Tai May Chean v United Eastern Resources Sdn Bhd (W-02(NCC)(A)-1955-10/2019)

UNITED EASTERN RESOURCES SDN BHD

NG PIK LIAN (NRIC NO.: 320718-05-5012) … RESPONDENTS [In The High Court Of Malaya At Kuala Lumpur (Commercial Division) Originating Summons No.: WA-24NCC-340-06/2019 In The Matter Of Sections 345, 347 And 348 Of The Companies Act 2016; And 2 of 54 In The Matter Of Rules Of Court 2012. Between Tai May Chean (NRIC No.: 531113-10-5670) … Plaintiff And

United Eastern Resources Sdn Bhd (Company No.: 416181-T)

Ng Pik Lian (NRIC No.: 320718-05-5012) … Defendants] CORAM: LEE SWEE SENG, JCA HADHARIAH SYED ISMAIL, JCA SEE MEE CHUN, JCA JUDGMENT OF THE COURT [1] The mother and daughter have against each other some pending suits before the courts since February 2013. The mother of all suits between them must surely be the one where the daughter is praying for a committee to be appointed to manage her mother’s affairs on ground of her supposed mental disability or incapacity under the Mental Health Act 3 of 54

This Mental Health action would have a domino-effect on the other pending contentious suits if the outcome is in favour of the daughter. [2] They are both at different rounds of their legal battles that have now reached the Court of Appeal and this present one is now at the leave application stage before the Federal Court. [3] This is an action launched on 25.6.2019 by the daughter against the company United Eastern Resources Sdn Bhd (“the Company”) and the mother, seeking leave of the High Court to bring an action in the name of the Company against another company named TYY Resources Sdn Bhd (“TYYR”), the vendor, that had received full purchase price of a property from the Company but had refused to transfer the property to the Company. [4] It is an action under ss 345, 347 and 348 of the Companies Act 2016 (‘the Act”). The Company is thus a nominal 1st defendant and the mother is the main 2nd defendant. [5] Apparently there are some tenants occupying the property which is a shop lot but that the vendor had failed to account for the rental collected and to pay over to the Company. [6] The plaintiff daughter had applied for leave to commence a derivative action for and on behalf of the 1st defendant against TYYR for the following orders: 4 of 54

(a) the transfer of a property held under Geran No. 10452, Lot No. 77, Section 6, Town and District of Kuala Lumpur having postal address at No. 21, Jalan Melati, 50100, Kuala Lumpur (“the Property”); and

