LI, Jie Nan v Soh Lian Heng (Su Lianxing) (P-02(NCC)(A)-1603-09/2024)

LI JE NAN (Nombor Pasport Republik Rakyat China: EF362464)

HOU XINGMEI (Nombor Pasport Republik Rakyat China: EG1405171) ...PERAYU-PERAYU

SOH LIAN HENG (Nombor Pasport Singapura: K2822608D)

XIN HAI RESOURCES SDN BHD (Nombor Pendaftaran Syarikat: 1236729-K) ...RESPONDEN-RESPONDEN [Dalam Mahkamah Tinggi Malaya Di Pulau Pinang Dalam Negeri Pulau Pinang, Malaysia Saman Pemula: PA-24NCC-23-06/2024 Dalam perkara mengenai Seksyen-seksyen 48, 245(8) dan 585 Akta Syarikat 2016; Dan Dalam perkara mengenai Aturan 88, Kaedah 2 Kaedah kaedah Mahkamah 2012; Dan Dalam perkara mengenai Xin Hai Resources Sdn. Bhd. (Nombor Pendaftaran Syarikat: 1236729-K)

LI, JIE NAN (Nombor Pasport Republik Rakyat China: EF362464)

HUO XINGMEI (Nombor Pasport Republik Rakyat China: EG1405171) ...PEMOHON-PEMOHON

SOH LIAN HENG (SU LIANXING) (Nombor Pasport Singapura:K2822608D)

XIN HAI RESOURCES SDN. BHD. (Nombor Pendaftaran Syarikat: 1236729-K) ...RESPONDEN-RESPONDEN] CORAM RAVINTHRAN N. PARAMAGURU, JCA ALWI BIN ABDUL WAHAB, JCA NADZARIN BIN WOK NORDIN, JCA

By way of a Notice of Appeal dated 11 September 2024, the Appellants had appealed against the Order dated 3 September 2024 granted by the High Court in Penang which dismissed the Originating Summons ("OS") filed by the Appellants dated 24 June 2024 with costs of RM5,000.00.

At the High Court, the Appellants had sought inter alia that $ 2^{\mathrm{nd}} $ Respondent ("R2") through $ 1^{\mathrm{st}} $ Respondent ("R1"), the company secretary, accountant, auditor and/or any individual being responsible for the same to supply to the Appellants and allow the Appellants and/or approved company auditor(s) appointed by the Appellants to inspect and/or to make copies and/or to take extracts of all the accounting records and financial documents of R2 from the date of its incorporation including but not limited to the following documents:

1 management accounts not limited to all ledgers, profit and loss, balance sheet and/or trial balance

2 R2's statutory records including directors and members resolution

3 list of assets and charges of R2

4 R2's bank statements

5 R2's tax files for all years

6 all agreements between R2 and third parties.

The $ 1^{\mathrm{st}} $ Respondent had raised a Preliminary Objection ("PO") in the hearing before the Court of Appeal on the grounds that the Appeal was,

1 an abuse of process, rendered nugatory and now academic as the Appellant had already obtained access and inspected the financial and accounting records of the $ 2^{\mathrm{nd}} $ Respondent;

2 the relief sought obtained was no longer a live dispute; and

3 the appointment of Messrs. Mustapha Raj was sub judice.

The Appellant's object to the PO and it was submitted before us the inter alia the following grounds: a. R1 has not obtained leave to adduce further evidence as per Rule 7(3) of the Rules of Court of Appeal 1994; b. the Inspection done so far by the Appellants had to be carried out in tranches due to restrictions imposed by R1; c. the documents were incomplete and given on a piecemeal basis, with the duration for inspection restricted, as well as the Respondents insistence of the Appellant's directors' presence when they are in fact residing overseas; and d. the Appeal was not moot as the Appellants were not given access to complete accounting and other records since R2's incorporation.

We had then informed the learned counsels for the parties to submit on the aforesaid PO and the main issues before us after which we would make a decision.

