Low Peng Boon v Low Janie

[1999] 1 SLR Low Peng Boon v Low Janie (LP Thean JA) 761

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Low Peng Boon v Low Janie & Ors and other appeals

COURT OF APPEAL — CIVIL APPEAL NOS 244 OF 1997 AND 120 & 130 OF 1998YONG PUNG HOW CJ, KARTHIGESU AND LP THEAN JJA22 OCTOBER 1998, 30 JANUARY 1999

Companies and Corporations— Oppression — Whether conduct amounted to oppressionof minority shareholder — Companies Act (Cap 50) s 216

Companies and Corporations— Oppression — Relief — Most appropriate remedy incircumstances — Whether winding up or sale of shares of minority shareholder to majorityshareholders — Companies Act (Cap 50) s 216

FactsIn the court below, the first respondent (‘JL’) in all three appeals, appliedfor relief under s 216 of the Companies Act (Cap 50) in her capacity as ashareholder of Eng Cheong Peng Kee Pte Ltd (‘ECPK’), a family companyand the fourth respondent in CA 244/97 and CA 12/98 and the thirdrespondent in CA 130/98.

JL alleged that her father (‘LPB’) (the first appellant in CA 244/97 andCA 120/98 and the second respondent in CA 130/98), her half-brother(‘LKG’) (the second respondent in CA 244/97 and CA 120/98 and the firstappellant in CA 130/98) and her cousin (‘LKS’) (the third respondent in CA244/98 and CA 120/98 and the second appellant in CA 130/98) hadconducted the affairs of ECPK and its subsidiaries and had exercised theirpowers in a manner oppressive to her or in disregard of her interests as ashareholder.

LPB was the managing director of ECPK whilst JL, LKG and LKS weredirectors. LPB, LKG, JL and LKS were shareholders of approximately32.5%, 30.7%, 14.5%, and 4% of the shares in ECPK respectively. ECPKwas also a holding company for profitable subsidiary companies inMalaysia and Hong Kong.

Amongst the factual allegations made were that LPB had used the fundsof ECPK or ECPK’s subsidiary in Hong Kong to pay for personal travels toHong Kong and China accompanied by his nurse and his private secretary,LKG’s wife; that the company and its subsidiary in Hong Kong hadpersisted in a policy of non-declaration of dividends with a view to shoringup the company’s profits; that the intended consequence of this policy wasto maximise the annual bonus payable to LPB; that LKG had abetted LPBin the concealment of his use of company funds for personal expenses; thatLKG had failed to give satisfactory answers to JL’s queries in relation to thesudden ballooning of advertisement expenses in the Malaysian subsidiary;that LPB, LKG and LKS had acted oppressively and in an indifferentmanner towards her in response to her various queries on the accountsrelating to the improper use of funds; and that LKS had with the approval ofLKG purchased a luxury car for his own use whilst JL was absent fromSingapore; that LKS had further charged petrol expenses to the companywithout authorisation.

762 Singapore Law Reports [1999] 1 SLR

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JL prayed for an order that LPB, LKG and LKS be ordered to purchaseher shares in the company; or alternatively, that the company be wound up.

In the course of trial, LPB and his counsel had represented theirwillingness to commence a voluntary winding-up of the company andrequested a stay of proceedings to convene an extraordinary generalmeeting for that purpose. Prior to this point in time, JL had, through hercounsel, withdrawn the alternative prayer for winding-up. The trial judgerefused the application for a stay on the grounds that it was premature todecide that winding-up was the appropriate remedy.

The trial judge accepted JL’s allegations and granted her application forrelief. He ordered LPB, LKG and LKS to buy the shares of JL in ECPK ata fair value, to be assessed on 16 September 1996 and with interest at 6%per annum, but without any discount, after taking into account all themoneys belonging to ECPK and/or its subsidiaries that had been misused bythe three of them.

In CA 244/97, LPB appealed against the trial judge’s decision not togrant a stay of proceedings. LPB in CA 120/98 and LKG and LKS in CA130/98 appealed against the trial judges’ decision to allow JL’s applicationfor relief.

Held, dismissing CA 244/97 and allowing CA 120 and 130/98 in part:(1) Since JL had withdrawn her prayer for winding up, the trial judge was

right to dismiss the application for a stay since it was not possible forhim to decide whether the remedy for winding up was in fact theappropriate remedy that would put an end to the matter complained of(see ¶ 22). Furthermore, in the course of the appeal, counsel for LPBinformed the court that his client no longer wished to have ECPKwound up, even in a voluntary liquidation. That being the position,there was no useful purpose in counsel pursuing the appeal further (see¶ 23).

(2) As for the appeals on the trial judge’s findings of fact in CA 120 and130/98, the court’s findings were as follows. Apart from the bareassertions made by LPB, there was really no evidence to show that anyof the trips he made to Hong Kong or China was for the purpose ofbusiness. LPB certainly had not succeeded in proving this fact. On theother hand, what was very significant was that the solicitors for LKG inthe case filed in CA 130/98 said that LPB in fact travelled to HongKong and China for pleasure and not for business. The finding of thetrial judge that the travelling and other expenses to Hong Kong andChina incurred by LPB were for his own personal needs was thereforefully justified (see ¶ 28).

(3) The trial judge was right to find that there was a deliberate course ofaction taken to maximise LPB’s bonus. The fact of the matter was thatthe shareholders of ECPK, other than LPB who received an annualbonus out of the profits, had never had the benefit of the fruit of theprofits made by ECPK’s Hong Kong subsidiary. To all intents andpurposes, there was no plan to use such moneys in any business ofECPK’s Hong Kong subsidiary or any company within the Group.Whilst there was nothing objectionable on such course being taken bythe company, it did, when it was considered together with other


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relevant facts, lead to the conclusion that the majority shareholder, ieLPB, deliberately hoarded the profits in ECPK’s Hong Kong subsidiaryfor the sake of earning interest, a component of which was paid to LPB.There was no denying that LPB was the sole beneficiary of thesubsidiary’s profits, although he owned only a third of the holdingcompany, ECPK (see ¶ 34).

(4) LKG’s defence that he was effectively under the control of his fatherand was in no position to question or disagree with LPB could not besustained. His complicity in the misfeasance extended to his havingdeliberately arranged for the accounts, invoices and vouchers todisguise the fact that LPB travelled for pleasure. Being an executivedirector of ECPK and being in charge of managing the business of itssubsidiaries and dealing with the auditors of all the companies inrelation to the preparation of accounts, LKG was also guilty ofcomplicity in the state of affairs that resulted in maximising the bonuspayments to LPB. The trial judge was also eminently correct in hisfinding that LKG had failed to give a satisfactory explanation for hisconduct relating to the advertising expenses. The only inference thatcould reasonably be drawn was that there was, at the lowest, somethingin the advertisement expenditure which was not proper and which LKGwas anxious to conceal (see ¶ 35 to 38).

(5) LPB and LKG approved the company’s accounts, despite JL’s relevantqueries as to the travelling expenses, foreign exchange differences, andthe advertising expenses. They adopted a dismissive attitude towardsher queries and either ignored or disregarded them (see ¶ 40 and 41).