(b) for an account of all rentals collected by TYYR on behalf of UER on the basis that the rentals are held by TYYR on a constructive trust for UER. [7] There is a deadlock in the Company as it has only 2 directors in the mother and the daughter who are also the 2 registered members of the Company, both holding an equal number of shares of one share each. [8] Even after receiving a formal notice from the daughter prior to this leave application, the mother had refused to take any legal action against the vendor company TYYR, which we understand to be a family company of some sort, the exact shareholding and directorship of which had not been disclosed to the Court in the affidavits filed. [9] The daughter cannot fathom why the mother could live with a purchase of a substantial asset of the Company and yet refused to have it registered in the Company’s name. The limitation period of 12 years for a specific performance action is just round the corner and the action would be statute-barred soon. [10] Any directors who had failed in the discharge of their statutory duties of care and skill to ensure that the Company becomes the registered owner of a landed asset and has possession of it would be 5 of 54 exposed to a negligent suit by the Company, who by then may be controlled by different shareholders, depending on who the mother would transfer or bequeath her shares to. There is also exposure to criminal liability under the Act for which the directors may be prosecuted. [11] On top of that the Company is a separate legal entity from its shareholders and directors and any dereliction of duties as a director of the Company to ensure that the assets of the Company are protected and preserved would expose the directors to suits by the shareholders, including future shareholders of the Company. [12] The mother is already about 89 years old and she might in her Will have bequeathed her 50% in the Company to anyone of her children. Her shares would be transmitted to whoever is the rightful beneficiary of her estate. [13] The daughter said that the mother had not disclosed any reason why she is not authorising the Company to take legal action to ensure the property is registered in the Company’s name before limitation sets in. She merely said she would not suffer any action being taken against the vendor company. [14] The daughter’s stand is that no one in the proper frame of mind would refuse to have the Property registered in the Company’s name when it is not disputed that the Company had paid the full redemption sum of RM1.815,801.31 for TYYR to redeem the Property from its bank BIMB on or about 20.6.2011 followed by TYYR’s instruction to its bank to deliver the title and related documents to the Company. The mother, being the 6 of 54 other half registered owner of the shares in the Company would also stand to gain from the registration of the Property in the name of the Company. [15] She said she has acted in the best interest of the Company by seeking leave of the Court to commence the specific performance suit in the name of the Company against the vendor company and that there is no collateral purpose intended by her action. [16] She is aware that her mother’s avowed stand is that her 50% share in the Company is not hers but that she was a mere nominee for her mother. Until that is resolved and even if that be resolved against her, there is still no prejudice to the Company and her mother because she would have the whole Company to herself with the landed asset sitting snugly secured and nicely nestled in the Company’s name, with streams of rental income flowing into the coffers of the Company. [17] The learned High Court Judge disagreed. The learned Judge was not impressed with her action to, as it were, right a wrong under the matriarchal leadership of the mother in the Company. [18] The learned Judge considered the daughter’s action in applying for stay of her other suits by and against the mother where the daughter has appealed to the Court of Appeal. The daughter would be acting in bad faith to commence this fresh action when in the other actions where she is appealing, she has asked for a stay of proceedings. [19] The learned Judge also considered the fact that there is a pending winding up petition filed against the Company and so if the 7 of 54 Company is wound up, the liquidator appointed would be in a position to bring an action to have the Property transferred to the Company’s name. [20] The learned Judge was apparently influenced by the fact that should it be held that the mother is mentally incapacitated from managing her own affairs including giving instructions to solicitors for the pending suits, then such a decision would invariably affect this particular leave order that the daughter is seeking in that the leave granted would have to be set aside resulting in unnecessary dissipation of time and energy on the part of all including the court. At any rate, having waited that long to bring this leave application, there does not seem to be any urgency in the matter which cannot be pursued by the Liquidator and that things would be clearer after the relevant High Court has heard the Mental Health Application brought by the daughter against the mother. [21] It would appear from the perspective of the mother, with which the learned High Court Judge agreed, that this current leave application is yet another spanner being thrown into the works by the daughter to get the upper hand in her strategy to win not just the battle but the war declared in the continuing saga of the family legal disputes. [22] The mother is in effect saying that the Court should not be awed by what the daughter has painted; a picture of her crusading for what is right and even righteous, when for more than a decade she had quietly sat by, in silence. To the mother, nothing has changed other than that she is now asking for the daughter’s shares back for she was a nominee to begin with. All hell seems to have broken loose. She sees her daughter springing into action in this case, for the battle has to be won not just at 8 of 54 the personal level but at the psychological level as well, with every step carefully crafted to score some points. [23] The learned High Court Judge had dismissed the daughter’s leave application in Enclosure 1 and against that decision she had appealed to this Court. [24] The daughter, Tai May Chean (“TMC”) is the plaintiff/appellant and the mother Ng Pik Lian (“NPL”) is the second defendant/second respondent; the Company being the nominal first defendant/first respondent. The daughter shall be referred to as TMC or the plaintiff and the mother as NPL or the defendant. [25] Whilst there is much heat in the disputations, we must yet seek to bring the light of the law to help discern the thoughts and action of the two protagonists, to dispassionately separate the cold facts of the corporation from the calculated family contestations that seek to engulf in a conflagration everything in its wake. What is the test of “good faith” for a leave application to commence a derivative action [26] The law appreciates that there would be occasions when a company is under the control of the majority who, for reasons best known to them, are not prepared to bring an action on behalf of the company to pursue what is in its interest, whether it be for recovering a debt or to enforce its rights, whether contractual or otherwise. It may also be a case where a company is not keen to defend an action brought against it but which is perceived by the minority as being not in the best interest of the 9 of 54 company. It also covers a case where the company may intervene in a proceeding. [27] Generally the majority is allowed to have its way and the minority at most, its say except where the majority can be shown not to be acting in the best interest of the company by its inaction when action is required. To ensure that the interest of the company is not being disregarded to the detriment of the minority who has the interest of the company in mind and at heart, the law requires leave to be obtained first from the Court before an action may be commenced in the name of the company. See s. 347(1) of the Act. [28] This right is available to a “complainant” which includes a member or director of a company. See s.345 of the Act. Section 348(2) of the Act requires a 30-day notice to be given to the directors prior to leave being sought from the Court. [29] The fact that the requisite notice had been given by the plaintiff TMC on 17.4.2019 is undisputed. Section 348 (4) of the Act provides that: “In deciding whether or not leave shall be granted, the Court must take into account 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 the application for leave to be granted.” (emphasis added) 10 of 54 [30] There are thus 2 limbs to s. 348(4) i.e. the complainant is acting in good faith (“Limb 1”) and it appears prima facie to be in the best interest of the company that the application for leave to be granted (“Limb 2”). Limb 1. The Good Faith Requirement [31] The learned Judicial Commissioner (“JC”) of the High Court had held that: “…in determining ‘good faith’, this Court needs to first consider whether, objectively assessed, there exists a good cause of action by UER against TYYR in respect of the Property and one that has reasonable prospect of success” and came to a conclusion that “…the requirement of ‘good faith’ on the part of the Plaintiff has not been established…” (emphasis added) [32] Learned counsel for the plaintiff had sought to challenge the learned JC’s finding of a lack of good faith on the part of the plaintiff on the following grounds:

(a) the learned JC clearly applied the wrong test (i.e. the objective test) for Limb 1;

(b) the learned JC failed to appreciate that hostility between the parties/or factions in corporate litigation disputes is bound to be present and therefore the mere fact that the parties are involved in other legal proceedings is insufficient to show lack of good faith on an applicant’s part; and 11 of 54

(c) the learned JC took into consideration irrelevant factors which were not raised by NPL herself. [33] Our own Court of Appeal in Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636 explained the test of good faith as follows: “[15] The second crucial requirement for the determination of the court in granting leave is the need for the respondent to show that he was acting in good faith in making this application (s181B(4)(a)). The onus of proof here is on the respondent on a balance of probabilities. The test of good faith is two-fold. One is an honest belief on the part of the respondent, and two, that this application is not brought up for a collateral purpose….” (emphasis added) [34] We agreed with learned counsel for the appellant that the Court of Appeal had followed the dicta in the Australian case of Swansson v Pratt [2002] NSWSC 583 as follows: [36] “Nevertheless, in my opinion, there are at least two interrelated factors to which the Courts will always have regard in determining whether the good faith requirement of s.237(2)(b) is satisfied., The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief., The second factor is whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process.”(emphasis added) [35] The “good faith” requirement has the twin elements of: 12 of 54

(a) whether the applicant honestly believed that a good cause of action exists and that it has a reasonable prospect of success; and

(b) whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process. [36] As may be rightly observed the Australian statutory provision on derivative action is similar to the Malaysian provision to the extent that an applicant must fulfil the requirement of “good faith” in seeking leave. S. 237(2) of the Australian Corporations Act 2001 (“the Australian Act”) states: “(2) The Court must grant the application if it is satisfied that:

(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b) the applicant is acting in good faith; and

(c) it is in the best interests of the company that the applicant be granted leave; and

(d) if the applicant is applying for leave to bring proceedings-- there is a serious question to be tried; and

(e) either:

(i) at least 14 days before making the application, the applicant gave written notice to the company of the 13 of 54 intention to apply for leave and of the reasons for applying; or

(i) is not satisfied.” [37] Our s.348(4) of the Act is also similar to s.216A(3) of the Singapore Companies Act (Chapter 50) (“The Singapore Companies Act) which reads: “(3) No action or arbitration may be brought and no intervention in an action or arbitration may be made under subsection (2) unless the Court is satisfied that —

(a) the complainant has given 14 days’ notice to the directors of the company of his intention to apply to the Court under subsection (2) if the directors of the company do not bring, diligently prosecute or defend or discontinue the action or arbitration;

