Tan Kheng Guan v Shigen Polycolor Sdn Bhd (PA-28NCC-42-05/2022)

SHIGEN POLYCOLOR SDN BHD

CHU KOK KHING (NRIC NO.:700916-07-5377) …RESPONDENTS GROUNDS OF JUDGMENT INTRODUCTION [1] This is a winding-up petition filed by the Petitioner under Sections 464 and 465 (1)(b), (c), (f), and (h) of the Companies Act 2016 (Companies Act). BRIEF FACTS AND CONTENTION OF PARTIES [2] The following facts were derived from the Winding-Up Petition in Enclosure 1 and the affidavits by the Petitioner and the 2nd Respondent (R2). [3] Shigen Polycolor Sdn Bhd (Company No. 566938-X), the 1st Respondent (R1), is a company incorporated in Malaysia on 14.12.2001 under the Companies Act as a private limited company limited by shares engaged in the plastic colouring trade with 4 subscribers' shares the nominal value of each was RM1.00. Each of the said shares was subscribed by the Petitioner, Loo Chui Li (NRIC No. 700710-07-5320), Ee Geng Choon (NRIC No. 530703-07-5112) and R2. [4] Loo Chui Li and Ee Geng Choon then transferred their respective one share in R1 to R2 and the Petitioner and after that transfer of shares, the Petitioner and R2 each held two (2) ordinary shares in R1. Later, the Petitioner failed to pay for the transfer of share from Ee Geng Choon to him and a demand for payment was issued by Ee Geng Choon to the Petitioner. [5] According to R2, in or about September 2004, an additional capital of RM50,000.00 was paid by him, but the company secretary for R1 had erroneously prepared and lodged the Return of Allotment of Shares of R1 as at 24.9.2004 for the allotment of 25,000 ordinary shares each in the names of the Petitioner and R2. To cut a long story short, and as a result of the error in the allotment of shares in R1, R2 applied in 2018/2019 to the Registrar of Companies to rectify the error on the register of shares of R1, which was approved. After rectification, the Petitioner holds two (2) ordinary shares in R1 and R2 holds 50,002 ordinary shares. [6] However, the Petitioner has filed at the Penang High Court Civil Suit No. PA-22NCvC-223-11/2017 (Suit No. 223) that concerns the alleged issue of breach of fiduciary duty by R2 or misappropriation of confidential information of R1. The Petitioner also claims ownership of R1 and that he owned 50% of R1. [7] Thereafter, R2 commenced at the Penang High Court Suit No. PA- 22NCVC-105-07/2020 (Suit No. 105) against the Petitioner for the necessary declaratory relief relating to the 24,998 ordinary shares that were registered in the name of the Petitioner before the rectification of the register of shares of R1. [8] Later, Suit No 223 was struck off and upon appeal to the Court of Appeal, it was reinstated. [9] Currently, both Suits No 223 and 105 are still active and pending at the Penang High Court. Issues pertaining to ownership of the shares of R1, and alleged breach of fiduciary duty by R2 or misappropriation of confidential information of R1, have not been disposed of. [10] It was the Petitioner's contention that he holds 50% of R1’s shares. R2 disputed. R2 contended that the Petitioner did not make a full and frank disclosure of all the material facts when the Petitioner alleged that he was at all material times the lawful and beneficial owner of 25,000 shares in R1. THE ISSUE [11] Whether the Petitioner has successfully proven the circumstances in which R1 may be wound up by this Court? ANALYSIS AND FINDINGS [12] The provision for winding-up is provided under Section 464 of the Companies Act, and the grounds for the petition are as provided in Section 465. [13] In this regard, in Wong Thai Kuai & Anor v. Kansas Corp Sdn Bhd [2007] 1 MLRH 650; [2007] 4 MLJ 33; [2007] 3 CLJ 263 the Court held- "The court has a discretionary power to wind up a company under s 218 of the Companies Act 1965. The use of the permissive word 'may' in ss 217, 218 and 221 of the Act - rather than the mandatory 'must' or 'shall', gives the court a discretion whether or not to wind up a company, even if the Petitioners have shown that they are 'creditors' and the debt in question is not disputed." [14] Likewise, the word “may” is also used in Section 464 of the Companies Act which clearly provides discretionary powers for the Court to wind-up a company or not. [15] This winding-up petition was filed under Sections 464 and 465

