1. ) Datuk Parmjit Singh A/L Meva Singh v Ekuiti Nasional Berhad (WA-22NCC-936-12/2023)

DATUK PARMJIT SINGH A/L MEVA SINGH [NRIC No.: 530329105771]

GURPARDEEP SINGH A/L C. JAGIR SINGH [NRIC No.: 650806086101]

MOHD HELMY BIN NORMAN [NRIC No.: 790114016457]

MUHAMMAD ANIS UR REHMAN [Passport No.: FE9153874]

VINESH A/L THIRUCHELVAM [NRIC No.: 740622105469]

ANTHONYSAMY E. A/L SANTHANASAMY [NRIC No.: 590908105519]

ZULIANA TONG BINTI ABDULLAH [NRIC No.: 600422015552]

ADRIAN CHAN JUNG PING [NRIC No.: 801102016207]

MUHAMMAD ALI [Passport No.: RU1797428]

NURUL SYAKIRIN BINTI MAHDI [NRIC No.: 880404065176]

RASODDIN BIN RAMNUDDIN HAMZAH [NRIC No.: 770629145081]

WONG HUA HONG [NRIC No.: 600702135110] … PLAINTIFFS AND EKUITI NASIONAL BERHAD [Company No.: 868265-U] …DEFENDANT JUDGMENT Introduction [1] This judgment deals with the Defendant’s application to strike out the Plaintiff’s action. [2] I found that there was no privity of contract between the Plaintiff and the Defendant. I also found no basis for this Court to lift the corporate veil based on the fact of ‘significant control’ or the theory of ‘the single economic group’. In any case, these were never pleaded. [3] Based on the aforesaid, I allowed the Defendant’s application to strike out the Plaintiff’s Writ and Statement of Claim with costs. Background Facts [4] The Plaintiffs are senior management and middle management personnel of APIIT Education Group (“AEG”) consisting of APIIT Sdn Bhd and Asia Pacific University Sdn Bhd. [5] The Defendant is a public limited company and at all material times was in the business of private equity fund management. More specifically, in the present case, the Defendant was appointed to manage the cash flow, liquidity and financial assets of Ekuinas Capital Sdn Bhd (“Ekuinas Capital”) [6] Ekuinas Capital is a private company which invests in private equity investments and acquires shares or invest in other companies. Ekuinas Capital received funds from Yayasan Ekuiti Nasional (“YEN”), a specific trust foundation set up by the government of Malaysia. [7] Ilmu Education Group Sdn BHd (“ILMU”) formerly known as Onetime Direction Sdn Bhd is a private limited investment holding company whose subsidiaries primarily provide educational courses and related services. At all material times, ILMU was a shareholder of AEG. [8] Sometime on or around November 2011, a performance-linked compensation plan known as the Management Incentive Plan (“MIP”) was proposed and discussed by the board of directors of AEG. The MIP was intended to, inter alia, reward the Plaintiffs for their contribution in creating shareholder value to AEG [9] Updated proposed terms of the MIP were further discussed in March 2013 and November 2013 where the Defendant’s representatives conducted presentations to the AEG Board in respect of the MIP (“the Board Presentation”). The implementation of the MIP was conditional upon AEG obtaining the necessary approvals from its board and shareholders, who at the time were ILMU and Sapura Resources Bhd (“SRB”), holding 51% and 49% respectively. [10] The MIP contemplated: a) the allocation of 10% of the total shares in AEG on a fully diluted basis to the Plaintiffs; b) the incentives would take the form of preference shares which would be converted into ordinary shares that would vest to the Plaintiffs immediately upon the shareholder of AEG exiting the company. [11] It is not in dispute that there was a subsequent understanding that the incentives to the Plaintiff under the MIP would take the form of cash instead of shares. [12] It is also not disputed that sometime in 2016, ILMU acquired SRB’s shares and became 100% shareholder of AEG. [13] On 17.08.2017, ILMU divested 100% of its equity stake in AEG through the share sale agreement (“Divestment SPA”) with Asia Pacific Education Holdings and Ilmu Utama Sdn Bhd (“the Purchasers”). [14] Concurrent with the Divestment SPA, ILMU entered into a letter of agreement dated 17.08.2017 (“MIP Agreement”) with the Purchasers, their holding company, Seek N Learn Sdn Bhd (“SNL”) and the Plaintiffs, containing inter alia, the following salient terms: a) ILMU shall pay the Plaintiffs (identified as “Key Management Personnel”), the MIP amount (identified as the “Incentive Amounts”) based on the final sale value as determined in the Divestment SPA; b) a sum of RM16,226,977.00 was identified as the Indicative Incentive Amounts based on a provisional consideration of RM568,383,434.00 for the purchase of the shares in