(b) the complainant is acting in good faith; and

(c) it appears to be prima facie in the interests of the company that the action or arbitration be brought, prosecuted, defended or discontinued.” [38] We appreciate that just because the applicant/plaintiff says that she honestly believes that she has acted in good faith does not mean that the Court must accept her word for it. The Court is required to assess her subjective satisfaction to see if as a member of the company her honest believe has been reasonable. If she is also a director, as in this case, the Court would have to consider if a director similarly circumstanced would honestly believe that she is acting in good faith. 14 of 54 [39] That objective evaluation of reasonableness does not convert the subjective satisfaction of the member or director into an objective satisfaction of the Court. Whether an applicant honestly and reasonably believes that a good cause of action exists is to be subjectively assessed by the Court. See the Singapore Court of Appeal case of Ang Thiam Swee v Low Hian Chor [2013] SGCA 11. [40] The Supreme Court in New South Wales in Maher v Honeysett & Maher Electrical Contractors [2005] NSWSC 859 said at paragraph [64] that the test is subjective in nature and held that “a state of mind” must be found in the applicant that he believes that a good cause of action exists and has reasonable prospects of success. [41] With the greatest of respect to the learned JC, the wrong test seemed to have been applied in assessing the element of “good faith”. [42] However, beyond nomenclature, we would proceed to consider whether by applying the right test of subjective satisfaction of the part of TMC, has she satisfied the test of “good faith” and “prima facie to be in the best interest of the company”. What is the test of acting “prima facie in the best interest of the Company” for a leave application to commence a derivative action [43] This is Limb 2 of the requirement under s. 348(4) of the Act i.e. it appears prima facie to be in the best interest of the company that the application for leave to be granted. 15 of 54 [44] The position of the law properly stated is that when the Court considers the question of whether an action would prima facie be in the best interest of the company, the Court must consider whether objectively speaking, the company would gain substantially in money or money’s worth and whether there are genuine commercial considerations for not wanting to pursue the intended claim. [45] Thus in Abdul Rahim Suleiman & Anor v Faridah Md Lazim & Ors [2017] 1 CLJ 633, the Court of Appeal held, in respect of Limb 2 as follows: “[36] in an application for leave, should not go into the merits of the case at the leave stage. Its role is to see if the application for leave is frivolous … Secondly, in the matter of an application for leave under s. 181A of the Act, it would be the duty of the court to weigh all the circumstances and decide whether the claim ought to be pursued. [37] At the leave stage, the issue is only whether it is in the best interest of the eighth respondent to pursue the claim. The apposite question therefore, should be whether, having considered the facts of the case, the eighth respondent would gain substantially in money or money's worth and that there were genuine commercial considerations for not wanting to pursue claims …” (emphasis added) [46] It has also been variously stated as that the intended action is a legitimate and arguable case. [47] In interpreting a similar provision in the Canadian legislation, Robins JA, delivering judgment on behalf of the Ontario Court of Appeal in Richardson Greenshields of Canada Limited v Kalmacoff et al 16 of 54

