Kong Yin Siong & 1 Lagi v Chin Chee Fui (W-02-(NCVC)(A)-1713-08/2017)

Court of Appeal of Malaysia30 May 2019W-02-(NCVC)(A)-1713-08/2017

The written judgment as the court issued it, with the coram, case number, and source links. Every paragraph has its own anchor.

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1 IN THE COURT OF APPEAL, MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO: S-02(NCVC)(A)-1713-08/2017 BETWEEN KONG YIN SIONG … 1ST APPELLANT (IC NO. 670321-12-5051) TAN GEOK CHOO … 2ND APPELLANT (Singaporean Passport No. E3551417N) CHIN CHEE FUI … RESPONDENT (IC NO. 781013-12-5457) [In the Matter of the High Court of Sabah and Sarawak at Kota Kinabalu Originating Summons No: BKI-24NCVC-12/2-2016 (HC2) In the matter of Wisma Rakyat Holdings Sdn Bhd (Company No. 606505-U) In the matter of Section 181 of the Companies Act 1965 In the matter of Order 88 rule 2 of the Rules of Court 2012 Between Chin Chee Fui … Plaintiff (IC No. 781013-12-5457) 2 And Kong Yin Siong … 1st Defendant (IC No. 670321-12-5051) Tan Geok Choo … 2nd Defendant (Singaporean Passport No. E3551417N) Wisma Rakyat Holdings Sdn Bhd … 3rd Defendant] (Company No. 606505-U) CORAM: TENGKU MAIMUN BINTI TUAN MAT, JCA MARY LIM THIAM SUAN, JCA YAACOB BIN HAJI MD SAM, JCA JUDGMENT OF THE COURT [1] On 17.8.2017, the High Court ordered Wisma Rakyat Holdings Sdn Bhd [Wisma Rakyat], the 3rd defendant before the High Court, to be wound-up. The appellants before us who were the 1st and 2nd defendants were dissatisfied with that decision; hence, the appeal. After considering the submissions of respective counsel, and upon proper consideration of the learned Judge’s reasons for making that order, and the appeal records, we unanimously dismissed the appeal, finding that there was no basis for appellate intervention. 3 The 181 Petition [2] The parties before us were directors and shareholders in Wisma Rakyat, the 3rd defendant at the High Court. The nature of Wisma Rakyat’s business is described in the records of the Companies Commission of Malaysia as “operation of a supermarket chain and retail store selling a broad range of goods ranging from clothing, food, household goods and other merchandise. It operates the “Rakyat Superstore” its flagship supermarket cum departmental store and six smaller branches that sell household goods, clothing, mobile prepaid preloads and other merchandise in Keningau. In addition, it also operates nine “Pasar Rakyat” stores selling household and electrical goods in Tawau, Tenom, Sipitang, Beaufort, Papar, Rugading, Tuaran, Kota Belud and Ranau in Sabah.” [3] The respondent had a 45% shareholding while the appellants who are husband and wife, held the balance shares. On 2.2.2016, the respondent commenced an action against the appellants and Wisma Rakyat under section 181 of the Companies Act 1965, alleging that there had been oppression of his minority rights as shareholder – “the 181 Petition”. [4] After a full hearing conducted in August 2016, on 3.2.2017, the learned Judge found that the affairs of Wisma Rakyat were being conducted and that the powers of the appellants, acting as directors, were, indeed, exercised in a manner which was oppressive and prejudicial to the respondent. The learned Judge found that the 4 appellants had “unfairly discriminated and disregarded the Plaintiff’s right as a shareholder of the company.” [5] Acknowledging that the respondent had specifically prayed for an order that Wisma Rakyat be wound-up and that a private liquidator be appointed and that while section 181(2) of the Companies Act 1965 provided that such order may be made, His Lordship held that it was but one of the options available as a remedy consequent to his finding of the presence of oppression. According to His Lordship: “However, at this juncture, I am of the opinion that the proper Court Order for the Plaintiff is for the 1st and 2nd Defendants to buy out the Plaintiff’s 45% shares at a fair value within 6 months failing which the 3rd Defendant company shall be wound-up.” [6] The learned Judge further ordered the parties to appear before him on 21.2.2017 in respect of the other declaratory and consequential orders sought by the respondent in the Originating Summons. [7] On 21.2.2017, after hearing the parties, the learned Judge appointed Wong Ching Yong as the Provisional Liquidator under section 231 of the Companies Act 1965 to preserve the assets of Wisma Rakyat and not to dispose of the assets of Wisma Rakyat without the leave of the Court; and that Wisma Rakyat was to continue its business on a “going concern” basis. [8] On 23.2.2017, the learned Judge made further other declarations/orders, amongst which was a declaration that the respondent holds 45% shares in Wisma Rakyat for his own benefit; that 5 certain properties held in the 1st appellant’s name were held on trust for Wisma Rakyat. Specific directions and orders were given to the Provisional Liquidator on various tasks that had to be undertaken, that findings on several matters had to be considered in computing the value of the shares of Wisma Rakyat, and that the Provisional Liquidator was to report his findings on certain directed matters within 3 months from the date of his appointment, and to make a further report on the deadline of 3.8.2017 for the appellants to purchase the respondent’s shares. [9] The appellants and Wisma Rakyat appealed against all three orders of the learned Judge, that is, the orders made on 3rd, 21st and 23rd February 2017. Pending the disposal of the appeal, the parties, on 14.4.2017, by consent, stayed the execution of the orders including the appointment of the Provisional Liquidator. [10] On 19.5.2017, the appeal was dismissed with costs by the Court of Appeal. The appellants subsequently sought leave to appeal to the Federal Court. [11] Meanwhile, following the dismissal of the appeal by the Court of Appeal, the Provisional Liquidator set about his tasks as directed in the order of Court dated 23.2.2017. Two reports were prepared and submitted to the High Court. The first is dated 5.6.2017, the second is a Share Valuation Report dated 28.7.2017. [12] In the intervening period between the First Report and the Share Valuation Report, the respondent’s solicitors wrote to the Deputy Registrar