Zev Supplies LLC v Aerolink International Sdn Bhd (WA-22NCvC-725-11/2021)

ORTHO PARTNER (NO. SYARIKAT.: 79892975800018) ...PLAINTIFFS

E PRESS HOLDINGS (M) SDN BHD (NO. SYARIKAT.:201301037941(1067770-D)) ... DEFENDANTS

This action concerns two commercial contracts for the supply of medical-grade nitrile examination gloves during the height of the COVID-19 pandemic. The Plaintiffs allege that the Defendants failed to deliver the contracted goods, supplied defective goods, and induced the Plaintiffs through misrepresentation and fraudulent trading.

Judgments in Default were entered earlier against the $ 2^{nd} $ Defendant (Ikarl) and $ 5^{th} $ Defendant (E Press). The $ 1^{st} $ Defendant (Aerolink) and $ 3^{rd} $ Defendant (Mamun) ceased participation and did not attend trial. The trial therefore proceeded solely against the $ 4^{th} $ Defendant ("D4"), Kamarul Hisham.

The Plaintiffs called one witness (PW1). The $ 4^{th} $ Defendant testified as DW1. I have considered all evidence, submissions, and the full documentary record.

The issues relating to the $ 4^{\mathrm{th}} $ Defendant are:

Whether D4 is liable for the sums paid under the 1st Contract (USD 2,534,400.00) and the additional USD 150,000 paid to D3.

Whether D4 is liable for the sums paid under the 2nd Contract (USD 1,456,875.00).

Whether the corporate veil of Ikarl should be lifted and whether D4 is personally liable under Section 540 Companies Act 2016 for fraudulent trading. The 1 $ ^{1 \mathrm{st}} $ Contract (July-December 2020)

In July 2020, during the height of the COVID-19 pandemic, the Plaintiffs sought a Malaysian supplier capable of providing Powder-Free Blue Nitrile Examination Gloves of FDA 510K standard. This requirement is pleaded at paragraph 9 of the Amended Statement of Claim and was never seriously disputed.

The Plaintiffs pleaded that the $ 1^{\mathrm{st}} $ Defendant (Aerolink) and $ 3^{\mathrm{rd}} $ Defendant (Mamun) represented that Aerolink was legally trading in such gloves and could supply Skymed-brand 510K Gloves. These representations are pleaded at paragraph 10 and were admitted by the 1st and 3rd Defendants in their Defence. As they did not attend trial, these admissions stand unrebutted.

Relying on these representations, the Plaintiffs agreed to purchase 330,000 boxes of Skymed 510K Gloves for USD 2,534,400,paid in four tranches between $ ^{7} $ th August and $ ^{2} $ nd September 2020. However, only 116,570 boxes were delivered, and these were not of the contracted specification—being mixed with latex, discoloured, shrivelled, dirty, torn, and not FDA-compliant.

Although the 4th Defendant attempted to distance himself on the basis that these events occurred before his appointment as director of Aerolink, this argument does not withstand scrutiny. The evidence shows that: - Ikarl (D2)a company controlled by D4 was the shipper/exporter for all deliveries; - all monies for the 1st Contract were received into Ikarl's bank account; - D4 admitted he was the operations director of Ikarl; and - D4 admitted he had entered into a business partnership with D3 specifically to trade gloves.

These facts place D4 squarely within the operational execution of the 1st Contract. The Plaintiffs pleaded that they "immediately informed" the Defendants of the defective and incomplete delivery. While no formal written notice to D4 was produced, the contemporaneous WhatsApp communications (Bundle B2) show repeated complaints made to D3, who-by D4's own admission was the person appointed to liaise with customers. D4 cannot now rely on the absence of direct communication to him when he expressly delegated customer communications to D3 and allowed D3 to act as the face of their joint glove-trading venture.

Following these complaints, the Defendants proposed supplying Brightway Gloves as an alternative for the undelivered balance. The Plaintiffs then paid an additional USD 150,000.00 directly into D3's personal account.

D4 admitted in cross-examination that he knew D3 received this money. This admission is significant: it confirms D4's knowledge of the ongoing dealings with the Plaintiffs and his awareness of the continuing contractual obligations.

The Plaintiffs pleaded that they eventually terminated the $ 1^{\mathrm{st}} $ Contract due to non-delivery of the remaining 213,430 boxes and due to the defective nature of the 116,570 boxes received. Although no photographs of the defective gloves were tendered, the Bills of Lading, Receiving Orders, and critically D4's own letters (B1, pp. 68-69, 80-81) corroborate the Plaintiffs' narrative that: - deliveries were incomplete, - the Defendants acknowledged the issues, and - D4 personally undertook to resolve them.

