Wong See Keong v Chin Su Fah (AA-24NCC-13-06/2023)

WONG SEE KEONG …PLAINTIFF (IDENTIFICATION NO: 490819-08-5765)

CHIN SU FAH

EWE THUAN HO

PEE PEE & SONS SDN BHD

JITSIN PACK SDN BHD (COMPANY NO: 198401002926 (115444-X)) …DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] The Plaintiff is a minority shareholder (17.6%) of Jitsin Pack Sdn Bhd (“the Company”). The Plaintiff had mounted an oppression claim against the Defendants pursuant to Section 346 of the Companies Act 2016, asserting that the Company's affairs were administered in a manner oppressive to the plaintiff as a minority shareholder. [2] The plaintiff sought to compel the 1st to 3rd Defendants to acquire all of the Plaintiff's shares in the company or to initiate the winding-up of the company as a consequence. BACKGROUND FACTS [3] The Plaintiff served as the managing director of the Company since its formation in 1984 until 24.6.2022; and as director until 23.6.2023. The shareholdings of the Company are split in the following manner:- Shareholder Shares % of Total Shares Chin Su Fah 437,620 20.3 Ewe Thuan Ho 494,100 22.9 Pee See & Sons Sdn Bhd 847,100 39.2 Wong See Keong 381,180 17.6 2,160,000 100 [4] At the time of filing this proceeding, the 1st Defendant, the 2nd Defendant, Chin Si Loo (“CSL”), Chin Kin Liew (“CKL”) and the Plaintiff held directorial positions within the company. The Plaintiff was not re- elected as a director at the AGM held on 23.6.2023, while the others remained as directors of the Company. [5] The 1st Defendant, CSL and CKL are brothers; and the 1st Defendant together with CSL are the directors of the 3rd Defendant. [6] In brief, the Plaintiff's complaints are as follows:-

The Plaintiff's termination as Managing Director, after serving for 35 years, was executed without adherence to the Articles of Association;

The Plaintiff was removed as Commissioner of an associated company in Indonesia without their knowledge and consent, as well as without the knowledge and consent of the Company's board of directors;

The plaintiff was deprived of information regarding the Company's RM7.3 million investment in its associated company in Indonesia by the majority shareholders;

The majority shareholders have endorsed an individual with a conflict of interest (the 1st Defendant’s son) to lead the associated company in Indonesia for their own personal advantage;

The majority shareholders, on the Board of Directors, refused to respond to inquiries regarding the

The majority shareholders have neglected to furnish the Plaintiff with the Financial Statements for review prior to the Annual General Meeting, yet proceeded to endorse them without due consideration;

The majority shareholders have also sanctioned the transfer of substantial sums of money from the Company to the associated company in Indonesia without providing any justification;

The majority shareholders have failed and/or refused to declare dividends for their personal gain in the associated company in Indonesia;

The majority shareholders have failed and/or refused to consider the Plaintiff's proposal to sell his shares;

The majority shareholders, on the Board of Directors, have failed and/or refused to answer the Plaintiff's queries and his right (as a director) to inspect the Company's accounts;

The majority shareholders have removed the Plaintiff from the Board of Directors;

The Plaintiff does not have any confidence in the conduct of the Board of Directors which consists of the majority shareholders. [7] The Plaintiff’s action fundamentally embodies a claim of oppression pursuant to section 346(1) of the Companies Act 1965 (CA 1965). THE LAW [8] Section 346 of the CA 2016 which is in pari materia to section 181 of the CA 1965 outlines the remedial measures available to minority shareholders when faced with oppressive actions within a company. The pertinent excerpt of the aforementioned section reads as follows:- “Remedy in cases of an oppression

(1) Any member debenture holder of a company may apply to the Court for an order under this section on the ground —

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 debenture holders including himself or in disregard of his or their interests as members, shareholders or debenture holders of the company; or

