Susma A/P Batuk @ Suresh Chandra v Envi Skyview Sdn Bhd (WA-24NCC-271-05/2025)

The Plaintiff is a minority shareholder who applied for leave to commence a derivative action against the Board of Directors of the Defendant, comprising Vinod Balanchandra Sekhar and Mohd Robiei Wong bin Abdullah (referred to here as “Vinod” and “Robiei” respectively, or collectively as “Putative Defendants”) for unauthorised use of the Defendant’s company funds. Background facts

The Defendant carries on business as the owner and operator of Envi Skydining Restaurant. The initial shareholders were the Plaintiff and Robiei, before they each sold 36% of the shares in the Defendant to Petra Festa Sdn Bhd in a sale and purchase agreement dated 11-1-2021.

The Defendant’s current shareholders are the Plaintiff (14%), Robiei (14%) and Petra Festa Sdn Bhd (72%). The Plaintiff contends that Vinod is Petra Festa Sdn Bhd’s director and controlling mind. As noted therefore, the Putative Defendants are the alleged wrongdoers in control of the Defendant.

On 27-11-2024, the Plaintiff wrote to each of the Putative Defendants and the Defendant to allege that a substantial sum of monies totalling RM5,566,111.00 had been siphoned out of the Defendant vide the following unexplained transactions:

On 15-4-2025, the Plaintiff’s solicitors issued a notice pursuant to section 347 of the Companies Act 2016 (“CA”) addressed to the Putative Defendants, stating the Plaintiff’s intention to commence these proceedings (“S. 347 Notice”). Analysis and findings

In moving the Court for leave under section 347 of the CA, the Plaintiff must demonstrate that she is acting in good faith and that it is prima facie in the best interest of the Defendant for leave to be granted. The law in this area is well-settled. See Dato’ Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd and another appeal [2024] 3 MLJ 433 (“Dato’ Seri Timor”) and Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636.

To demonstrate good faith, the Plaintiff must prove: a) an honest belief that a good cause of action exists with a reasonable prospect of success; and b) the application for leave is not brought up for a collateral purpose.

As clarified by the Federal Court in Dato’ Seri Timor, the test for assessing honest belief comprises both subjective and objective components: “… namely, whether the applicant honest believes that a good cause of action exists and has a reasonable prospect of success (subjective component), and the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief (objective component).”

The grounds cited in opposition to the Plaintiff’s application for leave, as set out in the Defendant’s affidavit, are as follows: a) any contemplated derivative action is premature and speculative, as the Plaintiff admits that she does not have access to the Defendant’s financial records and does not know the purpose of the payments; and b) the Plaintiff should be denied relief because of unclean hands, referring to a police report lodged by Robiei against the Plaintiff as the former financial controller of Majestic Skyview Sdn Bhd and another pending civil suit filed by the Plaintiff. There were other arguments that this Court considered to be trivial, such as the Plaintiff’s non-disclosure of an earlier notice concerning this matter, and responses from the Defendant and Robiei, the substance of which are dealt with below. Honest belief/Good cause of action

The Defendant’s primary ground of opposition is that, due to her admitted lack of access to the Defendant’s financial records, she cannot assert that there was any improper purpose much less have an honest belief that a good cause of action exists.

This Court found this argument to be wholly disingenuous for reasons that will be apparent further down in this judgment.

The Putative Defendants are directors and therefore, it follows that they owe a fiduciary duty to the Defendant. There can be no self-dealing with the assets of the Defendant that they control as trustees. In this case, the S. 347 Notice asserted the following facts: a) large sums of money had been paid to Robiei, Vinod, Skyview at 33 Sdn Bhd and Petra Group Management Services Sdn Bhd as particularised and reproduced above; b) Vinod is a director of the two corporate entities; and Petra Festa Sdn Bhd (the majority shareholder of the Defendant) is part of a complex holding structure, ultimately owned by The Petratara Fund VCC in Singapore; and c) the transactions are all without proper justification and/or without proper shareholders’ approval.

