Khon Sze Hooi v Ipay Solution Sdn Bhd (WA-24NCC-573-10/2025)

IPAY SOLUTION SDN BHD [Registration No.: 201601016836 (1187767-H)]

IYLIA DIYANA BINTI ABDUL HISHAM (IC No.: 920904-14-5600) … DEFENDANTS GROUNDS OF JUDGMENT A.INTRODUCTION [1] This is an application by the Plaintiff, Miss Khon Sze Hooi, by way of an Originating Summons, for leave to bring a statutory derivative action under section 347 of the Companies Act 2016 (“the CA S/N llEIyEgYfke17LXnN5pGzg 2016”). The leave sought is leave to sue, in the name of the 1st Defendant company, iPay Solution Sdn Bhd (“iPay”), its co-director and majority shareholder, the 2nd Defendant, Madam Iylia Diyana binti Abdul Hisham. [2] Having read the cause papers and the affidavits filed, and having heard learned counsel on both sides, I allowed the application with costs on 18 May 2026. My reasons follow. B.THE PARTIES AND THE DISPUTE IN OUTLINE [3] iPay is a small private company in the business of providing smart payment terminals and system integration solutions. From its incorporation it has had only two directors and two shareholders — the Plaintiff, Miss Khon, who holds 30% of its issued shares, and the 2nd Defendant, Madam Iylia, who holds the remaining 70%. [4] What appears once to have been a working partnership has, by mid-2025, fallen into impasse. The Plaintiff says that from 16 June S/N llEIyEgYfke17LXnN5pGzg 2025 onwards the 2nd Defendant has ceased to communicate with her altogether. The company, on his account, is in deadlock. But Miss Khon’s complaint goes further than mere deadlock. He says that while in office Madam Iylia has breached her duties as a director in several significant respects, to iPay’s detriment. Because she also controls the majority of the votes, the company’s ordinary organs — the board and the members in general meeting — cannot be used to call her to account. Hence this application. C.THE PLAINTIFF’S CASE [5] The Plaintiff’s complaint, distilled, is that the 2nd Defendant has, in her capacity as a director of iPay: a) failed to remit the company’s EIS and PERKESO contributions for the period February 2021 to June 2022, exposing iPay to statutory penalties and consequential liabilities; b) unilaterally imposed an unauthorised “Increased Rate” on Bank Kerjasama Rakyat Malaysia Berhad (“BKR”), a commercially significant counterpart, in disregard of iPay’s contractual position; S/N llEIyEgYfke17LXnN5pGzg c) abandoned her management responsibilities from 16 June 2025, leaving the company without meaningful executive oversight; and d) maintained an outstanding personal debt of RM2,600 owed to iPay, which she has neither acknowledged nor settled. [6] In short, Miss Khon says that the company has good causes of action against Madam Iylia which, for structural reasons, it cannot itself pursue. Leave under section 347 of the CA 2016 is therefore necessary. D.THE 2ND DEFENDANT’S POSITION [7] Madam Iylia’s resistance to the application rests, in substance, on a single proposition. She says that although she was registered as a director and held 70% of iPay’s shares, she was in truth no more than a “dormant director” — one who did not actively participate in the running of the company and who was never assigned operational responsibilities. She submits, in consequence, that she ought not to be visited with the statutory and fiduciary duties that the CA 2016 imposes on directors. S/N llEIyEgYfke17LXnN5pGzg [8] I will return to that defence in due course. It is enough at this stage to record that the law has, for some time, set its face against the suggestion that a person who has accepted appointment to the board and remains on the register can simply shrug off the duties of that office. E.THE ISSUES [9] The application calls for the determination of four questions: i. whether the Plaintiff has complied with the procedural prerequisites under sections 347 and 348 of the CA 2016; ii. whether the Plaintiff is acting in good faith within the meaning of section 350(1) (a); iii. whether it appears, prima facie, to be in the best interest of iPay that leave be granted under section 350(1)(b); and iv. whether the “dormant director” defence raised by the 2nd Defendant affords any answer. S/N llEIyEgYfke17LXnN5pGzg F.THE LEGAL FRAMEWORK [10] The statutory derivative action under the CA 2016 is governed by sections 345 to 350. Section 345 identifies the persons entitled to bring such an action — the “complainants” — and that term plainly includes a member of the company. Sections 347 and 348 prescribe the procedural conditions, the most important of which is the requirement that 30 days’ written notice be given to the directors of the company before the application is filed. [11] The substantive threshold for leave is set by section 350(1). The Court must be satisfied of two things: that the complainant is acting in good faith; and that it appears, prima facie, to be in the best interest of the company that the action be brought. [12] On the “good faith” limb, the decision of the Court of Appeal in Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636 remains authoritative. There are two questions to ask: first, whether the complainant honestly believes that there is a good cause of action with a reasonable prospect of success; and second, whether the application is brought for a collateral or ulterior purpose. The procedural vehicle for the application itself is Order 88 Rule 2 of the Rules of Court 2012. S/N llEIyEgYfke17LXnN5pGzg

(i) Procedural compliance [13] I can deal with the first issue shortly. The 30 days’ notice required by sections 347 and 348 of the CA 2016 was duly given to the directors of iPay before this Originating Summons was filed. The application itself has been properly filed under Order 88 Rule 2 of the Rules of Court 2012. I am satisfied that the Plaintiff has complied with the procedural prerequisites.