requesting for an appointment for parties to attend before the 6 learned Judge for further consequential orders or a winding up order as “the buyout order is due to expire on 03.08.2017.” This was opposed by the appellants who instructed their solicitors to inter alia informed the respondent that it was giving notice of intention to “exercise buyout as ordered by the Court. i.e., purchase all the shares of the Company Wisma Rakyat Holdings Sdn Bhd held by the Plaintiff at a fair value within 6 months. This is to prevent the Company from being wound-up.” In that same letter, the appellants further stated that: “Meanwhile, our clients will take possession of the business and the Company as from the date hereof in compliance with the Court order dated 3.2.2017 and the Provisional Liquidator’s duties and responsibilities which had been defaulted, ceased forthwith.” See letter dated 28.7.2017, addressed to the respondent’s solicitors and copied to the Court and to the solicitors acting for the Provisional Liquidator. [13] On that same date, 28.7.2017, Crowe Horwath [CH] released its Share Valuation Report to the Provisional Liquidator who also on the same date, sent the report to the Secretary to the learned Judge. On 31.7.2017, CH issued to the Provisional Liquidator a Clarification to this report which Clarification was also sent to Court by the Provisional Liquidator. At all times, the appellants were copied in on the Provisional Liquidator’s correspondence. [14] The appellants, on their part, through their solicitors, objected to both the Share Valuation Report and the Clarification, and this is reflected not only in their letter dated 28.7.2017 but in their subsequent letters dated 31.7.2017 and 1.8.2017. In its letter dated 1.8.2017, the 7 appellants took the position that with its buyout notice dated 28.7.2017 and the handing over of the Share Valuation Report to the Court, “the role of the Provisional Liquidator comes to an end”; and that “In these circumstances, the attempt by the Provisional Liquidator to provide the evaluation of the Plaintiff’s 45% shares by way of his letter dated 1.8.2017 must not be permitted as none of the orders of the Court dated 3.2.2017, 21.2.2017 and 23.2.2017 requires him or permits him to do so.” [15] On 3.8.2017, the appellants’ application for leave to appeal was dismissed by the Federal Court. That was also the deadline for the purchase or buyout of the respondent’s 45% shares. [16] As things turned out, the parties turned up before the learned Judge on 4.8.2017. On that date, the learned Judge ruled that “As there has been non-compliance of my earlier unless order, it has already expired.” The learned Judge then adjourned the matter to 17.8.2017 “for parties to tell me what is the fair value based on the valuation report since it is said to be subject to variables”. The appellants were also directed to file an affidavit within 7 days, that is, by 11.8.2017, explaining why they disagreed with the Share Valuation Report. [17] The appellants filed their affidavit on 16.8.2017. At paragraph 37 of that affidavit, the 1st appellant averred that “I have been duly advised by my solicitors and I verily believe that the “fair value” of the shares of the Company as at Valuation Date of 30 June 2017 was ‘zero’.” The appellants did not file any rebuttal valuation report in support of that belief. 8 [18] On 17.8.2017, Wisma Rakyat was wound-up. According to the learned Judge who had heard the petition from the time it was filed and who had made the relevant orders: i. the hearing date of 4.8.2017 was adjourned to 17.8.2017 in order to allow the appellants time to file their affidavit within 7 days, and for the parties to tell the Court what is the fair value based on the valuation report since it was subject to variables; ii. the affidavit was not filed according to directions given, it was filed a day before the hearing on 17.8.2017, leaving the Provisional Liquidator unable to “come up with an affidavit to address the issues raised in the defendants’ affidavit”; iii. the reasons for not immediately ordering a winding up at the outset “are there for all to see”; hence 6 months was set for the appellants to purchase all of the respondent’s shares failing which Wisma Rakyat “shall be wound-up”; iv. since 3.2.2017, and despite the letters sent expressing a desire for a proposed buyout, the appellants had not come up with any figure, amount or proposal on the fair value of the shares of Wisma Rakyat; v. the appellants were in the position to make that fair value; vi. the Provisional Liquidator, together with the assistance of professionals appointed by him, was appointed to assist the parties to come up with a fair value; vii. the respondent’s offer to buy the appellants’ shares at RM100,000 was not taken up; 9 viii. despite being given the opportunity to resolve the dispute by the buyout clause, the appellants were “nonchalant and saw no urgency to do so”. [19] The learned Judge added that he had “warned parties that if I am unable to conclude on the fair value by the 17th August 2017, I shall in accordance with my judgment of the 3rd of February 2017 wind-up the 3rd Defendant Company. I do not wish to prolong the matter any further. The Defendants were given adequate time and opportunity to buy out the Plaintiff and they have failed to avail themselves to this. In the circumstances since I cannot come to the fair value, pursuant to my earlier order, I order that the 3rd Defendant Company Wisma Rakyat Holdings Sdn Bhd (Company No. 606505-U) be wound-up.” [20] Wisma Rakyat was thence wound-up. The appellants being dissatisfied, appealed. Our deliberations and decision [21] The appellants’ grounds of complaint may be summarized as follows: i. the High Court took the view that since the fair value for the purchase of the respondent’s shares in Wisma Rakyat was disputed, Wisma Rakyat was to be wound-up when in fact the High Court was required to resolve the disputed fact as 10 to what amounts to the fair value for the purchase of the respondent’s shares in Wisma Rakyat; ii. the facts show that the Provisional Liquidator had yet to ascertain the fair value and had accepted that it had provided only a preliminary and incomplete report; iii. winding up is a