Liew Moong Ju v Peninsular Steel Galvanising Sdn Bhd (WA-24NCC-194-04/2024)

The plaintiff holds a 35% share in Peninsular Steel Galvanising Sdn Bhd ("PSG"), the first defendant in this case. The second defendant [Ng Kong Chen @ Ng Ting Miew (NRIC No.: 490325-10-5455) and the third defendant [Ng Jinn Yeong (NRIC No.: 810326-14-5547] are directors of PSG, with the second defendant owning 55% of the shares and the third defendant owning 10% of the shares in PSG.

The plaintiff has filed an Originating Summons dated 23-04-2024 in Enclosure 1 (“OS”) against the 2nd and 3rd defendants seeking a remedy premised on section 346 of the Companies Act 2016 [“CA 2016”] on the ground-i. that the affairs of PSG are being conducted or the powers of the directors are being exercised in a manner oppressive to him as a member; ii. or in disregard of his interests as a member.

Affidavits were filed by the parties. Subsequently, the plaintiff filed an application in Enclosure 13 dated 03-10-2024 under Order 28 rule 8 [1] Rules of Court 2012 [“ROC 2012”] to proceed with the OS as if it was begun by way of a Writ. This is opposed by the defendants.

The plaintiff contends it cannot proceed with the OS format but needs a conversion to a writ as a trial is required because-i. the defendants deny there is oppression; ii. there are factual allegations made by the plaintiff which are denied by the defendants; and iii. the plaintiff needs to subpoena witnesses to testify on disputed facts. [See Enclosure 21 plaintiff’s written submissions at paragraph 3]

The defendants contend a trial is not needed because “if there is any conflict of facts, which the plaintiff has failed to prove, the plaintiff could resort to the process under Order 28 rule 4 ROC 2012 to cross-examine the 2nd and 3rd defendants”, unquote. [See Enclosure 19 defendants’ written submissions at paragraph 18].

The defendants also contend a trial is not needed because-i. It is mandatory under Order 88 Rules of Court 2012 for an action under section 346 CA 2016 to be commenced by way of an OS; 4 ii. Issues raised are irrelevant to oppression and do not in any way prove that the plaintiff’s rights as a shareholder have been affected. It is trite law that mismanagement of the company, if any, do not amount to oppression; iii. The plaintiff is embarking on a fishing expedition via a trial; and iv. The plaintiff offered no explanation why the 2nd and 3rd defendants could not be cross-examined on the affidavits. [See Enclosure 19 defendants’ written submissions at paragraph 5]

Where the facts are contradicted on substantial grounds, the court has the discretion under Order 28 rule 8(1) ROC 2012 to order that the proceedings be continued as if the cause or matter had been begun by writ. [See Malaysian Civil Procedure 2024 Volume 1 Sweet and Maxwell at 28/8/1 and 88/2/4, Ting Ling Kiew v Tang Eng Iron Works Co Ltd [1992] 2 MLJ 217 SC; [1992] 3 CLJ 1685 SC [“Ting Ling Kiew”] and Khoo Kheng Sim v Khoo Chooi Leong [2001] 4 AMR 4552; [2002] 5 MLJ 345, HC [“Khoo Kheng Sim”]].

The plaintiff may by his own accord make such an application for conversion. However, the court may dismiss the conversion application where documentary evidence is sufficient to address the issues arising. [See Malaysian Civil Procedure 2024 Volume 1 Sweet and Maxwell at 28/8/1 and 88/2/4, Ho Yaw Ming v Ho Yau Hong & Ors [2021] MLJU 2271; [2021] 1 LNS 1915, HC [“Ho Yaw Ming”]; Lee Quan Yoong v Koh Heng Jin Holdings Sdn Bhd & Ors [2020] AMEJ 1001; [2021] MLJU 1201; [2021] 1 LNS 1018, HC [“Lee Quan Yoong”]].

