DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: W-02-1349-2011
1. DRICO (WATER-SPECIALIST) SDN BHD (No. Syarikat: 112278-M)
2. ISMAIL BIN JOHARI
3. KINOSHITA MASAO … RESPONDEN-
4. TAM KOK MENG RESPONDEN
[Dalam perkara Petisyen Terpinda bertarikh 14-12-2010 dalam Petisyen No. D-26-42 Tahun 2009 dalam Mahkamah Tinggi Malaya di Kuala Lumpur
DRICO LTD … PERAYU
DRICO (WATER-SPECIALIST) SDN BHD
(No. Syarikat: 112278-M) & 3 YANG LAIN … RESPONDEN-RESPONDEN
[Digabungkan melalui Perintah Mahkamah bertarikh 30-11-2010}
DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR (BAHAGIAN DAGANG)
PENGGULUNGAN SYARIKAT PETISYEN NO. D6-28-687-2008
DRICO LTD … PERAYU
DRICO (WATER-SPECIALIST0 SDN BHD
(No. Syarikat: 112278-M) & 3 YANG LAIN … RESPONDEN-RESPONDEN
CLEMENT SKINNER, JCA LINTON ALBERT, JCA ROHANA BINTI YUSUF, JCA
GROUNDS OF DECISION
 We had earlier heard this appeal by Drico Ltd (“the Appellant”) against part of the decision of the High Court, Kuala Lumpur given on the 14.12.2010 in respect of two winding-up petitions presented by the Appellant under section 181 and section 218 of the Companies Act 1965 (“the Act”) which were consolidated for hearing, against Drico (Water Specialists) Sdn Bhd (“the 1st Respondent”), Ismail Bin Johari (“the 2nd Respondent”), Kinoshita Masao (‘the 3rd Respondent”) and Tam Kok Meng (‘the 4th Respondent”).
 The 2nd and 3rd Respondents also lodged a cross-appeal against part of the decision of the High Court.
 We allowed the Appellant’s appeal in part against the decision of the High Court relating to the 2nd and 3rd Respondents, while we dismissed the cross-appeal of the 2nd and 3rd Respondents. These are our reasons for doing so.
 The Appellant is a company incorporated in Japan with expertise in water resource development and founded by one Hiroshi Nakazato.
It entered into a joint venture agreement (JVA) with two Malaysians Dato’ Mohd Saffian Bin H.A.Majid and Abdul Hamid bin Haji Zainuddin to form a company to undertake water related business in Malaysia. The 1st Respondent was incorporated as that joint venture company on 30.12.1983, on the understanding that the Appellant would provide the expertise and manage the business of the 1st Respondent.
 At the material time the shareholders of the 1st Respondent were: The Appellant holding 190,000 shares or 76%, the 2nd Respondent holding 40,000 shares or 16% and two other shareholders holding 10,000 and 10,001 shares or 4% each, respectively in the 1st Respondent.
 Appointed to the board of directors of the 1st Respondent were Hiroshi Nakazato and the 3rd Respondent who was a nominee of the Appellant. The 3rd Respondent was a long serving employee of the Appellant who moved to Malaysia to oversee and manage the operations of the 1st Respondent in the interest of the Appellant.
 The 2nd Respondent was appointed a director of the 1st Respondent on 1.5.1991.
 The 3rd Respondent was to retire from the employment of the Appellant in January 2008 on his reaching 60 years of age. In 2007 the Appellant took steps to appoint two of its nominees as directors of the 1st Respondent in view of the impending retirement of the 3rd Respondent, but the Appellant experienced opposition from the 2nd Respondent.
 Since the Appellant was having difficulty in appointing its nominees as directors of the 1st Respondent and since the 1st Respondent had completed all its projects in 2007 with no new projects or work pending, the Appellant decided that it would be best to voluntarily wind-up the 1st Respondent. A voluntary winding-up requires various steps to be taken by the directors of the 1st Respondent but the 2nd and 3rd Respondents did not take the necessary action in that direction.
