Tan Guan Eng v Ng Kweng Hee & Ors  1 MLJ 487 Facts The first plaintiff is a shareholder and director of the ninth defendant, Dragon Enterprises Sdn Bhd ('Dragon'). Dragon is the holding company and controlling shareholder of Thean Seng Co Sdn Bhd ('TSS'), the eighth defendant. Dragon is in turn a subsidiary of an incorporated investment company called BH Low Holdings Sdn Bhd ('BHL'). The first plaintiff is also a majority shareholder and director of BHL. The first and second defendants were the directors of both Dragon and TSS. Notice of TSS's extraordinary general meeting ('EGM') was given to pass a resolution to increase the issued and paid-up capital of TSS by way of a rights issue. The plaintiffs obtained an ex parte interlocutory injunction to restrain the holding of the EGM, alleging that the calling of the EGM by the first to seventh defendants was not a proper or bona fide exercise of their powers as directors of TSS because the calling of the EGM was to effect a change in the control of TSS in interest or favour of the first to seventh defendants. The defendants applied to discharge the interlocutory injunction. The defendants claimed that the purpose of increasing TSS's capital was to finance the cost of developing TSS's property and to reduce TSS's bank borrowings. The defendants argued that the first plaintiff had no locus standi to sue against TSS because the first plaintiff was not its shareholder. The plaintiffs urged the court to lift the corporate veil of TSS and Dragon because the first and second defendants were in de jure control of Dragon and were in de facto control of TSS and that they had placed themselves in a position of conflict of interest when they promoted their own personal interest. The second plaintiff argued that he had locus standi because since the injury alleged was personal to him as a member of TSS, the rule in Foss v Harbottle did not apply. Issue 1. Whether calling of TSS's EGM by the first to seventh defendants was a proper or bona fide exercise of their powers as TSS's directors 2. Whether plaintiff has locus standi to sue subsidiary company 3. Whether issue of locus standi should be decided as a preliminary point or at conclusion of trial Held: The court by dismissing the application to discharge injunction held that, (1) The issue whether calling of TSS's EGM by the first to seventh defendants was a proper or bona fide exercise of their powers as TSS's directors, was neither just nor convenient to be decided without the process of a full trial. (2) The term 'locus standi' means entitlement to judicial relief apart from the questions of the substantive merits and the legal capacity of a plaintiff. (3) In deciding the question of locus standi, the court will proceed on the basis that allegations in the statement of claim and in the documents relied upon by the plaintiffs are true. The jurisdiction to uphold a plea of no locus standi should only be exercised very carefully in circumstances where there is no possibility of doubt. (4) The traditional view of 'control' of a company is one of ownership but the new view considers who has de facto control of a company. In this case, His Lordship pointed out that shareholding may be one index to determine the question of control. It was held that, “The obvious and no doubt the easiest way of determining whether the wrongdoer has control of a company is to have regard to their shareholdings. If the majority of the shares is held by them, then it goes without saying that they are in control of the company; but if that is not the case, it does not necessarily follow that they are not in control, for the court may go behind the apparent ownership of the shares, in order to determine whether the wrongdoers do in fact control of the company”. “Apparent ownership” could be or perhaps, even an outsider, through the use of nominee directors, interlocking shareholding, and agreement of the shareholders or the use of proxies. (5) Although each company within a group of companies is a distinct entity, in certain circumstances courts have treated a group of companies as a single corporate entity. In the circumstances of this case a prima facie case for piercing the corporate veil had been established. (6) Both of the plaintiffs had established a prima facie case of locus standi to maintain this suit; there are also serious questions of law and fact to be tried.