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

If on such application the Court is of the opinion that either of those grounds is established, the Court may make such order as the court thinks fit with the view of bringing to an end of remedying the matters complained of, and without prejudice to the generality of subsection (1), the order may —

direct or prohibit any act or cancel or vary any transaction or resolution;

regulate the conduct of the affairs of the company in future;

provide for the purchase of the shares or debentures of the company by other members or debenture holders of the company or by the company itself;

in the case of a purchase of shares by the company, provide for a reduction accordingly of capital of the company; or

provide that the company be wound up.” [9] The provision outlined above confers the court the power to grant relief under section 346(2) of the CA. This authority is exercised when, upon examination of the factual circumstances, the court is satisfied that the company's affairs or the exercise of its directors' powers have been conducted in an oppressive manner or with disregard for the interests of a member or debenture holder. Additionally, if an action has occurred or is impending that unfairly discriminates against or prejudices a member or debenture holder, the court reserves the right to intervene and provide appropriate relief. [10] The seminal case in respect of s. 181 is Re Kong Thai Sawmill (Miri) Sdn Bhd & Ors v. Ling Beng Sung [1978] 1 LNS 170; [1978] 2 MLJ 227 where Lord Wilberforce, representing the Privy Council, articulated the following: “This section can trace its descent from section 210 of the United Kingdom Companies Act, 1948 which was introduced in that year in order to strengthen the position of minority shareholders in limited companies. It also resembles the rather wider section 186 of the Australian Companies Act, 1951. But section 181 isin important respects different from both its predecessors and is notably wider in scope than the United Kingdom section. In sub-section (1)(a) it adds disregard of the interests of members, etc. to oppression as a ground for relief in this respect making explicit what was already inherent in the section (see In re HR Harmer Ltd [1959] 1 WLR 62 75). It introduces a new ground in sub-section