These documents signed by D4 are powerful admissions that he was fully aware of the Plaintiffs, the contracts, the delivery failures, and the outstanding obligations. The $ 2^{\mathrm{nd}} $ Contract (December 2020-June 2021)

The evidence establishes that the Plaintiffs paid a total of USD 1,456,875.00 into the bank account of Ikarl Global Sdn Bhd (D2) pursuant to the second arrangement for the supply of 200,000 boxes of Brightway Gloves. This payment is supported by the bank documents in Bundle B1 and was expressly admitted by DW-1 during cross-examination.

The fact that Ikarl a company controlled and operated by the $ 4^{th} $ Defendant received the entirety of the contract monies places D4 squarely within the financial execution of the $ 2^{nd} $ Contract.

In response to the Plaintiffs' repeated inquiries regarding delivery, the 4th Defendant personally issued two written undertakings, dated 14 April 2021 and 25 May 2021, in which he expressly promised that delivery of the Brightway Gloves would be completed by May/June 2021, failing which a full refund would be made. These undertakings appear at pages 68-69 of Bundle B1 and bear the 4th Defendant's signature. There were issued on Ikarl's letterhead and constitute clear, unequivocal commitments by D4 in his capacity as director of the company.

Despite these personal assurances, no delivery was ever made under the 2 $ ^{nd} $ Contract. Equally, no refund whether partial or full was issued to the Plaintiffs. The complete absence of performance, coupled with the retention of the Plaintiffs' funds, is undisputed on the evidence. The pattern mirrors the failures under the 1 $ ^{st} $ Contract promises made, deadlines extended, and yet no substantive action taken. It is a sequence of events that reflects not mere commercial delay, but a persistent failure to honour contractual obligations.

The $ 4^{\mathrm{th}} $ Defendant's attempt during cross-examination to deny the signatures on the undertakings is rejected for the reasons already stated. He produced no contemporaneous police report, no expert evidence, and no forensic analysis to support his denial. The undertakings are Part B documents, their authenticity as documents was never challenged, and D4 himself had earlier admitted signing them in paragraph 35 of his Defence. His belated denial is inconsistent with the documentary record and lacks credibility.

In light of the undisputed receipt of the Plaintiffs' monies, the personal undertakings issued by D4, the complete non-delivery of goods, and the absence of any refund, I find that the $ 4^{th} $ Defendant is personally liable for the sums claimed under the $ 2^{nd} $ Contract.

His conduct, viewed cumulatively, demonstrates clear knowledge of the Plaintiffs' payments, personal assumption of responsibility, and a failure to fulfil or remedy the obligations undertaken.

The 4th Defendant's own testimony provides a clear and coherent picture of his involvement in the glove-trading venture. DW1 admitted that he had been a director of Ikarl Global Sdn Bhd (D2) since 26 March 2018. He further admitted that in July 2020, he invited the 3rd Defendant, Mamun, to join Ikarl as a 49% shareholder, and that they thereafter jointly operated the glove business. According to DW1, Mamun was responsible for customer dealings and marketing, while he himself was responsible for operations, including logistics, shipments, and warehouse matters.

DW1 also admitted that all monies for both the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Contracts were received into Ikarl's bank account, which he controlled as director (Q&A 4 and Q&A 22, DW-1; NOP p. 140 lines 24-29). He further accepted that all Bills of Lading (BOLs) for the glove shipments were issued by Ikarl, not Aerolink, and that Ikarl was the exporting entity. These admissions are fully corroborated by the Bills of Lading in Bundle B1, all of which name Ikarl Global Sdn Bhd as the shipper/exporter.

The Plaintiffs' evidence (Q&A 7-9 PW-1), together with the admissions by D1 and D3 at paragraph 11 of the Amended Defence (Bundle A, p. 42) and paragraph 9 of the Agreed Facts (Encl. 170), establishes that the $ 1^{\mathrm{st}} $ and $ 3^{\mathrm{rd}} $ Defendants represented that Aerolink could supply 330,000 boxes of Skymed 510K Gloves. The size ratio and shipment structure were also admitted by D1 and D3 (para 12, Amended Defence; para 10, Agreed Facts). D4 did not deny any of these representations in his evidence and expressly admitted that he followed D3's instructions in respect of shipping.

