Background

The dispute arose out of a joint venture (“JV”) for an integrated commercial development in Kuala Lumpur known as the “Imbi Project”.

• The Appellant, ISM Sendirian Berhad (“ISM”), owned by Dato’ Ray Cheah (“Dato Ray”) and his wife, held a 30% minority equity stake in five JV companies incorporated to acquire 11 parcels of land for the project.[2]The remaining 70% majority stake was held by the 6^th Respondent, MPHB Capital Berhad (“MPHB”).
• The five JV companies (1^st – 5^th Respondents) were structured as single-purpose vehicles, intended solely for land acquisition for the project rather than ongoing commercial operations[3].
• Although a draft shareholders’ agreement was prepared, it was never executed. The parties proceeded on the mutual understanding that they were bound by an oral agreement.[4]

The dispute concerned funding obligations[5]:

• ISM contended that the funding was split into cash and loan components, limiting its obligation to 30% of the cash portion (approximately 9% of the total acquisition costs).
• MPHB countered that funding obligations must strictly follow a 30:70 equity-based contribution across the board.

Following this disagreement, ISM commenced proceedings under s.181 of the CA 1965[6] alleging, amongst others, minority oppression, including funding demands, dilution via rights issues, and the imposition of interest on shareholder advances.

MPHB counterclaimed, amongst others, seeking a judicial declaration that the JV arrangement had been lawfully terminated by reason of ISM’s alleged breach of funding obligations, alongside claims for interest and opportunity costs[7].

High Court (“HC”) & Court of Appeal (“CA”) Decision

The HC found in ISM’s favour on three out of the five grounds. The remaining two grounds were dismissed, and no appeal was pursued against those findings. [8]

The CA reversed this decision, holding that the core dispute concerned the oral shareholders’ agreement between ISM and MPHB. As it did not relate to the “affairs of the company”, it was a private matter falling outside the statutory scope of s.181 of the CA 1965. [9]

Leave Questions at FC

The FC essentially granted leave on two questions [10]: –

Decisions & Key Findings

The FC dismissed both of the Appellant’s appeals and found no appealable error warranting appellate intervention.

(1) The Scope of Jet-Tech & “Affairs of the Company”

The FC undertook a close examination of Jet-Tech, in particular, on paragraph 37.

• The FC reaffirmed that a claim under s.181 of the CA 1965 requires that the conduct complained of must relate to the “affairs of the company”. In doing so, it clarified that Jet-Tech does not establish a blanket prohibition against oppression claims founded on breaches of shareholders’ agreements, and that paragraph 37 must be read in its factual context.

“[70] … there is no express pronouncement or indication in paragraph 37 or any part of the grounds of judgment that any breach of the shareholders’ agreement is not actionable under section 181 of the CA 1965”.

• The critical inquiry is whether the conduct complained of, in substance, relates to the affairs of the company.
• The phrase “affairs of the company” is broad and encompasses, amongst others, capital structure, dividend policy, voting rights, and generally “all matters which may come before the board for consideration”.[11] However, this broad formulation does not extend to purely inter se disputes between shareholders.
• The FC drew a clear distinction: “the company’s affairs cannot be equated with those of its shareholders”. Private arrangements remain a matter for private law remedies, if any[12].
• Applying these principles, the FC held that the principle of law in paragraph 37 of Jet-Tech is correct and its application is inherently fact-sensitive. Accordingly, Question 2 was answered in the affirmative. [13]
• On the facts, the five JV companies were passive special purpose vehicles with limited operational activity, incorporated solely for land acquisition, with no substantive business operations. The FC agreed with the CA that, in light of the nature of the JV companies as passive holding vehicles, the dispute did not concern the “affairs of the company”.[14]
• In these circumstances, the FC held that the requirement of conduct relating to the “affairs of the company” was not satisfied and the oppression claim under section 181 could not be sustained.[15]

(2) Establishing a Quasi-Partnership

The FC rejected the Appellant’s alternative argument that the JV amounted to a “quasi-partnership” capable of invoking equitable standards of fairness.

