Lee Wai Ping v 1. ) Mohd Taufik Bin Kamis (WA-24NCC-453-09/2024)

MOHD TAUFIK BIN KAMIS

SERATA HIJAU SDN. BHD. (COMPANY NO.: 1076421-V) ... DEFENDANTS GROUNDS OF JUDGMENT Introduction [1] Before the court is an Originating Summons dated 19.9.2024 filed by the Plaintiff, Lee Wai Ping, seeking leave pursuant to Sections 347 and 348(1) of the Companies Act 2016 to commence derivative proceedings in the name of and on behalf of the Second Defendant, Serata Hijau Sdn. Bhd. (“the Company”), against the First Defendant, Mohd Taufik Bin Kamis. [2] In accordance with Order 7, Rule 2(2) of the Rules of Court 2012, the parties in this Originating Summons are described as “Plaintiff” and “Defendants” respectively, as this is not an ex parte originating summons. [3] In the Originating Summons, the Plaintiff’s main relief is leave to commence and control derivative proceedings in the name and on behalf of the Company against the First Defendant. [4] Having considered the Originating Summons, affidavits filed, written submissions of both parties, and after hearing oral submissions, I allow the application with costs for the reasons set out below. Background Facts [5] The Company is a company incorporated in Malaysia with the Plaintiff and the First Defendant as its only directors, each holding 50% of the issued shares. This equal shareholding and directorship arrangement has created a deadlock situation in the company's governance. [6] The First Defendant is also a director of A & T Associates Sdn. Bhd. (“A & T”), which is a separate company. Through his company Debania Sdn. Bhd., the First Defendant holds 98% of the issued share capital of A & T, making him effectively the controlling shareholder and alter ego of A & T. [7] On 18.9.2018, the Company entered into a Sale and Purchase Agreement (“the SPA”) with A & T. Under the SPA, A & T agreed to sell, and the Company agreed to buy, logs, timber, trees, and related resources from a specific logging area covering 404.70 hectares within a larger logging zone in Mukim Hulu Tembeling, Daerah Jerantut, Negeri Pahang. [8] The key terms of the SPA included: (a) A & T's agreement to exclusively allow the Company to extract and remove the resources from the logging area; (b) The consideration of RM150,000.00 (“Purchase Price”); (c) A & T's obligation under Clause 11 to obtain the necessary forestry licence at its own cost and expense; and (d) Clause 3(b) which provided that A & T covenanted not to allow any other persons or company to extract logs or trees from the logging area during the SPA's duration. [9] The Plaintiff claims that the Purchase Price was paid to A & T in accordance with the instructions of the First Defendant, and that the Company thereby obtained valid ownership of the resources within the logging area. The First Defendant disputes this payment, but the evidence shows payment vouchers acknowledged by him. [10] The Plaintiff alleges that A & T failed to allow the Company to commence operations to extract the resources from the logging area. Instead, from around 2022, A & T allowed third parties to extract resources from the area, in breach of the SPA and with the knowledge and consent of the First Defendant. [11] The First Defendant claims the SPA was terminated by A & T on 11.12.2018, but this alleged termination was done unilaterally without the knowledge or consent of the Company. The Plaintiff only discovered this alleged termination resolution when it was exhibited by the First Defendant in his affidavit in Originating Summons No. WA- 24NCC-533-09/2023 (“OS 533”) in October 2023. [12] Significantly, after the alleged termination date of 11.12.2018, the First Defendant himself signed cheques on behalf of the Company making payments to third parties for implementation of the SPA between 2019 and 2020, contradicting his claim that the SPA was terminated. [13] The Plaintiff has initiated several legal proceedings related to the SPA: (a) Civil Suit No. WA-22NCVC-297-06/2023 (“Suit 297”) against A & T, which was withdrawn with liberty to file afresh; (b) OS 533 seeking leave to commence derivative proceedings against A & T, which was granted on 29.1.2024; (c) Civil Suit No. BA-22NCVC-77-02/2024 (“Suit 77”) - the derivative action against A & T, which is currently ongoing; and (d) Civil Suit No. WA-B52NCC-519-08/2022 (“Suit 519”) concerning a separate friendly loan matter. The Plaintiff’s Originating Summons [14] The Plaintiff filed an Originating Summons dated 19.9. 2024

OS 533 concerned A & T's breach of contract, whilst this application concerns the First Defendant's breach of fiduciary duties as director of the Company. More importantly, the First Defendant was never a defendant to any substantive claim in OS 533 - he was merely a nominal respondent due to his directorship roles. [37] The Low Teck Huat case relied upon by the Plaintiff is directly applicable. In that case, the plaintiff LTH had filed a fresh suit against certain defendants for conspiracy to injure, while defending himself in a separate ongoing suit (SAHC Suit 205) involving different parties. The defendants argued that the fresh conspiracy claim should have been raised in the earlier proceeding and was therefore barred by res judicata. The High Court rejected this argument and established that where