Jagadesh A/L Munusamy v Sm Avicnesvaran A/L Subramaniam (BA-24NCC-90-08/2024)

Content

DALAM MAHKAMAH TINGGI MALAYA DI SHAH ALAM DALAM NEGERI SELANGOR DARUL EHSAN (BAHAGIAN DAGANG) SAMAN PEMULA NO.: BA−24NCC−90−08/2024 Dalam perkara mengenai Phoenix Prospects Sdn Bhd (No. Syarikat: 248580-K) Dan Dalam perkara mengenai Seksyen 314 Akta Syarikat 2016 Dan Dalam perkara mengenai Aturan 92 kaedah 4 Kaedah-Kaedah Mahkamah 2012 ANTARA JAGADESH A/L MUNUSAMY (NO. K/P: 811008-01-5055) − PLAINTIF

Preamble

Pursuant to section 314 of Companies Act 2016 and/or Order 92 rule 4 of Rules of Court 2012 and/or the inherent jurisdiction of this Court, the Plaintiff seeks for the following Orders:

Preamble

Menurut khidmat nasihat undang-undang yang saya terima, di bawah Akta Syarikat 2016, notis EGM perlu dikeluarkan sekurang-kurangnya 14 hari sebelum tarikh mesyuarat diadakan. b. Notis kurang masa hanya boleh diberikan jika dipersetujui oleh sekurang-kurangnya 90 peratus daripada ahli yang berhak mengundi dalam mesyuarat tersebut dan yang mana tidak ditepati oleh Plaintif dalam apa cara sekalipun.”. S/N U5XgxGbtxEiTew4mG44jHg The submissions [11] The written submissions are filed accordingly and the parties had requested for verbal submissions too. Summary of the Plaintiff’s submission: [12] The guiding principles upon which this Court should exercise its power under s.314 CA 2016 which is in pari materia with the old s.150 CA 1965, are well settled. In Tamabina Sdn Bhd & Anor v Nakamichi Corporation Berhad [2016] 10 CLJ 148, the Court of Appeal emphasised that impracticability entails showing that attempts made to call and hold a meeting have been futile. This typically arises from a deadlock situation between the directors, or an intentional uncooperative attitude of the directors, or deliberate non-attendance despite proper notice having been given … “[22] We are inclined to agree with the above submission by counsel for the appellant. In our view, to show impracticability it is necessary to show evidence of attempts or efforts to call and hold a meeting and such attempts or effort have been futile. The reason for the futility in calling or holding a meeting must be attributed to some circumstances that make it almost impossible to hold the meeting. These circumstances could be due to a deadlock situation, an intentional un-cooperative attitude of the directors, a persistent effort to derail the meeting or deliberate non-attendance at meeting after a proper and S/N U5XgxGbtxEiTew4mG44jHg valid notice had been issued … This evidence must be in the affidavit supporting the application under s. 150 of the Companies Act 1965. However, lack of quorum per se is not sufficient to be evidence of impracticability of calling or holding a meeting. The lack of quorum due to absentia of the required numbers of the board members must be adequately explained in the affidavit in support of the application. [23] In Chuah Sean Kin & Ors (supra), the court said that to succeed under s. 150 two situations must be present. First, it is impracticable to call for a meeting and second, it is impracticable to conduct a meeting in accordance with the company’s articles or the Act. …”. [13] Additionally, the case of Tan Swee You v Sahiron Mohd Yunus & Anor [2021] 1 LNS 1756 (HC) reaffirmed that impracticability extends to situations where members deliberately fail to attend a general meeting to prevent proper quorum being achieved. Leonard David Shim JC (as he then was) held that − “[28] Impracticability will cover a potentially wide range of factual situations, including but not limited to a case where the members have deliberately failed to attend a general meeting so that a proper quorumcannot be constituted. This is because the quorum provisions could not be regarded as conferring a form of veto on a minority party where a situation of deadlock exists. S/N U5XgxGbtxEiTew4mG44jHg [29] In Re El Sombrero Ltd [1958] Ch 900, it was decided that the test is whether in the particular circumstances of the case the desired meeting of the company could, as a practical matter, be conducted. … [31] These principles were reiterated in Phuar Kong Seng v. Lim Hua [2005] 2 MLJ 338, where attempts to hold several extraordinary general meetings had failed and as the meetings are inquorate, a deadlock situation had occasioned. In the circumstances, the learned Judge held that the company clearly could not function without the intervention of the Court and an application pursuant to Section 150 was allowed.”