• A quasi-partnership requires a foundation of personal relationship, mutual trust, and confidence, typically arising from prior or long-standing dealings.[16]

• On the facts, ISM and MPHB had no prior dealings or business transactions, and their dealings in relation to the JV were limited and commercial in nature[17].

• The JV was negotiated and structured as an arm’s length transaction between business entities, where MPHB treated it purely as a standard commercial investment proposal.

• Accordingly, the factual threshold for a quasi-partnership was not met, and equitable considerations were not engaged.[18]

Key Takeaways

Conclusion

The FC’s decision confirms that paragraph 37 in Jet-Tech should not be read as establishing a categorical exclusion of minority oppression claims simply because the dispute concerns a shareholders’ agreement.

The critical inquiry remains whether, in substance, the impugned conduct relates to the “affairs of the company” under s.181 of the CA 1965, in which case shareholders’ agreement matters could still be the subject matter of a claim under s.181.

Ultimately, the ruling turns on characterisation: whether the alleged wrong implicates the “affairs of the company” or remains a private dispute between shareholders.

Our Dispute Resolution practice specialises in high-stakes civil, commercial and corporate disputes, including shareholders’ disputes, breach of contract, and debt recovery. We have experience representing clients at all levels of the Malaysian Courts, providing strategic and commercially sensible solutions to complex legal challenges.

If you require advice or representation in a legal dispute, please reach out to our team via our contact page.

Disclaimer: The content of this article is intended for general informational purposes only and does not constitute formal legal advice. Please refer to the Grounds of Judgment in the Federal Court Civil Appeal No. 02(f)-9-03/2025(W).

If you found this article useful, please feel free to download the PDF document in the link here.

An Overview: Quorum Requirements and Deadlock

In our recent article, Nicholas Yap examined how quorum requirements may, in certain circumstances, contribute to a shareholder deadlock under the Companies Act 2016.

This overview highlights:

• how deliberate non-attendance may prevent meetings from proceeding;
• the legal consequences of the absence of quorum;
• the Court’s power to intervene under section 314 of the Companies Act 2016, where it is impracticable to convene a meeting; and
• the use of written resolutions as a practical alternative for private companies.

The visual summary is intended to provide a concise snapshot of the key legal issues and practical considerations arising from quorum-related deadlock.

If you missed the full article, please read it here: Shareholder Dispute Briefs | When Quorum Requirements Are Used to Create Deadlock

Our Dispute Resolution practice specialises in high-stakes civil, commercial and corporate disputes, including shareholders’ disputes, breach of contract, and debt recovery. We have experience representing clients at all levels of the Malaysian Courts, providing strategic and commercially sensible solutions to complex legal challenges.

If you require advice or representation in a legal dispute, please reach out to our team via our contact page.

Disclaimer: The content of this post is intended for general informational purposes only and does not constitute formal legal advice.

Background

• The Appellants (“Plaintiffs”) entered into a Sale and Purchase Agreement (“SPA”) in June 2015 with DA Land Sdn Bhd (“DA Land”) for the purchase of four parcels of land (“Rawang 4”) for RM23 million.
• The Plaintiffs later assigned all rights under the SPA to the Respondent (“Defendant”) under an Assignment Agreement and a Supplemental Assignment, for RM25.5 million (“Assignment Arrangements”), structured as:
  • RM20 million: Set-off against a debt owed by the 1^st Plaintiff to the Defendant;
  • RM3 million: Paid directly to the Plaintiffs; and
  • 5 million: Treated as the Plaintiff’s investment in Rawang 4 (i.e., 4.5% of the land value)
• Unbeknownst to the Plaintiffs, the Defendant then entered into a separate back-dated SPA with DA Land for three lots (“Rawang 3”). In related proceedings, the Defendant was declared an unlicensed moneylender, and the related agreements were held void for illegality. DA Land was entitled to forfeit the deposit of RM23 million.
• The dispute arose when the Plaintiffs claimed the outstanding RM2.5 million on the basis of breach of the Assignment Arrangements.
• The Defendant counterclaimed for restitution of RM23 million, contending that the Plaintiffs’ SPA with DA Land was tainted by illegal moneylending transactions and that the Assignment Arrangements were similarly illegal and void.