proceedings involve different parties and causes of action that were not pleaded or raised in earlier proceedings, res judicata does not apply. Specifically, the court held: “In the circumstances, I do not find that res judicata or estoppel apply including the argument that there is multiplicity of proceedings. LTH's claim for conspiracy to injure against the Defendants is an independent and separate claim, therefore it cannot be said that it ought to have been raised in the SAHC Suit 205 especially when it involves different parties and a cause of action which was not pleaded or raised by LTH in SAHC Suit 205.” [38] The court further distinguished the case from other authorities in paragraph [49], noting specifically that: a) The conspiracy issue was never raised by LTH in the earlier suit; b) Not all the parties in the earlier suit and the fresh suit were the same - none of the defendants in the fresh suit were parties to the earlier suit; and c) LTH was not claiming any relief against any of the defendants in the fresh suit within the earlier proceedings. [39] Here, the conspiracy and fiduciary duty claims against the First Defendant personally were not pleaded or adjudicated in OS 533. Indeed, they could not have been, as the First Defendant was not the target defendant in that proceeding. [40] Importantly, the First Defendant's alleged wrongdoing as director of the Company gives rise to distinct legal obligations and potential remedies separate from A & T's contractual obligations. The fact that both arise from the same factual matrix does not make them identical causes of action for res judicata purposes. The First Defendant's role in OS 533 as a nominal respondent due to his conflicted directorship position cannot preclude him from being the proper target of derivative proceedings for his own breaches of duty. [41] The timing is also significant. The Plaintiff only discovered the full extent of the First Defendant's conspiracy when he voluntarily disclosed and exhibited the alleged termination resolution for the first time in his affidavit filed in OS 533 on 30.10.2023. This disclosure was made in his affidavit in reply, where he annexed a purported board resolution of A & T dated 11.12.2018 that claimed to terminate the SPA. Prior to this crucial disclosure in the October 2023 affidavit, the Plaintiff was unaware that the First Defendant and A & T had purportedly terminated the SPA unilaterally in December 2018. [42] Significantly, while the First Defendant had made a general assertion in his earlier affidavit filed on 27.6.2023 that he and A & T had “agreed to terminate the SPA” around November 2018, he had not disclosed or exhibited the actual termination resolution document itself at that time. It was only through the October 2023 affidavit that the First Defendant produced the physical evidence of this alleged termination by way of the board resolution, transforming what had been a mere assertion into documentary evidence of the conspiracy. [43] This revelation of the termination resolution demonstrated that the First Defendant had been acting in concert with A & T to defeat the Company's rights under the SPA whilst concealing this material fact from the Plaintiff and the Company for nearly five years. The belated disclosure of this critical document revealed the true nature and extent of the conspiracy between the First Defendant and A & T, giving rise to fresh and distinct causes of action for breach of fiduciary duty and conspiracy that were entirely separate from the contractual breach claims against A & T alone. This fresh documentary evidence revealed new causes of action that could not have been pursued earlier and which were entirely outside the scope of OS 533, where the First Defendant's personal conduct as director was not in issue and where he was merely a nominal respondent due to his conflicted directorship position. [44] Furthermore, the court in OS 533 did not make any definitive findings regarding the First Defendant's conduct as director because such findings were not sought and the First Defendant was not the target of any claim. The order was limited to permitting proceedings against A & T, without prejudice to other potential causes of action against other parties, including the First Defendant in his personal capacity as director. Whether the Application Constitutes a Multiplicity of Proceedings [45] The Plaintiff argues there is no multiplicity of proceedings because the various suits involve different defendants and different causes of action. Suits 297, OS 533, and Suit 77 concern A & T's contractual breaches, whilst this application concerns the First Defendant's fiduciary breaches. Suit 519 involves an entirely separate loan matter. [46] The First Defendant contends that multiple proceedings based on the same factual matrix constitute abuse of process, waste judicial resources, and risk inconsistent judgments. [47] The doctrine against multiplicity of proceedings exists to prevent abuse of process and conflicting judgments. However, the mere fact that proceedings arise from the same factual background does not automatically constitute impermissible multiplicity where they involve different legal relationships and remedies. [48] In this case, the different proceedings serve