Faizatul Hasanah Binti Hussain v Fauziah Binti Hussain (BA-12B-104-10/2025)

1 IN THE HIGH COURT OF MALAYA AT SHAH ALAM IN THE STATE OF SELANGOR DARUL EHSAN CIVIL APPEAL NO: BA-12B-104-10/2025 BETWEEN

1. FAIZATUL HASANAH BINTI HUSSAIN

2. MOHD AZHAR BIN MOHD KHALID … APPELLANTS AND FAUZIAH BINTI HUSSAIN … RESPONDENT GROUNDS OF JUDGMENT Introduction

1. This is an appeal by the Appellants against the whole decision of the learned Sessions Court Judge dated 29.09.2025, by which the Respondent’s claim was allowed after full trial and the learned Sessions Court awarded, inter alia, compensatory damages in the sum of RM502,980.00, exemplary damages of RM10,000.00, interest at 5% per annum and costs of RM7,000.00. The appeal therefore goes not merely to quantum, but to the very legal foundation upon which liability was imposed on the Appellants personally. 28/04/2026 10:09:38 BA-12B-104-10/2025 Kand. 25 **Note : Serial number will be used to verify the originality of this document via eFILING portal 2

2. The broad factual setting is not substantially disputed. The Respondent is the sister of the 1st Appellant and the sister-in-law of the 2nd Appellant. The case concerns a MARA financing arrangement connected to an intended restaurant venture said to involve premises under a DBKL tenancy. The Respondent’s case is that she agreed to become guarantor on the Appellants’ representations that the loan would be used as working capital for the restaurant and that they would honour the repayment obligations so that she would not be exposed to liability as guarantor. It is common ground that the restaurant was ultimately not opened and that the MARA financing later went into arrears.

3. The Respondent further contended that by reason of such default she was blacklisted by MARA, her own application for MARA business financing was rejected, and she consequently lost further business opportunities and future income. The learned Sessions Court accepted her case and fixed the Appellants with personal liability. The Appellants contend that the learned Sessions Court fell into serious error of law and principle in doing so.

4. Having considered the Record of Appeal material referred to by the parties, the written submissions of both sides, the Appellants’ Reply Submission, and the Respondent’s Hujahan Balas, I am satisfied that this is a proper case for appellate intervention. In my judgment, the decision below cannot stand. For reasons which I now set out, the appeal is allowed. **Note : Serial number will be used to verify the originality of this document via eFILING portal 3 Background facts

5. The Respondent’s own written submission sets out the material background. She says that in or around 2015 the Appellants represented to her that they had entered into a tenancy arrangement with DBKL under the name of Million Pictures Sdn Bhd in respect of premises at Taman Botani Perdana for the purpose of opening a restaurant. She says the Appellants required working capital, applied for MARA financing, and needed a guarantor. She therefore agreed to become guarantor by reason of the Appellants’ representations, oral assurances and family relationship.

6. The Respondent’s pleaded case was that the Appellants in truth never opened the restaurant, used the MARA financing for their own benefit, failed to honour the financing obligations, and thereby caused her blacklisting and further losses. Her written submission expressly maintained that the Appellants had from the beginning perpetrated fraud and/or fraudulent representation and/or undue influence upon her.

7. The Appellants’ case, however, was materially different. Their primary contention was that the learned Sessions Court wrongly imposed personal liability upon them notwithstanding the doctrine of separate legal entity. They maintained that the court below had, in effect, lifted or bypassed the corporate veil without legal basis. They further contended that the learned Sessions Court wrongly inferred fraud merely from the fact that the restaurant did not eventually open and the **Note : Serial number will be used to verify the originality of this document via eFILING portal 4 financing fell into arrears, whereas fraud in law must exist at the inception of the transaction. The parties’ submissions The Appellants’ submissions

8. Learned counsel for the Appellants submits that the learned Sessions Court erred in law in disregarding the doctrine of separate legal personality. Reliance was placed on ss 20 and 21 of the Companies Act 2016 and on the Federal Court authority of Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 4 CLJ 821. The Appellants say that a company is a legal person distinct from its directors and shareholders, and that the mere fact that the directors were involved in the events does not, without more, justify personal liability.

