Lau Jenn Feng v Fourseason Frontier Sdn. Bhd. (WA-24NCC-263-05/2025)

FOURSEASON FRONTIER SDN BHD (NO. SYARIKAT: 201601017575

CHAN KONG HONG (NO. K/P: 680117-06-5281) …DEFENDAN-DEFENDAN

The Plaintiff was seeking remedies under section 346 of the Companies Act 2016 (“CA”) as a 30% minority shareholder of the 1st Defendant, Fourseasons Frontier Sdn Bhd (“Company”). The majority shareholder of the Company is the 2nd Defendant, a friend of the Plaintiff’s mother. S/N 3e3x3loP0CRgXrezd0emA

The Plaintiff and the 2nd Defendant had collaborated to run a business using properties to be acquired by the Company, renovated and managed as short-term rental properties. Disputes arose and escalated within a year of the collaboration, leading to the filing of this action by the Plaintiff. Background facts

The Company itself was a pre-existing company incorporated by the 2nd Defendant in 2016 and repurposed as an investment holding company for the acquisition of properties. According to CCM records, the 2nd Defendant was the sole director, with his daughter and the Plaintiff appointed as alternate directors on 11-1-2024.

The Plaintiff and 2nd Defendant each injected RM200,000 in cash into the Company as capital and were respectively allotted 60,000 (30%) and 140,000 (70%) ordinary shares at RM1.00 par value. To fund the property acquisitions, each was supposed to have further advanced cash capital in proportion to their shareholding.

On 21-2-2024, the Company entered into a sale and purchase agreement for unit C141 at Fahrenheit 88, Jalan Bukit Bintang, (“Property 1”). The purchase was financed partly with the aforesaid capital contribution from the shareholders in the same 70:30 proportion, and partly with bank financing, jointly and severally guaranteed by the Plaintiff and 2nd Defendant. S/N 3e3x3loP0CRgXrezd0emA

On 15-8-2024, the Company entered into a sale and purchase agreement for Unit 26.05 at Wisma Cosway, Jalan Raja Chulan, (“Property 2”). On 9-7-2024, the Company signed an offer letter and put down a deposit to purchase another unit i.e. unit C205 at Fahrenheit 88 (“Property 3”). These 2 purchases too were supposed to have been financed in the same way as

1.

On 2-9-2024, the parties set up a 50-50 partnership known as Four Season Management on (“Partnership”), the purpose of which was to provide management and services for short term rental and accommodation. Analysis and findings

Describing the failure of the acquisition of Property 3 in October 2024 as the trigger point, the Plaintiff alleged that the 2nd Defendant had acted against his interest as a minority shareholder within the meaning of section 346(1) of the CA i.e. by a) usurping Property 3 and purchasing it in his own name together with his wife; b) revoking the Plaintiff’s appointment as his alternate director on 18-12-2024, and removing the Plaintiff’s access to the Company’s bank account; c) terminating services to Property 1; and S/N 3e3x3loP0CRgXrezd0emA d) trying to force the Plaintiff out of the Company with unfair and oppressive buy-out terms.

This Court dealt with the second allegation first, as it concerned the general allegation of exclusion from management, which requires this Court to make a finding on the nature of the relationship between the parties. This affected the analysis of the remaining complaints. Exclusion from management

It did not appear to be disputed that, as part of the collaboration that was partially realized before the parties fell out: a) the Plaintiff would be in charge of managing the operational aspects of the short-term rental business, and that the properties acquired by the Company would be used for this purpose; and b) the 2nd Defendant would handle the property acquisitions through the Company, and both parties would contribute capital in proportion to their shareholding and jointly guarantee loan facilities to purchase the properties.

The Plaintiff complained that he provided personal guarantees for Properties 1 and 2 and actively participated in the Company’s strategy and operations, but was removed as alternate director by the 2nd Defendant with a notice dated 18- S/N 3e3x3loP0CRgXrezd0emA 12-2024, revoking his appointment without just cause and together with that, his role as a signatory for the Company’s bank account.

The Plaintiff argued that the relationship between the parties and the Company was governed by the terms of a draft Shareholders’ Agreement that called for, inter alia, directorships for both and joint decision-making, deadlock provisions and a right of first refusal, and that these were the “Incorporation Agreement” or “Incorporation Understanding” (“Understanding”) between them.