remedy of last resort. [22] The appellants submitted that at the time of the winding-up, the parties were in disagreement in several respects concerning the share valuation: i. the effect of the Provisional Liquidator’s failures to run Wisma Rakyat as a going concern; ii. dates or period of valuation; iii. the Provisional Liquidator’s remuneration; iv. Trust Properties held by the 1st appellant for Wisma Rakyat’s benefit; v. sufficiency of the accounting records available to CH in making CH’s report; vi. the adjustments stated in CH’s report including the value of deferred tax assets, inventories, outstanding receivables and payables, tax position and outcome of litigation. [23] Since the High Court had specifically ordered the Provisional Liquidator to take steps towards ascertaining the fair value of the shares, amongst which was to appoint a valuer to determine the value of the Trust Properties, the Provisional Liquidator was then to ascertain the fair 11 value of the shares. As the Provisional Liquidator had taken full control of Wisma Rakyat and its documents, he was best placed to do so. [24] According to the appellants, the Order of the High Court dated 3.2.2017 required the purchase of the respondent’s shares at ‘fair value’. In the absence of agreement between the parties on that ‘fair value’, learned counsel for the appellants submitted that it was for the High Court to make the determination of what would be the ‘fair value’ of the shares. [25] The appellants argued that the Court’s order was also not an ‘unless order’ because it was not clear in form and effect. The appellants submitted that the order directing or ordering the appellants to “purchase all the shares of the Company held by the Plaintiff at a fair value within 6 months” is unclear and ambiguous, as it did not stipulate what is the so-called ‘fair value’. This was reflected in the emails and correspondence exchanged between the parties, and any ambiguity should also be resolved in the appellants’ favour. [26] Further, it was submitted that it was impossible for the appellants to have an exact compliance of the Court order without further arguments and ultimately the determination of the fair value. The High Court was obliged to still determine the grounds submitted by the breaching party. Lastly, even if there was a breach of the “unless order”, the High Court was still obliged to determine the grounds submitted by the breaching party. 12 [27] Those grounds show that even if it was true that there was failure to comply with the unless order: i. such failure or non-compliance was not intentional or contumelious; ii. there was no history of failure to comply; iii. it was the Provisional Liquidator who had failed to maintain Wisma Rakyat as a going concern; iv. the alleged failure was partly contributed by the fair value dispute with the respondent and the Provisional Liquidator; v. the appellants had made positive efforts to comply with the unless order but had been prevented from doing so by extraneous circumstances, that is, the dispute on the fair value. [28] Relying on Zen Courts Sdn Bhd v Bukit Jalil Development Sdn Bhd & Ors and another appeal [2017] 1 MLJ 301, the appellants submitted that when there is an order made for the purchase of shares at fair value, parties often dispute on the quantum of that fair value. In such a situation, it was the Court that should then determine the fair value. Citing The Companies Act of Malaysia: An Annotation (LexisNexis 2015) by Walter Woon & Andrew Hicks, the appellants submitted that the “valuation to be put on shares is a decision of the Court. This appears implicitly in all the cases. The Court may be assisted by professional valuers but ultimately the decision is the judge’s.” Having ordered the appellants to purchase the respondent’s shares at a fair value, the High Court must determine that fair value. 13 [29] It was further submitted that the learned Judge erred in holding that since there are serious differences between the views and opinions of the respective parties “so much so that I am unable to say what is the fair value for the shares of the Company”, Wisma Rakyat was to be wound-up. Not only should winding up be a last resort, relying on Folin & Brothers Sdn Bhd (in liquidation) & Ors v Folin Food Processing Sdn Bhd & Ors [2011] 6 MLJ 585 and several other decisions, the appellants submitted that the High Court was “empowered and actually duty bound to resolve the parties’ dispute on fair value”. Finally, the winding up order was criticized as being hastily made, less than one month after CH had issued its valuation report. [30] We must disagree, with respect. The underlying facts, events, and the several orders made by the High Court, Court of Appeal and the Federal Court are highly material in the present appeal, having a particular bearing in the proper appreciation of the reasons for the grant of the order to wind-up Wisma Rakyat. [31] We start with the four orders, all granted by the same learned Judge, and described by the appellants as follows: i. “Buy Out Order” dated 3.2.2017 – First Order; ii. Order dated 21.2.2017 – Second Order; iii. “Valuation Order” dated 23.2.2017 – Third Order; iv. “Winding Up Order” dated 17.8.2017 – Fourth Order. [32] These descriptions are but labels, the important task at all times, must be to examine the contents of those orders, the timing of those 14 orders and the co-relation of those orders to the order which is the subject of the present appeal. Once that is conducted, it will be readily appreciated that contrary to the submissions of the appellants, the learned Judge had not erred in his deliberations in arriving at his decision. Certainly, he has not plainly erred such as to warrant our appellate intervention. [33] Upon a proper appreciation of the First Order made on 3.2.2017, it will be readily seen that it extended beyond the matter of buying out one director and shareholder by the other. In fact, it starts with the determination of whether there has been oppression as alleged and which falls within the meaning of section 181 of the Companies Act 1965. [34] In the First Order, the learned Judge found the respondent’s allegation of oppression proved and there is a clear declaratory order to that effect:

