Presgo Gateways Sdn Bhd v Aim-Force Software Sdn Bhd (WA-24NCC-577-10/2023)

This judgment concerns an originating summons filed by a company seeking declaratory and injunctive reliefs against another company, to prevent the registration of shares sold to a third party on the grounds that it would result in a breach of confidentiality clauses in software agreements between the parties. The Plaintiff contends that the sale of shares would enable the third party to access confidential information provided to the Defendant, thereby prejudicing the Plaintiff's business interests. The Defendant argues that the Plaintiff has sued the wrong party, as the shares belong to the Defendant's sole shareholder, over which the Defendant has no control, and that the third party becoming a shareholder would not result in disclosure of confidential information. The key issues are whether the Plaintiff has a valid claim against the Defendant, and whether the injunctive reliefs sought can be granted. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 3

The Plaintiff, Presgo Gateways Sdn Bhd, is a company whose main business is the operation of parking facilities for motor vehicles in the state of Johor. The Plaintiff is currently conducting its business as a car park managing agent appointed by the Johor Bahru City Council (MBJB) pursuant to a Car Park Lots Management Agreement dated 25.04.2016.

The Defendant, Aim-Force Software Sdn Bhd, is a tech company that specialises in providing and supplying total integrated solutions known as “e-Enforcement” which is designed specially for councils to enhance and aid the management of parking and enforcement in the local council's area of jurisdiction. The Defendant was incorporated on 21.11.2002.

To facilitate the Plaintiff's obligations under the Car Park Lots Management Agreement with MBJB, the Plaintiff entered into the following agreements with the Defendant: a) An e-Enforcement Agreement dated 21.06.2016 (“the 1st Software Agreement”) for the commissioning and implementation of the Defendant's e-Enforcement Solution to manage parking and enforcement. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 4 b) A Software Maintenance Agreement dated 01.01.2022 (“the 2nd Software Agreement”) upon expiry of the 1st Software Agreement, for the Defendant to continue providing maintenance services for the e-Enforcement Solution. c) A Software and Maintenance Agreement dated 01.03.2023 (“the 3rd Software Agreement”) to develop and enhance an upgraded version of the Plaintiff's MBJB Spot parking application to include additional features apart from parking payment, upgrade the software to include a command-and-control function, and for the Defendant to continue providing maintenance services.

In order for the Plaintiff to utilise the Defendant's e-Enforcement Solution, the Plaintiff furnished the Defendant with information relating to its operations, including workflow, design of day-to-day monitoring, income monitoring, day-to-day enforcement, customer information and legal action against parking defaulters.

The 2nd Software Agreement and 3rd Software Agreement contained confidentiality clauses at clause 6 and clauses 1.1 and 7 respectively, which required the parties to maintain the confidentiality of information provided to each other for the purposes of the agreements. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 5

The implementation of the Defendant's e-Enforcement Solution led to the development of the MBJB Spot parking application by the Plaintiff and Defendant. The Defendant also developed a Command-and-Control Centre for the Plaintiff, which is a central monitoring unit to which data of the Plaintiff's entire operations is fed to enable the Plaintiff to control its operations.

On 27.07.2023, the Plaintiff informed the Defendant of its intention to purchase shares in the Defendant. The Defendant, by letter dated 23.08.2023, rejected the Plaintiff's offer to purchase shares, stating that it was not the right time for such a sale.

On 03.10.2023, the Plaintiff was informed by one of the Defendant's directors, Mr. Lew Chiew Yoon, that the Defendant was in the process of selling its shares to a company called ITMAX System Berhad (“ITMAX”). The Plaintiff discovered online articles dated 22.08.2023 and 24.08.2023 regarding the sale of 70% of the Defendant's shares to ITMAX for RM7.2 million.

ITMAX is a public listed company which had through its subsidiary obtained contracts in Johor to provide CCTV and smart traffic light systems, and was extending its business in Johor into parking management.

