1. ) Choong Yoon Choi v 1. ) 88 Restoran Guo Tai Sdn Bhd (JA-22NCvC-88-07/2023)

CHONG YOON CHOI (berniaga sebagai Wang Lee Seafood Trading

FRANCIS CHOONG WEN CHUNG (berniaga sebagai Wang Lee Seafood Trading (JM0583147-U) …. PLAINTIF-PLAINTIF

88 RESTORAN GUO TAI SDN BHD 21 (NO. Syarikat: 936695-D)

YU SZE HOU …. DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT 04/11/2025 09:33:10

This is a Writ action by the Plaintiffs (“P”) against the Defendants for recovery of payment for goods sold and delivered by the Plaintiff to the 1st Defendant (company) (“D1”) and for the 2nd ,3rd and 4th Defendants (“D2”, “D3” and “D4” respectively) who are the 1st Defendant’s directors to assume liability for the said payment.

On 15.07.2020, Judgment in Default of Appearance (“JID”) was allowed to be entered against D1 since the nature of claim is only monetary in nature.

Trial then commenced in respect of P’s claims against D2, D3 and

At the conclusion of the hearing, upon D1’s corporate veil being successfully lifted, judgment was entered against the D2, D3 and D4 for them to assume liability on jointly and severally basis towards the judgment sum, interests and cost entered against D1 under the JID.

D2, D3 and D4 have since filed their appeal to the Court of Appeal against the said decision of this Court. Salient facts

P’s claimed that between the period of 15.11.2019 until 14.03.2020, they have at the request of the Defendants supplied seafood (as P’s business is in the supply and sale of seafood) to them for a sum of RM 139,756.10 which is corroborated by P’s statement of accounts and the respective delivery orders.

The payment terms for the supply of the seafood would be cash on delivery.

D1 had acknowledged the receipt of the seafood supplied by P’s as could be seen on P’s delivery orders which also contains the value of each order and delivery made.

P’s case is that the invoices and/ or delivery orders were never disputed by D’s.

D’s had then refused and/ or failed to pay the amount outstanding despite an official demand being made by P’s solicitors.

It is also P’s pleaded case that D2, D3 and D4 are the minds controlling the operations and business of D1. In other words, they are not independent and separate from D1.

P’s pleaded case is also that this is fit and proper case for D1’s corporate veil to be lifted so as to render D2, D3 and/ or D4 to be made jointly and severally liable for D1’s debts owing to P’s.

D1 did not enter an appearance leading to JID being obtained against it by P’s.

D2, D3 and D4 denied any indebtedness to P’s and that any amount due and owing would be D1’s responsibility. Furthermore, they sought to distance themselves from D1 which according to them is a separate legal entity and that they are not involved with any of the transactions involving D1 and P’s. Accordingly, they claim they are not liable to P’s claim and that D1’s corporate veil ought not to be lifted.

During trial, P only produced one witness that is Francis Choong Wen Chung (P2) as SP1, whereas the Defendants produced two witnesses whom are Loh Wee Lon as SD1 and Yu Sze Hou (D4) as SD2. Lifting of D1’s corporate veil

P’s from the very beginning had consistently build the foundation of their case behind the need to lift D1’s corporate veil. A perusal of P’s amended statement of claim shows that P’s grounds to lift D1’s corporate veil is based on equitable fraud, avoidance of existing obligation or abuse of corporate legal personality. This lifting of the corporate veil is the fundamental issue in this trial although there were other issues to be tried.

To begin with, the doctrine of corporate personality also known as the separate legal entity principle treats a company as an entity separate from its members.

Refer to Lai Fee & Anor v Wong Yu Vee & Ors [2023] 4 CLJ 1 where it was held by the Federal Court at page 14 that: - “An action under s. 540 of the CA 2016 underpins the existence of the statutory exception to the common law doctrine of corporate personality, also known as the separate legal entity principle: that the company is treated as an entity separate from its members. This doctrine was propounded in the landmark judgment of the

House of Lords in Aron Salomon v. A Salomon & Co Ltd [1879] AC In Sunrise Sdn Bhd v. First Profile (M) Sdn Bhd & Anor [1997] 1 CLJ 529; [1996] 3 MLJ 533 FC the Federal Court reaffirmed the basic principle of the fundamental attribute of corporate personality that the corporation is a legal entity distinct from its members.”.

The exception to the principle of a company being a separate legal entity is the lifting or piercing of a corporate veil.

