James Joseph Dillon v Forensic Services (Malaysia) Sdn Bhd (WA-28NCC-985-10/2023)

FORENSIC SERVICES (MALAYSIA) SDN BHD

PAUL LEONG KONG WAI (NRIC NO: 790301-14-6429) ... RESPONDENTS GROUNDS OF JUDGMENT Introduction [1] Enclosure 1 is the Winding Up Petition dated 3.10.2023 by the petitioner, James Joseph Dillon (“the Petitioner”) to order for the first respondent, Forensic Services (Malaysia) Sdn Bhd (“the Company”) to be wound up on the ground that it is just and equitable to do so pursuant to Section 465(1) (h) of the Companies Act 2016. [2] However, I have dismissed Enclosure 1 as I am not of the opinion that it is just and equitable for the Company to be wound up, based on the reasonings which I shall explain hereafter. Background facts [3] The Company was incorporated in 1986. The object of the Company is to provide forensic investigation services (“the Forensic Business”). The Forensic Business is a very specialized field. It involves investigations into the causes of fire, explosion and other accidents. It covers mainly for the insurance industry. [4] Barry Ian Dillon (“Barry”) became a shareholder of the Company in

Barry has a science investigation background and had the necessary expertise and knowledge. Barry became the managing director of the Company and developed the Forensic Business by utilizing his expertise in forensic science. [5] The second respondent, Paul Leong Kong Wai (“the 2nd Respondent”) became a shareholder of the Company in 2008. However, as the 2nd Respondent lacks the necessary expertise and knowledge, Barry was allowed to continue to manage and operate the Company. [6] The Company has a paid-up capital of RM 500,000.00, comprising of 500,000 shares. Barry holds 372,500 shares. The 2nd Respondent holds 127,500 shares. [7] Sadly, Barry passed away in 2008. The Petitioner is Barry’s son. The Petitioner is also the executor of Barry’s estate (“the Estate”).

That there is a clear loss of substratum of the Company with the passing of Barry;

There exist a management breakdown and a deadlock between the Petitioner and the 2nd Respondent (being the only 2 shareholders and directors);

There is a mutual breakdown in trust and confidence between the Petitioner and the 2nd Respondent. Loss of substratum [18] The Petitioner argues that Barry was the one who led the Company to achieve its peak with his expertise. With Barry’s passing, the Company lost its core and substratum. The understanding was that Barry would be the one managing the Company, while the 2nd Respondent remains as a silent partner. When Barry died, that substratum and understanding no longer exists. [19] The Petitioner points out that the Company is in a specialized industry whereby technical knowledge and skills are necessary for the success of the Company. Barry had built his team of scientists and investigators. However, after the 2nd Respondent took control, a substantial part of the core team resigned and the Company was not what it was originally. [20] The Petitioner also submits that the Company has since deteriorated and the Company’s profits (unaudited) has been much lower since Barry’s passing. [21] The Petitioner and his sister, Mardi, does not know the 2nd Respondent personally and have no trust and confidence in the 2nd Respondent in respect of the business. Accordingly, the Petitioner submits that the loss of substratum of the Company is justified for it to be wound up. The Petitioner and Mardi do not want to continue the business with the 2nd Respondent. Management breakdown and deadlock [22] The Petitioner points out that the 2nd Respondent has been running the Company like a sole-proprietor, to the exclusion of the Petitioner. There is a clear breakdown in the management of the Company as the Petitioner is not involved in the day-to-day operations. In addition to management breakdown, there is also a deadlock between the Petitioner and the 2nd Respondent, as both of them cannot see eye-to-eye on many issues. [23] The accounts for the years 2020, 2021, 2022 and 2023 remains unaudited. The 2nd Respondent has also appointed a new auditor without the Petitioner’s consent. [24] The Petitioner and the 2nd Respondent cannot agree as to the future of the Company. The Petitioner wants to exit the Company. However, the 2nd Respondent wishes to continue with the business. As a result of the deadlock and management breakdown, the Company continues to suffer significant losses. The Petitioner submits that due to the unresolvable deadlock between them, it would be just and equitable to wind up the Company. Breakdown of mutual trust and confidence [25] The Petitioner explains that the relationship between the Petitioner and the 2nd Respondent has deteriorated to the point that the parties are no longer communicating. The 2nd Respondent had earlier indicated that he was willing to buy over Barry’s Shares. But instead of buying over the shares, the 2nd Respondent commenced with Suit