The proposed sale of 70% of the Defendant's shares is by Aim-Force Sdn Bhd, which is the sole shareholder of the S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 6 Defendant holding all 2,000,000 issued shares in the Defendant. The Defendant has 2 common directors with Aim-Force Sdn Bhd.

The Plaintiff contends that ITMAX's purchase of a 70% stake in the Defendant would enable ITMAX to have complete control and access to the Plaintiff's entire information, data and the MBJB Spot application, and benefit from the Plaintiff's industrial know-how, thus facilitating ITMAX to be a direct competitor with the Plaintiff in the car park management business.

On 23.10.2023, the Plaintiff initiated an Originating Summons action against the Defendant seeking various declaratory and injunctive reliefs.

The Plaintiff commenced this action against the Defendant, Aim-Force Software Sdn Bhd, by way of an Originating Summons dated 23.10.2023. The Originating Summons was subsequently amended pursuant to a court order dated 02.11.2023 (“Amended OS”).

By the Amended OS, the Plaintiff mainly seeks the following substantive reliefs: a) A declaration that the Defendant is in breach of the promise of confidentiality in the 2nd Software S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 7 Agreement and 3rd Software Agreement (collectively “the Agreements”) by the sale of the Defendant's shares to ITMAX; b) A declaration that there is an implied term in the Agreements that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information; and

A perpetual injunction to prevent the Defendant's shares from being sold and registered in the name of ITMAX.

The key arguments advance by the Plaintiff are summarised as below: a) The proposed sale of 70% of the Defendant's shares to ITMAX would result in a breach of confidentiality clauses in the 2nd and 3rd Software Agreements between the Plaintiff and Defendant. b) The sale would breach an implied term in those agreements that the Defendant must not prejudice the Plaintiff's business interests considering the confidential information the Defendant possesses. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 8 c) The Plaintiff seeks injunctions to prevent the Defendant from registering the share transfer to ITMAX. Though the sale is between the Defendant's parent company and ITMAX, the Defendant has the power under company law provisions to refuse registration. d) As a 70% shareholder, ITMAX would gain control of the Defendant and access to the Plaintiff's confidential information provided over the years to customise the Defendant's software for the Plaintiff's use. e) The confidentiality clauses only bind the Defendant as a contracting party, not shareholders like ITMAX, who would gain access without restrictions. This could allow ITMAX to unfairly compete using the Plaintiff's data. f) The Plaintiff has correctly targeted the Defendant, who has the power over share registration. It cannot restrict a share sale between unconnected third parties like the Defendant's parent company and ITMAX. g) If prejudiced, those third parties could have applied to intervene, rather than the Defendant arguing their case when they chose not to. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 9

The key arguments advance by the Defendant are summarised as below: a) The Plaintiff has no right to restrict the Defendant's parent company Aim-Force Sdn Bhd from selling its shares in the Defendant to another company like ITMAX. There is no relationship between the Plaintiff and this third party. b) The Plaintiff wrongly sued the Defendant when it cannot control or prevent its parent company from dealing with its shares in their proprietary rights. c) The reliefs sought against the Defendant to stop the share sale are illogical and legally untenable as the Defendant lacks such capacity and power. d) The share sale between non-parties does not constitute any breach of confidentiality clauses or implied terms by the Defendant in its agreements with the Plaintiff. e) The Plaintiff's confidential data remains protected regardless of change in the Defendant's shareholders, as these obligations bind the Defendant company and its board. Shareholders S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 10 cannot access such company information beyond statutory registers. f) The Plaintiff's fears are based on assumptions as there is no evidence the Defendant or a new shareholder like ITMAX gaining board control would misuse confidential data in breach of contract and directors' fiduciary duties. Analysis and findings of the court Whether there is an implied term in the 2nd Software Agreement and 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason being privy to the Plaintiff's confidential information.

