Damages Awarded in An Oppression Action

An award of damages is not listed as one of the reliefs in s. 346(2) of the 2016 Act.
Nonetheless, in Koh Jui Hiong (some weird ass symbol) Ors v. Ki Tak Sang And
Another Appeal,46 the Federal Court confirmed that an order for damages can be made
in an oppression action if the order is with the view to bring an end or to remedy the
matters complained of.
There can be an order to pay damages to an oppressed member or to the company. In
Toralf Mueller v, Alcim Holding Sdn Bhd,47 the court ordered Compensatory damages
to be paid by two of the respondents, jointly or severally, to the complainant in respect
of all losses suffered by the complainant. In the Court of Appeal decision of Drico Ltd
v. Drico (Water-Specialist) Sdn Bhd (same weird ass symbol) Ors,48 two of the
respondents were ordered to repay various sums of money to the company.

Alteration to the Articles of Association or the Constitution

Where an order made by the court has the effect of making an alteration or addition to
the company's constitution, then, the company concerned shall not, without leave of
the court, make any further alteration in or addition to the constitution which is
inconsistent with the order. Based on Section 346(4), the alterations or additions made
by the order shall have the same effect as if it were made by a duly passed resolution
of the company.

Winding Up
The remedy of winding up is listed under s. 346(2)(e) of the 2016 Act. No limiting
conditions are imposed and the granting of it is at the discretion of the court.
As stated by the Privy Council in Re Kong Thai Sawmill,50 the court will have in mind
the drastic character of this remedy if it is sought to be applied to a company which is
a going concern. The court will take into account the gravity of the oppressive
conduct, the possibility of remedying the complaints proved in other ways than by
winding up the company, the interest of the Complainant and the interests of other
members of the company not involved in the proceedings.
Nonetheless, an order for winding up a company should not be seen as a remedy of
last resort. It was not the intention of the legislature that the court in exercising its
discretion ought to grant the remedy of winding up only if other remedies are
inadequate or ineffectual for that purpose.51
As an example, the High Court in Choy Heng Min @ Chua Hing Ming v. Cheah Kah
Seng (damn symbol again) Ors52 ordered a winding up of the company at the
conclusion of an oppression action. The court found that the joint venture between the
shareholders came to an end. It was also not appropriate to order a share buy-out as
the valuation of the shares would be fraught with difficulties. The court held that the
only appropriate order to be made was for the company to be wound up.
In a situation where the court orders the winding up of a company under s. 346(2)(e)
of the 2016 Act, the provisions of the 2016 Act relating to winding up shall apply as if
the order to wind up had been made upon a petition presented by the company to the
court, with such adaptations as are necessary.53

6.5 COMMON LAW DERIVATIVE ACTION

A derivative action is an action brought by a shareholder based on a cause of action
that the Company has, rather than a cause of action belonging to the shareholder.
Thus, the remedy will ultimately benefit the Company and the aggrieved shareholder
will only benefit indirectly through his shareholding in the company.
The common law allows a minority shareholder to bring this action on behalf of the
company in situations where the company does not take action because the wrongdoer
controls the company and is able to prevent the company from taking any action.
There were strict requirements to commence a common law derivative action,
The procedural difficulties in commencing a common law derivative action largely
led to the enactment of the statutory derivative action mechanism. The statutory
mechanism would make it easier for an aggrieved shareholder to bring an action on
behalf of the company.

Principles of the Common Law Derivative Action

The principles for the common law derivative action will be briefly stated below. The
Court of Appeal in Abdul Rahim Aki v. Krubong Industrial Park (Melaka) Sdn Bhd
(shabaa) Ors62 explained that the common law carved out an exception for a
shareholder to bring an action on behalf of the company when the company, which
has been wronged, is unable to sue since the wrongdoers are in control of the
company. This is known as a ‘fraud upon the minority’ as the wrongdoers are able to
prevent the company from taking action against them.
The expression ‘fraud upon the minority’ does not mean actual fraud or deception at
common law. Lack of probity comes within the ambit of the expression. However, it
is not necessary to prove dishonesty before a minority shareholder can claim for the
relief sought. It is sufficient for the aggrieved shareholder to show that those wielding
majority control abused the powers vested in them where they used or omitted to use
their powers for an oblique or collateral motive.

