The decision of the Federal Court in ISM Sendirian Berhad v Queensway Nominees (Asing) Sdn Bhd & Ors deals with a situation that is familiar in many joint ventures. A commercial arrangement is put in place, the parties proceed on a shared understanding of how the deal is to be funded and managed and over time that understanding begins to diverge. What starts as a difference in expectations eventually develops into a dispute over who is obliged to do what under the arrangement.

In ISM, that dispute centred on funding obligations. One party took the position that the other had failed to contribute in accordance with what had been agreed. Instead of pursuing the matter as a breach of agreement, the claim was framed as one of minority oppression. The Federal Court did not accept that approach.

Commercial Disputes or Oppression?

The decision turns on a point that is simple in concept but often overlooked in practice. A claim for oppression is concerned with how a company is being run. It is not intended to address every disagreement that arises between shareholders, even if those disagreements stem from the same business relationship.

Where the real complaint is that a party has not honoured the terms of a deal, the law treats that as a contractual issue rather than a company law issue.

This distinction is not merely technical. It defines the scope of what the court is prepared to intervene in. The fact that a party considers the outcome to be unfair, or inconsistent with what was originally contemplated, does not in itself bring the matter within the scope of oppression. What matters is whether the conduct complained of can properly be said to involve the affairs of the company, as opposed to the rights and obligations of the parties under their agreement.

Seen in that light, the Court’s conclusion in ISM is unsurprising. The dispute was, at its core, about funding obligations between parties to a joint venture. It did not transform into an oppression claim simply because one side chose to characterise it that way.

A Breach of Shareholders Agreement is Not Automatically Oppression

Against that backdrop, the Federal Court addressed the role of a shareholders’ agreement, which often sits at the centre of joint venture disputes. Such agreements are typically intended to capture the commercial understanding between parties, including matters such as funding, control, decision-making and exit.

When disputes arise, there is a natural tendency to treat any departure from that understanding as something more than a contractual breach. The argument is often framed in terms of unfairness or prejudice, with the expectation that the court will intervene under the oppression framework.

A breach of a shareholders’ agreement does not automatically give rise to an oppression claim. At most, it may form part of the factual background, but only to the extent that it translates into conduct at the level of the company. If the complaint remains one of non-performance of agreed obligations between parties, it remains a matter to be addressed through the agreement itself.

This clarification is important because it shifts the focus away from labels and towards substance. The question is not whether an agreement has been breached, but whether the alleged conduct affects how the company’s affairs are carried out. If it does not, the oppression framework is not engaged.

“Affairs of the Company”

The structure of the joint venture in ISM reinforced this conclusion. The companies involved were essentially vehicles established to hold land for the project, without any meaningful operational activity of their own. Their role was limited and their function was largely passive.

In that context, the Court observed that there may not even be “affairs” within the company capable of being conducted in an oppressive manner. Where a company serves a limited and passive function, disputes are more likely to be characterised as disagreements between parties to a commercial arrangement rather than issues relating to the management of the company.

This aspect of the decision has practical implications. Many joint ventures, particularly in real estate and project-based investments, are structured in precisely this way. Corporate entities are used as holding vehicles, while the real commercial understanding sits outside the company in the form of agreements between the parties.

When disputes arise in such structures, the instinct to rely on company law remedies may not align with how the law views the dispute. The more limited the role of the company, the less likely it is that the dispute will be seen as one involving its affairs.

Substance over Form

One of the more useful aspects of the decision is the Court’s emphasis on substance over form. The Court did not simply accept the way the claim was framed. Instead, it examined what the dispute was really about.

The allegations included demands for contributions, rights issues and the imposition of interest. While these were linked to the companies involved, the Court found that they did not amount to conduct of the company’s affairs in a manner that could be described as oppressive. Rather, they reflected the parties’ differing positions on how the joint venture was to be funded and managed.

In other words, the dispute remained where it began — at the level of the parties’ arrangement. This approach serves as a reminder that the court will look beyond the language used in pleadings and focus on the underlying nature of the complaint. Simply describing conduct as oppressive does not make it so.

Practical Implications for Business Owners

From a practical standpoint, the message from ISM is measured but clear. The oppression remedy remains available where there is genuine misconduct in the way a company’s affairs are conducted but it is not a substitute for enforcing commercial agreements. For business owners and investors, this has several implications.

First, it reinforces the importance of clarity at the outset. Where the rights and obligations of the parties are clearly defined, disputes can be addressed on that basis. Where they are not, the law will not readily step in to reframe the dispute under a different legal label.

Second, it highlights the need to consider structure carefully. The way a joint venture is set up will influence how disputes are characterised. Where the company plays a limited role, the scope for invoking company law remedies may be correspondingly limited.

Third, it serves as a reminder that legal remedies have defined boundaries. Not every unfair outcome can be corrected through the courts and not every disagreement can be escalated into a statutory claim.

A Reaffirmation of Limits

The Federal Court’s decision does not narrow the remedy for oppression but it does reaffirm its proper limits. In doing so, it provides a clearer framework for distinguishing between disputes that belong in company law and those that do not.

Where the issue is how a company is being run, the court will intervene where appropriate. Where the issue is that a deal has not worked out as expected, the starting point remains the agreement between the parties. That distinction, while straightforward, is one that carries real consequences in practice.

Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.

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About the authors

Lum Man Chan
Partner
Dispute Resolution
Halim Hong & Quek
manchan@hhq.com.my

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Esther Lee Zhi Qian
Associate
Dispute Resolution
Halim Hong & Quek
esther.lee@hhq.com.my