Court: Federal Court, Putrajaya. Judges: Abdul Rahman Sebli CJSS, Abu Bakar Jais, and Vazeer Alam Mydin Meera FCJJ. Date: 18 July 2025.
1. Background and Facts
The dispute arose within the WTK Realty conglomerate, a set of family-owned companies founded by the late patriarch Wong Tuong Kwong. Following the patriarch’s death in 2004, his three sons—Wong Kie Nai (WKN), Wong Kie Yik (WKY), and Wong Kie Chie (WKC)—managed the group.
Between 2005 and 2007, a total of 8.5 million new shares were allotted and issued to WKN across three companies: WTK Realty, Southwind Plantation, and Ocarina Development. WKY and WKC raised no objections during WKN’s lifetime. However, following WKN’s death in 2013, WKY and WKC refused to register the shares in the name of his widow and executrix, Kathryn Ma. They commenced suits to nullify the shares, alleging the issuances breached Section 132D(1) of the Companies Act 1965 because prior shareholder approval was never obtained. Kathryn reciprocated with validation suits under Sections 63 and 355 of the Act.
2. Key Legal Issues
The Federal Court granted leave on four questions, primarily focusing on whether the common law “Duomatic principle” (informal unanimous assent) could serve as an exception to mandatory statutory requirements for prior approval, and whether the court could validate share issuances subsequently despite the statute requiring “prior” approval.
3. Judicial History
- High Court: Ruled in favor of WKY and WKC, declaring the share issuances null and void. The judge found that the lack of formal meetings and authorizations meant the resolutions were not attributable to the companies, and that validation would cause injustice via share dilution.
- Court of Appeal: Reversed the High Court’s decision by applying the Duomatic principle. It held that informal unanimous assent is as effective as a formal resolution, even if the assent is given after the event.
4. Federal Court Reasoning
The Federal Court dismissed the appeals and affirmed the Court of Appeal’s result, though it rejected the Duomatic reasoning in favor of a statutory approach:
- Statutory Cure vs. Common Law Principle: The Court held that since the Companies Act 1965 provides specific statutory mechanisms (Sections 63 and 355) to cure invalidities, any validation must be done under those sections rather than the Duomatic principle.
- Breach is Not a Nullity: The Court clarified that a breach of Section 132D(1) does not render the issuance a nullity because the Act expressly empowers the court to validate such acts if it is just and equitable to do so.
- Approbation and Reprobation: The Court found that WKY and WKC had acquiesced in the issuances for years. They had approved audited accounts showing the shares, received dividends from the increased capital, and even used the enlarged share capital as a condition to secure a RM19 million bank loan from AmBank. WKY and WKC were found to have “approbated and reprobated” by accepting the benefits of the capital injection while later seeking to void it.
- Substantial Injustice: The Court noted that failing to validate the shares would cause substantial injustice to WKN’s estate, especially since the companies had not offered to refund the millions in subscription monies paid by WKN.
5. Conclusion
The Federal Court answered Leave Question 3 in the affirmative, ruling that a court can depart from the requirement of prior approval to allow subsequent validation under Section 63 of the Companies Act 1965. The other questions regarding the Duomatic principle were left unanswered as they were not necessary for the disposal of the appeal.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