The Plaintiff contends that there is an implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information. The Plaintiff submits that the application of both the officious bystander test and the business efficacy test would imply such a term into the said agreements. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 11

The Defendant in response submits that there is no basis for such an implied term. The Defendant contends that any confidential information given by the Plaintiff to the Defendant is already protected by the confidentiality clauses in the 2nd Software Agreement and the 3rd Software Agreement. The Defendant further submits that such an alleged implied term is inherently illogical because the Defendant's e-Enforcement Solutions catering for inter alia car park management were developed by the Defendant some 2 decades ago and have been commissioned and implemented for a substantial number of parking management companies and councils or districts for the specific purpose of car park management, who would all in theory be a competitor of, and prejudicial to, the Plaintiff's business and/or interest. The Defendant also submits that the supposed implied term provides for the Defendant not to do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest, and in this case, the act in question is the proposed sale of the shares in the Defendant to ITMAX, which can only be done by Aim-Force Sdn Bhd and for which the Defendant has no control over.

Having considered the submissions of both parties, I find that the Plaintiff's contention that there is an implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 12 privy to the Plaintiff's confidential information is wholly untenable and baseless.

In this case, it is clear that the subject matter in question, namely the preservation and proper use of confidential information, is comprehensively covered by clauses 6.1 to 6.5 in the 2nd Software Agreement and clauses 7.1(a) to (f) of the 3rd Software Agreement.

Clause 6.1 of the 2nd Software Agreement defines “Confidential Information” to include, inter alia, “in the case of the Customer, all its customer information, and information relating to user specifications and requirements in relation to the development of the Software and/or System” and “concerning either party's internal business practices and/or actual or potential customers”. Clauses 6.2 to 6.5 then go on to impose detailed obligations on the parties in relation to maintaining the confidentiality of Confidential Information, including to “limit disclosure to such employees and contractors who have a need to know the information in question to carry out their responsibilities” and “use the same degree of care that it uses to protect its own confidential information”.

Similarly, clause 7.1(a) of the 3rd Software Agreement requires the parties to “treat as strictly confidential all information, trade secrets or confidential knowledge received or obtained as a result of entering into or performing this agreement or which relates to the provisions S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 13 or subject matter of this agreement or the negotiations relating to this agreement”. Clauses 7.1(b) to (f) then impose further stipulations on the parties' treatment of Confidential Information, including an obligation to “use its reasonable endeavours to cause all of its directors, officers, employees and agents who have or are likely to have access to any Confidential Information to observe all the obligations of confidentiality under this clause 7” and to not “disclose the Confidential Information to any person except to those authorised by the parties to know on a need to know basis”.

It is pertinent to note that the confidentiality provisions in the Agreements are extensive and go beyond merely imposing a general duty of confidentiality. They define the scope of Confidential Information, identify the limited circumstances and conditions under which Confidential Information may be disclosed, and prescribe the standard of care to be applied in the handling of such information. Read as a whole, these provisions evince a clear contractual intention to exhaustively regulate the parties' obligations in relation to confidentiality.

It is trite law that a term will not be implied into a contract where the express terms of the contract already cover the same subject matter. This principle was articulated by the Court of Appeal in Perwira Habib Bank (M) Bhd v Wong Keng Fatt [2015] 1 CLJ 659, where it was held: S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 14 “[43] The maxim expressum facit cessare tacitum has been applied in Malaysia in Arab-Malaysian Merchant Bank Bhd v Court Square Pelita Sdn Bhd [2000] 1 LNS 1,; [2005] 5 MLJ 273, per Ian Chin J: It is a canon of construction that an express term in a contract excludes the possibility of implying any term dealing with the same subject-matter as the express term.”

Applying this principle to the present case, it is plain that the comprehensive confidentiality provisions in clauses 6.1 to 6.5 of the 2nd Software Agreement and clauses 7.1(a) to (f) of the 3rd Software Agreement cover the exact same subject matter which the Plaintiff seeks to introduce by way of the implied term, namely the Defendant's obligations in preserving confidentiality. There is therefore no room for the implication of the Plaintiff's proposed term, as to do so would be contrary to the express intention of the parties as reflected in the confidentiality clauses they have agreed to.

