Kathryn Ma Wai Fong v Wong Kie Yik and 2 others
| Jurisdiction | UK Non-devolved |
| Judge | Lady Rose |
| Judgment Date | 09 May 2022 |
| Neutral Citation | [2022] UKPC 14 |
| Docket Number | Privy Council Appeal No 0008 of 2020 |
| Court | Privy Council |
[2022] UKPC 14
Lord Briggs
Lady Arden
Lord Burrows
Lord Stephens
Lady Rose
Privy Council Appeal No 0008 of 2020
Privy Council
Appellant
Jonathan Crow QC Hermann Boeddinghaus QC Eleanor Holland James Noble (Instructed by Latham & Watkins (London) LLP)
1st and 2nd Respondents (Wong Kie Yik and Wong Kie Chie)
David Alexander QC Ryan Perkins Aisling Dwyer Scott Tolliss Aline Mooney (Instructed by BDB Pitmans LLP (London))
3rd Respondent (Successful Trend Investments Corporation (“STIC”))
Adam Goodison Oliver Clifton Stuart D'Addona Robert Gregory (Instructed by BDB Pitmans LLP (London))
This appeal arises from a dispute between the claimant and the First and Second Respondents each of whom now holds one of the three shares issued by the Third Respondent, Successful Trend Investments Corporation (“STIC”). The First and Second Respondents, Wong Kie Yik and Wong Kie Chie, are brothers and this judgment refers to them as WKY and WKC. The claimant, Ms Ma, is the widow of Wong Kie Nai (“WKN”) who was the brother of WKY and WKC and who died in March 2013.
STIC is incorporated in the British Virgin Islands but is part of a larger corporate group established in Malaysia. The group (“the WTK Group”) was founded by the father of the three brothers, Datuk Wong Tuong Kwang (“Wong Tuong Kwang”). From August 2004 until April 2013, STIC's sole asset was a block of 55m non-voting convertible preference shares (“CPS”) issued by the principal company in the WTK Group called WTK Realty Sdn Bhd (“WTK Realty”).
In March 2013, shortly after the death of WKN, WKY and WKC caused STIC to exercise its option to convert those preference shares into 2,750,000 ordinary voting shares in WTK Realty (“the Conversion”). This claim has proceeded on the basis that the effect of the Conversion was to change the balance of voting power in WTK Realty in favour of WKY and WKC. Before the Conversion, Ms Ma, as holder of her late husband's direct shareholding in WTK Realty could expect to combine her own votes with those of her son's shareholding in WTK Realty so as to exercise a majority of the shareholder votes in WTK Realty. After the Conversion, WKY and WKC could expect to combine their own direct shareholdings in WTK Realty with the new votes held by STIC which they effectively controlled because they together held two of the three shares in STIC. They could thereafter outvote Ms Ma and her son at any shareholder meeting of WTK Realty.
Ms Ma has brought these proceedings claiming that the conduct of WKY and WKC in causing STIC to convert the CPS in WTK Realty was conduct in their capacity as majority shareholders in STIC which was unfairly prejudicial to her as the minority shareholder. She brings her claim under section 184I of the British Virgin Islands Business Companies Act 2004 (“the BCA 2004”).
Ms Ma puts her claim of unfair prejudice on a number of different bases. Her primary case is that the power to approve the Conversion conferred by STIC's constitution on WKY and WKC as majority shareholders was subject to equitable constraints which prevented them from approving any such resolution to convert unless all the shareholders were unanimous in wanting STIC to exercise that option. It was therefore, she says, unfairly prejudicial for WKY and WKC to ignore those equitable considerations in converting the CPS when she did not agree to it. Ms Ma also claims that the Conversion was instigated by WKY and WKC in their capacity as de facto directors of STIC. It was a breach by them of their fiduciary duties as such, because the Conversion was carried out for an improper purpose, namely to deprive her of voting control of WTK Realty. Ms Ma seeks an order winding up STIC.
The judge at first instance, Justice Adderley (Ag) sitting in the High Court of Justice, Virgin Islands (Commercial Division), dismissed all aspects of Ms Ma's claim in a judgment handed down on 14 December 2017. Despite dismissing the claim, he ordered that WKY and WKC buy Ms Ma's single share in STIC at a price to be determined at a trial on quantum. Ms Ma appealed against the judgment on a wide range of grounds. The respondents did not appeal against the buy-out order. The Court of Appeal dismissed Ms Ma's appeal and upheld the order in the terms made by the judge. Ms Ma now appeals to the Board.