The Plaintiffs were later informed that Ikarl (D2) would be the shipper and that a revised shipping schedule would apply. This revised timeline — 60,000 boxes in October 2020, 60,000 in early November, 70,000 at the end of November, 70,000 in early December, and the balance by end-December is supported by Q&A 10-13 PW-1, admitted by D1 and D3 (para 13, Amended Defence; para 10, Agreed Facts), and consistent with D4's own admission that he was in charge of operations and shipping.

In total, only 116,570 boxes were delivered out of the contracted 330,000 boxes. This is supported by Q&A 14 PW-1, the BOLs at pages 24,25,27,28-30,and 31-32 of Bundle B1,and DW1's own admissions (Q&A 26,28,31 & 33 DW-1).

The WhatsApp communication at page 3 of Bundle B2 shows that D3 was informed of shortages in the $ 1^{\mathrm{st}} $ and $ 3^{\mathrm{rd}} $ shipments. D4 did not deny these shortages in his testimony.

The 116,570 boxes delivered were not in accordance with the contracted specifications of Blue Nitrile 510K Gloves. PW-1 testified (Q&A 16) that the gloves were shrivelled, stained, dirty, torn, and contained multiple colours (purple, white, black) instead of blue.

There were also not all nitrile, but a mixture of latex gloves. These complaints were communicated to D3 via WhatsApp (Bundle B2, pp. 4-6). D4 did not deny this evidence in DW-1. The condition of the gloves rendered them unfit for purpose and fundamentally inconsistent with the specifications contracted for.

Upon receiving the defective gloves, the Plaintiffs informed the Defendants and sought a full refund. The Defendants responded that they would "investigate" the matter. Pending this, the Plaintiffs were persuaded to accept Brightway Gloves for the remaining balance of the 1st Contract, on condition that they pay an additional USD 150,000.

This is supported by Q&A 17-18 PW-1, the WhatsApp messages at pages 7-8 of Bundle B2, and the pleadings of D1 and D3, who stated that D4 would investigate the matter. This aligns with D4's own admission that he was responsible for procurement and shipping. D4 did not deny this in his testimony.

The Plaintiffs agreed to the top-up and paid USD 150,000.00 directly into D3's personal account, as instructed. This is supported by Q&A 19-20 PW-1, the bank documents at pages 34-35 of Bundle B1, and D4's own admission that D3 personally received this money (Bundle B1, p. 80).

Despite receiving the additional USD 150,000.00, the Defendants failed to deliver the remaining 213,430 boxes of Brightway Gloves. Instead, they delivered only 191,640 boxes, comprising SkyMed and MediShield gloves, which again were not of merchantable quality. This is supported by Q&A 21 PW-1 and the documentary evidence at pages 38, 41, 44, 49, 54-55, and 58 of Bundle B1.

D4's assertion that he "did not know the Plaintiffs" was contradicted by several contemporaneous documents bearing his signature, including:

a letter dated 14 April 2021 addressed directly to the Plaintiffs (B1, p. 68);

a letter dated 25 May 2021 addressed directly to the Plaintiffs (B1, p. 69); and

a letter dated 23 July 2021 from D4 to D3 (B1, pp. 80-81), expressly referencing the Plaintiffs and the "first order".

In addition, in paragraph 35 of his Defence, D4 expressly admitted signing the undertakings relating to the Plaintiffs' orders.

During cross-examination, D4 attempted to deny the signatures on these letters and undertakings. However, he produced no contemporaneous police report disputing the signatures (the report he relied on was lodged only after the commencement of this suit), and he produced no handwriting expert or forensic evidence to support his denial. The documents in question are Part B exhibits, and their authenticity as documents was never disputed during the trial.

In light of the documentary record, D4's own pleaded admissions, and his shifting explanations during cross-examination, I find that his denials are afterthoughts and not credible. The Court therefore accepts the letters and undertakings as genuine and as clear evidence of D4's knowledge, involvement, and responsibility in relation to the 1st Contract.

Accordingly, I find that the $ 1^{\mathrm{st}} $ to $ 4^{\mathrm{th}} $ Defendants breached the $ 1^{\mathrm{st}} $ Contract, and the Plaintiffs are entitled to recover the sum of USD 2,534,400.00 paid under the $ 1^{\mathrm{st}} $ Contract and the additional USD 150,000.00 paid for the Brightway substitution. This is supported by Q&A 22 PW-1, the WhatsApp communications at pages 9-14 of Bundle B2, and the correspondence at pages 70-72 of Bundle B1.

