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Jadual 1, Akta Mahkamah Kehakiman 1964 Dan 45 Dalam perkara berkenaan Seksyen-seksyen 31, 32, 33, 205, 310 Akta Syarikat 2016 Dan 50 Dalam perkara berkenaan kuasa inheren Mahkamah Tinggi 55 BETWEEN HUNG CHUN SDN.BHD. ...APPLICANT [COMPANY NO. : 197801001752 (38776-A) 60 AND (1) MAHKAMAH PERUSAHAAN MALAYSIA … 1st RESPONDENT (2) YEE CHOON YEW …2nd RESPONDENT (NRIC NO.: 780418-08-5399) 65 GROUNDS OF JUDGMENT Introduction [1]. This case revolves around the Applicant, Hung Chun Sdn. Bhd. (hereinafter referred as “the Company”), a family-owned S/N l7PDb/NtiUeM3oigSmwA6g company, embroiled in a dispute over the roles and rights of a key 70 family member within the Company, resulting in the key member being terminated. The matter was referred to the Industrial Court and was resolved by Consent Award and Rectification of the Consent Award, whereto the key member was ordered under the Award of the Industrial Court to be reappointed and be paid back 75 wages. However, shortly after his reappointment, he was removed from his directorship under the pretext of adhering to procedural norms under the Articles of Association, but as a matter of fact it was a calculated move to evade further financial responsibilities by the Company to the 2nd Respondent. 80 Background [2]. The Company is a family Company founded by the 2nd Respondent's father, is been managed by the 2nd Respondent and his siblings since 1st November, 2000. The 2nd Respondent, without formal employment or appointment letters, held multiple 85 roles in the Company, including as director, Human Resource Manager, and marketing manager. In addition, he is also a major shareholder of the Company. [3]. On 13 October 2014, the Company through an Extraordinary General Meeting, removed the 2nd Respondent as director, 90 effective 27 October 2014. Consequently, he was also relieved of his other positions in the Company, as his position was tied to his directorship. Dissatisfied with the Company’s doing, the 2nd Respondent filed a claim in the Industrial Court for reinstatement and other reliefs. 95 S/N l7PDb/NtiUeM3oigSmwA6g [4]. The Company argued that the 2nd Respondent's managerial roles were dependent on his directorship and that he was not a "workman" under the Industrial Relations Act 1967. However, a settlement was negotiated resulting in a Consent Award (No. 545 of 2018) being recorded on 13 March 2018, reinstating the 2nd 100 Respondent's directorship, employment positions, and other entitlements, along with back wages totalling RM 228,600.00, to be paid over six months. This award was later rectified on 7 May 2018. [5]. The Rectified Award dated 7 May 2018, stipulates among others the following terms: The 2nd Respondent shall be appointed as a 105 director of the Company as of 1st May 2018; the 2nd Respondent shall hold the positions as Health & Safety Officer and the Human Resource Manager of the Company as of 1st May 2018. The Company also agreed to create a new position titled New Business Marketing Manager as of 1st May 2018. The Company also agreed 110 that the 2nd Respondent shall enjoy all perks, privileges, and seniority as a director of the Company in view of his appointment as of 1st May 2018. The Company further agreed to pay compensation totalling RM288,600.00 (note: this part of the Award was complied with and is not an issue before this court). 115 [6]. However, despite the agreement between the parties under the Consent Award, the Company did not issue a formal appointment letter that would detail the terms and conditions of the 2nd Respondent’s position, job scope, salary, perks, and other related aspects, following the recording of the Consent Award. 120 S/N l7PDb/NtiUeM3oigSmwA6g [7]. This Court has meticulously reviewed the submissions presented by both parties orally and in writing and after careful consideration, the Court finds in favour of the 2nd Respondent. Findings of the court [8]. The Court finds that the 1st Respondent (Industrial Court) had 125 adhered to the terms of the Rectification of Consent Award dated 7th May 2018. The arguments presented by the Company concerning the 1st Respondent’s alleged failure to consider these terms are not substantiated. It is evident from the proceedings that the 1st Respondent evaluated the case within the confines of the 130 agreed terms, without overstepping into interpretative functions not warranted by the circumstances. [9]. This Court noticed that the Company never argued against the 2nd Respondent being an employee during the proceedings in the Industrial Court. By agreeing to the Consent Award, they basically 135 admitted that there was an employer-employee relationship. The Company's later claim that removing the words ‘Employer’ and ‘reinstatement’ from the Rectified Consent Award, made that relationship go away does not hold up, because their actions during the case showed they recognized the relationship. 