Upon a review of the draft Shareholders’ Agreement however, this Court noted that it was not just unexecuted, but there were material terms that were still not crystallized and apparently not accepted by the 2nd Defendant. Apart from the 70:30 shareholding ratio in the Company, the other terms in the draft were not carried into effect by conduct of the parties.

As it turned out, the Plaintiff was not appointed as a director of the Company. Instead, he accepted the role of alternate director. This was allegedly based on the 2nd Defendant’s assurance that it carried the same powers. However, the Plaintiff was clearly aware what an alternate director is as he drafted a clause on alternate directors in the draft Shareholders’ Agreement. S/N 3e3x3loP0CRgXrezd0emA

For whatever reason, he accepted that he was appointed as an alternate director to the 2nd Defendant in the Company and not a director in his own right on 11-1-2024. As such, this Court found that the Understanding in the terms encapsulated in the draft Shareholders’ Agreement, was not proved and the Plaintiff’s appointment as an alternate director was not an actionable breach.

That said, an action under section 346(1) of the CA does not turn on proof of a breach of an enforceable contract. At the heart of the complaint about his exclusion from management as oppression, is the question of whether the Plaintiff had a legitimate expectation that as a shareholder, he would not be excluded from participating in managing the Company as a director, alternate or otherwise.

The Plaintiff argued in submissions that he did have such a legitimate expectation because the Company was a quasi-partnership where equitable considerations may apply to make it unjust for one shareholder to insist on legal rights or to exercise them in a particular way (Ebrahimi v Westbourne Galleries [1972] 2 All ER 492 (“Ebrahimi”)).

As explained by Ramly Ali J in Eng Man Hin & Anor v King’s Confectionary Sdn Bhd & Ors [2005] 8 CLJ 77 (“Eng Man Hin”): S/N 3e3x3loP0CRgXrezd0emA “An "Ebrahimi" type of company is a "quasi-partnership" company having the following three elements, namely:

an association formed or continued on the basis of a personal relationship involving mutual confidence;

(ii) an agreement or understanding that all or some of the shareholders shall participate in the conduct of the business; and

(iii) restriction upon transfer of the members interests so that if confidence is lost or one member is removed from management, he cannot take out his stake and go elsewhere.”

The Federal Court in Jet-Tech Materials Sdn Bhd & Anor v Yushiro Chemical Industry Co Ltd & Ors and another appeal [2013] 2 MLJ 297 held that the section 346 of the CA remedy is not available for breach of private arrangements between shareholders, unless it arises in an Ebrahimi type of company.

Thus, this Court also considered whether generally, the conduct of the parties revealed any of the indicia of an Ebrahimi type of mutual trust and confidence between them as shareholders of the Company at all, such that the Plaintiff had a legitimate expectation that as a shareholder, he would not be removed as the Plaintiff’s alternate director. S/N 3e3x3loP0CRgXrezd0emA

On reviewing the facts and evidence in this case, it was apparent to this Court that the relationship between the Plaintiff and 2nd Defendant was distinguishable from those found in precedents cited by the Plaintiff on quasi-partnerships. Those typically involved family companies or longstanding directors with legitimate expectations of continued participation.

In this case, the Plaintiff and 2nd Defendant were not related and apart from a passing mention of a friendship between the Plaintiff’s mother and the 2nd Defendant, there was no evidence of any familiarity, trust and/or confidence between them. There was notably also no longstanding course of conduct between them to speak of.

In fact, what this Court found from the evidence, was that the relationship between the Plaintiff and 2nd Defendant was marked from the outset, by a respectful boundary and distance. The 2nd Defendant maintained the Company bank account and adopted a formal business relationship with the Plaintiff.

That relationship was exemplified by evidence of requests for proof of renovation expenses and audit of Property 1, the implementation of a claims process for proper accounting, and insistence on transparency of Partnership operations by the Plaintiff. This undermined the narrative that the business ran on mutual trust and confidence. S/N 3e3x3loP0CRgXrezd0emA

As to the parties’ respective management roles, the business of the Company was limited to property investment, real estate agency and project sourcing involving real estate investment if the draft Shareholders’ Agreement is indicative of the Plaintiff’s understanding as he says. There was no specific mention of the contemplated short term rental business.

Instead, the Plaintiff and 2nd Defendant established the separate Partnership. Consistent with this arrangement, the Company (as Landlord) rented Property 1 to the Partnership (as Tenant) on 27-9-2024.