(6) The conduct of LPB and LKG looked at as a whole fell short of thestandards of fair dealings. What they did constituted a clear decision tooverride the interest of a minority shareholder and amounted to anoppression of JL and a disregard of her interest in ECPK (see ¶ 42–45);Re Jermyn Street Turkish Baths Ltd[1971] 3 All ER 184; [1971] 1WLR 1043 andRe Kong Thai Sawmill (Miri) Sdn Bhd[1978] 2 MLJ227 followed.

(7) The alleged breaches of duty on the part of LKS were not oppressiveconduct. Nor were they related to the oppressive conduct which JLcomplained of against LPB and LKG. There was no participation byLKS in any of the matters complained of by JL against LPB and LKG.The trial judge’s finding that he was involved in the oppressive conductof LPB and LKG was not justified and JL’s claim against LKS ought tohave been dismissed (see ¶ 52–54).

(8) As to what was the most appropriate remedy, the court took intoaccount that ECPK was a family company which had been operatingfor several decades and there was now a rift in the family. The Grouphad been managed and run by LPB, LKG, LKS and JL. LPB was about85 years old, half paralysed and wheel chair bound, and was hardly ina position to manage and run ECPK and its subsidiaries. LKG in hiscase had stated that he did not wish to carry on and run the Group andasked for an order for winding up. LKS in his case also asked for awinding up order. It appeared that the other minority shareholders also


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wished to sell and realise their holdings in ECPK. In the very unusualcircumstances of this case, the appropriate remedy was a winding uporder and such an order was in the interest of ECPK as a whole (see ¶55–60).

Case(s) referred toCity Meat Co, Re(1984) 8 ACLR 673 (refd)Coliseum Stand Car Service, Re[1972] 1 MLJ 109 (refd)Company (No 00836 of 1995), A, Re[1996] 2 BCLC 192 (refd)Company (No 003843 of 1986), A, Re[1987] BCLC 562 (refd)Company (No 006834 of 1988), A, Re[1989] BCLC 365 (refd)Gee Hoe Chan Trading Co, Re[1991] SLR 837; [1991] 3 MLJ 137 (refd)HR Harmer, Re[1958] 3 All ER 689 (refd)Jermyn Street Turkish Baths, Re[1971] 3 All ER 184; [1971] 1 WLR 1043

(folld)Kong Thai Sawmill (Miri) Sdn Bhd, Re[1978] 2 MLJ 227 (folld)Kuah Kok Kim v Chong Lee Leong Seng Co (Pte) Ltd[1991] SLR 122;

[1991] 2 MLJ 129 (refd)Tri-Circle Investment, Re[1993] 2 SLR 523 (refd)

Legislation referred toCompanies Act (Cap 50) s 216

Appeal from: Originating Summons No 935 of 1996

LawyersWong Meng MengSC,Chou Sean YuandLow Wee Lin (Wong Partnership)for Low Peng Boon.Harry Elias SC,Audrey Thng, Eddie NgandChan Kia Peng (Harry Elias& Partners)for Janie Low.Michael KhooSC,Lim Chor PeeandJack Lee (Chor Pee & Partners)forLow Kee Guan.Lisa Chong (Lisa Chong & Partners)for Low Kee Siong.

Cur Adv Vult

LP Thean JA (delivering the judgment of the court): These three appeals arosefrom the proceedings instituted by the plaintiff, Janie Low (‘JL’), against herfather, Low Peng Boon (‘LPB’), her half-brother, Low Kee Guan (‘LKG’), andher cousin, Low Kee Siong (‘LKS’), and their family company, Eng Cheong PengKee Pte Ltd (‘ECPK’), for relief under s 216 of the Companies Act (Cap 50) (‘theAct’). They are all shareholders and directors of ECPK. In these proceedings, JLcomplained that LPB, LKG and LKS had conducted the affairs of ECPK and itssubsidiaries and had exercised their powers in a manner oppressive to her or indisregard of her interests as a shareholder of ECPK. The trial judge found that JLhad made out a case of oppression and made the necessary orders against LPB,LKG and LKS. All three of them appealed against the decision of the trial judge.Civil Appeal No 120 is an appeal by LPB alone against that decision of the trialjudge, and CA 130/98 is an appeal by LKG and LKS against the same decision of


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the trial judge. Civil Appeal 244/97 is also an appeal by LPB alone but against thedecision of the trial judge given while the hearing was in progress refusing to staythe proceedings or adjourn the hearing to enable ECPK to convene anextraordinary meeting to pass a special resolution for the voluntary winding up ofECPK. All the three appeals were heard together.

The facts

2 ECPK is a family company founded by LPB and his late brother, Low PengNam, and carries on the business of dealing in fruits, vegetables and otherfoodstuffs. It was incorporated on 4 June 1948, and its issued and paid up capitalis $1,000,000 divided into 10,000 shares of $100 each. The shareholders of ECPKare as follows:

3 ECPK has three wholly owned subsidiaries: Eng Cheong Peng Kee (HongKong) Ltd (‘ECPK (HK)’), incorporated on 1 March 1955 and engaged in thebusiness of fruiterers and greengrocers in Hong Kong; Eng Cheong Peng Kee(Malaysia) Sdn Bhd (‘ECPK (M)’) incorporated on 31 March 1967 and engagedin the business of fruiterers and greengrocers in Malaysia; and ECPK EnterprisesPte Ltd (‘ECPK Enterprises’) incorporated on 14 May 1970 engaged, inter alia, inholding and leasing out the premises known as Eng Cheong Tower situate at NorthBridge Road. There is also a subsidiary, ECPK Technologies Pte Ltd, which is adormant company. ECPK and it subsidiaries are hereinafter collectively referredto as ‘the Group’.

4 LPB is the managing director and LKG, LKS and JL are directors of ECPK,ECPK Enterprises, ECPK (HK) and ECPK (M); and in the Malaysian companyone Madam Yap Yoke Ying is also a director. LPB being the managing directorretains the overall management of the Group and LKG manages the trading armof the Group, while JL and LKS jointly manage the property holding company,ECPK Enterprises.

5 Although ECPK (HK), ECPK (M) and ECPK Enterprises are wholly ownedsubsidiaries of ECPK, the accounts of these subsidiaries are not consolidated withthat of ECPK. The corporate records of ECPK (HK) and ECPK (M) are kept inSingapore. Secretarial services for these two subsidiaries are rendered by Elite

Name Share PercentageLow Peng Boon 3,253 32.53%Low Kee Guan 3,066 30.66%Janie Low 1,452 14.52%Low Kee Siong 400 4%Low Kee Wah (LKS’s half brother) 400 4%Low Kee Cheong (LKS’s half brother) 400 4%Au Yong Woon (mother of Low Kee Cheongand Low Kee Wah)

233 2.33%

Ong Geok Mui (mother of LKS and Low KeeChuan)

396 3.96%

Low Kee Chuan (LKS’s brother) 400 4%


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Management Services Pte Ltd, which is a company based in Singapore.Furthermore, the control, direction and all management decisions regardingECPK and its subsidiaries emanate from Singapore.