 Accordingly on 7.10.2008 the Appellant filed Petition No. D6-29-687-2008 at the Kuala Lumpur High Court under s 218 (1) (h) of the Act to wind-up the 1st Respondent on the ground that it would be just and equitable to do so as the substratum of the company had failed and there was a deadlock and breakdown of mutual trust and confidence.
 Unknown to the Appellant then, the 2nd and 3rd Respondents had already taken steps between themselves to voluntarily wind-up the 1st Respondent on 30.8.2008 at an Extraordinary General Meeting of the 1st Respondent called for that purpose and to appoint the 4th Respondent as the Liquidator of the 1st Respondent. The Appellant claims it had no knowledge of the extraordinary general meeting of the 1st Respondent and did not participate in it.
 On becoming aware of the 4th Respondent’s appointment the Appellant began to make enquiries and searches. It alleges that it discovered oppressive and wrongful acts by the 2nd, 3rd and 4th
Respondents which had led to a wrongful depletion of the 1st Respondent’s assets.
 On 26.6.2009 the Appellant filed a Petition under section 181 of the Act to wind-up the 1st Respondent on the grounds of oppression, disregard of interest and unfairly prejudicial conduct.
 It needs to be mentioned that after the Appellant filed its section 218 Petition, the Appellant had filed an application to extend time to file the Affidavit Verifying the s 218 Petition and also another application to withdraw its s 218 Petition with liberty to file afresh. Various affidavits were filed by the 2nd Respondent on behalf of the 1st Respondent to resist the Appellant’s applications. Several hearings were held in respect of the applications but the Court was never informed by the 1st Respondent, the 2nd Respondent or their solicitors that the 1st Respondent was already voluntarily wound up on 30.8.2008.
The High Court decision
 (a) In relation to the 2nd and 3rd Respondent
The learned High Court Judicial Commissioner found that the affairs of the 1st Respondent had been conducted in a manner which was oppressive to the Appellant and wholly in disregard to its interest as a shareholder.
(b) In relation to the 4th Respondent
The learned High Court Judicial Commissioner dismissed the Appellant’s allegations against the 4th Respondent.
 In relation to the 1st Respondent
The learned Judicial Commissioner found that the 1st Respondent’s earlier voluntary winding-up was invalid. Since there was no commercial reasons for the continued existence of the 1st Respondent, the learned Judicial Commissioner found the most appropriate orders to make in the circumstances were these:
(a) In respect of the section 218 Petition
(i) That the 1st Respondent be wound-up and two Liquidators appointed in respect thereof.
(b) In respect of the section 181 Petition
(i) To grant various declarations sought, including that the voluntary winding-up of the 1st Respondent and the appointment of the Respondent was void and of no effect;
(ii) That the 2nd and 3rd Respondents be ordered to repay or refund to the 1st Respondent various sums of money identified in the judgment; and
(iii) That all costs of the Appellant against the 2nd and 3rd Respondents be borne by the 1st Respondent and all costs of the 4th Respondent be borne by the Appellant.
 However, the learned Judicial Commissioner did not order the 2nd Respondent to repay the Director’s fees of RM 5,000.00 per month for 11 years which was paid to the 2nd Respondent pursuant to the resolution on 30.6.2009, amounting to RM 660,000.00; or for the 3rd Respondent to repay the sum of RM 145,788.98 which was paid to the 3rd Respondent as expenses; or for the 2nd and 3rd Respondents to repay the sum of RM 261,150.00 and RM 307,500.00 respectively
which was paid to Messrs Benjamin Ng & Partners as solicitors of the 2nd and 3rd Respondents out of the 1st Respondent’s funds.
 The Appellant was dissatisfied with that part of the learned Judgicial Commissioner’s decision that did not order the repayment of the aforementioned monies to the 1st Respondent. The Appellant was also dissatisfied that the learned Judicial Commissioner had ordered the 1st Respondent to bear the legal costs of the 2nd and 3rd Respondents in the Petitions, and that the Appellant should bear the 4th Respondent’s costs. Apart from that, the Appellant was unhappy that the learned Judge found that the 2nd and 3rd Respondents had not acted in an oppressive manner when they refused to cooperate with the Appellant on the appointment of additional directors in the 1st Respondent. The Appellant was also unhappy that the learned Judicial Commissioner made no orders against the 4th Respondent.