Because of this litigation suit, the Petitioner no longer has any trust and confidence in the 2nd Respondent. The Petitioner submits that it is neither just nor equitable that the Petitioner be forced to remain in business with the 2nd Respondent when there is no relationship, trust or confidence between the both of them. Summary of the 2nd Respondent’s case (in opposing Enclosure 1) Winding-up petition filed in bad faith [26] The 2nd Respondent clarifies that Barry had sought an allotment of 250,000 new shares in the Company to be allotted to Barry’s wife, Evelyn Dillon (“Evelyn”). It was agreed between them that although the 250,000 new shares will be allotted to Evelyn, the 2nd Respondent would be the one paying for it. Hence the said shares would be held on trust for the 2nd Respondent. Evelyn later passed away and her shares were transferred to Barry. [27] The 2nd Respondent commenced Suit 510 to declare that he is the beneficial owner of the Trust Shares. Soon thereafter the Petitioner proceeded to initiate the winding up petition against the Company. The 2nd Respondent argues that the winding up petition was filed by the Petitioner in bad faith because it was meant to derail Suit 510. The 2nd Respondent states that the Petitioner is actually hoping that the winding up petition will eventually pressure the 2nd Respondent to buy over Barry’s Shares. Loss of substratum [28] The 2nd Respondent argues that the Petitioner’s assertions that there is a loss of substratum are all bare claims and not supported by any supporting evidence. The Petitioner’s claims that almost all of the core team has resigned are not true. When the 2nd Respondent took over the Company, there had been only four (4) resignations. Despite these four (4) resignations, the Company still have fifteen (15) employees and four (4) third party contractors. [29] After the 2nd Respondent took over, the Company continues to be an active business up until today. The 2nd Respondent also points out to the fact that the winding up petition was filed in 2023, which is 5 years after Barry’s death. This proves that there is actually no loss of substratum as the Company can still continue to operate and do business even without Barry. Management breakdown and deadlock [30] The 2nd Respondent argues that there cannot be a breakdown and deadlock as the Petitioner was never prevented from being involved in the Company. It was the Petitioner himself who has never shown any interest to carry out his duties as a director and he has never shown any interest in the business. The Petitioner had never called for a directors’ meeting or even set foot in the Company. The fact is that the Petitioner has never asked to be involved in the Company in any way. [31] The 2nd Respondent also points out that the audit cannot be completed due to the Petitioner’s own default. The Financial Statement cannot be completed as the Petitioner failed to sign it. The 2nd Respondent argues that it is not fair for the Petitioner to claim that there are management breakdown and deadlock when it is the Petitioner himself who has chosen not to participate in the management and operations. The deadlock is actually caused by the Petitioner himself. Breakdown of mutual trust and confidence [32] The 2nd Respondent submits that the transmission of Barry’s Shares to the beneficiaries of the Estate cannot be finalized because of the dispute over the Trust Shares. The transmission of Barry’s Shares can only take place after the outcome of the dispute. The 2nd Respondent states that he is open to purchase the remainder of the shares at fair market value if the Estate is prepared to recognize that the Trust Shares belong to him. Findings by the Court [33] Section 465(1) (h) of the Companies Act 2016 states that the court may order the winding up if the court is of the opinion that it is just and equitable that the company be wound up. In Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360, the court has a wide discretion to do justice if the court finds that upon consideration of all the circumstances, it is the best interest of all parties concerned that the company should be wound up based on the facts of the case. [34] In Gulf Business Construction (M) Sdn Bhd v Israq Holding Sdn Bhd [2010] 8 CLJ 775, the Court of Appeal gave a non-exhaustive list of illustrations of winding up on the just and equitable grand, which include: -

Where the substratum of the company has been lost. The basis of this is that the company no longer is in a position to carry on the business that the members agreed to. The test is a commercial one; the fact that under the memorandum of association, other businesses are possible is not in itself a ground for refusing a winding up. If the commercial risk has changed, it would be unfair for the majority to insist on the minority diversifying into a business that they did not agree to;

Where the company’s main object for its existence has lapsed;

Where the principal object of the company can no longer be achieved;

Where the company’s only business is ultra vires the company;

Where there is a lack of confidence amongst the shareholders that threaten the existence of the company;

Where the relationship of the parties in the company has broken down irretrievably;

Where the winding up of the company would open the door to investigate the misconduct of the directors of the company;

