A plaintiff seeking leave for a derivative action must demonstrate good faith and that the action is in the best interest of the company, as per statutory requirements.

Wan Muhammad Amin Wan Yahya J:

[1] This is the Plaintiff's application for leave to commence a derivative action against the Defendants under ss 347(1) and (2) and 348 of the Companies Act 2016 (" CA 2016")("this Application").

[2] The Plaintiff, Aurelia Joie Thai, is a director of the 1st Defendant, Maxter Glove Manufacturing Sdn Bhd., and seeks to bring an action on behalf of the 1st Defendant against the 2nd Defendant, Thai Kim Sim, who is also a director of the 1st Defendant.

[3] The application stems primarily from the acquisition of a Falcon 7X Aircraft ("the Aircraft") by the 1st Defendant at a purchase price of USD47,388,000, which the Plaintiff alleges was "bulldozed" through by the 2nd Defendant without proper board approval, followed by irregular accounting treatment of the acquisition.

A] Salient Background Facts

[4] The 1st Defendant is a wholly-owned subsidiary of Supermax Corporation Berhad ("SCB"), a public listed company with a public spread of shareholders. At the material time when the Aircraft acquisition was being considered, the 1st Defendant had only two directors: the Plaintiff and the 2nd Defendant.

[5] SCB's Board of Directors at the material time included Albert Saychuan Cheok (then Chairman), Dato' Ting Heng Peng, Ng Keng Lim @ Ngooi Keng Lim, Tan Chee Keong, Dr Rashid bin Bakar, and Cecile Jaclyn Thai. The 2nd Defendant was only appointed as Executive Chairman of SCB on 8 December 2021, after the Directors' Written Resolution approving the Aircraft acquisition was passed on 26 November 2021.

[6] On 26 November 2021, the Board of Directors of SCB approved the acquisition of the Aircraft by a vote of 5 to 1, with only Cecile Thai dissenting. On the same day, the 2nd Defendant, acting as the authorised representative of SCB, signed the 1st Defendant's Members' Written Resolution for the proposed acquisition.

[7] On 26 November 2021, the Plaintiff received a WhatsApp message from Andrew Lim (Senior Manager, Corporate Affairs and Investor Communications at SCB) with a proposed Board resolution of the 1st Defendant pertaining to the acquisition ("Aircraft Board Resolution") which had already been signed by the 2nd Defendant.

[8] The Plaintiff did not sign the resolution and later expressly refused to do so on 12 February 2022. Nevertheless, the acquisition proceeded, and the Aircraft was purchased.

B] The Applicable Legal Principles

[9] Section 348 (4) of CA 2016 requires that before leave is granted to commence a derivative action, the Court must be satisfied that:

i) the complainant is acting in good faith; and

ii) it appears prima facie to be in the best interest of the company that the application for leave be granted.

[10] These requirements are cumulative, and the onus is on the Plaintiff to satisfy the Court on a balance of probabilities that both criteria have been met.

C] Issues For Determination

[11] The main issues for determination are:

i) Whether the Plaintiff's application satisfies the statutory requirements under s 348(4) of CA 2016;

ii) Whether the Plaintiff is acting in good faith;

iii) Whether it appears prima facie to be in the best interest of the company to grant leave.

D] Analysis And Findings

The Corporate Relationship Between SCB And The 1st Defendant

[12] It is a fundamental principle of company law that a company incorporated under the Companies Act is a body corporate with legal personality separate from that of its members, as enshrined in s 20 of CA 2016. However, the corporate relationship between a parent company and its wholly-owned subsidiary must be viewed in its proper commercial context.

[13] As held in D.H.N. Food Distributors Ltd v. Tower Hamlets London Borough Council [1976] 1 WLR 852, groups of companies are often treated as one concern for practical business purposes. The English Court of Appeal held as follows:

"Third, lifting the corporate veil A further very interesting point was raised by Mr Dobry on company law. We all know that in many respects a group of companies are