James Khong Poh Wah v Yee Yoke Keen (WA-24NCC-522-09/2023)

YEE YOKE KEEN

YEE YOOK SENG

THAM KWOK SANG

SOLIDUZ RESOURCES SDN BHD

HYDROGEN TECH SDN BHD

GALAXY FCT SDN BHD (COMPANY NO. 1111471-W) … DEFENDANTS GROUNDS OF JUDGMENT A. Introduction [1] The plaintiff filed an originating summons, seeking orders to, amongst others: a. Invalidate the requisitioning by the 1st defendant of an extraordinary general meeting of the 4th defendant; and b. Enforce the terms of a collaboration agreement executed between the plaintiff and the 1st defendant. [2] The court substantially allowed the prayers sought in the originating summons. The reasons for the decision are set out below. B. Background Facts [3] The plaintiff and the 1st to 3rd defendants are directors and shareholders of the 4th to 6th defendants. [4] The 4th to 6th defendants are a group of companies (“Group”) engaged in the business of advisory, consulting and research, and production of hydrogen technology. The 4th defendant is the investment holding company of the Group, and holds 100% of the shares in the 5th defendant. The 5th defendant in turn holds 99.9% of the shares in the 6th defendant. [5] The shares of the 4th defendant are held in the following manner: a. 27% of its shares are held by the plaintiff; b.

51.7% of its shares are held by the 1st defendant; and c. The remaining 22.3% of its shares are held by 13 individual investors who were allotted shares between 2021 and 2022, including the 2nd and 3rd defendants. [6] The shareholding and directorship of the 4th to 6th defendants are reflected in the table below: Company Shareholders Directors 4th defendant Plaintiff (27%) 1st defendant (51.7%) Other individuals (22.3%) Plaintiff 1st defendant 2nd defendant 3rd defendant 5th defendant 4th defendant (100%) Plaintiff 1st defendant 2nd defendant 6th defendant 5th defendant (99%) Other individuals (1%) 1st defendant Chow Teow Wai Yew Teik Choon [7] The 1st defendant had sought to convene an extraordinary general meeting of the 4th defendant on 29 September 2023 (“EGM”), to remove the plaintiff as a director of the 4th defendant. The plaintiff claimed the requisitioning of the EGM is invalid, null and void. [8] The plaintiff further claimed that the 1st defendant’s act in requisitioning and in attempting to convene the EGM to remove the plaintiff as a director of the 4th defendant is in breach of the collaboration agreement dated 1 June 2021 executed between the plaintiff, the 1st defendant and the 5th defendant (“CA”). The plaintiff claimed that by the terms of the CA, he is entitled to participate in the management, governance, business and affairs of the Group. [9] As such, the plaintiff filed the originating summons to invalidate the requisitioning of the EGM by the 1st defendant, and to enforce the terms of the CA. [10] Pending the disposal of the originating summons, the court granted an ad interim order to restrain the defendants from proceeding with the EGM. C. Issues [11] Premised on the facts as set out, the court considered the following issues in the final determination of this matter: a. Whether the EGM was validly requisitioned; and b. Whether the requisitioning of the EGM was in breach of the CA. D. Issue 1: Was The EGM Validly Requisitioned? Events leading to the EGM [12] It is important to first highlight that leading up to the requisitioning of the EGM, the plaintiff and the 1st and 2nd defendants had disagreed on the conduct of a capital raising exercise which the 1st and 2nd defendants had proposed for the Group (“Exercise”). The 1st and 2nd defendants attempted to carry out the Exercise in June 