(1)(b) and, most importantly, in sub-section (2), which sets out the kinds of relief which may be granted, it provides for "remedying the matters complained of" and states as a specific type of relief that of winding-up of the company. Section 210 is differently constructed. Under it, the court is required to find that the facts would justify the making of a winding-up order under the "just and equitable" provision in the Act, but also that to wind-up the company would unfairly prejudice the "oppressed" minority. The Malaysian section, on the other hand, requires (under sub-section 1(a)) a finding of "oppression" or "disregard", and then leaves to the court a wide discretion as to the relief which it may grant, including among the options that of winding the company up. That option ranks equally with the others, so that it is incorrect to say that the primary remedy is winding-up. That may have been so before 1948 and even after the enactment of section 210, but is not the case under section 181. Their Lordships consider it important that courts applying section 181 should do so according to its terms and its purpose and should not regard themselves as necessarily bound by United Kingdom decisions, which are based upon a different section, and in some cases restrictive. The same applies, though with less force, to reliance upon Australian decisions upon section 186. There are three particular points of direct relevance in the present appeal. First, it is claimed by the appellants that the section is not a substitute for a minority shareholders' action and, specifically, that many if not most of the matters complained of would properly form the subject of such an action. Their Lordships agree with this in part. Relief cannot be sought under section 181 merely because facts are established which would found a minority shareholders' action: the section requires (relevantly) "oppression" or "disregard" to be shown, and these are not necessary elements in the action referred to. But if a case of "oppression" or "disregard" is made out, the section applies and it is no answer to say that relief might also have been obtained in a minority shareholders' action. To the extent that the appellants so contend their Lordships do not accept their argument. Secondly, for the case to be brought within section 181(1)(a) at all, the complaint must identify and prove "oppression" or "disregard". The mere fact that one or more of those managing the company possess a majority of the voting power and, in reliance upon that power, make policy or executive decisions, with which the complainant does not agree, is not enough. Those who take interests in companies limited by shares have to accept majority rule. It is only when majority rule passes over into rule oppressive of the minority, or in disregard of their interests, that the section can be invoked. As was said in a decision upon the United Kingdom section there must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect before a case of oppression can be made ( Elder v Elder & Watson Ltd 1952 SC 49): their Lordships would place the emphasis on "visible". And similarly "disregard" involves something more than a failure to take account of the minority's interest: there must be awareness of that interest and an evident decision to override it or brush it aside or to set at naught the proper company procedure (per Lord Clyde in Thompson v Drysdale 1925 SC 311 315). Neither "oppression" nor "disregard" need be shown by a use of the majority's voting power to vote down the minority: either may be demonstrated by a course of conduct which in some identifiable respect, or at an identifiable point in time, can be held to have crossed the line.” [11] Furthermore, in the case of Pan-Pacific Construction Holdings Sdn Bhd v. Ngiu-Kee Corporation (M) Bhd & Anor [2010] 6 CLJ 721, the Federal Court encapsulated the legal stance on oppression in relation to Section 181 of the Companies Act 1965. The Federal Court had in the said case delineated four categories of conduct and elucidated their correlation with the overarching concept of "unfairness" where it was held as follows: “[25] Therefore, in order to succeed in its petition pursuant to s. 181 the petitioner has to establish and 'must eminently be determined according to the facts' of this case that the affairs of the company are being conducted or that the powers of the directors are being exercised in an oppressive manner or in disregard of its interests, or to its prejudice some unfairly discriminatory or prejudicial act of the company has been done or threatened, or that some resolutions of the members, debenture holders or any class of them has been passed or is proposed to be passed. " [26] In other words s. 181 permits judicial remedy on four categories of conduct, namely, oppressive conduct, conduct in disregard of interests, unfairly discriminatory conduct or prejudicial conduct. [27] It may also be noted that from the wordings of 181 its basic theme is 'unfairness'. However, unfairness 'does not mean that the court can do whatever the individual judge happens to think fair. The concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles. "The court... has a very wide discretion, but it does not sit under a palm tree'". (See: O'Neil v. Philips [1999] 2 All ER 961). ... [29] Thus, in Re Kong Thai Sawmill (Miri) Sdn Bhd; Kong Thai Sawmill (Miri) Sdn Bhd & Ors v. Ung Beng Sung [1978] CLJU 170; [1978] 1 LNS 170 the term 'disregard of interests' is to be understood to mean 'unfair disregard while 'oppression denotes an 'unfairly prejudicial conduct' which means a conduct 'departing from standards of fair dealing and a violation of conditions of fair play'. But 'a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted'. And 'trivial or technical infringements of the articles were not Intended to give rise to petitions under s. 459'. (See: Re Saul D Harrison & Sons Pic (supra).” [12] Reference was additionally made to another Federal Court case, Owen Sim Liang Khui v. Piasau Jaya Sdn Bhd & Anor [1996] 4 CLJ 716, wherein it was established that the determination of oppression, disregard, unfair discrimination, or prejudice in any given case must be contingent upon the specific facts of that case. While precedent serves as a valuable guide delineating the principles considered and applied, each decision must be grounded in the unique factual context of the case at hand. Hence, although the Court possesses broad discretion, the application of fairness must be judicious and contextual, with judicial interpretation founded on rational principles. [13] The principle underlying section 346 entails the necessity for actual detriment to the personal interests of the shareholder or debenture holders. Thus, it is incumbent upon the Plaintiff to substantiate claims of oppression, disregard, unfair discrimination, or prejudice. This involves demonstrating a tangible deviation from equitable standards and a transgression of principles of fair play. The determination of whether oppression, disregard, unfair discrimination, or prejudice exists in a particular instance hinge on a thorough examination of the factual context surrounding each case. COURT’S FINDINGS [14] Considering the aforementioned principles and reverting to the particulars of the present case, the Plaintiffs had brought forth several allegations of oppressive mismanagement on the part of the Defendants as outlined above. [15] The Plaintiff further contends that the cumulative actions of the Defendants have effectively sidelined the Plaintiff from participating in management, thereby contravening the Plaintiff's fundamental rights and/or legitimate expectation to be involved in the Company's management. [16] On the issue of the Plaintiffs’ legitimate expectation, I find it apposite to recall the words of Lord Wilberforce in the case of Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360, where he outlined three circumstances under which the court may ascertain that the relationship constitutes a quasi-partnership in law as follows:- “Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, 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.” [17] It is crucial to emphasize that the enumerated circumstances mentioned above do not represent an exhaustive list. The determination of a quasi-partnership relies heavily on the specific facts of each case under examination. Furthermore, it was evident from the House of Lords' judgment that fulfilment of all three criteria was not mandatory. Depending on the particulars of the case, fulfilment of even a single criterion could prompt the court to conclude that the business arrangement constituted a quasi-partnership. [18] Considering the principles elucidated earlier and delving back into the particulars of the present case, it is my considered opinion that the Plaintiff's claim concerning legitimate expectation lacks merit. The Plaintiff has not provided any documentary evidence to this Court that substantiates an understanding or agreement between the Plaintiff and the Defendants regarding the Plaintiff's entitlement to participate in the management of the Company. [19] Even if this court were to rule in favour of the Plaintiff concerning the issue of legitimate expectation, it does not necessarily entail that the Plaintiff is entitled to the relief sought. To succeed, it is imperative for the Plaintiff to establish that the Defendants engaged in conduct oppressive to the Plaintiff's interests, conduct disregarding their interests, unfairly discriminatory conduct, or conduct prejudicial to the Plaintiff's interests. [20] I bear repetition in stating that the presence of oppression, disregard, unfair discrimination, or prejudice in any given case must be assessed based on the specific facts and circumstances unique to that case. [21] It is trite law that that merely exercising majority power does not constitute oppression of the minority. As affirmed in Re Kong Thai Sawmill (Miri) Sdn Bhd; Kong Thai Sawmill (Miri) Bhd & Ors. v. Ling Beng Sung [supra], where the Privy Council had underscored this notion as follows: "the mere fact that one or more of those managing the Company possessed majority of the voting power and, in reliance upon that power, made policy or executive decisions, with which the complainant did not agree, was not enough. There must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder was entitled to expect before a case of oppression could be made out. Similarly "disregard" involved something more than a failure to take account of a minority's interest. There must be awareness of that interest and an evident decision to override it or brush it aside or to set at naught the proper company procedure." [22] Bearing the above principles in mind, this court shall proceed to determine the alleged oppression raised by the Plaintiff.