Further, the supposed implied term submitted by the Plaintiff is inherently illogical. The Defendant's e-Enforcement Solutions catering for inter alia car park management were developed by the Defendant some 2 decades ago. Since June 2004, the Defendant has been commissioned and implemented the e-Enforcement™ Solutions for a substantial number of parking management companies and councils or districts for the specific purpose of car park management, and continues to do so to date. Each of the Defendant's customers would theoretically compete with and potentially harm the Plaintiff's business or interests, as they operate in the car park management S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 15 industry and purchase the Defendant's e-Enforcement Solutions for that purpose. Going by the Plaintiff's logic, it would mean that the Defendant cannot sell its e-Enforcement Solutions at all to anyone other than the Plaintiff.

Additionally, the act in question which allegedly would prejudice and/or jeopardise the Plaintiff's business and/or interest is the proposed sale of the shares in the Defendant to ITMAX. It is undisputed that the sale of the shares in the Defendant can only be done by Aim-Force Sdn Bhd and not the Defendant. The Defendant has no control over the same. In the circumstances, there is no act by the Defendant which could possibly amount to a breach of the supposed implied term.

Therefore, I find that the Plaintiff's contention that there is an implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information is devoid of merit and unsustainable. S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 16 Even if such an implied term exists, whether the sale of 70% of the Defendant's shares to ITMAX would amount to a breach of that implied term.

The Plaintiff contends that in the circumstances that there is an implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information, the sale of 70% of the Defendant's shares to ITMAX would amount to a breach of that implied term. The Plaintiff submits that ITMAX's purchase of 70% of the Defendant's shareholding would enable them to have complete control and access to the Plaintiff's entire information, data and the MBJB Spot Application, thus enabling ITMAX to benefit from the Plaintiff's industrial know-how and facilitate ITMAX to be a direct competitor with the Plaintiff in the car park management business. The Plaintiff further submits that ITMAX would also have full access to all customers' data and the ability to monitor the Plaintiff's business by monitoring the day-to-day operations of the Plaintiff in real time.

The Defendant in response submits that the sale of 70% of the shares in the Defendant to ITMAX would not amount to a breach of the supposed implied term because the sale is not an act by the Defendant but rather by Aim-Force Sdn Bhd. The Defendant contends that it has no control over the S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 17 same. The Defendant further submits that even if ITMAX becomes a shareholder in the Defendant, it would have no access to the confidential information in the hands of the management of the Defendant. The Defendant also submits that there is no evidence that the Defendant intends to disclose any confidential information to ITMAX if and when it becomes a shareholder in the Defendant.

I have already held that there is no implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information. However, in the event that I am wrong on this issue, I will now address, for completeness, whether the sale of 70% of the Defendant's shares to ITMAX would amount to a breach of that implied term.

Having considered the submissions of both parties, I find that the Plaintiff's contention that the sale of 70% of the Defendant's shares to ITMAX would amount to a breach of the supposed implied term is wholly untenable and without basis.

The supposed implied term, even if it exists, provides for the Defendant not to do any act which would prejudice and/or jeopardise the Plaintiff's business and/or interest in any form or manner by reason of being privy to the Plaintiff's S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 18 confidential information. In this case, the act in question is the proposed sale of the shares in the Defendant to ITMAX. It is undisputed that this act is not by the Defendant but rather by Aim-Force Sdn Bhd. The Defendant has no control over the same. In the circumstances, the Defendant cannot possibly be in breach of the supposed implied term.