 We allowed some of the Appellant’s grounds of appeal while dismissing the others. We did so for the following reasons.
Appointment of additional directors
 With regard to the appointment of additional directors in the 1st Respondent, in our view the learned Judicial Commissioner had erred in her finding. The learned Judicial Commissioner had said that by appointing 2 more directors, the Appellant was attempting to have 3 directors on the board, which was contrary to clause 5.1 of the JVA which says the Appellant may appoint only 2 nominee directors in the 1st Respondent. The Appellant had contended that the 2nd and 3rd
Respondents could not rely on clause 5.1 of the JVA because they were not parties to the JVA, but the learned Judicial Commissioner held that clause 9.7 of the JVA which states that the JVA shall be binding upon each party thereto and their respective successors and assigns, would allow the 2nd Respondent to rely on the terms of the JVA since Dato’ Mohd Soffian (a party to the JVA) had transferred his interest in the 1st Respondent to the 2nd Respondent.
 In our view the learned Judicial Commissioner failed to read clause 9.7 as a whole. The second part of that clause expressly provides that: “This agreement shall not be assignable by the parties hereto …without the prior written consent of the other party’. The Appellant’s case is that it never gave any written consent to assign the JVA to any other party, and the 2nd Respondent nor the 3rd Respondent adduced any evidence at the trial to prove such written consent.
 In the circumstances we find the learned Judicial Commissioner was plainly wrong to find that the 2nd and 3rd Respondent had not behaved oppressively when they refused to cooperate with the Appellant to appoint 2 more directors, when the 2nd and 3rd Respondents could not rely on clause 5.1 of the JVA to resist such appointments.
Repayment of director’s fees
 With regard to the payment of director’s fees of RM 660,000.00 to the 2nd Respondent, we allowed this ground of appeal for the following reasons. The evidence shows that the basis of the payment of
director’s fees of RM 5,000.00 per month to the 2nd Respondent, was the resolution passed at the AGM of the 1st Respondent on 30.6.2009 as the 2nd Respondent claimed he had not been paid director’s fees for 11 years. It was the Appellant’s case that contrary to what the 2nd Respondent claimed, there was evidence to show that the 2nd Respondent had been paid director’s fees. Such evidence was provided in the Minutes of the AGM’s held by the 1st Respondent in the year 2001 and 2002 where it was resolved that the remuneration paid to the directors for the year ended 31.12.2000 and 31.12.2001 amounted to RM 116,139.00 and RM 115,053.00 respectively.
 However, the learned Judicial Commissioner found that even though these resolutions may have been passed, there was no evidence adduced of the actual payments made to the 2nd Respondent of the director’s fees.
 In our judgment the learned Judicial Commissioner had failed to fully appreciate the oral evidence that was led before her. During his cross-examination the 2nd Respondent was questioned on the resolutions:
Ommen Koshy (for Appellant)
So based on this, remuneration was paid to the directors in the year
2000 and was approved in 2001, based on this
Ismail Johari (RW2)
Do you agree?
Ismail Johari (RW2)
Ya, should be
 In our view the above evidence given by the 2nd Respondent clearly amounted to an admission that remuneration was paid to the directors, contrary to what he had asserted of not being paid for 11 years. The learned Judicial Commissioner herself said in her judgment that: “During cross-examination, the 2nd Respondent admitted that payments have been made to the directors based on the said resolutions”. In the light of the express admission made by the 2nd Respondent in his own cross-examination that he had been paid director’s fees, there was no basis for the learned Judicial Commissioner to say that the Appellant needed to adduce evidence to prove the receipt of such payments by the 2nd Respondent.