The Appellants are the minority shareholders in R2 with the $ 1^{\mathrm{st}} $ Appellant ("A1") holding 24% and the $ 2^{\mathrm{nd}} $ Appellant ("A2") holding 25% of the share equity in R2, and they are also directors of R2 since 30 May 2019 whilst R1 is the director of R2 since 28 December 2017. Shareholdings ShareholderShare percentage$1^{st}$ Appellant24% (288,000)$2^{nd}$ Appellant25% (300,000)Ng Chee Khee51% (612,000)

One, Li Wen Hai ("Hai") is allegedly the beneficial owner and alter ego of R2.

R2 has 2 company secretaries, with Mr. Chee Wai Hong who is also the partner of the firm representing R1, Messrs. Allen Chee Ram in the High Court proceedings and the appeal at the Court of Appeal.

Based on the Appellants narrative of the events, Hai had requested for the monthly management accounts and the account book of R2 sometime in September 2023 but was told to refer his request to R1.

Thereafter the Appellants received an email on 6 February 2024 from one of the Company Secretary to peruse and approve the Reports and Financial Statements for the financial year ending 30 September 2023 ("Draft Reports and Financial Statements"). This email however did not provide the full financial and/or accounting documents to verify the said Draft Reports and Financial Statements.

A1 then sent an email to the said Company Secretary emphasizing that he does not understand English and requested the Chinese translation and the detailed financial information to which the said Company Secretary replied via email but once again no financial and/or accounting documents were provided.

A1 then sent another email request to which R1 only responded by stating that the accounts of R2 were unable to be resolved as the Appellants wanted "a more detail account without any specific reasons". R1 then called for a meeting in Penang despite knowing that the Appellants were living in China.

Thereafter, on 9 May 2024 A1 then replied that he needed the documents to perform his duty as a director of R2 and that he would be able to participate in the meeting remotely provided that the documents requested are given in advance or they are allowed to appoint an auditor to review the documents beforehand.

A month after the Appellants request for the documents, R1 then forwarded the general ledger, bank statements and other accounting and financial documents for the financial year ending 30 September 2023 to A1 but the Appellants did not receive the accounting and financial documents of R2 for the period since its inception.

The Appellants then commenced the OS at the High Court seeking the matters referred to in paragraph 3 above.

On 3 September 2024 the High Court dismissed the OS on the grounds of amongst others that,

1 R1's non-objection to the Appellants accessing the accounting and financial documents of R2 along with the cooperation provided by R1 which does not warrant the court's intervention for the appellants to enforce their rights under;

2 The application is premature as there is a mutual understanding that the Appellants will attend the shareholders meeting in September 2024 to resolve the issue of the detailed accounts; and

3 The Appellants should not complain about not understanding English.

The Appellants submits before us that: a. They have the absolute right to inspect the Company's accounting and other records as per sections 48 and 245 of the Companies Act 2016; b. The Learned High Court Judge (HCJ) was plainly wrong in imposing the burden on the Appellants to prove they have been denied access to the accounting and financial records of R2; and c. It is undisputed that the Appellants are directors of R2.

Sections 48 and 245 of the Companies Act 2016 respectively provide as follows: "Section 48 - Inspection of documents and records kept by company

Any document and record that is to be made available for inspection under this act, shall be made available for inspection by any person who is entitled to inspect such document and record at the registered office of a company or any other place allowed by this act.

A company shall provide proper facilities to enable the documents and records to be inspected.

The person who is entitled under this act to inspect the documents and records referred to in subsection (1) shall be allowed to make copies or take extracts from the documents and records." "Section 245 - Accounts to be kept

A company, the directors and managers of a company shall:

cause to be kept the accounting and other records to sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance sheets and any documents required to be attached thereto to be prepared; and

cause the accounting and other records to be kept in a manner as to enable the accounting and other records to be conveniently and properly audited.

A company, the directors and managers of a company shall cause appropriate entries to be made in the accounting and other records within sixty days of the completion of the transactions to which the entries relate.

The company shall retain the records referred to in subsection (1) for seven years after the completion of the transactions or operations to which the entries relate.

The records referred to in subsection (1) shall be kept at the registered office of the company or at such other place as the directors think fit, and shall at all times be open for inspection by the directors.