From the above analysis, the $ 4^{\mathrm{th}} $ Defendant's admissions, taken together with the documentary record, strongly corroborate the Plaintiffs' case that two separate contracts were concluded between the parties.

D4's own testimony confirms that he was fully aware of the nature of the gloves being traded he accepted in cross-examination that 510K Gloves are blue nitrile examination gloves, thereby demonstrating his knowledge of both the specifications and the quantities involved. This aligns with the Plaintiffs' pleaded case and removes any suggestion that he was unaware of the type of product or the scale of the transactions.

Equally significant are the admissions by the $ 1^{\mathrm{st}} $ and $ 3^{\mathrm{rd}} $ Defendants in their Amended Defence (Bundle A, p. 42, para 11) and in the Agreed Facts (Enclosure 170, para 9), where they expressly acknowledged the existence of two distinct contracts, together with the specifications, quantities, and pricing. These admissions stand unrebutted, as D1 and D3 did not attend trial, and they provide independent corroboration of the Plaintiffs' narrative.

Viewed cumulatively, the evidence paints a coherent picture: the Defendants were not engaged in a single, confused transaction, but in two structured commercial arrangements, each with its own pricing, quantities, timelines, and obligations.

D4's own knowledge of the product specifications, his operational role in Ikarl, and the admissions of D1 and D3 all converge to reinforce the Plaintiffs' case. The Defendants' conduct was not the product of misunderstanding or miscommunication; rather, it reflects a deliberate and coordinated course of dealing across two separate contracts. Liability for the USD 2,534,400.00 and USD 150,000.00

On the totality of the evidence, several critical facts emerge clearly and are either admitted or effectively undisputed.

First, although the $ 1^{\mathrm{st}} $ Contract was fronted in the name of Aerolink (D1), the actual shipper and exporting entity was Ikarl (D2). This is evident from all four Bills of Lading in Bundle B1, each of which names Ikarl Global Sdn Bhd as shipper/exporter, and is expressly admitted by DW-1 in his cross-examination (Q&A 26, 28, 31 & 33).

Secondly, all monies for the $ 1^{\mathrm{st}} $ Contract were received into Ikarl's bank account, as confirmed by PW-1 (Q&A 7-9) and admitted by D4 himself (Q&A 4 & 22 DW-1; NOP p. 140, lines 24-29).

Thirdly, D4 accepted that he and D3 jointly operated the glove business, with D3 handling customers and D4 handling operations.

Fourthly, D4 personally signed undertakings acknowledging responsibility for delivery and/or refund in relation to the Plaintiffs' orders (B1, pp. 68-69) and later wrote to D3 about the "first order" and the Plaintiffs (B1, pp. 80-81).

Finally, D4 admitted that he knew D3 received USD 150,000.00 personally from the Plaintiffs (B1, p. 80).

Taken together, these facts place D4 not at the periphery, but at the centre of the operational and financial execution of the $ 1^{\mathrm{st}} $ Contract.

The $ 1^{\mathrm{st}} $ Contract failed in several fundamental respects. Out of the contracted 330,000 boxes, only 116,570 boxes were delivered (Q&A 14 PW-1; BOLs in B1). Those boxes were, on the unshaken evidence of PW-1 (Q&A 16) and the contemporaneous WhatsApp messages (B2, pp. 4-6), defective and non-compliant—shrivelled, stained, dirty, torn, mixed with latex, and of multiple colours rather than blue nitrile 510K.

The remaining 213,430 boxes were never delivered. Instead, the Plaintiffs were persuaded to accept Brightway Gloves as a substitute, on condition that they pay an additional USD 150,000.00 which they did (Q&A 19-20 PW-1; B1, pp. 34-35).

Yet, even after this top-up, no Brightway Gloves were supplied for the balance under the 1 $ ^{1 \mathrm{st}} $ Contract; what was later sent comprised SkyMed and MediShield gloves, and only 191,640 boxes, again not of merchantable quality (Q&A 21 PW-1; B1, pp. 38, 41, 44, 49, 54 55, 58).

Throughout this period, despite repeated complaints and demands (B2, pp. 3-8, 9-14), no refund was ever made. The pattern that emerges is not one of an isolated logistical mishap or an honest commercial delay, but of a sustained failure to perform coupled with the continued retention of the Plaintiffs' monies.