(1)(b), (c), (f), and (h) of the Companies Act. In his submissions, the Petitioner gave the following reasons as to why R1 should be wound up- “The Petitioner further contended that the acts of R2 in fraudulently and illegally altering the shareholding structure and/or converting the Petitioner’s 24,998 shares to himself, without the consent, approval and knowledge of the Petitioner, together with the filing of that Civil Suit, clearly shows that the relationship and mutual trust and understanding between parties have irretrievably broken down and cannot be restored. As such, R1 cannot continue to operate in the hands of R2 and/or the Petitioner and as such R1 should be wound up. The Petitioner further contended that R2 had unlawfully and illegally appointed one Ee Geng Choon as an additional director of R1 on 29.11.2011. The Petitioner was not informed about such appointment and his consent and/or approval was not obtained. As a director, the Petitioner ought to have been notified wherein he would be entitled to vote for or against such appointment of new directors. Therefore, the said appointment of Ee Geng Choon is invalid and he ought to be removed from his post of a director of R1. This issue was raised and is the subject of contention in Civil Suit No. PA-22NCVC-105-07/2020 as well. R2 had also changed the company secretary of R1 and appointed one Tan Tong Lang (NRIC No.: 760908-12-5447) as company secretary for R1 with effect from 20.11.2017. Such change has been done without the consent and approval of the Petitioner. As such the appointment of Tan Tong Lang as company secretary is also invalid and he ought to be removed as well. This issue was also raised and is the subject of contention as well in Suit No. 105. The acts of the 2nd Respondent above in Unilaterally Appointing additional director(s) and in Changing of the Company Secretary without the consent, approval and knowledge of the Petitioner, clearly shows that the relationship and mutual trust and understanding between parties have irretrievably broken down and cannot be restored. As such, it would be just and equitable that R1 should be wound up. Various Civil Suits and/or Legal Proceedings filed between the Petitioner and the 2nd Respondent In addition to the Civil Suit No. PA-22NCVC-105-07/2020 as mentioned above, there has also been various disputes and/or allegations raised between both parties in other various legal proceedings and/or Civil Suits inter alia the following:- i) Penang High Court, Civil Suit No.: 22NCVC-87-06/2014 filed by Shifty Technology Sdn. Bhd. against Magnum Trade Sdn. Bhd. and against 4 individuals. ii) Penang High Court, Companies Winding Up Petition No.: 28NCC-55-03/2015, which was previously filed by the 2nd Respondent to wind up Shigen, but which was eventually withdrawn by the 2nd Respondent. iii) Penang High Court, Civil Suit No.: PA-22NCVC-223-11/2017, filed by the Petitioner against the 2nd Respondent and Shigen and other parties, wherein this suit was filed as a derivative action and is filed against the 2nd Respondent for stealing and misappropriating assets and proprietary information of Shigen (details of which shall be elaborated further below). By virtue of the various legal proceedings filed between parties, and the wild allegations and attempts made by the 2nd Respondent against the Petitioner in attempts of stealing and/or misappropriating and/or unlawfully converting/transferring the Petitioner’s shares to himself without the knowledge and consent of the Petitioner, as well as the various matters and events which have taken place between parties, it is clear that all mutual trust and confidence between the Petitioner and the 2nd Respondent has been broken down and they are not on talking terms and cannot get along with each other anymore. Due to the animosity between the Petitioner and the 2nd Respondent and that there is no hope of reconciliation or cooperation between them in the affairs of the company, and that the mutual trust and confidence between them has broken down irretrievably and is beyond reconciliation, it is just and equitable to wind up Shigen. Shigen has also been dormant since 2004 till todate, and under the Companies Act 2016 S465(1)(c), since its business has been suspended for more than a year, and is currently in a state of limbo, as well as being open to further misappropriation and abuse as a result of the 2nd Respondent’s actions, Shigen should therefore be wound up. The petitioner also states that as a result of The 2nd Respondent’s fraudulent actions, and his clear breach of fiduciary duties owed to Shigen, the whole substratum of the company has come to an end, and each of them not being able to see eye-to-eye in any matter whatsoever which has also led to Shigen being dormant, not being able to hold any meetings or file any accounts, which is