Notwithstanding subsection (4), the accounting and other records of operations outside Malaysia may be kept by the company at a place outside Malaysia provided that such accounting and other records shall be sent to and kept at a place in Malaysia and be made available for inspection by the directors at all times.

The accounting and other records referred to in subsection (5) shall include such statements and returns with respect to the business dealt with in the records so kept as to enable the preparation of true and fair financial statements and any documents required to be attached to the financial statements.

If any accounting and other records are kept at a place outside Malaysia under subsection (4) or (5), the Registrar may require the company to produce those records at a place in Malaysia or determine the type and manner of the records to be kept in Malaysia.

The Court may, in any particular case, order that the accounting and other records of a company be open to inspection by an approved company auditor acting for a director, subject to a written undertaking given to the Court that information acquired by the auditor during his inspection shall not be disclosed by him except to that director.

The company and every officer who contravene this section commit an offence and shall, on conviction, be liable to a fine not exceeding five hundred thousand ringgit or to imprisonment for a term not exceeding three years or to both."

We will start off by stating that the right of a director of a company to inspect its accounting and other records is a right existing at common law and is further recognised in the aforementioned sections in the Companies Act 2016.

This above proposition of law (albeit in reference to the previous Companies Act 1965) was explicitly referred in the Court of Appeal case of Dato' Tan Kim Hor & Ors v. Tan Chong Consolidated Sdn Bhd [2008] CLJU 741; [2008] 1 LNS 741; [2009] 2 MLJ 527, to which we respectfully adopt and apply, where Low Hop Bing JCA, delivering the judgment of the Court of Appeal referred and cited with approval a leading Singapore Court of Appeal authority Wuu Khek Chiang George v. ECRC Land Pte Ltd [1999] 3 SLR 65 CA as follows: [16] The relevant established principles have been succinctly stated by the Singapore Court of Appeal in Wuu Khek Chiang George. There, the appellant, a director of the respondent, took out an application under s.199 of the Singapore Companies Act (equipollent to our sec.167) for an order requiring the respondent to inspect its accounting and financial records. The High Court judge dismissed the application. After reviewing a long line of authorities, the Court of Appeal allowed the appellant's appeal and held, inter alia, that:

the right of a director of a company to inspect its accounting and other records is a right existing at common law and is recognised in s. 199 of the Companies Act. Such right is a concomitant of the fiduciary duties of good faith, care, skill and diligence which the director owes to the company, and as such, like other rights and powers, must be exercised for the benefit of the company. The obligation of the company to allow inspection by its director is mandatory;

this right has been described as being 'absolute'. A director is prima facie entitled to inspection and is not required to demonstrate any particular ground or 'need to know' as a basis: Molomby. So long as the right is exercised for the proper performance of the director's duties to the company and not with a view to causing any detriment to the company, it is in that sense 'absolute': see eg, Dato' Aw Kow v. Haw Par Bros (Pte) Ltd [1972] CLJU 25; [1972] 1 LNS 25; [1972] 2 MLJ 225; [1972-1974] SLR 391, Haw Par Brothers v. Dato Aw Kow [1973] CLJU 44; [1973] 1 LNS 44; [1973] 2 MLJ 169; [1972-1974] SLR 183; Leong Sun Wing v. Wah Hup Engineering Works Sdn Bhd (No 2) [1977] CSLR VII [1003]; Molomby; Welch & Anor v. Britannia Industries Pte Ltd [1993] 1 SLR 673; Edman v. Ross (1922) 22 SR (NSW) 351; and Conway & Ors v. Petronius Clothing Co Ltd & Ors [1978] 1 All ER 185; [1978] 1 WLR 72;

there is no residual discretion in the court to refuse inspection. Where the court bars a director from exercising his right of inspection, it is not in fact exercising a residual discretion, but is in such an event satisfied on the basis of the evidence before it that the director's intention is to use the information obtained for ulterior purposes such as with a view to causing detriment to the company and that the director is thus abusing the confidence reposed in him; Berlei Hestia (NZ) Ltd v. Fernyhough [1980] 2 NZLR 150 per Mahon J;