The conduct resembles a situation where a party, having taken the funds, keeps the door firmly shut while assuring the other that matters are "being looked into". The assurances offered did not translate into action; instead, the Plaintiffs were left waiting while the Defendants held on to the funds without delivering the contracted goods or returning the money. This sustained inaction, viewed cumulatively, is wholly inconsistent with good faith commercial dealing.

With respect, I am not in the same view with the Defence's submission that the Plaintiffs were obliged to return the unmerchantable goods before seeking a refund as misconceived and contrary to Section 43 of the Sale of Goods Act 1957.

Section 43 provides that where goods are delivered to a buyer who has the right to reject them, the buyer" is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them."

The statutory position is clear: the law does not impose on the buyer the burden of physically returning defective goods, particularly where the goods are unmerchantable or not in accordance with the contract. It is enough that the buyer communicates the rejection.

In this case, the Plaintiffs did precisely that. They informed the Defendants of the defects and sought the return of their monies. Instead of arranging a refund, D3 informed the Plaintiffs that D4 would "investigate" the matter and persuaded them to consider taking the remaining boxes under a different brand.

The Defendants' response thus shifted the focus away from refunding the Plaintiffs and towards proposing an alternative arrangement, effectively keeping the Plaintiffs' funds in hand while offering assurances that ultimately led nowhere.

The statutory protection in Section 43 exists for precisely this reason: to prevent a seller from insisting on the return of defective goods as a precondition to refund, thereby placing the buyer in a position of disadvantage. The Plaintiffs' rejection was properly communicated, and the Defendants' insistence on further steps or their suggestion that the Plaintiffs should continue with a different brand cannot override the clear wording of the statute.

In these circumstances, and bearing in mind D4's admitted role as operations director of Ikarl, his control over the bank account into which all contract monies were paid, his partnership with D3 in the glove business, and his personal undertakings to the Plaintiffs, I am unable to accept any suggestion that he was a mere bystander to the $ ^{1 s t} $ Contract.

The documentary trail and his own admissions demonstrate that he knowingly allowed Ikarl to receive and retain the Plaintiffs' funds, to ship defective and non-compliant goods, to fail to deliver the balance, and to withhold refunds despite clear contractual and equitable obligations to do so. On a balance of probabilities, I therefore find that D4 is personally liable for the sums claimed under the 1st Contract, namely USD 2,534,400.00 and the additional USD 150,000.00.

In the instant case, I have no doubt that D1 and D3's admissions in their Amended Defence that there were in fact two separate contracts together with their admissions as to the specifications, quantities, and pricing of those contracts provide strong corroboration of the Plaintiffs' case.

These admissions stand unrebutted, as neither D1 nor D3 attended trial to challenge or qualify them. Their pleaded position aligns entirely with the Plaintiffs' narrative and removes any ambiguity as to the structure of the commercial dealings between the parties.Further, D4's own testimony reinforces this conclusion.

In cross-examination, he accepted that he knew what "510K Gloves" were and confirmed that they referred to blue nitrile examination gloves. This acknowledgment demonstrates that he was not operating in the dark or at the periphery of the transactions; rather, he understood the product specifications and, by extension, the scale and nature of the orders being placed.

Taken together, the admissions of D1 and D3 and the concessions made by D4 form a coherent evidential thread: the parties were engaged in two distinct contractual arrangements, each with defined specifications and quantities.

The Defendants' own pleadings and testimony thus serve not to weaken the Plaintiffs' case, but to substantively support it. The picture that emerges is not one of confusion or miscommunication, but of a structured commercial engagement that the Defendants themselves recognised and acknowledged.

