COMPANIES ACT – OPPRESSION – DRAWING THE LINE: FEDERAL COURT DEFINES OPPRESSION VS. CORPORATE HARMS

Summary and Facts
A, a 50% shareholder, had been uninvolved in the company’s management for years. Meanwhile, B (the chairman) and C (a director) ran the business. The company owned valuable trademarks central to its operations, but in 2018, B secretly transferred these trademarks to D, a competing company tied to B and his daughter, for just RM10. The transfer lacked board approval and blindsided A.

Feeling sidelined and harmed, A filed an oppression action under Section 346, claiming that B’s actions were unfair and disregarded her rights as a shareholder. She sought a buyout of her shares. B and C countered, arguing the harm was corporate, affecting the company and all shareholders equally, and should be pursued as a derivative action under Section 347.

Legal Issues

Whether the harm was personal or corporate?
Whether the action should have been an oppression or derivative action?
Whether reflective loss barred the claim?

Court Findings

The Federal Court found that the wrongful transfer of trademarks caused harm to the company as a whole, not to A personally. The injury was shared equally by all shareholders, making it a corporate injury rather than personal oppression.
A incorrectly pursued an oppression action under Section 346. The appropriate remedy for corporate harm was a derivative action under Section 347, as the company, not A, was the proper plaintiff.
A’s claims of reduced share value and lost dividends constituted reflective loss, arising from harm to the company. Such claims cannot form the basis for an oppression action.

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