Further, it is settled law that even if ITMAX becomes a shareholder in the Defendant, it would have no access to any confidential information in the hands of the management of the Defendant. In Tengku Dato' Ibrahim Petra Tengku Indra Petra v. Petra Perdana Bhd & Another Appeal [2018] 2 CLJ 641, the Federal Court held: “[118] To sum up, the modern view of the relationship between shareholders in the general meeting and the board of directors on matters pertaining to management powers of the company has been well summarised by Stephen Bottomley's The Constitutional Corporation at p. 82 as follows: Since the 1906 case of Automatic Self-Cleansing Filter Syndicate Co Ltd v. Cunninghame, courts in the United Kingdom and Australia have accepted that where the board of directors is given exclusive powers to manage the corporation then neither individual members nor the general meeting may intervene in or dictate the exercise of that power. It follows from this that the board of directors is not simply the servant or agent of the general meeting. The board exercises an original grant of power...” S/N Msybzvrc9UugCTt6yHwZRg **Note : Serial number will be used to verify the originality of this document via eFILING portal 19

The Federal Court went on to hold: “[120] It is seen from the foregoing discussion that courts in other jurisdictions have consistently taken the view that shareholders in general meetings may not control the powers of management conferred by the articles of associations on a board of directors; they can only do so by altering the articles to take away the powers of the board of directors, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. Today this principle cannot be disputed. We respectfully agree and we would gratefully adopt this view.”

It is clear that a shareholder has no right to access the confidential information in the hands of the management of a company. This was further affirmed by the High Court in Satishchandre Pravinchandre Keval Chand Doshi v Rainbow Paradise Beach Resort Berhad [2022] 1 LNS

Quay Chew Soon J held: “[24] A shareholder's access to the documents of the company is basically restricted to statutory registers of the company. A cursory perusal of CA 2016 reveals that a shareholder has the right to inspect the following:

the register of members (section 55 of CA 2016);

the register of directors, managers and secretaries (section 57 of CA 2016);

the register of debenture holders (section 60 of CA 2016);

the register of substantial shareholders (section 144 of CA 2016);

a copy of every directors' service contract (section 233 of CA 2016);

records of resolutions and meetings (section 342 of CA 2016);

