Tai Hean Leng @ Tek Hean Leng v New Future Capital Sdn Bhd (WA-28NCC-465-07/2017)

This is a petition by the Petitioner to wind up the Respondent, New Future Capital Sdn Bhd (“NFC”) under section 465(1)(h) of the Companies Act 2016 on the ‘just and equitable’ ground. I have allowed the petition. These are the full reasons for my decision. 2

The late Tai Chet Siang, the late Datuk Tai E King (“DTEK”), the late Tai Ho Seng and the late Tai Swee Kian are brothers (“Brothers”). The Brothers are the first generation in the Tai family and each of them held shares and directorship in various family companies (collectively as the “Soon Seng Group”).

Safety Capital (“Safety Capital”) is a family company within the Soon Seng Group. It was formed by the late Tai Chet Siang and DTEK on 23.11.1955 to carry on insurance business. DTEK and the late Tai Chet Siang being the oldest male siblings of the first generation of the Tai family, managed the day-to-day operations of Safety Capital

Each of the Brothers had at various times incorporated family investment companies to hold their investments in companies within the Soon Seng Group independently of each other. DTEK, with a view of keeping his investments for the benefit of the Ng Pik Lian (his wife) (“NPL”) and himself and to pass on the business to the next generation, had involved his children, the Petitioner and TMC by allowing them to hold shares and directorships in the family investment companies. The 3 companies set up by DTEK to hold his family investments are, amongst others, as follows:

NFC;

United Eastern Resources Sdn Bhd (“UER”); and

New Way Capital Sdn Bhd (“NWC”).

From 2007 to 2011, DTEK and the late Tai Swee Kian on one side and also Tai Chet Siang family on the other were engaged in litigation over the affairs of Safety Capital. The litigation led to a settlement between both sides which saw Tai Chet Siang’s shares being bought out from Safety Capital. After the settlement was effected, and further to an internal restructuring, UER and NFC hold 67.10 and 32.90% equity interest respectively in Safety Capital. This is also the current shareholding structure of Safety Capital.

The Petitioner and TMC formed NFC together on 28.12.2005.

Since then, the directors and shareholders are, and always have been just both the Petitioner and TMC, i.e. just the brother and sister. Based on all the Forms 49 of NFC, both the Petitioner and TMC remain as the only 2 directors since its inception. There has never been any 4 appointment of an outsider to the board of directors (“BOD”) of NFC, a fact which is not denied by TMC.

The present BOD and their respective shareholdings in NFC are as follows: Director Number of Share Shareholding Percentage The Petitioner 1 50% TMC 1 50%

It cannot be gainsaid that NFC is a family company in the sense that it is being run and controlled by the siblings who are members of the Tai family. The only 2 directors holding the only 2 shares respectively each in NFC are the brother (the Petitioner) and the sister (TMC).

Sometime around 2013, there has been an irreconcilable breakdown in the relations between the Petitioner, DTEK and NPL on the one hand, and TMC on the other.

In particular, the two sides of the Tai family have been heavily involved in litigation comprising a number of legal proceedings regarding the family investment companies. 5

In 2013, NPL filed a suit in Kuala Lumpur High Court Originating Summons No.: 24NCC-49-02/2013 (“OS 49”) against, inter alia, TMC for oppressive conduct with regards to her management of the affairs of Safety Capital, a subsidiary of NFC.

In the course of the proceeding in OS 49, the Petitioner, NPL and TMC agreed to mediate the dispute to achieve a global settlement in respect of all the family investment companies. The parties mediated successfully before the Judge and this resulted in a Global Settlement Agreement (“GSA”) and a Consent Judgment, both dated 13.5.2013. Under the GSA, TMC agreed to sell and transfer all her shares and resign as director in the family investment companies, including NFC, for a consideration of RM13,000,000. It is not in dispute that in executing the GSA, the stated intention of the parties was to achieve “a clean break in corporate relationship between (the Petitioner) & (NPL) and TMC, and a clean exit for TMC...”.

However, subsequent to the GSA and Consent Judgment, TMC filed a suit in Kuala Lumpur High Court Suit No. 22NCC-497-07/2013 (“Suit 49”) to set aside the GSA and Consent Judgment on grounds, inter alia, that there was fraudulent misrepresentation by the Petitioner 6 and NPL against her. TMC also alleged that her signatures on the pre-signed share transfer forms and directors’ resignation letter in respect of TYY Resources Sdn Bhd, another company within the Soon Seng Group, were forged. The Petitioner and NPL, on the other hand, counterclaimed against TMC.

After a long and protracted trial, the Court delivered a decision on 21.2.2017 allowing TMC’s claim in part by setting aside the GSA and the Consent Judgment and restoring OS 49. However, the Court dismissed TMC’s claim in respect of the alleged forgery. The counterclaim by the Petitioner and NPL was dismissed.

Dissatisfied, TMC filed an appeal to the Court of Appeal on 13.3.2017. The Petitioner and NPL have also filed an appeal. The appeals are scheduled for hearing on 29.10.2018.

As a result of the High Court’s decision in Suit 497, the parties could not achieve a clean break in their corporate relationships and remain locked in the various family companies, including NFC.

Besides OS 49 and Suit 497, there are several other proceedings involving the parties (collectively referred to as “the Litigation”). 7

The allegations in the Litigation are seriously disputed on both sides. Both parties have made scathing cross allegations against each other in the Litigation. What is apparent from the scale of the Litigation and the severity of the allegations is that the mutual trust and confidence between the parties has irretrievably broken down.