The Plaintiff said that the reason for setting up the Partnership was due to delays in the completion of the conveyance of Property 1. The logic behind this was not at all apparent to this Court since ownership of Property 1 was material for the commencement of business under whichever entity.

So, whatever the reason, this Court found based on the undisputed evidence that the parties also decided to carry on their collaboration using 2 separate entities. The short term rental business was structured to be operated solely through the Partnership rather than directly by the Company.

Both entities set up separate bank accounts and the Partnership’s business revenue derived from short term rentals was to have been channeled into the Partnership account to pay rental for Property 1 to the Company. The S/N 3e3x3loP0CRgXrezd0emA Plaintiff was in charge of the Partnership business while the 2nd Defendant was in charge of the Company business.

Operationally, the evidence clearly indicated that the parties stayed within their respective domains.

As Lord Wilberforce observed in Ebrahimi one should not press the quasi-partnership analogy too far: "A company, however small, however domestic, is a company and not a partnership or even a quasi-partnership". The High Court in Eng Man Hin also cautioned that: “The case for giving effect to equitable considerations must be made in each instance and it is not sufficient simply to assert that the company is small or private, for in many cases the basis of the relationship will be adequately and exhaustively laid down in the Articles of Association of the company. If it is so defined by the Articles of Association or supplemented by a shareholders’ agreement, then there is little room for founding further legitimate expectations beyond those outlined in the documents.”

In the circumstances, this Court did not find any basis to depart from the corporate governance structure that was set up i.e. with the Plaintiff as an alternate director whose appointment was revocable by the 2nd Defendant. He had no legitimate expectation to participate in the Company’s management once the appointment was revoked. S/N 3e3x3loP0CRgXrezd0emA

The Plaintiff’s rights as a shareholder remained unaffected and accordingly, no case could be made under section 346(1) of the CA. That the Plaintiff is bound by the personal guarantees he gave to the banks is unfortunate, but that alone is not inherently inconsistent with his status as an alternate director and shareholder at the material time. Procuring a release from the guarantee is a separate matter.

According to the Plaintiff, he received an email from the vendor’s solicitors on 8-10-2024, setting a final deadline of 11- 10-2024 to execute the sale and purchase agreement for Property 3, which took the Plaintiff by surprise. Having paid 30% of the earnest deposit, the Plaintiff claimed that this was the first time he discovered that the acquisition was in jeopardy.

As determined, and based on admissions and conduct of the parties, it was the 2nd Defendant’s role to manage the acquisition of properties for the Company. The Company had not secured external financing to complete the sale and the Plaintiff must have known this, since he had not been asked to contribute his share of the balance consideration or sign any loan documentation. S/N 3e3x3loP0CRgXrezd0emA

As it turned out, the bank loans for the Company were rejected. There was evidence of formal rejection by UOB and Alliance Bank in November 2024 and although the Plaintiff disputed this, no credible evidence was shown that the Company did in fact have the capacity to secure the necessary loan to complete Property 3.

Even the purchase of Property 2 was not without issues. The purchase of Property 2 was to have been similarly financed as Property 1 was, except that the 2nd Defendant contended based on contemporaneous records that there was a shortfall of RM54,000.00 in the Plaintiff’s 30% capital contribution.

The Plaintiff offered only a bare denial about the shortfall and argued that it was irrelevant. Respectfully, this Court must disagree since it was the one foundational fact in agreement between the parties, i.e. that each agreed to contribute capital when required, in proportion to their shareholding in the Company.

Evidently, the banks considered the Company a risk. The loan documents for Property 2 were just being drawn up and the renovation of Property 1 was happening concurrently in October 2024. There was no revenue yet. From the communications exhibited, the Plaintiff was also concerned about the deposit paid for Property 3. S/N 3e3x3loP0CRgXrezd0emA

The explanation and reaction to what was now alleged as the Company’s “loss of corporate opportunity” to the 2nd Defendant were therefore not consistent with the Plaintiff’s narrative that the 2nd Defendant clandestinely appropriated Property 3. The following text conversation between the Plaintiff and 2nd Defendant on 14-10-2024 illustrated the point: Plaintiff : “Uncle Eddie, that C205 if we confirm don’t want to buy, you let me know, because after I know I can also introduce to others, see whether can discuss to take back the 30 thousand.” 2nd Defendant: “No, it doesn’t matter. I told the lawyer that I will take over myself, my wife will take over. She said she will find a way. She said it doesn’t matter how much money is borrowed. Since she said don’t want to waste the FD or the deposit. So the deposit is considered not forfeited now, for the time being, just leave it there for the lawyer to handle will do.”