9. The Appellants further submit that there was no pleaded and proved basis for lifting the veil. There was no proper finding that Million Pictures Sdn Bhd was a sham, façade or mere vehicle for fraud. On the contrary, the Sessions Court is said to have moved too quickly from involvement by the Appellants as directors to personal legal liability. The Appellants argue that this was a direct misapplication of company law principle.

10. On the issue of fraud, the Appellants relied on the classical principle in Derry v Peek (1889) 14 App Cas 337 and the statutory framework in s 17 of the Contracts Act 1950. They submit that fraud must be shown to exist at the time of inducement. It is not enough that a business later **Note : Serial number will be used to verify the originality of this document via eFILING portal 5 fails or that a promise is later not performed. Their reply submission expressly argues that the Sessions Court appears to have inferred fraudulent intent from the eventual failure to open the restaurant and the later failure to service the loan, whereas subsequent non-performance does not automatically establish lack of intention at the inception of the transaction.

11. The Appellants also stress that there was evidence of a tenancy agreement and steps towards opening the restaurant. In that regard, the Reply Submission says that there was indeed a tenancy agreement with DBKL and that steps were taken towards commencing operations, which, they say, materially undermines any inference that the transaction was a sham from the outset.

12. As for undue influence, the Appellants submit that s 16 of the Contracts Act 1950 was not properly applied. They rely on the legal requirement that it must be shown that one party was in a position to dominate the will of the other and used that position to obtain an unfair advantage. The Reply Submission argues that there was no clear finding that the Appellants were in such a position as a matter of law, and that family relationship alone could not suffice.

13. Finally, the Appellants challenge the damages award. They argue that the larger heads of damages were speculative and not strictly proved. In particular, they say the alleged lost opportunity to obtain RM500,000.00 in financing and the asserted future income depended **Note : Serial number will be used to verify the originality of this document via eFILING portal 6 on several contingencies and could not properly be treated as proved special damages. The Respondent’s submissions

14. The Respondent’s primary answer is that the appeal should be dismissed because the learned Sessions Court’s findings were findings of fact after full trial. The Respondent relied heavily on Ng Hoo Kui & Anor v Wendy Tan Lee Peng (Administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 10 CLJ 273 and the related authorities of UEM Group Bhd v Genisys Integrated Engineers Pte Ltd & Anor [2010] 9 CLJ 785 (FC), Henderson v Foxworth Investments Ltd and another [2014] 1 WLR 2600, Lee Ing Chin & Ors v Gan Yook Chin [2003] 2 CLJ 19, and Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1; [2004] 4 CLJ 309. The Respondent says that this Court should not disturb those findings unless they were plainly wrong or there was insufficient judicial appreciation of the evidence.

15. On the merits, the Respondent contends that the action was correctly brought against the Appellants personally. She relies on Victor Cham & Anor v Loh Bee Tuan [2006] 3 CLJ 770 and submits that directors who personally order, procure or participate in tortious acts may be personally liable. She also invokes Ong Leong Chiou [2021] 4 CLJ 821 for the proposition that the veil of incorporation is not inviolable and may be lifted where the corporate structure is utilised for fraudulent, dishonest or unlawful purposes. **Note : Serial number will be used to verify the originality of this document via eFILING portal 7

16. The Respondent further relied on cross-examination said to show that the Appellants themselves made the representations to her: that the MARA financing would be used as “modal pusingan untuk buka restoran”, that they would honour the MARA arrangement, and that she agreed to become guarantor on the basis of those promises. The Respondent says the learned Sessions Court was therefore correct in concluding that there were personal representations, personal inducement, and personal wrongdoing.

17. On adverse inference, the Respondent relies on s 114(g) of the Evidence Act 1950, together with Vila Mekar Sdn Bhd v Wong Yie

617. Dee [2025] CLJU 1703 and Amri Ibrahim & Anor v PP [2017] 1 CLJ Her complaint is that the Appellants produced no independent witness or supporting material to verify the alleged expenditure on the restaurant venture, and that the court below was entitled to treat their explanation as self-serving and unupported.

18. On undue influence, the Respondent relied on Royal Bank of Scotland v Etridge (No 2) [2001] 4 All ER 449 and Allcard v Skinner

(1887) 36 Ch D 145; [1886–90] All ER Rep 90. She submits that the sibling relationship and the trust and confidence reposed in the Appellants were sufficient to found undue influence or at least presumed undue influence.