Based on the affidavits filed, it does not appear to be disputed from therecords maintained with the Companies Commission of Malaysia, that the Putative Defendants have caused the Defendant to incorporate Skyview at 33 Sdn Bhd (“Skyview@33”) and another similarly named company, and that Robiei’s son was at a time, a director of Skyview@33.

The Plaintiff’s intended derivative action on behalf of the Defendant in respect of these transactions is not entirely without objective evidence. Based on bank statements evidencing these fund transfers described them as inter alia:

(a) “Vinod Balachandra Sekhar Funds” (RM300,000.00);

(b) “Robiei Wong/Norzita Shareholder Advance” (RM1,186,111.00);

(c) “Petra Group Management Services Sdn Bhd Temporary Loan to Dato Vinod” (RM500,000.00); and

(d) “Skyview at 33 Sdn Bhd Advance Forsetupcost” (RM350,000.00).

On 16-5-2025, solicitors for Robiei responded to the S. 347 Notice to disclose that Skyview@33 is a wholly owned subsidiary with legitimate inter-company dealings and some of the other payments are dividend payments that the Plaintiff also received in August 2024.

This Court finds that the above facts would give pause to a reasonable person to believe that a reasonable cause of action exists against the Putative Defendants for misuse of company funds. Objectively, that belief is amplified by the following facts: a) It is not denied that the impugned fund transfers were carried out. No Annual General Meeting has been convened and no statutory accounts of the Defendant have been presented by the Board of Directors since 2023 to justify these management decisions which cause a direct loss to the Defendant if they are not recovered. b) The contemporaneous response to the Plaintiff’s allegations via correspondence came only in response to the S. Notice and gave an incomplete explanation of the transactions. For example, there were no terms or plans for the recovery of the loans and advances made to the Putative Defendants and entities they have a direct interest in. The affidavits filed for the Defendant in these proceedings also contained no substantive responses. c) The Putative Defendants ought to have personal knowledge of the transactions queried, not least because they are the recipients of most of the fund transfers. However, the affidavit filed in response to this application was initially affirmed by a financial controller of the Defendant. Robiei responded via a failed attempt to intervene and stay of these proceedings pending his appeal against that decision. Still, neither Putative Defendants refrained from providing any account for the questioned transactions under oath.

The only opposing interest in this case, is that of the alleged wrongdoers in control of Defendant who have studiously refused to answer or account for questionable transactions. In granting leave to commence a derivative action on unsubstantiated transactions in Dato’ Seri Timor, the Federal Court found the applicant’s actions there to be "reasoned and reasonable" and aimed at seeking answers and that this was sufficient to found a cause of action and justify leave.

Considering the facts and circumstances set out above, this Court is similarly satisfied on a balance of probabilities, that the Plaintiff is moving this Court for leave application under section 347 of the CA with an honest belief that the Defendant has an actionable claim against the Putative Defendants as the alleged wrongdoers in control, as would any reasonable person. Unclean hands/Collateral purpose

The Federal Court in Dato’ Seri Timor emphasized that "collateral purpose" is the objective side of the good faith coin. To defeat a leave application on this ground, the evidence must show that the applicant’s primary motivation is something other than vindicating the Defendant for a wrong against it. While the absence of a collateral purpose is an element of good faith, and the burden of proof is on the Plaintiff, yet the onus must practically fall on the Defendant to assert and prove such collateral purpose.

The Defendant alleged that a police report has been lodged by Robiei against the Plaintiff as the former financial controller of Majestic Skyview Sdn Bhd, dated 14-5-2025, alleging that she had taken RM100,000.00 in 2021. Accordingly, the suggestion is that the Plaintiff has a collateral purpose for filing this action, perhaps to counter the criminal complaint against her.