. [14] Further, Wynn-parry J in Re El Sombrero [1958] 3 All ER 1 in construing the scope of the English section 135(1) of the CA 1948 which is similar to our old s.150 of the CA 1965, observed that in interpreting ‘impracticability’, the Court must examine the circumstances of the particular case and determine whether, as a practical matter, the desired meeting of the company can be convened, held and conducted. At 904, it was held that − “The first point of law which arises involves the construction of section 135 (1) of the Companies Act, 1948, the examination being directed to consider the scope of the phrase “If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that company may be called, or to S/N U5XgxGbtxEiTew4mG44jHg conduct the meeting of the company in manner prescribed by the articles or this Act… It is to be observed that the section opens with the words “If for any reason”, and therefore it follows that the section is intended to have, and, indeed, has by reason of its language, & necessarily wide scope. The next words are “…it is impracticable to call a meeting of a company…” The question then arises, what is the scope of the word “impracticable”? It is concededthat the word “impracticable" is not synonymous with the word “impossible” and it appears to me that the question necessarily raised by the introduction of that word ‘‘impracticable” is merely this: examine the circumstances of the particular case and answer the question whether, as a practical matter, the desired meeting of the company can be conducted, there being no doubt, of course, that it can be convened and held. Upon the face of the section there is no express limitation which would operate to give those words “is impracticable” any less meaning than that which I have stated, and I can find no good reason in the arguments which have been addressed to me on behalf of the respondents for qualifying in any way the force of that word “impracticable” or the interpretation which I have placed upon it, and therefore upon that point I am in favour of the applicant. S/N U5XgxGbtxEiTew4mG44jHg [15] It is submitted that the First Defendant’s deliberate refusal to attend the EGMs has resulted in the impracticability of convening the EGMs. In light of these circumstances, both criteria for impracticability as observed by the Court of Appeal in Tamabina (supra) are met. [16] The First Defendant’s Admission and Male Fide Conduct: The First Defendant has admitted on affidavit evidence to being the person responsible for freezing the accounts of Phoenix Prospects [See: para 19, page 25 of the First Defendant’s Affidavit in Reply (Enclosure 7)]. The First Defendant’s allegation that the accounts were frozen due to his alleged suspicion that the Plaintiff intended on using the company funds for personal use is without merit. There is not a shred of contemporaneous evidence to substantiate this allegation nor has the First Defendant taken any steps to pursue this belated assertion. This is a classic example of an afterthought. [17] Conversely, the First Defendant does not deny nor can he credibly challenge the Plaintiff’s assertion that since the bank accounts of Phoenix Prospects were frozen in early 2024, it is the Plaintiff who has been advancing monies to cover the business costs and expenses to ensure that Phoenix Prospects can continue its day-to-day operation and meet its obligations. Perhaps the most compelling argument in favour of Enclosure 1 is that the First Defendant also has not shown nor explained why he is unwilling to attend the said EGM. After all, if the First Defendant has complaints with regard to the Plaintiff’s conduct (which is denied), the S/N U5XgxGbtxEiTew4mG44jHg most appropriate avenue to address such concerns are at a meeting of the members of the company in accordance as laid down in Foss v Harbottle (1983) 2 Hare 461. [18] The First Defendant also has not shown he is prejudiced by attending the said EGM. In this regard, the First Defendant has had notice since March 2024 