Repayment of expenses by 3rd Respondent
 After the Appellant had presented its section 181 Petition, it obtained an order for the appointment of a Receiver and Manager in the person of KPMG, who after appointment presented several reports on the 1st Respondent. Based on KPMG’s report the Appellant sought to recover the sum of RM 145,788.98 paid to the 3rd Respondent. The learned Judicial Commissioner in her judgment said at page 88, Record of Appeal Vol 1:
“73. Based on the R & M Reports, various claims for telephone, travelling, hotel accommodation and medical expenses totaling RM 145,788.98 were paid out to the 3rd Respondent. However, the Petitioner itself in its submissions agreed that the supporting documents that were forwarded could not confirm or explain whether the payments made were rightful and proper e.g. provided for in the employment contracts. Thus, the Petitioner is not able to prove that the claim of the 3rd Respondent is lawful”.
 In our judgment the learned Judicial Commissioner had failed to appreciate the point being made by the Appellant. What the Appellant had submitted was that the supporting documents that were forwarded or provided by the 3rd Respondent to justify his claims amounting to RM 145,788.98 were insufficient and could not confirm whether the payments made were rightful and proper. In our view the learned Judicial Commissioner erred when she held that the Appellant had failed to prove that the various claims made by the 3rd Respondent were improper or unlawful, as there was no such burden on the Appellant. It was the 3rd Respondent who had made these various claims for payment to the 1st Respondent. It was for the 3rd Respondent to prove that he was entitled to make and be paid such claims. In the absence of any evidence adduced by the 3rd Respondent to show that the claims he had made were proper and lawful, the learned Judicial Commissioner should have ordered the 3rd Respondent to repay the sum of RM 145,788.98.
Legal fees paid out of 1st Respondent’s funds
 With regard to the sums of RM 261,150.00 and RM 307,500.00 which were paid out of the 1st Respondent’s funds to the law firm of Messrs Benjamin Ng & Partners, the learned Judicial Commissioner found on the evidence before her that these monies had been paid out by the 2nd and 3rd Respondent to that law firm as deposits for legal work on the basis of invoices issued by that firm. The invoices gave no particulars or details of the work for which the invoices were issued. The learned Judicial Commissioner said that the 2nd Respondent admitted that the 1st Respondent’s money had been used to pay for
work that had not been performed yet by that law firm. The learned Judicial Commissioner found the making of such payments by the 2nd and 3rd Respondent amounted to oppression. However the learned Judicial Commissioner went on to hold that the 2nd and 3rd Respondent need not repay the sums as the Court was unable to determine how much should be repaid as the Appellant led no evidence on the actual legal fees that ought to be paid.
 In our view the learned Judicial Commissioner was plainly wrong in her finding. The evidence led during the cross-examination of the 2nd Respondent shows clearly that the monies were paid as deposit for work to be done. At page 566, Appeal Record Vol 5 the 2nd Respondent was asked:
Ommen Koshy (for Appellant)
For all these bills, the details are the same, nearly exactly… the same. It is exactly the same, for all these bills which they regularly sent to the company . which did not have much details of the work that was done.
Do you agree? But you paid all those bills?
Ismail Johari (RW2)
Yes, this is, they is he said its not a bill …it’s a deposit for work to be done .
Ommen Koshy Deposit for. ?
Ismail Johari (RW2)
Work to be done .
… deposit to pay for the work to be done. The work tak ada lagi but dia ni dulu. Takut liquidation whole money being block, no money to be paid
Ommen Koshy (for Appellant)
So they took money upfront?
Ismail Johari (RW2)
And did they do the work … ?
Ismail Johari (RW2)
 The learned Judicial Commissioner had found that the failure of the 2nd and 3rd Respondents to retrieve the money paid out as deposit of legal fees was in breach of the 2nd and 3rd Respondent’s fiduciary duties as trustees of the 1st Respondent’s assets and amounted to oppression. Having found so, it was plainly wrong for the learned Judicial Commissioner to put the burden on the Appellant of proving what ought to have been paid by way of legal fees when the Appellant was not privy at all to what sort of instructions had been given to the lawyers and what their advice to the 2nd and 3rd Respondents were if at all, as even the invoices issued by the law firm were lacking in particulars. The 2nd and 3rd Respondent having made these payments to the lawyers in breach of their duties and in acting oppressively should have been ordered to repay the amounts.