Plaintiff’s removal as managing director [23] Regarding the first issue of the Plaintiff's removal as managing director, evidence has been presented to demonstrate that the Plaintiff was not forcibly removed but had voluntarily resigned from the position. This resignation was supported by a Director's resolution, which was duly signed and approved by the Plaintiff himself. Therefore, it is evident that the Plaintiff's departure from the role of managing director was a result of a collective decision rather than any oppressive action by the Defendants. [24] It is worth noting that an unfair dismissal, while significant, does not necessarily equate to oppression or a disregard for the interests of minority shareholders in the management of the Company or the exercise of directors' powers. Instead, issues related to unfair dismissal typically fall within the scope of the Industrial Relations Act 1967, which governs matters concerning employment and workplace relations. Therefore, while the Plaintiff's resignation from the position of managing director may raise concerns about fairness, it may not directly implicate oppression or disregard of minority shareholder interests under company law.

(ii) Plaintiff’s removal as Commissioner of Associate Company [25] The allegations concerning the Plaintiff's removal from the position of Commissioner at an associated company in Indonesia, PT International Packaging Manufacturing (“IPM”) are immaterial to the conduct of the affairs of the Company or the exercise of powers of the directors of the Company. Given that the Company holds a mere shareholder position in IPM, the operational matters of IPM fall under its own jurisdiction. The actions taken within the associated company would not directly impact the operations or management of the Company. Thus, the Plaintiff's contentions regarding their removal as Commissioner of an associated company in Indonesia are inconsequential to allegations of oppression or disregard of minority shareholder interests within the Company.

(iii) The Company’s investment in IPM [26] Plaintiff claimed that he was uninformed as to why the investment was required at IPM. However, the Defendants had contested this fact, particularly highlighting the involvement of the Plaintiff's son, who serves as the Chief Operating Officer of the company, and possesses full knowledge of the investments. Additionally, the Defendants point out that the Plaintiff's son signed the telegraphic transfer related to these investments. [27] In any case, the Plaintiff has not demonstrated how the investments in IPM could oppress him or disregard his interests as a minority shareholder. Ultimately, all shareholders stand to benefit equally from these investments, with no one poised to gain more benefits than the others. The mere opposition of the Plaintiff to the Company's investment in IPM does not necessarily indicate any "oppression" or "disregard of interest" on the part of the Defendants. [28] Additionally, evidence were led to show that the Plaintiff had signed and approved the Resolution for the first investment made in IPM. Consequently, the Plaintiff is estopped from asserting that he had no knowledge of the said investment.

(iv) On the issue of Financial Reports [29] The Plaintiff alleged that the Defendants refused to explain the discrepancies in the Company’s Financial Statements and that the Defendants had denied the Plaintiff his right of inspection the said Financial Statements. [30] This court finds the issue regarding the Plaintiff's alleged denial of access to the Company's financial statements irrelevant, given the absence of evidence supporting the claim. As a shareholder and director, the Plaintiff retains the right to inquire and obtain necessary information from the management whenever required.