that the Plaintiff has attempted to call numerous EGMs. All the First Defendant has done was to challenge the calling of these EGMs on the ground of technicality through his solicitors [See: pages 120 and 121, Exhibit A-15 of the Plaintiff’s Affidavit in Support (Enclosure 2)]. [19] With each passing day that the accounts remain frozen, Phoenix Prospects faces escalating financial challenges. This ongoing situation not only disrupts the company’s daily operations but also jeopardises its ability to meet obligations to creditors, suppliers and employees. It is our submission that the First Defendant’s conduct is akin to holding the company at ransom, using the quorum provisions of the Constitution to confer a form of veto power unto himself and stifle the affairs of the company within the meaning of Tan Swee You (supra). In this regard, there is a clear deadlock due to the Constitutional requirement of having a quorum of at least 2 members present, which has hindered the decision-making process and operations of Phoenix Prospects. This deadlock has arisen due to the First Defendant’s conduct, which necessitates this Court’s intervention to resolve the impasse and restore normal operations within Phoenix Prospects. S/N U5XgxGbtxEiTew4mG44jHg Summary of the First Defendant’s submission: [20] The main point raised by the First Defendant is there has been no “proper and valid notice” issued to the First Defendant. Consequently, there has been no impracticability in either calling or conducting an EGM between the parties and the Plaintiff fails the Low Son Siang burden of proof when it relates to a s. 314 Court Convened Meeting. [21] The onus is on the applicant to show that it is impracticable to call for a meeting of the company in any manner whatsoever or even to conduct the meeting in the manner prescribed by the articles of association of the company. And impracticable does not mean impossible. [22] Based on the above, the First Defendant submits that the issues to be determined are as follows: a. Whether the 1st EGM Notice and the 2nd EGM Notice provided the requisite notice period to the First Defendant. b. Whether the Plaintiff has shown that it was impractical to call and hold the EGMs of the 2nd Defendant at the material time. [23] Factually speaking, where the EGM Notices are concerned, there is no evidence that the 1st EGM Notice, for the EGM to be held on 13.05.2024, was issued on or about 28.02.2024 but the First Defendant has denied receiving the 1st EGM Notice with no rebuttal by the Plaintiff; S/N U5XgxGbtxEiTew4mG44jHg and the 2nd EGM Notice, for the EGM to be held on 24.05.2024, was issued and served on or about 14.05.2024. [24] As a matter of law: a. the notice period for the present resolution is 14 days. b. notice periods excludes the date of service of the notice and the day on which the meeting is to be held. Consequently, as the date of service is to be excluded and the day of the meeting is to be excluded, there is short service of the 1st EGM Notice and the 2nd EGM Notice. The 1st EGM Notice was allegedly “posted/couriered” on 28.02.2024 for an EGM scheduled to be held on 13.03.2024. 28th February is to be excluded and 13th. March is to be excluded. In other words, only 13 days had elapsed. The 2nd EGM Notice was served on 14.05.2024 with the EGM scheduled on 24.05.2024. 14th. May is to be excluded and 24th. May is also to be excluded. In other words, only 11 days had elapsed. [25] Given the short service, 1st EGM Notice and the 2nd EGM Notice did not provide the requisite notice period to the First Defendant. By extension, the Plaintiff is not entitled to assert that he has attempted to call for any EGMs validly thus far. S/N U5XgxGbtxEiTew4mG44jHg [26] Second Issue - the Plaintiff has failed to show that it was impractical to call and hold the EGMs of the Second Defendant/Phoenix Prospects Sdn Bhd at the material time. [27] Given the fact that there is short notice of the EGM, the First Defendant submits that the Application is actually a mischievous attempt to remove the First Defendant from the Board of the Secnd Defendant where Section 314 has been invoked through the guise of alleged “impracticability to call a meeting”. Seen properly, the Application is actally being made in complete