I heard counsel and allowed the plaintiff’s application on 09-01-2025 with costs in the cause. The defendants are unhappy and have appealed to the Court of Appeal on 27-01-2025.

These are my Grounds of Judgment. For the purposes of this Judgment, the term “oppression”, when used in isolation by me, is used as a short form to refer to the entire range of conduct prohibited by section 346 of the CA 2016.

On 23-04-2024, the plaintiff filed an OS seeking reliefs under section 346 of the CA 2016 on the grounds that the 2nd and 3rd defendants have conducted and/or are conducting the affairs of the 1st defendant and/or are exercising their powers as directors in a manner oppressive or unfairly prejudicial to the plaintiff and/or in disregard of the plaintiff’s interest as a member of the 1st defendant.

The plaintiff is a minority shareholder of the 1st defendant holding 35% shares. The 2nd defendant holds 55% shares in the 1st defendant and the 3rd defendant holds 10% shares in the 1st defendant.

The plaintiff is not relying on section 465(1)(h) of the CA 2016 which provides the Court with the power to wind up a company on just and equitable ground.

Based on the facts set out in the affidavit in support of the OS [Enclosure 2], the plaintiff is asserting there is oppression, unfair prejudice to the plaintiff and/or in disregard of the plaintiff’s interest as a member of the 1st defendant on the grounds that-i. The 2nd and 3rd defendants [as dominant shareholders] are pursuing a course of conduct to advance their own interests to the detriment of the plaintiff; and ii. The 2nd and 3rd defendants [as dominant shareholders] are running the 1st defendant as if it were their own, disregarding the rights and interests of the plaintiff.

Where the facts are contradicted on substantial grounds, the court has the discretion under Order 28 rule 8(1) ROC 2012 to order that the proceedings be continued as if the cause or matter had been begun by writ.

The test on conversion of OS to writ is whether the facts are contradicted on substantial grounds and whether there is a plea of fraud. It is not whether the plaintiff is embarking on a fishing expedition 7 via a trial as submitted by the defendants’ counsel. The authorities are settled on this test. It is in fact trite law. [See Malaysian Civil Procedure 2024 Volume 1 Sweet and Maxwell at 28/8/1 and 88/2/4, Ting Ling Kiew and Khoo Kheng Sim].

The Supreme Court said so way back in 1992 in the case of Ting Ling Kiew. Jemuri Serjan CJ (Delivering the Judgment Of The Court) said-Encik Cecil Abraham for the appellants took up the point on procedure and practice and submitted that the learned trial judge erred in law in dealing with the application summarily by an originating summons under O 88 r 2(1) when he should have resorted to O 28 r 8(1) of the RHC, especially in the light of the plea of fraud and the conflicting affidavit evidence. He set out instances of the conflicts of evidence in the affidavit of Encik Rex Chen Jui Yuen, the regional manager of the respondent company and of Encik Ting Ling Kiew, the first appellant. For instance, with regard to the three instances on which the learned trial judge based his decision there is conflicting evidence. … Apart from the various inconsistencies in the affidavits of the appellants and the respondents in the court below, we also observe other matters which have not been satisfactorily explained in the affidavits and could be resolved if the proceedings have been begun by writ. … The other matter that should be looked into in detail by the court entailing the presence of witnesses to be examined and cross-examined, discoveries and production of relevant documents connected therewith relates to the statements of accounts of the company ending 31 December 1985. … In an ordinary proceeding commenced by a writ Mr Wong Siew Chow would definitely have to be subpoenaed to give evidence on such an important matter as an allegation of fraud or fraudulent representation because it is only he who could explain what actually happened. An inference on facts which themselves could not therein be established as proved is in our view not justified. As Hoffman J said in Re Augustus Barnet & Sons [1986] BCLC 170 at p 175: … An intention thus qualified is not an adequate basis for a belief that there is good reason for thinking that funds will become available to pay the company’s debts as they fall due and can therefore give rise to an inference that there was an intent to defraud – see R v Grantham [1984] 3 All ER 166, [1984] BCLC 270, [1984] QB 675. I do not accept this form of reasoning, which involves translating the actual facts pleaded into generalities and then drawing inferences from those generalities rather than the facts themselves. … We have given anxious consideration to the facts of this case … and in the light of the … uncertainties of the various facts as they are made available before the court, … we have come to the conclusion that the better decision under the circumstances is to allow the appeal, and pursuant to O 28 r 8(1) order the proceedings to continue as if begun by writ and the parties to deliver their pleadings in accordance with O 18… [Emphasis added]

