TOB CHEE HOONG V TOB CHEE CHOONG & ORS
Originating Summons No.: WA-24NCC-199-05/2016
Judge: YA Mohd Nazlan Mohd Ghazali
Oppression – minority oppression – Section 181 of the Companies Act 1965 – affairs of the company – company in which the complainant is not a member – fundamental understanding
Brief Facts:
The Plaintiff commenced the originating summons against the 1st to 3rd Defendants on the allegation of minority oppression under Section 181 of the Companies Act 1965 (“CA 1965”).
The Plaintiff and the 1st Defendant are brothers. The 2nd and 3rd Defendants are the nephews and the 1st Defendant’s sons. They were the 4 shareholders of the 4th Defendant. The 4th Defendant is an investment holding company, and wholly owns Orchard Circle Sdn Bhd (“Orchard Circle”), a property development company.
The Plaintiff’s primary contention was that the 1st, 2nd and 3rd Defendants had operated and managed the 4th Defendant and Orchard Circle in a manner that was in total disregard for the fundamental understanding between the parties, and they were oppressive, unfair and prejudicial to the Plaintiff.
The Learned High Court Judge found that, on a balance of probabilities, the Plaintiff had successfully established his case of minority oppression under Section 181(1)(a) of the CA 1965.
Summary of the principles held by the High Court:
1. ‘Affairs of the company’ may include affairs of a company in which the complainant is not a member.
(i) The pre-requisite of Section 181(1) of the CA 1965 that a complainant must be a registered member of the company against which the complaints have been made remains.
(ii) However, the terms ‘affairs of the company’ in Section 181(1)(a) of the CA 1965 (and the current Section 346(1) of the Companies Act 2016) does not necessarily limit the scope to those ‘affairs’ concerning only the company in which the complainant is a member.
(iii) In a group of companies situation under Section 181 of CA 1965, particularly concerning a relationship of a company and its wholly-owned subsidiary, complaints about the affairs of the wholly-owned subsidiary should justifiable be taken into account when such affairs impact and/or affect the holding company.
(iv) However, the Court emphasised that the existence of a holding and subsidiary structure may not necessarily mean that the affairs of the latter will always be those of the former (and vice versa). The issue of whether the Court ought to consider the affairs of the subsidiary (or the holding company) is fact-sensitive and a question of evidence.
2. Fundamental understanding
(i) Based on the evidence before the Court, there was indeed a fundamental understanding that the Plaintiff and the First Defendant, as siblings, that they would continue to be involved in the joint management of the 4th Defendant and its subsidiary.
(ii) The decisions and conduct of the 1st, 2nd and 3rd Defendants were diametrically opposite to ensuring the joint management by the Plaintiff and the 1st Defendant of the 4th Defendant and Orchard Circle.
3. Oppression
(i) The Court found that there was a violation of the fundamental understanding in how the companies ought to be managed.
(ii) Further, referring to the English House of Lords’ case of O’Neill v Philips [1999] 2 All ER 961, the Court held that exclusion from management without any exit offer is manifestly oppressive.
