THAI KIM SIM (No. Kad Pengenalan: 601019-01-5047) ... DEFENDAN-DEFENDAN S/N MjG5xpugCUilKe30hiIsiA Page 2 of 13 JUDGMENT [1] This is the Plaintiff's application for leave to commence a derivative action against the Defendants under Sections 347(1) and (2) and 348 of the Companies Act 2016 (“CA 2016”)(“this Application”). [2] The Plaintiff, Aurelia Joie Thai, is a director of the 1st Defendant, Maxter Glove Manufacturing Sdn. Bhd., and seeks to bring an action on behalf of the 1st Defendant against the 2nd Defendant, Thai Kim Sim, who is also a director of the 1st Defendant. [3] The application stems primarily from the acquisition of a Falcon 7X Aircraft (“the Aircraft”) by the 1st Defendant at a purchase price of USD47,388,000, which the Plaintiff alleges was “bulldozed” through by the 2nd Defendant without proper board approval, followed by irregular accounting treatment of the acquisition. A] SALIENT BACKGROUND FACTS [4] The 1st Defendant is a wholly-owned subsidiary of Supermax Corporation Berhad (“SCB”), a public listed company with a public spread of shareholders. At the material time when the Aircraft acquisition was being considered, the 1st Defendant had only two directors: the Plaintiff and the 2nd Defendant. [5] SCB’s Board of Directors at the material time included Albert Saychuan Cheok (then Chairman), Dato' Ting Heng Peng, Ng Keng Lim @ Ngooi Keng Lim, Tan Chee Keong, Dr. Rashid bin Bakar, and Cecile Jaclyn Thai. The 2nd Defendant was only appointed as Executive Chairman of SCB on 8.12.2021, after the Directors’ Written Resolution approving the Aircraft acquisition was passed on 26.11.2021. [6] On 26.11.2021, the Board of Directors of SCB approved the acquisition of the Aircraft by a vote of 5 to 1, with only Cecile Thai dissenting. On the same day, the 2nd Defendant, acting as the authorised representative of SCB, signed the 1st Defendant’s Members’ Written Resolution for the proposed acquisition. S/N MjG5xpugCUilKe30hiIsiA Page 3 of 13 [7] On 26.11.2021, the Plaintiff received a WhatsApp message from Andrew Lim (Senior Manager, Corporate Affairs and Investor Communications at SCB) with a proposed Board resolution of the 1st Defendant pertaining to the acquisition (“Aircraft Board Resolution”) which had already been signed by the 2nd Defendant. [8] The Plaintiff did not sign the resolution and later expressly refused to do so on 12.2.2022. Nevertheless, the acquisition proceeded, and the Aircraft was purchased. B] THE APPLICABLE LEGAL PRINCIPLES [9] Section 348(4) of CA 2016 requires that before leave is granted to commence a derivative action, the Court must be satisfied that: i) the complainant is acting in good faith; and ii) it appears prima facie to be in the best interest of the company that the application for leave be granted. [10] These requirements are cumulative, and the onus is on the Plaintiff to satisfy the Court on a balance of probabilities that both criteria have been met. C] ISSUES FOR DETERMINATION [11] The main issues for determination are: i) Whether the Plaintiff's application satisfies the statutory requirements under Section 348(4) of CA 2016; ii) Whether the Plaintiff is acting in good faith; iii) Whether it appears prima facie to be in the best interest of the company to grant leave. S/N MjG5xpugCUilKe30hiIsiA Page 4 of 13 D] ANALYSIS AND FINDINGS The Corporate Relationship Between SCB and The 1st Defendant [12] It is a fundamental principle of company law that a company incorporated under the Companies Act is a body corporate with legal personality separate from that of its members, as enshrined in Section 20 of CA 2016. However, the corporate relationship between a parent company and its wholly-owned subsidiary must be viewed in its proper commercial context. [13] As held in D.H.N. Food Distributors Ltd v. Tower Hamlets London Borough Council [1976] 1 WLR 852, groups of companies are often treated as one concern for practical business purposes. The English Court of Appeal held as follows: “Third, lifting the corporate veil. A further very interesting point was raised by Mr. Dobry on company law. We all know that in many respects a group of companies are treated together for the purpose of general accounts, balance sheet, and profit and loss account. They are treated as one concern. Professor Gower in Modern Company Law. 3rd ed. (1969), p. 216 says: “there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group.” This is especially the case when a parent company owns all