19. On damages, the Respondent submits that the Sessions Court was correct to award RM502,980.00, which she says comprised blacklisting consequences, lost opportunity to secure RM500,000.00 in MARA **Note : Serial number will be used to verify the originality of this document via eFILING portal 8 financing, future income of RM494,880.00, and payment of RM8,100.00. She relied on Viva Odyssey Sdn Bhd v Oxford United Sdn Bhd & Ors [2025] CLJU 2972, Hadley v Baxendale [2010] 9 CLJ 785 (FC), Shim Yen Lin v Cedric Wong King Ti [2022] MLJU 2370, Khairul Effendi & Anor v Lim Boon Yan [2025] CLJU 3127, Bumi Cash Sdn Bhd v Bumiputra-Commerce Bank Berhad [2006] 3 MLRH 359, and Bank Bumiputra Malaysia Berhad v First Circle Rubber Products Sdn Bhd [2004] 4 MLRH 168. She further says exemplary damages of RM10,000.00 were properly awarded under Rookes v Barnard [1964] 1 All ER 367, Templeton & Ors v Low Yat Holdings Sdn Bhd & Anor [1992] CLJU 7; [1992] 1 LNS 7; [1993] 1 MLJ 443, and Tay Keong Kok & Ors v Eastmont Sdn Bhd & Another Appeal [2025] 1 CLJ 583. Issues for determination

20. In my judgment, the appeal turns on the following issues:

21. I accept the Respondent’s submission that an appellate court must be slow to interfere with findings of fact by a trial court. That is the settled principle reflected in Ng Hoo Kui [2020] 10 CLJ 273, Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600, Lee Ing Chin [2003] 2 CLJ 19 and Gan Yook Chin [2005] 2 MLJ 1; [2004] 4 CLJ 309. The appellate court does not simply substitute its own view of the facts because it might have reached a different conclusion.

22. But appellate restraint is not appellate abdication. The Appellants’ Reply Submission is correct to emphasise that appellate intervention is justified where there is no or insufficient judicial appreciation of the evidence, where relevant legal principles were not applied, or where the conclusion reached could not reasonably be justified on the material before the court. That is precisely how the Appellants have framed the present appeal.

23. In the present case, the issues of separate legal entity, fraud at inception, undue influence under s 16 of the Contracts Act 1950, and strict proof of special damages are not merely factual matters. They require correct legal analysis. In my respectful view, that legal analysis was not sufficiently undertaken below. I therefore hold that this is a proper case for appellate intervention. **Note : Serial number will be used to verify the originality of this document via eFILING portal 10 Issue 2: Separate legal entity and personal liability

24. The starting point must be the doctrine of separate legal personality. That principle is embedded in ss 20 and 21 of the Companies Act 2016 and was reaffirmed in Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 4 CLJ 821. A company is, in law, distinct from its directors and shareholders. The mere fact that a company is family-controlled, or that its directors are the moving minds behind a transaction, does not automatically make them personally liable.

25. I accept, as the Respondent submitted, that there are recognised exceptions. Victor Cham & Anor v Loh Bee Tuan [2006] 3 CLJ 770 supports the proposition that a director or officer who personally commits or procures a tort may be personally liable. Ong Leong Chiou likewise recognises that the veil of incorporation may be lifted where the corporate form is used for fraudulent, dishonest or unlawful purposes. But those are exceptions. They require careful factual and legal foundation.

26. In the present case, I am unable to find that the learned Sessions Court sufficiently identified that foundation. There was no clear and reasoned finding that Million Pictures Sdn Bhd was itself a sham or façade from inception. Nor was there a sufficiently clear analysis distinguishing the company-related financing arrangement from a separate, independently established tort personally committed by the Appellants. Instead, the court below appears to have moved directly from the fact that the Appellants dealt with the Respondent and were the only **Note : Serial number will be used to verify the originality of this document via eFILING portal 11 directors/shareholders to the conclusion that they were personally liable. That, with respect, is an impermissible shortcut.