The 2 main claims made by the Plaintiff was, firstly, that TMC had misappropriated RM4.9 million from the 2nd Defendant without her knowledge and that TMC was holding her share in the 1st Defendant 19 of 54 company as trustee for the Plaintiff’s benefit. On the first allegation, the Plaintiff has said that she does not know the basis on which TMC had taken the 2nd Defendant’s monies but TMC in her affidavit in reply has admitted to taking for herself and her companies the said sum of money and explained her basis for taking the money. On the second issue, the only eye witness to TMC signing the pre-signed documents was her father who was the Plaintiff’s husband who has passed away in May of this year. The Plaintiff was not an eye witness and she has no personal knowledge to enable her to say that TMC had signed the blank forms. Most likely, the determination of this issue will be subject to the opinions of handwriting experts who were scheduled to file affidavits and be subject to cross examination at the hearing. Strictly speaking, however the issue of forgery arises out of the counterclaim in Suit 49 and is not part of the oppression suit in Suit 49.” [58] TMC had also applied for stay of the mother’s Winding Up Petition against the Company in Kuala Lumpur High Court Companies Winding Up Petition No.: WA-28NCC-466-07/2017 (the “Company’s Winding Up Petition”) pending the disposal of the Mental Health Proceedings; the Winding Up being on the just and equitable ground. [59] The learned JC was of the view that it was disingenuous for TMC to commence the Mental Health Proceedings and on one hand stay all legal proceedings brought by the mother NPL on the ground that NPL does not have the mental capacity to manage herself and her affairs and to instruct solicitors but on the other hand to commence this suit against NPL and to assert that she was the wrongdoer in control of UER which has caused it to be incapacitated from bringing an action against TYYR. [60] The learned JC observed that TMC should hold this proceeding pending the results of the Mental Health Proceedings. At any rate all the 20 of 54 plaintiff’s stay applications were dismissed by the High Court with the result that there were no stay of the various contentious suits and the decisions are currently pending appeals to the Court of Appeal. [61] At first blush it appears that since all proceedings by the mother against the daughter are sought to be stayed and with that too all proceedings by the daughter against the mother, it would be natural that this present leave proceeding should not be allowed to proceed. However, there are peculiar considerations here such as limitation setting in and exposure of the daughter to suits for breach of fiduciary duty and statutory duty under the Act and even a criminal prosecution for an offence under the Act as well as what can only result in a likely overall benefit to the Company. [62] All these, as we hope to demonstrate, would justify treating this leave application as a stand-alone application that can be separately addressed, unaffected by the raging storm and howling wind of the contentions suits pending that seem to be gathering momentum with each step taken by the two protagonists. [63] As highlighted to us by learned counsel for the daughter, the mother herself had not brought up at all the Mental Health Proceedings in her Affidavit in Opposition affirmed on 1.8.2019. We agree with learned counsel for the plaintiff that the parties are bound by their depositions in their affidavits. See Tengku Ezuan Ismara bin Tengku Nun Ahmad & Anor v Lim Seng Choon David [2017] MLJU 1927. [64] It was brought up for the first time in the Affidavit filed by the mother’s solicitor Wong Zhi Khung which was filed on 13.9.2019 which 21 of 54 was after the deadline set by the High Court for the filing of the second defendant’s Affidavit and after the plaintiff’s solicitors had filed their submissions. It was also impressed upon us by the plaintiff’s counsel that no leave was sought nor obtained from the High Court for the filing and service of the said defendant’s solicitor’s Affidavit. [65] We also note that it was learned counsel’s submission on behalf of the mother that before the daughter may challenge the capacity of the mother to affirm her Affidavits in OS 49 and a Suit 124 and to instruct her solicitors to act for her, the daughter must first have obtained an order under the Mental Health Act 2001 after an inquiry under s. 52 thereof. The daughter had applied to strike out the mother’s action in OS 49 and to strike out her Affidavit in Suit 124. [66] The learned JC Wong Chee Lin observed as follows in Ng Pik Lian v United Eastern Resources Sdn Bhd & Ors and another appeal [2018] MLJU 1331: “[30] Learned Counsel for the Plaintiff submits that the Court should not make the order sought by the applicants as they cannot seek to challenge the mental capacity of the Plaintiff without making an inquiry under section 52 of the Mental Health Act 2001. It is not in dispute that the applications herein are not brought pursuant to the Mental Health Act 2001. [31] In support, the Plaintiff relies on the Court of Appeal decision in the case of MTD Prime Sdn Bhd v See Hwee Keong & Ors and another appeal [2016] 4 MLJ 695 wherein the defendants contended that the plaintiff had no locus standi to bring the action as he lacked the mental capacity to do so. The Court of Appeal held that: 22 of 54 “…As a general rule, under O 76 r 2(1) of the Rules of Court 2012 (“the ROC 2012”) a person under disability does not have the capacity to bring proceedings in Court. Order 76 r 2(1) of the ROC 2012 provides: A person under disability may not bring, make a claim in, defend, make a counterclaim in, or intervene in any proceedings, or appear in any proceedings under a judgment or order notice of which has been served on him, except by his litigation representative. Order 76 r 1 of the ROC 2012 in essence provides that a person under disability is a person who is a minor or a patient. A ‘patient’ means a ‘mentally disturbed person’ within the meaning of the Mental Health Act 2001. … However, what is of greater significance for the purpose of this appeal is the definition of a ‘mentally disordered person’ as set out in s 51 of the Mental Health Act 2001. The said s 51 provides that a ‘mentally disordered person’ means any person found by due course of law to be mentally disordered and incapable of managing himself and his affairs. The law in the form of s 52 of the Mental Health Act 2001 requires that an inquiry be held before any person is declared to be a mentally disordered person. In the instant case, the plaintiff cannot be said to be a mentally disordered person as he has not been so found by due course of law to be mentally disordered and incapable of managing himself and his affairs. This by itself is sufficient to defeat the argument raised by the defendants (See Wan Chon v Chua Ka Bu [2990] 2 MLJ 460). 