6 ECPK and its subsidiaries are a group of prosperous companies and havesubstantial assets including large cash reserves. The main assets include the EngCheong Towers at North Bridge Road and ECPK’s main office at 15 and 16Hongkong Street. The business was essentially built up by LPB. LPB is now about85 years old. Sometime in 1984 he suffered a debilitating stroke and as a result heis semi-paralysed and uses a wheel chair to move around. His state of health issuch that he requires 24 hour nursing and medical care. In spite of his lack ofmobility he did not cease to take on an active role in the management of the affairsof ECPK and its subsidiaries. He continues to retain the overall management ofthe companies and receives reports on the financial status and business affairs ofthe companies from the other directors to whom he has left the day to dayoperations and management. Since the time he suffered the stroke he has stoppedgoing to the offices of ECPK and its subsidiaries. Annual general meetings ofECPK are held and conducted at LPB’s house at 2C, Amber Road, Singapore.

7 LPB’s remuneration as the managing director of ECPK includes annualbonuses paid from the net profits of ECPK and ECPK (HK). As for LKS whomanages the trading arm of the Group, his remuneration also includes an annualbonus derived from the net profits of ECPK. In the case of JL and LKG whojointly manage the property arm, ECPK Enterprises, their remuneration includesan annual bonus derived from the net profits of ECPK Enterprises.

8 JL’s claim for relief under s 216 of the Companies Act is based on thefollowing:

(a) that LPB had used huge amounts of funds of ECPK (HK) for payment of histravelling and other expenses to Hong Kong and China and these trips werefor his personal purpose and not for the purpose of any business of ECPK(HK);

(b) that the profits of ECPK (HK) year after year were not distributed toshareholders through ECPK but were accumulated and placed on fixeddeposits for the purpose of increasing the amount of bonus paid to LPB whichwas calculated at the rate of 20% of the net profits, before tax, of ECPK (HK),and that further in computing the profits of ECPK (HK), the gains in foreignexchange differences were taken into account, in spite of a shareholder’sresolution of ECPK to the contrary passed on 31 December 1991;

(c) that in the account of ECPK (M) for the financial year ending 30 June 1995there was a meteoric rise in the advertisement expenses from RM255 in 1994to RM283,314 in 1995 with no proper explanation given by LPB and/or LKG;

(d) that LPB, LKG and LKS had acted oppressively and in an indifferent mannertowards her in response to her various queries on the accounts relating to theimproper use of funds of ECPK (HK) and ECPK (M); and

(e) that LKS with the approval of LKG purchased a Jaguar XJR car with thefunds from ECPK Enterprises without her knowledge and in disregard of JL’sviews, at the time when she was not in Singapore.


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9 At the trial the main witnesses who gave material evidence were JL and LPB.LKG and LKS, despite having filed their respective affidavits, elected not to giveany evidence, and thus their affidavits of evidence-in-chief not being tested werenot admitted and considered by the trial judge. In the course of the trial, counselfor LPB applied for either a stay of the proceedings or an adjournment of thehearing to allow ECPK to convene an extraordinary general meeting to pass aspecial resolution for the voluntary winding up of ECPK. The trial judge,however, rejected this application and continued with the trial.

Decision below

10 At the conclusion, the trial judge held that JL had succeeded in making out acase against all three of them under s 216 of the Companies Act. He said, at ¶ 10as follows:

[T]here is the clearest evidence of a visible departure from the standards of fair dealingand a violation of the conditions of fair play by the first, second and third defendants[LPB, LKG and LKS]. The plaintiff has proved her case. The affairs of ECPK (S) andits subsidiaries are being conducted and the first, second and third defendants’ powersas directors are being exercised in a manner oppressive to the plaintiff and in disregardof her interests as a shareholder of ECPK (S) and its subsidiaries. Nothing that was saidby the first defendant in evidence indicated the contrary. Instead it reinforced theplaintiff’s case. The first defendant was certainly not a non-participant as he claimed.He was the key beneficiary. His evidence lacked credibility.

11 The trial judge then went on and made specific findings against each of them.As against LPB, he found as follows. First, LPB had incurred huge travelling andother expenses for himself and his nurse and LKG’s wife who accompanied himin his travels to Hong Kong and China and all these expenses were paid by ECPK(HK), and in that connection the travelling expenses for his trips to China,although paid out of the funds of ECPK (HK), were not recorded and accountedfor in the books of ECPK (HK). His travels were purely for his own purposes andnot for any business of ECPK (HK). Thus, he had made use of funds of ECPK(HK) for his own personal needs.

12 Secondly, LPB had year after year amassed and accumulated the profits ofECPK (HK) and placed them in fixed deposits for the purpose of increasing thequantum of his bonus which was calculated at the rate of 20% of the profits eachyear. He neither caused dividends to be declared nor caused profits to be returnedto the shareholders through ECPK. In determining the bonus at 20% payable outof the profits, ECPK (HK) included in the computation of profits unrealisedforeign exchange gains in disregard of the shareholders’ resolution to the contrarypassed on 31 December 1991.

13 In respect of the huge advertisement expenses amounting to RM283,314incurred by ECPK (M) in 1995, the trial judge appeared to have accepted that LPBdid not know anything about such expenses, but he found that LPB approved theaccounts of ECPK (M) at the annual general meeting held on 22 March 1996.

14 Lastly, the trial judge found that LPB was ‘a dominant and autocratic person’and that at the annual general meeting of ECPK held on 24 February 1996 hedirected LKG how he should vote on certain issues. He was very intolerant of the


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legitimate and proper questions which JL asked in respect of the accounts ofECPK and its subsidiaries. He did not respect the legitimate wishes of JL andignored totally her simple and reasonable requests.

15 As against LKG, the trial judge found that he was the executive director ofECPK and managed the trading activities of ECPK, ECPK (HK) and ECPK (M).He is the person to whom the staff of these companies would be answerable andfrom whom the staff would take instructions and directions. As regards the hugetravelling expenses incurred by LPB which were paid out of the funds of ECPK(HK), LKG abetted LPB in such exercise. He instructed the travel agents to makethe travel arrangements for LPB and the latter’s travelling companions and toword the invoices in such a way so as to mask the fact that the travellingcompanions’ tickets were also included in the invoices, and caused the debit notesof ECPK (HK) to be prepared in such a manner as to as to give the impression thatthey were for the tickets of LPB only.

16 The trial judge found that LKG was in charge of ECPK (M)’s tradingactivities, and yet he (LKG) gave different answers on different occasions relatingto the large advertisement expenditure of RM283,214 incurred by ECPK (M) in1995. That expenditure was never explained by LKG. Together with LPB andLKS, he approved the accounts of ECPK, ECPK (HK) and ECPK (M) eventhough he was well aware that the respective accounts were not in order, in thatillegitimate and illegal expenses had been included in those accounts. Lastly, thetrial judge also held that LKG abetted LKS in the purchase of the motor car, a 4.0litre Jaguar XJR, by approving the vouchers and signing the cheques of ECPKEnterprises for the payment of the booking fee and COE.

17 Turning to LKS, the trial judge found that he was fully aware that theaccounts of ECPK and its subsidiaries were not in order in that improper andillegitimate expenses had been included in the respective accounts, and yet hewilfully chose to approve those accounts. In so doing he committed a breach ofhis fiduciary duty to each of the companies in the Group. He also committed twofurther breaches of fiduciary duty: he charged to the account of ECPK Enterprisespetrol expenses not attributable to his car, and used the funds of ECPK Enterprisesfor payment of the booking fee and COE for the car, a 4.0 litre Jaguar XJR, whichhe had ordered, and intended to use the company’s funds to pay the balance of thepurchase price for the car. The trial judge formed the view that LKS was beholdento LPB and LKG for his position in ECPK Enterprises, such that he readilycomplied with their wishes in complete disregard of his fiduciary duty and theinterest of the shareholders of ECPK.