the right of a director to inspect the books and records of the company flows from his office as a director and enables him to perform his duties as a director. The corollary of this is that the right will be lost where it is exercised not to advance the interests of the company but some other ulterior purpose to injure the company: Edman v. Ross, Molomby; Deluge Holdings Pty Ltd & Anor v Bowlay & Ors [1991] 9 ACLC 1486; Welch & Anor; Re Geneva Finance Ltd (Receiver and Manager Appointed) (1992) 10 ACLC 668; and Paul Nicholson Iwn. Faber Medi-Serve Sdn Bhd dan lain-lain [2002] 5 CLJ 383; [2002] 1 MLJ 355. [28] In our view, s.167(6) is intended to facilitate and liberalise, and is not meant to impede, the right of inspection. Indeed, almost unbridled powers are conferred upon the court to give effect to the directors' right of inspection. Clearly, it is within the powers of the court to allow the plaintiffs to furnish a fresh undertaking by the auditor in terms as required by the court, by addressing it to the court and by deleting therefrom the words relating to the appointed servants/agents. This is especially so after the learned judge had arrived at a specific decision that the defendant had, in the first instance, failed to discharge its burden to show that the plaintiffs' inspection would result in any detriment to the interests of the defendant. That is a reaffirmation that the right of inspection by the plaintiffs as directors of the defendants pursuant to s.167(6) is 'absolute'."

We further note that the above sections 48 and 245 of the Companies Act 2016 do not make a denial of access or a demand as a requirement before commencing an action under the aforementioned sections.

We were referred to by learned counsel for the Respondents to the High Court case of Loh Teck Wah v Lim Pang Kiam & Ors [2022] 6 CLJ 549 where the learned Liza Chan Sow Keng, JC (as she then was) held as follows: [16] With utmost respect to learned counsel for the defendants, this contention falls as I am of the utmost respectful view that a prior request or demand is not a sine qua non for the commencing of an action to inspect the accounts of the companies under s.245(4) of the CA 2016:

even if the email dated 9 February 2021 cannot be considered as a request or demand, in my view, s.245 of the CA 2016 is cast in clear language; the court has a duty to expound the language of the words used and apply the plain and ordinary meaning of the words in the section/statute under consideration. It will be odious for the court to rewrite it to include a requirement that a prior request or demand is a sine qua non to the commencing of an action by the plaintiff to the court. A literal interpretation of s.245 supports this view when this section is contrasted with the wordings of other sections in the CA 2016 where a mandatory notice is required - as mere example, for instance, an application under s.348 of the CA 2016 mandating 30 days' prior notice to the directors of the intention to apply for leave of court under s.347;

(ii) even if contrary to the view that I have come to, that a prior demand or request for inspection/documents must be made and the right was refused, as suggested by learned counsel Mr Yap Boon Hau, the defendants were served with the OS, which in my opinion, is itself, a demand for inspection;

(iii) a similar objection was made in Mirza Mohamed Tariq Beg Mirza HH Beg v. Perunding Pakarmedia Sdn Bhd [2009] 10 CLJ 273. The objection there was deemed settled when in the course of hearing, the learned judge asked "whether the company was prepared to allow Mirza access to the accounting and other records of the company. There was no clear affirmative answer in response". In the instant case before this court, it is evident that the companies in strenuously objecting to the application are not agreeable to let the plaintiff inspect the companies' accounting and other records;

(iv) as such, I am of the view that the two cases of James Theophilus Fredericks which followed Dato' Seri Timor Shah Rafiq v. Nautilus Tug & Towage Sdn Bhd [2018] 2 CLJ 103; [2018] 8 MLJ 394 (relied upon by the defendants), which laid down the criteria that (i) the applicant has demanded for inspection, and (ii) such right was refused before the applicant can proceed to bring action in court, being High Court decisions, are persuasive but not binding on this court in regards to this point."

We have read Loh Teck Wah (supra) and are in complete agreement with the learned JC therein that a literal reading of sections 48 and 245 of the Companies Act 2016 do not show that a demand is required prior to the commencing of an action by the Plaintiff/Appellants to the court. In the circumstances, the Appellants here do not bear any burden to prove that they have been denied access to the accounting and financial records of R2.