However, this Court finds that the allegation was credibly disputed by the Plaintiff because Majestic Skyview Sdn Bhd is a different entity from the Defendant and the complaint is quite a stale one. The Plaintiff also adduced a members’ written resolution of that company dated 25-2-2021, signed by Robiei and the Plaintiff, that it is to repay the Plaintiff a RM100,000.00 advance when in funds. The authenticity of this resolution is being challenged, but it is understood that has been no further police action.

The Defendant also argued that the present action was filed to pressure the Defendant and the Putative Defendants in connection with another suit pending in WA-B52NCC-2743-11/2024 (“Suit 2743”) that the Plaintiff has filed against the Defendant for monies owed. As a collateral purpose, it was not sufficiently articulated what the perceived cause and effect is that constitutes “pressure” in this case.

It was highlighted however, that in resisting Suit 2743, the Defendant has sought a number of extensions of time to produce an alleged “forensic audit” to ascertain what the Plaintiff allegedly owes to the Defendant, but no report was ever furnished despite the passage of time. Defendant’s counsel also represented to this Court on 5-1-2026 that a relevant forensic audit was underway.

In short, there is no evidence of a collateral purpose on the part of the Plaintiff in taking this action or a clear articulation by the Defendant of what that collateral purpose might be. Best interest of company

The "best interest of the company" test requires a broad, objective assessment of commercial reality rather than a narrow focus on legal merit. The court must also objectively weigh the potential financial recovery against the "intangible" costs of litigation. As clarified by the Federal Court: “[46] In the end the question of whether it is prima facie in the best interest of the company to bring an action is a wide one involving consideration of factors beyond the merits of the proceedings. So, broadly speaking, apart from the prospects of success of the action, other factors are the likely costs of the action including legal fees, likely recovery if the action is successful and likely consequences to the company if the action is unsuccessful.”

Clearly, legal merits must be assessed as a factor in the "best interest of the company" test. However, the Federal Court in Dato’ Seri Timor has also held that the leave stage is a preliminary filter designed to weed out frivolous claims, not a venue for a "mini-trial" on the merits. The threshold for legal merits is described as follows: “[41]…whether the proposed action is legitimate and arguable. [42] … In other words, there must be some reasonable chance of success such that if the claim is proved, the company will stand to gain substantially in financial terms…. The threshold is not so high as to suggest that the applicant must succeed but only that there is a reasonable basis for the claim.”

The merits threshold should not have an overly burdensome evidentiary requirement so as not to stifle legitimate claims by minority shareholders. This Court has already found that a reasonable person would conclude that a good cause of action exists and has a reasonable prospect of success.

Other than the admitted paucity of evidence in the hands of the Plaintiff, which is not unexpected in the circumstances and which the discretion of the Court under section 350 of the CA is designed to remedy, this Court was presented with no good reason why it is not in the best interest of the Defendant to pursue the intended derivative action on its behalf. Conclusion

After considering all the evidence and submissions, this Court allowed Enclosure 1 in terms of prayers 1 and 2.

In respect of the costs to sustain the derivative action, it was ordered that the Plaintiff shall be entitled to be indemnified by the Defendant for reasonable legal costs and expenses incurred for the derivative proceedings to be commenced, subject to the following conditions: a) the indemnity shall cover 50% of the legal costs supported by solicitors’ tax invoices, with the balance 50% to be paid in advance by the Plaintiff and recoverable only after the successful trial of the derivative action to be commenced; b) the indemnity shall not cover costs of proceedings in the derivative action to be commenced, for which an adverse costs order is made against the company.

The Defendant was ordered to pay the costs of this application following the event, in the sum of RM10,000.00. Bertarikh: 08 Mei 2026 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR Peguam Untuk Plaintif: Kimberly Teh Zhe Wei Tetuan Thomas Philip Untuk Defendan: Yee Jun Hong (Frederick Teng Siaw Chuing bersamanya) Tetuan JH Yee & Co