The WTK Group was founded by Wong Tuong Kwang. The WTK Group's main operations are in Malaysia, with businesses dealing primarily in forest ownership and management, timber logging and harvesting, oil palm production and construction. The WTK Group's businesses diversified over time and now include hotel services and insurance and shipping services. Wong Tuong Kwang and his wife Datin Tiong Liang Ting had three sons, the eldest being WKY, then WKN and the youngest WKC. They also had three daughters who did not, the Board was told, play any part in the family business. Ms Ma and WKN were married in 1970 and have two children, Neil and Mimi.
The judge described WTK Realty as a family holding company. It was incorporated in Malaysia in 1981. Wong Tuong Kwang and his eldest son WKY were the first directors and shareholders of WTK Realty and WKN was its managing director from 1986 having been the manager since 1981. WKC and WKY also worked in the WTK Group after finishing their studies. WKC has lived in Australia since 1984 looking after the family business interests there and WKY has managed the group's timber concessions and logging business.
Wong Tuong Kwang suffered a severe stroke in 1993 but was able to remain active in the management of the group. In May 2004, he became seriously ill and he died in November 2004. After his death, WKN became managing director of most of the companies in the WTK Group including WTK Realty. WKN became ill in March 2011 and WKY took over the de facto management of the group. WKN died in March 2013.
The proportions of the voting shares held in WTK Realty over the years have been as follows. From its formation in 1981 until 2002 each of the three brothers held 29% of the shares and Wong Tuong Kwang held 13%. In August 2004, shortly before he died, Wong Tuong Kwang signed a blank share transfer form which WKN completed, transferring thereby 1,252,000 shares of Wong Tuong Kwang's shares to WKN. In 2007, after Wong Tuong Kwang's death, WKN caused WTK Realty to issue 4m shares to himself. He later transferred 800,000 of his shares to his son Neil. The 5.252m shares which WKN added to his holding in WTK Realty diluted the voting power of WKY and WKC to 23% each whilst WKN and his son Neil together held 54%. WKC has challenged the validity of those two share transactions in proceedings in Malaysia. Judgments have been handed down in those two actions but are under appeal. If those judgments are upheld and the share transactions set aside, that would neutralise the effect of the Conversion because WKN and his son would never have had majority control over WTK Realty.
STIC was set up in November 1996, that is a few years after Wong Tuong Kwang suffered his stroke but whilst he was still in charge of the WTK Group. There are three ordinary voting shares in STIC. Until recently they were held by Gainsville Ltd which is the trustee under three trusts in favour of the three brothers each trust formerly holding one share in STIC. The sole de jure director of STIC from 1 May 2003 to 28 March 2014 was Mr Lo Fui Kiun (“Mr Lo”).
In July 2004, STIC resolved to subscribe for 55m CPS in WTK Realty with a par value of RM0.01 under a subscription agreement between the two companies. The CPS were issued in August 2004 and held a preferential right to dividends and a right to a return on capital in the event of an insolvency but they conferred no voting rights. One of the factual disputes between the parties in these proceedings is whether STIC ever in fact paid the RM550,000 subscription price for the CPS.
According to the terms of issue contained in a schedule to the subscription agreement, the CPS could be converted at any time into ordinary voting shares in WTK Realty at a rate of 20 CPS to one ordinary share with the ordinary share having a par value of RM1. On 25 March 2013, STIC resolved to convert the 55m CPS to 2,750,000 ordinary voting shares to be paid for at a par value of RM1. The Conversion was completed on 8 April 2013. The consideration was to be paid partly in cash of RM2.2m and partly by treating the RM550,000 originally paid for the CPS as part of the consideration for the new ordinary shares. Ms Ma has also contended in these proceedings that the RM2.2m was never paid by STIC.
After the Conversion WKY's and WKC's direct shareholdings in WTK Realty made up 19.40% each but they also, through making up the majority in STIC effectively controlled STIC's voting shares which were 14.40% of the total. They therefore controlled 53.20% of the voting shares in WTK Realty. Ms Ma and her son Neil continued to hold their voting shares in WTK Realty but these now represented only 46.80% of the votes in WTK Realty.
In May 2014, after WKN had died, Gainsville conveyed one share to each of Ms Ma, WKY and WKC so that they are now equal legal and beneficial owners of STIC.
These proceedings are one claim in a wider series of disputes between Ms Ma on the one side and WKY and WKC on the other, including several claims brought in Malaysia. In the course of proceedings in the Malaysian courts, a winding-up order has been made in respect of WTK Realty on Ms Ma's application. That order is subject to an appeal.
Ms Ma launched these proceedings in May 2015 claiming on behalf of the estate as well as in her personal capacity as beneficiary. Section 184I of the BCA 2004 (inserted in...
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