distinct purposes and involve different parties, legal relationships and causes of action: a) Suit 297 was originally filed against A & T for breach and default of the SPA, but was subsequently withdrawn with liberty to file afresh. b) OS 533 was an application for leave to commence derivative proceedings specifically against A & T for their breach and default of the SPA. This originating summons was allowed on 29.1.2024, permitting the Plaintiff to pursue derivative proceedings against A & T on behalf of the Company. c) Suit 77 is the derivative action commenced following the court's order in OS 533, seeking to hold A & T liable for breach of contract under the SPA. This suit is brought by the Company (through the Plaintiff as derivative plaintiff) against A & T for contractual breaches. d) Suit 519 involves an entirely separate matter concerning a friendly loan in the sum of RM562,300.00 given by the Plaintiff to the First Defendant, which the First Defendant failed to repay. This suit makes no mention of the SPA and is unrelated to the present application. [49] In contrast, this application (OS 453) seeks to hold the First Defendant personally liable for breach of fiduciary duties, fraud, conspiracy and related causes of action arising from his conduct as director of the Company. Unlike the other proceedings which target A & T for contractual breaches, this application concerns the First Defendant's personal breaches of duties owed to the Company in his capacity as director. [50] These are separate legal relationships requiring different evidence and potentially different remedies. Whilst Suits 297, OS 533 and Suit 77 concern A & T's contractual obligations under the SPA, this application addresses the First Defendant's fiduciary obligations as a director of the Company - distinct legal duties that can be breached independently of any contractual breaches by A & T. [51] In this case, the different proceedings serve distinct purposes: Suit 77 seeks to hold A & T liable for breach of contract, whilst this application seeks to hold the First Defendant liable for breach of fiduciary duties. These are separate legal relationships requiring different evidence and potentially different remedies. [52] The case of Ho Num Chon concerned petitioners who had commenced minority oppression proceedings under section 181 of the Companies Act 1965 against the respondent company, and subsequently filed a winding up petition under section 218 of the same Act based on substantially the same facts. The High Court was required to determine whether such concurrent proceedings constituted multiplicity of proceedings and an abuse of process. Mohd Nazlan JC (as he then was) held that the filing of two separate proceedings under sections 181 and 218 at about the same time and based on substantially the same facts, seeking similar relief including the winding up of the company, constituted prima facie multiplicity of proceedings and an abuse of process. The court emphasised that multiplicity becomes problematic when it involves “substantially the same facts” and seeks “similar relief” from the same parties. The court held: “I thus hold that the conduct of the petitioners in the instant case in instituting a winding up petition when it had already commenced an originating summons for minority oppression based on substantially the same facts, and seeking similar relief, to be prima facie a multiplicity of proceedings and an abuse of process. In this context, the law's abhorrence of the risk of inconsistent decisions is the basis of the rule against multiplicity; and its aversion to unnecessary actions, given the duplicity and where the conduct is not made in good faith, is the essence of the abuse of process.” [53] Here, whilst the facts overlap, the parties, legal relationships, and potential remedies are different. [54] Importantly, derivative proceedings against directors for breach of fiduciary duty serve different corporate governance purposes than contractual claims against third parties. As a matter of legal principle, derivative proceedings against directors for breach of fiduciary duty serve different corporate governance purposes than contractual claims against third parties, even when arising from the same factual matrix. [55] The risk of conflicting judgments is minimal here because the proceedings concern different legal issues. A finding that A & T breached the SPA does not preclude a finding that the First Defendant breached his fiduciary duties as director of the Company. [56] Moreover, the deadlock situation between the Plaintiff and First Defendant means that derivative proceedings may be the only mechanism available to vindicate the Company's rights against its own director. [57] I therefore find that this application does not constitute impermissible multiplicity of proceedings. Whether the Plaintiff Has Complied with Section 348(2) of the Companies Act 2016 [58] The Plaintiff argues she complied with Section 348(2) by serving notice dated 3.1.2024 on the First Defendant. She contends that as the only two directors, serving notice on the First Defendant was sufficient. The First Defendant's failure to respond constitutes admission of the allegations [59] The First Defendant submits that the 3.1.2024 letter was issued