Subsection

(1) A Declaration that the affairs of the 3rd Defendant Company (hereinafter referred to as “the Company”) are being conducted and the powers of the 1st and 2nd Defendants (acting as directors) are being exercised in a manner oppressive to the Plaintiff. [35] The order of the High Court may be seen at page 2 of the respondent’s Common Bundle [CBD] while the grounds for such decision are at pages 4 to 26 of CBD. 15 [36] The Second Order that was pronounced on that same date concerns the order to buy out the respondent’s shares. It is referred to by the appellants as the “Buy Out Order” and it states:

Subsection

(2) That the 1st and 2nd Defendants purchase all the shares of the Company held by the Plaintiff at a fair value within 6 months, failing which the Company shall be wound-up. [37] This order that the appellants buy up the respondent’s shares was seen as the “proper” option by the learned Judge – see page 25 of CBD; as opposed to the winding up order that was sought by the respondent at the material time. But, it must not be overlooked that even at the very start and in the first of many orders yet to come, the learned Judge had already considered that Wisma Rakyat will be wound-up where the appellants do not purchase the respondent’s shares within 6 months. [38] Consistent and following on from this decision, the learned Judge went on to make the Second Order appointing Wong Ching Yong as the Provisional Liquidator, together with two specific orders on preservation of assets and to continue running Wisma Rakyat as a ‘going concern’ on 21.2.2017 – see page 28 of CBD which specifically states the First Order of 3.2.2017. [39] Two days later, the parties were back in Court for the Third Order. This is where the “Valuation Order” was made. [40] Before making further detailed orders including more declaratory orders, the learned Judge, once again, referred to his two earlier orders – see pages 30 to 34 of CBD. The Third Order made on 23.2.2017 16 pertained to the identification of Wisma Rakyat’s properties and assets, ordering of specific tasks to be undertaken by the Provisional Liquidator and the matters and findings that had to be taken into consideration in valuing the shares of Wisma Rakyat. [41] At the same time, his Lordship made these following orders:

Subsection

(6) That the Provisional Liquidator appointed by Order dated 21.2.2017:

(i) appoint a property valuer to conduct a valuation on all the properties of the Company including those Trust Properties as described in Declaration 2 above;

Subparagraph

(ii) …

Subparagraph

(iii) …

Subparagraph

(iv) appoint an approved company auditor to value the shares of the Company taking into consideration all the above findings.

Subsection

(7) It is further ordered that:

(i) The Provisional Liquidator shall report to the Court their findings on the above matters within 3 months from the date of appointment of the Provisional Liquidator and shall make a further report on the deadline for the 1st and 2nd defendants to purchase the Plaintiff’s 45% shares in the 3rd defendant Company, namely on 03.8.2017.