On that basis and on the basis that there is a complete deadlock in NFC, the Petitioner has petitioned to wind up NFC on the ‘just and equitable’ ground.

The Petitioner submitted that NFC is a family company and that at all times, the management of NFC’s business and affairs was based on mutual trust and confidence and/or good faith amongst and between the members of the Tai family who were shareholders and/or directors.

It is also the Petitioner’s case that TMC holds her share in NFC as trustee for her mother NPL and that TMC should act in the interest of NPL. This is denied by TMC who claims that she is the beneficial owner of her share in NFC and is not trustee for anyone. 8

It is essential to the Petitioner’s case that he must show that the relationship between the 2 shareholders and directors was based on mutual trust and confidence and/or good faith because it is the contention of the Petitioner that this relationship of mutual trust and confidence has broken down irretrievably or irreconcilably and, for that reason, it is just and equitable to wind up NFC.

The Petitioner submitted that the jurisprudence firmly demonstrates the existence of the element of mutual trust and confidence between members of a family who are family members. The Petitioner refers to the case of Varusay Mohamed Shaik Abdul Rahman v SVK Patchee Brothers (Malaysia) Sdn Bhd [2002] 3 CLJ 741 at p. 748 where it was said: “On the facts of this case especially where the pre-existing partnership had been converted into a limited company and run as a family business it is our considered view that the company was formed and continued on the basis of a personal relationship involving mutual confidence…”

The Petitioner also relied on the case of Chow Kwok Chuen v Chow Kwok Chi and Another [2008] 4 SLR 362 at para [33] where it was said: 9 “…But where, as in the present case, the family interest is fundamental to the purpose of the company, then the inextricability of the family relations from the business relations amongst the directors may provide justification for equitable winding up of the company because in such a set-up mutual trust and confidence are paramount.”

The Petitioner also submitted that as long as he can show a relationship of mutual trust and confidence between himself and TMC that is sufficient. He need not show that NFC is a quasi-partnership

The Petitioner referred to the Federal Court decision in Perak Integrated Networks Services Sdn Bhd v Urban Domain Sdn Bhd & Anor [2018] 5 CLJ 513 where it was made clear that the elements of a quasi-partnership enumerated by Lord Wilberforce in Ebrahimi are not preconditions before the ‘just and equitable’ provision can be relied on. The Court held as follows: “[70] Lord Wilberforce went on to enumerate a number of elements typically present where the “just and equitable” ground is invoked: “The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements:

an association formed or continued on the basis of a personal relationship, 10 involving mutual confidence – this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be ‘sleeping’ members), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members’ interest in the company – so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere. It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves.” [71] It is noted that these elements are non-essential, and are not to be interpreted as preconditions before the just and equitable clause can be relied upon: Tien Ik Enterprise Sdn Bhd & Ors v Woodsville Sdn Bhd [1995] 1 MLJ 769 at 776. [72] Lord Wilberforce explained that through the just and equitable clause, certain obligations common to partnership relations may come in; the analogy to partnership is convenient because the concepts of probity, good faith, and mutual confidence, developed in partnership law, become relevant considerations once the elements stated above are found to exist (at 379). [73] Pertinently, it was emphasized in Ebrahimi that it would be “impossible, and wholly undesirable, to define” all the circumstances in which a company 11 should be wound up on equitable considerations (at 379). Lord Wilberforce expressly rejected the creation of particular categories of cases for the just and equitable clause to apply (at 375): “...there has been a tendency to create categories or headings under which cases must be brought if the clause is to apply. This is wrong. Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances”.

In fact, prior to the Federal Court’s decision in Perak Integrated, it had already been broadly accepted that the exercise of the provision under ‘just and equitable’ ground is expansive and not to be construed in a restrictive way. As explained by Lord Wilberforce in Ebrahimi at p 374- 375: “...there has been a tendency to create categories or headings under which cases must be brought if the (just and equitable) clause is to apply. This is wrong. Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances”.

Similarly, in Thomas v Mackay Investments Pty Ltd [1996] 22 ACSR 294, Owen J at p 302 said: 12 “Counsel for the respondents submitted that this case did not fall within any of the recognized areas in which the just and equitable ground is usually employed. It must be recognized that there is no necessary limit to the generality of the words ‘just and equitable’. They are to be applied in their ordinary meaning as calling for the exercise of judgment in the conventional way”.

And in Chow Kwok Chuen v Chow Kwok Chi and anor [2008] 4 SLR(R) 362, the Court of Appeal of Singapore at [17] said: “[17]...The concept of ‘just and equitable’ is a dynamic one and we should not circumscribe its scope by reference to case law when the cases themselves do not seek to do more than apply the concept of ‘just and equitable’ to the circumstances of each case”.

