner that is oppressive, discriminatory, or unfairly prejudicial. In Re Kong Thai Sawmill (supra), it was held at page 229I that: “… The mere fact that one or more of those managing the company possess a majority of the voting power and, in reliance upon that power, make policy or executive decisions, with which the complainant does not agree, is not enough. Those who take interests in companies limited by shares have to accept majority rule. It is only when majority rule passes over into rule oppressive of the minority, or in disregard of their interests, that the section can be invoked. As was said in a decision upon the United Kingdom section there must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect before a case of oppression can be made …” (emphasis added) [34] In the present case, I find that the Alleged Oppressive Acts do not constitute a visible departure from the standards of fair dealing or a violation of the conditions of fair play between the plaintiff and the 1st defendant. [35] I am also guided by Ho Sue San @ David Ho Sue San v Hovid Bhd & Ors [2024] 5 MLJ 165, where the Court of Appeal refused an order to enforce a bargain that the plaintiff was unable to secure through negotiations, after the plaintiff failed to establish oppressive conduct. [36] In the present case, the evidence suggests that the allegations of oppression arose only after the plaintiff failed to persuade the 1st defendant and SSK to purchase his shares in the 2nd defendant on terms acceptable to him. The plaintiff contended that the conditions proposed by the 1st defendant for the purchase of his shares were unfair and oppressive. However, negotiations for the sale and purchase of shares are inherently commercial in nature and depend upon the willingness of the parties to agree on mutually acceptable terms. The fact that negotiations fail, or that one party proposes conditions which the other finds unacceptable, does not in itself amount to oppressive conduct. [37] In my view, the present proceedings are an attempt to obtain through litigation what the plaintiff was unable to achieve through commercial negotiation. Section 346 of the CA 2016 cannot be invoked for this purpose. [38] When the Alleged Oppressive Acts are considered collectively, they do not disclose a pattern of conduct amounting to commercial unfairness. Rather, they reveal a breakdown in the commercial relationship between the parties following unsuccessful negotiations for the sale of the plaintiff’s shares. Section 346 of the CA 2016 is not designed to resolve such commercial impasses, nor to compel the purchase of shares on terms which the parties themselves have been unable to agree. E. Decision [39] The court finds that the plaintiff has failed to establish that the defendants’ conduct amounts to oppression within the meaning of section 346 of the CA 2016. On this basis, the court dismissed the originating summons, with costs. Dated 12 March 2026 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiff : Raspreet Kaur Sidhu (together Simranjeet Kaur Sandhu) of Messrs. Ras & Co Defendants : Darren Lai Messrs Rohamat & Ling