2023, but the plaintiff objected, citing a lack of proper disclosure. [13] The plaintiff issued an email dated 19 July 2023, requesting for a meeting of the board of directors (“BOD”) of the 4th and 5th defendants, to discuss the Exercise. On the same date, he also emailed the 1st defendant, to inform the 1st defendant of his request. In the email, the plaintiff reminded the 1st defendant that the terms of the CA should be used as a framework for the parties to collaborate towards a common goal. On 21 July 2023, the company secretary of the Group (“Company Secretary”) issued the notice of the BOD meeting requested by the plaintiff. The meeting was fixed on 3 August 2023. [14] The 1st defendant in turn, issued letters dated 20 July 2023 to the Company Secretary, to requisition an extraordinary general meeting to remove the plaintiff as a director of the 4th and 5th defendants (“1st Defendant’s July 2023 Letters”). Following these letters, the Company Secretary issued notices to fix BOD meetings of the 4th and 5th defendants on 31 July 2023. However, the BOD meetings were called off due to a lack of quorum. [15] The BOD meeting called by the plaintiff went on as scheduled on 3 August 2023 (“August 2023 BOD Meeting”). The EGM [16] During the August 2023 BOD Meeting, after completing discussions on all agenda items of the meeting, the 1st defendant, deliberating under the “Any Other Matters” agenda item and declaring that he was acting under section 313 of the Companies Act 2016 (“CA 2016”) moved to propose the EGM, to remove the plaintiff as a director of the 4th defendant. The plaintiff objected, noting that the proposal was not in the agenda item of the August 2023 BOD. [17] After the August 2023 BOD Meeting ended, the Company Secretary issued the following emails: a. An email dated 3 August 2023, enclosing a letter of the same date issued by the 1st defendant to the BOD of the 4th defendant (“1st Defendant’s Requisition Letter”). By the 1st Defendant’s Requisition Letter, the 1st defendant as the holder of 51.76% of the shares in the 4th defendant sought to requisition the EGM under section 313 of the CA 2016 to pass an ordinary resolution pursuant to section 206(3) and section 322(1) of the CA 2016, to remove the plaintiff as a director of the 4th defendant. b. An email dated 1 September 2023, notifying shareholders of the 4th defendant that the Company Secretary had received a requisition from the 1st defendant for the removal of the plaintiff as a director of the 4th defendant, and for the EGM to be held on 29 September 2023. The email attached a notice of the EGM (“Notice of the EGM”), which states that a meeting was called by the 1st defendant pursuant to section 313 of the CA 2016, and pursuant to the 1st Defendant’s Requisition Letter. The validity of the requisitioning of the EGM [18] The proposal for the EGM was moved by the 1st defendant at the end of the August 2023 BOD Meeting, after discussions on all agenda items of the meeting had concluded. Acting as the chairman and deliberating under the “Another Other Matters” agenda item of the meeting, the 1st defendant called to convene the EGM to remove the plaintiff as a director of the 4th and 5th defendants. [19] The minutes of the August 2023 BOD state: “7.3 The Chairman then declared that by virtue of the rights vested in him as a majority shareholder of the Company and pursuant to Section 313 of the Companies Act 2016, he proposed to table the following motion at today's meeting which has been convened with full quorum: · To convene an Extraordinary General meeting to remove Mr. James Khong as Director of the Company.