23 of 54 …… [34] Based on the authorities cited by Learned Counsel for the Plaintiff, I agree that I should not dismiss the Plaintiff’s actions on the ground of mental incapacity as she has not been found to be mentally disordered pursuant to due course of law ie under the Mental Health Act 2001. Assuming, however, that I am wrong and that I am at liberty to determine the mental capacity of the Plaintiff without an inquiry under section 52 of the Mental Health Act 2001, I would find that TMC has adduced sufficient evidence to shift the evidential burden of proof to the Plaintiff.” [67] The learned JC Wong Chee Lin finally concluded as follows: “[79] In all the premises, I am of the view that it would be just for me to only decide whether I will admit or exclude the affidavits of the Plaintiff and her husband after hearing the other evidence in Suit 49 and not at this juncture. Accordingly, I dismiss all the applications to strike out Suit 49 (the application by TMC and the 2nd and 4th Defendants in Suit 49 and the application by TMC in Suit 124) with no order as to costs.” [68] That was what constrained the daughter to file the Mental Health Proceedings for the appointment of a committee to manage the affairs of the mother and it would be natural then to apply for a stay of OS 49, Suit 124 and a subsequent Winding Up Petition so as to properly put the horse before the cart. [69] We also note that it was the mother who had earlier applied for a stay of OS 49 when she was unhappy with the decision of the High Court in Civil Suit No. 22NCC-497-07/2-2013 (“Suit 497”) to set aside a consent judgment entered into in OS 49 with the result that OS 49 was restored for hearing. The mother’s application for stay of OS 49 pending her 24 of 54 appeal against the setting aside of the consent judgment was dismissed by the learned JC Khadijah Idris in Ng Pik Lian v United Eastern Resources Sdn Bhd & Ors [2018] MLJU 568. The mother had not appealed against that decision dismissing her stay of OS 49. [70] We find merit in the plaintiff’s argument that these proceedings especially the Mental Health Proceedings, would not be relevant to the proposed derivative action because NPL would not be named as a party to the said action. More importantly, if the derivative action were to succeed, UER would benefit from the said action which would indirectly benefit NPL as a shareholder of UER in equal manner as TMC since both hold equal shares in UER. At this stage all that the plaintiff needs to show is that prima facie the proposed derivative action would be in the best interest of the company. [71] With respect we do not think that just because there is a history of pending litigation between the plaintiff daughter and the defendant mother, there must then be some oblique or collateral purpose that the plaintiff is here pursuing. [72] Hostility between the parties does not equate to a lack of good faith and neither does it raise any presumption of a collateral purpose on the part of the applicant unless it is a case where the venomous vendetta of the parties has led to vile vilification, clouding all reasonable and rational decision and producing a perverted pursuit for personal gains. See the case of Pang Yong Hock and Another v PKS Contracts Services Pte Ltd [2004] SGCA 18 at paragraphs 20 and 22. 25 of 54 [73] Whilst we share the concern of the learned JC in that the Court “cannot but be alive to the possibility that the Plaintiff’s [TMC] present action is part of her strategy in furthering her own personal interests in the legal proceedings against the parties therein rather than the interest of the 1st Defendant [UER]”, the Court must nevertheless assess her subjective satisfaction of having acted in “good faith” and “in the best interest of the company” by evaluating dispassionately the benefits that she seeks to obtain for the Company through the proposed litigation. [74] If there is to be shown a collateral purpose, it has to be borne out from the reasons given by the defendant mother in opposing the leave application for a derivative action against TYYR. [75] Having chosen the structure of a limited company to house her interests in the Property, the mother cannot ignore the parameters within which a director cum member of the Company, in this case her daughter with whom she has fallen out, is constrained to act to preserve and promote the best interest of the Company. [76] It is not disputed that the Company had paid TYYR’s bank to redeem the Property of TYYR and the relevant Transfer Form had been sent by the solicitors of TYYR for its client’s execution but TYYR had not executed as the transferor. The rental continued to be collected by TYYR without any accounting to the Company UER. [77] If indeed this leave action is a strategic move by the plaintiff in the overall big picture of the multiplicity of suits between the mother and daughter, then it has to be shown how this strategy could not be furthering the best interest of the Company. The plaintiff may even be acting 26 of 54 selfishly as a member of the Company, but then it is the kind of altruistic selfishness that would preserve for the Company what it is supposed to have obtained, with the Property duly registered in its name. [78] Even if it is finally decided that the shares that she holds in the Company is only as a nominee for her mother, that would still not bring any detriment to the Company but only the fruits of proper governance where the Company, having paid the purchase price for the Property, has every right, consistent with the law and proper accounting, to have the Property reflected as a registered asset of the Company with the land title reflecting that. It is trite law that under the Torrens system of title by registration, the title is everything. [79] The learned JC was arguably affected by TMC’s conduct in seeking to stay OS 49, Suit 124 and the Company’s Winding Up Proceedings, when to proceed would not be to her advantage but on the other hand, to push for her leave application to be heard, to further ostensibly, the Company’s interests as a whole. [80] Whilst TMC may be no angel, we cannot say that she has slipped over to the dark side by wanting to ensure that the Company conducts its affairs in accordance with the law and that its member and director in her, be allowed to pursue the derivative action, not directed against NPL but against TYYR which is supposed to have done everything to ensure that the Property is registered in the name of the Company and the rental accounted for. [81] Not to do so would be a dereliction of her duty as a director of the Company that the law enjoins to have her act at all time properly, with 27 of 54 all due diligence of reasonable skill and care and in the best interest of the Company. [82] It is no comfort to say that no one would sue her for any breach of fiduciary duties as the other member is the mother who is not willing to take any legal action against the vendor TYYR. As is only too obvious, any new members of the company, in going through the records of the Company may want to take action against the directors who were responsible for not ensuring that the