In the case of Yam Kong Seng & Anor V Yee Weng Kai [2014] MLJU 476 it was held:- " [9] Aggrieved by the decision of the Court of Appeal, the appellants successfully obtained leave to appeal to the Federal Court on 23.4.2013, on the following questions of law: i. whether an admission by a party in a pleading that he is ready and willing to repay a debt is a judicial admission of his liability in respect of such debt; and ii. whether a message sent by Short Messaging Service (SMS) issued by an individual acknowledging a debt is in law an acknowledgment within the meaning of section 27(1) of the Limitation Act 1953. And:- [14] We find that the parties were not disputing the existence of an agreement in respect of the construction of the said factory or that payments had been made out to the company. The main issues left for consideration were whether there was a judicial admission and whether the respondent could be held liable for the claimed sum. First Question [15] To enable us to ascertain whether there was a judicial admission we need to refer to paragraph 8 of the Defence. It reads as follows: "8...Further Defendants 1 & 2 aver that the Defendants were ready and willing at all material time to settle the said amount within six months hut as there was no mutual agreement as to a fixed rate of interest or whether there was any interest at all, the date of breach was not fixed, and lack of a unequivocal written demand all of which put the whole outstanding sum for repayment in dispute ..." [16] The above averment was in response to paragraph 12 of the Statement of Claim wherein the appellants averred that the company and the respondent had confirmed in writing of the amount owing and payable to them. It is trite law that a judicial admission made in a pleading stand on a higher footing than evidentiary admission (Sarkar's Law of Evidence) with the respondent's admission therein be made the foundation of the rights of the parties (Satish Mohan Bilal v State of UP AIR 1986 All 126, 128 1985 All CJ 507). Any failure on the part of the respondent to rebut the admission to avoid the legal consequences of his admission would entitle the appellants to enter judgment against him. [17] Having perused the Defence in particular paragraph 8, we find that there is clear judicial admission of the debt owed. The question that must follow would be whether the respondent was avoiding responsibility to pay up. In Jacob and Goldrein's Pleadings: Principles and Practice [1990] pp 133-134 in dealing with confession and avoidance, the following is stated: Confession and Avoidance Meaning The term 'confession and avoidance' is the description of a plea in the defence which, while expressly or impliedly admitting or confessing or assuming the truth of the material facts alleged in the statement of claim, seeks at the same time to avoid or destroy the legal consequences of those facts. The plea is invoked by alleging fresh or additional facts to establish some legal justification or excuse, or some other ground for avoiding or escaping legal liability. The defendant, as it were, confesses the truth of what is alleged against him but proceed immediately to 'avoid' the effect of such allegations. [18] Having scrutinized the Defence we find that the respondent has failed to avoid legal liability. With there being judicial admission by the respondent sufficient to hold him liable to the amount claimed the answer to the first question of law in this appeal must be answered in the positive." (emphasis added)

It is trite law that companies possess their own separate legal personality and may sue and be sued in their own names. Equally, it is well-established that companies act through their directors, and that directors are generally not personally liable for the acts of the company.

However, the law recognises important exceptions. In appropriate circumstances, the Court may pierce or lift the corporate veil under the general law, and the Companies Act 2016 provides a statutory mechanism for personal liability under Section 540, particularly where fraud or abuse of the corporate structure is involved.

Both parties have addressed the legal principles extensively in their submissions. It suffices to refer to two key authorities.

First, the Federal Court in Gurbachan Singh s/o Bagawan Singh & Ors v Vellasamy s/o Pennusamy & Ors (2015) 1 MLJ 773 affirmed that the corporate veil may be lifted where a company is used for fraudulent purposes, to avoid existing obligations, or to abuse the corporate personality. The Court endorsed the reasoning in Prest v Petrodel Resources Ltd [2013] UKSC 34, recognising that the veil will not shield wrongdoing.

Secondly, in D4's own cited authority, Universal Health Care (R&D) Sdn Bhd v Ramli bin Md Saleh [2023] MLRHU 1417, the Federal Court reiterated that dishonesty is a question of fact, to be determined from the entirety of the circumstances.

In the present case, D4 himself testified that he and the other Defendants acted as a single entity in their dealings with the Plaintiffs. He did not deny that he was effectively the alter ego of Ikarl (D2), particularly when responding to the Plaintiffs' Letter of Demand.

The evidence shows that D4 was not merely a passive director but the individual who orchestrated the operational and financial aspects of the transactions. His role permeated every stage of the dealings.

The factual matrix, as narrated earlier, demonstrates that D4 was the architect and driving force behind the entire arrangement. He re-structured D2 by bringing D3 in as a 49% shareholder, appointed him as director, and jointly operated the glove business. This was not a case of a director unaware of the company's dealings; it was a director who set the machinery in motion and controlled its operation much like the engineer who not only designs the system but also turns the key, directs the flow, and keeps the gears moving. The commercial engine did not run on its own; it ran because D4 built it, primed it, and kept it running.

In addition to veil-lifting under general principles, Section 540 Companies Act 2016 provides a statutory route for imposing personal liability on directors who knowingly participate in carrying on a company's business with intent to defraud creditors. The provision exists to protect creditors from precisely the type of conduct exhibited in this case.

Section 540(1) CA 2016 provides that where it appears that the business of a company has been carried on with intent to defraud creditors or for any fraudulent purpose, the Court may declare that any person who was knowingly a party to such conduct shall be personally responsible, without limitation, for the company's debts.

