Case update: Victory for the minority shareholders against well known franchise

Kuala Lumpur High Court, 6th of March 2024:

Our clients for this case have been facing a difficult situation since year 2019. In May of 2019, our client had been approached by a friend to invest in a franchise Bubble Tea shop next to Pavilion 2, Bukit Jalil. Our clients upon seeing the location and considering all relevant factors, had invested a large sum of monies to the business, hoping for a booming business and profits to be earned.

However, the friend who is the director of this company, had in August 2019 changed the shop's location despite our clients being promised that it will be in Pavilion 2. Instead, it was changed to the front door at Eko Cheras Mall. When our client is still considering whether they are okay with the location, the director again changed the location to the mall's indoor which is further away from the front door, and would not get as much exposure.

At the time, the director had promised our clients that if they are not okay with the change of location, our clients may withdraw their investment at any time. After considering, our clients choose to withdraw from the company. However, the director refused to return the monies, and instead withheld the monies until this very day. The director had also deliberately refused to involve our clients in the business, and did not pay any dividends to our clients even after almost 5 years.

We have assisted our clients to move this claim to Court. However during court, the Director had claimed that she had never made the promise to refund the monies, and in fact she had never promised to open the shop initially at Pavilion 2. In essence, the Director claims that our client is not entitled to get back their monies.

We have fought the case through full trial and won. The director had appealed and we again on 6th of March 2024 had won the appeal again. The Court's decision is based on the following:-

1. In this case, there is no written agreement or promise between parties. Instead, we are able to prove through insinuations and nuances of the whatsapp conversation between parties that indeed the Director had promised to refund the monies to our clients. This marks a rare and important precedent where an oral contract is enforced based solely on the circumstantial evidences and inferences from WhatsApp conversations;
   

2. The Court had decided that there is misrepresentation by the Director in terms of the location of the bubble tea shop, and that the location of the shop is a fundamental term which goes to the root of the contract and therefore, the agreement to invest is null and void;
   

3. The Court had also decided that based on our arguments, there is likelihood that the Director had in fact breached the principle of unjust enrichment, wherein the Director had unjustly benefitted from the investment monies paid, but did not pay any dividends.
   

4. The appellate court did not disturb the findings of the trial court and affirmed all of the decisions made.

Based on the above, we are delighted that we are able to assist our clients as minority shareholders to recover their investment monies and to be withdrawn from the company that they no longer wanted to be a part of. So next time you drink a bubble tea, remember this story of how you should be careful prior to investing in a business!

For more information on this case, you may contact us at this website, or through email at zenchyuanco@gmail.com , or through phone calls and whatsapp at 016-4358376, whereby we can provide even more detailed insight and the written grounds of judgment.

Written by,

Loh Cien Zen

Partner, Head of litigation

Resident Patent and Industrial Design Agent

Our Mr Loh Cien Zen has a huge portfolio and experience in civil litigation, including but not limited to a long illustrious experience in handling energy supply disputes with Tenaga Nasional Berhad, tort of negligence, defamation, interference, corporate and contractual disputes, strata management cases, etc. He is currently the head of litigation in our firm and also our resident patent and industrial design consultant, with active partnerships with foreign companies from China, local listed companies and other law firms.