High Court (“HC”) & Court of Appeal (“CA”) Decision

The HC dismissed both the claim and the counterclaim, finding, amongst others, that there was no evidence to support the Defendant’s allegation that the Assignment Arrangements were tainted by illegal moneylending transactions, and that it was unreasonable for the Plaintiffs to pursue their claim given that the Defendant was no longer able to acquire the entirety of Rawang 4[3].

The CA partially overturned the HC’s decision, allowing the Defendant’s appeal. Relying on Berjaya and Damansara Realty Bhd v Bungsar Hill Holdings Sdn Bhd & Anor [2011] 6 MLJ 464, the CA held, amongst others, that:

• there had been a TFC, as the Plaintiffs were not in a position to absolutely assign any rights or interests in Rawang 4, as one of the lands was subject to a caveat; and
• the Defendant was entitled to restitution of the RM23 million, as no relevant benefit had been conferred.[4]

Read together, both decisions referred to the TFC[5]  framework articulated in Berjaya and Damansara Realty, prompting the FC to revisit both the proper scope of the doctrine and the correct test for its application.

The central issues on appeal were whether TFC could be invoked to recover RM23 million in circumstances involving, amongst others, alleged illegality, claimant-caused loss and part performance; whether the proper test for TFC lay in Berjaya or Stocznia Gdanska, and whether the doctrine had been wrongly conflated with the principles of rescission, termination and restitution.

Decision & Key Findings

The FC allowed the Plaintiffs’ appeal, holding that Berjaya is no longer good law. In doing so, FC restored a clear doctrinal boundary between the contractual remedies and restitutionary claims.

(1) Overruling of Berjaya Times Square

• The FC rejected the test for TFC as formulated in Berjaya, namely, “whether the party in default has failed to perform his promise in its entirety”[6].
• The FC expressly held that this approach wrongly conflated the right to terminate a contract for breach with the right to claim restitution, erroneously recasting both under the common law right to rescind, thereby importing the doctrine of TFC into the termination analysis[7].
• This gave rise to doctrinal confusion, particularly in the interpretation of ss. 40, 65, and 66 of the Contracts Act 1950 (“CA 1950”), by conflating principles of repudiatory termination with the separate restitutionary doctrine of TFC.
• Reaffirming Stocznia Gdanska, the FC held that the correct inquiry was not “whether the party in default has failed to perform his promise in its entirety”, but whether the promisor had performed any part of the contractual duties in respect of which payment is due:

“[76] … the true test is instead …: “The test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due.”

• The consequence is significant: any part-performance of the contractual duties (and corresponding benefit received) negates a claim in restitution for TFC. In such circumstances, the appropriate remedy lies in damages, not restitution.

(2) Clarifying Recission, Termination and Restitution 

• The FC clarified these principles as follows:

• Applying these principles, the FC found that the Plaintiffs had, at the very least, part-performed their obligations under the Assignment Arrangements – resulting in benefit to the Defendant. Accordingly, there was no TFC [11].

(3) Equitable Bar & The “Architect of Loss”

• The FC further reaffirmed that restitution is an equitable remedy and may be denied for unconscionable conduct.

“[129] … Unconscionable conduct on the part of a claimant would defeat a claim for restitution.”

• Given the Defendant’s involvement in illegal moneylending and his status as an unlicensed moneylender, the Court held that he was the “architect of his own loss”[12], and therefore disentitled from invoking TFC to obtain restitution.

(4) Prospective Effect

• To preserve commercial certainty and avoid reopening cases decided on the earlier Berjaya position, the FC held that the clarified test would apply prospectively only[13].

Key Takeaways

More than overruling the Berjaya test, Lim Swee Choo recalibrates the boundary between contractual remedies and restitution, and restores doctrinal clarity to Malaysian law.

Our Dispute Resolution practice specialises in high-stakes civil, commercial and corporate disputes, including shareholders’ disputes, breach of contract, and debt recovery. We have experience representing clients at all levels of the Malaysian Courts, providing strategic and commercially sensible solutions to complex legal challenges.

