Wang Chih Tsang ... 1ST Appellant v Cheng Pi Chun ... Respondent (No. S-02-(NCVC)(A)-1084-06/2016)

The 3rd appellant is a company, acquired after the 1st appellant obtained RM1.2 million from his family through a family agreement entered into between the 1st appellant and his family members. The 1st appellant is the managing director of the 2nd and 3rd appellants while the respondent is a shareholder and a director of the 3rd appellant. [3] Before us, the appellants are appealing against the order of the High Court at Sandakan dated 5.5.2016 (the said order) which allowed the respondent’s petition to wind up the 3rd appellant and also to appoint an independent liquidator to investigate into the 1st and 2nd appellants’ conduct in the affairs of the 3rd appellant and to commence appropriate action against the 1st and 2nd appellants. 3 Preliminary Objection (P.O) [4] At the outset of the hearing of the appeal before us, learned counsel for the respondent had raised a P.O that by virtue of the said order, the 3rd appellant is a wound up company and therefore has no locus standi to initiate this appeal without first obtaining sanction from the Official Receiver (OR). Learned counsel cited the decision of the Federal Court in Winstech Engineering Sdn Bhd v Espl (M) Sdn Bhd [2014] 2CLJ 1 wherein the Federal Court had allowed the p.o raised by the respondent and refused leave to appeal on the ground that the sanction by the OR given on 19.8.2013 had no retrospective effect, hence the application for leave filed prior to the issuance of the sanction was invalid. [5] Learned counsel for the appellants argued that Winstech’s case, supra, can be distinguished as Winstech’s leave application did not arise from the decision of the winding up Court Judge in granting the winding up order. It arose from a civil suit filed by Winstech where Winstech’s claim was dismissed and the defendant’s counter claim was allowed. Unlike the instant appeal, the suit in Winstech’s case, supra, was not a continuation of the winding up proceedings. 4 [6] Having heard the arguments on the P.O, we unanimously held that the P.O raised was without merit. We respectfully agreed with learned counsel for the appellants that Winstech’s case, supra, is distinguishable from the instant appeal as the appeal herein pertains to the order which had resulted in the company being wound up. The appellants herein were aggrieved with the winding-up order made against the 3rd appellant. In Sri Hartamas Development Sdn Bhd v MBF Finance Bhd [1991] 3 MLJ 325 Hashim Yeop A. Sani CJ (Malaya), delivering the judgment of the Supreme Court had inter alia at page 326 stated the following: “However, in our view, Mr Loh (counsel for the respondent) was not with respect, correct if he said that the company could not appeal against the winding-up order. It is provided quite clearly in section 253(2) of the Act, that, subject to the rules, an appeal from any order or decision made or given in the winding-up of a company shall lie in the same manner and subject to the same condition as an appeal from any order or decision of the court in cases within its ordinary jurisdiction. Therefore under that provision, an appeal can be made to this court against an order for the winding-up of a company” 5 [7] At page 327, His Lordship further stated: “After a winding-up order is made, generally speaking no one but the liquidator can act on behalf of the company. But it is quite clear that the company has a right to be heard to say that the winding-up order is wrong and to appeal against the order…” [8] The Court of Appeal in Taman Sungai Dua Develompent Sdn Bhd (previously known as Supershine (M) Sdn. Bhd) v Goh Boon Kim [1997] 2 MLJ 526 had intra alia held: “(2) ... Further, it is common ground that notwithstanding the appointment of a provisional liquidator, the board still his residuary power, for example, it can instruct solicitor and counsel to oppose the current petition and, if a winding-up order is made, to appeal against that order…” (emphasis added). [9] Therefore we were of the view that where a company is appealing against a winding up order made against it as in this instance, no sanction of the Official Receiver is required to be obtained before it can be allowed to file or proceed with the appeal. On that footing, we dismissed the P.O. 6 The Appeal [10] The respondent’s cause of action against the appellant in the Originating Petition dated 11.9.2014 (the petition) was based on oppression under section 181 of the Companies Act 1965. The respondent claimed that she had contributed to the 3rd appellant by transferring RM1.3 million from Taiwan to Malaysia for the purchase of 5 pieces of land bought by the 3rd appellant. The alleged oppressive conducts by the appellants to the respondent as summarised by the learned JC who heard the petition were: “(i) Misappropriation of the respondent’s and the 3rd appellant’s fund,

(a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or holders of debentures including himself or in disregard of his or their interests as members, shareholders or holders of debentures of the company; or 8

(b) that some act of the company has been done or is threatened or that some resolution of the members, holders of debentures or any class has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures (including himself).