all due to The 2nd Respondent’s wrongdoings. This clear breakdown within the shareholders of the company has caused it to be stagnant and unable to function therefore the Petitioner contends that it be just and equitable for the company to be wound up. The Petitioner therefore states that it will be in the interest of all concerned and just and equitable that Shigen be wound up with the appointment of liquidators to pursue and to recover all monies and assets which have been misappropriated and to investigate into the affairs of the company. It is clear from the matters stated above in the Petition and the actions and conduct of the 2nd Respondent show that there is clearly a breach of mutual trust and understanding and a violation of the legitimate expectation of the Petitioner, wherein the 2nd Respondent clearly has no intention to respect and honour the mutual trust and understanding between him and the Petitioner in respect of the management and conduct and affairs of Shigen. By virtue of the various legal proceedings filed between parties, and the wild allegations and attempts made by the 2nd Respondent against the Petitioner in attempts of stealing and/or misappropriating and/or unlawfully converting/transferring the Petitioner’s shares to himself without the knowledge and consent of the Petitioner, as well as the various matters and events which have taken place between parties, it is clear that all mutual trust and confidence between the Petitioner and the 2nd Respondent has been broken down and they are not on talking terms and cannot get along with each other anymore. All these demonstrate that there has been an irreconcilable breakdown of mutual trust and confidence between them wherein the relationship between them is acrimonious and they view each other with personal animosity. It is no longer possible for the parties to agree on the future conduct of Shigen. Shigen’s business activities and affairs had been based on mutual trust and confidence and/or good faith amongst the shareholders. Under the existing circumstances, it is difficult for them to work together to advance the company’s interest and it is futile for Shigen to continue to exist and therefore, it is just and equitable to wind up Shigen pursuant to Section 465(1)(h) Companies Act 2016. By reason of the matters aforesaid, the Petitioner contends that there are adequate grounds to order a winding up of Shigen based on the just and equitable ground. [16] This Court finds that the main ground put forward by the Petitioner for the winding-up of R1 is mainly on the basis that it is just and equitable to wind up the company and that there was a deadlock of shareholders and/or directors due to the breakdown of mutual trust and confidence. The Petitioner contended that “the acts of R2 in fraudulently and illegally altering the shareholding structure …, without the consent, approval and knowledge of the Petitioner, together with the filing of that Civil Suit, clearly shows that the relationship and mutual trust and understanding between parties have irretrievably broken down and cannot be restored. As such, R1 cannot continue to operate in the hands of R2 and/or the Petitioner and as such R1 should be wound up.”. [17] On the point of 'just and equitable' ground, the Federal Court in Tan Keen Keong v. Tan Eng Hong Paper & Stationary Sdn Bhd & Ors [2021] 2 MLRA 333; [2021] 2 CLJ 318; [2021] 3 MLJ 914 held- "[92] The just and equitable jurisdiction must be exercised carefully and judiciously, with special regard for the irreversible and drastic nature of a winding-up as a court-ordered remedy (see Perennial (Capitol) Pte Ltd & Anor v. Capitol Investment Holdings Pte Ltd [2018] 1 SLR 763." [18] Also, in Repute Ventures Sdn Bhd v. Spandeck Engineering Sdn Bhd & Anor [2008] 4 MLRH 814; [2008] AMEJ 0061; [2008] CLJU 107; [2008] MLJU 110, it was held- "The application of the 'just and equitable' provision in the section was discussed in the House of Lords case of Ebrahimi v. Westbourne Galleries Ltd & Ors [1973] AC 360; [1972] 2 All ER 492; [1972] 2 WLR 1289. In that case, Lord Wilberforce said ([1973] AC 360 at p 379; [1972] 2 All ER 492 at pp 499-500; [1972] 2 WLR 1289 at pp 1297-1298): My Lords, in my opinion these authorities represent a sound and rational development of the law which should be endorsed. The foundation of it all lies in the words 'just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that the courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the companies act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way." [19] Further, the Court of Appeal has set out a non-exhaustive list to illustrate how the ground of just and equitable may be met in Gulf Business Construction (M) Sdn Bhd v. Israq Holding Sdn Bhd [2010] 2 MLRA 411; [2010] 8 CLJ 775; [2010] 5 MLJ 34, which can be summarised as below-