140 [10]. The Court notes that the 2nd Respondent’s refusal to accept the three specified positions was based on additional conditions introduced by the Company, which were not part of the Rectification of Consent Award. Thus, the 2nd Respondent’s actions were as a result of the Company reneging from the agreed 145 terms, and not a refusal to comply with the Award itself. S/N l7PDb/NtiUeM3oigSmwA6g [11]. The Court finds that the Industrial Court acted within its jurisdiction in adjudicating the matter. The referral of the case by the Minister of Human Resource under Section 20(1) of the Industrial Relations Act 1967 and the absence of any challenge of the 2nd 150 Respondent's employee status during the proceedings in the Industrial Court provide sufficient basis for the Industrial Court’s jurisdiction. [12]. Evidence presented among others a letter dated 14 July 2018, supports the 2nd Respondent’s claim of being hindered from 155 performing his duties. The Court thus finds the 1st Respondent's decision that the Company did not enable the 2nd Respondent to carry out his duties and failed to pay his entitlements as justified. [13]. The Company submits that they did the needful to properly appoint the 2nd Respondent as a Director of the Company on 20th April 160 2018, through a Directors Resolution passed by the Company's Directors, the appointment took effect immediately on the same day. This appointment is in compliance with the Consent Award's requirement that the 2nd Respondent be appointed as a director by 1st May 2018. 165 [14]. However, it is the Company’s submission that the 2nd Respondent was retired as a director according to Article 69 of the Company's Articles of Association on 20th March 2019 at the Annual General Meeting (“AGM”), not by forced termination in breach of the Consent Award. 170 [15]. The Company submits that its constitution i.e. the Memorandum and Articles of Association, is a governing document that S/N l7PDb/NtiUeM3oigSmwA6g supersedes any shareholders' agreement. This preposition is supported by the case of Beh Chun Chuan v. Paloh Medical Centre Sdn Bhd [1999] 3 MLJ 262; [1999] 7 CLJ 1; [1999] 3 AMR 175 3352 (refd); [1999] 2 MLRH 840, where His Lordship Justice Kang Hwee Gee had stated that the company's acts and those of its officers must align with its constitution. Extraneous documents cannot override the constitution's provisions, doing so would bring disorder in corporate governance. The relevant passage from the 180 case is append below: “There is strong rationale in support of this proposition. Much like a club is governed by its constitution, a company is governed by its memorandum and articles of association. A company's memorandum and articles are therefore the cananic yardstick 185 upon which the legality of its act and those of its officers must be tested and any acts of the company or of its officers which are opposed to its memorandum or articles are likely to be struck down by the court as ultra vires. To rely on extrinsic document to determine the legality of the act of the company or of its 190 directors would be to invite uncertainty in corporate governance.” [16]. The Companies Act 2016, sections 32 and 33, provides that a company's constitution binds not only the company and its 195 members but also its directors. These provisions mandate that the appointment of company directors must strictly adhere to the company's Articles of Association (“AOA”), a principle reiterated in the case of Mohd Radwan Alami v. Ibrahim Mohd Yusof & Ors case. [2019] 10 MLJ 761; [2019] 3 AMR 889; [2020] 1 MLRH 200 228 as follows: S/N l7PDb/NtiUeM3oigSmwA6g “[32] The appointment of a company director is a significant action by the company. It must be in accordance with the constitution/AOA of the company. If the manner in which such appointments are to be made is prescribed, it has to be followed religiously as the AOA 205 of the company is the basic law of a company. In fact, the AOA is a contractual obligation