the shares of the subsidiaries—so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says. …” (own emphasis added) [14] In the present case, SCB holds 100% of the shares in the 1st Defendant. This complete ownership creates a relationship where, as noted in Hotel Jaya Puri Bhd v. National Union of Hotel, Bar & Restaurant Workers & Anor [1980] 1 MLJ 109, the parent S/N MjG5xpugCUilKe30hiIsiA Page 5 of 13 company exercises considerable influence over the subsidiary, which may act as an agent of the parent company. The Authority of the Sole Shareholder [15] While the business and affairs of a company shall be managed by its Board of Directors as per Section 211 of CA 2016, the significance of a resolution by a sole shareholder cannot be overlooked. [16] Section 344 of CA 2016 recognises the power of a sole member to make decisions that “may be taken by the company in meeting of members” and which “has effect as if agreed by the company in meeting of members.” [17] In this case, SCB, as the sole shareholder of the 1st Defendant, approved the acquisition through its Board of Directors’ resolution dated 26.11.2021. The 2nd Defendant, as SCB’s authorised representative, then signed the 1st Defendant’s Members’ Written Resolution dated 26.11.2021 pursuant to Section 344 of CA 2016. [18] This Court finds that when a holding company which owns 100% of a subsidiary's shares resolves to take a particular action through the subsidiary, it would be contrary to commercial reality and good business practice for the directors of the subsidiary to frustrate the wishes of its sole shareholder without compelling reason for example if it is clearly unlawful to do so. Regarding the 2nd Defendant’s Alleged Control Over SCB [19] I have also taken into account that the Plaintiff has raised allegations about the 2nd Defendant having control over SCB. However, I find that this issue, if it exists at all, is a separate corporate governance matter that would need to be addressed at the SCB level through appropriate proceedings. It is not relevant to this derivative action application concerning the 1st Defendant. [20] The focus of Section 348(4) of CA 2016 is whether the action is in the best interest of the 1st Defendant itself, not its parent company. S/N MjG5xpugCUilKe30hiIsiA Page 6 of 13 [21] Further and in any event, the 2nd Defendant was not a director of SCB at the time the Aircraft acquisition was approved by SCB’s Board of Directors. He was only re-appointed to the SCB Board on 8.12.2021, after the resolution was passed on 26.11.2021. This fact further dispels the Plaintiff’s allegation that the 2nd Defendant engineered or bulldozed the decision at the parent company level. The Plaintiff’s Refusal to Sign the Resolution [22] While Article 106 of the 1st Defendant's Constitution requires a majority of directors to approve any resolution, I find that the Plaintiff's refusal to sign the Aircraft Board Resolution must be viewed in light of SCB’s explicit approval as the sole shareholder. [23] The Defendants correctly point out that the Plaintiff’s refusal created a deadlock at the board level of the 1st Defendant, constraining the 1st Defendant to rely on the approval from its holding company. Given the economic reality of the group structure, SCB’s clear directive should have been implemented by the 1st Defendant’s directors. [24] The 2nd Defendant’s decision to proceed with the acquisition after obtaining SCB’s approval was not, in my view, indicative of wrongdoing. Rather, it was a practical business solution to the deadlock, particularly in the absence of any credible or alternative course of action from the Plaintiff. [25] The Plaintiff, by contrast, had ample opportunity to raise any concerns at the material time, whether through a formal objection, board correspondence, or by requisitioning a shareholders’ meeting, but chose not to do so. Her challenge, brought more than a year later, undermines the credibility of her claim. Regarding Commercial Justification for the Aircraft [26] Furthermore, the evidence demonstrates that the acquisition of the Aircraft was commercially justified. The 1st Defendant’s previous aircraft (owned by Maxter Healthcare Pte Ltd) was a Falcon 2000LXS model that was inadequate for long-haul international travel without multiple refuelling stops. Given the global nature of S/N MjG5xpugCUilKe30hiIsiA Page 7 of 13 the Supermax Group’s operations, with offices in numerous countries including Singapore, Hong