where the substratum of the company has gone;

where the company's main object for its existence has lapsed;

where the company is carrying on its business at a loss and the remaining assets of the company are insufficient to pay its debts;

where the parties' relationship has broken down irretrievably;

where there is a lack of confidence among the shareholders that threaten the very existence of the company;

where the winding-up of the company would open the door to investigate the misconduct of the directors. [20] The Petitioner contended that R2 had unlawfully and illegally misappropriated and/or stolen the Petitioner’s shares in the amount of 24,998 shares. He alleged that R2 had committed an unlawful, illegal and fraudulent act in relation to the shares owned by the Petitioner, wherein pursuant to R2’s unlawful application and misrepresentations, it had led SSM to carry out such a rectification, and R2 had consequently fraudulently and wrongfully converted the Petitioner’s 24,998 shares to himself. [21] R2 contended that there was no breakdown of mutual trust and confidence as alleged by the Petitioner, but for the intention of the Petitioner to deny his rights of R1’s ordinary shares. [22] R2 also contended that the Petitioner only holds two (2) units of shares out of 50,004 total issued shares, which is equivalent to 0.000039% of shareholding in R1. He relied on the Federal Court case of Tan Keen Keong (supra), which held that winding up was not the proper remedy when there is other moderate remedy available, such as an offer for a share buyout for minority shareholders. [23] It was rather difficult for this Court to ascertain whether it is just and equitable to wind up R1. The difficulty arises when the petitioner contended that he owns 50% of R1’s shares, whereas R2 contended that it was not true. If the Court in Suit No. 105 allowed R2’s claim, then the contention of the Petitioner is not valid. At the time of the filing of this Petition, the Petitioner owns only two (2) units of shares out of 50,004 issued shares, representing 0.000039% of the shareholding in R1. Suit No. 105 is still pending disposal. [24] Further, all the issues pleaded to support this petition including the issues on shareholding and misappropriation of confidential information are issues pleaded in the pending civil Suit No. 223 and Suit No.105. [25] Thus, this Court finds that it is premature and improper to file the winding-up petition before the pending actions are properly disposed of. [26] Obviously, this winding-up Court cannot decide on the merits of Suit No. 223 and Suit No. 105. [27] In the case of Lau Jick Ing v Lim Heng Sean@ Eddie Lim & Anor [2021] 8 MLJ 9; [2021] CLJU 1210; [2020] AMEJ 1158; [2020] MLRHU 1217, it was held- “[37] Firstly, as a going concern company it is unjust and inequitable to wind up the second defendant. Secondly winding up is a drastic action not only to the second defendant as a going concern but also to the creditors of the second defendant. Thirdly the remedy sought in winding up and derivative action are different. The Court of Appeal in Perak Integrated Networks Services Sdn Bhd v Urban Domain Sdn Bhd (on behalf of themselves and Pins OSC & Maintenance Services Sdn Bhd through derivative action) & Anor [2018] 4 MLJ 1; [2018] 5 CLJ 513; [2018] 1 LNS 486 explained the difference between the two actions as follows: [47] ... Derivative action is a procedural convenience for enabling the court to do justice and for the benefit of a company which is controlled by miscreant director and shareholder and persons associated to them. A winding up action, on the other hand, provides a separate remedy to a shareholder to seek redress for his grievance and for his benefit. We wish to emphasise that the court should not shut its door to any person who comes forward to start the proceedings for the benefit of a company and not for some other purpose (Nurcombe v Nurcombe). Thus the winding up of the second defendant will serve the first defendant's interest as a shareholder but will cause irreparable damage to the second defendant which is a going concern. This is especially so in light of the future fees commission it is expected to continue to receive from Sutera Matra for the service stations procured by the plaintiff for the next 20 to 25 years. [38] Clearly the first defendant's intended winding up proceeding is not bona fide. It is made for a collateral purpose, ie to thwart the second defendant's claim against Sutera Matra where the first defendant has direct proprietary and pecuniary interest. [39] The first defendant proposed to wind up the second defendant on just and equitable ground. In view of the first defendant's conduct as stated above, the first defendant himself does not come with clean hand for him to seek the equitable jurisdiction of the winding up court to wind up the second defendant on equitable grounds.”