that members subscribe to and it contains covenants that each member will observe all the provisions of the AOA.” 210 [17]. The Articles of Association of the Company, specifically Article 69, define the procedure for what is termed "filling a casual vacancy" in the position of director. This type of appointment is meant to be temporary, extending only until the upcoming AGM. At this meeting, the temporarily appointed director has the opportunity 215 to be re-elected. The provision of Article 69 is as follows: “The directors shall have power at any time, and from time to time, appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that the total number of directors shall not at any time exceed the number fixed 220 in accordance with these Regulations. Any director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account shall determine the directors who are to retire by rotation at that meeting. “ 225 (emphasis added for the underline) [18]. Referring to the case of Tan Sri Dato’ Wan Sidek Wan Abdul Rahman v. Rahman Hydraulic Tin Berhad [2012] 6 MLJ 681; [2012] 3 MELR 117; [2012] 4 MLRA 147; [2012] 8 CLJ 801; 230 S/N l7PDb/NtiUeM3oigSmwA6g [2012] 4 AMR 806 (refd), the Company emphasizes that the duration of a director's service is clearly outlined in the Articles of Association. It confirms that a director appointed to fill the vacancy, serves only until the forthcoming Annual General Meeting. This precedent strengthens the rule that director’s 235 appointments must strictly follow the Articles of Association to ensure their legitimacy as de jure directors. The court in Tan Sri Dato’ Wan Sidek Wan Abdul Rahman’s case (supra) stated this: “[32] The effect of articles 60(1), 109 and s 143 of the Companies Act is clear and unambiguous ie the appellant would 240 hold office of his directorship only until the next AGM of the respondent which was to be held in accordance with the articles of association within such period as extended by the registrar under s 143 of the Companies Act 1965. In re Consolidated Nickel Mines, Ltd [1914] 1 Ch 883, it was emphasised by 245 Sargant J that: “A director on his appointment does not ordinarily step into an office which is perpetual unless terminated by some act, but into an office the holding of which is limited by the terms of the articles.” 250 …….. [35] That being the case, we are of the same opinion with the learned chairman of the Industrial Court as well as the learned High Court judge that being a director appointed to fill a casual vacancy, the appellant therefore ceased to be a director on or 255 after 31 December 1998. The appellant and all the other directors of the respondent during the period from 31 December 1998–15 June 2001 (when the next AGM was finally held after the appointment of the special administrators), were not de S/N l7PDb/NtiUeM3oigSmwA6g jure directors of the respondent. They were not duly appointed 260 in accordance with the articles of association of the respondent company.” [19]. In summary, the Company asserts that the 2nd Respondent's directorship was established in accordance with Article 69 of the 265 Articles of Association and was duly ended or concluded at the subsequent AGM held on March 20, 2019. This process, as argued by the Applicant, was to reflect strict adherence to the governing legal and constitutional provisions of the Company, ensuring that all director appointments and retirements are executed in a manner 270 that is both lawful and consistent with the Company's Articles of Association. [20]. The 2nd Respondent contends that he served as the director of the Company until October 13, 2014, when he was unjustly dismissed from his roles, including Director cum Marketing and Human 275 Resource Manager. Following legal action in the Industrial Court, a Consent Award was reached, mandating the 2nd Respondent's reappointment. Given these circumstances surrounding the 2nd Respondent's reappointment on April 20, 2018, he argues that his reinstatement was not merely to fill a casual vacancy but was in 280 compliance with a court order. I would further reiterate that this situation does not equate with filling a vacancy, as the 2nd Respondent should not have been dismissed in the first place and should have continued serving as a director throughout. Hence, the Consent Award by the Industrial Court, which ordered 285 compensation for back wages to the 2nd Respondent, this implies that the position was not vacant and that his filling was not casual. S/N l7PDb/NtiUeM3oigSmwA6g Therefore, I find that Article 69 does not apply to the retirement of the 2nd Respondent. [21]. The Company and the 2nd Respondent are consistently at a 290 deadlock, unable to reach an agreement on moving forward with the business of the Company. The Applicant believed that invoking Article 69 of the Company’s Articles of Association was the solution, whereas the 2nd Respondent argued that this was an invalid process executed in bad faith. 