Subparagraph

(ii) Unless the 1st and 2nd defendants acquire all the 45% shares of the Plaintiff in the Company at fair value within 6 months from the date of the Order, the Company shall be wound-up and the Provisional Liquidator shall be appointed as the Liquidator of the Company. [emphasis added] [42] At paragraph (7) of the Third Order, the learned Judge specifically fixed timelines for the submission of reports of the Provisional Liquidator; the first to be within 3 months from the date of his appointment, and a further report on the deadline of 3.8.2017 for the purchase of the respondent’s shares. 17 [43] But that was not all. What ensues is critical. At paragraph 7(ii), His Lordship made the further order that “Unless the 1st and 2nd defendants acquire all the 45% shares of the Plaintiff in the Company at fair value within 6 months from the date of the Order, the Company shall be wound-up and the Provisional Liquidator shall be appointed as the Liquidator of the Company.” The issue that arises here is whether this amounts to an “Unless Order”; with the appellants contesting that it is not and that there were none ever issued. We will return to this shortly as it is necessary to put the full context against which the learned Judge came to his decision to wind-up Wisma Rakyat, as explained by His Lordship. [44] Following on from the Third Order, the attention shifts to the Provisional Liquidator and what he had done in relation to the tasks and duties entrusted by the Court. As ordered, on 21.6.2017, the Provisional Liquidator submitted his First Report for the period 23.2.2017 to 22.5.2017 to the High Court vide an affidavit affirmed on 20.6.2017. [45] As seen from the terms of the Third Order, apart from continuing the business of Wisma Rakyat as a ‘going concern’, declaring certain properties held by the 1st appellant as properties held on trust for Wisma Rakyat [Trust Properties], the Third Order included an order for the valuation of the shares of Wisma Rakyat. For this purpose, the High Court ordered the Provisional Liquidator to appoint a property valuer and an auditor. The Provisional Liquidator appointed Henry Butcher Malaysia (Sabah) Sdn Bhd as the property valuer and CH as the auditor. 18 [46] When valuing Wisma Rakyat’s shares, the Third Order directed the Provisional Liquidator to take into consideration inter alia the following: i. valuation of all the properties of Wisma Rakyat, including the Trust Properties; ii. credit all rentals and income received by the 1st appellant for the use of properties and premises belonging to Wisma Rakyat including the Trust Properties back to Wisma Rakyat; iii. treat such credit as the property of Wisma Rakyat in computing the value of the shares of Wisma Rakyat; iv. review the directors’ ledgers from 2003 to 2017 to ascertain any improper or unsubstantiated credits or whether further credits ought to be recorded in the directors’ ledgers, v. take into custody and control Wisma Rakyat’s shares in ACI Technology Sdn Bhd which the High Court had deemed Wisma Rakyat was entitled to. [47] The Provisional Liquidator explained that in carrying out his duties and obligations, of which the main ones are as spelt out above, he therefore needed to meet the appellants and obtain documents and records from them. He was unsuccessful. [48] And so, the Provisional Liquidator reported in his First Report that he faced “challenges of resistance from the directors of the Company, in co-operating to facilitate the process. While the Company, can continue as ‘a going concern’ in the short term, the financial position of the Company is as such that the uncertainties surrounding the shareholder 19 dispute must be resolved expeditiously, otherwise the confidence of the suppliers and the employees will be affected and thus affect the Company’s business and value.” [49] At page 2 of his First Report seen at page 335 of R/A 2/2, the Provisional Liquidator also recorded encountering the following issues, quite aside from the appellants’ solicitors confirmation that the appellants “were not prepared to meet the PL” despite his repeated follow-up by telephone and WhatsApp messages:  Company’s Accounting Records The PL and his representatives have not been able to access the Company’s accounting books and records through the Auto Count system or hard copies of the accounting records at the Company’s office. The Company does not have any accounting staff apart from the accounts clerks who are responsible for the accounts payable and receivable for the Company. The Company appointed an external consultant, JL Management to assist in overseeing the accounting function in the Company’s office. Following the PL’s notice of appointment and the PL’s representatives’ attempts to meet the consultant, the consultant tendered its resignation. The PL’s representatives had written to the consultant on numerous occasions to seek its co-operation but were unsuccessful. As such, without the cooperation from the directors, the PL is facing difficulty ascertaining the Company’s financial position. In addition, without access to the Company’s full accounting books and records, the PL is finding difficulty in conducting the tasks required by the High Court to be undertaken including the review of the Company’s directors’ ledgers, the recovery of rentals paid to the directors and the valuation of the Company’s shares. [50] In addition, the Provisional Liquidator reported that difficulties were also encountered by CH: 20  Appointment of Approved Auditor to Value the Company The PL has appointed Crowe Howarth to undertake the valuation of the Company but without the co-operation of both KYS and TGC as directors of the Company in producing the books and records of the Company, the valuation exercise may be futile. The only documents that Crowe Howarth is able to work on are the audited accounts of the Company as contained in the audit report and which are also presently ‘in dispute’ between the parties. It is essential that both KYS and TGC as the directors of the Company come forward to give their co-operation in order that a fair valuation report with full information available can be carried out. [51] In his concluding remarks at page 338, the Provisional Liquidator opined that “it is critical that both KYS and TGC as the directors of the Company be compelled to co-operate with the PL, in order that the desired outcome as envisaged by the High Court is achieved as if the matter is protracted, the Company’s operations will suffer and the Company’s financial position will deteriorate.” [52] With the caveat on the difficulties faced, the Provisional Liquidator reported inter alia that in respect of the valuation of Wisma Rakyat’s properties including the Trust Properties, Henry Butcher had on 6.4.2017 submitted a provisional valuation certification for the properties totaling RM39.9 million and the provisional forced sale value of RM31.16 million. [53] Next was the Share Valuation Report dated 28.7.2017 prepared by CH, the purpose of the report being “to provide an opinion on the indicative value of equity sharers in the Company. The fair value is to be the price that a willing but not anxious buyer, acting at arm’s length with 21 adequate information, would be prepared to pay; and a willing but not anxious seller would be prepared to accept”. CH opined that “the fair value of the equity shares of WRH, based on the NAV approach, is in the range from RM0.93 to RM1.05 per share”, subject to certain adjustments:

(a) de-recognition of deferred tax assets should their recognition no longer be supportable (refer Section 5.2.3);

(b) inventories value as of the Valuation Date (refer Section 5.2.4);

(d) tax positions as of the Valuation Date (refer Section 5.2.7);