disregard of relevant legal provisions and statutory safeguards provided for a removal of director under the Companies Act, 2016. These statutory protections are in place for Directors and it must be adhered to. The decisions [28] On 29-11-2024, this Court has made her decisions as follows: “Mahkamah ini telah meneliti Saman Pemula, afidavit dan hujahan bertulis termasuk hujahan tambahan (lisan) berkenaan dengan permohonan Plaintif/Pemohon terhadap Defendan-Defendan/Responden-Responden. Permohonan Plaintif yang di bawa ke muka pengadilan sebagai “intervensi” menurut seksyen 314 Akta Syarikat 2016 dapat menyelesaikan situasi kebuntuan bagi urusan berkenaan dengan perniagaan Defendan Kedua/Phoenix Prospects Sdn Bhd di mana Plaintif ialah pemegang saham majoriti. S/N U5XgxGbtxEiTew4mG44jHg Maka, Plaintif/Pemohon memohon agar Mahkamah ini memerintahkan − a) suatu Mesyuarat Agung Luar Biasa Defendan Ke-2, Phoenix Prospects Sdn Bhd (No. Syarikat.: 248580-K) dipanggil, diadakan dan dijalankan dalam tempoh 14 hari dari tarikh Perintah ini atau pada masa dan tempat yang Mahkamah yang Mulia ini akan perintahkan, bagi tujuan mempertimbangkan dan jika difikirkan sesuai, untuk meluluskan resolusi-resolusi yang dinyatakan dalam

Lampiran

Lampiran A yang dilampirkan bersama ini; (b) bahawa satu ahli daripada Defendan Ke-2 (Phoenix Prospects Sdn Bhd) yang menghadiri secara sendiri atau melalui proksi di Mesyuarat Agung Luar Biasa tersebut akan dianggap membentuk suatu kuorum. Cadangan Resolusi-Resolusi yang akan dibentangkan dalam EGM adalah sebagaimana Lampiran A Saman Pemula. Mahkamah telah meneliti peruntukan seksyen 314 Akta 777 yang memperkatakan menenai Mesyuarat/Pengurusan Syarikat. Atas permohonan seseorang pengarah yang ingin memanggil suatu EGM untuk membincangkan sesuatu urgent matter, pengarah tersebut boleh memohon perintah Mahkamah untuk memanggil suatu EGM. Subseksyen 314 (5) Akta 777 memperuntukkan “A meeting called, held and conducted in accordance with an order S/N U5XgxGbtxEiTew4mG44jHg under this section shall be deemed for all purposes to be a meeting of the company duly called, held and conducted.”. Selepas mempertimbangkan keperluan untuk Mahkamah campurtangan dalam pengurusan syarikat (Defendan Kedua/Responden Kedua), maka, Saman Pemula ini dibenarkan seperti yang berikut: (a) Mesyuarat Agung Luar Biasa Defendan Ke-2, Phoenix Prospects Sdn Bhd dipanggil, diadakan dan dijalankan dalam tempoh 14 hari dari tarikh Perintah ini bagi tujuan mempertimbangkan Cadangan Resolusi-Resolusi yang dinyatakan dalam Lampiran A; (b) bahawa satu ahli daripada Defendan Ke-2 (Phoenix Prospects Sdn Bhd) yang menghadiri secara sendiri atau melalui proksi di Mesyuarat Agung Luar Biasa tersebut akan dianggap membentuk suatu kuorum; dan (c) kos sebanyak RM5000.00(tertakluk kepada fi alokatur) ditanggung secara bersesama oleh Defendan-Defendan/Responden-Responden untuk dibayar kepada Plaintif/Pemohon.”. [29] In the High Court of Kuala Lumpur, in the case of Elin Hong Pei Shang v. TBH WELLNESS SDN. BHD. & Anor [2024] AMEJ 2449, Ong Chee Kwan J, held that − S/N U5XgxGbtxEiTew4mG44jHg “Section 314 of the Companies Act 2016 provides the Court with the powers, either on its own motion or on the application of a director or a member of a company who would be entitled to vote at the meeting of the company to order for a meeting to be called, held and conducted in any manner the Court thinks fit. The section applies if for any reason it is impracticable to call for a meeting of members of a company in any manner in which meetings of that company may be called.”. [30] This Court is not bound by the High Court of Kuala Lumpur’s decision. However, the principles of law enunciated is clear that where an application made pursuant to Section 314 of the Companies Act, the primary contention was that the Court ought not to order the meeting which includes a proposal to remove a director when the said director has commenced a separate and pending action to restrain the company from convening the very meeting and to remove the First Defendant as a director. [31] Section 314 of the Companies Act 2016 is trite. The Plaintiff as the applicant shoulders the burden to prove that it is “impracticable” to conduct a meeting in the matter prescribed