295 [22]. With that said, given that the Applicant had applied Article 69 of the Company's Articles of Association, which is the incorrect provision, it is not necessary for me to specify or elaborate further on the appropriate Articles of Association that should be adopted. It suffices to say that the provision invoked by the Applicant is 300 incorrect. [23]. Nonetheless, for the sake of completeness, according to the Companies Act 2016, specifically section 206, shareholders are granted the right to remove a director from office before the director's term expires through an ordinary resolution. This is 305 permissible notwithstanding any provision in the company's Articles of Association or any agreement between the company and the director. “s.206. Removal of directors (1) A director may be removed before the expiration of the director’s 310 period of office as follows: (a)subject to the constitution, in the case of a private company, by ordinary resolution; or S/N l7PDb/NtiUeM3oigSmwA6g (b) in the case of a public company, in accordance with this section...” 315 [24]. Similarly, according to Palmer’s Company Law, Volume 2 [Reviewed: September 2023] at para 8.1317, the UK’s Companies Act 2006 s.168-169 also allows shareholders the power to remove directors via ordinary resolution, regardless of 320 any company articles or agreements, before a director's term ends. “8.1317: This is one of the most important rights given to shareholders. Companies Act 2006 ss.168–169 provide wide powers for the removal of directors by ordinary resolution, before the expiration of the director’s period of office, and notwithstanding 325 anything in the company’s articles or in any agreement between the company and the director (s.168(1)).1 Special procedures must be followed (see below) and a director is guaranteed certain protections (see below). On the other hand, a director-member cannot frustrate the process by refusing to attend a meeting, thus 330 rendering it inquorate; in those circumstances, the court may order a meeting under Companies Act 2006 s.306.2 Even assuming a director may be entitled to petition for a just and equitable winding up on the principles stated by the House of Lords in Ebrahimi v Westbourne Galleries Ltd,3 this does not prevent his being 335 dismissed from the board by a resolution under Companies Act 2006 s.168.4” Conclusion [25]. In the upshot and for the reasons aforesaid, I dismiss the 340 Company's application for judicial review. The Court orders the S/N l7PDb/NtiUeM3oigSmwA6g assessment of the outstanding sum to be paid by the Company to the 2nd Respondent and the restoration of the 2nd Respondent’s position in the Company as per the terms of the Consent Order. The Court further orders that the case be reverted to the Deputy 345 Registrar for direction regarding assessment. No orders as to costs. Date : 20 June 2024 350 Moses Susayan MOSES SUSAYAN Judicial Commissioner High Court in Malaya 355 at Ipoh, Perak Counsel: 360 For the Applicant : Khong Jia Luo (together wih Chong Kok Yew) Advocates and Solicitors Messrs HL Lee & Co 365 Ipoh, Perak For the 2nd Respondent: Raam Kumar Advocates and Solicitors 370 Messrs K.B. Tan Kumar & Partners Ipoh, Perak S/N l7PDb/NtiUeM3oigSmwA6g (Notice: This Grounds of Decision is subject to official editorial revision) 375 Headnotes Judicial Review ─ Consent Award ─ Rectification of Consent Award Agreeing to the Consent Award, the Company admits to the employer-employee relationship and cannot deny it post-Rectified Consent Award. 380 Company Law ─ Whether the appointment of a director pursuant to the order of the Industrial Court in a Consent Award can be considered as “filling a casual vacancy,” which can be terminated pursuant to Article 69 of the Articles of Association. ─ Section 206 of the Companies Act 2016 grants shareholders the right to remove a director from office before the 385 director's term expires through an ordinary resolution S/N l7PDb/NtiUeM3oigSmwA6g