法律承认公司, 幕后股东/董事的存在？

  1. 原告称本身在1994年开始就以信托的方式拥有一家公司的10%股份。他指被告在12.9.2017私下将他的股份转让，因此将被告告上法庭。
  2. 他要求拿回10％的股份，并做出以下的诉求：
    • a declaration that the Plaintiff was the owner of the shares registered in the name of the 1st Defendant on or before 12.9.2018;
    • a declaration that the 1st Defendant held the shares in trust for the Plaintiff.
    • an order that the Defendant, the secretary of the 6th Defendant and the Companies Commission of Malaysia do rectify the shareholding of the 6th Defendant by transferring the shares presently held by the 2 nd Defendant to the Plaintiff, or in the alternative, the 2nd Defendant reimburses the Plaintiff the value of the shares; and
    • that the 1st and 2nd Defendants pay the Plaintiff damages to be assessed and costs of this action.
  3. 原告辩称本身是公司的幕后股东/董事。他指被告自1994年至2017年都让他出席股东大会，而且其他股东也允许他在公司出现，并没有提出反对，这表示他们都承认本身的股权。
  4. 然而法庭指公司的股东或董事不受任何约束或需要承认原告的股权；只有法律上被承认的股东才有法定地位；而被告不属于前者，因此法律并不承认他是公司的股东/董事。Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interest in any share or unit of a share or (except only by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.”
  5. 公司的股东或董事不受任何约束或被需要承认其他人的股权.companies have nothing whatever to do with the relation between trustees and their cestuis que trust in respect of the shares of the company. If a trustee is on the company’s register as the holder of shares, the relations which he may have with some other person in respect of the shares are matters with which the company have nothing whatever to do; they can look only to the man whose name is upon the register.”
  6. 法庭不承认原告拥有公司的股份，驳回了原告的申请。

Background

  1. The Plaintiff in his amended statement of claim [Enclosure 25] claims that he is the beneficial owner of 10% shares (“the shares”) in the 6th Defendant on or before 12.9.2018. The shares were claimed to be held in trust by the 1st Defendant on his behalf.
  2. He alleged that there was an acceptance and recognition of his beneficial ownership of the shares by the shareholders and directors from the time the 6th Defendant began operations in 1994.
  3. On 12.9.2017, the shares were transferred by the 1st Defendant to the 2nd Defendant. The Plaintiff alleges that the shares were transferred without his knowledge and in violation of an earlier resolution to that the dispute be referred to the court.
  4. The Plaintiff alleges that the 2nd Defendant in facilitating the transfer of the shares to himself had violated the procedures of the 6th Defendant, the recognition of the Plaintiff’s standing by the directors and shareholders at the relevant time and his fiduciary duty as a director of the 6th Defendant. As a result, he claims that the Defendants are estopped from denying his ownership of the shares.
  5. He now seeks the following reliefs:

(i) a declaration that the Plaintiff was the owner of the shares registered in the name of the 1st Defendant on or before 12.9.2018;

(ii) a declaration that the 1st Defendant held the shares in trust for the Plaintiff.

(iii) an order that the Defendant, the secretary of the 6th Defendant and the Companies Commission of Malaysia do rectify the shareholding of the 6th Defendant by transferring the shares presently held by the 2nd Defendant to the Plaintiff, or in the alternative, the 2nd Defendant reimburses the Plaintiff the value of the shares; and (iv) that the 1st and 2nd Defendants pay the Plaintiff damages to be assessed and costs of this action. Applications to strike out.

  1. Applications were taken out by the Defendants to strike out the action under O 18 r 19(1) Rules of the Court 2012 (“O 18 r 19(1)”) or under the inherent jurisdiction of the court. There are altogether three applications:

(i) Enclosure 30, filed by the 1st Defendant pursuant to grounds (a), (b) and/or (d) of O 18 r 9(1).

(ii) Enclosure 35, filed by the 3rd to 6th Defendants pursuant to ground (a) and (d) of O 18 r 9(1).