18 In conclusion, the trial judge made the following orders. First, he orderedLPB, LKG and LKS to buy the shares of JL in ECPK at a fair value without anydiscount, after taking into account all the moneys belonging to ECPK and/or itssubsidiaries that had been misused by the three of them. Secondly, he ordered thatthe fair value of ECPK’s net assets be determined as at 16 September 1996 andthat interest at 6% per annum be paid on the shares of JL as from 16 September1996. Thirdly, he ordered that one Mr Ng Boon Yew of M/s KPMG Peat Marwickbe appointed to determine the fair value of the shares of JL and the sale andpurchase be completed within 90 days from the date of valuation. Lastly, he


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ordered that the costs of ECPK be borne by LPB, LKG and LKS on an indemnitybasis and that they pay the costs of JL.

Civil Appeal No 244 of 1997

19 It is convenient to dispose of, first, CA 244/97. This appeal arose out of aninterlocutory order made in the course of the hearing. On 10 November 1997, LPBthrough his counsel made an offer in open court to purchase JL’s shares at adiscount of 25%, subject to his receiving financial assistance from ECPK for thatpurpose. That offer was not accepted by JL. Just over a week later, on 19November 1997, a second proposal was made in open court by his counsel thatECPK be voluntarily wound up, and for that purpose counsel applied for thehearing to be adjourned or the proceedings to be stayed so as to allow ECPK toconvene an extraordinary general meeting for the purpose of passing a specialresolution for the voluntary winding up of the company. The application wassupported by LKG and LKS, but was opposed by JL.

20 The trial judge refused the application on two grounds, namely, (i) that it wastoo early to pre-determine that winding-up was the appropriate remedy, and (ii)that not to allow JL to proceed further would be to deny her the right to be heardand to compel her to accept a remedy before she had presented her case for therelief she sought.

21 Before us counsel for LPB endeavoured to show that the offer made by LPB,if accepted, would have put an end to the complaint of JL and it was an abuse ofprocess for JL to continue to pursue the application. He relied onRe A Company(No 003843 of 1986)[1987] BCLC 562;Re A Company (No 006834 of 1988)[1989] BCLC 365 andRe A Company (No 00836 of 1995)[1996] 2 BCLC 192,197. We do not find these three cases of any assistance. In each of the three cases,the minority shareholders concerned petitioned to court for relief under s 459 ofthe Companies Act 1985 of the United Kingdom (which is the equivalent of but issomewhat different from s 216 of our Companies Act), and the majority appliedfor a stay of the petition on the ground that an offer had been made to purchase theminority’s shares at a reasonable price which the minority ought to have accepted.In the first case, Millett J granted a stay holding that the offer made was fair andthat it was unreasonable for the minority shareholders to press on with the petitionas that would result in a later payment to them at a lesser sum. The second casewas decided by Hoffmann J, who granted a stay on the ground that in that case itwas plain that the appropriate solution to the breakdown in the relationshipbetween the majority and the minority shareholders was for the former to buy theshares of the latter at a fair price, for the determination of which there was amachinery provided in the articles of association of the company, and the majorityhad made an offer to purchase the minority’s shares on those terms, and that itwould be an abuse of process for the petitioner to continue the proceedings unders 459. Similarly, in the third case, there was an offer made by the majority topurchase the shares of the minority at a fair price, and Judge Week QC, sitting asa deputy judge, granted a stay on the ground that the offer would give to theminority all the relief which he could realistically expect to obtain on his petitionand it would be an abuse of process for the petitioner to proceed with the petition.


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22 The factual position here is entirely different. What JL sought was an orderfor LPB, LKG and LKS to purchase her shares and not an order for the windingup of ECPK. Although in her originating summons seeking for relief under s 216of the Companies Act JL originally sought an alternative order for the winding-upof ECPK in the event the court was not inclined to order a purchase of her shares,that prayer was withdrawn by her through her counsel in open court on 12November 1997 and with the leave of the court was deleted from the originatingsummons. Secondly, at the stage of LPB’s application it was not possible for thetrial judge to decide whether the remedy for winding up was in fact the appropriateremedy that would put an end to the matter complained of.

23 In the circumstances, we do not think that the trial judge erred in refusing theapplication. In any event, in the course of arguing this appeal before us, counselfor LPB informed us that his client no longer wishes to have ECPK wound up evenin a voluntary liquidation. That being the position, we do not see any usefulpurpose in counsel pursuing this appeal further. Accordingly, we dismiss theappeal and award the costs of the appeal to JL and order that the deposit in courtas security for costs be paid to JL or her solicitors to account of costs. As for LKGand LKS, although they were not joined as appellants, they, in fact, support theappeal. We make no order as to costs in their favour.

Civil Appeals Nos 120 and 130 of 1998

24 We now turn to these two appeals which we propose to consider together, asthey are against the same judgment of the trial judge. The main issue here iswhether LPB, LKG and LKS collectively or each of them individually had actedin a manner oppressive to JL or in disregard of her interests as a shareholder ofECPK. It is necessary to examine the specific allegations made by JL.

Travelling expenses

25 It is not disputed that LPB made numerous trips to Hong Kong betweenMarch 1995 and May 1997 and during this period he also made trips to China. Ashe required 24 hours nursing and medical care and needed help in Hong Kong andChina, he was accompanied by his nurse and by LKG’s wife who acted as hispersonal assistant or secretary. It is also not disputed that these travelling and otherexpenses were paid by ECPK (HK). According to the case filed on behalf of JL,the travelling expenses incurred by LPB and his travelling companions to HongKong alone (without taking into consideration LPB’s China expenses and nurses’overseas assignment fees) amounted in total to a huge sum of HK$3,039,079.54.This amount may not be absolutely correct and may have to be verified. It is notdisputed, however, that the total amount incurred was very considerable.

26 What is in dispute is whether these trips were made for or in connection withany business of ECPK (HK) or any other company within the Group. JL’scomplaint was that all these trips were made for pleasure and not for any business.She relied on the information she received from LKG to that effect. It was also hercase that as LPB was not even well enough to attend at the office of ECPK inSingapore as its managing director, it is inconceivable that he was well enough to


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travel to Hong Kong or China to do business without any other company executiveaccompanying him.

27 At the trial, copies of facsimiles purporting to be letters sent by LPB fromHong Kong to various parties in China soliciting businesses were produced witha view to showing that his trips to Hong Kong and China were for the purpose ofbusiness. But most of the letters were not replied to and none of them resulted inany business contracts. It was argued on behalf of JL that these facsimiles couldhave been easily sent from Singapore, and in any event as most of the lettersinvited the recipients to reply to Singapore, there was no need for LPB to visitHong Kong to send out the facsimiles. It was, therefore, suggested that the letterswere fabricated to support LPB’s contention that he travelled to Hong Kong andChina for business.