Kong, Tokyo, Dublin, Amsterdam, Montreal, Chicago, Houston and Miami, there was a legitimate business need for an aircraft with extended range capabilities. [27] The former aircraft was subsequently sold for USD23 million, realising a substantial book profit of USD7.67 million (net of depreciation). This indicates prudent asset management rather than reckless expenditure. The acquisition of the new Aircraft thus represents a strategic upgrade of an existing asset class rather than an entirely novel and unjustified purchase. [28] The Plaintiff has not demonstrated that the acquisition has caused actual financial harm to the 1st Defendant. On the contrary, the 1st Defendant remained profitable during the relevant period, and the Aircraft continues to serve its intended business purpose of facilitating global operations. Good Faith Requirement [29] The onus is on the Plaintiff to demonstrate that she is acting in good faith. This requires showing both an honest belief that a good cause of action exists with reasonable prospects of success (Discovery Enterprise Inc v. Ebco Industries Ltd [1997] BCTC LEXIS 5338), and that the application is not brought for a collateral purpose (Celcom (M) Bhd v. Mohd Shuaib Ishak [2011] 3 MLJ 636). [30] I find the Plaintiff has failed to demonstrate good faith for several reasons: i) First, the timing and context of this Application raise questions about the Plaintiff’s true motivations. The application appears to coincide with other litigation involving the 2nd Defendant, including proceedings related to a judicial separation between the 2nd Defendant and the Plaintiff’s mother. ii) Second, there is evidence suggesting personal animosity between the Plaintiff and the 2nd Defendant. The Plaintiff’s refusal to sign the Aircraft Board Resolution, followed much S/N MjG5xpugCUilKe30hiIsiA Page 8 of 13 later by this Application, indicates that this may be part of a broader dispute rather than a genuine concern for corporate governance. iii) Third, the Plaintiff’s claim that she is protecting the 1st Defendant’s interests is undermined by the commercial reality that the 1st Defendant has not suffered demonstrable financial loss from the acquisition. More significantly, she has not identified any arguable or specific cause of action against the 2nd Defendant that raises a serious question to be tried. The allegations are generalised and largely inferential, lacking sufficient particularity to meet the threshold of a bona fide derivative action. Best Interest of the Company [31] Even if I were to find the Plaintiff was acting in good faith, I am not satisfied that granting leave would be prima facie in the best interest of the 1st Defendant. [32] The Defendants have demonstrated that: i) The acquisition was commercially justified to support the 1st Defendant’s global expansion; ii) The Aircraft serves a legitimate business purpose in facilitating international travel for executives and business partners; iii) There has been no demonstrated financial loss to the 1st Defendant arising from the acquisition; iv) Litigation would likely disrupt the 1st Defendant 's operations and incur significant costs. [33] As noted in Fazal Ellahi Oli Mohamed & Anor v. KM Oli Mohamed Sdn Bhd [2020] 1 LNS 2215, the Court must consider the practical and commercial interests of the company, and whether the company would gain substantially from the proposed derivative action. S/N MjG5xpugCUilKe30hiIsiA Page 9 of 13 [34] In this case, the Plaintiff has not adequately shown how proceeding with this derivative action would benefit the 1st Defendant from a practical and commercial perspective. Accounting Treatment [35] The Plaintiff alleges that the Aircraft’s acquisition was not properly disclosed in the audited accounts of the 1st Defendant and SCB, claiming it was hidden under “Property, Plant and Equipment” rather than being separately disclosed. [36] The Defendants submitted that: i) The accounting treatment was reviewed by external auditors RSM Malaysia PLT who did not raise any impropriety; ii) The classification as “Property, Plant and Equipment” was consistent with standard accounting practices; iii) In the interest of enhancing clarity, the auditors subsequently reclassified the item “Aircraft” into a specific category, which was a mere presentation adjustment. [37] I accept that the accounting treatment, though later refined for presentation, was not inherently improper or intended to conceal the acquisition. The