Order of costs
 With regard to the order of costs made by the learned Judicial Commissioner, we found the order made plainly wrong as costs ought to follow the event. As the learned Judicial Commissioner had found the 2nd and 3rd Respondents had acted oppressively it is they who should bear the costs and not the 1st Respondent.
Claim against 4th Respondent
 The Appellant complained that the 4th Respondent had acted oppressively and in disregard of its rights in effecting, and acting in furtherance of the voluntarily liquidation; refusing to furnish adequate explanation of the voluntary liquidation; failing to disclose the voluntary winding up of the 1st Respondent in the affidavits affirmed by the 4th Respondent in the s 218 Petition; in aligning himself with the 2nd and 3rd Respondents including in the transfer of shares to the 2nd Respondent and failing to investigate the affairs of the 1st Respondent especially prior to the voluntary winding-up; causing the wrongful depletion of assets of the 1st Respondent; misrepresenting to the High Court through the 2nd Respondent, that the 1st Respondent was a going concern in the s 181 Petition; refusing to acknowledge or recognize the Appellant’s rights as majority shareholder; descending into the arena of litigation on behalf of the 1st Respondent; and acting in breach of fiduciary duties and against the interests of the Appellant. It is also the Appellant’s case that the appointment of the 4th Respondent was invalid by virtue of the procedural defects in the calling of and holding of the Extraordinary General Meeting on 30.8.2008. Therefore, according to the Appellant, since the Court had held that the 4th Respondent’s appointment was invalid, any subsequent acts done by the 4th Respondent would also have been invalid. Hence it was the submission of the Appellant that the learned Judicial Commissioner erred in finding that the 4th Respondent had not acted oppressively.
 Having considered the submissions made by the Appellant on each of these points, we find no merit in them for the following reasons.
Even though the appointment of the 4th Respondent was subsequently held to be defective by the Court, there is no evidence that the 4th Respondent knew about the invalidity and had acted regardless. In the circumstances it is our view that ss 268 and 232(8) of the Companies Act which provides that the acts of a liquidator shall be valid notwithstanding any defects that may afterwards be discovered in his appointment or qualification, would be available to the 4th Respondent so that his acts remain valid notwithstanding the finding of the Court that the Extraordinary General Meeting held on 30.8.2008 at which it was resolved to voluntarily wind-up the 1st Respondent and to appoint the 4th Respondent as liquidator was invalidly held.
 In our view the learned Judicial Commissioner was correct in applying ss 268 and 232(8) of the Act in this case. With regard to the other matters complained of by the Appellant in relation to the conduct of the 4th Respondent in relation to the discharge of his functions as liquidator, the learned Judicial Commissioner had come to a finding of fact that the 4th Respondent had acted in good faith at all times since he had consulted his lawyers and acted on their advice regarding the stand he should take in relation to these two petitions. Further, the 4th Respondent had consulted with his peers in reputable accounting firms such as KPMG and Price Waterhouse Coopers before making payment out of monies belonging to the 1st Respondent. The learned Judicial Commissioner also found that the 4th Respondent, on becoming aware of the complaints concerning the conduct of the lawyer who was advising him, had changed lawyers after which the 4th Respondent, obviously on the advice of his new lawyers, maintained a more neutral stand in the litigation.
 In our view the learned Judicial Commissioner was entitled to arrive at her finding, on the basis of the evidence before her, that the 4th Respondent had acted in good faith at all times. We find no cause to interfere with the finding of the learned Judicial Commissioner that the 4th Respondent had not acted in an oppressive manner in relation to the Appellant or the 1st Respondent.
 In their cross-appeal the 2nd and 3rd Respondents sought to challenge the decision of the learned Judicial Commissioner on points of law and error of fact. As far as error of law is concerned, it was the contention of the 2nd and 3rd Respondents that the learned Judicial Commissioner had misdirected herself on the law under s 181 of the Act when she failed to take cognizance of the “wider concepts” of the law of oppression.