This test of ‘a plea of fraud and conflicting affidavit evidence’ has since been consistently followed by subsequent courts. For example, in Khoo Kheng Sim, Low Hop Bing J said- Besides the allegation of fraud, there are numerous disputes of facts which would certainly call for the application of O 28 r 8(1) of the RHC for the purpose of enabling the court to order the proceedings herein to continue as if the cause or matter had been so begun by way of a writ. I therefore hold that the proceedings herein shall continue as if this cause or matter had been begun by way of a writ and further order that the parties do deliver their pleadings in accordance with O 18 of the RHC as has been done by the Supreme Court in Ting Ling Kiew & Anor. [Emphasis added]

A corollary to this test of ‘a plea of fraud and conflicting affidavit evidence’ is that the court will dismiss the conversion application where documentary evidence is sufficient to address the issues arising. [See Ho Yaw Ming and Lee Quan Yoong].

The defendants contend a trial is not needed because, and I quote, - i. It is mandatory under Order 88 ROC 2012 for an action under section 346 CA 2016 to be commenced by way of an OS; ii. Issues raised are irrelevant to oppression and do not in any way prove that the plaintiff’s rights as a shareholder have been affected. It is trite law that mismanagement of the company, if any, do not amount to oppression; iii. The plaintiff is embarking on a fishing expedition via a trial; and 10 iv. “If there is any conflict of facts, which the plaintiff has failed to prove, the plaintiff could resort to the process under Order 28 rule 4 ROC 2012 to cross-examine the 2nd and 3rd defendants”, unquote. The plaintiff offered no explanation why the 2nd and 3rd defendants could not be cross-examined on the affidavits. [See Enclosure 19 defendants’ written submissions at paragraphs 5 and 18]

I will examine the 4 issues raised by the defendants one by one. Issue 1 - It is mandatory under Order 88 ROC 2012 for an action under section 346 CA 2016 to be commenced by way of an OS

Learned counsel for the defendants contends that it is mandatory under Order 88 ROC 2012 for an action under section 346 CA 2016 to be commenced by way of an OS. [See Enclosure 19 defendants’ written submissions at paragraphs 6 - 8].

Learned counsel for the defendants then contends that “In the case of Ng Chee Choy v Better Symbol Sdn. Bhd. [2013] 5 CLJ 417, the High Court had struck off an action commenced under section 181 Companies Act 1965 by way of a writ for non-compliance with Order 88 rule 2 RC 2012”. [“Ng Chee Choy”]”.

I find this submission of counsel for the defendants set out in Enclosure 19 defendants’ written submissions from paragraphs 6 to 8 misconceived. The case before me is not a situation where the plaintiff 11 had filed a writ. Nowhere did Ng Chee Choy say a plaintiff who had filed an OS cannot apply to court to convert the OS to that of a writ. Issue 2 - Issues raised are irrelevant to oppression and do not in any way prove that the plaintiff’s rights as a shareholder have been affected. It is trite law that mismanagement of the company, if any, do not amount to oppression

This ground as framed by counsel for the defendants is not supported by the defendants’ own written submissions. In Enclosure 19 defendants’ written submissions at paragraphs 10 and 11 counsel asserts-

Mismanagement of the company does not necessarily constitute oppression or disregard of a member’s interests.