Perhaps the Plaintiff’s real complaint was that the 2nd Defendant unilaterally took the position that he would personally take over the purchase of Property 3. However, it was an undisputable fact that the Company had no capacity to acquire Property 3, and what transpired was the 2nd Defendant’s personal assumption of risk and liability, not a diversion of a real corporate opportunity. S/N 3e3x3loP0CRgXrezd0emA

In any case, as a matter of law, if the crux of the Plaintiff’s complaint was that the 2nd Defendant allegedly acted in breach of his fiduciary duties to the Company by appropriating a valuable asset for his own personal interest i.e. diversion of a corporate opportunity, then that was a classic case that called for a derivative action, not a claim of oppression. The Plaintiff suffered no loss distinct from that of the company (Low Cheng Teik & Ors v Low Ean Nee [2024] 5 MLJ 580 (“Low Cheng Teik”)).

As noted by the Federal Court case of Pan-Pacific Construction Holdings Sdn Bhd v. Ngiu-Kee Corporation (M) Bhd & Anor [2010] 6 CLJ 721 (“Pan-Pacific Construction”): “[41] It has also been held that merely establishing that a respondent has, in breach of its fiduciary duty brought about a transaction involving the assets of the company which had benefited the majority shareholder would not suffice to enable a petitioner to obtain an order under s. 459 of the English Companies Act 1985 unless the petitioner could show that it had suffered loss by reason of the transaction. (See: Rock Nominees Ltd v. RCO (Holdings) plc [2004] 1 BCLC 439). [42] Premised therefore on the foregoing discourse there is merit in the submission of learned counsel for the respondent when he submitted: S/N 3e3x3loP0CRgXrezd0emA

that in order for the petitioner to succeed it is not enough to merely 'raise or establish that there was any breach of any fiduciary duty or duties but must also establish that any such breach (if any) constitutes oppressive conduct, conduct in disregard of interest, unfairly discriminatory conduct or prejudicial conduct' within the scope of s. 181(1)(a) or (b) of the Act; and

(ii) that in the final analysis the question whether there is oppression, disregard, unfair discrimination or whether the act complained of is prejudicial is one that must be determined according to the facts of each particular case.”

To conclude on this point, this Court did not find any compelling evidence that the 2nd Defendant’s actions in relation to the failed purchase of Property 3 by the Company, amounted to oppressive conduct, conduct in disregard of interest, unfairly discriminatory conduct or prejudicial conduct within the meaning of section 346(1) of the CA. Termination of services to Property 1

The Plaintiff alleged that on 4-3-2025, the 2nd Defendant had unilaterally instructed the management office of Fahrenheit 88 to terminate the supply of water and electricity to Property 1 without prior notice or valid justification, citing this as an act of oppression designed to sabotage the Partnership operations. S/N 3e3x3loP0CRgXrezd0emA

As it relates to the affairs of the Company or the acts of a director of the Company, the Plaintiff argued that because Property 1 was the primary source of revenue for the business venture, the 2nd Defendant’s actions effectively excluded the Plaintiff from the commercial benefits he was entitled to as a 30% shareholder and partner.

In principle, it is correct to say that where a minority shareholder is himself guilty of some wrongdoing, misconduct, or abuse of his position, he cannot invoke the oppression jurisdiction to obtain relief. The law does not permit a shareholder to take advantage of his own improper conduct to characterise the consequences of that conduct as oppressive.

In this case, the Plaintiff had provided no substantive response to the allegation that he had not been paying short-term rentals collected from Property 1 into the Partnership bank account as envisaged, so that rent can be paid to the Company. Rental payments were in turn needed to pay off the bank loans.

Further, this Court reviewed the documentary evidence and found that the contemporaneous records of communications indicated that the Plaintiff had been unresponsive to requests for access to Property 1 for inspections, and did not disclose proper accounts for renovation expenses, business accounts or guest bookings. S/N 3e3x3loP0CRgXrezd0emA

It also appeared to be undisputed that the last rental paid by the Partnership was in December 2024. Thereafter, the Plaintiff attempted to pay rent for Property 1 from his personal bank account, but this was rejected by the 2nd Defendant who insisted that payments must come from the Partnership account.