7.5 In response, Mr. James Khong objected to the above proposal, citing the following reasons (verbatim transcriptions in italics): · James: “This is not an agenda at this meeting for something major like this, is invalid.” · James: “For the same three reasons that I have objected to the earlier meeting being held, I am making same objections for this meeting in respect of this matter. This is not a valid discussion at this meeting.” · Mr. Yee YK insisted that because notice for removal was first given (on 21st July) for the meeting on 31st, and today's meeting is on 3rd, there is sufficient notice given. · Mr. James Khong objected because the notice was only given for that meeting (31st July) and not this meeting (3rd August).

7.6 Mr. Yee YK insisted on issuing notice anyway. Mr. James Khong objected.

7.7 Matter put up for vote. Save for Mr. James Khong, the rest of the Board members concurred to Mr. Yee YK's proposal.” (emphasis added) [20] In determining whether the process of requisitioning the EGM was valid, I considered two main questions, namely: a. Whether it was lawful for the 1st defendant to move to convene the EGM under the “Any Other Matters” item; and b. Whether the 1st defendant was validly acting under section 313 of the CA 2016. [21] My responses to these questions are as follows: a. Was it lawful for the 1st defendant to move to convene the EGM under the “Any Other Matters” item? i. In respect of this first question, I find the deliberations under the “Any Other Matters” item to be unlawful, null and void, as there was a lack of notice on matters to be discussed. ii. The 4th defendant’s constitution adopts the Third Schedule of the CA 2016. Paragraph 4 of the Third Schedule provides that: “4. A notice of a meeting of the Board shall be sent to every director who is in Malaysia, and the notice shall include the date, time and place of the meeting and the matters to be discussed.” (emphasis added) iii. Based on the 4th defendant’s constitution, which adopted the Third Schedule of the CA 2016, the matters to be discussed in a BOD meeting of the 4th defendant must be included in the notice of the meeting. iv. The question of whether all matters to be discussed must be set out in a notice of a BOD meeting was considered in Rozilawati bt Hj Basir v Nationwide Express Holdings Bhd [2021] 8 MLJ 243. The High Court found that as the constitution of the 1st defendant did not mandate that the notice of a BOD meeting shall include matters to be discussed, there was no requirement to have all matters discussed (including the termination of the plaintiff as the managing director of the 1st defendant) to be included in the notice of the meeting. Nonetheless, I found the following statement of Ong Chee Kwan JC (as His Lordship then was), though obiter, to be relevant and persuasive to the case before this court: “[44] For the avoidance of doubts, it is certainly not the case that because there is no legal requirement for the notice to include an agenda of the matters to be discussed at the meeting, that such agenda for the meeting should be dispensed with. In fact, it is pertinent to note that para 4 of the Third Schedule of the Companies Act 2016 (‘the CA 2016’) provides that a notice of a meeting of the board shall, among others, include the matters to be discussed. Although the company is at liberty not to adopt the Third Schedule or any of the rules therein, it nevertheless reflect the legislative’s intent that such practice should be the default provision whenever the Third Schedule is adopted.” (emphasis added) v. The 4th defendant’s constitution requires the matters to be discussed in a BOD meeting of the 4th defendant to be included in the notice of the meeting. As the removal of the plaintiff as a director of the 4th defendant was not one of the matters included in the notice of the August 2023 BOD Meeting, I am of the view that it is unlawful for the matter to be moved during the meeting. vi. I also find the lack of notice of the matter of the removal of the plaintiff would not only invalidate the deliberations of the matter during the August 2023 Meeting, but also the acts that flow from the matter. As a consequence, the 1st Defendant’s Requisition Letter, which contains a request to the BOD of the 4th defendant for the EGM to be held to remove the plaintiff, would also be null and void. b. Was the 1st defendant validly acting under section 313 of the CA 2016? i. Further, in the 1st Defendant’s Requisition Letter, the 1st defendant claimed to be acting under section 313 of the CA 2016. As such, in assessing the validity of the issuance of the 1st Defendant’s Requisition Letter, I went on to consider this second question, namely, whether the 1st defendant was validly acting under section 313 of the CA 2016. ii. Section 313 of the CA 2016 grants power to a member of a company to requisition a meeting of members of the company. I am of the view that the power granted under section 313 can only be invoked if the requirements under sections 311 and 312 of the CA 2016 have not been met. In this regard, sections 311, 312 and 313 must be read together. iii. Section 311(2) of the CA 2016 provides that: “(1) The members of a company may require the directors to convene a meeting of members of the company.” iv. The manner and form of the requisition are provided for in section 311(2) of the CA 2016. Section 311(3) then goes on to provide that the directors of the company shall call for a meeting of its members once the company has received a requisition to do so from members representing a certain percentage of the paid-up capital and/or voting rights of the company. v. Section 312 of the CA 2016 further provides that the directors of a company are duty-bound to call for a meeting of members of the company called for under section 311, within specified timelines. vi. Section 313 of the CA 2016 only comes into play if the directors of the company fail to call for a meeting of members of the company in accordance with section 312. Section 313(1) provides: “(1) If the directors –