(a) The EIS and PERKESO contributions [17] The Plaintiff has produced records suggesting that no statutory contributions were remitted in respect of iPay for the period February 2021 to June 2022. During that period the 2nd Defendant was one of only two directors and was the majority shareholder. A director’s duty in this regard is not difficult to state. She must inquire, ascertain, and ensure that the company’s statutory contributions are paid. That is what the High Court held in Ravichanthiran a/l Ganesan v Percetakan Wawasan Maju Sdn Bhd & Ors [2017] 8 MLJ 450, and it is, with respect, plainly correct. The duty is reinforced by sections 213, 214 and 218 of the CA 2016, which require directors to act honestly, with reasonable care and diligence, and which prohibit the improper use of company property or position. S/N llEIyEgYfke17LXnN5pGzg [18] If, as the records suggest, the contributions were withheld or applied elsewhere, the company has a clear cause of action. The conduct may, in addition, engage wider principles — including those underlying sections 405 and 406 of the Penal Code — but I need express no concluded view on that at this leave stage. It is enough, for present purposes, that the matter is more than fit to be litigated.

(b) The unauthorised “Increased Rate” imposed on BKR [19] This complaint warrants somewhat closer examination, given the sums involved. Between 2020 and 2024, iPay entered into a series of contracts with Bank Kerjasama Rakyat Malaysia Berhad (“BKR”) for the supply, installation, and maintenance of hardware and software systems. The Third Schedule to those contracts fixed the rate for the SIM service component at RM12.00 plus 6% SST per SIM per month, on a minimum commitment of 200 SIMs over 36 months. The Plaintiff’s evidence, however, is that from September 2020 to December 2024 the rate actually billed to BKR was not the contractual RM12.00 but RM14.00 plus 6% SST — a markup of RM2.00 per SIM per month, applied without his knowledge and without authority from the company. The discrepancy came to light only when BKR itself, by letter dated 17 November 2024, wrote to iPay alleging overcharging and asking for an explanation. BKR’s own reconciliation, communicated on 4 S/N llEIyEgYfke17LXnN5pGzg December 2024, placed the total overcharge at RM298,406.20 — a sum which, in the context of a company of iPay’s size, can fairly be described as substantial. [20] Madam Iylia does not, as I read her affidavit, deny that the higher rate was applied. Her position, broadly, is twofold: that the increase was imposed to “cover network costs not provided for in the supplier agreement”; and that, in any event, the Plaintiff knew of the arrangement. For the latter proposition she relies upon a WhatsApp exchange between herself and the Plaintiff dated 28 November 2024. I make no concluded finding on either contention — both are matters for trial. I observe, however, that the chronology gives the defence a degree of difficulty even at this prima facie stage. The WhatsApp exchange of 28 November 2024 post-dates BKR’s complaint of 17 November 2024 by some eleven days; on the face of it, that conversation cannot evidence prior knowledge on Miss Khon’s part. Indeed, the Plaintiff says — and Madam Iylia has not, in her affidavit, contradicted her on this — that it was during that very conversation that she had to explain to her the purpose of the Increased Rate. That would scarcely have been necessary had he already been a party to the arrangement. [21] The commercial consequence, if the Plaintiff’s case is ultimately S/N llEIyEgYfke17LXnN5pGzg made good, is plain enough. iPay will have been placed, at its own director’s hand, in breach of its written contract with its principal client; it will have exposed itself to a claim for restitution or damages in the region of RM298,406.20; and the long-term relationship with BKR — the company’s main commercial counterpart — will have been put in serious jeopardy. These are not theoretical harms. No director acting with ordinary prudence would, in my view, have undertaken such a unilateral step without first weighing the risk against any purported commercial justification. On the materials before me, there is a prima facie case more than fit to go forward.

(c) Abandonment of management [22] The Plaintiff says, and Madam Iylia has not seriously denied, that from 16 June 2025 she ceased to communicate with her at all. She did not respond to messages, did not attend to the company’s affairs, and did not participate in any board-level decision. Whatever one’s view of the underlying breakdown, the consequence is plain: iPay has been left without effective oversight at the very level where oversight is most needed. S/N llEIyEgYfke17LXnN5pGzg

(d) The personal debt of RM2,600 [23] Madam Iylia has not disputed the existence of an outstanding personal sum of RM2,600 owed by her to iPay. The figure, taken in isolation, is modest. But it is, on the face of it, a continuing conflict of interest which — given the deadlock and her controlling stake — the ordinary corporate processes cannot resolve. [24] Taken together, these matters disclose, on a prima facie view, a body of conduct serious enough to make litigation by iPay sensible and in its interest. The sums and commercial relationships involved are not trivial. More fundamentally, the principle is significant: a director ought not to be left in office with unaddressed allegations of this kind hanging over her, where the company is structurally unable to call her to account.

Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636 (CA)

Ravichanthiran a/l Ganesan v Percetakan Wawasan Maju Sdn Bhd & Ors [2017] 8 MLJ 450 (HC)

Kuan Shin @ Kuan Nyong Hin & Ors v Ng Aik Kee & Ors [2020]

Petra Perdana Bhd v Tengku Dato’ Ibrahim Petra Tengku Indra Petra & Other Appeals [2018] 2 MLJ 177 (FC)

Companies Act 2016, sections 213, 214, 218, 345, 347, 348 and 350 2. Penal Code, sections 405 and 406

Rules of Court 2012, Order 88 Rule 2 S/N llEIyEgYfke17LXnN5pGzg