If you require advice or representation in a legal dispute, please reach out to our team via our contact page.

Disclaimer: The content of this article is intended for general informational purposes only and does not constitute formal legal advice. Please refer to the reported decision in Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong [2025] 6 MLJ 327 for the complete decision and reasoning.

If you found this article useful, please feel free to download the PDF document in the link here.

In Malaysia, a members’ meeting serves as the primary forum for decision-making by shareholders and the exercise of their rights.

Generally, a member is entitled to request that a members’ meeting be held, subject to compliance with the requirements under the Companies Act 2016 (“CA 2016”) and the company’s constitution.

These members’ meetings are vital because there are matters of utmost significance that often require sanction or approval from the members under, amongst others, the CA 2016. For example, under Section 223(1)(b) CA 2016, the disposal of a substantial portion of the company’s property is not to be carried into effect unless the disposal has been approved by the members.

Quorum Requirements: The Potential Abuse

Pursuant to S.328(1) – (2) CA 2016, the default requisite quorum for a members’ meeting is two members (save for a single-member company), unless otherwise provided in the company’s constitution.

In a scenario where there are only two members, a deadlock may occur when one of the two members deliberately refuses to attend the meeting, thereby resulting in the lack of the requisite quorum for the meeting to convene.

This will give rise to a decision-making deadlock.

Pursuant to S.328(4) – (5) CA 2016, without the requisite quorum, no business shall be transacted, and the meeting shall be either dissolved or adjourned.

What happens if a resolution is passed without the requisite quorum? 

The Federal Court affirmed the Court of Appeal’s decision to validate the share issuances, but did so on a different basis – relying on the specific statutory provisions under S.63 and/or S.355 CA 1965.

In Malaysia, it has been held by the Courts[1] that a meeting convened without the requisite quorum would be a nullity, rendering any resolution passed in the said meeting to be invalid.

Without the requisite quorum to convene the meeting, this may jeopardise the company’s operation due to the inability to pass a resolution to, amongst others:

• approve directors’ remuneration;
• appoint the company’s auditor;
• approve the company’s annual audited financial statements;
• reappoint the directors who are retiring.

What is designed as a procedural safeguard, if misused, may be deployed by a minority member as an instrument of obstruction capable of paralysing the company’s operations.

Judicial Intervention: The “Impracticability” Test

In such a scenario, an aggrieved shareholder cannot be left without recourse.

Under S.314 CA 2016, the Court may order a meeting to be called in any manner that the Court thinks fit, including a direction that the presence of a single member shall be deemed to constitute a sufficient quorum. (See: S.314(2) & (4) CA 2016).

That said, such a remedy is not available as of right. The Court generally expects the members to first exhaust the internal mechanisms under the CA 2016.

Judicial intervention under S.314 CA 2016 will typically only be invoked where it is impracticable to convene or conduct a meeting in the usual manner (See: S.314(1) CA 2016).

This raises the critical question: what amounts to “impracticable”?

It has been held that impracticability is not narrowly confined. It will “cover a potentially wide range of factual situations, including but not limited to a case where the members have deliberately failed to attend a general meeting so that a proper quorum cannot be constituted…”[2]

Quorum provisions, after all, are not intended to operate as a veto mechanism in the hands of a minority where a deadlock exists.

In Tamabina Sdn Bhd & Anor v Nakamichi Corporation Berhad [2016] 10 CLJ 148, the Malaysian Court of Appeal held that:-

“[22]… to show impracticability it is necessary to show evidence of attempts or efforts to call and hold a meeting and such attempts or effort have been futile. The reason for the futility in calling or holding a meeting must be attributed to some circumstances that make it almost impossible to hold the meeting. These circumstances could be due to a deadlock situation, an intentional un-cooperative attitude of the directors, a persistent effort to derail the meeting or deliberate non-attendance at meeting after a proper and valid notice had been issued so as to force the meeting to be called off for want of quorum. The categories of such reasons are never closed.”

Lee Yee Wuen v Kien Yiap Trading [2020] 1 LNS 236

• The Court affirmed that a minority cannot use the quorum provisions as a ‘veto’ to deny the majority’s rights.