before leave was granted in OS 533 and was intended for that proceeding, not this application. He argues no proper notice was given after Suit 77 commenced [60] Section 348(2) requires that “the complainant shall give thirty days' notice in writing to the directors of his intention to apply for the leave of court under section 347.” This is indeed a mandatory requirement that must be satisfied. [61] However, the purpose of this notice requirement, as explained in Salina bt Mohamad Sukor v MVD International Sdn Bhd & Anor [2019] 9 MLJ 762 (HC), is “to give an opportunity to the directors of the company to consider, respond and accede to a request by the complainant for proceedings to be commenced in the name of the company.” [62] The letter dated 3.1.2024 served as the mandatory Section 348(2) notice under the Companies Act 2016 and represents a comprehensive communication that fully satisfied the statutory requirements for derivative proceedings. This crucial notice was served on the First Defendant at his registered address in Villa Firdaus, Lot 120, No. 35, Persiaran Cinta Alam, Country Heights, 43000 Kajang, Selangor Darul Ehsan, demonstrating proper service of process. [63] The letter clearly and unambiguously stated the Plaintiff's intention to apply for leave to commence proceedings against the First Defendant for multiple specific causes of action: “deceit, fraud, tort of conspiracy and/or breach of fiduciary duties as a director of the Company.” These are precisely the causes of action now pleaded in this application (OS 453), demonstrating clear alignment between the notice and the present proceedings. This adequately conveyed the nature of the intended derivative proceedings and fulfilled the statutory purpose of giving the directors advance notice of the complainant's intentions. [64] The notice specifically identified proceedings against the First Defendant personally for his conduct “as a director of the Company,” which corresponds exactly to the relief sought in this application. The letter contained detailed allegations that the First Defendant's “wrongful conduct and acts against the Company” had resulted in “losses and damages suffered by the Company.” [65] More specifically, the notice alleged the First Defendant's “abject failure to protect the 2nd Respondent as its director and caused the 2nd Respondent to suffer harm, losses and damages.” These allegations form the foundation of the present application for derivative proceedings against the First Defendant in his capacity as director, establishing the necessary causal link between his breach of duties and the harm suffered by the Company. [66] The notice encompassed the following key elements: a) Clear identification of the First Defendant's dual role and conflict of interest as both director of the Company and controlling shareholder (through Debania Sdn. Bhd.) of A&T; b) Specific allegations of breach of fiduciary duties in his capacity as director; c) Claims of fraudulent conduct and conspiracy to harm the Company's interests; and d) Assertions that his actions resulted in quantifiable losses and damages to the Company. [67] The First Defendant's argument about timing is overly technical and ignores the substantive purpose of the notice requirement. While the letter preceded the resolution of OS 533, it specifically concerned proceedings against the First Defendant personally for breach of fiduciary duties and conspiracy - matters that were never part of OS 533, which only sought relief against A & T for contractual breach. The notice was therefore directly relevant to this application (OS 453) rather than OS 533. [68] Crucially, the First Defendant acknowledged receipt of the notice but failed to respond. This failure to respond carries significant legal implications established by Malaysian precedent. [69] In Goh Swee Boh @ Goh Cheng Kin & Anor v Conweld Engineering Sdn Bhd [2021] CLJU 353 (HC), the High Court dealt with a section 348(2) Companies Act 2016 notice in derivative proceedings. Her Ladyship Liza Chan Sow Keng held that “the Defendant's failure to deny the Plaintiff's Demand must necessarily mean that the Defendant admits the statements therein” and referenced the Court of Appeal authority in David Wong Hon Leong v Noorazman bin Adnan [1995] 4 CLJ 155, which accepted the principle that “if one man of business states in a letter to another that he has agreed to do certain things, the person who receives that letter must answer it if he means to dispute the fact.” [70] Similarly, in KGN Jaya Sdn Bhd v Pan Reliance Sdn Bhd [1996] 2 CLJ 611 (CA), the Court of Appeal through Gopal Sri Ram JCA established that prolonged silence in response to allegations can constitute admission. The court held: “..the appellant, by its silence coupled with the other circumstances of the case, encouraged the respondent to believe that it intended to raise no challenge to the existence of a prior legal relation between the parties or to the figure which the account showed as owing by it. Having done so, it ought not to be permitted to now contend otherwise. It follows that it does not, therefore, lie in the mouth of the appellant to now deny the respondent's claim.” [71] These authorities establish that failure to respond to such notices can constitute