substantial purchase and asset of the Company is preserved. [83] The mother is already in her late eighties and her shares in the company may be bequeathed to her other children who may not see eye-to-eye with their sibling TMC. If at the end of the day TMC’s shares is declared by the Court to have been held in trust for the mother NPL, TMC might find herself not only ousted from the company but also facing a suit from the Company for not ensuring something as simple as ensuring that the Company’s Property is duly registered in the Company’s name. [84] We are not given more information about TYYR in terms of shareholding and directorship save that it is a family company but the reality is why should TMC suffer the risk of being sued for breach of fiduciary and statutory duties under the Act because of a possible new dynamics in the family dispute as and when the mother NPL is no more. [85] We must resist every temptation to read more into the undisputed facts that stare at us in the face. We may not fathom the under-lying currents in the simmering discontent that had led to the conflagration in the multiple suits filed by the daughter and the mother at different fronts 28 of 54 for indeed who can understand the motives and motivations of family relationships that have gone awfully awry. [86] Be that as it may, the learned JC had earlier found that the daughter TMC had shown a good prima facie cause of action by the Company UER against TYYR and that the mother NPL was unable to rebut the documentary evidence showing payment of the redemption sum by UER. There was also the finding of the learned JC that the transfer documents had been forwarded to UER evidencing the purchase of the Property and that there was nothing to suggest that UER had paid TYYR for any other reason. The learned JC’s clarity of findings of facts are set out below: “[38] I find that the Plaintiff has shown that there is a good prima facie cause of action by UER against TYYR in respect of UER’s purchase of the Property from TYYR. The 2nd Defendant has not been able to rebut the documentary evidence showing that the redemption sum of RM1,815,801.31 was in fact paid by UER to BIMB. There is also the fact that the Transfer From 14A and the Assignment of the Property were forwarded to UER evidencing the purchase of the Property. [39] Apart from the 2nd Defendant’s letter of 19.9.2014 stating that she had ‘no recollection that UER has ever insisted that any property of TYY be transferred to UER or that any rental income by TYY should be paid to UER’ and stating further that she ‘had not, do not and will not support, any legal action to be taken by UER against TYY’, there is nothing before this Court suggesting that the payment of the said sum of RM1,815,801.31 was for any purpose otherwise than for the purchase of the Property. In fact, the 2nd Defendant in the same letter had stated that she had ‘no issue with any rentals relating to the above property being held by TYY and I have not and 29 of 54 will not support any action to insist that the above property be transferred from TYY to UER’.” [87] We agree with learned counsel for the daughter that the above provided ample objective grounds to sustain a subjective good faith that is required to bring this derivative action. [88] We are of the view that, more often than not, a leave application of this nature is constrained by the parties sometimes obstinately refusing to agree with the other in the context of trouble brewing and even boiling over in disputes that have disrupted if not destroyed the already fragile relationship of mutual trust and confidence. Such being the case, we need to tease out the material facts not in dispute and see if there are any valid reasons proffered for prohibiting what is prima facie an action that can only be for the best interest of the Company. It does not matter if the same parties are already litigating at various fronts and that this move by one may be seen by the other as trying to score points in the overall tally of the battle and the bigger scheme of things. [89] Parties may even be hostile towards each other arising out of a total collapse of the element of mutual trust and confidence. It is only too true that love can so easily turn to hate and that trust once broken, is difficult to be restored. [90] Decided cases have illustrated that when faced with the allegation of a collateral and oblique purpose in seeking leave, the plaintiff applicant must point to the cold facts that cannot be contradicted that if leave is granted, prima facie the action would be in the best interest of the company. 30 of 54 [91] Our attention was drawn on to the case of Ong Keng Hat v Fortune Frontier (M) Sdn Bhd & Anor [2015] 11 MLJ 604 where Mohd Nazlan JC (as he then was) held at paragraph 46: “The court ruled that the onus was on the applicant to establish good faith on his part and the court must assess the motivations of an applicant in order to determine whether he is acting in good faith. Good faith was stated to be less dependant on the motives which trigger the application, but more on the purpose of the proposed derivative action, which must have a clear nexus with the company’s benefits or interests. The motivations of the applicant would only amount to a lack of good faith if they revealed that the applicant’s judgment was influenced by purely personal considerations. The applicant must demonstrate that he is genuinely aggrieved and that his collateral purpose is sufficiently consistent with the objective of doing justice to the company.” (emphasis added) [92] See also the cases of Pang Yong Hock and Another v PKS Contracts Services Pte Ltd [2004] SGCA 18 at paragraphs 20 and 21 and Ang Thiam Swee at paragraph 13. [93] The cases suggest that the focus and concern of the Court should be less on the motive that triggers the action but the mission that the action is sought to achieve. For after all, as Solomon would remind us, the purposes of a person’s heart are deep waters and it would take one who has insight to draw them out. [94] It is a case of the ends must justify the means and here the means is the unpleasantness of the Court’s hand in moving the subject company into action when it has chosen the default position of inaction. 31 of 54 The ends is that the Company’s landed asset in the Property purchased would be preserved and the right to collect rental. There is also a need for the Company’s accounts and Annual Report to accurately and correctly reflect the purchase by the Company and a substantial asset at that. [95] The Company UER’s accounts have to be audited and the auditor would naturally be asking for the proof of the Property purchased and unless this is reflected in the title being registered in the Company’s name, there may be a need to qualify the accounts. [96] Section 245(1) and (2) of the Companies Act 2016 imposes a duty on directors of a company to keep proper accounting records to explain the transactions of a company as follows: “245(1) A company, the directors and managers of a company shall -