The Petitioner submitted that it had been argued many times unsuccessfully that to attract the ‘just and equitable’ jurisdiction, the company must be a quasi-partnership or the elements, or at least one of the elements identified in the Ebrahimi case must be present, or is a condition precedent. This was raised in the Federal Court in Tien Ik Enterprises Sdn Bhd v Woodsville Sdn Bhd [1995] 1 MLJ 769. The Federal Court rejected the argument and said at p. 777 as follows: 13 “It was the contention of the learned counsel for the appellants before the learned judge that the elements mentioned in the judgment of Lord Wilberforce must be present before a company can be regarded as one which can be imbued with the characteristics of a quasi-partnership association. The learned judge did not accept it. She said [1994] 3 MLJ 100 at pp 100- 101): I cannot accept this contention as the judgment does not say that. It merely sets out the circumstances under which the equitable considerations can be adopted and by way of an illustration, the three elements were stated as examples of circumstances where the just and equitable provision can apply. I emphasize that Ebrahimi’s case does not lay down any test when the ‘just and equitable’ provision can be applied. Before us the same point was taken. The learned counsel contended that the learned judge had misunderstood and misapplied the principles in the case. He said the three elements identified by Lord Wilberforce were the conditions on which the court would be prepared to import equitable considerations to govern the relationship between shareholders and not confine it to be governed solely by the articles of the company. He further submitted that to correctly apply the Ebrahimi rules, the learned judge was obliged to find if one or more of the three elements existed... 14 We are of the view that the learned judge was correct in her interpretation of the judgment of Lord Wilberforce. It is not essential and therefore not a condition that before the Ebrahimi principles can be applied, the elements or at least one of the elements mentioned by Lord Wilberforce must be present. To interpret in the way contended by the learned counsel would be putting something in the judgment which is not there”.

The Petitioner submitted that the just and equitable jurisdiction is not confined to the so-called ‘quasi-partnership’ cases. Neither does one have to prove that the company is a ‘quasi-partnership’ to attract that jurisdiction. In Dato’ Ting Check Sii v Marine Utama Sdn Bhd & Anor [2013] 9 MLJ 527, following the decision of the Federal Court, Supang Lian J said: “[18] Thus, based on the authorities referred to above, there is no merit in the contention of the respondents that the petitioner must prove that the company is a quasi-partnership under the ‘just and equitable’ limb of s 218 of the Act. Also, there is no merit in the contention that the three elements mentioned in Ebrahimi’s case must be fulfilled before the just and equitable ground can apply”.

‘Mutual trust and confidence’ is clearly not an exclusive peculiarity of quasi-partnership companies. Mutual trust and confidence is 15 generally the bedrock of family companies and where family interest is fundamental or closely related to the raison d’etre of the company, applicable considerations apply. In Tang Choon Keng Realty (Pte) Ltd v Tang Wee Cheng [1991] 2 SLR(R) 1, Chan Sek Keong J (as he then was) in rejecting the submission that mutual trust and confidence is only peculiar to quasi-partnership companies said that relationship between family members is even more personal than between partners. At p 30: “Counsel for the plaintiffs has argued that there is nothing in the winding-up petition which can support this ground, and that the decisions concerning partnerships became companies are not relevant, as TCKR was not a partnership at inception. I do not think his argument is sustainable in law having regard to the observations of Lord Wilberforce. The relationship between members of a family company is even more personal, even if the level of mutual confidence that is necessary may not be more, than in a relationship between partners”.

TMC submitted that NFC is not a family company. She submitted that a company cannot be considered a family company on the mere premise that it is comprised of family members. She relied inter alia on the Singapore Court of Appeal case of Chow Kwok Chuen v Chow Kwok Chi [2008] 4 SLR 362 which was also relied on by Learned Counsel for the Petitioner. There the court said this: “Admittedly, not all 16 family companies in the broader sense of the term would automatically be analogous to quasi-partnerships. Only where the family interest is closely related to the raison d’etre of the company, will mutual trust and confidence be as important as in a quasi-partnership.”

TMC also relied on the case of Hind Overseas Private Limited v Raghunath Prasad Jhunjhunwalla AIR 1976 SC 91 where the Supreme Court of India refused to accept that a company was a quasi-partnership on the mere premise that its members were familially related. The Court held that “because the shareholding is between two family groups, it cannot be said that the company thereby takes the image of partnership.”

TMC submitted further that there are a series of reasons why NFC cannot be considered a family company. They are as follows:

NFC did not function on any common understanding between its shareholders and directors. The Petitioner has not even provided any documentary evidence to support his claim;

instead, at all material times, NFC functions in accordance with NFC’s Memorandum and Articles of Association; 17

other than the Petitioner and TMC, none of the other siblings ever held positions in NFC;

at all material times, TMC did not hold her positions in NFC on a nominee basis. In this regard:

instead, TMC held her position in her own right;

(ii) TMC was not described as nominee in the Settlement Agreement, but was instead described as a shareholder in her own right;

(iii) a clear indication that TMC holds her positions in NFC in her own right is demonstrated through her qualifications, experience and conduct in corporate affairs; and

(iv) in any event, the issue of whether TMC is a nominee is pending determination in OS 49, where forensic evidence has been led to assist with the determination of the issue.

I am of the view, based on the authorities cited to me, that I do not have to decide whether NFC is a quasi-partnership or not. However I have to decide whether NFC is a family company where the Petitioner 18 and TMC deal with each other based on a relationship of mutual trust and confidence. And to answer that, I have to decide whether the family interest is closely related to the raison d’etre of the company, in other words, whether the family interest is fundamental to the purpose of the company.

The Petitioner submitted that the late DTEK, the father of the Petitioner and TMC was the one who set up NFC, amongst other family companies, in order to pass the business down to the next generation. It is also not apparently disputed that NFC never paid for its shares in Safety Capital which are worth a lot of money. There are other companies in which the Petitioner and TMC or NPL and TMC are shareholders and directors. I am of the view that NFC is one of many family companies wherein it was intended that the relationship of the shareholders and directors will be based on mutual trust and confidence and good faith.