Where there is no reasonable hope of ultimate profit for the company. Loss of substratum [35] The Petitioner had tried to show that Barry was the one who led the Company with his expertise and when Barry passed away, the Company had lost its core and substratum. The Petitioner had also submitted that it was Barry who had built the Company’s team and after the 2nd Respondent took control, a substantial part of the core team resigned and the Company was not what it used to be. However, as correctly pointed out by the 2nd Respondent, these allegations are all bare claims and not supported by evidence. [36] Barry had passed away in 2018. The winding up petition was only filed in 2023, which is five (5) years later. During these five (5) years, the Company still continues to be active. There is also nothing to show that the Company has deviated from its main object. The Company continues to undertake the same business for which it was incorporated. [37] As regards to the allegation that a substantial part of the core team had resigned, the Petitioner did not show any proof or gave any supporting details of such mass resignations. As pointed out by the 2nd Respondent, there were only four (4) resignations that had actually taken place: - • Yu Ong Siang (Operation Manager); • Poon Poh Wong (Mechanical Manager); • Lim Sze Hue (Maintenance Consultant); • Aini Ling (General Manager). These four (4) resignations occurred in 2020, which is some 2 years after Barry has passed away. The reasons for the resignations were also not related to that fact that Barry had passed away. These reasons include matters such as career change, retirement and family reasons. By and large, the current team at the Company remains the same. [38] The Petitioner had also contended that the reason the proposed acquisition by Envista did not materialize was due to the fact that Barry had passed away and that there were no requisite talent or technical skills left in the Company. However, this allegation is also not supported by any documentary evidence. As such, in the absence any supporting evidence, it is not possible to make any such assumption or conclusion. [39] As regards to the Petitioner’s contention that the Company has deteriorated after Barry’s passing and that the Company’s profits (unaudited) have been far lower since then, the 2nd Respondent had provided a comparison table of the Company’s income and profit from 2015 to 2024 (“Exhibit A-13” at Enclosure 50) as follows: - Year Revenue Net Profit 2016 5,475,441 201,729 2017 4,703,461 (749,384) 2018 4,281,386 383,851 2019 3,458,525 (716,980) 2020 3,437,368 506,459.06 2021 2,178,044.3 285,424.61 2022 1,367,769.7 (694,535.24) 2023 1,700,512.78 (389,037.78) 2024 2,535,149.97 157,338.61 The 2nd Respondent had admitted that 2019 was challenging as Barry had passed away the year before. However, the Company had recovered in 2020 and had made a profit of RM 506,459.06. However, the period of 2021 - 2022 were challenging due to the Covid pandemic. Things improved thereafter and the Company posted profits in 2023 and 2024. [40] The facts show that even after Barry has passed away, the Company continues to be active. There does not appear to be any loss of substratum as alleged by the Petitioner. There is also nothing to show that the main purpose or object of the Company for which it was formed is gone or has been abandoned. Save for the dip in profits during the pandemic period, there is also nothing to suggest or support the claim that the Company is deteriorating or losing its value. [41] In Re Goodwealth Trading Pte Ltd [1991] 2 MLJ 314, the Court in Singapore held: - “… A company's substratum is the main object which it was formed to achieve. If its main object was to carry on a certain business, and it is no longer able to carry on that business, its substratum is gone, and any member may petition for a winding-up order on the just and equitable ground … a court must determine the real object for which the company was formed, and will allow a winding-up petition if this object has to all intents and purposes been abandoned.” [42] Similarly, in Liew Jui Hua & Ors v Johor Property (M) Sdn Bhd [1998] 2 CLJ Supp 34, the Court explained the failure of the substratum of a company as follows: - “A failure of substratum. This would be in a situation where the whole substratum of the company has gone down the drain … The substratum has been held to be gone when the main object for which the company was formed has become impracticable …” [43] However, in this particular case, I do not find any basis to support the contention that there is a loss of substratum where the main object or purpose of the Company is gone or abandoned, as suggested by the authorities of Re Goodwealth Trading Pte Ltd and Liew Jui Hua & Ors v Johor Property (M) Sdn Bhd. Management breakdown and deadlock [44] I find it hard to accept the Petitioner’s contention that there is a breakdown in the management of the Company due to the fact that the Petitioner is not involved in the day-to-day operations. As correctly pointed out by the 1st Respondent, it is the Petitioner himself who chose not to participate in the Company. The Petitioner had clearly admitted in the winding up petition that he has no interest in the Company or the business: - “18. The Petitioner had, since his father’s passing, informed the 2nd Respondent that the Petitioner and his sister, Mardi who are the beneficiaries have no interest in their late father’s forensic business and had offered to sell all the late Barry Ian Dillon’s shares in the 1st Respondent Company to the 2nd Respondent or to a third party, with the consent of the 2nd Respondent. The Petitioner and Mardi are not based in Malaysia and do not have the technical scientific skills to be involved in the business of the 1st Respondent Company.” [45] It is quite clear that from the time the Petitioner was appointed as a director in 2018, he has never shown any interest to carry out his duty as a director, nor has he shown any interest in the business. Despite his concerns as to the mismanagement of the Company’s accounts and how the Company is now solely managed by the 2nd Respondent, he has never attempted to call for a director’s meeting nor was he physically present in the office. He has never requested to be involved in the management of the Company. [46] On the Petitioner’s complaint that the Financial Statement has not been audited and lodged, the 2nd Respondent’s affidavit in reply affirmed on 15.10.2029 (“Enclosure 50”), namely Exhibits A-7, A-8 and A-9, show the series of exchanges made between the Petitioner, the Company’s employee / representative and the 2nd Respondent communicating and discussing on this issue. The exchanges between them can be summarized as follows: -