We also hold that no reasons need be given by the Appellants in seeking access to and to be provided with the accounting and financial records of R2 as contended by R1 in its email of 6 May 2024 to A1.

There is an absolute right under the law for the Appellants to be provided with the accounting and financial records of R2. Authority for this can be found in Low Ean Nee v SNE Marketing Sdn Bhd [2024] 1 CLJ 24 where the Court of Appeal held, [39] We have carefully examined the appeal record and in particular, the rival contentions as stated in the respective affidavits that were filed by the parties. We have also studied the cases that were relied upon by the parties. From the several case laws that were read to us, we find it to be quite wellsettled that the appellant, as a director of the respondent, has the absolute right to inspect the documents and the appellant is not required to provide any covenant or reasons for the inspection. [40] In amplification, we are compelled to state here that it is trite that the right of a director of a company to inspect the company's accounting and other records is a right existing in common law. Thus, s. 254 of the Companies Act 2016 is declaratory of the director's common law right. According to the cases, a director's right to inspect accounting and financial records is a concomitant of the fiduciary duties of good faith, care, skill and diligence which the director owes to the company, and as such, like other rights and powers, must be exercised for the benefit of the company. [41] Thus, the obligation of the company to allow inspection by its director is regarded as mandatory. And, being an "absolute" right, a director is prima facie entitled to inspection and is not required to demonstrate any particular ground or 'need to know' as a basis. As such, the right to inspect remains extant so long as the right is exercised for the proper performance of the director's duties to the company and not with a view to causing any detriment to the company."

In our case, despite holding that sections 48 and 245 of the Companies Act 2016 are clear and unambiguous and that the said sections grant the directors the rights to inspect the accounting records of the company, never the less the HCJ held that the provisions are self-executing and that the Appellants could exercise their right without seeking a court Order.

As stated by us in our grounds above, we have applied the plain and ordinary meaning of the words contained in the said sections 48 and 245 of the Companies Act 2016 as well as the common law principle that the right to inspection is absolute and from the cases and the law we have cited, we hold that the Court can make an order for inspection even without a demand or prior request or denial of access or restriction.

We now turn to the requirement of the pre-requisite that the Appellants have to first prove a denial of access to the said Company's records, as was held by the HCJ, before the Court can grant an Order under section 585 of the Companies Act 2016.

Section 585 of the Companies Act 2016 reads: "Section 585. Court may compel compliance If an officer or former officer of a company or any other person failed or omitted to do any act, matter or thing which by or under this Act he is or was required or directed to do, including to permit the inspection of any register, minute book or document or to supply a copy of any register, minute book or document, the Court on the application of the Registrar or any member of the company or the Official Receiver or liquidator may by order require that officer or former officer or person to do the act, matter or thing immediately or within such time as is allowed by the order, and for the purpose of complying with any such order, the former officer shall be deemed to have the same status, powers and duties as he had at the time the act, matter or thing should have been done."

We hold that the HCJ's decision on this point is not correct in law. The said section 585 of the Companies Act 2016 does not in our judgment impede the absolute right of the Appellants to inspection of the company documents sought for and that the Appellants need not prove denial of access or restriction to the said documents before the Court may grant an order under the aforesaid section.

At the sake of repetition and as stated by us, sections 48 and 245 of the Companies Act 2016 gives the right to the Appellant directors to inspect the company records. Section 585 of the Companies Act 2016 cannot be construed or intended to obstruct or hinder such right but was meant to facilitate the same in addition to the existing common law right to do so.

It was held by the HCJ that the Appellants were the majority shareholders of R2. This is factually wrong as the register of the company shows that Ng Chee Khee is the majority shareholder of R2. In any event this issue is in our view irrelevant as the right to inspect and have access to the documents of the Company is as stipulated in sections 48,245 and 585 of the Companies Act 2016.