It cannot be disputed that there is no longer any relationship of trust or confidence between the Petitioner and TMC. Not only are they not on speaking terms, they have made scathing allegations against each other in the Litigation. They just cannot get on with each other. 19

The Court is not asked to determine the rights and wrongs of the various factual allegations made in the Litigation. Rather, the very existence of the serious and wide-ranging allegations in the Litigation demonstrates that there has been an irreconcilable breakdown in the relationship of mutual trust and confidence amongst the members of the Tai family and between the Petitioner and TMC. In Dato’ Ting Check Sii v Marine Utama Sdn Bhd & Anor [2013] 9 MLJ 527, the court found that the numerous litigations are self –evident of the acrimonious relationship between the parties. This is what the Court said: “…The respondents do not deny the series of litigation in court between the parties, but deny that there is a deadlock in management. To my mind, the numerous litigation and drawn out battles in court speak of the acrimony between the parties.”

When relationship between family members has broken down, the court would be ready to wind up the company. In Varusay Mohamed Shaik Abdul Rahman v SVK Patchee Brothers (Malaysia) Sdn Bhd [2002] 3 CLJ 741, the subject company was a family company and was run by the descendants of the patriarch and founder. A dispute arose between the family members which led to various allegations being made against one another. Based on, among other things, the affidavit 20 evidence that the family members were not on speaking terms and could not work together with one another, the Court of Appeal found that there was a breakdown in mutual trust and confidence amongst the family members and ordered the company to be wound up on the ‘just and equitable’ ground. At pp 748-749 of the judgment, the Court of Appeal held: “On the facts of this case especially where the pre-existing partnership had been converted into a limited company and run as a family business it is our considered view that the company was formed and continued on the basis of a personal relationship involving mutual confidence. By reason of the allegations as proved either taken as a whole or in part, in particular grievances (i), (iii) and (iv), it is manifestly clear that the parties no longer enjoyed the confidence of each other. This fact provided convincing evidence of the breakdown of mutual confidence and good faith among the parties to justify the winding-up on the just and equitable ground. We are fortified in our view by what was deposed by SD2 who is the head of the other faction when questioned by the court. He said: Varusay (the appellant) is our cousin brother, his relationship is not good with me and my whole family. We are not on speaking terms since 1992. It’s a family problem, we can’t work together”. That statement sealed the fate of the company”. 21

In Ong Ching Chee & 3 ors v Ong Ching Chee Realty Sdn Bhd [2014] 2 AMCR, the High Court applied the Court of Appeal’s decision in the Varusay Mohamed Shaik Abdul Rahman case, supra, to the Ong family company. The Court found that the Ong family company is a typical Chinese company with unique characteristics (at para 29): “29. ...The Respondent here is a Chinese family owned company amongst the stable of the Ong family related companies. The patriarch is undoubtedly Ong Senior who is now in his twilight years. He founded the companies and/or funded their conception and operations. He together with his sons participated in the growth and development of the companies for over 30 years. From the evolution and transformation of the shareholding structure and appointment to the board of directors of the companies, I find and hold it is Ong Senior’s desire that the Ong family companies would be operated harmoniously with fair participation by all his children. This is his tacit wish all along which typical of a Chinese patriarch. Notwithstanding that his older sons from the first marriage were involved in management of the companies in the early formative years, it necessarily follows that the older sons must devolve and share the running of the companies with his younger sons from the second marriage with the passage of time. The patriarch stays on to ensure and oversee the fulfilment of that wish. There is in this sense no distinct separation between family and company with the minority yielding company control to the majority. In my view these are incidences of the 22 unique characteristic of Chinese companies as alluded to in the Australian Journal of Corporate Law article cited by the Respondent”.

Based on the evidence in that case, the Court found that the animosity amongst the Ong family members was ‘hopelessly beyond reconciliation’ and proceeded to wind up the company on the ‘just and equitable’ ground. At paragraph 33 of the judgment, the learned Judge held: “33. Based on the undisputed facts herein, I find and hold that the actions that have taken place in 2013 to wit: the altercation, lodgement of police reports of crime committed and the removal of the Petitioners as directors particularly Ong Senior, the patriarch himself, cumulatively evidence breakdown and loss of mutual confidence and trust amongst the shareholders in the management of the Respondent. It seems to me that on the one hand, the directors from the majority shareholders saw the Petitioners as both a nuisance and threat to them. On the other hand, the Petitioners were suspicious of these directors’ perceived lacking in fair dealing and became victimized when they sought to protect their rights and interests. The animosity amongst them is hopelessly beyond reconciliation”.

Also, in Narayani Sivaprakaspillai & Ors, supra, the Court found that the mutual trust and confidence between the family members had totally deteriorated and the various legal actions between the parties 23 made it impossible to run the company successfully. The Court then ordered the winding-up of the company on the ‘just and equitable’ ground (at pp 12-13).

