Leave for derivative action requires proof of good faith and best interest of the company; ongoing disputes do not negate responsibilities if action serves company interests.

Lee Swee Seng JCA:

[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 2001. 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 June 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 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:

(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 two directors in the mother and the daughter who are also the two 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 around 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 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 ens