are required under section 311 to call a meeting of members; and

do not do so in accordance with section 312, the members who requisitioned the meeting, or any of the members representing more than one half of the total voting rights of all of the members who requisitioned the meeting, may call for a meeting of members.” (emphasis added) vii. Reading sections 311, 312 and 313 of the CA 2016 holistically, it is clear that section 313 can only be invoked if the directors of the 4th defendant failed to requisition a meeting of members of the 4th defendant in accordance with section 312, having received a requisition under section 311. viii. In the present case, there was no prior requisition under section 311 of the CA 2016. I note that the 1st defendant had belatedly claimed that the 1st Defendant’s July 2023 Letters, which he issued to requisition an extraordinary general meeting to remove the plaintiff as a director of the 4th and 5th defendants, are letters issued under section 311(1) of the CA 2016. He also claimed that the 1st Defendant’s Requisition Letter was issued following the failure of the 4th defendant’s BOD to act on the 1st Defendant’s July 2023 Letters. ix. It is however clear from the documents before the court that this claim is an afterthought, as the position that had been taken by the 1st defendant is that the 1st Defendant’s Requisition Letter was the requisition for the BOD for the EGM to be convened. The Notice of the EGM was thereafter issued following the 1st Defendant’s Requisition Letter. In addition, the 1st Defendant’s July 2023 Letters were issued to the Company Secretary, not to the BOD of the 4th defendant as required under section 311(1) of the CA 2016. x. What is also clear is that the 1st defendant had hastily exercised his power under section 313 of the CA 2016 to requisition the EGM, without considering the steps required to be taken under sections 311 and 312 of the CA 2016. In Abdul Malek Faisal bin Mohd Hyffny v Shaikh Markhzan Jalani & Ors [2023] 4 MLJ 207, the Court of Appeal held at paragraph [59] that when an extraordinary general meeting is convened under section 313 of the CA 2016, procedures must be complied with. xi. In the present case, since the power under section 313 was not exercisable by the 1st defendant at the material time, I find that the 1st Defendant’s Requisition Letter was not validly issued. It would further follow that the Notice of the EGM issued to shareholders of the 4th defendant pursuant to the 1st Defendant’s Requisition Letter is also invalid, null and void. xii. It is also important to note that the 1st Defendant’s Requisition Letter states that the EGM is to be held to consider, and if thought fit, pass an ordinary resolution pursuant to sections 206(3) and 322(1) of the CA 2016, to remove the plaintiff as a director of the 4th defendant. Section 206 of the CA 2016 provides as follows: “(1) A director may be removed before the expiration of the director's period of office as follows:

subject to the constitution, in the case of a private company, by ordinary resolution; or

in the case of a public company, in accordance with this section.

Notwithstanding anything in the constitution or any agreement between a public company and a director, the company may by ordinary resolution at a meeting remove the director before the expiration of the director's tenure of office.