the register of charges (section 362 of CA 2016).” [39] The Defendant continues to be bound by the confidentiality clauses in the 2nd Software Agreement and the 3rd Software Agreement regardless of the identity of its shareholders. The management of the Defendant continues to owe fiduciary duties to the Defendant to ensure the Defendant complies with the same. [40] The inviolable distinction between the role and rights of shareholders and the board of directors was further elucidated by the Court of Appeal in Dato' Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176, where it was held: “Directors owe their duties to the company and not to individual shareholders. In Percival v Wright [1902] 2 Ch 421, a case in point, concerned the directors who purchased shares from existing shareholders without disclosing that they were in the process of negotiating a takeover bid at a higher price. It was held that since the directors owed no fiduciary duties to the shareholders, they could not be liable for the non-disclosure. ... In Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] 2 All ER 563; [1983] Ch 258, it was held that: The directors indeed stand in a fiduciary relationship to the company, as they are appointed to manage the affairs of the company and they owe fiduciary duties to the company though not to the creditors, present or future, or to individual shareholders.” S/N Msybzvrc9UugCTt6yHwZRg [41] Similarly, in BSNC Corporation Bhd v Ganesh Kumar Bangah [2010] 7 MLJ 85, Mary Lim JC (as she then was) stated: “These several provisions show that the defendant's duty is owed to the company and not to the plaintiff. As a director of MOLACS, the defendant owes a fiduciary duty to act in the interests and for the benefit of the company (and the company alone) and it is enforceable in the same way as any other fiduciary duty owed to a company by its directors - see Halsbury's Laws of England (4th Ed, 1996 Reissue) Vol 7(1) at para 582 on 'Position of directors generally'. It is equally well established that the defendant as a director or CEO owes no fiduciary duty towards any individual shareholder in the company — see Halsbury's Laws of England Vol [2010] 7 MLJ 85 at 957(2) para 1193.” [42] The upshot of these authorities is that shareholders and directors stand in fundamentally different positions vis-à-vis the company's confidential information. Shareholders, in their capacity as shareholders, are not entitled to access the company's confidential documents and information. Their right to inspect documents is confined to those statutorily prescribed registers and records expressly stated in the Companies Act 2016 (“CA 2016”), such as the register of members (section 55), register of directors (section 57), register of substantial shareholders (section 144) and so on. On the other hand, the board of directors, by virtue of their office and fiduciary duties, are entrusted with the management of the company's affairs, including the custody of its confidential information. The directors' fiduciary duties S/N Msybzvrc9UugCTt6yHwZRg are owed to the company, and not to any individual shareholder. [43] Applying these principles to the present facts, it is abundantly clear that ITMAX would not automatically gain access to the Defendant's confidential information merely by becoming a shareholder in the Defendant. ITMAX's position would be no different from that of any other shareholder - it would not be entitled to peruse or obtain the Defendant's confidential records and documents. [44] Even if ITMAX were to appoint representatives to the Defendant's board of directors upon becoming a shareholder, those individuals will owe fiduciary duties to act in the best interest of the Defendant, and not ITMAX. This is clear from the passages in Dato' Abul Hasan bin Mohamed Rashid and BSNC Corporation Bhd cited above - nominee directors are not relieved of their fiduciary duties to the company merely because they are appointed by a particular shareholder. To the contrary, these nominee directors will be obliged to ensure that the Defendant maintains the confidentiality of the Plaintiff's information in accordance with the Software Agreements and not disclose the same to ITMAX or any other third party. [45] It is noteworthy that the Plaintiff has not adduced an iota of evidence to substantiate its bare assertion that ITMAX would gain access to its confidential information. There is no indication whatsoever that the Defendant's existing S/N Msybzvrc9UugCTt6yHwZRg management intends to disclose such information to ITMAX upon the latter becoming its shareholder, much less