Atlantis Engineering & Construction Sdn Bhd v Tan Yu Ping (AA-22NCC-10-05/2024)

HEE KAH PAU (NRIC NO. K/P: 630617-05-5981) … DEFENDANTS 20 AND CHAI SIN FAH 25 (NRIC NO.: 570407-08-6171) … THIRD-PARTY LEOW SUAN YANG (NRIC NO. 760912-08-5885) … PROPOSED INTERVENER 30 S/N Qhj7NwVqVUq5gmm2hpzolQ GROUNDS OF JUDGMENT [1] This is the court’s decision on Enclosure 8, an application by Mr Leow Suan Yang to intervene in this derivative action and to take over conduct of the proceedings in substitution of Mr Chai Sin Fah. 35 [2] The plaintiff opposes the application on procedural and jurisdictional grounds, while the defendants support it on the basis that a conflict of interest has arisen affecting Mr Chai. [3] The material facts are not in dispute. This action was commenced pursuant to leave granted by the Court of Appeal to Mr Chai. 40 Subsequently, a third-party notice was issued against him alleging his involvement in the impugned transactions. [4] Importantly, this court has, in a separate decision under Enclosure 46, found as an unreported case Atlantis Engineering & Construction Sdn Bhd v. Tan Yu Ping & Anor; Chai Sin Fah 45 (Third Party); Leow Suan Yang (Proposed Intervener) [2026] MLRHU 810; [2026] CLJU 899 refused to set aside the third-party notice. Applying the principles in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36; [1993] 1 MLRA 611; [1993] 4 CLJ 7; [1993] 2 AMR 1969, Seruan 50 Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul Makmur & Anor [2016] 3 MLJ 1; [2016] 2 MLRA 263; [2016] 3 CLJ 1; [2016] 2 AMR 795 and Sathish Kumar Ayyaswamy & Anor v. Peeran Syed Mohamed Syed Mahaboob [2025] 5 CLJ 385; [2025] MLJU 33; [2025] 2 MLRA 863, this court found that the 55 S/N Qhj7NwVqVUq5gmm2hpzolQ third-party proceedings disclose triable issues and are not plainly unsustainable. [5] The consequence of that finding is clear and bears a distinct effect on the disposal of this application. The allegations against Mr Chai are not speculative. They raise real issues of participation in the 60 impugned transactions, which must be determined at trial. [6] Against that backdrop, the issues in this application are whether this court has jurisdiction to substitute the person in conduct, whether the Court of Appeal’s leave precludes such substitution, and whether the circumstances justify substitution. 65 [7] In law, section 350(a) of the Companies Act 2016 confers a wide discretion on the court to authorise “the complainant or any other person” to control the conduct of proceedings. This discretion is continuing and is not exhausted upon the grant of leave to commence a derivative action. This principle is reflected in Por Lin 70 Chiang v Tanjung Aircond Engineering Sdn Bhd & Anor [2019] 1 CLJU 700; [2019] MLRHU 475, FMC Petroleum Equipment (Malaysia) Sdn Bhd v FMC Wellhead Equipment Sdn Bhd & Anor [2019] MLJU 473; [2019] MLRHU 529; [2019] CLJU 758, where the High Court states: 75 “Since leave is granted by this Honourable Court ... it is expeditious, fair and appropriate to also grant the Plaintiff the ancillary reliefs ... which this Court has the power under s 350 of the Companies Act 2016 to grant such ancillary reliefs as prayed for by the Plaintiff.” 80 S/N Qhj7NwVqVUq5gmm2hpzolQ [8] The leave granted by the Court of Appeal merely authorised the commencement of the derivative action. It did not confer upon Mr Chai an exclusive, permanent, or irrevocable right to control the proceedings. Significantly, no order was made vesting sole conduct of the proceedings in Mr Chai to the exclusion of all others. 85 Accordingly, the court's supervisory jurisdiction over the derivative action remains intact. The conduct of a derivative action continues to be subject to the court's oversight to ensure that it is prosecuted in the best interests of the company. As this court observed in its grounds of judgment delivered in disposing of Enclosure 49 in 90 Atlantis Engineering & Construction Sdn Bhd (supra): "The Court of Appeal’s leave merely authorises the commencement of the derivative action. It does not confer exclusive or irrevocable control on Mr Chai. There was no order vesting the conduct of the proceeding solely in him. Accordingly, this Court retains full supervisory jurisdiction 95 over derivative action." The court therefore retains the power to make such further orders as may be necessary to safeguard the integrity of the proceedings and the interests of the company. 100 [9] The central question is whether Mr Chai can continue to conduct the proceedings. I am of the view that he cannot. [10] Mr Chai is now both the complainant and a third party alleged to be a co-tortfeasor. This creates a clear and irreconcilable conflict. [11] Following the court’s refusal to strike out the third-party notice, Mr 105 Chai now stands in the position of a third party facing a claim for S/N Qhj7NwVqVUq5gmm2hpzolQ contribution arising from the same transactions forming the subject matter of this action. [12] This creates a real and direct conflict. As complainant, he must prosecute the claim fully on behalf of the company in its interests. 110 As a third party, he must defend himself against potential liability for the same alleged wrongdoing. [13] These positions are irreconcilable. The conflict is no longer theoretical but grounded in pleaded facts which this court has already held disclose triable issues. It is a structural conflict that 115 goes to the root of the proceedings. There is a real risk that the prosecution of the claim may be compromised [14] The court has also considered whether Mr Chai may remain in control of the derivative action, and with Mr Leow providing "assistance and information" pursuant to Section 350(c) of the 120 Companies Act 2016. The subsection provides:

for any person to provide assistance and information to the complainant, including to allow inspection of the company’s books. [15] Under Section 350(c), the Court may order any person to provide 125 "assistance and information to the complainant." While this provision is often utilized to facilitate access to corporate records, it could theoretically be applied to maintain Mr Chai’s formal status as the complainant while allowing Mr Leow to drive the litigation strategy. 130 S/N Qhj7NwVqVUq5gmm2hpzolQ [16] This court finds that approach inappropriate. Assistance does not remove control. The person in conduct retains ultimate authority over litigation strategy, the presentation of evidence, and settlement decisions. As observed in Dato’ Sri Tee Yam & Ors v Classita Holdings Bhd [2023] MLRHU 1316; [2023] CLJU 1518; [2023] 135 MLJU 1719, the court will consider whether the company's action is being genuinely prosecuted and whether there are bona fide grounds to believe that the conduct of the proceedings may be compromised. Where such concerns arise, the court's supervisory jurisdiction may properly be invoked. In the present case, the conflict 140 affecting Mr Chai remains unresolved, notwithstanding any assistance that Mr Leow may provide. Assistance alone, therefore, does not cure the conflict, and there remains a real risk of a compromised or ineffective prosecution. [17] Turning to the Intervener, Mr Leow is a director and shareholder of 145 the company and is not implicated in the impugned transactions. He stands in a position of an independent and neutral person. His interests are aligned with those of the company, and he is therefore a suitable person to assume conduct of the proceedings. [18] The plaintiff’s argument that the Court of Appeal’s leave to 150 commence action precludes substitution is without merit. This application does not seek to revisit the grant of leave but addresses a material change of circumstances arising after the commencement of the action. The material change in the circumstances was only after the leave was obtained. 155 S/N Qhj7NwVqVUq5gmm2hpzolQ [19] In a case that did not specifically deal with derivative actions, the Court of Appeal in Ng King Chong & Anor v Ooi Kim Geik & Ors [2019] 2 MLJ 398; [2019] 2 CLJ 246; [2019] 1 MLRA 221 made clear that the paramount consideration in derivative litigation is the welfare of the company. Where a conflict arises affecting the proper 160 prosecution of the action, the court must intervene in the interests of the company. It stated as follows: “[23] … It is trite that unlike the just and equitable ground for winding up as well as the oppression action, the derivative action is instituted on behalf of the company for a cause of action which the company has 165 against a wrongdoer. So it is quite different in that any remedy obtained is for the benefit of the company.” [20] In the present case, given that the third-party claim against Mr Chai has been upheld as disclosing triable issues, the conflict is both real 170 and unavoidable. [21] Accordingly, substitution is not merely appropriate but necessary to preserve the integrity of the proceedings. As observed by the Court of Appeal in Celcom (M) Bhd v Mohd Shuaib Ishak [2010] 2 MLRA 202; [2010] 7 CLJ 808; [2011] 3 MLJ 636, derivative 175 proceedings must be brought in good faith and in the interests of the company. The court must remain vigilant against situations in which the proceedings are driven by personal interests or constitute an abuse of process. The court’s supervisory jurisdiction exists to ensure that derivative proceedings are conducted in a manner that 180 preserves their integrity and advances the interests of the company. S/N Qhj7NwVqVUq5gmm2hpzolQ [22] I therefore allow enclosure 8. Mr Leow Suan Yang is granted leave to intervene and is authorised to take over the conduct of the proceedings in substitution of Mr Chai Sin Fah. [23] Mr Chai shall cease to have conduct of the proceedings but may 185 assist if required pursuant to s.350(c). Costs in the cause RM5,000. Dated : 15th Jun 2026 [MOSES SUSAYAN] 190 JUDGE HIGH COURT IN MALAYA AT IPOH, PERAK Counsel : 195 For the Plaintiff : Dato’ Gobinath Mohana Advocates and Solicitors [Messrs The Law Office of Mohana & Co] Batu Caves, Selangor 200 For the Defendants : Yohendra Nadarajan Advocates and Solicitors [Messrs Yohendra Nadarajan] Petaling Jaya, Selangor 205 S/N Qhj7NwVqVUq5gmm2hpzolQ For the Intervener : Shivdev Singh Advocates and Solicitors [Messrs L.H. Singh & Co] Ipoh, Perak 210 (Notice: This Ground of Decision is subject to official editorial revision) Headnotes: COMPANIES: Derivative action – Application to substitute person conducting proceedings – Whether court retains supervisory jurisdiction 215 after leave granted – Whether third-party notice disclosing triable issues created a real and irreconcilable conflict of interest – Whether complainant’s dual role as complainant and alleged co-tortfeasor created risk of compromised prosecution – Whether assistance under s.350(c) cured conflict – Whether Intervener was an independent and suitable 220 person to conduct proceedings – Whether substitution necessary to safeguard interests of company and integrity of proceedings