The Federal Court in Lai Fee & Anor v Wong Yu Yee & Anor [2023] 4 CLJ1 confirmed that this provision is a statutory exception to the doctrine of separate legal personality and operates to render officers personally liable where the circumstances warrant it.

Two key phrases in Section 540 merit emphasis: "if it appears" and "with intent to defraud". The Federal Court in Lai Fee (supra) held that the words "if it appears" impose a lower threshold, enabling the Court to act where the evidence reasonably supports the inference of fraudulent trading.

As for "intent to defraud", the Court endorsed the principle in Rv Grantham [1984] BCLC 270, that a company carries on business with intent to defraud when it incurs debts at a time when, to the knowledge of its directors, there is no reasonable prospect of paying those debts. The concept also extends to conduct intended to deprive creditors of an economic advantage or to inflict economic loss.

Applying these principles, the evidence demonstrates that D4 knowingly participated in conduct that falls squarely within Section 540. He admitted that D1 to D5 acted as a single entity towards the Plaintiffs. The statutory threshold of "if it appears" is clearly met on the facts.

The intent to defraud is evident from several circumstances:

Illegality of business — D2 traded in gloves without the required licence. LGM confirmed that D2 had no such licence. This illegality, prohibited by law and contrary to public policy, renders the contracts void under Section 24 of the Contracts Act, entitling the Plaintiffs to restoration under Section 66.

Misrepresentation of brands D2 agreed to sell Skymed and Brightway gloves despite having no rights to those brands. D4 admitted that D2's own brand was Medishield. This misrepresentation induced the Plaintiffs to contract.

Indemnity letter D4, through D2, issued an indemnity to D1 and D3 (B1, p. 50) acknowledging "mismanagement" in respect of the Plaintiffs. His denial of the signature is unpersuasive: the document is a Part B exhibit, authenticity was never disputed, and no expert evidence was produced.

Undertaking dated 14 April 2021 D4 personally undertook to deliver the remaining gloves (B1, p. 68). This was not fulfilled, causing economic loss.

Undertaking dated 25 May 2021 D4 issued a second undertaking (B1, p. 69), also unfulfilled. His denial of the signature is contradicted by his own Defence and unsupported by any forensic evidence.

It is also significant that D4 did not deny receiving the Plaintiffs' Letter of Demand, which expressly stated that he was personally liable. His silence on this point is telling and consistent with his operational control over the transactions.

Finally, D4 allowed judgment to be entered against D2 without contesting it, while vigorously defending only his personal liability. This selective defence strategy underscores his attempt to shelter behind the corporate veil much like a man holding up the company as a shield to absorb the blow while he steps safely behind it. The Court cannot permit the corporate structure to be used in this manner to avoid personal accountability for conduct that, on the evidence, was orchestrated and executed by D4 himself."

The Plaintiffs contend that the Defendants were not conducting a lawful glove-trading business, as neither D1, D2 nor D5 possessed the required licence from the Malaysian Rubber Board (LGM). This is supported by the LGM confirmations at pages 73-74 and 78 of Bundle B1.

Notices to Produce were issued on 24.3.2023 to D1, D3 and D4, requiring them to produce any licence authorising the sale or export of rubber gloves for 2020-2021. The Defendants failed to produce any such licence, and D4 despite producing numerous documents did not produce a single licence from LGM. The inference is that no licence existed.

Under Section 55 of the Malaysian Rubber Board (Incorporation) Act 1996, the rubber industry is regulated by subsidiary legislation. Regulation 3(1) of the Malaysian Rubber Board (Licensing and Permit) Regulations 2014 expressly prohibits any person from selling or exporting rubber gloves without a licence. The use of the word "shall" makes the requirement mandatory.

Accordingly, the sale and export of gloves by D1 and D2 without a licence renders the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Contracts void under Sections 24(a) and 25 of the Contracts Act 1950, as the object of the agreements was forbidden by law and, if permitted, would defeat the statutory licensing regime.

The Federal Court in Duli Yang Amat Mulia Tunku Ibrahim Ismail Ibni Sultan Iskandar Al-Haj V. Datuk Captain Hamzah Mohd Noor & Another Appeal [2009] 4 CLJ 329 emphasised that that the word "must" in procedural rules denotes an absolute and mandatory obligation, stronger even than "shall". When a rule states that a step "must" be taken within a prescribed time, compliance is strict and inflexible, and failure to comply renders the act (such as an affidavit or application) inadmissible. The Court has no discretion to excuse non-compliance unless expressly provided for. This interpretation has been consistently affirmed in Malaysian and English authorities.

