TENGKU DATO' IBRAHIM PETRA TENGKU INDRA PETRA v. PETRA PERDANA BERHAD & ANOTHER CASE

[2018] 1 MLRA 263
Federal Court, Putrajaya
Raus Sharif CJ, Zulkefli Ahmad Makinudin PCA, Zainun Ali, Azahar Mohamed, Jeffrey Tan FCJJ
[Civil Appeals No: 02(f)-7-03-2016 (W) & 02(f)-8-03-2016 (W)]
Raus Sharif CJ, Zulkefli Ahmad Makinudin PCA, Zainun Ali, Azahar Mohamed, Jeffrey Tan FCJJ

Company Law : Directors - Duties - Governance and management of company as between directors and shareholders in general meetings - Directors' duties to act in best interests of company in divestments of company's shareholding - Division of powers between shareholders and directors - Test for breach of directors' duties - 'Best interests of company' - Principles to be applied

These two related appeals, emanating from the same action in the High Court, raised important questions in company law on governance and management of a company as between directors and shareholders in general meetings. The subject matter of the dispute between the parties revolved around the issue of the directors' duties to act in the best interests of the plaintiff in the divestments of the plaintiff's shareholding in its wholly owned subsidiary, one Petra Energy Berhad ("PEB"). These appeals vitally concerned alleged breaches by the directors of the duty owed to the plaintiff in the divestments of the PEB shares. The dispute centred on the purpose for which certain divestments in 2009 ("Second Divestment" and "Third Divestment" or "Second and Third Divestments" accordingly) were actually effected. As a consequence of these divestments, the plaintiff complained that it lost its controlling block of shares in PEB and that PEB ceased to be a subsidiary of the plaintiff. The plaintiff further complained that all the shares so divested eventually ended up in the hands of one Shorefield Resources Sdn Bhd ("Shorefield"), which became the single largest shareholder in PEB. The legal dispute arose when the plaintiff then took issue with these divestments by instituting the relevant High Court action. The High Court Judge dismissed the plaintiff's claim but, on appeal, the Court of Appeal unanimously allowed the appeal and effectively reversed the High Court's decision. The defendants thus applied for leave to appeal to this court. This court thereafter granted the defendants leave to appeal for the determination of several questions of law pertaining to the division of powers between shareholders and directors, the test for breach of directors' duties, and 'best interests of the company'.

Sign up to view full cases Login