The court establishes that a statutory derivative action can be initiated by a shareholder even if not a minority, focusing on good faith and best corporate interest criteria under the Companies Act 1965.

Introduction

[1] This case concerns an application by the Plaintiff by way of an originating summons dated 21 January 2015, for leave under Companies Act 1965 , s 181A of the , to bring a statutory derivative action on behalf of Fortune Frontier (M) Sdn Bhd, being the first defendant company, against China State Construction Engineering (M) Sdn Bhd ("China State Construction") and one Tan Wei Rong.

[2] I heard the application on 28 May 2015 and gave my decision to grant leave on 25 June 2015. This is my judgment, setting out the full reasons for my decision on the application which involves a number of important points on the scope of Companies Act 1965 , ss 181A and 181B of the .

Salient Background Facts

[3] The Plaintiff and the second defendant equally own the locally incorporated first defendant company, by virtue of the single share held by each, both of whom are also the only directors on the Board of the first defendant company, with a paid up capital of RM2.

[4] Tan Wei Rong, the son of Tan Boon Leong, the second defendant, is the owner of a landed property under Geran Mukim 967, Lot 1737 Mukim Pulai, District of Johor Bahru ("TWR Land"), which location is adjacent to a landed property owned by the first defendant, held under HSM 181, Lot 1363, Mukim Pulai, District of Johor Bahru ("First Defendant's Land").

[5] Tan Wei Rong had been negotiating with China State Construction to rent out TWR Land. Given that access to TWR Land is through the First Defendant's Land, and since China State Construction required larger space to house their workers, set up operations site office and store machineries, Tan Wei Rong suggested that the First Defendant's Land be rented to China State Construction as well.

[6] The Plaintiff and the second defendant, being directors of the first defendant, agreed with the suggestion, provided the interest of the first defendant be safeguarded in any such transaction. The directors then agreed that Tan Wei Rong instruct Messrs Dennis Nik & Wong to draft a tenancy agreement for the purpose.

[7] Dissatisfied with the draft by Messrs Dennis Nik & Wong, the Plaintiff instructed Messrs Woon Wee Yuen & Partners to prepare a new draft tenancy agreement.

[8] On 17 September 2014, Tan Wei Rong entered into a Tenancy Agreement with China State Construction in respect of both TWR Land and the First Defendant's Land, the latter by way of a sub-tenancy in Tan Wei Rong's capacity as its purported tenant, notwithstanding the absence of a written tenancy agreement between the first defendant and Tan Wei Rong.

Grounds For Leave Application

[9] The grounds for the application are stated to be as follows:-

(i) China State Construction and Tan Wei Rong had trespassed into the First Defendant's Land, causing losses to the first defendant. It is of relevance to mention that Tan Wei Rong is not a present or past member of the Board of the first defendant;

(ii) The second defendant, despite being a director and 50% shareholder of the first defendant, had refused to cooperate with and assist the Plaintiff to protect the first defendant and prevent the first defendant from incurring losses as a consequence of the actions and conduct of China State Construction and Tan Wei Rong;

(iii) The second defendant had failed in his duty as a director of the first defendant by putting personal interest before the interest of the first defendant, by way of in effect, preventin