Tan Pit Mooi v 1. ) Jaia Sdn Bhd (WA-28NCC-667-11/2020)

JAIA SDN BHD (Company No.: 201901041048 (1350378-A))

JASMINE JANE MOHAN

LAW WEN JIA

ANDY TAN KIAN KOK (NRIC.: 700508-08-5007) … RESPONDENTS GROUNDS OF JUDGMENT INTRODUCTION [1] The Petitioner filed this petition to wind-up the First Respondent (“R1”) pursuant to section 461(1)(f) and (h) of the Companies Act 2016 (“CA 2016”): BACKGROUND FACTS [2] Prior to the dispute between the Petitioner and the Second Respondent (“R2”), the Petitioner and R2 were in a casual friendly relationship. [3] Prior to the incorporation of R1, it is not disputed that the Petitioner had been selling “Stayzon” branded products as a reseller/distributor (“the brand”) and carrying out the business of selling, distributing and marketing products under the brand and other business activities (“business”). [4] At the time of incorporation of JAIA Sdn Bhd (“R1”), the Petitioner held no proprietary interest over the “Stayzon” mark (whether registered or otherwise) or the brand. [5] R1 was established on 12.11.2019 by both the Petitioner and R2. During the incorporation of R1, both the Petitioner and R2 held equal shares and were the only two directors of R1. [6] The owner and product developer of the brand is an Australian company. On 19.12.2019, R1 and the brand owner entered into an agreement dated 09.12.2019 for the purpose as set out therein. [7] R1 then took steps to register the “Stayzon” mark in Malaysia. R2 was responsible for the sales and marketing of the products whilst the Petitioner was responsible for the back-end operations of R1, which includes production, supply chain, product certification/registration and accounts. [9]

As at 16.06.2020, the issued share capital of R1 was RM100.00 divided into 100 ordinary shares. The shareholding structure of R1 as at 16.06.2020 was as follows:

(ii) As at the date of the petition, the shareholding structure of R1 is as follows: Shareholders Shareholding / (%) Tan Pit Mooi / Petitioner 50 (approximately 0.12%) Chia Chee Hoong 10 (approximately 0.025%) Jasmine Jane Mohan / R2 38,440 (approximately 92.175%) Law Wen Jia / R3 1602 (approximately 3.84%) Andi Tan Kian Kok / R4 1602 (approximately 3.84%) [10] To assist the running of the day-to-day operations of R1’s business, the Third (“R3”) and Fourth (“R4”) Respondents were hired to work on flexible hours. [11] R3 was appointed to manage the online marketing matters while R4 handled financial and accounting matters. R2 decided to offer shares in R1 to R3 and R4 in recognition and appreciation of their contributions. PETITIONER’S GROUNDS TO WIND-UP R1 [12] The main grounds relied on by the Petitioner in presenting the petition is that there is a loss of mutual trust and confidence, leading to a breakdown in the working relationship between the Petitioner and R2, who were the founders of R1. The Petitioner avers that since R1 was set up as a quasi-partnership, once there is a loss of trust between the Petitioner and R2, R1 ought to be wound-up since it would be difficult for them to work together in managing the affairs of R1. [13] The Petitioner further avers that there is a deadlock in the management of R1 and proceeded to issue a “deadlock” email to R2 on 03.06.2022. [14] The Petitioner claims that there are numerous incidents where R2’s actions were “unjust and unfair” to the Petitioner, and that these incidents show that the conduct of R2 in running the affairs of R1 was to benefit her own interests rather than the interest of the members as a whole. The conduct complained of includes:

lack of probity in the accounts for the year ending March 2021, where the Petitioner avers that the gross profit drastically dropped from 70% to 49%.

the appointment of R3 and R4 as directors of R1 with the intention of diluting the Petitioner’s position in R1 and to outvote her on the Board of Directors of R1.

Failure by R2 to pay invoices issued by Signature Concept (M) Sdn Bhd which is a company owned by the Petitioner’s husband.

R1 is a form of quasi-partnership, thus there is a deadlock in the management of R1. R1’s RESPONSE TO THE ALLEGATIONS BY THE PETITIONER [15] In respect to the allegation of lack of probity in the accounts where the gross profit dropped from 70% to 49%, R2 avers that the Petitioners had full access, knowledge and control of the relevant accounting records kept in the accounting software system used by R1 (see pages 37-38 of Enclosure 8). [16] R2 contends that R4 as the person in charge of financial matters had by email dated 28.04.2021 provided feedback and explanation to the Petitioner on the issues with the profit margin (see Exhibit J- 4 of R1’s affidavit in reply, Enclosure 8). [17] After the email stated above, the Petitioner had no further queries on the profit margin. Additionally, the Petitioner had no comments on the draft management accounts for November to March 2020 when they were circulated to the Petitioner. [18] (i) With respect to the appointment of R3 and R4 as shareholders and directors of R1, such appointments were done through proper channels at a shareholders meeting on 21.11.2020 to increase the share capital of R1. Despite the offer to the Petitioner to take up the shares to be allocated to her, on a pro-rated basis, the Petitioner declined to take up the offer. Thus, she cannot now complain that the increase in shareholding has diluted her control over R1.