28 Apart from the bare assertions made by LPB, there was really no evidence toshow that any of the trips he made to Hong Kong or China was for the purpose ofbusiness. LPB certainly had not succeeded in proving this fact. On the other hand,what is very significant is that the solicitors for LKG in the case filed in CA 130/98 said that LPB in fact travelled to Hong Kong and China for pleasure and notfor business. LKG’s solicitors said at ¶ 67 of the case:

On the facts, it is clear that while LPB may have acted oppressively towards JL, all LKGwas guilty of were errors of judgment and a misguided loyalty to his father. He knewthat LPB was using ECPK (HK)’s moneys for his personal expenses. But the court mustappreciate the position LKG was in. LPB was his father. LPB had worked for manyyears to build up the ECPK Group. As a result, LPB’s children, including JL, have beenwell provided for and had an interest in companies which were very profitable andwealthy. LPB was old (84 years) and had been an invalid for the last 12 years. Was LKGnow to refuse his father the freedom to travel as he wished or to insist that he (LPB) usehis own personal finances? Can it seriously be suggested that LKG could, in thecircumstances, have stood in his father’s way and stop him from getting what hewanted.

Such admission confirms substantially the allegations made by JL. In ourjudgment, the finding of the trial judge that the travelling and other expenses toHong Kong and China incurred by LPB were for his own personal needs is fullyjustified.

Bonus to LPB

29 It is not in dispute that ECPK (HK) has substantial retained profits placed infixed deposits with banks. It is also not in dispute that LPB is entitled annually toa bonus from ECPK (HK) at the rate of 20% of the net profit, before tax, and theseprofits include the interests derived from the fixed deposits which came from theretained profits. Hitherto, no dividends have been declared and paid and no capitalrepayment has been made by ECPK (HK), and year after year its profits have beenretained and placed in fixed deposits. This state of affairs has the result ofmaximising the annual bonus paid to LPB. It is contended by JL that this financialarrangement was part of a policy deliberately adopted by LPB to maximise hisbonus at the expense of the shareholders’ rights to a distribution of the profits.


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30 It is contended on behalf of LPB that there has been no deliberate policy toretain the profits of ECPK (HK) for the dominant purpose of enriching LPB. It hasbeen the practice of ECPK (HK) to retain the profits and that practice has beenadopted and continued for many years. JL herself, until sometime in 1996, hadnever objected to this state of affairs of the company being conducted as such, andhad approved the accounts of ECPK (HK) which showed that bonuses were paid.It is said, therefore, that JL had acquiesced in this course of action, and her delayin bringing proceedings militates against a finding that she has been ‘oppressed’.It is also argued that the decision not to distribute profits was entirely innocent,and JL herself, until sometime in 1996, had never put forward any plan to use theprofits. It is accepted that there were never any plans to put the accumulatedprofits of ECPK (HK) to use.

31 We do not think that such acquiescence on the part of JL would be of muchassistance in support of LPB’s case. It certainly does not preclude JL from raisingher objection subsequently. Her evidence was that in the early 1980s she raisedthe question whether interest earned on fixed deposits ought to be counted as partof the net profits of the company (of which LPB was entitled to 20%), but that LPBtold her off and passed a resolution on 10 October 1983 providing that ‘thedetermination of the net profit of the company should include interests receivedfrom fixed deposits or other deposits’. There was also evidence that JL at certainstage did support a move proposed by her uncle for distribution of the profits butLPB was hostile to any suggestion that the accumulated profits in Hong Kongshould be distributed either by way of dividend or capital reduction. JL by herselfalone would be in no position to oppose or object to the accumulation andretention of profits of ECPK (HK).

32 JL contends that there are other circumstances which indicate that the policyof non-distribution of the profits of ECPK (HK) was pursued by LPB entirely inhis self-interest, and not in the interest of ECPK or its shareholders. JL relies, first,on the unrealised gains in the foreign exchange differences. It is not disputed thatit is common accounting practice to take foreign exchange differences intoaccount in computing a company’s profit and loss accounts. However, pursuant toa shareholders’ resolution of ECPK passed on 31 December 1991, it was resolvedthat this practice should cease in respect of all the companies in the Group.Nonetheless, the practice continued to be adhered to by ECPK (HK) (but not bythe other companies in the Group) with the result that there were continuedenhancements of the profits of ECPK (HK), and, by corollary effect, the annualbonuses paid to LPB. When LPB was confronted about this practice at the annualgeneral meeting on 22 March 1996, the legal advisor of ECPK said that it was theresult of an oversight. Even then, no action was taken to rectify the accounts until12 December 1996, which appeared to have been prompted by the institution ofthese proceedings by JL.

33 JL next relies on the selective use of dates for the purpose of calculating theextent of unrealised foreign exchange gains. For example, in the trial balance for1994, foreign exchange differences reflected a loss of HK$28,000. When the finalaccounts were rendered, that, however, had turned into a profit of HK$2.5m. Itwas alleged by JL, and accepted by the trial judge, that the only feasibleexplanation was that between the presentation of the trial balance and the


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preparation of the final accounts, a date for calculation had been selected so as toreflect a huge profit as opposed to a loss. As LPB was the only person who stoodto benefit from this exercise, the inexorable conclusion, says JL, is that he it waswho had authorised it.

34 The trial judge accepted the contention that on a balance of probabilities therewas a deliberate course of action taken to maximise LPB’s bonus. On the materialbefore him, he was justified in arriving at this conclusion. The fact of the matterwas that the shareholders of ECPK, other than LPB who received an annual bonusout of the profits, had never had the benefit of the fruit of ECPK (HK)’s profits.To all intents and purposes, there was no plan to use such moneys in any businessof ECPK (HK) or any company within the Group. Whilst there is nothingobjectionable on such course being taken by the company, it does, when it isconsidered together with other relevant facts, lead to the conclusion that themajority shareholder, ie LPB, deliberately hoards the profits in ECPK (HK) for thesake of earning interest, a component of which is paid to himself. There is nodenying that LPB is the sole beneficiary of the subsidiary’s profits, although heowns only a third of the holding company, ECPK.

LKG’s involvement

35 In CA 130/98, it is argued on behalf of LKG that in relation to the travelexpenditure of LPB he did not commit any misfeasance. It was his father who wasresponsible. His case is that his father was a typical elderly patriarch of the familywho was very domineering and would stand no dissension from any of hischildren and found no need to account to any of his children how much he spent.He was effectively under the control of his father and was in no position toquestion or disagree with the latter when he was asked to arrange for ECPK (HK)to pay for his travelling expenses. LKG himself, however, had derived no benefitfrom the expenditure incurred and the arrangements he made for LPB. If he wasguilty of acquiescing in his father’s breach of trust and fiduciary duty, it was onlybecause he was overwhelmed by his father’s authoritarianism.

36 In our opinion, LKG’s defence cannot be sustained. His role was not sopassive as he puts it. His complicity in the misfeasance extended to his havingdeliberately arranged for the accounts, invoices and vouchers to disguise the factthat LPB travelled for pleasure. He admitted that he made the travel arrangementsfor his father, and these arrangements included the issue of invoices referring toonly the ‘ticket’ issued to ‘PB Low’ without disclosing the tickets issued to LPB’stravelling companions. It is not disputed that, in fact, on each occasion when threetickets were issued, namely: to LPB, LKG’s wife and the nurse respectively, theinvoices therefor would reflect that only one ticket was issued to LPB. Nosatisfactory explanation or answer was given by LKG as to why the invoices wereso suspiciously worded. LKG himself declined to give evidence, and LPB saidthat he was not responsible for making the arrangements. The trial judge made thefollowing finding at ¶ 11.14:

11.14 The second defendant [LKG] is the person who contacted and instructed thetravel agents Voyager to make the travel arrangements for the first defendant andhis travelling companions, and to word their invoices to mask the fact that thetravelling companions’ tickets were also included in the invoices. He had the


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debit notes of ECPK (S) prepared in such a manner as to give the impression thatthey are for only one (1) air ticket for the first defendant. He is the person whomanages ECPK (HK) and is in charge of its trading activities. The entries in thejournals of ECPK (HK) relating to ‘Outport travelling — 1’ were made on thesecond defendant’s instructions.