(iii) Enclosure 41 is filed by the 2ndDefendant pursuant to ground (b) and (d) of O 18 r 9(1).

Preliminary Objection

  1. The Plaintiff raised a preliminary objection with regard to the manner in which the grounds relied on were framed. He relied on certain High Court cases which had dismissed applications where the grounds had been framed cumulatively. I dismiss the preliminary objection on the following two grounds:

(a) The present Rules of Court 2012 by virtue of O 2 r 3 require the Court to have regard to the overriding interest of justice and not just technical non- compliance. Preliminary Objections are no longer allowed for technical non-compliance unless it is shown to have caused substantial miscarriage of justice. There was no evidence of any substantial miscarriage of justice shown in this case.

(b) Recent decisions of the Court of Appeal has established that the combination of the limbs of O 18 r 19(1), as seen in the present case, in one single application does not render the application irregular or defective (see Amanah Raya Bhd (wakil diri bagi Cheng Song Lim, si mati) v Ong Chin Hoo [2019] MLJU 198; Solai Realty Sdn Bhd v United Overseas Bank (M) Bhd [2013] 4 MLJ 545). In these cases the limbs were lumped cumulatively with the words “and/or” in Amanah Raya and “and” in Solai Realty.

Decision of the Court

  1. I make it clear that for ground (a) of O 18 r 19(1) no affidavits except the statement of claim was considered by me to determine whether there was a reasonable cause of action.
  2. I also kept in mind the following established principles:

(i) Only in obviously unsustainable cases that recourse should be had to the summary process under O 18 r 19(1) (Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 4 CLJ 7).

(ii) The phrase “frivolous or vexatious” in paragraph (b) of O 18 r 19(1) refer to groundless actions or pleadings with no prospect of success. In considering whether any pleading is frivolous or vexatious, one is entitled to look at the whole history of the matter. However, it is not appropriate in striking out proceedings to resolve dispute of facts on affidavit evidence (See Thong & Anor v Saw Beng Chong [2103] 3 MLJ 235).

(iii) The phrase “abuse of the process of the Court” in paragraph (d) of O 18 r 19(1) signifies that the process of the court must be used bone fide and properly and must not be abused. A situation where the court’s process is used for an unlawful object and not for the actual purpose to achieve justice falls under this ground. A determination of this ground includes considerations of public policy and interests of justice. (see Solai Realty Sdn Bhd (above); Gabriel Peter & Partners (Suing as a Firm) v Wee Chong Jin [1988] 1 SLR 374; and Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd v Liew Choong Kin [2018] 6 CLJ 217).

  1. My decision for each of the applications is set out separately below.

Enclosure 30 (1st Defendant’s Application)

  1. The 1st Defendant is the wife of the Plaintiff and there has been a break-up of the marriage for some years now. Divorce proceedings are presently pending in the Penang High Court vide Divorce Petition No. PA-33-217-06/2017 (“the divorce proceedings”). The 1st Defendant claims that the shares were given to her as a gift during the marriage. She is the registered holder of the shares in the 6th Defendant since 1994.
  2. I find that from the four corners of the statement of claim that there is a reasonable cause of action and am not persuaded that the action is obviously unsustainable. Thus, ground (a) of O 18 r 19(1) fails.
  3. The 1st Defendant submits that the proper forum to determine the issue of the ownership of the shares is in the divorce proceedings. In filing this action, the Plaintiff is trying to circumvent the provisions of the Law Reform (Marriage and Divorce) Act 1976, in particular Section 76 which deals with the division of matrimonial assets.
  4. I agree. The division of all assets of the marriage must be determined in the divorce proceedings. The Plaintiff has further submitted to the divorce proceedings by admitting in his answer and Cross-Petition that the shares were acquired for investment and to increase the income of the family.
  5. It is therefore an abuse of the process of the court to file these proceedings when there are pending proceedings on the division of the matrimonial assets. This is in these circumstances a proper case to strike out the statement of claim pursuant to ground (d) of O 18 r 19(1). Accordingly, on this ground alone, the Plaintiff’s action against the 1st Defendant is struck out.
  6. I am not persuaded by the 1st Defendant on her other reasons for the action to be struck out. The action against her is for breach of trust and damages. This cause of action is not connected with the other purported “tortfeasors”. Her claim that the shares are a gift in light of the Plaintiff’s allegation that she is holding the shares in trust is obviously a triable issue. The reasons are therefore insufficient to strike out the action against her.