that they would be entitled to do so. Indeed, as stated in ITMAX's announcement to Bursa Malaysia dated 29.08.2023, the Defendant's existing management will continue to be involved in the day-to-day operations and business activities of the Defendant, even after the share acquisition by ITMAX. There is therefore no basis to conclude that the acquisition will result in the Defendant's management being sidelined or its confidentiality obligations being compromised. [46] Ultimately, the Plaintiff's contention that ITMAX would obtain the Defendant's confidential information is founded on nothing more than sheer speculation and conjecture. With respect, such convenient suppositions sans evidence are plainly insufficient to sustain the serious assertions of breach of confidentiality that have been levelled against the Defendant in this action. The law does not permit the court to draw inferences of breach or unlawful disclosure based on the Plaintiff's unilateral apprehension of the same, no matter how keenly felt. Rather, the Plaintiff bears the burden of proving the factual basis for its claims, which it has failed to discharge. [47] Therefore, even if I am wrong and there is an implied term in the 2nd Software Agreement and the 3rd Software Agreement that the Defendant would not do any act which would prejudice and/or jeopardise the Plaintiff's business S/N Msybzvrc9UugCTt6yHwZRg and/or interest in any form or manner by reason of being privy to the Plaintiff's confidential information, I find that the sale of 70% of the Defendant's shares to ITMAX would not amount to a breach of that implied term. The Plaintiff's contention in this regard is devoid of merit. Whether the Plaintiff can seek injunctive relief compelling the Defendant's directors to exercise this power to refuse registration of the share transfer even when the shares have been sold. [48] The Plaintiff submits that the injunctive relief it seeks would compel the Defendant's directors to exercise this power to refuse registration of the share transfer, in order to prevent a breach of the Software Agreements, even if Aim-Force Sdn Bhd cannot be stopped from selling its shares to ITMAX. The Plaintiff contends that the Defendant's argument that it has no power to stop the registration of the transfer of shares to ITMAX is erroneous. The Plaintiff argues that Section 106(1)(b) CA 2016 empowers the Defendant's directors to pass a resolution refusing to register the transfer of shares to ITMAX on the grounds that the sale and registration of the shares would result in a breach of the confidentiality clauses in the Software Agreements between the Plaintiff and Defendant, thereby exposing the Defendant to a claim for damages. [49] The Plaintiff further submits that the declaratory reliefs it seeks are on the effect of the proposed share sale on the S/N Msybzvrc9UugCTt6yHwZRg Defendant, and therefore the fact that the sale itself is not within the Defendant's control is irrelevant to the court's determination of the effect of the sale. It is argued that since the Defendant has the power to refuse registration of the share transfer, the court should proceed to determine whether the sale and registration of the shares to ITMAX would cause a breach of the confidentiality clauses. [50] I am unable to accept the Plaintiff's arguments. Firstly, the Plaintiff's reliance on Section 106(1)(b) CA 2016 is misconceived. While this provision confers a discretionary power on the directors to refuse registration of a transfer of shares, it does not impose any duty on the directors to do so. The directors are not bound to refuse registration of a transfer merely because it is alleged that the transfer may result in the company breaching a contract. The directors' overarching duty is to act in the best interests of the company as a whole, and not just the interests of a particular shareholder. Refusing to register a valid share transfer without proper justification could potentially expose the directors to claims by the transferor shareholder. The existence of confidentiality obligations to a third party such as the Plaintiff does not in itself constitute sufficient reason for refusing to register a share transfer. [51] I am unable to accept the Plaintiff's arguments. Firstly, the Plaintiff's reliance on Section 106(1)(b) CA 2016 is misconceived. Section 106(1)(b) states: S/N Msybzvrc9UugCTt6yHwZRg “(1) A company shall enter or cause to be entered the name of the transferee in the register of members as shareholder within thirty days from the receipt of the instrument of transfer under subsection 105(1) unless— ...