Piercing the corporate veil entails a party who seeks to impose a personal liability on an individual who may or may not be a director, shareholder or employee of the said company.

The lifting of the corporate veil on the other hand is a situation where the Court lifts the corporate veil of the company to determine the actual position of a state of affairs without imposing any personal liability on anyone in particular.

In GS Yuasa Corp v GBI Marketing Malaysian Sdn Bhd [2017] 8 MLJ 166, it was held at page 190 that: - “[30] In KTL Sdn Bhd & Anor v Leong Oow Lai [2014] MLJU 1405; [2014] AMEJ 1458 at paras 66-67, I have followed Staughton LJ’s judgment in the English Court of Appeal case of Atlas Maritime Co SA v Avalon Maritime Ltd; The Coral Rose (No 1) [1991] 4 All ER 769 at p 779, regarding the following difference between the lifting of a corporate veil and its piercing:

the corporate veil of a company is pierced when the rights, liabilities and/or activities of a company are considered or deemed by the court to be the rights, liabilities and/or activities of the controller or alter ego of the company; and

a company’s corporate veil is lifted when the court does not consider the separate legal personality of the company in ascertaining the true factual position in relation to the company.”.

The High Court in GS Yuasa (supra) at page 189 had also reiterated the principles concerning the lifting or piercing of the corporate veil of the company: - “[29] To lift or pierce the corporate veil of OBI and the defendant, three Federal Court judgments require the plaintiff to fulfil the following two cumulative conditions (‘two conditions’):

the piercing or lifting of a corporate veil is in the interest of justice; and

there exists special circumstances to pierce or lift the corporate veil of OBI and the defendant, such as:

there has been commission of actual fraud or common law fraud against the plaintiff;

(ii) equitable fraud or constructive fraud has been committed against the plaintiff;

(iii) to prevent the evasion of obligation or liability; or

(iv) to prevent an abuse of corporate personality. I rely on the following three Federal Court judgments which have laid down the two conditions:

Hasan Lah FCJ’s judgment in Solid Investments Ltd v Alcatel-Lucent (M) Sdn Bhd (previously known as Alcatel Network Systems (M) Sdn Bhd) [2014] 3 MLJ 785 at p 803; [2014] 3 CLJ 73 at p 92;

the decision of Richard Malanjum CJ (Sabah and Sarawak) in Gurbachan Singh s/o Bagawan Singh & Ors v Vellasamy s/o Pennusamy & Ors (on their behalf and for the 213 sub-purchasers of plots of land known as PN35553, Lot 9108, Mukim Hutan Melintang, Hilir Perak) and other appeals [2015] 1 MLJ 773 at paras 96-99; and

the judgment of Richard Malanjum CJ (Sabah & Sarawak) in Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd & Anor [2015] 6 MLJ 449; [2015] 9 CLJ 537 at paras 39 and pp 44-45.”.

On the current state of law where lifting or piercing the corporate veil is concerned, refer to Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 4 CLJ 821 where the Federal Court at pages 853- 855 held that: - “[99] The following conclusions may be drawn in relation to the disregarding of the corporate veil:

There subsists a long line of authority over the years in Malaysia which recognises that fraud, whether common law fraud or fraud in equity permits the court disregarding of the corporate personality. This body of law as adopted from the United Kingdom takes its line of reasoning from the 'fraud unravels all' principle as expounded by Denning LJ in Lazarus v. Beasley (above). That body of law remains correct and relevant and ought not to be lightly tampered with. It is reflective of the position in law recognised in Salomon v. Salomon(above). It is moreover, with respect, entirely legally coherent because the theoretical concept of the separate corporate personality was founded to enable business to be conducted. It is the essence of incorporation that the shareholder/controller of the company limits his liability in respect of the future conduct of the company's affairs. There is nothing wrong with that. Advantage is taken of limited liability to avoid personal liability if things go wrong. (see Persad v. Singh per Lord Neuberger [2017] UKPC 32). However, the limitation of liability envisages that such future conduct of the company's business is to be conducted honestly and with integrity - the law is predicated on that assumption. Once honesty is abandoned and the company is utilised as a vehicle for dishonest conduct, or fraud, or unconscionable conduct, then the basis for the separate corporate personality is jeopardised and undermined. It no longer serves the purpose it was intended for. As such it is only correct that a court investigating the injury or loss suffered by reason of the wrongful utilisation of the corporate personality, or the abuse of the corporate personality, is allowed to both look behind the façade to ascertain the true facts and also impose liability against the persons perpetrating such wrongdoing as is required on the facts of a particular case. This body of law relating to fraud subsists outside of the doctrine of 'piercing' the corporate veil as explained in Prest;