Abdul Halim bin Mutaref v ALM Autoserve Sdn Bhd & Anor [2023] MLJU 2358

• The Court intervened where a shareholder’s acknowledged “deliberate refusal to attend the meeting” resulted in a lack of quorum, thereby creating an impasse.

Golden Crescent v PDC Associates [2025] CLJU 915

• Judicial intervention was warranted as the Court found strong evidence of a genuine deadlock arising from a member’s “systemic non-attendance at properly noticed meetings”.

Alternative to Members’ Meeting: Written Resolutions

Under the new CA 2016, members of a private company may pass resolutions by way of a written resolution, without the need to convene a members’ meeting. This is governed under, amongst others, S.297 to S.308 CA 2016.

A key advantage to this mechanism is that it is not subject to the quorum requirement[3], unlike the resolutions sought to be passed in a members’ meeting.

In the circumstances, where a company is unable to pass a resolution due to the inability to convene a valid meeting for want of quorum, it may consider utilising the written resolution procedure.

This provides a practical alternative mechanism to effect members’ decisions without the need for a meeting.

That said, this remains subject to the company’s constitution, which may modify or restrict the use of written resolutions and compliance with any applicable legal requirements.

Looking Ahead: Other Possible Instances

Quorum-related deadlock is only one of several challenges that may arise in convening meetings. Other scenarios where a meeting cannot be convened may include, amongst others, a director’s refusal to convene a meeting requested by the members – an issue we will explore in a future article.

[1] Geointelligence Sdn Bhd v Azhar bin Hj Ismail & Anor [2022] MLJU 2881; 
Lee Nyuk Heng & Anor v Pembangunan Ladang Hassan Sdn Bhd & Ors [2002] MLJU 684

[2] Tan Swee You v Sahiron bin Mohd Yunus & Anor [2021] MLJU 2244, para [28]

[3] LGB Engineering Sdn Bhd & Ors v Rayston Resources Sdn Bhd [2023] 1 MLJ 649

Our Dispute Resolution practice specialises in high-stakes civil, commercial and corporate disputes, including shareholders’ disputes, breach of contract, and debt recovery. We have experience representing clients at all levels of the Malaysian Courts, providing strategic and commercially sensible solutions to complex legal challenges.

If you require advice or representation in a legal dispute, please reach out to our team via our contact page.

Disclaimer: The content of this article is intended for general informational purposes only and does not constitute formal legal advice.

If you found this article useful, please feel free to download the PDF document in the link here.

A recent matter handled by our Dispute Resolution team was featured across several Malaysian news outlets.

We represented YB Syahredzan Johan, Member of Parliament for Bangi, in defamation proceedings successfully concluded before the Kuala Lumpur High Court on 22.9.2025.

The matter was handled by our Daniel Albert, Nicholas Yap and Amanda Yap.

Media coverage included major news outlets such as 𝘍𝘳𝘦𝘦 𝘔𝘢𝘭𝘢𝘺𝘴𝘪𝘢 𝘛𝘰𝘥𝘢𝘺, 𝘔𝘢𝘭𝘢𝘺 𝘔𝘢𝘪𝘭, 𝘉𝘦𝘳𝘯𝘢𝘮𝘢, 𝘕𝘚𝘛, 𝘔𝘢𝘭𝘢𝘺𝘴𝘪𝘢𝘬𝘪𝘯𝘪, 𝘉𝘦𝘳𝘪𝘵𝘢 𝘏𝘢𝘳𝘪𝘢𝘯 𝘢𝘯𝘥 𝘖𝘳𝘪𝘦𝘯𝘵𝘢𝘭 𝘋𝘢𝘪𝘭𝘺.

Our Dispute Resolution practice specialises in high-stakes civil, commercial and corporate disputes, including shareholders’ litigation, breach of contract, and debt recovery. We have experience representing clients at all levels of the Malaysian Courts and in domestic arbitration, providing strategic and commercially sensible solutions to complex legal challenges.

If you require advice or representation in a legal dispute, please reach out to our team via our contact page.