(a) direct of prohibit any act or cancel or vary any transaction or resolution;

(b) regulate the conduct of the affairs of the company in future;

(c) provide for the purchase of the shares or debentures of the company by other members or holders of debentures of the company or by the company itself; 9

(d) in the case of a purchase of shares by the company provide for a reduction accordingly of the company’s capital; or

(e) provide that the company be wound up.

(a) Member or shareholder of a company;

(b) Holder of a debenture of a company; and

(c) In the case of a declared company under Part IX, the Minister (charged with responsibility for companies). Other than those persons stated above, no other persons can claim any protection or relief under s. 181, not even a director, executive or employee of a company.” [15] Hence, it is clear that what is envisaged by section 181 is that the act of oppression must relate to the petitioner’s status as a member or shareholder of the company. [16] Back to the finding of the learned JC, on the alleged oppression, we shall deal with them as follows:

(i) Misappropriation of the respondent’s and the 3rd appellant’s fund. 12 [17] The learned JC had in respect of the 1st alleged oppression found at paragraph 49 of His Lordship’s grounds of decision the following: “Upon the inspection on the said statement of accounts it was discovered that the funds of the 3rd Respondent had been misused for the benefit of the 2nd Respondent in the following transactions:

(i) Payments to Commercial Servicing Agency for the levy charges on one Tasarus Tanel, who work for the 2nd Respondent,

(b) In my opinion the filing of the Originating Summons by the Petitioner shows that the 1st Respondent had been preventing the Petitioner from the management of the company. There is no reason for the 1st Respondent to deny such access to the Petitioner considering the fact that she is also one of the directors of the 3rd Respondent. Such 15 refusal has put the Petitioner in a difficult position which resulted in the filing of the Originating Summons which is unnecessary if the 1st Respondent was to act reasonably towards another director of the company.

(c) This refusal is further compounded by the 1st Respondent act in preventing the Petitioner from attending the Board of Director Meeting of the 3rd Respondent as well as its Annual General Meeting held on 20th day of July 2014.

(d) It was proven during the trial that DW5, the company secretary of the 3rd Defendant had issued a notice of the AGM to be convened on 20th day of July 2014 One of the agenda of AGM was to receive and adopt the audited account of the 3rd Defendant for year ended 31st day of March 2007 until 31st day of March 2013. It was also DW5 evidence that the notice of the Board of Directors Meeting would be faxed to all directors. However he did not fax the said notice to the Petitioner because he does not have her fax number.

(e) During cross examination DW5 told the court the notice of the Board of Directors Meeting on 20th day of July 2014 purportedly sent to the Petitioner did not bear the address of the Petitioner. Likewise the notice of the AGM on 20th day of July 2014 purportedly sent to the Petitioner also does not bear the address of the Petitioner. 16

(f) It was admitted by DW5 that he could not contact the Petitioner for the purpose of the service of the said notices and a lady by the name of Chong Li Mee had accepted service of the notice on behalf of the Petitioner.” [22] Further, the learned JC said:

(a) “Having examined the evidence I am of the opinion that it is safe to conclude that the 1st Respondent had been in control of the said company. He gave instructions to the company secretary and run the company as if it is a private own business. He was also responsible in denying the Petitioner access to the record of the company forcing her to file an Originating Summons seeking for redress and it was only after the filing of the said Originating Summons that the Petitioner was given limited access to the statement of accounts of the 3rd Respondent.

(b) The record of the meetings on 28th day of September 2007 and 10th day of December 2007 were not properly kept and there is a possibility that the signature of one of the directors were forged.