AEG; c) the Plaintiffs agreed to invest the Incentive Amounts to subscribe for shares in SNL; d) The Incentive Amounts were to be deducted from the total sale consideration at the time of completion of the Divestment SPA, thereby reducing the amounts received by ILMU towards the disposal of its interest in AEG; and e) Thereafter, SNL will issue and allot shares to the Plaintiffs or their nominees to the value of the Incentive Amounts. [15] Significantly, the Defendant was not a party to the MIP Agreement. [16] Further, the terms of the Divestment SPA and the MIP Agreement were completed with the Incentive Amounts being deducted from the total consideration paid to ILMU. [17] Shares in SNL were issued and allotted to the Plaintiffs. The Plaintiffs’ tax liability in respect of the Incentive Amounts was remitted to the Inland Revenue Board. The Plaintiffs executed the MIP Agreement and completed the terms thereof in full settlement of all of ILMU’s obligations concerning the MIP. [18] Since the completion of the Divestment SPA and terms of the MIP Agreement, the Plaintiffs had neither claimed nor demanded any alleged outstanding sum in respect of the MIP until sometime on 20.12.2023. Thereafter on 27.12.2023, the Plaintiffs filed this action. Plaintiffs’ Claims [19] The Plaintiffs’ cause of action as pleaded at paragraph 18 of the Statement of Claim is that during the Board Presentation, “the Board then by its conduct has agreed and approved the MIP and thus a contract and an agreement was thus constituted between the Plaintiffs and the Defendant”. [20] It is the Plaintiffs’ case that: a) there was an agreement between the Plaintiffs and the Defendant at the Board Presentation in November 2013; b) the Defendant was under an obligation to pay the MIP incentives to the Plaintiffs; c) the 49% of the MIP allocation was paid by the Defendant. This was the Incentive Amounts stated in the MIP Agreement; and d) the Defendant is in breach of the alleged agreement by failing to pay the Plaintiffs the remaining 51% MIP allocation. The Striking Out Application [21] The Defendant’s application to strike out the Plaintiffs’ action is based on the following grounds: a) there is no privity of contract between the Plaintiffs and the Defendant; b) ILMU and the Defendant are separate legal entities; c) the MIP has been fully discharged under the MIP Agreement. Court’s Considerations [22] The Plaintiffs’ pleaded case is that the Defendant was the former majority shareholder of AEG (para. 15 of Statement of Claim), had disposed of its 100% stake in AEG (para. 22 of Statement of Claim), and had only paid the Plaintiffs 51% of the MIP obligation (para. of Statement of Claim). To this end, the Plaintiffs allege that the Defendant had breached its agreement with the Plaintiff by failing to pay the remaining 49% of the MIP obligation. [23] However, the indisputable evidence is that the Defendant was never a shareholder of AEG at all. [24] On the contrary, ILMU was the shareholder of AEG and it was ILMU that was the contracting party to the MIP Agreement. Further, the Plaintiffs’ Incentive Amount was not paid by the Defendant as pleaded but instead were paid out of the consideration for the AEG shares purchased by the Purchasers from ILMU. [25] To my mind, the MIP Agreement for which the Plaintiffs were privy, had set out the settlement of the Plaintiffs’ claims under the MIP and by the Plaintiffs’ acceptance and performance of the terms and conditions thereto, there is in law, accord and satisfaction of the Plaintiffs’ claims and entitlements under the MIP. [26] Indeed, as the MIP was premised on the allotment of AEG preference shares to the Plaintiffs and was always subject to the approval of the board of AEG and its shareholders, it is clear that the party who was obliged to the Plaintiffs under the MIP was ILMU and not the Defendant. [27] The Plaintiffs’ cause of action as pleaded was based on the existence of a contract with the Defendant. The Plaintiffs did not seek to lift the corporate veil in their Statement of Claim. Indeed, in the written submission filed by the Plaintiffs, the Plaintiffs re-iterated that they were not seeking to lift the corporate veil at all. [28] In any case, the Defendant was never the ultimate shareholder of AEG at all. The ultimate shareholder of AEG was one Equinas Capital who in turn was wholly owned by YEN. [29] At the hearing, learned counsel for the Plaintiffs had sought to impose a contractual relationship with the Defendant