Derivative actions may be pursued by equal shareholders in deadlock situations, as controlling wrongdoers can prevent justice from being served.

Idrus Harun JCA:

Preliminaries

[1] This appeal is related to Civil Appeal No: 02(NCC)(W)-2434-11-2013 ("the second appeal"). At the commencement of the hearing of this appeal on 5 November 2015, the learned counsel for the appellant informed us that firstly, he would argue on this appeal first and that if we were with the appellant, the second appeal would be rendered academic and secondly, the parties to this appeal agreed to confine their submissions at this stage on the issue of derivative action only.

[2] This is an appeal from a decision of the High Court on 26 September 2013 after a full trial wherein the 1st respondent's claim against the appellant was allowed with costs. The appellant was the 2nd respondent in the High Court whilst the 1st respondent was the plaintiff.

[3] It is also noteworthy that the claim by the 1st respondent against Dato' Seri Dr Abdullah Fadzil Che Wan (the 3rd defendant) in the suit before the Court of first instance was dismissed with costs. The second appeal is the 1st respondent's appeal against the said decision.

Summary Of Material Facts

[4] The appellant was granted a licence on or about 11 July 2005 to provide network facilities to telecommunication providers by the Malaysian Communications and Multimedia Commission. Subsequently, a concession agreement was entered into by the appellant and the government of the state of Perak on 10 July 2007, appointing the appellant as the sole concessionaire to undertake works in the state of Perak under the licence. Pursuant to the licence, the appellant entered into a licence agreement on 1 June 2006 with Maxis, Digi and Celcom, also known as the Group A Operators, whereby the appellant agreed to construct telecommunication towers at its own costs and rent it to the Group A Operators for a fixed period of time.

[5] Subsequently, the appellant and the 1st respondent entered into an arrangement by way of a shareholders' agreement dated 21 May 2007 whereby a separate entity, which was the 2nd respondent, was created. Pursuant to the said agreement, the 1st respondent becomes a 50% shareholder of the 2nd respondent while the appellant is the only other 50% shareholder. The 3rd defendant is a 90% indirect shareholder of the appellant by virtue of the fact that he owns 90% of Perak Communication Technology Sdn Bhd which in turn wholly owns the appellant. Hence, the 3rd defendant is also a 45% indirect shareholder of the 2nd respondent. However, he is not a party to this appeal. Thus, by the management agreement dated 21 May 2007 entered into between the appellant, the 2nd respondent, PINS Capital Sdn Bhd and the 1st respondent, it was agreed that the appellant should award the entire construction work of the infrastructures to the 2nd respondent and should appoint the 2nd respondent as the exclusive management company to manage, lease and receive rental and to carry out the maintenance of the infrastructures. It was also agreed that in the event that the appellant was awarded construction project by other telecommunication providers for the construction of infrastructures, it should also award the said construction work to the 2nd respondent.

[6] As events turned out, besides the Group A Operators, there were also other telecommunication providers involved, namely Group B Operators which entered into an agreement with the appellant. By virtue of cl 4.1 of the management agreement and the first supplemental management agreement dated 27 May 2007, the appellant is liable