Ong Hock Sim FJ:

The appellants are three of four directors of the Seremban Town Service Sendirian Berhad (hereinafter called "the company") and were sued in their capacities as such, as the second, third and fourth defendants by the respondent, a shareholder of the company, in Civil Action No. 449 of 1973, in the High Court at Kuala Lumpur.Action was discontinued at the commencement of the hearing against the first defendant, the company's managing director and father of the respondent.

The proceedings were instituted as a result of a decision of the Board of Directors at a meeting on April 7 1973 to allot to nine named Bumiputra workers of the company 31,500 unissued shares at par which would thereby increase the paid-up capital to $136,500 of the authorised capital of $250,000.The basis of the action is set out in paras 6 and 7 of the Statement of Claim as follows:

6. The defendants have recently resolved to grant and/or issue the unissued new shares of the said company to members of the public which said shares have not or at all been first offered to the plaintiff and the existing shareholders of the company in accordance with the aforesaid Articles of Association of the said company."

(These Articles were Articles 6 to 9, 25 to 40 and 46 - vide para. 5 of the Statement of Claim.)

7. The defendants' resolution to grant and/or issue such unissued new shares to members of the public are void and unlawful and ultra vires the Articles of Association of the said company as the said Articles expressly prohibit such issues to any members of the public.

The Statement of Defence appears unnecessarily verbose and patently evasive and briefly the appellants say:

(a) Neither the appellant nor any other shareholder was entitled to be offered the shares in question.

(b) The offer of such shares was in accordance with the Articles of Association and in compliance with the New Economic Policy to enable Bumiputras to own thirty per centum capital shares in commercial undertakings.

In opening his case, respondent's Counsel posed the Issues as hereunder:

(1) Whether the plaintiff had under the articles the sole and primary rights to the issue of any or (of?) unissued shares of the company before offering the same to any one outside the company.

(2) Whether the defendants by not offering these shares to the plaintiff are acting ultra vires.

(3)If the defendants had acted so whether such act is bona fide or mala fide.

(4) Whether the defendants by virtue of the Articles of Association can act contrary to the decision of the company.

He conceded the answers to issues 3) and 4) were dependent upon the evidence but in our view, it was little wonder to us that the learned Judge concluded "most of the lengthy evidence adduced was in fact unnecessary" and that -

the hearing was protracted because plaintiff sought also to show that -

(a) the second defendant has throughout his tenure of office as director of the company never really been interested in the welfare of the company but only his own;

(b) there was evidence of bad faith in the decision of the Board of Directors; and

(c) the persons described in the list submitted by the second defendant to the Board of Directors were low level employees of the company and therefore men of straw and such, not to pay for the shares and consequently the venture of the company to allow bumiputra participation in case was just another 'Ali Baba' system."

We agree with the learned judge's approach in the first instance as he says:

Briefly, in the main action, the plaintiff set for a declaration that the acts of the defendants to issue the unissued new shares of the company to the selected owns is void and ultra vires of the Memorandum and Articles of Association

of the company.The plaintiff also seeks for an injunction to restrain the defendants from holding or conducting any Directors' meeting to approve, issue, convey, dispose or transfer the unissued new shares of the company to any members of the p