on the grounds that: a) ILMU was a special purpose vehicle which the Defendant has significant control over; b) ILMU, Equinas Capital and the Defendant are all part of a single economic group, which means that the obligations of ILMU can be treated as the Defendant’s obligations. [30] With respect to learned counsel for the Plaintiffs, quite apart from the fact that the aforesaid were never pleaded, neither the fact of ‘significant control’ nor ‘the single economic group’ is sufficient to lift the corporate veil or to create a contractual relationship which never existed in the first place. [31] In Neelakandan Swaminathan v. Sivanathan K Senathi Rajah [2022] 1 LNS 2136, I had struck off a similar case where the plaintiff sought to pierce the corporate veil of a subsidiary company to impose liability on the holding company. There, the plaintiff in submissions had sought to rely on a cause of action which had not been pleaded. At paras 17 and 21 of my judgment, I had held as follows: “[17] The Plaintiff has not shown any factual evidence that there exist special circumstances to pierce the corporate veil in the form of actual fraud or common law fraud or equitable or constructive fraud. Neither is there any allegation of any abuse of corporate structure or evasion of liability by the 2nd Defendant … [21] It is trite that pleadings cannot be improved vide averments made in affidavits”. [32] The authorities support the position that the courts will only pierce the corporate veil while ignoring the doctrine of privity of contract in exceptional circumstances. Even then, the burden of establishing fraudulent conduct is high, which in our case the Plaintiffs have failed to either plead or establish. Clearly, ‘significant control’ alone is insufficient. Justice Atan Mustaffa Yussof Ahmad in CBM Bhd v. Lyanna bt Mohd Johan & Anor [2024] MLJU 319 outlined the circumstances for piercing the corporate veil in this manner: “[6] The doctrine of lifting or piercing the corporate veil is an exceptional and cautiously applied principle, reserved for circumstances where the separation of the corporate entity from its controllers is misused to perpetrate fraud, evade legal obligations, or conceal true ownership. It is well-established jurisprudence that the corporate veil can only be pierced under special circumstances where it can be shown that the company is being used as a facade to conceal the true facts of the matter, essentially when the corporate form is abused for illegitimate purposes. [8] There is also a notable absence of any specific pleading by the Plaintiff that directly implicates the First Defendant in fraudulent trading or any deceitful conduct that would necessitate lifting the corporate veil … [9] Critically, the Plaintiff’s reliance on the concept of the First Defendant being the ‘alter ego’ and or ‘agent of controller’ of the Second Defendant is insufficiently substantiated within its pleadings. The jurisprudence mandates a high threshold for such a claim, necessitating concrete evidence and precise pleadings that unambiguously demonstrate the company was a mere facade for the First Defendant’s alleged fraudulent activities. The Plaintiff’s submissions fall short of this threshold, lacking the necessary particulars and evidentiary basis to establish that the Second Defendant was used by the First Defendant in a manner that would justify the exceptional remedy of piercing the corporate veil”. [33] As regards the submission premised on a single economic unit, in Tenaga Nasional Bhd v. Irham Niaga Sdn Bhd & Ano [2011] 1 MLJ 752, the Court of Appeal allowed an appeal to strike out the where it was pleaded that the appellant and its subsidiary operated as one economic unit: - “[24] The sting of the respondents' claim against the appellant (TNB) can be seen at paras 53 54 of the statement of claim. It is in these paragraphs that the respondents pleaded that the appellant (TNB) and its subsidiary TNBT operated as one economic unit. What the respondents were trying to convey was this. That TNBT and the appellant (TNB) are one and the same entity. And because of this, the respondents alleged that the appellant (TNB) is the alter ego of TNBT and, consequently, the veil of incorporation must be lifted. [25] The English Court of Appeal in Adams and others v Cape Industries plc and another [1991] 1 All ER 929, considered extensively the single economic unit argument. Slade LJ delivering the judgment of the English Court of Appeal (with a coram of