subsequent reclassification appears to be a matter of improving clarity, not to remedy any substantive error or impropriety. [38] It is also notable that the Plaintiff had previously signed off on earlier audited financial statements in which the former aircraft (Falcon 2000LXS) was similarly classified under “Plant, Machinery and Equipment” without objection. [39] Therefore, her current challenge to the same treatment applied to the Aircraft (Falcon 7X) is inconsistent and undermines the credibility of her complaint. The Defendants rightly characterise this as approbating and reprobating. In connection to this, the Court of Appeal in Cheah Theam Kheng v. City Centre Sdn Bhd (In Liquidation) & Other Appeals [2012] 2 CLJ 16 held as follows: S/N MjG5xpugCUilKe30hiIsiA Page 10 of 13 “[105] We categorically say that the liquidator cannot blow hot and cold to suit him whenever he feels like it. He cannot approbate and reprobate in the same breath. On the one hand, he claims that the High Court order dated 26 July 2001 overrides or displaces a statute which render the said order invalid and yet he has the audacity to continue to act as a liquidator by virtue of the said order. In the words of Sir Nicolas Browne-Wilkinson VC in Express Newspapers Plc v. News (UK) Ltd And Others [199013 All ER 376, at pp. 383 to 384: There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance.” (own emphasis added) [40] Furthermore, the independent accountant’s report from GTC Consulting Sdn Bhd, relied on by the Plaintiff, is expressly stated to be a preliminary desktop review, containing material qualifications and caveats. It does not conclusively establish any wrongdoing. As the report itself acknowledges, the evidence was insufficient to draw firm conclusions and several key issues remained open. [41] Taken together, these factors reinforce the view that the Plaintiff has not demonstrated any irregularity or impropriety in the accounting treatment that would warrant the grant of leave for a derivative action. E] CONCLUSION [42] The Plaintiff has failed to satisfy the requirements under Section 348(4) of CA 2016: i) She has not demonstrated that she is acting in good faith, as there are indications that the application may be motivated by personal disputes rather than genuine concern for corporate interests; S/N MjG5xpugCUilKe30hiIsiA Page 11 of 13 ii) It does not appear prima facie to be in the best interest of the 1st Defendant for leave to be granted to commence a derivative action on behalf of the 1st Defendant against the 2nd Defendant. The commercial justification for the Aircraft acquisition has been established, and the proposed litigation would not only be disruptive and costly, but more importantly, unnecessary, as the Plaintiff has failed to identify any specific cause of action that the 1st Defendant has against the 2nd Defendant, or to demonstrate what benefit the 1st Defendant would derive from pursuing the litigation. [43] Furthermore, SCB, as the sole shareholder of the 1st Defendant, had explicitly approved the acquisition. In the context of a wholly-owned subsidiary, the directors of the 1st Defendant should give effect to the wishes of its parent company unless there are compelling reasons not to do so, for example, where the proposed act would be unlawful, and no such reasons exist in this case. [44] Accordingly, this Application is dismissed with costs of RM15,000/- in favour of the Defendants. Dated this 22nd day of May, 2025 -SGD- (WAN MUHAMMAD AMIN BIN WAN YAHYA) Judge High Court of Malaya, Kuala Lumpur (Commercial Division (NCC 3)) S/N MjG5xpugCUilKe30hiIsiA Page 12 of 13 COUNSEL FOR THE PLAINTIFF Rishwant Singh (Mohd Wafiy bin Azman, Wardah Yumna binti Yunus and Nur Fathin Farrisya binti Md Noor together with him) Messrs Azmi & Associates Suite 6.03, Tingkat 6, Menara Keck Seng, 203 Jalan Bukit Bintang, 55100 Kuala Lumpur Tel: 03-21185070 Emel: general@azmilaw.com COUNSEL FOR THE DEFENDANTS Raja Singam Gothandapani (Nik Azila Shuhada, Tong Wei Hang, Ong Tze Xian, Karu Ashwin A/L Karu Ramesh Kumar (pupil-in-chambers) and Muhammad Sirhan Sidqi bin Abdul Aziz (pupil-in-chambers) together with him) Messrs Shearn Delamore & Co. Tingkat 7, Wisma Hamzah-Kwong Hing, No. 1, Leboh Ampang, 50100 Kuala Lumpur Tel: 03-20272610 Emel: info@shearndelamore.com LEGISLATION / RULES CITED Companies Act 2016 Section 20 Section 211 Section 344 Sections 347(1) and (2) Section 348(4) S/N MjG5xpugCUilKe30hiIsiA Page 13 of 13