It is instructive to refer to the leading English authority of In re Yenidje Tobacco Company, Limited [1916] 2 Ch D 426 (“Re Yenidje”), where, just like the present case, there were two equal shareholders and directors. Their relationship had broken down to the extent that they were not on speaking terms. Communication between them had to be made through a third party. Also, one of them had brought legal action accusing the other of fraud. In winding up the company, Lord Cozens-Hardy MR at pp 430-431 held: “In those circumstances, supposing it had been a private partnership, an ordinary partnership between two people having equal shares, and there being no other provision to terminate it, what would have been the position? I think it is quite clear under the law of partnership, as has been asserted in this Court for many years and is now laid down by the Partnership Act, that that state of things might be a ground for dissolution of the partnership for the reasons which are stated by Lord Lindley in his book on Partnership at p. in the passage which I will read, and which, I think is quite justified by the authorities to which he refers: “Refusal to meet on matters of business, continued quarrelling, and such a state of animosity as precludes all 24 reasonable hope of reconciliation and friendly co-operation have been held sufficient to justify a dissolution. It is not necessary, in order to induce the Court to interfere, to show personal rudeness on the part of one partner to the other, or even any gross misconduct as a partner. All that is necessary is to satisfy the Court that it is impossible for the partners to place that confidence in each other which each has a right to expect, and that such impossibility has not been caused by the person seeking to take advantage of it”. Now here we have this fact. Mr Rothman has commenced an action charging Mr Weinberg with fraud in obtaining the agreement under which he, Rothman, sold his business to the company. I ask myself the question: When one of the two partners has commenced, and has not discontinued, an action charging his co-partner with fraud in the inception of the partnership, is it likely, is it reasonable, is it common sense, to suppose those two partners can work together in the manner in which they ought to work in the conduct of the partnership business? Is it possible to say that it is not just and equitable that that state of things should not be allowed to continue, and that the Court should not intervene and say this is not what the parties contemplated by the arrangement into which they entered? They assumed, and it is the foundation of the whole of the agreement that was made, that the two would act as reasonable men with reasonable courtesy and reasonable conduct in every way towards each other, and arbitration was only to be resorted to with regard to some particular dispute between the directors which could not be determined in any other 25 way. Certainly, having regard to the fact that the only two directors will not speak to each other, and no business which deserves the name of business in the affairs of the company can be carried on, I think the company should not be allowed to continue”.

In Singapore, the Court of Appeal in Chow Kwok Chuen v Chow Kwok Chi & Another [2008] 4 SLR (R) 362 ordered a family company run and owned by 3 siblings to be wound up on the basis that there was a loss of mutual trust and confidence between them. The Singapore Court of Appeal at paragraph [48] held: “48. The relationship amongst the three brothers appears regrettably ruined, and the very premise on which they became involved (rather than voluntarily joining to do business together) in the Company has been frustrated even though the Companies presently remains operational. This has resulted in practical deadlock and loss of mutual trust and confidence, making it futile to remain as fellow directors of the Companies”.

In Yap Lai Seng v High-On Industries Sdn Bhd & Anor [2016] 1 AMCR 146, there was a breakdown in the relationship and the parties were no longer on talking terms. The Court found it just and equitable to wind up the company as it would be difficult for the parties to be working 26 together again. At paragraph [25] of the judgment, the learned Judge held: “The company still owns the land estimated to be worth between RM1 million and RM2,400,000.00 based on the offer. The parties are no longer on talking terms. There has been a breakdown of mutual trust and confidence between the parties. The partnership or quasi-partnership between the Petitioner and the 2nd Respondent has broken down. It would be difficult for both of them to be working together in the company or to enhance the interest of the company: see Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492; Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 CLJ 441; Tan Kim Hor & Ors v Tan Heng Chew & Ors [2009] 2 CLJ 242”.

The Court does not have to analyze the reason why the relationship between the parties has broken down. In Australia, the Court in Re Dalkeith Investments Pty Ltd [1984] 9 ACLR 247 applied the principles in Re Yenidje Tobacco Company, Limited, supra, and held (at p 252): “...It is no part of my function to attempt to analyze or apportion the reasons for the animosity that has grown up between the parties. The divorce, and the inevitable litigation that has preceded or accompanied it, has in my view, destroyed the relationship of mutual trust and confidence which might otherwise have been expected to subsist between them as members of the 27 same family group. It is no longer possible for them to work together for the common good or to rely, for the protection of their interests and investments in the company, upon the goodwill which they supposed would exist between them. The point has now been reached where such a state of animosity exists between them as precludes all reasonable hope of reconciliation and friendly co-operation in the affairs of the company: see Re Yenidje Tobacco Co [1916] 2 Ch at 426 and 435. On the strength of what was said by Lord Cozens-Hardy MR, in that decision and of other authorities such as Lawrence v Lawrich Motors Ltd [1948] 2 SALR 1029 and Re Westbourne Galleries Ltd [1973] AC 360, particularly at 384, per Lord Cross, the petitioner, is in consequence entitled to a winding up order on the just and equitable ground in s 364(1)(j) of the Companies (Qld) Code”. (Emphasis added)

In Canada, the Ontario Court of Appeal in Re Bondi Better Bananas Ltd [1952] 1 DLR 277 also applied the principles in Re Yenidje Tobacco Company, Limited, supra, and held that a state of animosity which precludes all reasonable hope of reconciliation is sufficient to justify a winding up order under the ‘just and equitable’ provision. At pp 281-282: “...In our view, there is a further ground of equal application to this case. We think the principles governing the dissolution of partnerships apply to the circumstances in which these two gentlemen find themselves as equal owners of the capital stock and in equal control of this private company and if this be 28 so authority is not required for the proposition that “continued quarrelling and such animosity as precluded all reasonable hope of reconciliation and friendly co-operation,” is sufficient to justify the order: Lindley on Partnership, 11th ed., p. 691. Cases such as Re Yenidje Tobacco Co., [1916] 2 Ch. 426; Loch v John Blackwood Ltd., [1924] A.C. 783, and Re Winding up Ordinance & Timbers Ltd. [1917], 35 D.L.R. 431, 11 A.L.R. 432, support the conclusion that these principles properly may be applied to the case at bar”.