(e) outstanding payables as of the Valuation Date (refer Section 5.2.12);

(f) the outcome of litigation as outlines in Section 4(a); and

(g) finance costs adjustments with respect to trust properties (refer Section 5.2.9). See CH’s Share Valuation Report which can be found at pages 765 to 783 of R/A 2/4 and pages 83 to 102 of CBD. [54] In its report, CH explained that while there are two commonly used and acceptable methods for determining the indicative fair value of unquoted equity shares: the asset approach based on net asset value [NAV]; and the income approach based on discounted cash flow analysis [DCF], and because Wisma Rakyat was intended to be valued on a going concern basis where there is no realization of the operating 22 assets, the DCF “would be the preferred method of valuation of the business of the Company”. That method, however, was not considered because of the limited information available to them. In CH’s words, “we do not consider DCF method” was because:

(a) management business plan is not available for a realistic and supportable cash flow forecast to be prepared for our assessment.

(b) an emphasis of matter was included in the Auditors’ Report of the Company for the financial year ended 31 December 2015 stating that there was an existence of material uncertainty for the Company to continue as a going concern in the absence of the funding commitments. [55] Under such circumstances, CH considered the NVA approach as an alternative, where the total value of the business is based on the sum of the net underlying assets and liabilities of the business, and where every asset and liability on the statement of financial position is marked to current fair value. Be that as it may, CH acknowledged that should the cash flow method be adopted and information is available for the required adjustments to be made, the fair value of the equity shares could be significantly different from the NAV method used. [56] Upon receipt of the Share Valuation Report, the Provisional Liquidator queried CH on “Particulars of other payables amounting to RM12,950,446.00”, recorded as “acquisition costs of properties” in its report. On 31.7.2017, CH issued a Clarification to its Share Valuation Report. [57] The Share Valuation Report and the Clarification were both submitted to the High Court by the Provisional Liquidator vide its Further 23 Report dated 31.7.2017. In the Further Report, the Provisional Liquidator at paragraph 5 highlighted once again his difficulty in meeting up with the 1st appellant, especially to verify the amounts used by the 1st appellant: “…over the relevant years, to pay banking loans in connection with the Trust Properties. Unfortunately, this amount cannot be verified by Crowe Howarth Sibu accurately due to insufficient/incomplete accounting records made available. Therefore, further discussion and deliberation are needed between the 1st defendant, Provisional Liquidator and Crowe Howarth Sibu. Regrettably, I would also like to take this opportunity to inform this Honourable Court that up till now, and despite repeated requests by me, the 1st Defendant has declined to meet up with me who is the Provisional Liquidator. As such, collating and verification of accounting document/information are extremely slow and difficult.” [58] After urging the Court to “take judicial notice of the matter and to make all necessary directions in the interest of the Company,” the Provisional Liquidator concluded that the respondent’s buyout of 45% share of Wisma Rakyat was a total of RM5,610,109 comprising NVA of 45% share, share of Trust Properties and share of rentals paid to the directors. [59] It must be pointed out that the Provisional Liquidator also prepared and submitted to the High Court a Second Report dated 28.7.2017, on the “Status As At 28.7.2017” – see page 737 to 760 of R/A 2/4 and pages 145 to 168 of CBD. The purpose of the report is “to update the High Court on the issues arising from the administration of the Company and the various issues that the PL has been tasked to address by the High Court.” 24 [60] The Provisional Liquidator again recorded the difficulties faced in carrying out the orders of the Court, that there were no responses from the appellants despite repeated letters sent [paragraph 2(iii) in Executive Summary]; and the general lack of co-operation from the appellants and their solicitors [paragraphs 2.1, 3.3, 5.3]. [61] On the financial position of Wisma Rakyat, the Provisional Liquidator noted that “it appears that the Company’s liabilities are more than its assets and given such a position, it would be technically insolvent. The Company therefore has an uncertain future if no additional funds are injected by the shareholders into the Company to meet its monthly commitments.” The Provisional Liquidator found that: “Based on a financial commitment of approximately RM900,000 per month not including directors’ drawings and remuneration and assuming an average gross margin of 30%, then an average monthly revenue of RM3 million is required for the Company to maintain a breakeven cash flow position. Based on prevailing monthly turnover of RM1.1 million to RM1.5 million, the Company’s current business is not sustainable.” [62] On the status of the buyout by the appellants, the Provisional Liquidator reported at paragraphs 4 and 6 that apart from a recent letter from the appellants’ solicitors “declaring that KYS was exercising the option of buying out CCF, as far as the PL is aware there has not been any firm offer by KYS to CCF to ‘acquire’ the 45% block of shares in the Company.” The Provisional Liquidator then went on to conclude at paragraph 7 that the “indicative value of the Company’s shares on a ‘going concern’ basis is between RM0.93 to RM1.05 per share. However, the Company is technically insolvent as it is in a net liability position, and is not able to meet its liabilities as they fall due. As such, 25 the party acquiring the shares in the Company would be required to, apart from acquiring the Company’s shares, inject significant amount of additional funds to meet its monthly commitments. The Company’s adverse financial