the directors passed a resolution to refuse or delay the registration of the transfer within thirty days from the receipt of the instrument of transfer and the resolution sets out in full the reasons for refusing or delaying the registration;” [52] While this provision confers a discretionary power on the directors to refuse registration of a transfer of shares, it does not impose any positive duty on the directors to do so, even if the transfer may result in the company being in breach of contract. The permissive language used in the provision - “unless the directors passed a resolution” - makes clear that the power to refuse registration is facultative and not obligatory. There is nothing in the wording of Section 106(1)(b) CA 2016 to suggest that directors are compelled to refuse registration in any particular circumstance. [53] Furthermore, it is trite law that the directors' paramount duty is to act bona fide in the best interests of the company as a whole, and not just the interests of a particular shareholder or third party. This is codified in Section 213(1) CA 2016, which provides that “A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.” The Federal Court in Petra Perdana Bhd v Tengku Dato' Ibrahim Petra bin Tengku Indra Petra held S/N Msybzvrc9UugCTt6yHwZRg that directors owe a fiduciary duty to act bona fide in the best interests of the company as a whole, and not for any individual shareholders, nor in situations of conflict between their duty to the company and personal interests. [54] In considering whether to refuse registration of a share transfer under Section 106(1)(b) CA 2016, the directors must therefore balance all relevant factors and act in good faith in the best interest of the company. The mere fact that registering the transfer may result in the company breaching a contract with a third party is not in itself determinative or conclusive, without more. The directors would be entitled, and indeed obliged, to consider the broader implications of refusing registration, including the potential prejudice to the transferee shareholder and exposure to claims by the transferor. [55] It bears emphasis that a refusal to register a transfer is a very serious step that deprives the transferee of its proprietary rights over the shares. A company's power to refuse to register a transfer of shares should sparingly be exercised and only where exceptional circumstances exist since a refusal by a company to register a transfer has the effect of depriving a shareholder his right of transfer, a right of property in his shares which is an incident of his ownership of the shares. [56] Given the gravity of refusing registration, the directors would be acting properly in refusing registration only if they are S/N Msybzvrc9UugCTt6yHwZRg satisfied that there are compelling grounds to do so, having undertaken a holistic assessment of all relevant considerations. The interests of the company as a whole must be prioritised over the interests of any one particular stakeholder. The bare assertion by the Plaintiff that registering the transfer may place the Defendant in breach of the confidentiality provisions in the Software Agreements does not without more give rise to an obligation on the directors to refuse registration. [57] Therefore, I find that the Plaintiff's attempt to construe Section 106(1)(b) CA 2016 as imposing a duty on the Defendant's directors to refuse registration in the present circumstances is plainly untenable. To the contrary, Section 106(1)(b) confers a discretionary power, the exercise of which must be guided by the directors' overarching fiduciary duties to act in the best interest of the Defendant. The Plaintiff's argument that the mere existence of the confidentiality clauses mandates a refusal of registration is overly simplistic and fails to consider the full breadth of the directors' fiduciary obligations. [58] Secondly, the Plaintiff is essentially seeking to have this court dictate how the Defendant's directors should exercise their discretionary powers in relation to the management of the company's affairs. This runs contrary to the fundamental principle that the courts will be slow to interfere with the internal management of companies, as recognised in cases like Owen Sim Liang Khui v Piasau Jaya Sdn Bhd & Anor S/N Msybzvrc9UugCTt6yHwZRg [1996] 1 MLJ 113 (FC) and Lim Seng Boon v Chew Shin Yong, Mark & Ors [2022] 1 LNS 1490 (HC). [59] In Owen Sim, the Federal Court stated: “Traditionally, courts have been reluctant to interfere with matters relating to the internal management of incorporated companies. Through a series of decisions of the Court of Chancery in the mid nineteenth century, they administered unto themselves a jurisdictional prohibition from entering upon domestic disputes between corporators. Two landmark decisions settled the law upon the subject for all time. The first of these was Foss v. Harbottle [1843] 67 ER 190; the second was Mozley v. Alston [1847] 41 ER 833.” [60] In Lim Seng Boon Liza Chan J quotes from the Privy Council case of Burland v Earle [1902] AC 83 which states “It is an elementary principle of the law relating to joint stock companies that the court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so.” [61] Thirdly, I find no merit in the Plaintiff's contention that the court can grant declaratory relief on the effect of the share sale regardless of who the seller is. In essence, the Plaintiff is inviting the court to make a binding declaration on the contractual implications of a share transfer by Aim-Force Sdn Bhd, who is not even a party to this action. This would be contrary to the well established principle that the court S/N Msybzvrc9UugCTt6yHwZRg should not grant declaratory relief which may prejudice the rights of parties who are not before the court. [62] Finally, the injunctive relief sought by the Plaintiff amounts to no more than an attempt to compel the Defendant's directors to exercise their discretionary power under Section 106(1)(b) in a particular manner. The court cannot make an order fettering the exercise of directors' statutory powers in this way, especially in the context of a share transfer between third parties which does not involve any positive act on the part of the Defendant. [63] In the premises, I find that the Plaintiff's arguments are devoid of merit and legally unsustainable. The attempt to invoke Section 106(1)(b) and seek declaratory and injunctive relief against the Defendant is a thinly veiled attempt to have the court interfere with the internal management of the Defendant and dictate how its directors should exercise their powers. This is not something the court will do, save in the most exceptional circumstances which do not apply here. Conclusion [64] In conclusion, the Plaintiff's claims for declaratory and injunctive relief against the Defendant are fundamentally flawed. The Plaintiff is seeking relief from the Defendant for actions entirely outside the Defendant's control regarding its own shares. There is no legal basis for the Plaintiff to S/N Msybzvrc9UugCTt6yHwZRg restrain the Defendant from registering a share transfer between third parties, nor can the Defendant be compelled to refuse such registration based solely on the Plaintiff's contractual interests. For these reasons, I hold that the Plaintiff has failed to establish any basis for the court to grant the declaratory and injunctive reliefs sought against the Defendant. The Plaintiff's action in this Amended OS is therefore dismissed with costs of RM15,000. 29 March 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Datuk V Manokaran & Yohendra Nadarajan (Messrs Yohendra Nadarajan) For the Defendant: Douglas yee & Lim Pit Feng (Messrs. Douglas Yee