admission of the allegations, particularly where serious wrongdoing is alleged and a prompt denial would be expected from an innocent party. [72] The notice requirement serves to give directors an opportunity to address concerns before litigation. The First Defendant was given clear notice of the intention to pursue him personally for breach of fiduciary duties and conspiracy, yet chose not to respond. The First Defendant was given this opportunity but chose not to respond, thereby waiving any right to complain about the adequacy of notice. [73] Furthermore, the substantive alignment between the 3.1.2024 notice and the present application demonstrates that this was not a case of repurposing a notice intended for different proceedings. The notice clearly contemplated derivative action against the First Defendant for the very misconduct now alleged in OS 453. I therefore find that the Plaintiff has adequately complied with Section 348(2) of the Companies Act 2016. Whether the Plaintiff is Acting in Good Faith and the Application is Prima Facie in the Best Interests of the Company [74] The Plaintiff argues she is acting in good faith with valid causes of action against the First Defendant including fraud, breach of fiduciary duties, and conspiracy. She contends that where there is a prima facie cause of action, good faith is assumed. [75] The First Defendant submits the Plaintiff is not acting in good faith as she knows the Company has no valid cause of action against him. He argues the SPA was validly terminated and contravened forestry legislation. [76] Section 348(4) of the Companies Act 2016 requires consideration of whether: (a) the complainant is acting in good faith; and (b) it appears prima facie to be in the best interest of the company that leave be granted. [77] The Federal Court in Dato' Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd and another appeal [2024] 3 MLJ 433 provides guidance that good faith comprises subjective (honest belief in good cause of action) and objective (reasonable person would hold same belief) components. [78] The test for establishing good faith in derivative action applications has been comprehensively developed through Malaysian and Singaporean jurisprudence. In Ho Hon Chung v Tung Sang Trading Sdn Bhd & Ors [2020] CLJU 1376 (HC), the High Court adopted the Singaporean approach from Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another [2011] SGHC 88, where Justice Judith Prakash established the following principles for determining good faith in derivative actions. a) where there is prima facie cause of action against the wrongdoer by the company, good faith is assumed; b) bad faith is usually inferred from the lack of arguable cause of action or a prima facie case; c) self-interest, motive and hostility alone is insufficient to evidence a lack of good faith; and d) the burden is on the defendant resisting a leave application to show that the plaintiff is not acting in good faith. [79] The High Court in Ho Hon Chung v Tung Sang Trading Sdn Bhd endorsed these principles as helpful guidance for Malaysian courts when deciding issues of good faith in derivative actions under the Companies Act 2016. The court specifically stated at paragraph [41]: “In the Singapore case of Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another [2011] SGHC 88, Justice Judith Prakash endorsed the following as helpful in deciding on the issue of good faith...” [80] The evidence establishes several prima facie causes of action against the First Defendant: a) Breach of Fiduciary Duties: As established in Kumpulan Powernet Berhad & Anor v Woo Wai Mun & Ors [2023] CLJU 2384 (HC), directors owe duties of loyalty and must not place themselves in positions where duty and interest conflict. The First Defendant, as director of both the Company and controlling shareholder of A & T, was in conflict of interest. b) Fraud and Conspiracy: The evidence shows the First Defendant made representations about profitable logging operations to induce the Plaintiff to join the Company, then conspired with A & T to prevent the Company from benefiting from the SPA whilst allowing third parties to extract resources. c) Failure to Act in Company's Best Interests: The First Defendant failed to protect the Company's interests when A & T breached the SPA, instead supporting A & T's position due to his controlling interest in that company. [81] The First Defendant's conduct after the alleged termination date of 11.12.2018 provides compelling evidence supporting the Plaintiff's case. Despite his claim that the SPA was terminated by A & T on 11.12.2018, the First Defendant himself signed multiple cheques on behalf of the Company making payments to third parties specifically for SPA implementation purposes throughout 2019-2020, conduct that directly and fundamentally contradicts his assertion that the SPA was terminated in December 2018. [82] The documented evidence reveals that the First Defendant signed the following cheques for SPA-related activities well after the alleged termination date: a) RM9,764.05 via Maybank Berhad cheque No. 351203 dated 1.10.2019 to Lua Mui Lang for the costs of access roads in the Logging Area; b) RM38,000.00 via Maybank Berhad cheque No. 351215 dated 15.5.2020 to Debina Sdn. Bhd. as a