JUDGMENT

(Enclosure 1)

Leonard David Shim J:

Introduction

[1] This is an application for leave to initiate a derivative action on behalf of the 1st respondent, Power Majestic Sdn Bhd (PMSB) against the 2nd to 8th respondent pursuant to ss 347, 348 and 350 of the Companies Act 2016.

[2] The grounds of this application are (a) the applicants are acting in good faith (b) it is in the best interest of the 1st respondent that the Originating Summons be allowed in terms and (c) all other reasons set out in the 1st applicant's Affidavit No 1 of Lim Lee Ching and the 2nd applicant's Affidavit No 1 of Hong Boon Swee both affirmed on 29 May 2024.

[3] The applicants summarised the criteria for the granting of leave to institute derivative action(s) as decided in Dato' Seri Timor Shah Rafiq v. Nautilus Tug & Towage Sdn Bhd; [2024] 3 MLJ 433; [2024] 10 CLJ 757 as follows:

a. Common law derivative action has now been displaced by the statutory regime under the CA 2016 (see s 347(3) CA 2016) (para 19 of the Law Report).

b. However, common law principles on interpretation of "good faith" and "best interest of the company" within the meaning of s 348 will still be relevant and applicable in the appropriate circumstances (para 19 of the Law Report).

c. The case of Celcom (Malaysia) Bhd v. Mohd Shuaib Ishak; [2011] 3 MLJ 636; [2010] 3 CLJ 808 ('Celcom') (which was dealing with CA 1965) is still relevant and applicable to ss 347 and 348 CA 2016 as they are in pari materia to ss 181A to 181B of CA 1965 except on the point of applicability of common law derivative action (para 30 of the Law Report).

d. The applicant(s) must meet the dual elements or requirements of s 348(4) CA 2016:

i. Good faith;

ii. It appears prima facie to be in the best interest of the company

(para 22 of the Law Report)

e. Based on the 2 requirements, leave is not intended to be given lightly.

(para 22 of the Law Report).

f. Once leave is given, it vests extraordinary power in the applicants to represent and advance the company's interest. Thus, the court role is to ensure strict compliance with the statutory requirements (para 23 of the Law Report).

g. The test for good faith is two-fold:

i. honest belief on the part of the applicants that a good cause of action exists and has a reasonable prospect of success;

ii. the application is not brought for a collateral purpose. (following Celcom's case) (para 28 of the Law Report)

h. In respect of the two-fold test:

i. If the applicant fails to establish that he has requisite honest belief, it must follow that the application is made for a collateral purpose such that it is an abuse of process (para 31 of the Law Report);

ii. If the applicant is not acting in good faith, the demonstration of a legitimate case would not be in the best interest of the company (para 31 of the Law Report);

iii. If the applicant exhibits an honest belief, the court must further assess whether such belief of the applicant is such that no reasonable person in the circumstances would hold that belief. It must not be such a perverse belief that will create serious doubt of the honest belief of the applicant in the first place. In other words, the "honest belief" must not be so perverse that no reasonable man will hold such "honest belief" (para 32 of the Law Report);

iv. Therefore, the test for assessing honest belief comprises of both subjective and objective components:

1. Whether the applicant honestly believe that the company has a good cause of action and has a reasonable prospect of success (subjective component) (para 33 of the Law Report);

2. Whether the applicant ought to be disbelieved because no reasonable person in the circumstances could hold that belief (objective component) (para 33 of the Law Report).

i. The onus of proof of good faith is on the balance of probabilities (para 28 of the Law Report). (Celcom, para 15)

j. The presence of the private interest cannot necessarily negate good faith if the same coincides with that of the company (para 35 of the Law Report).

k. P