Similarly, in another Canadian decision in Re National Drive-in Theatres Ltd 1954 CarswellBC 11; [1954] 2 DLR 55, the Court at paragraphs [52] and [53] held: “52. Applying this reasoning here, I have no trouble in finding that, in the analogous circumstances which exist here as to partnership, there is “continued quarrelling and such a state of animosity as precludes all reasonable hope of reconciliation and friendly co-operation.

This is abundantly evident from a reading of minutes of meetings of shareholders’ and directors’ meetings during 1953 and provides an additional reason for winding up the company”.

I am of the view that based on the irretrievable breakdown of the relationship of mutual trust and confidence between the Petitioner and 29 TMC, the Petitioner has shown a prima facie case for the winding up of NFC. I will have to deal with the defences raised by TMC later.

The Petitioner also relies on a separate ground, that of complete deadlock in management, to wind up NFC. The classic case on deadlock is that of Re Yenidje which has already been referred to.

In the present case, there are only 2 directors and 2 shareholders each holding 1 share in NFC. In Perak Integrated Networks Services Sdn Bhd , supra the Federal Court held that the Court may exercise its discretion to wind up a company on the ‘ just and equitable’ ground if a deadlock exists: “[75] In cases where there was a deadlock in the board of directors and body of members in a company, the courts have exercised jurisdiction under the just and equitable provision to order a company to be wound up”.

Similarly, in Ng Eng Hiam v Ng Kee Wei & Ors [1965] 1 MLJ 238, at 240, the court shared the same view: “Their Lordships do not propose to review these authorities in detail. The question whether such a deadlock exists as makes it just and equitable to 30 wind the company up is a question predominantly of fact in each case. The principle is clear that if the court is satisfied that complete deadlock exists in the management of a company the jurisdiction will be exercised”.

Also, in Dato’ Ting Check Sii, supra, the court held: “[26] To my mind, the numerous litigation and drawn out battles in court speak of the acrimony between the parties. It is rather futile to deny there is no deadlock in management of the company. There are after all only two surviving shareholders of the company namely the petitioner and the second respondent and they are locked in battle in the courts”. For all these reasons, it is just and equitable, in my view, to order that the company be wound up under s 218(1)(i) of the Companies Act 1965”.

In Canada, in Re Bondi Better Bananas Ltd, supra, the Ontario Court of Appeal went one step further and held that deadlock by itself is sufficient to warrant the winding-up of a company. At p. 281: “The Court is of the opinion, upon careful consideration of the voluminous material by way of affidavits and cross-examination, that it is just and equitable to direct the winding-up of the Company and that it is in the interest of all the shareholders that such an order be made. A deadlock exists and 31 that in itself, in the circumstances here, is sufficient warrant for the order”. (Emphasis added)

The Petitioner has submitted on how the deadlock situation and the breakdown in relationship between the parties had affected the affairs of NFC.

Firstly, NFC has defaulted in tabling and lodging its audited financial statements from the financial year ended (“FYE”) 31.12.2009 to 31.12.2015 in breach of s 169(1) of the repealed Companies Act 1965. The audited financial statements for the FYE 31.12.2009 was the last annual accounts tabled at the annual general meeting (“AGM”) held on 25.6.2010.

Secondly, NFC has failed to circulate and lodge with the Registrar, the audited financial statements for the FYE 31.12.2016 within the time period stipulated under ss 256 and 259 of the Companies Act 2016.

Thirdly, UER has failed to lodge its annual return since 25.6.2010 in breach of s 165(1) of the repealed Companies Act 1965. 32

Lastly, UER has failed to hold any AGM since 25.6.2010 in breach of s 143(1) of the repealed Companies Act 1965.

In Dato’ Ting Check Sii, supra, the company had breached its statutory obligations in preparing its annual accounts and holding AGM for years due to the acrimony and dispute between the parties. The learned Judge ordered that the company be wound up on the ‘just and equitable’ ground. At para [31]: “[31] ...In addition, based on what has been said above, I find that the company has not been able to comply with its statutory obligations for years due to the acrimony and dispute between the petitioner and the 2nd respondent. Further, there can be no denying that there is a stalemate in the management of the company. For all these reasons, it is just and equitable, in my view, to order that the company be wound up under section 218(1)(i) of the Companies Act 1965”.

Similarly, in Yap Lai Seng case, supra, the Court wound up the company on the ‘just and equitable’ grounds because of, inter alia, the company’s failure to file its annual accounts and returns and to hold the statutory meetings. The Court at paras [18] and [27] of the judgment held: 33 “[18] ...Since the board meeting held on May 12, 1990, no shareholders meeting or board of directors meeting was ever called or held. Since then the first respondent did not file its annual return and account to the Companies Commission of Malaysia. [27] For the reasons given, it is just and equitable to wind up the company, sell the land and divide the proceeds of sale to the two shareholders/contributors of the company after deducting the expenses of the sale”.