In order to prove oppression, this Court would require evidence of oppressive conduct that goes beyond normal business disagreements and decisions made by the majority shareholders. [Emphasis added] [26] Counsel for the defendants has conflated the conversion application before me and the hearing on the merits. We are not at the stage of hearing of the OS proper. At this stage of whether the court should convert the OS to a writ all that the plaintiff needs to show is that prima facie he has set out facts, which if proven, will support a finding of oppression. [27] Based on the facts set out in the affidavit in support of the OS [Enclosure 2] the plaintiff is asserting there is oppression, unfair prejudice to the plaintiff and/or in disregard of the plaintiff’s interest as a member of the 1st defendant on the grounds that-i. The 2nd and 3rd defendants [as dominant shareholders] are pursuing a course of conduct to advance their own interests to the detriment of the plaintiff; and ii. The 2nd and 3rd defendants [as dominant shareholders] are running the 1st defendants as if it were their own, disregarding the rights and interests of the plaintiff. [28] These two grounds if proven can constitute oppression, unfair prejudice to the plaintiff and/or in disregard of the plaintiff’s interest as a member of the 1st defendant. [See Low Cheng Teik & Ors v Low Ean Nee [2024] 9 CLJ 171 FC and Dato Gue See Sew & 2 Ors v Heng Tang Hai & 2 Ors [2020] 1 LNS 169]. [29] The facts in support of the plaintiff’s case, which are denied and disputed by the defendants, have been listed in the plaintiff’s written submissions Enclosure 21 at paragraphs 12 to 13. They are-i. That the 2nd defendant and 3rd defendant excluded the plaintiff entirely from the running of the day-to-day operations of PSG; ii. That the 2nd defendant and 3rd defendant denied the plaintiff access to PSG's accounting and other records notwithstanding the plaintiff is a member/shareholder in PSG; iii. That the 2nd defendant revoked the plaintiff's director's allowance without explanation; and iv. That there is an abuse of power regarding the management and use of PSG funds by the 2nd defendant and 3rd defendant. Pleas of fraud [30] Allegations in respect of the misuse of PSG funds by the 2nd defendant and 3rd defendant amounting to RM 2,730,000 and RM 1,516 are set out in the supporting affidavit at paragraph 35 and 59 respectively. These allegations are in fact pleas of fraud which mean the plaintiff cannot litigate by way of an OS. [31] In the premises I dismiss this 2nd ground of the defendants. I now consider ground 3. Issue 3 - The plaintiff is embarking on a fishing expedition via a trial Historical origins and scope of the term “fishing expedition” [32] The term “fishing expedition” is used in a broad sense by judges to refer to a few grounds to disallow a discovery application in a court suit or a pre-action discovery for documents pursuant to Order 24 ROC