(a) cause to be kept the accounting and other records to sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance sheets and any documents required to be attached thereto to be prepared; and

(b) cause the accounting and other records to be kept in a manner as to enable the accounting and other records to be conveniently and properly audited.”

(a) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and

(b) any additional knowledge, skill and experience which the director in fact has.

(a) that the Company had purchased the said Property;

(b) that the Company had paid on 27.6.2011 the redemption sum of RM1,851,801.31 for the said Property to BIMB;

(c) that TYYR solicitors, Messrs Balasingam & Co themselves had forwarded the Transfer Documents to UER for execution by way of a letter dated 18.1.2013;

(d) that the Transfer Documents were then forwarded to TYYR for execution vide letter dated 6.2.2013 but TYYR refused to do so despite the Company being the beneficial owner of the said Property. [159] TYYR would stand in the position of a bare trustee of the Property and the uncontroverted evidence presented so far clearly show that prima facie the said Property is that of the Company and that it should be allowed to pursue its good cause of action against TYYR. [160] The mother NPL would also owe a fiduciary and statutory duty to the Company to safeguard the asset of the Company and this cannot be affected nor assailed by the outcome of the dispute between the 53 of 54 mother and the daughter on the true nature of her shareholding in the Company. [161] We cannot appreciate how there could be a “genuine commercial consideration” by the mother in refusing to pursue the claim against TYYR when prima facie the mother would be in breach of her fiduciary duties as a director of Company. [162] We see no good reason to deny the Company the right to prove and to claim what it has a basis for asserting that the Property should be duly registered in its name. [163] Therefore, we had allowed the appeal and granted an order in terms of the OS as we were of the view that there is good faith on the part of the appellant/plaintiff and prima facie it is in the best interest of the Company. In any event the mother respondent, being a 50% shareholder in the Company, would also stand to gain from the action if successful. [164] The order of the High Court dated 24.10.2019 dismissing the plaintiff’s leave application for a derivative action was set aside. We also ordered costs of RM20,000.00 to the appellant to be paid by the respondent mother subject to allocator. Dated: 21 September 2021. Sgd. LEE SWEE SENG Judge Court of Appeal Malaysia 54 of 54 For the Appellant: Goh Meng Yew Goh Jen Nie Messrs Iza Ng Yeoh & Kit For the Respondent: Michael Chow Keat Thye Wong Zhi Khung Messrs Michael Chow Date of Decision: 27 April 2021.