Chen, Ya-Li v Chong Shu Wen (WA-24NCC-687-12/2025)

CHONG SHU WEN (NO. K/P: 840716-05-5050)

STEP UP PROPERTY SDN. BHD. [NO. SYARIKAT: 201901023142 (1332471-X)] ... DEFENDANTS S/N I1wcqhC2rkKb8L9hb5iSNw GROUNDS OF JUDGMENT A. INTRODUCTION

The Plaintiff, Chen, Ya-Li ("the Plaintiff"), brings this application in two capacities: first, in her personal capacity as a registered 49% minority shareholder and director of the Second Defendant, Step Up Property Sdn. Bhd. ("D2"); and second, as the duly appointed executor of the estate of her late husband, Chou, Hao-Pin ("the Deceased"). The First Defendant, Chong Shu Wen ("D1"), holds 51% of the shares in D2 and serves as a director of D2. D1 is additionally a director of JL New Development City (Melaka) Sdn. Bhd. ("JL New Development"), the vendor of a property that forms the subject matter of this dispute.

By Originating Summons dated 2 December 2025 (Enclosure 1), the Plaintiff applies to this Court pursuant to Sections 347, 348, and 350 of the Companies Act 2016 ("CA 2016") for leave to bring, maintain, and have sole conduct of a derivative action in the name of and on behalf of D2. The intended defendants in the proposed writ action are D1 and JL New Development. The Plaintiff seeks the following procedural orders in Enclosure 1:

Leave to initiate, maintain, and have sole authority and control over the intended writ action on behalf of D2, including any interlocutory applications and appeals arising therefrom;

An order directing D2, the intended defendants, and their respective agents to disclose all relevant information and documents to the Plaintiff for use in the proceedings; and

An order that the intended defendants indemnify the Plaintiff for all costs, expenses, disbursements, taxes, and legal fees incurred in bringing the present application and the intended writ action.

In the intended writ action, the Plaintiff seeks to recover, on D2's behalf, the following financial reliefs arising from alleged fraud and material breaches of a Sale and Purchase Agreement dated 17 April 2019 ("the SPA") entered into between D2 and JL New Development for the acquisition of a property at Casa Del Rio Residences, Melaka ("the Property"):

A refund of the entire purchase price of RM1,989,400.00;

Interest of approximately RM266,602.08 for breach of clause 3 of the SPA;

Liquidated Ascertained Damages ("LAD") of approximately RM1,027,974.58 for JL New S/N I1wcqhC2rkKb8L9hb5iSNw Development's failure to deliver vacant possession within the time stipulated under clause 6 of the SPA; and

Compensation for fines, late-stamping penalties, and increased legal fees imposed on D2 arising from D1's unilateral instruction to stamp the SPA and Deed of Assignment years after the transaction.

Having considered the affidavit evidence, the written submissions of the parties, and the oral arguments presented, this Court dismisses Enclosure 1 in its entirety with costs. The reasons follow.

On 17 April 2019, D2 entered into the SPA with JL New Development to acquire the Property for the purchase price of RM1,989,400.00. The deceased paid the purchase price, together with legal fees and stamp duty, to JVV Investment Holding Ltd. Notwithstanding full payment, neither the legal title to the Property nor vacant possession thereof was immediately transferred to D2.

D1 asserts that the delay in stamping the SPA and executing the Deed of Assignment was the result of an informal arrangement intended to facilitate a potential direct resale of the Property to a third-S/N I1wcqhC2rkKb8L9hb5iSNw party buyer, so as to avoid a duplication of stamp duty obligations. This arrangement, if it existed as described, was one in which D2's own directors acquiesced. This assertion is not rebutted by any contemporaneous documentary evidence adduced by the Plaintiff.

In early 2025, D1 arranged for a proposed resale of the Property to Paradise Town Sdn. Bhd. at RM2,000,000.00, which would have yielded a modest profit for D2. The Plaintiff declined to execute the Deed of Revocation required to complete the resale. The sale and purchase agreement with Paradise Town was never executed. No transaction was completed and no actual loss accrued to D2 as a result.

The Plaintiff subsequently accused D1 and JL New Development of fraud and breach of the SPA for failing to deliver the Property and its title to D2. Following the commencement of the present suit in December 2025, D1 instructed solicitors to proceed with the stamping of the SPA and the execution and registration of the Deed of Assignment. D2 was duly registered as the legal owner of the Property in January 2026.

It is further in evidence, and not materially contested, that since September 2019 the Property has been tenanted. Rental income derived from the Property has throughout this period been received personally by the Plaintiff and her sister-in-law and has not been S/N I1wcqhC2rkKb8L9hb5iSNw remitted to or recorded as a receipt of D2. [Note for issuance: The entity through which rental was channelled is described in the evidence variously as "JVV Investment Holding Ltd" and "JVV International Sdn. Bhd.". The precise identity of and relationship between these entities requires verification before this judgment is issued.]