Further, the Company had reimbursed the Plaintiff RM77,307.37 for the renovation and fit-out of Property 1, but the 2nd Defendant argued that the Plaintiff failed to account for RM20,000.00 in petty cash despite repeated requests. In that context, receipts and invoices produced for the first time in the Plaintiff’s second affidavit appeared contrived.

Thereafter, police reports were lodged by the 2nd Defendant and Plaintiff against each other, for changing the locks to Property 1 and removal of movable items, furniture and fittings from Property 1 without authorisation from the Company. However, this Court need not go further into these details.

It was these operational disputes that led the 2nd Defendant to issue a notice to dissolve the Partnership on 11-3-2025, that in turn led to the termination of the tenancy agreement for Property 1 on 14-3-2025. It was unclear why things escalated to this stage, as this Court could find to substantive response from the Plaintiff. S/N 3e3x3loP0CRgXrezd0emA

In the circumstances, the 2nd Defendant effected what may be characterised as a corporate act on behalf of the Company, and the termination of services to Property 1 to stop its use by the Plaintiff when the Company was receiving no revenue from such use, cannot be said to be oppressive to the Plaintiff, who came to Court with unclean hands. Oppressive buy-out terms

Dealing just briefly with this final allegation, the Plaintiff alleges that the 2nd Defendant imposed oppressive terms for the Plaintiff to exit the Company as a minority shareholder when the parties attempted to negotiate a parting of ways.

Generally, the private negotiation between the 2 shareholders in relation to the proposed sale of shares and the Plaintiff’s intention to purchase the Company’s Property 1 have nothing to do with the affairs of the company (Toshiba Elevator and Building Systems Corporation v Interplex Sdn Bhd & Ors and Another Case [2021] MLJU 36).

This proposition is consistent with binding authority where the Federal Court in Low Cheng Teik had this to say about the use of section 346 of the CA to force a buy-out: “[87] This strict delineation is necessary to prevent shareholders from bringing an oppression action for ancillary purposes, that is, in situations where there is S/N 3e3x3loP0CRgXrezd0emA no unfairly prejudicial conduct affecting their interests qua shareholder. The oppression remedy is not available where a minority shareholder simply wishes to leave and take their investment in the company with them or to sell their shares without a discount to reflect their minority shareholding (see: Suying Design at para [36]). Nor can the remedy be used as a tool to take control of or break up the company. [88] As stated by Loh Siew Cheang in Corporate Powers Accountability (LexisNexis, 3rd Ed, 2018) at 9-384: In Re a Company [1983] BCLC 126, Lord Grantchester QC held that s75 of the Companies Act 1980 (UK) [the then UK equivalent of an oppression action under s 346 of our Companies Act] was not enacted to enable a ‘locked-in’ minority shareholder to require the company to buy him out….”

Thus, if the Plaintiff believes that he has an enforceable agreement against the 2nd Defendant, he may take that up in a civil suit for specific performance. The Court, exercising its jurisdiction under section 346(1) of the CA upon which it was moved, may not grant remedies without a finding of liability under that provision first. S/N 3e3x3loP0CRgXrezd0emA

This Court recognized that the Plaintiff is locked in 2 strained commercial relationships – the Company and the Partnership – with the 2nd Defendant. Only the parties themselves can pinpoint exactly what caused the fracture, and they must deal with the consequences of their participation.

For the reasons set out in this Judgment, this Court was constrained to find that a case has not been made out under section 346(1) of the CA on the set of allegations raised here. This, of course, does not preclude the filing of another oppression action if other acts of the majority justify such action in the future.

The Originating Summons was thus dismissed with costs of RM15,000.00. Bertarikh: 31 Disember 2025 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR S/N 3e3x3loP0CRgXrezd0emA Peguam Untuk Plaintif: Ivanpal Singh Grewal (Keshvinder Kaur a/p Harvinder Singh bersamanya) Tetuan A J Ariffin, Yeo & Harpal Untuk Defendan: Melissa Chan Shyuk Wern Tetuan Justin Voon Chooi & Wing S/N 3e3x3loP0CRgXrezd0emA