Enclosure 35 (3rd, 4th & 5th Defendant’s Application)

  1. The 3rd, 4th and 5th Defendants are shareholders of the 6th Defendant. Article 12 of the Memorandum of Articles of Association (“the Article”) of the 6th Defendant does not recognise any person holding any shares on trust except as required by law. The shares has been transferred to the 2nd Defendant and subsequently registered in the 2nd Defendant’s name by the 6th Defendant.
  2. The Article reads as follows:

“Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interest in any share or unit of a share or (except only by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.”

  1. The Plaintiff submits that the Defendants have acknowledged his beneficial interest by acceptance of the Plaintiff’s attendances, decision making and execution of resolution of the Board of Directors and/or General Meetings of the shareholders since 1994 until 2017. This has raised questions of law on constructive trust, estoppel and waiver. In his attempt to overcome the Article 12 hurdle, the Plaintiff says that these questions fall within the meaning of the phrase “by law otherwise provided” in the Article.
  2. The issue is therefore one of pure construction of the Article. The Article says that no person shall be recognised by the company as holding any share upon any trust unless it is provided by law.
  3. I am of the view that the company, shareholders and directors are not bound by or compelled in any way to recognise the right the Plaintiff and this includes the issues of constructive trust, estoppel and waiver.
  4. The Federal Court decision in Yeng Hing Enterprise Sdn Bhd v Liow Su Fah [1979] 2 MLJ 240, where a similar provision as the Article was in issue, said that while a company does not take cognisance of trusts, section 163 of the Companies Act 1965 (now section 110 of the Companies Act 2016) should be read with conjunction with its articles of association which doesn’t comply with this provision.
  5. The Federal Court followed the principle stated in Re Perkins, ex parte Mexican Santa Barbara Mining Co [1890] 24 QBD 613 which states:

“… companies have nothing whatever to do with the relation between trustees and their cestuis que trust in respect of the shares of the company. If a trustee is on the company’s register as the holder of shares, the relations which he may have with some other person in respect of the shares are matters with which the company have nothing whatever to do; they can look only to the man whose name is upon the register.”

  1. The dispute between the Plaintiff and the 1st Defendant over the shares does not concern the other shareholders and the 6th Defendant. The shareholders and the 6th Defendant only recognised the registered shareholder of the shares, who was the 1st Defendant, and that too only until the 6th Defendant registered the shares in the name of the 2nd Defendant.
  2. In the circumstances, the Plaintiff has no claim against the 3rd, 4th 5th and 6th Defendants. This is therefore a proper case to strike out the statement of claim pursuant to grounds (b) or (d) of O 18 r 19(1) as stated in Yeng Hing Enterprise. The Plaintiff’s action is therefore obviously unsustainable and is struck out against these Defendants pursuant to ground (d) of O 18 r 19(1) since they relied only on this ground.

Enclosure 41 （2nd Defendant’s Application)

  1. The 2nd Defendant is a shareholder of the 6th Defendant. He relies on same Article 12 argument as the 3rd, 4th 5 th and 6th Defendants. For the same reasons, I hold that the Plaintiff has no claim against the 2nd Defendant. This is therefore a proper case to strike out the statement of claim under grounds (b) or (d) of O 18 r 19(1). The Plaintiff’s statement of claim and accordingly this action is struck out against the 2nd Defendant pursuant to ground (b) and (d) of O 18 r 19(1).

Conclusion

  1. In the circumstances, Enclosures 30, 35 and 41 are allowed. The action against the Defendants is dismissed with costs.

Source: Tan Bak Lee v Chen Siew Lee & Ors [2019] MLJU 990. High Court Pulau Pinang. Amarjeet Singh Serjit SinghJC.

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