position cannot be maintained for much longer and unless the parties are able to conclude a share sale agreement shortly, it is likely that the Company will have to be wound-up anyway due to its insolvent position.” [63] All of the above and more, were before the Court when His Lordship granted the order to wind-up Wisma Rakyat on 17.8.2017. Not to forget is the material fact that this was the same learned Judge who had heard the 181 oppression petition and who had made the orders on 3.2.2017, 21.2.2017 and 23.2.2017, all of which have been affirmed on appeal. Those orders are all co-related, in fact the latter two were consequential orders as explained by His Lordship. And, as we have seen, the learned Judge had repeatedly reminded himself and the parties that Wisma Rakyat shall be wound-up if the appellants do not purchase all of the respondent’s shares at a fair value by a certain deadline. [64] The order to wind-up Wisma Rakyat was an order that the learned Judge was perfectly entitled to make, and His Lordship had in fact already made it from the start, within the terms of section 181(2) of the Companies Act 1965. The learned Judge gave the parties time to comply with that order. In fact, the learned Judge put mechanisms in place to assist the parties including the appointment of the Provisional Liquidator and professionals to assist the Provisional Liquidator, towards achieving and complying with that order. His Lordship even fixed 26 deadlines for compliance, and for reports on various matters to be submitted by the Provisional Liquidator. We note that the length of time given by His Lordship is not in issue, and cannot be an issue since the related decisions have been affirmed on appeal. [65] In any case, the learned Judge had explained that the deadline of 6 months was set because His Lordship “did not want to prolong the matter” and that meanwhile the Provisional Liquidator was appointed to “take charge of the 3rd Defendant Company as I do not propose to leave the affairs of the said company in the hands of the 1st and 2nd Defendants after having heard the evidence on how this company was being run, managed and operated in complete disregard of the Plaintiff’s rights and interest as a shareholder and director of the same.” [66] The deadline for the purchase of the respondent’s 45% equity share in Wisma Rakyat is by 3.8.2017. And, it goes without a shadow of doubt that if that does not take place, then Wisma Rakyat shall be wound-up. That has always been the clear terms of the order of Court from the very first order on 3.2.2017. And, as explained too, by the learned Judge, the order to wind-up was given because “the relationship between the Plaintiff and the 1st Defendant has gone so bad, it is beyond repair. It is impossible for them to work with each other. The buyout order was made with a view to bringing an end or to remedy the matters that the Plaintiff had complained of.” [67] Thus, the only matter preventing the winding-up, which was sought by the respondent at the outset of his oppression petition, was the purchase of the respondent’s shares in Wisma Rakyat. That was put off 27 for the reasons already explained by His Lordship. Meanwhile, a Provisional Liquidator was appointed to keep Wisma Rakyat’s business going although the learned Judge did warn that the Provisional Liquidator shall be the Liquidator if there is no purchase of the respondent’s shares in which case, Wisma Rakyat shall be wound-up – see order dated 23.2.2017. [68] And, His Lordship kept a watchful eye on all the orders given. More particularly, His Lordship was concerned with efforts towards compliance of the order of sale. His Lordship took note of the fact that despite the appellants’ solicitors conveying to the Provisional Liquidator of their desire for a proposed buyout, no amount was proposed by them. His Lordship was of the view that given the time since 3.2.2017 and since the appellants were in the position to have a fair idea of what the value of the shares of Wisma Rakyat was, they should have come up with a figure. [69] Yet, despite having been given a copy of the Share Valuation Report as well as the Provisional Liquidator’s various reports, the appellants never came up with their estimation of a fair value of the respondent’s shares. The purchase was upon the direction of the Court following from acts of oppression; the price for the purchase was upon fair value. Instead, the appellants showed resistance and generally did not co-operate, arguing that the Share Valuation Report was not proper, that the audit report showed a negative value. This prompted the learned counsel for the respondent to offer on his client’s behalf RM100,000.00 to buy out the appellants’ shares. The offer was not 28 taken up. Specifically, his Lordship found the appellants nonchalant and a lack of urgency to resolve the dispute. [70] Having appreciated all these factual circumstances against which the learned Judge had come to his decision, we understand and wholly agree with the reasons put forth by His Lordship. Contrary to the submissions of the appellants that there was no unless order and that the order given by His Lordship is unclear, that there has been no contumelious failure on the appellants’ part, the evidence show, quite clearly and plainly that there are clear and specific orders: i. that “the 1st and 2nd Defendants purchase all shares at a fair value within 6 months, failing which the Company shall be wound-up” – order dated 3.2.2017; ii. that “Unless the 1st and 2nd Defendants acquire all the 45% shares of the Plaintiff in the Company at fair value within 6 months from the date of the Order, the Company shall be wound-up and the Provisional Liquidator shall be appointed as the Liquidator of the Company” – order dated 23.2.2017; [71] We cannot see how the order can be any clearer than as set out above. It is a clear peremptory order which, as we have mentioned, the learned Judge kept a watchful eye on, not wanting to prolong matters but gave the appellants “adequate time and opportunity to buy out the Plaintiff”; to offer a fair value for the respondent’s shares, assisted