6.7 THE STATUTORY DERIVATIVE ACTION

The provisions on the statutory derivative action are contained in s. 347 to s. 350 of
the 2016 Act. These sections are similar to s. 181 A to s, 181E of the 1965 Act. The
procedure for a statutory derivative action is in two stages. Firstly, an application is
filed seeking for leave of the court. Secondly, if leave is granted, then the applicant
will be clothed with the power to initiate, intervene in or defend a proceeding on
behalf of the company.
Complainant in a Statutory Derivative Action
A complainant must obtain the leave of court to bring a derivative action in the name
of the company.
A complainant is defined as66(a) a member, ora person who is entitled to be registered
as a member of a company; (b) a former member of a company if the application
relates to circumstances in which the member ceased to be a member; (c) any director;
or (d) the Registrar of Companies, in the case of a company declared under s. 590 of
the 2016 Act.
“Initiate, intervene in or defend a proceeding on behalf of the company”
Section 347(1) of the 2016 Act uses the words "initiate, intervene in or defend a
proceeding on behalf of the company". The High Court in Abdul Rahim Suleiman
(you again) Anor v. Faridah Mad Lazim (dude wtf) Ors67 (''Abdul Rahim Suleiman)
held that these words meant that the complainant could only seek leave to:
a) Bring a new action on behalf of a company;
b) intervene in the name of a company in a pending action which does not involve
the company; or
c) Defend a pending action against a company.
The High Court held that leave for a statutory derivative action could not be granted
to continue pending actions on behalf of the company. The court also compared the
Malaysian provision with the language used in the equivalent provisions in Canada
and Singapore. Those jurisdictions had provisions to allow the court to grant leave for
the purpose of prosecuting or discontinuing an action on behalf of the Company,
Requirements for Leave
(i) Notice
The first requirement is that the complainant must give 30 days’ notice in writing to
the directors of his intention to apply for leave under s. 347 of the 2016 Act.68 The
purpose of this compulsory notice is to give the company the opportunity, through its
board of directors, to consider its rights and course of action.
The Court of Appeal in Abdul Rahim Suleinnan (dude who r u?) Anor v, Faridah Md
Lazim (y u keeping coming back?) Ors69 held that the notice in writing merely had to
set out the intention to apply for leave of the court. There was no additional
requirement to provide more detailed information so as to give reasonable notice to
the company's directors.
Further, it is possible that the 30-day notice period can be shortened. The High Court
in Ng Hoy Keong V, Chua Choon Yang (sthapp) Ors70 allowed the notice period to be
shortened to nine days. The court held that the time frame for the notice was not
mandatory and the intention of that section was to ensure that the directors were not
taken by surprise, The court could exercise its powers under s. 355(4) of the 1965 Act
to abridge any time for the doing of any act. There is an identical power in s. 582(4)
of the 2016 to allow for abridgment of time.
(ii) Good Faith
After the expiry of the notice period, a complainant can make an application by
originating summons for leave of the Court.71 There are two requirements which the
court shall take into account when deciding to grant leave. The first is whether the
Complainant is acting in good faith,
The Court of Appeal in Celcom (M) Bhd v. Mohd Shuaib Ishak72 (‘Celcom') held that
the test of good faith is two-fold, i.e. (i) an honest belief on the part of the applicant;
and (ii) the application is not brought for a collateral purpose.
(iii) Prinna Facie in the Best Interest of the Company
The second requirement which must be demonstrated is that it appears prima facie to
be in the best interest of the company that the application for leave be granted.
The Court of Appeal in Celcom adopted the Singapore Court of Appeal decision of
Pang Yong Hock (noo plis) Another V. PKS Contracts Services Pte Ltd73 ('Pang Yong
Hock). Factors taken into consideration on whether it was "prima facie to be in the
best interests of the company” would be whether the company stands to gain
substantially in money or in money's Worth and whether the company has genuine
commercial considerations for not wanting to pursue certain claims. For instance,
perhaps the company does not want to damage a good, long-term, profitable
relationship or that it does not wish to generate bad publicity for itself because of
some important negotiations which are underway.
The court may also weigh the availability of an alternative remedy, such as winding
up of a company. In Pang Yang Hock, where there was an impasse in the management
of the company and the company was not performing well financially, the appropriate
solution in that case was to wind up the company.

Ratification
Under common law, if a wrong has been effectively ratified by the shareholders of the
company, this will be a complete bar to a derivative action. The company will not
have any wrong to complain about since an act authorised by its shareholders is an act
of the company itself.
Section 349 of the 2016 Act addresses this issue by providing that the fact the alleged
wrong to the company may be approved or ratified by the members is not by itself
sufficient for a stay or dismissal of the action. Such approval or ratification may,
however, be taken into account by the court when determining whether to grant leave
and in the making of any orders.

Powers of the Court

In granting leave, the Court has a wide range of powers in making such orders as it
thinks appropriate, Aside from authorising the complainant or any other person to
control the conduct of the proceedings, some of the other orders that the court may
grant includes.76
(i) Giving Directions
Depending on the circumstances of the case, the court is able to grant specific
directions for the conduct of the proceedings.77 In the Singapore case of Teo Gek
Luang v. Ng Ai Tiong,78 the court granted leave to the complainant subject to certain
conditions. The court exercised its discretion under the similar Singapore provisions
to make an order that the complainant was not to commence an action until 22 days
had lapsed, and if the defendant-director paid the sums due to the company within 14
days of the order, the complainant was then not allowed to commence an action.
(ii) Access to Information
The court may order any person to provide assistance and information to the
complainant, including to allow inspection of the company's books.79
This provision allows a complainant to obtain evidence by accessing documents
normally not available to him, for instance Board documents or management
accounts.
(iii) Costs
The court can make orders in relation to legal fees and costs. The Court can order the
company to pay reasonable legal fees and disbursements incurred by the complainant,
and also a wider order for indemnity for all the costs incurred.
The court may be guided by the principles enunciated in Wallersteiner v. Moir (No
2)80. It was decided that where there is a reasonable case for the minority shareholder
to bring an action at the expense of the company, then the shareholder should
ordinarily have a right to an indemnity for his costs, whether or not the case is
successful.
Statutory Derivative Action Not Available to a Company in Liquidation
An application for leave under s. 347 of the 2016 Act to commence a statutory
derivative action will not be allowed where the Company is already in liquidation.
The Singapore Court of Appeal in Petroships investment Pte Ltd v. Wealthplus Pte Ltd
And Others And Another Matter81 ('Petroships) held that s. 216A of the Singapore
Companies Act (equivalent to s. 347 of the 2016 Act) was meant to provide minority
shareholders with a statutory avenue to commence an action in the name of the
company. The legislative history of s. 216A of the Singapore Companies Act did not
suggest that it was meant to be applied to a company in liquidation.
Further, the statutory remedies in the liquidation regime negated the need for a
shareholder to seek leave for a statutory derivative action, This did not mean that there
would be no remedy against a corporate wrong. In liquidation, whether in a voluntary
or compulsory winding up, the liquidator would still be subject to oversight of the
court.
The decision in Petroships is consistent with the statutory derivative action authorities
from the UK82, Australia83, and New Zealand.84