27. I am conscious that the Respondent relied on parts of the cross-examination and MARA documentation to argue that the Appellants were named as “pelanggan” and had admitted they signed in their personal capacities. Even taking that at its highest, the issue still required disciplined legal analysis. The existence of their names or signatures on documents does not by itself answer the question whether the financing arrangement was in truth theirs personally or whether they committed a personal tort attracting liability irrespective of the company structure.

28. In my judgment, the learned Sessions Court did not sufficiently undertake that legal inquiry. I therefore find merit in the Appellants’ complaint that personal liability was imposed without adequate legal basis consistent with Ong Leong Chiou [2021] 4 CLJ 821 and the statutory doctrine of separate legal personality. Issue 3: Fraud and fraudulent misrepresentation

29. Fraud is a serious allegation. The law has always treated it as such. Whether one approaches the matter through Derry v Peek [1889] 14 App Cas 337 through s 17 of the Contracts Act 1950, the requirement remains that the alleged representation must be shown to have been false when made and made knowingly, without belief in its truth, or **Note : Serial number will be used to verify the originality of this document via eFILING portal 12 recklessly. A later failure to perform does not, without more, establish fraud at inception.

30. The difficulty I have with the judgment below is that, on the material cited to me, the reasoning appears substantially to have proceeded on the basis that because the restaurant never opened and because the financing later went into arrears, the earlier representations must therefore have been fraudulent. The Appellants’ Reply Submission expressly criticizes this reasoning, and in my view correctly so. Subsequent non-performance does not automatically establish absence of intention to perform when the promise was made.

31. The evidence relied on by the Appellants in reply is important. They say there was indeed a tenancy agreement with DBKL and that steps were taken toward commencing operations. If that is so, it materially weakens the inference that the entire venture was a sham from the start. It may still be that the venture later failed, that the financing was mishandled, or that the Appellants’ conduct was blameworthy. But blameworthiness is not the same as legal fraud.

32. The Respondent, for her part, relied on cross-examination said to show that the Appellants had promised the financing would be used as modal pusingan and that they would honour the MARA arrangement. I accept that such evidence may establish that representations were made. It may also establish inducement. But the decisive question remains whether the representations were false when made in the legal sense **Note : Serial number will be used to verify the originality of this document via eFILING portal 13 required by Derry v Peek [1889] 14 App Cas 337 and s 17. On the material before this Court, that threshold was not met.

33. Nor do I consider that the Respondent’s reliance on adverse inference under s 114(g) of the Evidence Act 1950 cures the deficiency. I accept that Vila Mekar Sdn Bhd v Wong Yie Dee [2025] CLJU 1703 and Amri Ibrahim & Anor v PP [2017] 1 CLJ 617 support the drawing of adverse inference where material evidence is withheld. But adverse inference cannot substitute for proof of the essential ingredients of fraud. At most, it may justify caution in accepting an unsupported explanation. It cannot by itself establish that the Appellants were dishonest from the beginning.

34. I therefore hold that the learned Sessions Court erred in finding fraud and fraudulent misrepresentation proved. Issue 4: Undue influence

35. The Respondent also relied on undue influence. The governing provision is s 16 of the Contracts Act 1950. That section requires proof that one party was in a position to dominate the will of another and used that position to obtain an unfair advantage. The authorities cited by the Respondent, namely Royal Bank of Scotland v Etridge (No 2) [2001] 4 All ER 449 and Allcard v Skinner (1887) 36 Ch D 145, are classic authorities on actual and presumed undue influence. **Note : Serial number will be used to verify the originality of this document via eFILING portal 14

36. However, those authorities do not support the proposition that family relationship alone suffices. Trust and confidence may be relevant background. They may explain why a party entered into a transaction. But they do not automatically amount to legal domination of will. There must be a structured analysis: whether there was actual undue influence, whether circumstances existed to raise a presumption, whether the transaction was such as to call for explanation, and whether the burden shifted.

37. On the material before me, I do not find that such a structured legal analysis was undertaken below. The Respondent’s case, as repeatedly framed, was substantially that she agreed because of the Appellants’ promises and representations about the restaurant venture and repayment. That is more naturally analysed as inducement by representation than as domination of will in the strict legal sense of undue influence.