Slade, Mustill and Ralph Gibson LJJ) aptly said at p 1016: The 'single economic unit' argument There is no general principle that all companies in a group of companies are to be regarded as one. On the contrary, the fundamental principle is that 'each company in a group of companies (a relatively modern concept) is a separate legal entity possessed of separate legal rights and liabilities': The Albazero; owners of the cargo lately laden on board the ship or vessel Albacruz v Owners of the ship or vessel Albazero [1977] AC 774 at p 807; [1975] 3 All ER 21 at p 28, per Roskill LJ. It is thus indisputable that each of Cape, Capasco, NAAC and CPC were in law separate legal entities. Mr Morison did not go so far as to submit that the very fact of the parent-subsidiary relationship existing between Cape and NAAC rendered Cape or Capasco present in Illinois. Nevertheless, he submitted that the court will, in appropriate circumstances, ignore the distinction in law between members of a group of companies treating them as one, and that broadly speaking, it will do so whenever it considers that justice so demands. In support of this submission, he referred us to a number of authorities. [26] Continuing at p 1019, Slade LJ had this to say: Mr Morison described the theme of all these cases as being that where legal technicalities would produce injustice in cases involving members of a group of companies, such technicalities should not be allowed to prevail. We do not think that the cases relied on go nearly so far as this. As Sir Godfray Le Quesne submitted, save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Aron Salomon (Pauper) v A Salomon and Company, Limited [1897] AC 22; [1895 99] All ER Rep 33 merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities. [27] Continuing further at p 1021, Slade LJ said in trenchant terms: In the light of the set up and operations of the Cape group and of the relationship between Cape/Capasco and NAAC we see the attraction of the approach adopted by Lord Denning MR in the DHN case [1976] 3 All ER 462 at p 467; [1976] 1 WLR 852 at p 860 which Mr Morison urged us to adopt: This group is virtually the same as a partnership in which all the three partners are companies. In our judgment, however, we have no discretion to reject the distinction between the members of the group as a technical point. We agree with Scott J that the observations of Robert Goff LJ in Note Bank of Tokyo Ltd v Karoon and another [1987] AC 45 at p 64; [1986] 3 All ER 468 at p 486 are apposite: Counsel suggested beguilingly that it would be technical for us to distinguish between parent and subsidiary company in this context; economically, he said, they were one. But we are concerned not with economics but with law. The distinction between the two is, in law, fundamental and cannot here be bridged. [28] Finally, in regard to the lifting of the veil of incorporation, Slade LJ approached it in this way (see p 1026 of the report): Whether or not such a course deserves moral approval, there was nothing illegal as such in Cape arranging its affairs (whether by the use of subsidiaries or otherwise) so as to attract the minimum publicity to its involvement in the sale of Cape asbestos in the United States. As to condition (iii), we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. Mr Morison urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group's asbestos trade in the United States without the risks of tortious liability. This may be so. However, in our judgment, Cape was in law entitled to organise the group's affairs in that manner and (save in the case of AMC to which special considerations apply) to expect that the court would apply the principle of Aron Salomon (Pauper) v A Salomon and Company, Limited [1897] AC 22; [1895 99] All ER Rep 33 in the ordinary way. [61] We categorically say that those who have chosen the benefits of incorporation must bear the rigours of the rule in Salomon's case. And those who deal with a company should likewise be well aware of the rule in Salomon's case. [62] If the appellant (TNB) is held liable to make payment to the respondents for the award against TNBT then the rule in Salomon's case will be relegated into oblivion. The facts of the present appeal do not permit us to depart from the rule in Salomon's case. [63] Unless the statute states otherwise, the principle that the separate legal entities with all the rights and liabilities would normally attach to separate legal entities cannot be