The draft audited report 2019 was sent by email to the

The Petitioner replied on 4.1.2020 stating that he is still reviewing the draft reports;

The Company’s email reply to the Petitioner on 3.2.2020 to answer to the Petitioner’s queries regarding the reports;

The 2nd Respondent’s email reply on 6.4.2020 to answer to the Petitioner’s solicitor’s queries;

The 2nd Respondent’s email reply on 9.6.2020 to further answer to the Petitioner’s solicitors’ queries;

A series of emails from 5.5.2021 to 20.7.2021 by the Company and / or 2nd Respondent to follow up on the outstanding reports. [47] An audited financial statement of a company would have to be signed by all the directors before being circulated to the shareholders. Thereafter, it will be lodged with the Companies Commission of Malaysia. This means that regardless of whether the Petitioner’s queries has been answered or responded to satisfactorily, the fact remains that the Petitioner has failed to sign the Financial Statement. In the Petitioner’s affidavit in reply affirmed on 5.11.2024 (“Enclosure 52”), the Petitioner states in paragraph

that: - “27. In response to paragraphs 45 to 51 of 2nd Respondent’s AIR, I repeat paragraphs 35-37 of the Winding-up Petition and highlight that the 1st and/or 2nd Respondent had failed to answer my queries pertaining to the audited accounts for financial year ended 31.1.2018 and draft audited accounts for financial year ended 31.1.2019 satisfactorily. The answers that were provided only raised more questions, and it is clear that the 2nd Respondent did not want to provide me with a true clarification of the issues I have raised. Therefore, I could not be expected to sign off on the draft audited accounts for the year 2019 in the circumstances. It is clear from the 2nd Respondent’s AIR that the 2nd Respondent was solely operating and managing the 1st Respondent Company to my exclusion.” [48] This also means that the audits for the following years thereafter would also not be able to be completed and lodged with the Companies Commission of Malaysia simply because of the fact that the Financial Statement 2019 is still pending. [49] On issue of the change of auditors, the Company’s email to the Petitioner on 16.12.2019 explained that the change of auditors was necessitated by the resignation of the previous auditor. There does not appear to be anything peculiar or sinister about it. However, if the Petitioner suspects otherwise, the Petitioner could have raise his concerns and could easily have taken the necessary steps or actions within his powers as a director and shareholder. The Petitioner failed to do so at that material time but is now raising this issue to support the winding up application. A mere change of auditors would not on its own give rise to a management breakdown or deadlock. [50] In Wong Ah Chau (IC No 440616-10-5177) v WBW Engineering & Construction Sdn Bhd (Co No 614046-H) [2015] MLJU 479, the Court held: - “[42] The Petitioner failed to adduce any evidence through his affidavits that he has been excluded from participating in the management of the Respondent. Winding up is a drastic remedy. … [43] In the instant Petition, the other shareholders and directors opposed the Petition. The “just and equitable” winding up petition is a drastic remedy, and a Court should be slow to allow such a Petition. Winding up on just and equitable grounds is based on equitable principles. The maxim, “he who comes to Court in equity must come with clean hands” is therefore applicable. In assessing whether it would be just and equitable to wind up on grounds of the alleged deadlock, it is essential for the Court to consider who has, in actual fact caused the deadlock.” [51] Similarly, in Ebrahimi v Westbourne Galleries Ltd and others [1972] 2 All ER 492, Lord Cross (at p. 507) said: - “A petitioner who relies on the 'just and equitable' clause must come to court with clean hands, and if the breakdown in confidence between him and the other parties to the dispute appears to have been due to his misconduct he cannot insist on the company being wound up if they wish it to continue.” Breakdown of mutual trust and confidence [52] Although Suit 510 has absolutely no bearing to this current matter and the issue of the Trust Shares will be ultimately decided in Suit 510 or any appeal thereafter, I agree with the 2nd Respondent’s argument that if the winding up petition is allowed, it would effectively