(ii) I would respectfully concur with the legal rationale prescribed by Lord Sumption in Prest, which explains that in order to ascertain whether the veil of incorporation ought to be 'pierced', the nature of the wrongdoing in issue ought to be analysed to ascertain whether it falls within the purview of the 'concealment' principle or the 'evasion' principle. To this end, the distinction between the two principles of concealment and evasion are of importance and benefit to enable a court to analyse with greater accuracy the basis on which the corporate personality is being disregarded. It also results in different consequences as explained earlier; Concealment Principle

(iii) The analysis in Prest, namely that the concealment principle does not in reality pierce the veil of incorporation, but allows the court to disregard or look behind the corporate personality to ascertain the true facts, ought to be considered for use and application in this jurisdiction. The reason is because after ascertaining the true facts concealed behind the corporate personality, it will enable a court to determine which legal principle of substantive law it will then utilise to determine whether liability subsists, or does not subsist, against a party to the dispute, on a given set of facts. This may involve the utilisation of the principles of agency or trusts or some other area of the law. Such application allows for a greater analysis of the basis on which liability is imposed, rather than simply stating that the corporate veil has been lifted and imposing liability on a party without explaining the legal basis for doing so. It is also important to note that it does not engage the evasion principle such that the corporate veil is not pierced; Evasion Principle

(iv) If the wrongdoing warrants the application of the evasion principle, the consequence is that the corporate veil is pierced, so as to enable liability to be imposed on a person, seemingly unconnected to the transaction in dispute. First, it is necessary to ascertain if there is a legal right against the person in control of a company which exists independently of the company's involvement, and a company is interposed such that the legal personality of the company defeats the legal right or frustrates its enforcement. This is a considerable obstacle to overcome, and it is only rarely that an appropriate set of facts will allow for such 'piercing'. Ultimately, the narrow and rigid test ensures that the corporate personality is not lightly disregarded. Even when the facts of a particular case warrant invoking the evasion principle enabling the corporate veil to be pierced, the court may only apply the doctrine to deprive the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. If there subsists a legal relationship between the company and its controller, it might not be necessary to pierce the corporate veil, in which event it ought not to be pierced …”.

On the issue of fraud and avoidance of legal obligations, reference may be made to Gurbachan Singh Bagawan Singh & Ors v Vellasamy Pennusamy & Other Appeals [2015] 1 CLJ 719 where the Federal Court at page 757 held that: - “[96] But in the event that we should, we are of the view that it is now a settled law in Malaysia that the court would lift the corporate veil of a corporation if such corporation was set up for fraudulent purposes, or where it was established to avoid an existing obligation or even to prevent the abuse of a corporate legal personality. [97] As to what constitutes fraudulent purposes it has been described as to include actual fraud or fraud in equity. And fraud in equity occurred in '... cases where there are signs of separate personalities of companies being used to enable persons to evade their contractual obligations or duties, the court would disregard the notional separateness of the companies ...”.

Based on the above, it is apparent that D2, D3 and D4 despite being D1’s directors had somewhat deliberately chosed to ignore D1’s plight in light of the demands which subsequently crystalized into the present suit. They were also aware of the debt owing by D1 to P’s despite their defence stating otherwise. According to SD2 in cross-examination: - Thank you so much, YA. Okay Encik Yu, tadi okat setujukah dengan saya kalau sekiranya saya katakan masih terdapat hutang Defendan Pertama terhadap Plaintif pada November, 2019. Setuju? Soalan saya, setujukah dengan saya sekiranya saya katakan masih terdapat hutang Defendan Pertama terhadap Plaintif pada bulan November 2019, setuju? Setuju Untuk Disember 2019, setuju? Setuju Untuk Januari 2020, setuju? Setuju Februari 2020, setuju? Setuju Okay sila nyatakan kepada Mahkamah bila wabak covid ini mula berlaku dan mula perintah pergerakkan kawalan mula diperintahkan oleh Kerajaan Malaysia? Okay yang saya tahu…. Bila? Bila? Bulan 3 Bulan 3. Saya cadangkan kepada kamu sebelum bulan 3 tersebut perniagaan kamu berjalan dengan baik dan kamu tiada sebarang masalah, setuju? A: Ada niaga.”.