deposit to the Pahang State Forestry Department to demonstrate the Company's interest in extracting and producing logs, timber, trees and related resources in the Logging Area; c) RM5,600.00 via Maybank Berhad cheque No. 351212 dated 11.3.2020 to Gunung Aais Enterprise for the survey of logs, timber, trees and related resources; d) RM10,000.00 via Maybank Berhad cheque No. 351224 dated 30.9.2020 to Sahrizan Bin Mohamed for the costs of approval of the Logging Area plan; and e) RM10,000.00 via Maybank Berhad cheque No. 351223 dated 30.9.2020 to Mohd Azlan Bin Abdul Razak for the costs of calculating logs. [83] This pattern of payments spanning nearly two years after the alleged termination date demonstrates that the First Defendant's actions were wholly inconsistent with his current position that the SPA had been terminated. A director who genuinely believed a contract had been validly terminated would not authorize substantial Company expenditures totaling RM73,364.05 for the implementation and ongoing execution of that same allegedly terminated agreement. [84] The First Defendant has failed to discharge his burden of proving bad faith. His arguments about the SPA's validity go to the merits rather than the Plaintiff's good faith. The Plaintiff's honest belief in the company's rights is evidenced by her persistent efforts to vindicate them. [85] Regarding the best interests test, the law in Abdul Rahim Aki v Krubong Industrial Park (Melaka) Sdn Bhd & Ors [1995] 4 CLJ 551 (CA) recognises that minority shareholders may claim relief where those wielding control abuse their powers for improper purposes. This Court of Appeal decision concerning derivative actions and minority shareholders' rights. The case involved a minority shareholder holding 46.7% of shares in Tunas Murni Sdn Bhd who alleged that the other directors had misconducted themselves to the company's detriment through certain land transfer dealings with Krubong Industrial Park. The Court of Appeal, led by Gopal Sri Ram JCA, provided important clarification on the concept of “fraud upon a minority” in derivative actions. His Lordship stated: “It is sufficient for a plaintiff in an action grounded upon the doctrine to show that those wielding majority control abused the powers vested in them in the sense that they used or omitted to use their powers for an oblique or collateral motive or purpose and not for the true purpose for which the power was entrusted to them either by the memorandum and articles of association, by statute or the general law.” [86] The court further clarified that “fraud upon a minority” is a term of art that “has absolutely nothing whatsoever to do with actual fraud or deception at common law” and that “it is not necessary to prove dishonesty before a minority shareholder may claim relief under the doctrine.” This principle directly supports the proposition that minority shareholders can seek relief where controlling parties abuse their powers for improper purposes, even without proving actual fraud or dishonesty. [87] The Company has suffered clear detriment from the First Defendant's conduct. It paid RM150,000.00 but was denied the benefits of the SPA, whilst the First Defendant benefited through his interest in A & T which received payments and allowed third parties to extract resources. [88] The deadlock situation makes derivative proceedings the only available remedy. Without court intervention, the First Defendant's wrongdoing would go unredressed due to his blocking position as 50% shareholder-director. [89] I therefore find that the Plaintiff is acting in good faith and that granting leave is prima facie in the best interests of the Company. Whether There Has Been Undue Delay in Bringing the Application [90] The Plaintiff argues there was no undue delay as she only discovered the conspiracy and breach of fiduciary duty when the First Defendant disclosed the termination resolution in October 2023. She relies on Dato' Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd [supra] showing that explained delay does not negate good faith. [91] The First Defendant contends that nearly six years' delay without satisfactory explanation demonstrates lack of good faith and genuine belief in the case merits. [92] The timeline reveals that the Plaintiff's discovery of the full extent of wrongdoing was gradual and protracted due to the First Defendant's concealment of material facts. The Plaintiff first discovered that third parties were extracting resources from the logging area in breach of the SPA around 2022. However, the crucial revelation came much later when the First Defendant disclosed the alleged termination resolution for the first time in his affidavit in OS 533 in October 2023. This disclosure revealed that the First Defendant and A & T had purportedly terminated the SPA unilaterally in December 2018 without the knowledge or consent of the Company, demonstrating that the First Defendant had been acting in concert with A & T to defeat the Company's rights whilst concealing this conspiracy from the Plaintiff and the Company. The discovery of this hidden termination resolution gave rise to fresh causes of action for breach of fiduciary duty and conspiracy that were entirely distinct from the earlier contractual breach claims