Thus, allowing D1 and D2 to trade gloves without a licence would undermine the express statutory framework, contrary to Section 24(b) of the Contracts Act 1950. See: Ingat Kawan (M) Sdn Bhd V Boustead Naval Shipyard Sdn Bhd [2014] 7 MLJ 24 Superole Sdn Bhd V Bonfull Sdn Bhd & Ors [2020] MLJU 1821

On this basis, D3 and D4 carried out glove trading illegally, and such conduct justifies piercing the corporate veil. The Plaintiffs rely on Solid Investments Ltd V Alcatel-Lucent (M) Sdn Bhd (previously known as Alcatel Ntework Systems (M) Sdn Bhd [2014] 3 CLJ 73 and Gurbachan Singh S/O Bagawan Singh & Ors V Vellasamy S/O Pennusamy & Ors [2015] 1 MLJ 773, which set out two conditions for veil-lifting: (i) special circumstances such as illegality; and (ii) the interests of justice.

In the instant case, both conditions are satisfied here. The evidence shows that as I had mentioned earlier, D4 re-structured D2 by bringing D3 in as a 49% shareholder specifically to trade gloves during the COVID-19 pandemic a period of high demand and heightened risk of exploitation. D2 was not even registered with SSM to conduct glove trading (Bundle B1, p.14). D2 thus operated as a facade for D3 and D4's activities.

The relevant facts demonstrate that D3 and D4 were the alter ego of D1 and D2: (a) D4 was the sole shareholder and director of D2; (b) D3 initially approached D4 only to offer commission; (c) D4 refused commission and instead proposed a joint venture; (d) D4 then brought D3 into D2 as a 49% shareholder and director. They jointly controlled and operated the business.The principle that "illegality unravels everything" applies. See: Lim Kar Bee V Duofortis Properties (M) Sdn Bhd [1992] 2 MLJ 281 Janet Ooi Hui Ming V Stc Management Sdn Bhd & Anor [2020] MLJU 2602, which confirm that contracts tainted by illegality cannot be enforced.

D3 and D4 were the individuals managing D1 and D2 and must be taken to know that glove trading required a licence. D4 even produced an LGM warning letter dated 22.12.2020 (Bundle B3, pp. 3-4) cautioning against unlicensed trading. Despite this, they continued to trade without a licence.

By breaching Regulation 3, D3 and D4 engaged in illegal trading, taking advantage of the pandemic to sell gloves unlawfully. To absolve them would undermine the statutory regime and public policy. Ignorance of the law is no excuse.

D3 and D4 knew, or must be taken to know, that the contracts were void for illegality. Yet they continued to solicit payments, made false representations, and D4 even issued undertakings. Now that their conduct has been exposed, D4 seeks refuge behind the corporate veil a position the Court should not permit.

For the reasons set out in this Judgment, the Court makes the following orders:

Judgment is entered against the $ 1^{\mathrm{st}} $ $ 3^{\mathrm{rd}} $ and $ 4^{\mathrm{th}} $ Defendants jointly/severally for the following sums: i. for the sum of USD2,684,400.00 for the 1st Contract; ii. interest at the rate of 5% per annum on the sum of USD2,684,400.00 from the date of filing of the writ until full settlement; iii. for the sum of USD1,456,875.00 for the 2nd Contract; iv. interest at the rate of 5% per annum on the sum of USD1,456,875.00 from the date of filing of the writ until full settlement; v. Costs of RM40,000.00 to the Plaintiff.

The Court records its appreciation to learned counsel for both the Plaintiff and the Defendant for their professionalism, courtesy, and focused advocacy throughout the trial, which materially assisted the Court in the fair and efficient disposal of the matter. I hereby order so. Date: 24.07.2026 NIXON ANAK KENNEDY KUMBONG Judicial Commissioner High Court of Malaya Kuala Lumpur PARTIES For the Plaintiffs: Solicitor: Jennifer Chandran Messrs Vaasan Chan & Chandran Unit 23-2, Level 23, Binjai 8, No.2 Lorong Binjai, 50450 Kuala Lumpur For the Defendants: Solicitor: Siti Saliah & Nor Shafiqah Messrs Mazlifah & Partners No. 13A & 15A, $ 1^{\mathrm{st}} $ Floor, Jalan SS 24/8, Taman Megah, 47301 Petaling Jaya,