by the constitution or Companies Act 2016, which in this case, is the latter. In Tamabina Sdn. Bhd. & Anor v. Nakamichi Corporation Bhd (supra), the Court of Appeal held − “The law is clear: The onus is on the applicant to show that it is impracticable to call for a meeting of the company in any manner S/N U5XgxGbtxEiTew4mG44jHg whatsoever or even to conduct the meeting in the manner prescribed by the articles of association of the company. And impracticable does not mean impossible - see Low Son Siang v. Lee Kim Yong [1999] 1CLJ 529”. [32] To show impracticability, the learned counsel for the Plaintiff has explained to me about the futility of attempting to call and hold a meeting due to circumstances that make it impracticable to do so. In applying the principles in Tamabina, the learned counsel for the Plaintiff submitted the relevant paragraphs − “[22] In our view, to show impracticability, it is necessary to show evidence of attempts or efforts to call and hold a meeting and such attempts or efforts had been futile. The reason for the futilityin calling or holding a meeting must be attributed to some circumstances that made it almost impossible to hold the meeting. These circumstances could be due to a deadlock situation, an intentional un-cooperative attitude of the directors, a persistent effort to derail the meeting or deliberate nonattendance at the meeting after proper and valid notice had been issued so as to force the meeting to be called off for want of quorum. The categories of such reasons are never closed. This evidence must be in the affidavit supporting the application under s.150 of the Companies Act 1965 ... S/N U5XgxGbtxEiTew4mG44jHg [23] In Chuah Sean Kin & Ors (supra), the court said that to succeed under s. 150 two situations must be present. First, it isimpracticable to call for a meeting and second, it is impracticable to conduct a meeting in accordance with the company’s articles or the Act. We agree with this statement of the law. ... [24] In Corporate Power Accountability, 3rd Edition at p. 1170, the learned author Dato’ Loh Siew Cheang gave a detailed definition of “impracticable” which is reproduced as follows: “24-87 There is judicial consensus in all jurisdictions having provisions similar or equivalent to s 314 as to what is meant by the word ‘impracticable’. It means impracticable to call for any meeting in any manner and to conduct the same as required under the articles: Tamabina Sdn Bhd. It is not within the meaning of ‘impractical’ if before the date of a scheduled general meeting the directors exercised their rights under the articles of the company to frustrate the known intention of the requisitionists to remove them from office by resigning and appointing new directors: Monnington v Easier Plc...”. [25] It is apposite to note further passages by the learned author which expands on a breakdown in the quorum provisions. The relevant passage is reproduced as follows: S/N U5XgxGbtxEiTew4mG44jHg “24-94 Section 328(2) provides that two or more members present in person or proxy shall constitute a quorum. Where a clear majority of the shares of the company is held by a member, the law forbids the other member or members from using the quorum provision to paralyse the operations of the company, or to frustrate the legitimate intentions of the majority. The quorum provision is a requirement in law for the proper constitution of a meeting. It is not a proprietary right such as to confer upon a member a form of entitlement to veto the democratic machinery of a company in its decision-making process...” [emphasis added by Ong Chee Kwan J] [33] The plain fact of this case before me is that the deadlock exists between the Plaintiff and the First Defendant. The deadlock of these two individuals must be resolved one way or another. It is either capable of being resolved by ordering a meeting, with the Proposed Resolutions attached in the OS (Annexure A). Only by the Court’s intervention through this OS, the old disputes, the alleged ransom, the proposed resolution and most importantly to uplift the freezing of the Second Defendant’s bank accounts could be and ought to be resolved. S/N U5XgxGbtxEiTew4mG44jHg [34] The First Defendant’s main reason for objecting and for not attending