against A & T. [93] The Dato' Seri Timor Shah Rafiq case is directly applicable. There, the court found that a six-year delay was “not inordinate or unreasonable but a necessary result of the plaintiff's painstaking efforts to procure accountability from the majority directors.” The court emphasised that “the delay, if any, was not attributable to the plaintiff, and delay per se would not negate good faith if the same is accountable for.” [94] Here, the delay was not due to the Plaintiff's indolence but to the First Defendant's concealment of material facts. The termination resolution was only disclosed in October 2023, giving rise to fresh causes of action for conspiracy and breach of fiduciary duty. [95] The Plaintiff acted with reasonable promptitude after discovering the full extent of wrongdoing. The notice was issued in January 2024, and this application was filed in September 2024, allowing reasonable time for the Section 348(2) notice period and preparation. [96] The case distinguishes from Fazal Ellahi Oli Mohamed & Anor v KM Oli Mohamed Sdn Bhd [2023] 4 MLJ 302 (CA) where there was unexplained delay. Here, the delay is fully explained by the gradual discovery of concealed wrongdoing. [97] Moreover, the First Defendant cannot complain of delay when he was the cause of it through concealment of material facts. The doctrine of laches does not assist wrongdoers who conceal their misconduct. [98] I therefore find that there has been no undue delay that would justify refusing leave. Whether the Proposed Derivative Action Has Reasonable Prospects of Success [99] Although not explicitly required by Section 348(4), the prospects of success are relevant to both good faith and best interests considerations. [100] The proposed derivative action has strong prospects of success on multiple grounds: a) Breach of Fiduciary Duties: The evidence clearly shows the First Defendant placed himself in a position where his duties to the Company conflicted with his interests in A & T. His failure to protect the Company's rights under the SPA whilst advancing A & T's interests constitutes clear breach of fiduciary duty. b) Fraud: The First Defendant's representations about profitable logging operations, followed by his conspiracy with A & T to deny the Company those benefits, establishes a clear case of fraud. c) Conspiracy: The First Defendant's collaboration with A & T to terminate the SPA unilaterally and allow third parties to benefit from the logging area establishes unlawful conspiracy to injure the Company. [101] The First Defendant's arguments about the SPA's validity are undermined by his own conduct in signing cheques for its implementation after the alleged termination date. His actions were inconsistent with his current claims. [102] The payment of the purchase price is evidenced by vouchers acknowledged by the First Defendant. His subsequent claims about forgery and coercion are not credible given his contemporaneous conduct. [103] Clause 11 of the SPA clearly made A & T responsible for obtaining forestry licences, negating the First Defendant's arguments about the Company's failures in this regard. [104] I therefore find that the proposed derivative action has reasonable prospects of success. Conclusion and Order [105] Having carefully considered all the evidence and submissions, I find that the Plaintiff has satisfied all requirements for leave to commence derivative proceedings under Section 348 of the Companies Act 2016. [106] The application is not barred by res judicata as it concerns distinct causes of action not previously adjudicated. There is no impermissible multiplicity of proceedings as the different suits serve different purposes against different parties. [107] The Plaintiff has adequately complied with the notice requirements under Section 348(2), and the First Defendant's failure to respond constitutes admission of the allegations. [108] The Plaintiff is acting in good faith with honest belief in valid causes of action, and granting leave is prima facie in the best interests of the Company. There has been no undue delay, and the proposed action has reasonable prospects of success. [109] The evidence reveals a clear case of a director placing his personal interests above his duties to the company, exactly the type of misconduct that derivative proceedings are designed to address. [110] In the circumstances where there is corporate deadlock and the wrongdoing director holds a blocking position, derivative proceedings represent the only available remedy to vindicate the company's rights. [111] Accordingly, I make the following orders: a) The Plaintiff is granted leave to commence derivative proceedings in the name of and on behalf of the Second Defendant against the First Defendant; b) The Plaintiff, as director and shareholder of the Second Defendant, is granted permission to control, fully and in all aspects, all proceedings by the Second Defendant against the First Defendant; and c) Costs in the sum of RM10,000.00 are to be paid by the First Defendant to the Plaintiff, subject to taxation. 10 September 2025 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Jacky Loi with Ho Cheng En (Messrs T.Y. Teh & Partners) For the 1st Defendant: Dato Yee Teck Fah with Dato Yee Mi Kenn (Messrs Yee Teck Fah & Co)