. [28] Reference is also made to the case cited by R2 in the case of Mammoth Empire Construction Sdn. Bhd. v Kenwise Sdn. Bhd. [2020] 4 MLRH 468; [2020] AMEJ 0165; [2020] MLJU 1363, that it is premature and improper for a winding-up petition to be presented at the stage before pending actions involving the subject matter of the petition are properly disposed of. It was held- [24) In view of there being a serious and bona fide dispute between the parties as to the validity of the Arbitration Award which is the alleged debt in respect of any proposed Winding Up Petition and the fact that there are 3 important related actions via Originating Summons ('OS') pending before the Shah Alam High Court i.e., the Setting Aside and the Reference of Question of Law Applications by the Plaintiff and the Recognition and Enforcement Application by the Defendant, it would be premature and improper for a Winding Up Petition to be presented at this stage before the pending actions are properly disposed of. (Emphasis Added) [29] As such, this Court is of the considered view that it is premature and improper for the winding-up petition to be filed before the pending actions are properly disposed of. Further, the issues raised in the other proceedings are real and will affect R1; thus, at this stage, the filing of this petition is premature. [30] Thus, this Court is inclined to the submissions of R2 that the filing of this petition raises suspicious circumstances and that the Petitioner has misused this Petition as a tool to steal a march in the pending litigation between the Petitioner and R2 regarding the issues surrounding R1, with ill intent. Also, the Petitioner is attempting to re-litigate identical issues under a different guise and the Petitioner has not come to Court with clean hands when he filed this petition to try the same issues which are pending at the Penang High Court in Suits No. 223 and 105. [31] This Court is of the considered view that it is only possible to wind up a company on just and equitable grounds if there are satisfactory reasons for the court to exercise its discretion and form an opinion that it is just and equitable to order a winding up. Further, a party seeking a winding-up under the just and equitable rule must came to court with clean hands (See: Ho Shen Lee (M) Sdn Bhd & Ors v. Lim Shen Lee [2023] 1 MLRA 535; [2022] 6 MLJ 276; [2022] CLJU 2317). [32] Further, in Dato' Ting Check Sii v. Datuk Hj Mohammad Tufail Mahmud & Anor [2007] 3 MLRH 858; [2007] 7 MLJ 618; [2008] 7 CLJ 453, the Court held that certain circumstances are not capable of constituting just and equitable grounds for winding up a company. These may include allegations of mismanagement or misappropriation of funds by directors, quarrels and groupings among shareholders, general or mere allegations of oppression of minority shareholders, the substratum not wholly gone, and the company running at a loss. This decision highlights that not all circumstances can justify winding up a company under just and equitable grounds. That being said, the Court has wider roles in assessing whether the winding up of a company is a just and equitable solution for the shareholders. In submitting the petition to wind up under this particular ground, the applicant is expected to submit and prove their allegations while arguing that the continuous existence of the company is no longer viable and may cause significant challenges or difficulties to the shareholders. [33] Moreover, the Federal Court in Tan Keen Keong (supra) held that winding up was not the proper remedy when there is other moderate remedy available, such as an offer for a share buyout for minority shareholders. This Court also finds that at the moment since Suit No. 105 has not been disposed of, the majority shareholder in R1 is still R2. Therefore, the Petitioner only possess minimal shareholding of 0.000039% in R1, whilst R2 possess majority of the shareholding [34] Likewise, in Litar Sistem Adilkap Sdn Bhd v Lee Teak Hock & [2020] 7 CLJ 84; Anor [2020] 5 MLJ 43; [2020] AMEJ 0517; [2020] MLRAU 133, the Court of Appeal held- [49] All the foregoing findings based on the facts narrated are also consistent with the principle that winding up of a company should be a remedy of the last resort (see Dato Ting Check Sii v. Mohamad Tufail Mahmud & Anor [2007] 3 MLRH 858; [2007] 7 MLJ 618; [2008] 7 CLJ 453; Liew Jui Hua & Ors v. Johor Property (M) Sdn Bhd [1996] 2 MLRH 144 and Weng Wah Construction Co Sdn Bhd v. Yik Foong Development Sdn Bhd [1994] 1 MLRH 836; [1994] 2 MLJ 266; [1994] 3 CLJ 511; [1994] 2 AMR 1137). [35] Accordingly, winding up is a drastic and irreversible remedy and should not be used as a tool for a minority shareholder to further personal dispute. [36] It was also observed that there was a consent judgment before the Court of Appeal pertaining to a winding-up petition No 28NCC-55-03/2015 (W/Up No. 55) which was previously filed by R2 against R1, and that W/Up No. 55 is to be stayed until disposal of W/Up No. 55. Clearly, this is an indication that it has been the common intention of the parties, to resolve all issues pertaining to R1. [37] As such, upon perusal of the evidence adduced as well as submissions of the parties, this Court is not satisfied that there are grounds to wind up R1, particularly on the basis of just or equitable circumstances. It is also not just and equitable to allow the winding-up of R1 until the disposal of the Suits No. 223 and No. 105. [38] To summarise, this Court finds that-

The Petitioner did not come with clean hands;

The Petitioner has not satisfied this Court that the grounds he complained of in the Petition justify that R1 company be wound up; and

The Petitioner's complaints are premature, pending disposal of Suits No. 223 and Suit No. 105. CONCLUSION [39] Based on the above deliberations, the Petition is dismissed with costs. Dated: 6th JANUARY 2026 -SGD- (SUZANA BINTI MUHAMAD SAID) Judicial Commissioner of the High Court Georgetown, Pulau Pinang For the Petitioner: Karin Lim Ai Ching and Nicholas Lim Wei Jian Messrs. Presgrave & Matthews For the 2nd Respondent: John Khoo Boo Lai, Khoo Ding Yuan and Martin