Ng Soon Huat v Teh Hong Ann (WA-22NCC-552-08/2024)

specific performance of the share sale agreement dated 1.9.2023 (“the SSA”) for the sale of 119,815 shares (“the Sale Shares”) held by the Plaintiff in Ann Heng Sdn. Bhd. ("the Company") through the following means:

the Defendant to pay the remaining balance of RM4,000,000.00 to the Plaintiff within 14 days from the date of judgment; and

(ii) the parties to complete the sale of the Sale Shares in accordance with Clause 4 of the SSA;

alternatively, damages to be assessed for the Defendant's breach of contract as an addition or substitute for specific performance;

the Defendant to procure the payment of Director's Fees by the Company to the Plaintiff at RM2,000.00 per month from August 2024 until the completion of the SSA as agreed and provided under Clause 3.4 of the SSA;

interest at a rate of 8% per annum on the remaining balance of RM4,000,000.00, calculated daily, from 1.3.2024 until the actual date of payment of the remaining balance. [2] Significantly, the Defendant did not dispute that he had breached the SSA but contended that specific performance would not be an appropriate remedy in the circumstance of this case. Background facts [3] The Company, Ann Heng Sdn. Bhd, was incorporated on 3.11.1981. At all material times, the Company was a property holding company without any business operation. [4] The issued and paid up share capital of the Company at the material times comprised of 958,517 ordinary shares of RM1.00 each. [5] The Plaintiff owned 12.5% equivalent to 119,815 shares whereas the Defendant owned 12.2% equivalent to 117,317 shares of the Company. [6] Both the Plaintiff and Defendant are directors of the Company. [7] The controlling stake in the Company (601,574 shares or more than 60%) belonged to members of the Defendant’s family (“Teh Family”). At all material times, the Defendant was and still is the Managing Director of the Company. [8] On 1.9.2023, the Plaintiff and the Defendant entered into the SSA whereby the Plaintiff agreed to sell and the Defendant agreed to purchase all the Sale Shares from the Plaintiff, comprising the Plaintiff’s entire 12.5% of the shareholding in the Company for a total consideration of RM5.0 million. [9]

6.6 Specific Performance Notwithstanding the foregoing provisions of this clause 6, the non-defaulting party shall be at liberty to take such action in law as may be necessary to compel the defaulting party by way of specific performance to complete the transaction contemplated in this agreement (in which respect the alternative remedy of monetary compensation shall not be regarded as compensation or sufficient compensation for any default of a party in the performance of the terms and conditions herein) and/or to claim damages for the breach of the defaulting party.” [emphasis added] [17] Also, separately, the Plaintiff relied on the statutory provisions under sections 11(1)(b) and (c) of the Specific Relief Act 1950 which stipulate thus: Section 11(1)(b) and (c) “Cases in which specific performance enforceable:

Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced –

when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done;

when the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief;” [18] Further, there is no question that summary judgment on specific performance can be awarded to the Plaintiff under Order 81 rule 3 of the Rules of Court 2012. [19] In the present case, the Sale Shares were shares of a private company and accordingly were not shares that would be freely saleable in the open market. This was all the more so as the Sale Shares comprised of only 12.5% of the total paid up shares of the Company. In other words, the Sale Shares were minority shares only. [20] In Pamaron Holdings Sdn Bhd v. Ganda Holdings Bhd [1988] 3 MLJ 347 (“Pamaron Holdings”), VC George J (as he then was), in allowing the plaintiff’s application for summary judgment for specific performance of a sale and purchase of shares of a private limited company, held that “the authorities show that a seller of shares not freely saleable in the open market is entitled to specific performance”, citing the cases of Duncuft v Albrecht (1841) 59 ER 1104, Gan Realty Sdn Bhd v Nicholas & Ors [1969] 2 MLJ 110, Turner v Bladin (1950–51) 82 CLR 463 and Odessa Tramways Co v Mendel (1878) 8 Ch D 235. [21] In the case of the Company, its Articles of Association expressly prohibit any members of the public from subscribing for its shares. Article 3 provides: “3. The Company is a Private Company, and accordingly”- …

