A court must rigorously apply the requirements of good faith and direct causal connection in derivative actions under the Companies Act, ensuring alignment with the company's best interests.

[1] The facts underlying this application are not disputed and we are grateful to learned counsel of both parties for having briefly simplified them. Suffice that we reproduce the brief facts as found in the appellants written submission:-

a. The respondent filed an application by way of originating summons seeking leave pursuant to s 181A of the Companies Act 1965 to commence a derivative action in the name of the Appellant against the appellants directors, Telekom Malaysia Berhad (TM) and Telekom Enterprise Sdn Bhd (TESB) and their directors.

b. On 9 July 2008, leave was granted by the High Court Judge for the respondent to commence a derivative action in the name of the appellant along the lines of the proposed statement of claim. This is the order being appealed against.

c. The derivative action in the name of the appellant is intended to recover the alleged loss and damages suffered by the appellant for the breach of the amended and Restated Supplemental Agreement dated 4 April 2002 entered into between amongst others the appellant and DeTeAsia Holding GmbH ("the ARSA").

d. Under the ARSA, the appellant agreed that it would not merge its business to allot/issue new shares without the consent of DeTeAsia.

e. Alternatively, if consent is not given, the appellant would have to fulfill the conditions in Schedule 1 to the ARSA. Under Schedule 1, the appellant would have to procure a third party to buy out the DeTeAsia held shares in the appellant.

f. At the material time, DeTeAsia held 6.05% of shares in the appellant.

g. On 28 October 2002 the appellant entered into an agreement with TM for the acquisition of TMs entire shareholding in TM Cellular Sdn Bhd (TM Cellular) subject to consideration of issuance of 635,471,698 ordinary Celcom Shares to TESB at the price of RM2.65 each to be taken as fully paid up ("the Conditional SPA").

h. On 7 March 2003, DeTeAsia commenced arbitration proceedings against the appellant in the ICC International Court of Arbitration ("the Arbitration").

i. In the arbitration, DeTeAsia sought to enforce the Buy Out Provision in Schedule 1 to the ARSA by alleging that the appellant entered into the Conditional SPA without the consent of DeTeAsia and without adhering to the buy out at RM7 per Celcom share (ie, the appellants shares).

j. As a result of the issuance of Celcom shares under the SPA to TESB, TESB was thereafter legally obliged to offer to purchase Celcom Shares from the other shareholders pursuant to s 34 of the Securities Commission Act 1993 ("SC Act").

k. On 3 April 2003, TESB issued a Notice of Mandatory Offer ("MGO") to the appellants Board of Directors at RM2.75 per Celcom share which was then followed by a takeover document being dispatched on 23 May 2003.

l. On 17 April 2003, the Conditional SPA was completed and in the circumstances, TESB held 46.35% of equity interest in the appellant.

m. On 22 April 2003, TESB acquired an additional 55,000,000 Celcom Shares through direct business transaction at the price of RM2.715 each which increased its equity interest in the appellant to 48.45%.

n. As at 19 June 3003, TESB vide the mandatory general offer acquired 96.32% of the appellants shareholding thereby triggering a compulsory acquisition of the remaining Celcom shares pursuant to s 34 of the Act.

o. Pursuant to the compulsory buy-out under s 34 of the Act, the respondents Celcom Shares were compulsorily acquired by TESB.

p. On 2 August 2005, an arbitration award ("the award") was published and handed down by the ICC International Court of Arbitration in the Arbitration against the appellant for damages in the sum of USD177,234,609 together with interest in the sum of USD410,000 and costs of arbitration in the sum of USD820,000 ("award sum").

q. The award was only limited to the issue of the enforceability of the Buy Out Provision. There was no finding in respect of the validity or legality of the Conditional SPA and there was no order for specific performance of the Buy Out Prov