In this regard, while D2, D3 and D4 entered an appearance D1 did not enter an appearance. This lends credence to the proposition that they were ignoring their obligations when they were the controlling minds behind D1. Refer to SD1’s evidence during evidence in chief:- Apakah yang berlaku pada syarikat Defendan Pertama selepas itu? A: Memandangkan wabak pandemic Covid-19 semakin serius di Malaysia, Kerajaan Malaysia telah mengumumkan Perintah Kawalan Pergerakan dari tarikh 18.03.2020 sehingga 04.05.2020, di mana kebanyakan perniagaan telah dipengaruhi dan perniagaan Defendan Pertama juga dijejaskan dengan teruk dan mengalami kerugian yang serius. Oleh itu Defendan Kedua sehingga Defendan Keempat, iaitu pengarah-pengarah dan juga pemegang saham syarikat Defendan Pertama, kami telahpun memutuskan untuk menamatkan perniagaan Syarikat Defendan Pertama dengan menamatkan Perjanjian Sewaan Restoran dan menjualkan perniagaan Defendan Pertama.”.

At the same time, D2, D3 and D4’s action in selling off D1 at a lower price to an entity known as Dragon Crest Restaurant Sdn Bhd in total disregard of the market value also supports the contention that they were attempting to avoid their obligations towards P’s. This would qualify as among the special circumstances to justify the corporate veil being pierced. In RDS Bina Sdn Bhd v Ong Chin Hoe & Anor [2014] 5 CLJ 639, it was held by the High Court at pages 664-665:- “[93] There are signs aplenty that prove amply the defendants' creative use of the notional concept of corporate separateness to evade their contractual obligations and duties. This notion of separateness between Springs Court and the defendants ought to be disregarded by reason of the defendants' own disregard at all time. The facts and circumstances have been satisfactorily shown by the plaintiff to be akin to equitable fraud and impropriety on creditors such as the plaintiff. Although the sum due to the plaintiff is disputed, the debt owed to the plaintiff is not denied. Given these circumstances, it is indeed appropriate if not necessary, to depart from the strict rule of separate legal entity. [94] I therefore am satisfied that the defendants are the right parties to this action and that they have failed to pay as promised to the plaintiff. The upshot of all this is that the defendants are therefore personally, jointly and severally liable for the debt due to the plaintiff under the project.”.

This Court would also like to illustrate certain conduct on D2, D3 and D4’s part which is quite apparent that there was an attempt on their part to evade obligations owed to P’s by engaging in fraudulent conduct based on the evidence adduced throughout this trial. First there is the “Sale of Chattels Agreement” dated 15.06.2020 specifically at clauses 7 and 8 which stipulates in essence that there are no pending legal proceedings nor claim against D1. This representation is untrue since at that material time (15.06.2020), D2, D3 and D4 would have knowledge based on P’s Notice of Demand that legal proceedings are forthcoming.

Despite the above state of affairs, D2, D3 and D4 continued to enter into the agreement which seeks to portrays that the Defendants do not owe anything whatsoever as of 15.06.2020 and that no legal proceedings or claim are pending as of 15.06.2020.

To fortify the above findings, reference may be made to SD2’s evidence during cross-examination: - Klausa 7 kata apa? The vendor shall pay satisfy and discharge all debts and liabilities in connection. Ada buat? Ada pay all the debts hutang-hutang lain semua? Ada ke tak ada? 100% tak ada 100% tak ada. Okay saya rujuk kamu kepada soalan No.8. Boleh Sorry Klausa 8(f). Baca yang ini. There are no pending legal proceeding nor claims against the Vendor which may affect the Vendor’s title or its rights to dispose of the Schedule I don’t’ know how this and the stock. Okay sila nyatakan kepada Mahkamah bila perjanjian ini dimasuki oleh kamu? Bila sign. Bila Bila sign tarik ini Jun 15th. Jun 15th. Bila kamu terima notis tuntutan daripada Plaintif-Plaintif? Sebelum itu. Bila? Tidak pasti Tak pasti Okay. Saya cadangkan kepada kamu sememangnya sebelum kamu memasuki perjanjian ini kamu tahu terdapat tuntutan daripada Plaintif terhadap Defendan-Defendan, setuju ke tidak setuju? Saya tahu saya punya Restaurant memang ada hutang. Setuju ke tidak setuju? Setuju apa? Saya cadangkan kepada kamu sememangnya kamu tahu sebelum kamu tandatangan perjanjian ini sememangnya kamu tahu berkenaan dengan tuntutan Plaintif kepada Defendan-Defendan, setuju ke tidak?