Refusal to circulate Company’s Financial Statements [31] The Plaintiff alleged that the Defendants breached Sections 257 and 258 of the Companies Act 2016 by failing to circulate the Company's Financial Statements at least 21 days before the AGM. [32] The contention regarding the delayed receipt of the Financial Report is deemed baseless, as all shareholders received the report simultaneously and there was nothing to show that the minority shareholders were disproportionately disadvantaged compared to the majority shareholders. Therefore, there is no merit in the assertion that the Plaintiff was unfairly disadvantaged in this regard.

(vi) Failure to declare dividends [33] The Plaintiff claimed that despite the Company making a profit of RM1,106,732.00 in 2020 and RM2,341,961.00 in 2021, the Defendants, sitting on the board of directors, had failed to declare dividends. [34] This court finds this argument as advanced by the Plaintiff untenable as it is established that all shareholders, including the 2nd Defendant, did not receive any dividends for the year 2020. This demonstrates that the issue was not isolated to the Plaintiff but affected all shareholders equally. Consequently, it may be challenging to assert that the non-payment of dividends amounted to oppression or unfair treatment of the plaintiff specifically as a minority shareholder. [35] Based on the factual matrix of the case, it is evident that the core of the Plaintiff's assertion revolves around the alleged misconduct of the Defendants vis-à-vis the Company rather than against the Plaintiff as a shareholder. The Plaintiff had, throughout his Originating Summons (OS) and his Affidavit in Support (AIS), failed to provide any concrete details on how he was oppressed in his capacity as a shareholder. Furthermore, there was no dispute regarding the Plaintiff's ownership percentage in the Company, which remains unchanged. [36] Most of the issues raised by the Plaintiff pertain to the conduct and decisions made during board meetings in which the Plaintiff held a directorial position. These allegations, including breaches of the Articles of Association and misconduct in the management and administration of the Company, primarily constitute corporate wrongs that are actionable but fall outside the purview of Section 346 of the Companies Act 2016. The Plaintiff has not demonstrated in any manner how these issues directly impact him as a shareholder. [37] The Plaintiff had failed to provide sufficient evidence to substantiate any financial losses incurred resulting from the conduct of the Defendants. Additionally, the Plaintiff had also failed to demonstrate any prejudice caused to him resulting from the Defendants’ actions. [38] It is essential to recognize that the potential incorrectness of decisions made by the 1st and 2nd Defendants in managing the Company does not inherently confer upon shareholders the entitlement to seek recourse under Section 346 of the Companies Act 1965. [39] Furthermore, there is a lack of evidence presented indicating any loss suffered by the Company. Even if such losses were to arise, it is important to understand that the loss suffered by a company is separate and distinct from that suffered by its shareholders. In instances where a shareholder’s loss merely reflects loss incurred by the company, the proper party to seek recovery of the reflective loss is the company itself, not the individual shareholder. This legal principle, aims to prevent double recovery (see the case of Mak Siew Wei v. Yeoh Eng Kong and other appeals [2018] MLJU 1770). [40] After careful consideration of all the facts and arguments presented, I am driven inexorably to the conclusion that the Plaintiff’s action against the Defendants lacks merit and was plainly and obviously unsustainable. It is thus my definitive conclusion that the Plaintiff’s action against the Defendants should be dismissed. CONCLUSION [41] In light of the foregoing analysis and considering the principles enshrined in the Companies Act 2016 and relevant case law, it is evident that the Plaintiff's case lacks merit and is plainly unsustainable. The Plaintiff has failed to substantiate allegations of oppression, disregard, unfair discrimination, or prejudice in a manner sufficient to warrant relief under Section 346 of the Companies Act 2016. [42] The Plaintiff's allegations primarily focus on corporate governance issues rather than actions directly prejudicial to the Plaintiff as a shareholder. Furthermore, the Plaintiff has failed to demonstrate how he has suffered any tangible losses or prejudice resulting from the Defendants' actions. [43] Given the lack of merit in the Plaintiff's action, it is my firm decision that the Plaintiff’s action under Section 346 of the Companies Act 2016 is hereby dismissed with costs of RM10,000.00 to Defendant 1, 3 and 4 and RM3,300.00 to Defendant 2. Dated: 20.03.2024 -signed- (ABDUL WAHAB BIN MOHAMED) JUDGE HIGH COURT OF MALAYA IPOH, PERAK Pihak-pihak: Tetuan Chan & Associates bagi pihak Perayu Peguamcara & Peguambela No. 1, Jalan Tun Sambanthan 30000 Ipoh, Perak Tel:

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