38. The Appellants’ Reply Submission, in my view, fairly points out that there was no clear finding that they were in a legal position to dominate the Respondent’s will within the meaning of s 16. Accordingly, I find that the conclusion on undue influence cannot safely stand. **Note : Serial number will be used to verify the originality of this document via eFILING portal 15 Issue 5: Damages

39. Once the findings on personal liability, fraud and undue influence fall away, the damages award necessarily becomes unsustainable. But even independently, I would have difficulty in maintaining the award as granted below.

40. The Respondent’s own written submission identifies the losses as including: blacklisting by MARA, loss of opportunity for her child’s MRSM registration, loss of opportunity to obtain RM500,000.00 through MARA Skim Mudah Jaya, future income of RM494,880.00, and payment of RM8,100.00. Those figures formed the basis of the RM502,980.00 award which the learned Sessions Court upheld.

41. Of these items, the RM8,100.00 payment stands on a more direct footing. But the larger heads of loss are plainly contingent. The claim for loss of the RM500,000.00 financing opportunity depends on a chain of assumptions: that financing would have been approved, that it would have been disbursed, that the intended business would have proceeded, and that the asserted profits would in fact have been realised. That is not the ordinary stuff of strict proof of special damages.

42. I accept that Viva Odyssey Sdn Bhd v Oxford United Sdn Bhd & Ors [2025] CLJU 2972 and Shim Yen Lin v Cedric Wong King Ti [2022] MLJU 2370 may support, in a proper case, recovery for loss of opportunity. I also accept the general remoteness principle in Hadley v Baxendale (1854) 9 Ex Ch 341; 156 ER 145. But such claims remain **Note : Serial number will be used to verify the originality of this document via eFILING portal 16 subject to proof. They cannot be awarded merely because they are asserted in figures. On the present record, the larger parts of the RM502,980.00 award were too uncertain and insufficiently proved to be legally sustainable.

43. The same applies to exemplary damages. The Respondent relied on Rookes v Barnard [1964] 1 All ER 367, Templeton & Ors v Low Yat Holdings Sdn Bhd & Anor [1992] CLJU 7; [1992] 1 LNS 7; [1993] 1 MLJ 443, and Tay Keong Kok & Ors v Eastmont Sdn Bhd & Another Appeal [2025] 1 CLJ 583. Those authorities do not assist unless the qualifying wrongful conduct is first established. Once the finding of fraud falls away, the basis for exemplary damages also falls away. Conclusion

44. Drawing the threads together, I find as follows.

45. First, this is a proper case for appellate intervention notwithstanding the general principle of restraint expressed in Ng Hoo Kui [2020] 10 CLJ 273 and the related authorities, because the present appeal discloses material misdirection in law and insufficient judicial appreciation of the legal issues. **Note : Serial number will be used to verify the originality of this document via eFILING portal 17

46. Second, the learned Sessions Court erred in imposing personal liability on the Appellants without first satisfying the legal threshold for displacing the doctrine of separate legal personality as stated in Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 4 CLJ 821.

47. Third, fraud and fraudulent misrepresentation were not proved according to the requirements of Derry v Peek [1889] 14 App Cas 337 and s 17 of the Contracts Act 1950. The court below appears to have reasoned backwards from subsequent non-performance to fraudulent intent at inception, which was impermissible.

48. Fourth, undue influence under s 16 of the Contracts Act 1950 was not properly established. Family relationship and trust, without the structured legal analysis required by Royal Bank of Scotland v Etridge (No 2) [2001] 4 All ER 449 and Allcard v Skinner (1887) 36 Ch D 145 were insufficient.

49. Fifth, the substantial award of RM502,980.00 and the exemplary damages of RM10,000.00 were not legally sustainable on the evidence. **Note : Serial number will be used to verify the originality of this document via eFILING portal 18

50. Accordingly, the appeal is allowed. The judgment of the learned Sessions Court dated 29.09.2025 is set aside. Dated this 27th March 2026 -sgd- ………………………………….. Datin Asmah binti Musa Pesuruhjaya Kehakiman Mahkamah Tinggi Malaya Mahkamah Tinggi Shah Alam Counsel for Plaintiff : Ms. Raja Saidatul Akma binti Raja Lope Messrs Lope Maizura Counsel for Defendant : Mr. Noorazmir bin Zakaria Messrs. Akram Hizri Azad & Azmir **Note : Serial number will be used to verify the originality of this document via eFILING portal