any invitation to the public to subscribe for any share in or debentures of the Company is prohibited” [22] Whilst the aforesaid Article 3 does not prohibit the sale of the Sale Shares to members of the public, the effect of the Article is that any new shares of the Company would only be issued to existing members of the Company. This makes the minority stakes belonging to the Plaintiff in the form of the Sale Shares to be much less attractive for any third party to purchase. As such, it is the judgment of this Court that following the judgment of VC George J (as he then was) in Pamaron Holdings, the Sale Shares in this case were indeed shares which were not freely saleable in the open market and thus the Plaintiff was entitled to specific performance of the SSA. [23] Furthermore, by the terms of the SSA, particular under Clause 6.6 thereto, the Defendant had contractually agreed that that the alternative remedy of monetary compensation would not be regarded as compensation or sufficient compensation for the Defendant’s default in the performance of the terms and conditions of the SSA. [24] Accordingly, by the Defendant’s own agreement, this was a case where when the act agreed to be done, namely the Defendant’s agreement to purchase of the Sale Shares was such that pecuniary compensation for its non-performance would not afford adequate relief to the Plaintiff. This was therefore a circumstance coming under Section 11(1)(c) of the Specific Reliefs Act 1950 where the Court ought to exercise its discretion to grant specific performance. [25] Indeed, it could also be said that the Plaintiff could not be remedied adequately by damages as it was difficult to ascertain the actual loss of the Plaintiff due to the Defendant’s non-performance of the SSA since the Sale Shares were not freely saleable in the open market. [26] In the English case of Duncuft v Albrecht (1841) 59 ER 1104, it was held as follows: “Then the only question is whether there has been any decision, from whence you can extract a conclusion that the Court will not decree a specific performance of an agreement for the sale of such shares? Now, I agree that it has been long since decided that you cannot have a bill for the specific performance of an agreement to transfer a certain quantity of stock. But, in my opinion, there is not any sort of analogy between a quantity of 3 per cents, or any other stock of that description (which is always to be had by any person who chooses to apply for it in the market), and a certain number of railway shares of a particular description; which railway shares are limited in number, and which, as has been observed, are not always to be had in the market. And, as no decision has been produced to the contrary, my opinion is that they are a subject with respect to which an agreement may be made which this Court will enforce.” [emphasis added] [27] Similarly, Raja Azlan Shah J, in the case of Gan Realty Sdn Bhd v Nicholas & Ors [1969] 2 MLJ 11012, applied the same ratio and held that: “Applying that it is beyond doubt that the agreement to transfer the bank's shares which are not available in the open market can be specifically enforced, for there is no standard for ascertaining the actual loss which would have been caused by its non-performance (see section 11). Here the inconvenience caused to the plaintiffs would be irreparable and could not be remedied by damages.” [emphasis added] [28] There was also further support for the Plaintiff in the case of Dato’ Yeoh Kian Hin v Wijaya Astana Sdn Bhd & Ors [2002] 7 MLJ 685 where the High Court held that: “… Having conducted some research on my own into the matter I found that the first defendant's contention is without merits because of the following passage in Halsbury's Laws of England (4th Ed, Reissue) at p 480:

(ii) Sale of Shares Contracts relating to shares. It is the practice of the court to grant specific performance of contracts for the sale of shares in companies, unless they are freely available in the market. This means that specific performance will usually be ordered of a contract for the sale of shares not quoted on the International Stock Exchange. The first defendant has not shown that the Pacific Matrix shares are freely available in the market. It has also not shown that the Pacific Matrix shares are quoted on the International Stock Exchange. In Woodlands v Hind [1955] 2 All ER 604, [1955] 1 WLR 688 it was held that summary judgment for specific performance of a contract for the sale of shares in a limited company can be given.” [emphasis added] [29] Based on the aforesaid, this Court agreed with the Plaintiff that the facts in the present case were such that it would be just and equitable to grant summary judgment for specific performance of the SSA. More specifically: a) the Plaintiff does not participate in the management and operation of the Company while the Defendant and his family are in control of the same. This was an undisputed fact; b) the Plaintiff’s intention in entering the SSA was clearly to dispose of the Sale Shares held by him in the Company and to exit from the Company; c) damages in lieu of specific performance would not be an adequate remedy to the Plaintiff as the Plaintiff would not be restored to the position he would have enjoyed had the SSA been performed and completed; and d) the Defendant had no bona fide defence to the Plaintiff’s claim. The claim that the Defendant had issues with his family members which had resulted in the funds not forthcoming for the purchase of the Sale Shares was not a valid and acceptable ground for the breach at all. The Defendant’s claim, taken at its highest, was a mere financial difficulty which could not amount to an event of frustration. In this regard, the case of Pacific Forest Industries Sdn Bhd & Anor v. Lin Wen-Chih & Anor [2009] 6 MLJ 293 wherein the Federal Court held the following was instructive: “[22] A contract does not become frustrated merely because it becomes difficult to perform. If a party has no money to pay his debt, it cannot be considered impossible to perform as it is not frustration. Neither can he plead frustration because the terms of the contract make it difficult to interpret. If it cannot be performed or becomes unlawful to perform, then the party who is to perform his part of the bargain can plead frustration. The doctrine of frustration is only a special case to discharge a contract by an impossibility of performance after the contract was entered into (see Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154(HL)). A contract is frustrated when subsequent to its formation, a change of circumstances renders the contract legally or physically impossible to be performed (see Visu Sinnadurai, Law of Contract in Malaysia and Singapore: Cases and Commentary (2nd Ed, 1987) at p 519).” [emphasis added] Conclusions [30] By reason of the above, this Court had no hesitation in granting the Plaintiff an order in terms of the prayers stated in Enclosure 26 with costs. This included the obligation on the part of the Defendant to procure the payment to the Plaintiff of the Director’s Fee which the Defendant did not dispute. Dated the 2nd day of May 2025 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Counsel for Plaintiff:

Counsel for Defendant:

Pamaron Holdings Sdn Bhd v. Ganda Holdings Bhd [1988] 3 MLJ 347 2. Duncuft v Albrecht (1841) 59 ER 1104 3. Gan Realty Sdn Bhd v Nicholas & Ors [1969] 2 MLJ 110 4. Turner v Bladin (1950–51) 82 CLR 463 5. Odessa Tramways Co v Mendel (1878) 8 Ch D 235 6. Dato’ Yeoh Kian Hin v Wijaya Astana Sdn Bhd & Ors [2002] 7 MLJ 685 7. Pacific Forest Industries Sdn Bhd & Anor v. Lin Wen-Chih & Anor [2009] 6 MLJ 293

Sections 11(1)(b) and (c) of the Specific Relief Act 1950 2. Order 81 rule 3 of the Rules of Court 2012