overlooked. The individuals that form the company and the company itself are separate legal entities. [64] It is undeniable that the appellant (TNB) is entitled to use the corporate structure of setting up and using TNBT as a subsidiary to enter into a contract. It is perfectly legitimate and nothing sinister can be read into it. Whether it is morally wrong or otherwise is totally immaterial.” [34] In fact, our Court of Appeal in Formis Resources Bhd & Ors. v. Risk Management and Safety System Pty Ltd & Ors. And Other Appeals [2016] 9 CLJ 169 has also opined on this point where it held: “[36] Bearing in mind that the basic relationship is between the plaintiff and the 12th defendant and that that relationship is purely contractual housed in the agreement, and that the claim is for the sums clearly arising under that agreement, the plaintiff's action against parties other than the 12th defendant must first surmount the fundamental principle of separate corporate legal entity. That principle is trite and too enshrined under our corporate laws to require setting out … [37] This principle stands in the way of the plaintiff's claim and it is a principle that the court cannot ignore. The events complained of including the acquisition of the 12th defendant, the subsequent disposal of the 12th defendant to the 13th defendant, the intercompany borrowings, the decisions to cease operations, the writing off of debts, the running and management of business operations, announcements at Bursa Malaysia, are all events and matters which routinely occur in the corporate world and in the general scheme of doing business or running a corporation. The transactions and decisions of companies, though under one umbrella or group of companies remain the individual decisions of the particular company until and unless there are holdings out or representations, guarantees to the contrary. The shareholding of the company, be it by a single sole or by thousands of shareholders does not affect these principles. There is no obligation in law for any one of the companies in the group, or for the holding company, to be liable for the obligations of another within the group. For that matter, there is no obligation for a subsidiary, no matter how substantively owned by a holding company, to be liable for the obligations of its holding company. These firm principles allow corporations to breathe and function, to do business.” [35] The Board Presentation relied upon by the Plaintiff as the basis to constitute a contract between the Defendant and the Plaintiffs simply cannot be sustained for the following reasons: a) the Board Presentation was given by the representatives of the Defendant to the Board of AEG in the Defendant’s capacity as the appointed private equity fund management company for AEG; b) the Defendant never assumed any personal obligations in respect of the MIP; c) the Board Presentation were merely proposals which were always subject to the approval of the Board of AEG and its shareholders. [36] Whilst it is true that in the Board Presentation, the Defendant was named as the shareholder of AEG, this was clearly an inaccurate statement of fact and in any event, cannot without more give rise to a creation of a contractual relationship between the Plaintiffs and the Defendant and or amounts to an intention that the Defendant would be assuming personal responsibility for the MIP. [37] The Defendant was never a party to any agreements executed with the Plaintiffs concerning the MIP obligations. A perusal of the MIP Agreement shows that there was no privity of contract between the Defendant and the Plaintiff, as only ILMU and the Plaintiffs were parties to the said agreement. Conclusion [38] Accordingly, it is my judgment that this is a clear and obvious case where the Plaintiffs’ claims are wholly without any legal basis, unsustainable and bound to fail. [39] In the premises, I allowed the Defendant’s application to strike out the Plaintiff’s action with costs. Dated the 31st day of July 2024 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Mr. Aaron Aiman together with Mr. Daniel Bock for Plaintiff

Messrs. Shukor Baljit & Partners (Kuala Lumpur) Mr. Ashok Kandiah together with Mr. Mishand Patmanathan for

Neelakandan Swaminathan v. Sivanathan K Senathi Rajah [2022] 1 LNS 2136 2. CBM Bhd v. Lyanna bt Mohd Johan & Anor [2024] MLJU 319 3. Tenaga Nasional Bhd v. Irham Niaga Sdn Bhd & Ano [2011] 1 MLJ 752 4. Formis Resources Bhd & Ors. v. Risk Management and Safety