Furthermore, the sale of D1 was also done immediately with an absence of supporting documents common to such sales of a business in the normal course of things. In this regard there were no audited reports prepared nor was there a resolution to sell D1 to a third party. Refer once more to SD2’s evidence during cross-examination to illuminate this point: - You ada auditor ke tidak? Ada Defendan Satu ada auditor? Ada Ada tak di dalam dokumen kamu ini auditor report sebelum jual setakat tarikh 15hb.6? Macam ini rasa tak ada. Tak ada. Selepas jual ada auditor report? Tak ada lah.”.

As observed above, D1 was also sold below market value at RM320,000.00 when D2, D3 and D4 were fully aware that D1’s debts at the time of its sale was RM800,000.00. This was confirmed by SD2 during cross examination when he answered the following:- Ada, okay. Okay setakat 15 Jun 2020 berapa hutang keseluruhan Defendan Pertama? Sebelum masuk I sudah tengok lebih kurang RM800,000.00.”

Now, the pertinent issue arising as a result of the above is the rationale and/ or need for D1 to be sold at such a low price immediately when its debts stood at RM800,000.00 at the time of the sale.

Resulting from the above, there is also a doubt as to whether the entire sale is as represented by D2, D3 and D4. This doubt arises as a perusal of the “Sale of Chattels Agreement” dated 15.06.2020 specifically provides that the Vendor(s) will sell and the Purchaser(s) will purchase chattels annexed in Schedule 1 at all the assets thereof. Despite the wordings of this agreement, SD2 gave evidence to the contrary when he said that some assets (or chattels as described by the agreement) were not sold despite the agreement:- Kejap. Refer muka surat 29 Bundle

YA, Bundle C, 29. Okay Bahagian Pertama depan sekali. Apa ini? Bahagian Pertama yang paling depan yang ini? Satu Toyota Hiace. Okay apa ini, apa dokumen ini dia attach together dengan chartered agreement tadi. Ya Apa ini? Ini saya punya list of assets. Okay ini apa Toyota? Hiace. Okay berapa harganya? RM101,000.00. Ini pun you bagi sekali dengan kepada Restaurant Dragon Crest ke? Tak.”.

SD2’s credibility as a witness is severely affected in light of the above as it just does not add up on the overall scheme of the factual matrix of the case. SD2 was evasive when questions were posed to him particularly when pertinent questions were put to him and thus not credible. Refer to Looh Keo v Looh Chee Peng & Ors [2024] 1 CLJ 467 (High Court) page 514: - “In deciding the matter, I will make clear that I have preferred the evidence of the plaintiff's witnesses, whom I viewed as 'more credible' in support of the plaintiff's contentions, as compared to the defendants' witnesses, whom I found 'evasive' when troubling questions were put to them, and were not credible. The defendants' witnesses' evidence simply does not add up. Even if there were discrepancies in the plaintiff's witnesses' evidence, if at all, were minor and not relevant, and on the whole, the plaintiff's witnesses were forthright, their evidence was comprehensive, compelling, convincing and consistent with the documents and the overall probabilities.”.

It is open to this court to infer based on the above evidence that D1’s sale was intended to evade obligations owed to P’s. On the drawing of inferences, reference may be made to Caswell v Powell Duffryn Associates Collieries Ltd [1940] AC 152 where the House of Lords at page 169 held that: “Inferences must be carefully distinguished from conjecture or speculation. There can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish. In some cases the other facts can be inferred with as much practical certainty as if they had actually been observed. In other cases the inference does not go beyond reasonable probability. But if there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation or conjecture.”.

Based on reasons stated above, having pierced D1’s corporate veil, this court finds that D2, D3 and D4 were engaged in conduct to evade obligations owed to P’s as explained above and there were elements of equitable fraud involved as well.

As such, P’s claim is allowed and D2, D3 and D4 are jointly and severally liable to pay D1’s judgment sum of RM139,756.00 together with 5% interest on the judgment sum from date of judgment till date of full settlement.

Finally, costs of RM10,000.00 is awarded to P’s to be paid by D2, D3 and D4. Date: 30th October 2025 …………………………………………. (NOOR HISHAM BIN ISMAIL) JUDGE HIGH COURT, JOHOR BAHRU Solicitors for the Plaintiff : Jegathisvaran Ramachandram together with Pavithra M/s Vimala Kasturi & Partners Skudai, Johor. Solicitors for the Defendants : YS Chong together with Lee Le Yi M/s YK Chin Johor Bahru, Johor