Sun Pharmaceutical Sdn Bhd v 1. ) Wong Fong Leng 2. ) Mazuriah binti Abu Darin 3. ) Gan Jia Swee 4. ) Jabatan Peguam Negara

Case Significance

A substantial worked example of a statutory derivative action under the Companies Act 2016: a director who diverts corporate opportunities, licences and assets to competing companies breaches fiduciary duty, and senior officers who knowingly assist are liable as accessories notwithstanding a plea of honest and reasonable conduct.

This High Court decision at Kuala Lumpur concerns a derivative action brought in the name of a company against a director and two senior officers for breach of fiduciary duty and duty of fidelity, and the diversion of the company's business to competing entities. The plaintiff, Sun Pharmaceutical Sdn Bhd, was once a profitable distributor holding distributorships and National Pharmaceutical Regulatory Agency licences for imported pharmaceutical products. The action, brought derivatively by its founder and co-shareholder, alleged that the company's business was systematically dismantled by those occupying positions of trust: its director and controlling mind (the first defendant), together with two senior officers (the second and third defendants). The court found that, following the breakdown of the founder's marriage to the first defendant, the company's distributorships, licences and assets were diverted to other entities — notably Sino Health Sdn Bhd and Pharma Nord Sdn Bhd — through misleading representations to the foreign principals, incomplete disclosure to the founder, and the improper use of those companies. It examined the fiduciary obligations of directors under the Companies Act 2016, and held that the senior officers, entrusted with strategic roles and confidential information, owed duties of fidelity and were liable as accessories for knowingly assisting the breach; their defence that they had acted honestly and reasonably was rejected. The court found the breaches established and assessed compensatory damages for the loss of the company's business, payable jointly and severally by the defendants. The court situated the case against a backdrop of related proceedings, including an earlier consent judgment that had compelled the first defendant to restore the founder as a registered 50% shareholder and to pay his share of withheld dividends after a forged transfer of shares. It awarded interest on the damages at 5% per annum from the date of judgment until full satisfaction, ordered costs of RM150,000 against the first defendant (inclusive of an earlier interlocutory costs order) and RM80,000 against the second and third defendants jointly and severally, all payable to the founder, subject to allocatur, and directed that the substantive heads of damages be borne by the defendants jointly and severally.