We further find that the request to inspect, seek access to and to be provided with the accounting and financial records of R2 have not been shown to be clouded by any ulterior motives or improper purposes on the part of the Appellants to injure the company. In the circumstances, the Appellants right to be provided with the said records must therefore be upheld. See the Court of Appeal in Low Ean Nee (supra) where the Court there held, [42] According to the established jurisprudence, there is no residual discretion in the court to refuse inspection. The principle is that where the court bars a director from exercising his right of inspection, it is not in fact exercising a residual discretion, but is in such an event, satisfied on the basis of the evidence before it that the director's intention is to use the information obtained for ulterior purposes such as with a view to causing detriment to the company and that the director is thus abusing the confidence reposed in him. Thus, in those circumstances, the right will be lost where it is exercised not to advance the interests of the company but some other ulterior purpose to injure the company."

Further authority for the above proposition can also be found in Dato Tan Kim Hor & Ors (supra) where the Court of Appeal also held, [9] It is settled law that the defendant, having resisted the plaintiffs' right to inspect the accounting and other records of the defendant, bears the burden of proving that the plaintiffs' right is being, or will be, exercised for an improper purpose: Australian Metropolitan Life Assurance Co Ltd v Ure & Ors(1923) 33 CLR 199, per Isaacs J; and Wuu Khek Chiang George v ECRC Land Pte Ltd [1999] 3 SLR 65CA, per LP Thean JA. [10] It is for the defendant to show 'clear proof' and to satisfy the court affirmatively' that the grant of the right of inspection would be for a purpose detrimental to the interests of the company...".

We have also found that the HCJ had refused to grant the Order sought for in the OS as some of the documents being the general ledger, bank statements and other financial and accounting documents for the financial year ending 30 September 2023 have been received by the Appellants.

We hold that the above decision is erroneous as the documents are incomplete and covered only 1 financial year.

We also agree with the Appellants that a partial or selective provision of documents cannot and does not extinguish the Appellants absolute right of inspection. Thus, the Respondents argument that the HCJ was correct to dismiss the OS as R1 had never restricted access to the Appellants and had consistently cooperated with the Appellants is, with respect, untenable and misconceived. Was the OS premature?

The HCJ had held that the OS was premature as there was an understanding that the Appellants will attend the shareholders meeting in September 2025.

We are unable to agree with the aforesaid HCJ's decision as the Appellants right to inspect and be provided the company documents are, as mentioned previously, absolute. In any event the evidence before us shows that the Appellants had via emails dated 9 May 2024 and 16 May 2024 respectively expressly stated the condition for them attending the meeting was that all financial information be provided to them and secondly that they needed time to review the documents provided and that shareholders meeting needs to be postponed until after September.

On the issue of the Appellants inability to understand English which the HCJ held that the Appellants should not complain of the same as the common business language and documents in Malaysia were either Malay and English, with respect we disagree that this should be one of the grounds to reject the Appellants request to inspect etc. the documents as the main and most pertinent issue which the HCJ should have considered is whether the inspection is in law to be allowed and not the Appellants inability to understand English.

Based on all of our aforesaid grounds, we are satisfied that the decision of the learned HCJ in refusing to make the order for the appellants inspection pursuant to section 245 of the Companies Act 2016 was in all circumstances plainly wrong and warranted our appellate intervention.

We therefore dismiss the PO and allow the appeal and set aside the decision of the High Court, due to the large number of documents sought for inspection as listed in the OS and order the inspection as per section 245(8) of the Companies Act 2016. The High Court Order dated 3 September 2024 is hereby set aside.

We further order that the Respondents are to supply the documents sought in the OS as per sections 245(1)(a) and 245(3) of the Companies Act 2016 for a period of 7 years prior to 3 September 2024.

Having considered the surrounding circumstances of this case we are minded not to order costs in respect of this appeal. Similarly, no costs is allowed in the Court below. Dated: 16 October 2025 (NADZARIN WOK NORDIN) Judge Court of Appeal Malaysia Putrajaya Parties Appearing For the Appellant: Gan Khong Aik Cheah Zhi Qian [Messrs. Gan Partnership] For the 1 $ ^{st} $ Respondent: Chee Wai Hong Siti Norain Binti Mohamaed [Messrs. Allen Chee Ram]