For example, i. Courts have refused to allow fishing expeditions for documents that are irrelevant to the claim in the case in which the request is made; ii. Courts also do not allow fishing expeditions where the applicant is either attempting to force the responding party to develop the applicant’s case or attempting to develop speculative claims lacking any support in fact. An example of this is when the application for discovery will have the effect of shifting the burden of proof from the plaintiff to the defendant.; and [See Kenwood Electronics (Malaysia) Sdn Bhd v People’s Audio Sdn Bhd & Ors [2003] 5 MLJ 276 HC, Ong Commodities Pte Ltd v Kek Tek Huat Sdn Bhd & Anor [2016] 10 MLJ 344 HC and Hanson Building Materials Malaysia Sdn Bhd v Quah Soon Leong & Ors [2017] MLJU 152 HC]. iii. Courts also apply the fishing expedition label to discovery that is overly broad, unduly burdensome or imposes unnecessary expense on the responding party. [See Jonathan M. Redgrave & Ted S. Hiser, The Information Age, Part I: Fishing in the Ocean, A Critical Examination of Discovery in the Electronic Age, 2 SEDONA CONF. J. 195 (2001) and Sharifah Sofia Syed Hussein (representing Hak Asasi Hidupan Liar Malaysia Global) & Ors v Pengarah Kepada Lembaga Kebajikan Haiwan [2023] 1 MLRH 691; [2022] 12 MLJ 37; [2022] 7 CLJ 267]. [33] Therefore, it is clear that the argument raised by counsel for the defendants that the conversion of a hearing by OS to a trial by writ should be dismissed on the ground that the plaintiff is embarking on a fishing expedition via a trial is a misunderstanding of the jurisprudence for discovery and conversion. [34] In my view, objection based on ‘fishing expedition’ is not a defence to an application for conversion of a hearing by OS to a trial by writ. [35] As stated above, in a conversion application the Supreme Court in the case of Ting Ling Kiew had stated that the only relevant considerations are whether the plaintiff is making ‘a plea of fraud’ and whether there is ‘conflicting affidavit evidence’ between the parties that require a trial in order for the judge to decide whether to prefer the testimony of the plaintiff or the defendant. [36] The Supreme Court’s decision in Ting Ling Kiew has been consistently followed by courts since then. I see no reason to depart from the reasoning. In any event, it is binding on the High Courts. Issue 4 - If there is any conflict of facts the plaintiff could resort to the process under Order 28 rule 4 ROC 2012 to cross-examine the 2nd and 3rd defendants [37] The law is that if there is a conflict of facts on the affidavit evidence filed by parties the plaintiff can apply under Order 28 rule 4 ROC 2012 to cross-examine the deponents of the affidavits or asks for a conversion of the OS to a writ as a trial is required. [38] The defendants assert I should only give the former order. [39] I don’t think that my discretion can be circumscribed as dictated by the defendants’ counsel. [40] The Supreme Court in Ting Ling Kiew has stated clearly that where the facts are contradicted on substantial grounds, the court has the discretion under Order 28 rule 8(1) Rules of Court 2012 to order that the proceedings be continued as if the cause or matter had been begun by writ. [41] Ultimately, it’s the discretion of the judge. When the plaintiff has proven there is a material dispute on the facts in my view the court should accede to the preference of the plaintiff. After all, it is his case to prosecute and win. [42] We must bear in mind the plaintiff has the burden of proof. This burden can be onerous if the hearing is by way of an OS and there are disputed facts as the court must then decide based solely on a consideration of the undisputed facts. [See Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 MLJ 433 Privy Council [“Tay Bok Choon”] at Held 2 to 4]. [43] In Tay Bok Choon, the Privy Council said at Held 2 to 4- 2) in civil proceedings the trial judge has no power to dictate to a litigant what evidence he should tender. In winding-up proceedings the trial judge cannot refuse to read affidavits which have been properly sworn, filed and produced to him, unless some opposing party has applied for the attendance for cross-examination of the deponent and that application has been granted and the deponent does not attend;

if allegations are made in affidavits by the petitioner and those allegations are credibly denied by the respondent's affidavits, then in the absence of oral evidence or cross-examination, the judge must ignore the disputed allegations. The judge must then decide the fate of the petition by consideration of the undisputed facts;