In our opinion, LKG acted in derogation of his duty as a director.

37 LKG was also guilty of complicity in the state of affairs that resulted inmaximising the bonus payments to LPB. He is the executive director of ECPK,and at all material times he managed the trading activities of ECPK, ECPK (M)and ECPK (HK). Clearly, he is the person to whom the staff of the threecompanies would be answerable and from whom the staff would take instructionsand directions. He is also the person who dealt with the auditors of thesecompanies in relation to the accounts of these companies and related matters. Thetrial judge said at ¶ 11.9:

11.9 The second defendant is the ‘contact person’ within these companies with theirrespective auditors in Hong Kong (M/s Kwan Wong Tan & Fong), Malaysia(M/s Ling Kam Hoong & Co) and Singapore (M/s Foo Kon & Tan). He is theperson whom Eric Tan deals with in ECPK (S) and its subsidiaries. He is also theperson whom the staff of these three companies are answerable to and fromwhom the staff would take instructions and directions.

Hence, he played a part in the affairs of ECPK (HK) in relation to the retention ofprofits, the investment of such profits in deposits with banks and the treatment offoreign exchange gains in the computation of profits and the resultantenhancements of bonuses paid to LPB.

Advertisement expenses

38 It is not in dispute that the advertisement expenses of ECPK (M) for the year1995 had ballooned to a staggering sum of RM283,314 as compared to the sum ofRM255 incurred in the previous year. LKG was in charge of the Malaysian tradingoperations, and such a huge increase necessarily called for an explanation fromhim, but no satisfactory explanation was forthcoming.

39 In his affidavit filed in the proceedings below LKG said that the expenses hadbeen reimbursed by way of ‘commissions’ or ‘discounts on sales’. Thisexplanation was not only vague and suspect but was never substantiated inevidence. His defence that JL was relying on ‘innuendo and suspicion’ and that itwas unfair to draw any adverse inferences against him for not giving evidence atthe trial is manifestly untenable. The trial judge held at ¶ 11.10:

11.10 The second defendant is the person in charge of ECPK (M)’s trading activities,and yet he gave different answers on different occasions relating to the largeadvertisement expenditure of RM283,214.00 incurred by ECPK (M). Thisconduct was never explained when it could have been by the second defendant.

The trial judge was eminently correct in his finding. The only inference we canreasonably draw is that there was, at the lowest, something in the advertisementexpenditure which was not proper and which LKG was anxious to conceal. Weshould mention, however, that in respect of this matter, LPB had no involvement.


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Approval of accounts

40 Next, JL complained that the decision of LPB, LKG and LKS to approveECPK’s accounts at the annual general meeting held in 1996, notwithstanding thequeries raised on her behalf concerning (i) the travelling expenses of LPB, (ii) theadvertisement expenses, and (iii) the foreign exchange differences, demonstratedthe oppressive conduct on the part of the majority, in that they used their positionsto gloss over the genuine concerns indicated by JL with reference to the accountsof the companies in the Group.

41 Approval of the accounts of ECPK per se by LPB and LKG is not oppressiveconduct. However, that must be looked at in the context in which they dealt withJL’s queries as to the illegitimate and improper use or application of company’sfunds. It is not disputed that at the annual general meeting of ECPK, JL throughher proxy raised those queries and made her objections or reservations known andnone of those objections or reservations were addressed. Although partialrestitution has been made in respect of items (i) and (iii) by LPB, these itemsremain a matter of serious contention on behalf of JL. The substance of JL’scomplaint was that LPB and LKG had made improper use of company’s funds andthe failure of LPB and LKG to address them and rectify the accounts of ECPK andits subsidiaries. Instead, they adopted a dismissive attitude towards such queriesand either ignored or disregarded them. On the evidence adduced, JL succeededin making good this complaint against LPB and LKG but, for the reasons whichwe shall give shortly, not against LKS.

Whether conduct was oppressive

42 We now turn to the question whether the course of conduct of LPB and LKGconsidered as a whole was oppressive to JL or in disregard of her interest. The lawas to what generally is oppression or disregard of a minority interest under s 216of the Companies Act has been stated in several cases. It is sufficient to refer tothe following. InRe Jermyn Street Turkish Baths Ltd[1971] 3 All ER 184, 199;[1971] 1 WLR 1043, 1059–1060 (which was a decision on s 210 of the UnitedKingdom Companies Act 1948) Buckley LJ delivering the judgment of the Courtof Appeal had this to say about ‘oppression’:

We are concerned only to consider whether the affairs of the company were, when thepetition was presented, being conducted in a manner oppressive to some part of themembers of the company. What does the word ‘oppressive’ mean in this context? In ourjudgment, oppression occurs when shareholders, having a dominant power in acompany, either (1) exercise that power to procure that something is done or not donein the conduct of the company’s affairs or (2) procure by an express or implicit threat ofan exercise of that power that something is not done in the conduct of the company’saffairs; and when such conduct is unfair or, to use the expression adopted by ViscountSimonds inScottish Co-operative Wholesale Society Ltd v Meyer[1959] AC 324, 342‘burdensome, harsh and wrongful’ to the other members of the company or some ofthem, and lacks that degree of probity which they are entitled to expect in the conductof the company’s affairs: seeScottish Co-operative Wholesale Society Ltd v MeyerandRe HR Harmer Ltd[1959] 1 WLR 62. We do not say that this is necessarily acomprehensive definition of the meaning of the word ‘oppressive’ in s 210, for theaffairs of life are so diverse that it is dangerous to attempt a universal definition. Wethink, however, that it may serve as a sufficient definition for the present purpose.


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Oppression must, we think, import that the oppressed are being constrained to submitto something which is unfair to them as the result of some overbearing act or attitude onthe part of the oppressor. If a director of a company were to draw remuneration to whichhe was not legally entitled or in excess of the remuneration to which he was legallyentitled, this might no doubt found misfeasance proceedings or proceedings for someother kind of relief, but it would not of itself amount to oppression. Nor would the factthat the director was a majority shareholder in the company make any difference, unlesshe had used his majority voting powers to procure or retain the remuneration or to stifleproceedings by the company or other shareholders in relation to it.

43 In the celebrated case ofRe Kong Thai Sawmill (Miri) Sdn Bhd[1978] 2 MLJ227, 229 (which was a Privy Council decision on an appeal from the Federal Courtof Malaysia and concerned the application of the Malaysian equivalent of s 216 ofour Act), Lord Wilberforce said:

[F]or the case to be brought within s 181(1)(a) at all, the complaint must identify andprove ‘oppression’ or ‘disregard’. The mere fact that one or more of those managing thecompany possess a majority of the voting power and, in reliance upon that power, makepolicy 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. Itis only when majority rule passes over into rule oppressive of the minority, or indisregard of their interests, that the section can be invoked … there must be a visibledeparture from the standards of fair dealing and a violation of the conditions of fair playwhich a shareholder is entitled to expect before a case of oppression can be made (Elderv Elder & Watson Ltd): their Lordships would place the emphasis on ‘visible’. Andsimilarly ‘disregard’ involves something more than a failure to take account of theminority’s interest: there must be awareness of that interest and an evident decision tooverride it or brush it aside or to set at naught the proper company procedure (per LordClyde inThompson v Drysdale).