Special notice is required of a resolution to remove a director under this section or to appoint another person instead of the director at the same meeting.” (emphasis added) xiii. Section 206(3) of the CA 2016 imposes a requirement for a special notice, in respect of a resolution to remove a director under section 206. xiv. The requirements of a special notice are set out in section 322 of the CA 2016. Section 322(1) provides that where special notice is required in respect of a resolution, the resolution shall not be effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved. xv. In the present case, the Notice of the EGM was issued on 1 September 2023, notifying the directors of the 4th defendant that the EGM was to be held on 29 September 2023. This means that, excluding the date of the Notice of the EGM and the date of the EGM, a notice of 27 days was given on the EGM, which is one day short of the 28-day requirement specified under section 322(1) of the CA 2016. The period of notice under section 322(1) of the CA 2016 and therefore, the issuance of a special notice under section 206(3) have not been complied with. [22] I am guided by HLB Nominees (Tempatan) Sdn Bhd v SJA Bhd [2005] 1 CLJ 203, where the Court of Appeal held that non-compliance with requirements on the issuance of proper and valid notices of meetings for the removal of directors is not curable: “In the present appeal, the purpose of the meeting to be held is to remove some of the existing directors including the 2nd plaintiff and in their place to elect the directors of the defendant's choice. To do that, a proper and valid notice of such a meeting should be issued because that meeting would affect the right of those directors to be removed who had been duly elected at a proper and valid AGM of the company. For that, the process and procedure for calling such a meeting should be adhered to strictly as stated in Mansfield v. N.S.W. Leagues'Club Bowling Club Ltd, the Australian case cited in the above judgment, where it was held that a general meeting to elect the board of directors was held to be invalid for want of proper notice. In my view, any defect in the process or procedure in calling the meeting and at the meeting is not curable under s. 355 of the Act. In the present appeal, not only the notice was defective due to the fact that the meeting to be held exceeded the permissible three-month period but also that notice had been declared null and void. There is nothing to prevent the defendant from making another requisition for another EGM, whereby if the plaintiffs failed to convene the EGM requested, the defendant is at liberty to issue a proper and valid notice to hold the EGM.” (emphasis added) [23] Similarly, in the present case, the 1st defendant’s non-compliance with the various provisions of the CA 2016 cannot be cured. The requisitioning of the EGM is therefore null and void. E. Issue 2: Was The Requisitioning Of The EGM A Breach Of The CA? [24] The CA was executed between the plaintiff, the 1st defendant and the 5th defendant. There are three main terms of the CA that are relevant to the determination of this dispute between the parties. [25] The first is recital B, which provides that the terms of the CA shall govern the relationship between the parties in relation to the Group. [26] The second term is clause 4(a) to (g), which provides that the plaintiff and the 1st defendant shall mutually participate in the management of the Group through their appointments as directors of the Group. [27] The third term is in clause 4, which states that: “Notwithstanding what is stated in this Agreement of the SRSBSA, the Majority Party agrees to use its voting rights to procure that the Company (and/or any subsidiary of the Company) Including the Board of Directors, shall not take any action in respect of any of the matters (hereinafter, the "Reserved Matters") set out in Schedule 2 unless the prior written consent of both Parties hereto has been obtained.” (emphasis added) [28] The reserved matters in schedule 2 of the CA (“Reserved Matters”) include: “The appointment, removal or suspension of the chief executive officer, the chief financial officer, any Director of the Company (or its subsidiaries) or any other senior management personnel of the Company.” (emphasis added) [29] From the above terms, the parties have agreed that: a. The plaintiff and the 1st defendant shall mutually participate in the management of companies in the Group, including the 4th defendant; and b. The voting rights of what is referred to as the “Majority Party” (the party holding the larger number of shares in a company in the Group) shall be used to ensure that no action shall be taken on any of the Reserved Matters unless prior written consent of the plaintiff and the 1st defendant has been obtained. [30] The contention raised by the defendants is that the terms of the CA set out above are not binding as they restrict the voting rights of the 1st defendant. [31] I am unable to agree with such contention. The regulation of voting rights under the CA applies and is enforceable by the plaintiff as against the 1st defendant, in view of the agreement of the parties, as set out in the CA. Under clause 4 of the CA, the parties have agreed to use their voting rights to procure that the 4th defendant, including the BOD, shall not take action on any of the Reserved Matters unless prior written consent of the plaintiff and the 1st defendant has been obtained. The Reserved Matters specifically include the appointment and removal of directors, and as such, the plaintiff cannot be removed as a director unless he consents to being removed. [32] I find the terms of the CA to be binding on the parties, and the exercise of rights by the 1st defendant as a Majority Party to remove the plaintiff as a director of the 4th defendant, is a breach of the terms of the CA. [33] The plaintiff also sought to be made a mandatory signatory to the bank accounts of the 4th and 5th defendants, as agreed during the August 2023 BOD Meeting and in accordance with clause 4(f) of the CA. As I have found that the terms of the CA are binding on the parties, it would follow that clause 4(f) can be enforced by the plaintiff. F. Decision [34] With the findings as set out, the court is of the view that the plaintiff has proven his case against the defendants in respect of the invalidity of the EGM, the binding nature of the terms of the CA on the parties, and the breach of the terms of the CA by the 1st defendant, in requisitioning the EGM. [35] As such, the court granted the following declarations: a. The CA is valid, binding and enforceable vis-à-vis the plaintiff and the 1st defendant or through his agents, nominees, proxies or servants; b. The 1st Defendant’s Requisition Letter and all acts and steps taken pursuant to the letter are null and void; c. The Notice of the EGM and all acts and steps taken pursuant to the notice are null and void; and d. The requisitioning, calling and convening of any extraordinary general meeting to remove the plaintiff as a director of the 4th defendant and companies within the Group, without the prior written consent of the plaintiff, is and would be, in breach of the CA. [36] Consequent to the declarations above, the court further ordered that: a. The 1st defendant, whether by himself or by his agents, nominees, proxies or servants be restrained (whether in his capacity as a director or through the exercise of any powers and rights attached to or flowing from the majority shares currently registered in his name in the 4th defendant) from doing any acts or taking any steps to cause or which may result in the removal of the plaintiff as a director of the 4th defendant without his prior written consent; and b.