in this case the Board is satisfied that the judge confined his consideration of the petition to the undisputed facts and rightly concluded that the petitioner had made out his case that it was just and equitable to wind up the company. [Emphasis added] [44] Speaking for myself, I prefer that pleadings be filed as then parties are bound by their pleadings. In contrast, any averment in an affidavit by a deponent can be modified and even corrected fully in a later affidavit. [45] An additional factor in favour of converting to writ is because the plaintiff intends to call individuals who are named in the affidavits to give evidence on the material disputes of facts. As these individuals did not affirm any affidavit, an order for cross-examination of deponents of affidavits is of no utility to the plaintiff. [See Datuk Kasi a/l Kl Palaniappan v Menara Embun Sdn Bhd & Ors And Another Appeal [2018] MLJU 1651 HC [“Datuk Kasi a/l Kl Palaniappan”]]. [46] In Datuk Kasi A/L Kl Palaniappan, the High Court allowed the application to convert the originating summons into a writ action due to the need to subpoena witnesses. There were no affidavits affirmed by those witnesses. [47] The plaintiff has identified six of the witnesses he wishes to subpoena. He has set out the paragraphs in the affidavits filed which relates to these subpoenaed witnesses. [48] At this stage, I cannot accept the submission of the defendants that these witnesses are not relevant. It is premature for the court to assess. [49] In conclusion, I dismiss the objection of the defendants and allows the conversion to writ. Decision [50] For the reasons above, I allow the plaintiff’s application in Enclosure 13 dated 03-10-2024 to proceed with the OS as if it was begun by way of a Writ. Order in terms prayers 1 and 2 with costs in the cause. [51] Plaintiff is to file Statement of Claim by 24-01-2025. Defendants are to file defence by 14-02-2025. Plaintiff to file Reply by 24-02-2025. e-Review before Deputy Registrar on 25-02-2025 at 9 am. ………(signed)…………. Leong Wai Hong Judge High Court of Malaya Kuala Lumpur (NCC 6) Dated: 20th February 2025. COUNSEL: 1) Arthur Wang and Vicky Ong Xian Qiu for plaintiff. (Arthur Wang, Lian & Associates (Kuala Lumpur)) 2) Karen Lee and Nurul Hana Hairizam for defendant. (Wong Kian Kheong (Kuala Lumpur)) CASES REFERRED TO: 1) Datuk Kasi a/l Kl Palaniappan v Menara Embun Sdn Bhd & Ors And Another Appeal [2018] MLJU 1651 HC. 2) Hanson Building Materials Malaysia Sdn Bhd v Quah Soon Leong & Ors [2017] MLJU 152 HC. 3) Ho Yaw Ming v Ho Yau Hong & Ors [2021] MLJU 2271; [2021] 1 LNS 1915, HC. 4) Kenwood Electronics (Malaysia) Sdn Bhd v People’s Audio Sdn Bhd & Ors [2003] 5 MLJ 276 HC. 5) Khoo Kheng Sim v Khoo Chooi Leong [2001] 4 AMR 4552; [2002] 5 MLJ 345, HC. 6) Lee Quan Yoong v Koh Heng Jin Holdings Sdn Bhd & Ors [2020] AMEJ 1001; [2021] MLJU 1201; [2021] 1 LNS 1018, HC. 7) Low Cheng Teik & Ors v Low Ean Nee [2024] 9 CLJ 171 FC. 8) Ng Chee Choy v Better Symbol Sdn. Bhd. [2013] 5 CLJ 417. 9) Ong Commodities Pte Ltd v Kek Tek Huat Sdn Bhd & Anor [2016] 10 MLJ 344 HC. 10) Re Augustus Barnet & Sons [1986] BCLC 170. 11) R v Grantham [1984] 3 All ER 166, [1984] BCLC 270, [1984] QB 675. 12) Sharifah Sofia Syed Hussein (representing Hak Asasi Hidupan Liar Malaysia Global) & Ors v Pengarah Kepada Lembaga Kebajikan Haiwan [2023] 1 MLRH 691; [2022] 12 MLJ 37; [2022] 7 CLJ 267. 13) Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 MLJ 433. 14) Ting Ling Kiew v Tang Eng Iron Works Co Ltd [1992] 2 MLJ 217 SC; [1992] 3 CLJ 1685 SC. LEGISLATION REFERRED TO: 1) Companies Act 2016, section 346, section 465(1)(h). 2) Rules of Court 2012, Order 24, Order 28 rule 8 [1], Order 28 rule 4, Order 88. LITERATURE REFERRED TO: 1) Jonathan M. Redgrave & Ted S. Hiser, The Information Age, Part I: Fishing in the Ocean, A Critical Examination of Discovery in the Electronic Age, 2 SEDONA CONF. J. 195 (2001). 2) Malaysian Civil Procedure 2024 Volume 1 Sweet and Maxwell at 28/8/1 and 88/2/4.