His Lordship’s pronouncements have been adopted and followed in ourjurisdiction: seeRe Gee Hoe Chan Trading Co Pte Ltd[1991] SLR 837; [1991] 3MLJ 137 andRe Tri-Circle Investment Pte Ltd[1993] 2 SLR 523.

44 It seem to us that the conduct of LPB and LKG looked at as a whole falls shortof the standards of fair dealings. LPB’s use of ECPK (HK)’s funds for his personaltravels; his continued acceptance of the practice of retaining profits of ECPK (HK)year after year and their placement in fixed deposits with banks which resulted inenhancement of his bonuses and which denied the other shareholders the benefitof any distribution of those profits and his resistance to any suggestion fordistribution of those profits; his approval of the accounts of ECPK and itssubsidiaries which were shown to him to have contained improper items ofexpenses charged to those accounts; his failure to direct necessary rectificationsor adjustments to be made to those accounts; and his repeatedly dismissivetreatment of the legitimate queries made on behalf JL, in our judgment, constitutea clear decision to override the interest of a minority shareholder and amount toan oppression of JL and a disregard of her interest in ECPK. According to LKG,LPB was a typical elderly patriarch and was autocratic and would stand nodissension from any of his children and saw no need to answer to any of hischildren. It seems to us that having co-founded ECPK and having built it up intoa prosperous company which has benefited his children including LKG and JL,LPB probably felt that he was entitled to some privileges. Throughout the years


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he must have been accustomed to doing things in the way as he saw fit and as hepleased including dealing with the company’s assets, and felt that he was entitledto treat the company and its subsidiaries as his and their assets as his own. Hisactions stemmed from a deep-seated but misguided belief that having by hisefforts and labours built up ECPK and its subsidiaries, he was entitled to treat thecompany and its subsidiaries as if they were under his sole proprietorship and usetheir funds for his own purposes. Nonetheless, having set up the corporatestructure in which there are minority shareholders whose interests must also bereckoned, he cannot treat the company and the subsidiaries as his own and use thecorporate funds and assets for his own purposes and disregard the interests of theminority shareholders as he did. He owed a fiduciary duty to the company.

45 In so far as LKG is concerned, he himself committed acts of misfeasance andassisted and abetted his father’s conduct in the affairs of the company. He playedan active role in relation to LPB’s use of ECPK (HK)’s funds, the retention ofprofits of ECPK (HK) resulting in the enhancements of LPB’s bonuses and theinclusion of illegitimate and improper items in the accounts of ECPK and itssubsidiaries and the approval of such accounts.

46 We are reinforced in our conclusion from a consideration of the decidedcases. InRe HR Harmer Ltd[1958] 3 All ER 689, one H formed a privatecompany to take over his business, which was subsequently carried on by him andhis sons. He was chairman and his sons were directors. He had the majority ofvotes and was in a position to pass any resolution including special resolution ofthe company. He ran the company as if it were his own, ignoring the interests ofthe shareholders and wishes of the directors, taking up business ventures overseaswithout the consent of the board, and drawing money from the company for hispersonal expenses. His sons’ petition for relief under s 210 of the Companies Act1948 was granted by the High Court and on appeal was affirmed by the Court ofAppeal.

47 Similarly, inRe Coliseum Stand Car Service Ltd[1972] 1 MLJ 109, the HighCourt of Malaysia granted relief where the respondent, a majority shareholder, ranthe business by himself and refused to declare dividends despite the making ofsubstantial profits. He continued to receive a salary, though he was overseas andwas not contributing to it. He took personal loans for himself and his son, andfailed to disclose the circumstances relating to the renting and use of the premisesof the company. The High Court ordered a sale of some of the shares held by therespondent to the applicant to balance the equation of power within the companyand to effect a joint management of the affairs of the company.

48 InRe City Meat Co Pty Ltd(1984) 8 ACLR 673, the minority shareholders ofa private company with very huge assets complained that very small dividendshad been declared and paid, while one Ken Lowe who held 36% had beenreceiving a very comfortable income from the company. In addition to his salaryand director’s fees, he received also a service payment at the rate of 10% of theprofits of the company. Ken Lowe was an autocrat who had been running thecompany for years and had no intention of losing grip on the business of thecompany and regarded the company as his own. Millhouse J of the Supreme Courtof South Australia said, at p 681:


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I have no doubt that Mr Ken Lowe has acted ‘in the affairs of the company in [his] owninterests rather than in the interests of the members as a whole’. He enjoys working. Hewill brook no interference. He has his plans for the full development of Pitlochry andKendal and they will be carried through regardless of what the petitioners say. Theshareholders can wait for a good dividend until that has been done. He will keep themeat wholesaling business going even though it is not profitable … Even if that conductbe not ‘unjust’ and ‘inequitable’ (seeEbrahimi v Westbourne Galleries Ltdper LordCross at p 503) it is certainly ‘unfair’ and ‘unjust’ to the minority shareholders in CityMeat.

49 Re Gee Hoe Chan Trading Co Pte Ltd[1991] SLR 837; [1991] 3 MLJ 137was a decision of our High Court. There, the company was run by a familypatriarch. Following his death, the shareholders split into factions, resulting in onegroup in control and drawing directors’ fees from the company whilst refusing todeclare dividends. The High Court considered that this behaviour amounted to anoppression, and granted relief in the minority’s favour.

50 In our judgment, the trial judge was therefore justified in finding that LPB andLKG had conducted the affairs of ECPK and its subsidiaries and exercised theirpower in a manner oppressive to JL and in disregard of her interest as ashareholder.

LKS’s position

51 The complaints JL made against LKS were (i) the improper charging of petrolexpenses to ECPK Enterprises, (ii) his frequent absence from duty in themanagement of that company, (iii) his purchase of the luxury car, a 4.0 litre JaguarXLJ, and (iv) his approval of the audited accounts of ECPK, ECPK (HK) andECPK (M) which he knew contained illegitimate and improper items. It is not thecase of JL that LKS collaborated with LPB in relation to the improper travellingexpenditure borne by ECPK (HK) or collaborated with LKG in relation to theinexplicable huge advertising expenses incurred by ECPK (M). Clearly, there wasno evidence that he had played any part in respect of either of those matters. Norwas he involved or had any part to play on the matter relating to payment of bonusto LPB by ECPK (HK).

52 It may be that the improper charging of petrol expenses to ECPK Enterprisesand his frequent absence from duty were breaches of duty as a director, but we donot consider that these breaches as oppressive conduct in relation to JL. Nor werethey related to the oppressive conduct which JL complained of against LPB andLKG.

53 As for the purchase of the luxury car, we have some doubt whether it isimproper. It appears to be the policy of the Group to provide cars or transportallowances to the directors. It may be that LKS had exceeded the reasonable limitin purchasing such an expensive car and that the purchase of such a car wasextravagant; but that must depend on what the Group ordinarily provides for itsdirectors, and it is not uncommon for rich companies to provide its directors withluxury cars. In any event, it is open to the board of directors of ECPK Enterprisesto approve or disapprove such an expenditure. LPB in his evidence said that he didnot know of such expenditure and would certainly not approve such purchase.