I am of the view that based on deadlock, the Petitioner has also shown a prima facie case for the winding up of NFC.

I will now deal with the submissions of TMC. Firstly, she submitted that the Petition should be dismissed in limine as it has been filed with ulterior motives and in bad faith. The law is clear in providing that winding up petitions may be dismissed if they have been filed in bad faith or for collateral purposes. I need not refer to the authorities cited by TMC for this proposition.

TMC submitted that the real intention behind filing the Petition is to remove her from NFC. She referred to OS 49. However, OS 49 was 34 filed by her mother NPL and the Petitioner is not even a party to OS 49. Then TCM relies on the Petitioner’s attempt to use the name of NFC to bring an oppression petition against her with regard to the affairs of Safety Capital. I do not see how that can be construed as an attempt by the Petitioner to get rid of TMC from NFC. Then TMC relied on the lodgement of allegedly forged documents by the Petitioner, NPL and her agents with the Companies Commission Malaysia to remove her as a director and shareholder of UER. However, this has nothing to do with

Secondly, TMC submitted that the wrestling of control of TMC’s shares in NFC would enable the Petitioner to gain control of Safety Capital and have access to its assets. She alleges that there are a number of other companies in which the Petitioner and NPL and TMC are shareholders and directors and there have been no winding up petitions in respect of those companies. I do not see the relevance of these submissions. The winding up of NFC per se would not deprive TMC of her share in NFC. That would be the subject matter of other actions, if any. For purposes of the Petition, TMC is recognised as having 1 share out of the 2 shares in NFC. 35

68.

TMC also submitted that this Petition is filed to delay and derail OS I have already stated that the Petitioner is not a party to OS 49. Neither is NFC a party in OS 49. OS 49 is before this Court and the Petition will not in any way delay the disposal of OS 49.

I find that TMC has not made out her allegation that the Petitioner was actuated by an ulterior motive in filing this winding up petition.

TMC next submitted that this Petition should also be dismissed as it is a multiplicitous form of relief. This is because of another winding up petition against UER in another court. However, the shareholders and directors of UER are TMC’s mother NPL and TMC. That winding up petition involves a completely different company and the Petitioner is also different. TMC attempted to transfer that Petition to this Court to be heard together with this Petition but her application was dismissed and her appeal had been dismissed by the Court of Appeal. The issues are similar only because in that case, it is also alleged that UER is a family company wherein the relationship between NPL and TMC had irretrievably broken down and there is also deadlock. Since they relate to different companies and different shareholders and directors, there is no multiplicity. I find that TMC has not made out her allegation of multiplicity. 36

Next, TMC said that there is a delay of 4 years in the filing of this winding up petition since the relationship broke down in 2013 with the filing of OS 49. She relied on the case of Re Senson Auto Supplies Sdn Bhd [1988] 1 MLJ 326 where the court held that it is settled law that delay by petitioners in initiating proceedings after they have realised that they have been the victims of a scheme of oppression will induce the court to refuse relief, since this indicates that they have acquiesced in the conduct complained about and their complaints are not therefore made in good faith.

In the present case, there is no question of any acquiescence on the part of the Petitioner. I find that the case relied on by TMC is distinguishable and there is no undue delay on the part of the Petitioner in bringing this action. It must be noted that the parties had agreed on the GSA whereby all ties with TMC will be severed. As long as the GSA was valid, there was no necessity for the Petitioner to wind up NFC in order to sever ties with TMC. It was only in 2017 that the court upon TMC’s application set aside the GSA, thus making it necessary for the Petitioner to petition to wind up NFC if he wanted to sever ties with TMC. Thus there is no delay. 37

TMC also submitted that the Petition warrants dismissal as it is a drastic form of relief. TMC submitted that the clearest alternative is OS 49 where NPL has prayed for the removal of TMC as a director. However, OS 49 does not concern the affairs of NFC as NFC is not a party to OS 49. NPL could not have asked for the removal of TMC as director of NFC in OS 49. In any event, the fact that there might be alternative remedies does not preclude the Court from making a winding up order where it is just to do so.

In Tien Ik Enterprises Sdn Bhd & 4 Ors v Woodsville Sdn Bhd [1995] 1 LNS 99, the Supreme Court held at p. 1046 that “It is not obligatory for our courts to consider the availability of alternative remedies before making a winding up order under s. 218(1)(i) of the

I am also not with TMC on this allegation of hers.

TMC also submitted that it is not the law that a winding up can be granted on the mere basis of numerous legal suits between the parties. In this regard: 38

the Hong Kong case of Re Tourmaline Ltd. [2004] 4 HKC 348 held that “it is inapt to equate the pending litigation between petitioners and Mr Chan as a deadlock in the management of the company or a deadlock in the company as a whole”; and

the Honourable Court is invited to treat the Dato’ Ting Check Sii v Marine Utama Sdn Bhd [2013] 9 MLJ 527 cause with caution. The High Court accepted that there was a breakdown of the relationship of mutual trust and confidence due to the “series of litigation in court between the parties...” (para 26). It did not decide that the respondent company should be wound up due to the breakdown in relations, but rather that the winding up was necessary as the substratum of the company had been lost (para 25).

