TAN ZU YAN v 1. ) TAN CHOR EEOW 2. ) TAN LIONG HUAT @ TAN SWEE HUAT 3. ) TAN CHEON HUAT 4. ) TAN CHOR HAN 5. ) P M MAHSURI SDN BHD

Case Significance

Reaffirms that alleged breaches of directors' duties are corporate wrongs for a derivative action under section 347 rather than a section 346 oppression claim, and that grievances arising from a shareholder's employment role do not amount to oppression of his interests as a member.

This High Court decision in the Commercial Division at Kuala Lumpur is a companion to related family oppression proceedings and concerns a minority oppression action under section 346 of the Companies Act 2016 over a rice-milling business. The plaintiff, holding a 25% minority stake, alleged that the first and second defendants had conducted the affairs of the company oppressively and had breached their duties as directors under sections 213, 214, 218, 219 and 223 of the Act. The shareholding had come about after the plaintiff's father purchased a quarter of the second defendant's shares and registered them in the plaintiff's name, with the majority coming to be held collectively by the defendants. Applying the principles it had set out in the related judgment concerning the associated company, the Court found that the complaints levelled against the first and second defendants did not amount to acts affecting the plaintiff's interest as a minority shareholder such as to justify invoking section 346. The alleged breaches of directors' duties were, in substance, corporate wrongs whose proper plaintiff was the company, to be pursued if at all by a derivative action under section 347 of the Act. The remaining grievances — such as the plaintiff's removal from a messaging group and from the company's accounting system, and notifications to third parties that his role had ceased — were complaints about his treatment in his employment capacity rather than wrongs to him as a shareholder. Concluding that the matters relied on did not disclose oppression within the meaning of section 346, the Court dismissed the originating summons with costs of RM20,000. The analysis mirrored the Court's reasoning in the companion proceedings concerning the associated family company, treating the distinction between a wrong to the company and a wrong to the member as decisive: because the substance of the plaintiff's grievances lay either in the company's own causes of action or in his position as an employee, section 346 was not the appropriate vehicle for the relief he sought.