Chai Kin Loong v LTK Foresta Sdn Bhd (CA-24NCC-5-06/2025)

LTK FORESTA SDN. BHD. (Company No.: 201801045883 (1307915-U))

WONG WOON THEN (NRIC No.: 660801-06-5423)

CHAI WEI KONG (NRIC No.:640505-06-5455) ... DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] This is the Plaintiff's application pursuant to sections 347 and 348 of the Companies Act 2016 ("CA 2016") for leave to commence a derivative action on behalf of the 1st Defendant company against the intended defendants. [2] The Plaintiff is a director and the single largest shareholder of the 1st Defendant with a shareholding of 40%. [3] The gravamen of the Plaintiff's complaint concerns payments amounting to RM2,003,179.84 made by the 1st Defendant to Golden Blink Sdn Bhd ("Golden Blink”), a company controlled by the 2nd Defendant and his family members. [4] The Plaintiff contends that the payments were made pursuant to a subsequent agreement dated 15.09.2023 ("the 3rd Contract"), which was allegedly entered into without the Plaintiff's knowledge or approval and in breach of the fiduciary duties owed by the 2nd and 3rd Defendants to the 1st Defendant. [5] The Defendants oppose the application principally on the grounds that: i. the Plaintiff is acting in bad faith; ii. the intended action is not in the best interest of the company; iii. the Plaintiff ought to have exhausted internal mechanisms of the company; iv. no draft statement of claim was exhibited; and v. the reliefs sought are overly wide. vi. Having considered the affidavits, submissions and authorities of the parties, I allow the Plaintiff's application. THE APPLICABLE PRINCIPLES [6] Sections 347 and 348 CA 2016 govern derivative proceedings. Under section 348(4), the Court shall consider whether: i. the complainant is acting in good faith; and ii. it appears prima facie to be in the best interest of the company that leave be granted. [7] The applicable principles are well established. In Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636, the Court of Appeal held that the requirement of good faith entails: i. an honest belief in the cause of action; and ii. absence of collateral purpose. [8] In Tang Kwor Ham v Pengurusan Danaharta Nasional Bhd [2006] 5 MLJ 60, the Court of Appeal emphasised that the Court should not conduct a mini trial at the leave stage and need only determine whether there exists an arguable case warranting further investigation. [9] Similarly, in Salina bt Mohamad Sukor v MVD International Sdn Bhd [2019] 9 MLJ 762, it was held that leave ought to be granted where there exists a serious question to be tried. WHETHER THE PLAINTIFF ACTED IN GOOD FAITH [10] I am satisfied that the Plaintiff has satisfied the good faith requirement under section 348(4)(a). [11] The intended action concerns the recovery of RM2,003,179.84 allegedly paid improperly by the 1st Defendant to Golden Blink. [12] The Plaintiff alleges, inter alia: i. that the 3rd Contract was entered into without proper corporate approval; ii. that the payment structure was materially altered to favour Golden Blink; iii. that the payments were made notwithstanding the absence of fulfilment of the contractual condition precedent; iv. and that the payments were effected for the benefit of entities controlled by the 2nd Defendant and his family members. [13] These are serious allegations involving potential breaches of fiduciary duty and related-party transactions. [14] Importantly, the Defendants did not substantively address several critical allegations raised by the Plaintiff, particularly: i. the alleged absence of termination of the Logging Consignments; ii. the alleged non-fulfilment of clause 3 of the 3rd Contract; and iii. the absence of evidence demonstrating achievement of contractual milestones before payment. [15] Instead, the Defendants focused primarily on allegations that the Plaintiff was dissatisfied with the management of the company. [16] In my judgment, dissatisfaction with management alone does not establish bad faith. [17] The Defendants further alleged that the Plaintiff sought to "harass" or "take revenge" against the 2nd and 3rd Defendants. However, no evidence was adduced to substantiate these allegations. [18] I accept the Plaintiff's submission that the intended action is directed towards recovery of company funds allegedly dissipated through improper transactions. Prima facie, such objective aligns with the interests of the company. WHETHER THE APPLICATION IS PRIMA FACIE IN THE BEST INTEREST OF THE COMPANY [19] I also find that the Plaintiff has satisfied section 348(4)(b). The intended derivative action seeks recovery of substantial sums allegedly belonging to the company. [20] The contemporaneous documents exhibited by the Plaintiff, including the minutes of meetings dated 16.10.2024 and 10.12.2024, prima facie support the Plaintiff's contention that he was seeking information regarding the 3rd Contract and payments made to Golden Blink. [21] The Defendants argued that the Plaintiff was aware of Golden Blink's involvement since 2020. While that may be so, the Plaintiff's complaint is not merely the existence of Golden Blink or the 2nd Defendant's interest therein. Rather, the complaint concerns: i. the execution of the 3rd Contract; ii. the altered payment terms; and iii. the alleged diversion of company funds. [22] Further, the Defendants' argument that the Plaintiff ought to have first exhausted internal company remedies is unpersuasive. [23] Sections 347 and 348 CA 2016 do not impose a mandatory requirement that a complainant convene a members' meeting or remove directors before commencing derivative proceedings. [24] In any event, the Plaintiff had already issued the statutory notice pursuant to section 348, thereby affording the company and directors an opportunity to take action. The Defendants declined to do so. WHETHER A DRAFT STATEMENT OF CLAIM IS MANDATORY [25] The Defendants argued that the absence of a draft statement of claim is fatal. I do not agree. [26] As correctly submitted by the Plaintiff, there is no express statutory requirement under sections 347 or 348 CA 2016 mandating the filing of a draft statement of claim. [27] I respectfully agree with the reasoning in Globaland Property Development Sdn Bhd v Maiasuka Sdn Bhd [2020] MLJU 2033, that the statutory requirements are confined to those expressly stated in section 348. [28] In the present case, the Plaintiff has sufficiently particularised the intended causes of action in the supporting affidavit. ANCILLARY RELIEFS [29] The Defendants further objected to the breadth of the reliefs sought, particularly those relating to disclosure and inspection of documents. [30] Section 350 CA 2016 confers broad powers upon the Court to make consequential and ancillary orders necessary to facilitate derivative proceedings, including orders permitting access to company books and records. [31] I agree with the Plaintiff that such powers are sufficiently wide to support the reliefs sought, subject always to appropriate supervision by the Court during the conduct of the proceedings. CONCLUSION [32] For the reasons stated above, I find that: i. the Plaintiff is acting in good faith; ii. the intended action is prima facie in the best interest of the 1st Defendant; and iii. the Plaintiff has satisfied the requirements under sections 347 and 348 CA 2016. Accordingly, Enclosure 5 is allowed with costs of RM10,000.00 subject to allocatur. Dated: 26 June 2026 (SAMRY BIN MASRI) Judicial Commissioner High Court Kuantan Counsel for the Plaintiff : Tetuan Thangaraj & Associates Peguambela & Peguamcara Unit D1-3A-13, Blok D1 Solaris Dutamas No. 1, Jalan Dutamas Hartamas Height 50480 Kuala Lumpur Counsel for the : Tetuan Jacob Goldie S.S Chew Defendants Peguambela & Peguamcara B48, Level , Lorong Tun Ismail 8 Sri Dagangan II 25000 Kuantan Pahang Darul Makmur