(ii) Additionally, the Petitioner did not raise any issue with the increase in share capital of R1 at the shareholders meeting held on 21.11.2020. Neither did she take any court action to challenge the validity of the meeting and resolutions passed at the said meeting.

(iii) In fact, the Petitioner admitted in her affidavit in reply that she chose not to invest further in R1 during the capitalisation exercise because she was of the view R1 is not profitable. [19] With respect to the alleged failure by R2 to pay invoices to certain creditors, R2 has replied that there are issues and discrepancies concerning those invoices which are disputed by R2, in particular the alleged debt to Signature Concept Sdn Bhd, which R2 contends is a company owned by the Petitioner’s husband. In any event, it is up to those creditors to file proceedings to recover the monies allegedly owed to them. R2 avers that she had to exercise prudence in preserving cash and to ensure the accuracy of those invoices issued by some of the creditors. FINDINGS BY THE COURT [20] This Court finds that the explanation by R2 is credible and in accord with good management practice. Thus, such refusal to pay out on questionable invoices is more for the benefit of R1 as a whole and cannot by any stretch of imagination be construed to be for the benefit of R2 personally. [21] (i) The pivotal issue in this Petition is whether R1 was set up and continues to be a quasi-partnership. As pointed out by R2, this submission was never pleaded by the Petitioner.

(ii) Based on the current shareholding in R1, the Petitioner holds only 50 shares out of the total issued shares of 41,704 shares. Thus, the Petitioner holds only approximately 0.12 per cent (0.12%) of the issued share capital of the company. The Petitioner holds the smallest percentage of shares amongst the four (4) shareholders. Therefore, after the increase of share capital in R1, with the addition of new shareholders, it is no longer in a form of quasi-partnership and thus, there cannot be any deadlock in the running of the R1 as a company. [22] The overarching issue in this case is why the Petitioner who holds less than one per cent (1%) of the issued share capital of R1 chose to file this petition to wind-up R1 when her interest in R1 is minuscule. If she is unhappy with the way R1 is being managed and wants to exit, she could have filed a petition under section 346 of the CA 2016 where this Court could order R2 to purchase her shares in R1. This shows mala fide on the part of the Petitioner. [23] Additionally, the Petitioner failed to disclose that R1 had filed a suit against her and other related individuals in suit WA-22IP-14- 03/2021 (KL IP Suit) for breach of director’s duties, copyright infringement and passing off. Therefore, the filing of this winding-up petition is actuated by her ulterior motive to frustrate and terminate the suit against her in the KL IP Suit. [24] I am guided by the decision of the court in the case of Tan Geok Hwa v Cantamin Construction Development Sdn Bhd (2009) MLJU 1329, which held as follows: “And that the petition for winding-up dated 10.09.2009 was presented only after the alleged misappropriation. When there is even a semblance of ulterior motive to wind-up the company… it is trite that the court will be reluctant to entertain the application. Support for the proposition is found in a number of cases (see Re Senson Auto Supplies Sdn Bhd).” [25] I find that R2 is not a quasi-partnership, and there is no deadlock in the management of the company since the Petitioner only holds less than one per cent (1%) of the shares in R1. [26] It does not stand to reason why R2 who currently holds 92.17% of the shareholding in R1 would want to act against the interest of other shareholders and in her own interest when she already owns over 90% of the shares of R1 and whatever benefit which accrues to R1 would largely go to her as the largest shareholder. [27] Thus, for the reasons aforesaid, I find that on a balance of probabilities, the Petitioner has failed to prove her case to wind-up R1 under the provisions of section 465(1)(f) and (h) of the CA 2016. [28] Therefore, I dismiss this petition with costs of RM5,000.00. Dated 5 Disember 2023 ……………t.t……………… Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE APPLICANT: MS SUZANE KURIAN SOLICITORS FOR THE APPLICANT: TETUAN JEEVA PARTNERSHIP COUNSEL FOR THE RESPONDENT: MR BRYAN TEO AND ONG SHU CING SOLICITORS FOR THE RESPONDENT: TETUAN JOEL & MEI Cases Referred to: ➢ Tan Geok Hwa v Cantamin Construction Development Sdn Bhd

MLJU 1329 Legislation Referred to: ➢ 461(1)(f) and (h) of the Companies Act 2016 ➢ Companies (Winding-up) Rules 1972 ➢ Rules of Court 2012 Decision date: 13.03.2023