the proposed EGM is the complaint about the EGM notice is defective. [35] The fact about the Company Secretary who was appointed by the First Defendant and the communication between the First Defendant and the Company Secretary showed that the EGM notice/s is/are sent to the accurate addresses of the First Defendant and not only to the First Defendant’s mother address. With respect to this point, the reasons raised by the learned counsel for the First Defendant are misconceived and untenable. [36] This Court had already decided that the balance of convenience lies in favour of the Plaintiff to proceed with the proposed EGM. This is in line with the settled law that the Court will not interfere with the internal management of the Second Defendant. It is clear in my decision that “Mesyuarat Agung Luar Biasa Defendan Ke-2, Phoenix Prospects Sdn Bhd dipanggil, diadakan dan dijalankan dalam tempoh 14 hari dari tarikh Perintah ini bagi tujuan mempertimbangkan Cadangan Resolusi-Resolusi yang dinyatakan dalam Lampiran A”. [37] I am also referring to the decisions by Ong Chee Kwan J as follows: “… whether it should exercise its discretion in favour of the grant of relief. These stages are sequential: the requirement of impracticability is a condition precedent for the exercise of the court’s power. If it is not satisfied, the s 182 application fails in limine and the question of the court’s discretion does S/N U5XgxGbtxEiTew4mG44jHg not arise for consideration. As in every application for relief, the burden of proof falls on the applicant. He has to show that the requirement of impracticability has been met and that the court should exercise its discretion in his favour … … Learned counsel for the 1st Defendant contended that it is not ‘impracticable’ to convene a meeting because the 1st Defendant will attend if the proposed EGM does not contain a resolution to remove CKS as a director. With respect, it is not for the 1st Defendant to pick and choose which resolutions that ought to be put before the members at the proposed EGM. By the First Defendant’s stated position, it is clear that the proposed EGM is not practicable as the 1st Defendant has chosen to frustrate the quorum requirement for a meeting to consider, inter alia, the removal of CKS as a director …”. [38] In the case of Mohd Radwan Alami v Ibrahim bin Mohd Yusof & Ors [2019] 10 10 MLJ 761, the Court held that − “…the second defendant must resort to what was provided under the Act. The solution to the deadlock could be resolve by having recourse to s 314 of the Act. Section 314 of the Act clearly did not preclude a court from convening a meeting by the attendance of one single shareholder. The onus lay on the party seeking to move the court to order such a meeting by demonstrating that it was impracticable to do so under the normal provisions of the company’s AOA.”. S/N U5XgxGbtxEiTew4mG44jHg Based on the facts of this case, the Plaintiff was in the situation where he was inability to convene a meeting due to the breakdown in relationship between him and the First Defendant. Conclusion [39] Premised on the above, I have no hesitation in granting the Plaintiff’s application in the OS as follows: (a) Mesyuarat Agung Luar Biasa Defendan Ke-2, Phoenix Prospects Sdn Bhd dipanggil, diadakan dan dijalankan dalam tempoh 14 hari dari tarikh Perintah ini bagi tujuan mempertimbangkan Cadangan Resolusi-Resolusi yang dinyatakan dalam Lampiran A; (b) bahawa satu ahli daripada Defendan Ke-2 (Phoenix Prospects Sdn Bhd) yang menghadiri secara sendiri atau melalui proksi di Mesyuarat Agung Luar Biasa tersebut akan dianggap membentuk suatu kuorum; dan (c) kos sebanyak RM5000.00(tertakluk kepada fi alokatur) ditanggung secara bersesama oleh Defendan-Defendan/Responden-Responden untuk dibayar kepada Plaintif/Pemohon. S/N U5XgxGbtxEiTew4mG44jHg [40] This Court appreciates all the written submissions by the learned counsels for the Plaintiff and the First Defendant. Dated: 31 January 2025. RoziBainon ( ROZI BINTI BAINON ) Judicial Commissioner Shah Alam High Court Civil NCvC12 Counsels: For the Plaintiff: Sagana Kaliyapan Tetuan Kumar & Co., Penang For the First Defendant: Nizam Bashir bin Abdul Kariem Bashir Tetuan Nizam Bashir & Associates, Kuala Lumpur S/N U5XgxGbtxEiTew4mG44jHg