The Plaintiff contends that D1 and JL New Development committed fraud and breached the SPA by failing to deliver the Property and legal title to D2 for nearly seven years from 2019, despite full payment of the purchase price of RM1,989,400.00. The Plaintiff further asserts that D2's ability to take legal action has been entirely paralysed by D1's conflict of interest: D1 serves as a director of both D2 and JL New Development, and has accordingly declined to authorise any action against the defaulting vendor. The Plaintiff additionally contends that D1's unilateral instruction to stamp the SPA and Deed of Assignment was made without board authorisation and has caused D2 to incur fines, late-stamping penalties, and increased legal costs.

D1 opposes the application on two grounds. First, D1 submits that the Plaintiff is not acting in good faith, her true motivation being a private dispute with D1 rather than any genuine concern for D2's welfare. Second, D1 submits that granting leave is not prima facie in D2's best interest, as D2 is now the registered legal owner of the S/N I1wcqhC2rkKb8L9hb5iSNw Property and the proposed derivative action would expose D2 to substantial costs and litigation risk without commensurate benefit.

The following issues arise for determination:

Whether the Plaintiff has standing as a "complainant" within the meaning of Section 345 of the CA 2016 to bring this application;

(ii) Whether the Plaintiff is acting in good faith within the meaning of Section 348(4) (a) of the CA 2016; and

(iii) Whether it appears prima facie to be in the best interest of D2 that leave be granted, within the meaning of Section 348(4) (b) of the CA 2016. E. PRINCIPLES OF LAW

The framework governing derivative actions is set out in Part IV, Division 5 of the CA 2016. This Court sets out the relevant provisions and the applicable authorities below.

Section 345 of the CA 2016 defines a "complainant" to include, among others, a member of a company. A "member" under Section 2 S/N I1wcqhC2rkKb8L9hb5iSNw of the CA 2016 is a person entered in a company's register of members as the holder of shares in that company. The Plaintiff is a registered 49% shareholder of D2 and accordingly qualifies as a complainant in her personal capacity. As regards her additional capacity as executor of the Deceased's estate, the evidence does not establish that the Deceased held shares in D2 in his own name. The executor capacity is not relied upon as an independent basis for standing, and it is unnecessary for this Court to decide it.

Section 347(1) of the CA 2016 provides as follows: "A complainant may apply to the Court for leave to bring proceedings in the name of, and on behalf of, a company or intervene in proceedings to which the company is a party for the purpose of prosecuting, defending or discontinuing the proceedings on behalf of the company."

Section 348(4) of the CA 2016, which prescribes the threshold test for the grant of leave, provides as follows: "In deciding whether to grant leave under this section, the Court shall take into account — (a) whether the complainant is acting in good faith; and (b) whether it appears prima facie to be in the best interest of the company that leave be granted."

The burden of establishing both limbs rests on the applicant. The applicable standard is the balance of probabilities. In Miller v Minister of Pensions [1947] 2 All ER 372, Denning J (as he then was) stated that proof on a balance of probabilities requires a reasonable degree of probability, greater than mere suspicion but falling short of certainty. That standard governs this application.

On the first limb — good faith — the Court of Appeal in Celcom (M) Bhd v Mohd Shuaib Ishak 3 MLJ 636* held that the requirement of good faith demands that an applicant demonstrate an honest belief in the existence of a good cause of action and that the application is not brought for a collateral or improper purpose. Leave for a derivative action is not to be granted lightly. * The year of this decision requires verification before this judgment is issued. The citation is retained as it appears in the material placed before this Court.

On the second limb — best interest of the company — this Court is not required at this stage to conduct a detailed examination of the merits of the proposed action. The question is whether, having regard to all the circumstances, the prosecution of the proposed action would benefit the company and advance its corporate interests, rather than subject it to unnecessary costs, disruption, and risk. Where the ordinary corporate governance mechanisms available to the applicant remain unutilised, the Court will be slow to find that resort to a derivative action is in the company's best interest.