TMC submitted that in any event, it is the Petitioner who has been conducting himself unreasonably in respect of the management of NFC. In this regards, the Petitioner has allegedly refused to attend meetings of the Board of Directors and/or General Meetings on several occasions for no good reason. 39

In answer to TMC’s allegations, I am of the view that the Court is not relying on the existence of the Litigation to show deadlock. The deadlock is because there are only 2 directors and 2 equal shareholders in NFC and their relationship has irretrievably broken down. The existence of the Litigation shows that the relationship of mutual trust and confidence between the parties had broken down irreconciably Also, quite apart from the case of Dato’ Ting Check Sii, the Petitioner has shown numerous cases where the court has wound up the company where the relationship of mutual trust and confidence has broken down.

It would be too simplistic for TMC to blame the Petitioner as being the cause of the breakdown in relationship or deadlock. The Court is not in a position to determine the rights and wrongs of the parties in the Litigation and the Court is not required to do so. Unless it is very clear on the undisputed facts that the Petitioner is wholly to be blamed for the deadlock or the breakdown in relationship, which is not the case here, the Court should not and could not decide who is more to blame for the state of affairs in NFC. Most probably both parties should share some portion of the blame. I cannot find that the Petitioner is wholly to blame on the undisputed facts so I will not dismiss the Petition on the ground suggested by TMC. 40

TMC also submitted that NFC is presently a dormant company and is not engaged in any business nor operations. It has no staff. What little administrative work for NFC there is, is performed by TMC’s staff in her own company World Executive Search Sdn Bhd.

TMC submitted that it is accepted that a winding up petition can be dismissed where the respondent company is shown to be dormant or not in active trading. The Hong Kong Court of First Instance in Catdave Investments Ltd v Barbican Capital Invesment Ltd [2007] HKCU 1996: “[98] The primary relief sought is a winding-up order under the just and equitable ground. It is contended by Mr Wong that any of the grounds set out in the Petition, if proved, would give jurisdiction to make a winding-up order. [99] In my judgment, given my findings above, Mr Tse has failed to satisfy me that it would be just and equitable to wind-up Barbican. [100] On Mr Tse’s own case, Barbican is and has always been a property holding company and, in his own words, had been dormant for years. There was no shareholders agreement as alleged by Mr Tse, and he had not been excluded from its management. He did not raise any complaint or voice any 41 concern over the lack of annual general meetings prior to his resignation in September 2003. The $4 million Everglory loan is at best a very stale claim. He was content to allow Mr Tsang to collect the rent from Property #3, which was relatively modest and parts of it might have been spent on maintaining the premises. In any case, I do not believe Mr Tse did not know that Mr Tsang had been collecting the rent over the years. [101] What remains is the failure to file corporate and tax returns, and the failure to convene annual general meetings after Mr Tse’s resignation in September 2003. Mr Wong understandably made much of these failures. This is, to my mind, the most troubling feature in the case. Nevertheless, one must not lose sight of the fact that there has not been any material change in Barbican’s financial position since the acquisition of the Properties in the early 1990s. Mr Tse himself said in 2001 that Barbican had been dormant, and nothing has changed since. There has been no change in shareholding and directorship since 2003 so the annual returns would not have shown anything new. And since Barbican had no active business, the financial statements would not have shown any significant differences over the years. Mr Tse could have invoked his right as 30% shareholder to requisition a general meeting, but he has not shown any eagerness to do so. [102] Accordingly, on the facts of this case, the failure to file corporate and tax returns, although in breach of statutory duties, have not caused any prejudice to Mr Tse as a shareholders. 42 [103] Similarly, in the circumstances of this case, the failure to convene annual general meetings since 2003, although regrettable and in breach of statutory duty, does not cause Mr Tse any real prejudice as a shareholder. [104] In any case, these breaches could be remedied in the future and Mr Tsang and Mrs Tsang must ensure that Barbican will comply with its statutory duties in all respects. [105] In my judgment, such failures are not so serious as to warrant winding-up Barbican”.

In the present case, the Petitioner is not relying on the adverse effects of the deadlock on the affairs of NFC as the sole ground to wind up NFC. The ground relied upon is deadlock and the Petitioner merely referred to the adverse effects of the deadlock and breakdown in relationship on the affairs of the company. In any event, the case referred to by TMC is not a case of deadlock and the court there held that the various breaches could be remedied in the future and Mr Tsang and Mrs Tsang must ensure that Barbican will comply with its statutory duties in all respects.

That will not happen in this case, as the only 2 directors and shareholders cannot see eye to eye on anything so there is no hope of 43 the adverse effects on the affairs of the company being remedied in the future. I agree with the Petitioner that the only option in this case of irretrievable breakdown and deadlock is to order the winding up of the company. Accordingly, I grant order in terms of the winding up petition with costs of RM10,000.00 subject to allocator. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Dated: 4th October 2018 44 Solicitors For The Petitioner Kelvin Seet Wan Nam & Ryan Chu Soon Wei Messrs Chooi & Company + Cheang & Ariff Advocates & Solicitors 39 Court @ Loke Mansion 273A, Jalan Medan Tuanku 50300 Kuala Lumpur Tel: 03-2691 0803 Fax: 03-2693 4475 / 2692 8533 / 2694 0622 Solicitors For The Respondent Steven Thiru, Gregory Das & Muhammad Zarqali Mohd Noor Messrs Steven Thiru & Sudhar Partnership Advocates & Solicitors A1-12-01, Arcoris Mont Kiara Jalan Kiara, Mont Kiara 50480 Kuala Lumpur