Tan Han Kwan & 2 Lagi KSCH Property Sdn Bhd & 4 Lagi

Tan Han Kwan & 2 Lagi KSCH Property Sdn Bhd & 4 Lagi

On the balance of probabilities the court was satisfied the plaintiffs honestly believed a good cause of action existed and that the complaints were not manifestly ill-founded; there was a reasonable basis to infer potential breaches (related party rental, unexplained payments, possible secret profits) and the wrongdoers controlled the company and were unwilling to act, therefore leave under s.348(4) CA 2016 was granted as the proposed derivative action was prima facie in the best interests of the company.

Citation
WA-24NCC-425-09/2020 (Mahkamah Tinggi)
Parties
Plaintiff: Tan Han Kwan; Plaintiff: Tan Mei Li; Plaintiff: Tan Su Li; 1st Defendant (company): KSCH Property Sdn Bhd; 2nd Defendant: Ch'ng Kong San; 3rd Defendant: Teh Siew Ho; 4th Defendant: Woo Yoke Fong; 5th Defendant: Lee Yen Mei
Court
High Court
Jurisdiction
Malaysia
Judgment Date
18 May 2021
Case Number
WA-24NCC-425-09/2020 (Mahkamah Tinggi)
Procedural Posture
Derivative Action Under Companies Act 2016 / Originating Summons for Leave Under S.347/s.348 (leave Granted)
Outcome
Leave granted to plaintiffs to commence derivative action on behalf of KSCH Property Sdn Bhd under s.347 CA 2016
Legal Topics
Derivative Action Leave, Breach of Fiduciary Duty, Related Party Transactions, Disclosure Obligations (mpers), Directors' Remuneration, Mismanagement, Abuse of Process, Good Faith Test, Best Interests of the Company
Source Language
Malay/English
Company Law Corporate Governance Civil Procedure Derivative Action Leave Breach of Fiduciary Duty Related Party Transactions Disclosure Obligations (mpers) Directors' Remuneration +4 more

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Parties

Tan Han Kwan

Plaintiff

Tan Mei Li

Plaintiff

Tan Su Li

Plaintiff

KSCH Property Sdn Bhd

1st Defendant (company)

Ch'ng Kong San

2nd Defendant

Teh Siew Ho

3rd Defendant

Woo Yoke Fong

4th Defendant

Lee Yen Mei

5th Defendant

Procedural Posture

Derivative Action Under Companies Act 2016 / Originating Summons for Leave Under S.347/s.348 (leave Granted)

Legal Issues

  1. 1 Whether plaintiffs acted in good faith in seeking leave under s.347/s.348 CA 2016
  2. 2 Whether there is a reasonable cause of action/ prima facie case of breach of fiduciary duty and mismanagement (related party rental, secret profits, excessive payments, misuse of company funds)
  3. 3 Whether the proposed derivative action is prima facie in the best interests of the company

Ratio Decidendi

On the balance of probabilities the court was satisfied the plaintiffs honestly believed a good cause of action existed and that the complaints were not manifestly ill-founded; there was a reasonable basis to infer potential breaches (related party rental, unexplained payments, possible secret profits) and the wrongdoers controlled the company and were unwilling to act, therefore leave under s.348(4) CA 2016 was granted as the proposed derivative action was prima facie in the best interests of the company.

Court Disposition

Leave granted to plaintiffs to commence derivative action on behalf of KSCH Property Sdn Bhd under s.347 CA 2016

Orders

  • Grant leave to commence derivative action on behalf of KSCH Property Sdn Bhd
  • Amend prayer (g) to: Company to pay reasonable legal fees and disbursements incurred by Plaintiffs in connection with the intended derivative action