Section 350 of the CA 2016 empowers this Court, upon granting leave, to make such orders as it thinks fit regulating the conduct of the proceedings, including orders conferring sole conduct of the action on the complainant. As leave is refused in this matter, Section 350 does not arise for consideration and this Court makes no order thereunder. F. ANALYSIS AND FINDINGS Issue (i): Standing 21. This Court finds that the Plaintiff has standing as a complainant under Section 345 of the CA 2016 in her personal capacity as a registered 49% shareholder of D2. Standing is not in issue between the parties, and this Court proceeds accordingly. The Plaintiff's additional capacity as executor of the deceased's estate does not require decision and this Court declines to express a view on it. Issue (ii): Good Faith — Section 348(4) (a)

This Court finds, on the balance of probabilities,that the Plaintiff is acting in good faith within the meaning of Section 348(4) (a) of the CA 2016. As a 49% shareholder and director of D2, the Plaintiff has a legitimate and recognised interest in the proper management of D2's assets and the enforcement of D2's legal rights. Her concern that D2 has been denied the full benefit of a transaction for which full payment was made — and that the controlling director has, by reason of his dual directorship in both D2 and the defaulting vendor, declined S/N I1wcqhC2rkKb8L9hb5iSNw to authorise any legal recourse — is an honest concern that any reasonable director and shareholder in her position might entertain. This Court accepts that the Plaintiff holds an honest belief in the existence of a cause of action on D2's behalf and that her application is prompted, at least in substantial part, by that belief.

D1 relies on the fact that the Plaintiff and her sister-in-law have personally received rental income from the Property since September 2019, which income was not remitted to D2's account, as evidence of collateral purpose and bad faith. This Court does not accept that submission for the purposes of the good faith inquiry. Whether the Plaintiff ought to have accounted to D2 for rental receipts is a separate matter of corporate governance — it is a question of the Plaintiff's duties as a director of D2, and D2 has its own internal remedies to pursue that question if it sees fit. That matter does not, in this Court's assessment, negate the Plaintiff's honest belief in D2's underlying cause of action against JL New Development and D1. Furthermore, this Court observes that the Plaintiff, as a beneficial owner of 49% of D2 and a person who has throughout this period derived personal use and rental benefit from the Property, may herself be said to have already obtained a measure of return on the original investment. That observation does not defeat good faith, but it bears on the question of best interest, to which this Court now turns.

This Court accordingly finds that the Plaintiff satisfies the first limb of Section 348(4) (a) of the CA 2016. S/N I1wcqhC2rkKb8L9hb5iSNw Issue (iii): Best Interest of the Company — Section 348(4) (b)

Notwithstanding this Court's finding on good faith, the application must fail on the second limb. This Court is not satisfied, on the balance of probabilities, that it is prima facie in the best interest of D2 that leave be granted. This Court's reasons are as follows.

First, D2 has not, on the evidence before this Court, suffered any demonstrated monetary loss. The Property — for which the full purchase price of RM1,989,400.00 was paid — is now duly registered in D2's name. The transfer was completed in January 2026. D2 accordingly holds the very asset that it contracted to acquire. In these circumstances, the principal head of relief sought in the intended action, namely a full refund of the purchase price, has no subsisting basis. D2 cannot simultaneously hold the Property as its registered owner and seek to recover the purchase price as though the transaction had wholly failed. The primary substratum of the proposed action has been removed by subsequent events.

Second, even if the remaining financial claims — LAD of approximately RM1,027,974.58, interest of approximately RM266,602.08, and the late-stamping penalty claim — technically subsist in law, that alone does not satisfy the best interest threshold. The question is whether it is in D2's best interest to pursue them through the mechanism of a derivative action at this juncture. This Court is of the view that it is not, for two reasons.

As regards the LAD and interest claims, the prospect of recovery is materially uncertain. The delay in the delivery of vacant possession and in the stamping of the SPA arose, at least in part, from an informal arrangement entered into by D2's own directors, including D1, whereby the SPA was deliberately left unstamped to preserve the option of a direct resale. D2 was therefore not an innocent party to the delay. In any contested claim for LAD, JL New Development would be entitled to rely on that arrangement as a defence — whether framed as a variation of the delivery obligation, a waiver of the stipulated timeline, or an estoppel by convention arising from the mutual conduct of the parties. Such defences have a prima facie basis on the facts and would render the outcome of any litigation uncertain. To embroil D2 in complex and costly litigation for uncertain returns is not in D2's best interest.

As regards the late-stamping penalty claim against D1 personally, this Court is similarly unpersuaded. Whatever the procedural regularity of D1's instruction to stamp the SPA and Deed of Assignment, its consequence was to perfect D2's ownership of the Property — the very outcome that the Plaintiff herself sought. D2 is now a registered proprietor with a secured asset. It is difficult, on these facts, to characterise the act of registration as having caused D2 actionable loss. This head of claim discloses no prima facie viable cause of action sufficient to justify the grant of leave.

Third, and independently, the derivative action is a remedy of last resort. It is designed for circumstances where the company is wholly unable, by reason of the wrongdoer's control over it, to pursue its own claim through any available internal mechanism. It is not designed to be the first resort of a dissatisfied minority shareholder who has not first attempted to resolve the matter through the company's own governance processes. In this case, the Plaintiff, as a director of D2, is not without recourse within D2's corporate structure. Section 311(3) of the CA 2016 entitles a director to call a board meeting. The Plaintiff has the standing and the right to convene a board meeting of D2, to place the question of whether D2 should pursue legal action against JL New Development squarely before the board, and to compel D1 to declare and manage her conflict of interest in accordance with D2's constitution and the CA 2016.