render Suit 510 nugatory. It was also pointed out that the winding up petition was filed after Suit 510, hence the Petitioner’s tactical approach is difficult to ignore. [53] In Middy Industries Sdn Bhd & Ors v Arensi-Marley (M) Sdn Bhd [2013] 3 MLJ 511, the phrase “abuse of the process of the court” had been described generally to refer to situation where the court’s process is used for unlawful objects and not for the actual purpose intended to achieve justice. [54] In PNL Capital Sdn Bhd & Ors v Loh Teck Wah & Ors [2022] 6 MLJ 304, the Court of Appeal held: - “[47] In the light of the serious allegations made by the respective parties against each other, the High Court must, though conscious of the fact that it is not deciding the shareholders’ disputes, have regard to such facts as may be relevant to ascertain if the IJM application was made bona fide without it being weaponized as a tool to further the applicant’s pecuniary and personal interest in the target company Fintree and to wrench control of it from its sole director by ‘booting’ him out with the appointment of the IJM. … [73] In any event it would be an abuse of the process and reek of mala fide. The court must see beyond the shadow and charade to the substance and the core of the disputes between the shareholders. The protective shield of judicial management was sought not for the protection of the company Fintree but for the protection of and promoting the interest of the minority shareholder in the applicant Loh in a shareholders’ fight. [74] The court would not allow its process to be abused for a collateral purpose.” Conclusion [55] The facts in this case do not support a just and equitable winding up of the Company. It is a drastic measure of last resort. In reaching to my conclusion, I accept the principles stated in Le Apple Boutique Hotel Sdn Bhd v Keen Solution Sdn Bhd & Another Appeal [2023] 9 CLJ 429: - “[48] In any case, it must be reminded that a winding up petition is a drastic measure of last resort which should only be moved when all other avenues of recovery were already exhausted. We take heed of the eminent Federal Court's recent decision in Tan Keen Keong v Tan Eng Hong Paper & Stationery Sdn Bhd & Ors And Other Appeals [2021] 2 CLJ 318; [2021] 3 MLJ 914: [92] The just and equitable jurisdiction must be exercised carefully and judiciously, with special regard for the irreversible and drastic nature of a winding up as a court-ordered remedy (see Perennial (Capitol) Pte Ltd And Another v Capitol Investment Holdings Pte Ltd And Other Appeals [2018] 1 SLR 763). Not only are there more moderate remedies available, the purported wrongs under the Income Tax Act 1967 have been addressed and dealt with by the relevant authorities; and where they have not, to be dealt with by those charged with the necessary jurisdiction; or as far as the petitioner is concerned, for him, as a minority shareholder in both TEH Holdings and TEH Paper, to file an action under s. 181 of the Companies Act 1965 since the learned judge found that his real complaint was of oppression and that he actually wanted his shares bought out.” [56] Accordingly, for the reasons above, Enclosure 1 is dismissed with costs fixed at RM10,000.00 subject to allocator. Dated the 16th day of December 2025 …………………………………….. DR. SEOW HOCK PENG Judicial Commissioner High Court (Commercial Division Ncc2 & Admiralty) High Court of Kuala Lumpur In the Federal Territory, Malaysia Counsel for Petitioner: Miss Joshinae Wong Peism Ting together with Mr Wong Chee Ming; Miss Nursyazriena Binti Ya’akub; and Mr Irvin Wong Chee Ming (Messrs. Christina Chia Law Chambers) Counsel for 2nd Respondent: Mr Douglas Yee Wan-Li; together with Mr Siew Choon Jern; and Miss Tang Joey (Messrs. Douglas Yee) Case Reference:

Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360 2. Gulf Business Construction (M) Sdn Bhd v Israq Holding Sdn Bhd [2010] 8 CLJ 775 3. Re Goodwealth Trading Pte Ltd [1991] 2 MLJ 314 4. Liew Jui Hua & Ors v. Johor Property (M) Sdn. Bhd. [1998] 2 CLJ Supp 34 5. Wong Ah Chau v WBW Engineering & Construction Sdn. Bhd. (Co. No. 614046-H) [2015] MLJU 479 6. Ebrahimi v Westbourne Galleries Ltd and others [1972] 2 All ER 492 7. Middy Industries Sdn Bhd & Ors v Arensi-Marley (M) Sdn Bhd [2013] 3 MLJ 511 8. PNL Capital Sdn Bhd & Ors v Loh Teck Wah & Ors [2022] 6 MLJ 304 9. Le Apple Boutique Hotel Sdn Bhd v Keen Solution Sdn Bhd &

Section 465(1)(h) Companies Act 2016