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Assuming that such a purchase was a breach of duty on the part of LKS, suchbreach again is not oppressive conduct vis-à-vis JL.

54 There was no active participation by LKS in any of the matters complainedof by JL against LPB and LKG. LKS was only a 4% shareholder. Not only was hea small minority shareholder himself, but his involvement in the management ofthe Group was minimal. He and JL are both executive directors of ECPKEnterprises, and he is not an executive director of the parent company itself. Hisinvolvement in the matters complained of was limited to (i) signing a circularresolution dated 15 December 1995 which, amongst other things, approved thefinancial statements of ECPK (HK) for the year ended 30 June 1995, and (ii)voting in favour of adopting the audited accounts of ECPK and its subsidiaries atthe annual general meeting on 22 March 1996. True it is that as a shareholder hevoted in favour of the adoption and passing of the accounts of ECPK and itssubsidiaries but this alone is not sufficient to make him a party to the oppressiveacts complained of. It could not be said that he used his voting power as ashareholder to oppress JL. In our judgment, the trial judge’s finding that he wasinvolved in the oppressive conduct of LPB and LKG was not justified. JL’s claimagainst LKS ought to have been dismissed.

The remedy

55 The question now is what is the most appropriate remedy in the circumstancesof this case. Section 216(2) of the Act provides:

(2) If on such application the Court is of the opinion that either of such grounds isestablished the Court may, with a view to bringing to an end or remedying thematters complained of, make such order as it thinks fit and, without prejudice tothe generality of the foregoing, the order may —

(a) …(b) …(c) …(d) 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;(e) in the case of a purchase of shares by the company provide for a reduction

accordingly of the company’s capital; or(f) provide that the company be would up.

Each of the remedies enumerated therein ranks equally:Re Kong Thai Sawmill(Miri) Sdn Bhd[1978] 2 MLJ 229, 233 per Lord Wilberforce andKuah Kok Kimv Chong Lee Leong Seng Co (Pte) Ltd[1991] SLR 122; [1991] 2 MLJ 129. Thecourt has an unfettered discretion to make such order as it thinks most appropriate.Each case has to be considered on its own merits.

56 ECPK and its operating subsidiaries are a prosperous group of companies,and in normal circumstances an order requiring the oppressive majority (in thiscase LPB and LKG) to buy the shares of the oppressed minority (in this case JL)is an appropriate order. But this is a very unusual case and there are otherconsiderations which we should bear in mind in determining the appropriateremedy. This is a family company which has been operating for several decades.The strength of the company lies in the unity and commitment of each member of


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the family to advance the interests of the family business. Once, however, there isa rift in the family, it may or would no longer be feasible for the business tocontinue. The Group has been managed and run by LPB, LKG, LKS and JL. LPBis about 85 years old, half paralysed and wheel chair bound, and is hardly in aposition to manage and run ECPK and its subsidiaries. Notwithstanding that, he isnot asking for a winding up order. Subject to the determination of an appropriateprice and presumably subject to the court granting him an order authorizing thenecessary financial assistance to be provided by ECPK to enable him to buy theshares, he is in favour of buying the shares of JL. Be that as it may, we do not thinkthat he could effectively run the Group without the assistance of LKG andprobably LKS. Further, we do not expect that he would be able to change hismanagement style and temperament; he would remain autocratic and domineeringand a dominant figure at board and management levels and would continue to dealwith the affairs of ECPK and its subsidiaries as though these companies were allunder his sole proprietorship.

57 LKG in his case has stated that he did not wish to carry on and run the Groupand asked for an order for winding up. That statement was probably made out ofself interest and in apprehension of the possibility that an order affirming the orderbelow might be made against him, and he could not afford to buy the shares of JL.

58 LKS in his case also asked for a winding up order. Understandably, being avery small minority shareholder he would like to realize his shares. It appears thatthe other minority shareholders, who are not a party to these proceedings, alsowish to sell and realize their holdings in ECPK. All these minority shareholdershave probably found that their shares in ECPK have been locked in and would liketo ‘cash out’. In addition, it appears there are a couple of minority shareholderswho have taken legal advice and are awaiting the outcome of this appeal beforeconsidering instituting similar proceedings against LPB under s 216 of theCompanies Act on the same or similar grounds. In determining the appropriateremedy, the court should also consider the interest of all the minorityshareholders.

59 JL, on the other hand, objects to the remedy of winding up on the ground thatit would result in lower returns to her of her shares in the company as the assetswould have to be sold in a depressed market, and that it would take a long timebefore the assets are realised and distributed. However, at the time when sheinstituted proceedings seeking relief under s 216 of the Companies Act, she askedfor an order of winding up as an alternative relief. At the hearing, on 12 November1997, her counsel asked for leave to withdraw that prayer and since then she hassought an order for her shares to be purchased. It is argued by counsel for theappellants that the reason for this change of mind is that the value of theimmovable property belonging to the Group had considerably declined since thedate of the filing of her application. We think that this point is not without merit.

Conclusion

60 In our judgment, in the very unusual circumstances of this case, theappropriate remedy to be made is a winding up order and such an order is in theinterest of ECPK as a whole. Accordingly, we set aside the entire order madebelow, and make the following orders. We dismiss JL’s claim in the originating


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swummons against LKS. Next, we order that ECPK be wound up. In addition, wemake the following consequential orders. As against LPB we order: (i) that LPBmake restitution in respect of all the travelling expenses incurred by LPB forhimself, his nurse and his daughter-in-law in respect of his trips to Hong Kong andChina during the period between March 1995 and May 1997 to the extent that hehas not already done so; and (ii) that LPB make restitution, to the extent that hehas not already done so, of all sums received by way of bonuses from ECPK (HK)insofar as those bonuses were attributable to the failure of ECPK (HK) to complywith the shareholders’ resolution of 31 December 1991 that all companies in theECPK Group should not take unrealized foreign exchange differences intoaccount in the calculation of net profits. As against LKG, we order that he makerestitution of the amount of RM283,314 as advertisement expenses incurred byECPK (M).

Costs

61 We now come to the question of costs. We have already dealt with the costsin CA 244/98. In respect of CA 130/98 we order JL to pay the costs of LKS hereand below. In respect of CA 120 and 130/98 we order LPB and LKG to pay thecosts of JL here and below, but only one set of costs is to paid to JL, and thedeposits in court in these two appeals as security for costs are to be paid to JL orher solicitors to account of costs. Lastly, in all the three appeals before us, weorder LPB and LKG to pay to ECPK the costs here and below on an indemnitybasis. In this connection, we order that all fees, expenses and disbursementsincurred by and charged to ECPK and/or any of its subsidiaries be fullyreimbursed by LPB and LKG.

62 We have also considered whether in all these appeals we should grant acertificate for two solicitors for getting up the case and attendance in court underO 59 r 19(2), and have come to the conclusion that no such certificate should begranted.

Consequential orders

63 In view of the order we have made for the winding up of ECPK, there mayfurther consequential orders we need to make. Parties are at liberty to address uson such further orders, if any, in the form of written submissions to be submittedwithin seven days from today.

Order accordingly.

Reported by Justin Chan Hsiang-yu

Date post:	02-Dec-2014
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