The evidence before this Court does not disclose that the Plaintiff has taken any step to convene such a board meeting or to formally place the matter before D2's board for collective decision prior to commencing the present application. In the absence of any attempt to utilise the ordinary governance mechanisms available to her as a director, the Plaintiff has not demonstrated that the derivative action — with all the cost and disruption it entails for D2 — is the appropriate and necessary remedy at this stage. A company's resources are not to be directed towards litigation simply because one of its directors has formed the view that a claim exists. The proper starting point is the board, not the courts.

This Court further observes, by way of observation only and not forming any part of this Court's ratio decidendi, that the relationship between the parties as co-directors and shareholders of D2 involves a range of ongoing internal matters — including the management and accounting of rental receipts from the Property, and the question of whether and how D2 should pursue any claims arising from the SPA — which are, by their nature, matters of internal corporate governance. This Court makes no adverse observation against either party in that regard. The point is simply this: where the disputes between a company’s directors are as intertwined with the company’s internal affairs as they are in this case, the boardroom is the proper first forum for their resolution. The derivative action is a measure of last resort, not a substitute for the governance processes that the CA 2016 places at the disposal of every director. That observation fortifies, without being necessary to, the conclusions reached on the best interest limb above.

This Court accordingly finds that the Plaintiff fails to satisfy the second limb of Section 348(4)(b) of the CA 2016.

For the reasons set out above, while this Court accepts that the Plaintiff acts in good faith as a shareholder and director genuinely concerned with the enforcement of D2's rights, the application must nonetheless fail. D2 has not suffered any demonstrated monetary S/N I1wcqhC2rkKb8L9hb5iSNw loss — the Property is now registered in D2's name and the primary basis of the proposed action has been superseded by events. The remaining claims face material uncertainty of recovery by reason of D2's own directors' participation in the informal arrangement. The Plaintiff has not exhausted the ordinary corporate governance mechanisms available to her as a director of D2 before resorting to this Court. And the late-stamping penalty claim discloses no prima facie actionable loss to D2. The application is accordingly dismissed on the second limb of Section 348(4) of the CA 2016.

This Court now addresses each prayer in Enclosure 1 individually.

Prayer (a) — Leave to initiate, maintain, and have sole conduct of a derivative action on behalf of D2: This prayer is dismissed. The Plaintiff has failed to satisfy the second limb of Section 348(4) of the

Prayer (b) — Disclosure order against D2, the intended defendants, and their agents: This prayer is dismissed. It is consequential upon and ancillary to the grant of leave. As leave is refused, no basis remains on which this Court could compel disclosure by parties who are not before this Court as parties to these proceedings.

Prayer (c) — Indemnity order against the intended defendants for all costs, expenses, disbursements, and legal fees: This prayer is dismissed. Sections 347, 348, and 350 of the CA 2016 do not provide for an order requiring intended defendants — who are not parties to the present application — to indemnify an applicant for the costs of the leave application. The proper statutory basis for any costs indemnity in favour of a derivative action applicant lies in Section 348(8) of the CA 2016, which empowers this Court to order that the company indemnify the complainant. No such order arises here as leave is refused. The prayer as framed is additionally misconceived in directing the indemnity obligation at the intended defendants rather than the company on whose behalf the proposed action would be brought.

The Originating Summons in Enclosure 1 is accordingly dismissed in its entirety.

The Plaintiff shall pay the First Defendant's costs of this application, assessed on a party-and-party basis and fixed at RM8,000.00, to be paid within fourteen (14) days from the date of this order. S/N I1wcqhC2rkKb8L9hb5iSNw

This Court records its appreciation to learned counsel for both parties for the assistance rendered through their written submissions and oral arguments. Dated 13hb April 2026 (MOHAMAD REDZUAN BIN IDRUS) JUDICIAL COMMISSIONER KUALA LUMPUR HIGH COURT NCC 5 WILAYAH PERSEKUTUAN KUALA LUMPUR Plaintiff’s Counsel : Cheah Ben Jie (Chris Lim Su Heng Advocates & Solicitors) Defendant’s Counsel : Nur Qamarina Aqilah binti Roslan (Malis & Khoo Advocates & Solicitors) The Second Defendant did not appear and was not represented S/N I1wcqhC2rkKb8L9hb5iSNw List Of Cases Referred To:  Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636  Miller v Minister of Pensions [1947] 2 All ER 372  Wako Merchant Bank (Singapore) Ltd v Lim Lean Heng & Ors [2000] 3 MLJ 401 Legislation Referred To:  Companies Act 2016 — Sections 2, 311(3), 345, 347, 348(4), 348(8), 350