(c) However, most importantly is the fact that the notice of the meeting on 20th day of July 2014 was not properly served on the Petitioner.” 17 [23] First thing that came to our minds from the above excerpt, if it was true that the respondent had been denied access to the record books of the 3rd appellant for many years even though she had been a shareholder since 2006, why did she not take action then?. In paragraph 40 of the petition as shown at page 40 of the Core Bundle, the respondent alleged that except for the AGM fixed on 28.9.2007, which she had attended, she had never attended any other general meeting or board meeting of the 3rd appellant. As a shareholder and as a director, did it not occur to her why was she not called for any meeting for many years. Why did she keep quiet? [24] Hence, we agree with learned counsel for the appellant that if this allegation is true, there was obviously inordinate delay on the part of the respondent in filing the petition only in 2014 and this delay cannot be condoned. This Court in Mascon Rinota Sdn Bhd v Rinota Construction Sdn Bhd [2016] 4 CLJ 854 had held: “(1) The question of delay in filing the petition was of paramount importance in any consideration of the exercise of the court’s discretion under s. 181 of the CA. Herein, this petition was only filed in 2006, ie, ten years after those matters complained of had first occurred. Acting without expediency to protect or further one’s rights when an alleged breach or violation of such 18 right arose amounted to acquiescence, meaning acceptance or consent to that situation. The court should deny relief to an interested party who had sat on his rights and accepted tacitly such practices or decisions adopted by a company in its business affairs over time, but who now wished to advance matters related to or arising therefrom as a grievance for relief under s. 181 of the CA.” [25] In Lin Kai Wing & Anor v Lim Kai Lam & Ors [2016] 10 CLJ 77 this Court held inter alia: “The fact that the respondents had possession of the accounts pursuant to the oppression petition as of 2010 and yet failed to lodge a police report alleging fraud or seeking recovery until some two years later suggested that the respondents’ claim lacked legitimacy. Further, litigation in relation to matters involving the business of KMT or KMTSB ought to be litigated in one suit. Filing several suits gave rise to the possibility of duplicity in findings and not to mention, res judicata. The trial judge failed to appreciate that a plea of fraud was not simply made out by pointing to the undisputed fact of withdrawals from KMT or KMTSB. It requires considerably more to establish fraud. Even by applying the lower standard of a balance of probabilities, the plea of fraud was simply not made out.” 19 [26] Similarly in this instance, it took about 8 years for the respondent to present her petition despite her being a co-signatory of the 3rd appellant’s cheques and despite her purported exclusion from attending the 3rd appellant’s meeting. This in our view is sufficient to deny her from the relief she sought for. [27] We also noted that the learned JC was persuaded by the fact that the respondent was “prevented” from attending the Board of Directors meeting. As alluded to earlier, section 181 concerns only with the petitioner’s position as a member or shareholder of the company, and not her status as a director. The petitioner must show both that the conduct of the majority is “oppressive” and that it affects her in her capacity as a shareholder. See Soh Jiun Jen, supra. Hence we opined that the learned JC erred when he took into consideration the respondent’s status as a director to allow her the protection of section 181. [28] Further Section 181(1)(a) clearly says “that the affairs of the company is being conducted or the powers of the directors are being exercised”. There are 4 directors of the 3rd respondent but only the 1st respondent was named in the petition. Where is the evidence that the majority is oppressive towards her?. Just because the 1st appellant allegedly had 20 full control in the decision making of the 3rd appellant, that fact if true, in our view, is not enough to show oppression. See Re Kong Thai Sawmill (Miri) Sdn Bhd, supra. [29] We therefore opined that the respondent’s contention that she was excluded by the 1st appellant in managing the 3rd Respondent and that the 3rd appellant was managed autocratically was insufficient to prove her claim of oppression under section 181.

(i) A piece of land measuring 14.62 acres situated at Sg Batang, Mile 10, Sandakan,

(a) Direct or prohibit any act or cancel or vary any transaction or resolution,

(b) Regulate the conduct of the of affairs of the company in future,

(c) Provide for the purchase of the shares or debentures of the company by other members or holder of debentures of the company or by the company itself, 23

(d) In the case of a purchase of shares by the company provide for a reduction accordingly of the company’s capital; or

(e) Provide that the company be wound up. [35] With the word “or” at the end of paragraph (d) of subsection 181(2), it is clear in our view, that those paragraphs must be read disjunctively. The court is empowered to make only one order and the learned JC in this instant appeal had chosen paragraph (e) i.e to wind-up the 3rd respondent. However the learned JC had gone further by ordering the investigation into the conduct of the 1st & 2nd appellants in the affairs of the 3rd appellant and to commence appropriate action against them. This in our view is definitely beyond the scope of section 181. This is further compounded by the fact that the respondent is not a member or shareholder of the 2nd appellant and therefore has no interest whatsoever in the 2nd appellant. Neither was the 1st or 2nd appellant a member or shareholder of the 3rd appellant at the time of the filing of the petition. Thus it was our view that the learned JC erred when he made the order under section 181 against the 1st and 2nd appellants. 24 Conclusion [36] In the circumstances and for the reasons stated, we were of the unanimous view that this was a fit and appropriate case for appellate intervention. We were of the view that the learned JC erred in holding that oppression had been established based on the grounds raised by the respondent. We therefore set aside the High Court order and allowed the appeal with costs of RM40,000 here and below subject to payment of allocator fee. Deposit was ordered to be refunded. Dated: 13 Disember 2017 (ZALEHA BINTI YUSOF) Judge Court of Appeal Malaysia Serena Liew Chun Yean Advocates for the 1st, 2nd and 3rd Appellants: Messrs Serena Liew & Associates Advocates & Solicitors Suite 6AF13, 6th Floor, Block A Kompleks Karamunsing 88300 KOTA KINABALU SABAH. Ken Yong Advocates for the Respondent Messrs Ken Yong & Co. Advocates & Solicitors Block B3, Lot 3, 1st Floor Bandar Labuk Jaya, Mile 7 90000 SANDAKAN SABAH.