Lavania & Balan Chambers

Introduction

This case involves an application by Teo Heng Tatt ("Plaintiff") against All Kurma Sdn Bhd ("1st Defendant"), Pamella Chiang, and Yurisa Chiang ("2nd and 3rd Defendants"), asserting that the 2nd and 3rd Defendants conducted the affairs of the 1st Defendant in an oppressive manner (under Section 346 of the Companies Act 2016), disregarding the Plaintiff's interests as a minority shareholder. The Defendant sought a stay of proceedings under Section 10 of the Arbitration Act 2005, arguing that the disputes between the parties should be resolved through arbitration as per the Shareholders Agreement ("SA"). The High Court's judgment focused on whether the claims of oppression, as alleged by the Plaintiff, were subject to arbitration and whether the 2nd and 3rd Defendants had taken steps in the proceedings that would preclude them from seeking a stay of the court proceedings.

Background Facts

The Plaintiff held a 20% shareholding in the 1st Defendant, while the 2nd and 3rd Defendants, who are sisters, held a 60% shareholding. The remaining 20% was held by one Rudy Halim. The Plaintiff was a salaried director but had resigned on October 1, 2021.

The core issue revolves around a Shareholders Agreement dated February 21, 2019, which included a clause mandating that all disputes arising from the agreement be referred to arbitration in Singapore under the Singapore International Arbitration Centre (SIAC) rules with the law of Singapore governing.

The Plaintiff also alleged that the 2nd and 3rd Defendants breached the Shareholders Agreement by engaging in competing businesses.

The Issues

The court had to determine several key issues:

1.  Whether the Plaintiff’s oppression claims fell within the scope of the arbitration agreement.

2.  Whether the 2nd and 3rd Defendants had taken steps in the proceedings that would preclude a stay.

3.  Whether oppression claims are arbitrable under Malaysian law.

Analysis and Discussion

Scope of the Arbitration Agreement

The court considered the broad scope of the arbitration clause within the Shareholders Agreement, particularly clause 25.4, which encompassed any dispute arising from the agreement. The court observed that the Plaintiff's claims were premised on alleged breaches of the Shareholders Agreement, particularly clauses 7 and 9. Consequently, the court found that these disputes fell within the scope of the arbitration clause. The court relied on the Federal Court’s decision in Press Metal Sarawak v Etiqa Takaful Bhd [2016] 5 MLJ 417, which established that a stay must be granted unless the arbitration agreement is null, void, or inoperative.

Steps Taken in the Proceedings

The Plaintiff argued that the 2nd and 3rd Defendants had submitted themselves to the jurisdiction of the High Court by filing Suit No. PA-22NCC-30-09/2021 (Suit No. 30), which alleged breaches of fiduciary duties by the Plaintiff. However, the court clarified that "taking steps in the proceedings" refers specifically to the current proceedings, not separate litigation. The court emphasized that Suit No. 30 was filed by the company (the 1st Defendant) and not by the 2nd and 3rd Defendants in their personal capacities, therefore, it did not constitute taking steps in the present proceedings, and the Defendants were not precluded from seeking a stay.

Arbitrability of Oppression Claims

The court addressed the critical issue of whether oppression claims are arbitrable under Malaysian law. The Plaintiff cited the decision in Aras Jalinan Sdn Bhd v Tipco Asphalt Public Company Limited & Ors [2011] MLJU 754 to argue that statutory remedies under Section 346 of the Companies Act 2016 should not be subject to arbitration. However, the court distinguished this case, finding that it involved a striking-out application rather than the issue of arbitrability.

The Court of Appeal’s decision in Padda Gurtaj Singh v Tune Talk Sdn Bhd & Ors [2022] 4 MLJ 257, which established that claims under the Companies Act are arbitrable as long as a valid arbitration agreement exists. The court found no public policy reasons to exclude the present dispute from arbitration, noting that the conflict was purely between shareholders and did not involve the interests of creditors or the public.

The court also considered the decision in Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57 from the Singapore Court of Appeal, which upheld the arbitrability of minority oppression claims in the context of a solvent company. The court found this reasoning applicable and persuasive, further supporting the view that the Plaintiff’s oppression claims were subject to arbitration.

Conclusion

This judgment reinforces the principle that courts will uphold arbitration agreements and stay court proceedings, even in cases involving statutory claims under the Companies Act 2016, as long as there is a valid arbitration agreement and no compelling reasons of public policy to exclude arbitration. The growing acceptance of arbitration for minority oppression claims highlights the evolving landscape of corporate dispute resolution in Malaysia, where the balance between judicial oversight and party autonomy continues to be refined.

Commentary on Minority Oppression Arbitrability

The Malaysian courts, following the reasoning in cases like Padda Gurtaj Singh v Tune Talk Sdn Bhd & Ors [2022] 4 MLJ 257, have affirmed that as long as a valid arbitration agreement exists, there is no inherent bar to arbitrating oppression claims. This approach aligns with the global trend of favouring arbitration for its efficiency, confidentiality, and party autonomy, even in matters involving statutory rights.

The High Court’s reliance on the Singapore Court of Appeal’s decision in Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57 is particularly noteworthy. It underscores the principle that the arbitrability of such disputes does not diminish the protection afforded to minority shareholders. Instead, it allows parties to resolve their disputes in a forum of their choosing, provided that the arbitration process can address the issues adequately and fairly.

So, in framing your claim in Court based on a breach of a shareholders agreement for an oppression of shareholders suit under section 346 of the Companies Act 2016, take careful consideration whether the said shareholders agreement contains an arbitration clause or not.

This article is authored by Lavinia Kumaraendran (Partner) and Zafran Shofian (Intern) of the Commercial Litigation Practice of Lavania & Balan Chambers. It contains general information only. The contents are not intended to constitute legal advice on any specific matter nor is it an expression of legal opinion and should not be relied upon as such.