 We find no merit in this submission. The learned Judicial Commissioner had in her written grounds first set out the relevant provisions of s 181 of the Act and then dealt with the leading case law on the section, including Re Kong Thai Sawmill; Kong Thai Sawmill (Miri) Sdn Bhd & Ors v Lim Beng Sung  2 MLJ 227 where the Privy Council drew attention to the fact that s 181 of our Act is in import respects different from its English and Australian equivalent in that our s 181 is wider in scope. The learned Judge also referred to the recent Federal Court decision of Pan-Pacific Construction Holdings Sdn Bhd v Ngiu-Kee Corporation (M) Bhd & Anor  6 CLJ 721. We accordingly find no substance in the complaint of the 2nd and 3rd
Respondents regarding the learned Judicial Commissioner’s understanding of s 181 or its scope.
 The other grounds of appeal of the 2nd and 3rd Respondents relate to findings of fact made by the learned Judicial Commissioner. For instance, the 2nd land 3rd Respondents contended that the learned Judicial Commissioner had wrongly decided that as the 3rd Respondent was not holding a valid proxy to represent the Appellant at the Extraordinary General Meeting held on 30.8.2008, the resolutions passed at the EGM on the voluntary winding-up of the 1st Respondent and the appointment of the 4th Respondent or liquidator were invalid. The 2nd and 3rd Respondents also contended that the learned Judge wrongly, decided the question of the transfer of 15,000 shares from the Appellant to the 2nd Respondent and on whether the 2nd and 3rd Respondents had made disclosure about the incorporation of East Trade & Technology Sdn Bhd (“ETT”) in which they had an interest in and to which company a Letter of Guarantee was provided by the Appellant and payments made from the Appellant to ETT.
 A reading of her judgment shows that in arriving at her findings on each of the matters which the 2nd and 3rd Respondent complain about, the learned Judicial Commissioner had made her findings based on the evidence which was led before her on these issues. The learned Judicial Commissioner also gave reasons for her findings. In our view the learned Judicial Commissioner had correctly appreciated the evidence led before her on each of these issues and had applied the law correctly to the facts before her. We find no reason to interfere with the findings of the learned Judicial Commissioner.
 It was for all the above reasons that we unanimously:
1. Allowed the appeal of the Appellant in respect of the 2nd and 3rd
Respondents and ordered that:
(a) The 2nd Respondent repay RM600,000.00 to the 1st Respondent;
(b) The 3rd Respondent repay RM 145,788.98 to the 1st Respondent;
(c) The 2nd and 3rd Respondent jointly and severally repay RM 261,150.00 and RM 307,500.00 to the 1st Respondent.
2. Dismissed the Appellant’s appeal in respect of the 4th Respondent with costs of RM 30,000.00.
3. With reference to the costs awarded to the Appellant at the High Court which the learned Judicial Commissioner ordered to be paid by the 1st Respondent, we vary the order and order that the Appellant’s costs of RM 30,000.00 at the High Court be paid by the 2nd and 3rd Respondent jointly and severally.
4. Dismissed the cross-appeal of the 2nd and 3rd Respondent with costs of RM 30,000.00 to the Appellant.
DATUK CLEMENT SKINNER Judge
Court of Appeal, Malaysia
Dated: 20th December 2013
For Appellant : Oommen Koshy together with Lee Shih and Kwan Will Sen Messrs Skrine Advocates & Solicitors, Kuala Lumpur
For 1st Respondent : R Himahlini with Yeoh Jit Mei Messrs Lee Hishamuddin Allen & Gledhill Advocates & Solicitors Kuala Lumpur
For 2nd and 3rd : Respondents Tang Kim Choong Mrs K.C. Tang & Co Advocates & Solicitors Kuala Lumpur
For 4th Respondent : Malik Imtiaz Sawar Messrs Yap & Company Advocates & Solicitors Kuala Lumpur