by an independent professional in the Provisional Liquidator, an officer of the 29 Court in such matters. In the learned Judge’s words, the appellants “have failed to avail themselves to this.” [72] As for the fair value, His Lordship has also explained that he had “earlier warned parties that if I am unable to conclude on the fair value by the 17th August 2017, I shall in accordance with my judgment of the 3rd February 2017 wind-up the 3rd Defendant Company.” Since His Lordship could not come up with a fair value, pursuant to his earlier order, Wisma Rakyat was wound-up. These reasons are sound, of basis and justified; and which the learned Judge was entitled to rely on to reach the decision now complained of. [73] The appellants submitted that it was the duty and task of the learned Judge to assess and determine the fair value. With respect, while that may generally be right, the cases relied on and cited must be read with care. In those decisions, the Court had made the purchase of shares and thereby the valuation of shares of the company is the order made as a consequence of oppression, that compensation to the oppressed shareholder for the injury done to him is the primary purpose of the petition under section 181. In that event, the Court must undertake that exercise. [74] However, in the present 181 oppression petition, the respondent sought to have Wisma Rakyat wound-up. His Lordship had considered that as not being the immediate remedy for the particular reasons explained; hence the specific direction to the Provisional Liquidator to continue the business of Wisma Rakyat on the basis of “a going concern”. To facilitate the purchase of the respondent’s shares and to 30 deal with the matter of what the fair value is, His Lordship had anticipated the issue, addressed it by putting in place particular mechanisms for that precise purpose. His Lordship had also explained this. [75] The Provisional Liquidator, assisted by a property valuer and an auditor was to and they have, fixed the fair value of the shares of Wisma Rakyat and a fair value for the respondent’s 45% share. That fair value of the Company’s shares on a ‘going concern’ basis was between RM0.93 to RM1.05 per share. The circumstances presented in the Federal Court decision in Zen Courts Sdn Bhd (supra) are quite different from the facts in the present. In that case, the issue was the meaning and extent of application of the clause “liberty to apply” in approaching the Court to determine the final value of the shares in question. The final arbiter of the final value of the shares was always the Court in that appeal. [76] The appellants before us disagreed with the fair value determined by the Provisional Liquidator but did not offer any figure of their own other than to claim that the fair value of Wisma Rakyat’s shares as at the date of valuation, 30.6.2017 was “zero”. Even that is upon advice by their solicitors and not by appropriately competent experts experienced in the valuation of shares in a buyout. [77] We agree with the learned Judge that the offer was questionable in its sincerity. It was not genuine. If it be the genuine offer, then it made good sense that the offer from the respondent of RM100,000.00 would be a windfall. Yet, the offer was not taken up, indicating the lack of 31 sincerity in the appellants’ contention that the value of Wisma Rakyat’s shares was “zero”. The appellants plagued the whole exercise of the buyout with negative and improper conduct, lack of co-operation, setting up barriers at almost every turn, with the unfortunate involvement of solicitors [see paragraphs 3.3 and 5 in the Second Report], there was firm evidence of non-compliance to justify the orders made by the learned Judge. The Court must show its disapproval of such misconduct by not allowing the defaulting party, the appellants, to take advantage of their own wrong or default – see Court of Appeal’s decision in Su Wee Lip & Philip Su v Hj Lassim Abdul Rahman [2009] 1 MLJ 580. [78] In any case, the winding-up order was made on the premise that there was no buyout and the appellants’ “Buy Out Notice” dated 28.7.2017 does not meet the terms of the order. By that notice sent to the Provisional Liquidator, the appellants claimed that they had exercised their right to buy out the respondent’s shares but had also reserved their right to challenge the merits of CH’s valuation setting out factors, events and circumstances which they claimed would have a direct adverse effect on the valuation. However, as rightly pointed out by the Provisional Liquidator, the appellants did not propose any value for the respondent’s shares. [79] Having examined the appellants’ letter to the Provisional Liquidator, we do not find the notice to exercise buyout meeting the terms of the order. The order envisaged a completion of the exercise of which there is clearly and undisputedly none; and not the mere giving of a notice. To accept that line of proposition would be to fly in the face of the clear terms of the order. 32 Conclusion [80] Consequently, we are of the unanimous view that there are no merits in this appeal. We are not satisfied that the learned Judge was plainly wrong in his refusal to fix the fair value. His Lordship has explained his reasons in very clear and succinct terms. [81] The appeal is therefore dismissed with costs. The decision of the learned Judge is affirmed. Dated: 30th May 2019 (MARY LIM THIAM SUAN) Judge Court of Appeal Malaysia 33 Counsel/Solicitors For the appellants: Norbert Yap (Grace Chaw Hei Hei with him) Messrs Grace Chaw & Co. Lot No. 7, DBKK No. C-2-7, 2nd Floor, Block C, K.K. Taipan Inanam 88450 Kota Kinabalu Sabah. For the respondent: Colin Lau Suan Hua (Rebecca Thong Fei Eng with him) Messrs Szetu & Co. F-36-3A, Block F, Floor 3A KK Times Square, Coastal Highway 88100 Kota Kinbalu Sabah.

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Kong Yin Siong & 1 Lagi v Chin Chee Fui (W-02-(NCVC)(A)-1713-08/2017)

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Kong Yin Siong & 1 Lagi v Chin Chee Fui (W-02-(NCVC)(A)-1713-08/2017)

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