Eastmont Sdn Bhd v 1. ) Tay Keong Kok (BA-22NCC-82-06/2020)

TAY KEONG KOK (NO. KPl 670520-10-5539)

CHONG SHEAU LING

CHUA CHOON YANG

MOHAMAD HANAFFI BIN MOHAMED JAAFAR

MOHD YAZID BIN TUNGGAL

YEO TIONG WE (NO.KP: 720114-10-5743) …DEFENDANTS BA-22NCC-82-06/2020 2 GROUNDS OF JUDGMENT Introduction [1] This is an application by the Plaintiff pursuant to section 540 of the Companies Act 2016 (CA) against the Defendants who are the common directors and/or shareholders and/or ultimate controllers of Mega Planner Jaya Sdn Bhd (Mega Planner) and Dakota Engineering Sdn Bhd (Dakota) for jointly and severally carrying out businesses with the intent to defraud the creditors of the company by using Dakota to wind up the company in order to avoid repayment of debts due by Mega Planner to the Plaintiff. [2] After a full trial, I allowed Plaintiff’s application with cost of RM50,000.00. Below are the reasons for my decision. Background [3] Plaintiff, Eastmont Sdn Bhd, a company involves in the building and construction business, was awarded a project by a company named Mega Planner Jaya Sdn Bhd on 3.08.2012 vide letter of award dated 3.08.2012 (Letter of Award) to carry out sub-structure works for 16 level serviced apartment in Taman Melati, Kuala Lumpur for a sum of RM26,000,000.00 (Project). BA-22NCC-82-06/2020 3 [4] Plaintiff has completed its works in accordance with the Letter of Award, however, the Letter of Award was subsequently terminated mutually by the Plaintiff and Mega Planner in December 2013 as a result of the default of payment of interim certificate by Mega Planner. [5] On 10.06.2019, Plaintiff filed a claim against Mega Planner at Kuala Lumpur High Court vide suit no. WA-22C-51-06/2019 to claim for the outstanding payment in the sum of RM12.551,557.28 due and owing by Mega Planner to the Plaintiff. [6] On 11.06.2019, the Writ of Summons and the Statement of Claim was served to the registered address and business address of Mega Planner. The business address of Mega Planner is the same as the business address of Dakota Engineering Sdn Bhd (“Dakota”). [7] On 21.06.2019, Plaintiff’s solicitors Messrs. Ricky Tan & Co received a letter from Dakota’s solicitors to inform that Mega Planner has been wound up on 14.05.2019 vide Shah Alam High Court Winding Up Petition No. BA-28NCC-97-02/2019 filed by Dakota. BA-22NCC-82-06/2020 4 [8] The Winding up petition filed by Dakota against Mega Planner was premised on a Judgment in Default of Appearance dated 27.11.2018 vide Suit No. 42-10/2018 (“JID”). [9] Defendant 4 was the common directors of both companies, i.e. Dakota and Mega Planner, when Dakota initiated its action against Mega Planner on 3.10.2018. Defendant 4 only resigned as the director of Dakota on 30.11 2018 i.e. after Dakota had obtained JID against Mega Planner on 27.11.2018. [10] On 25.07.2019, Plaintiff filed a leave application at the Shah Alam High Court vide the post Winding Up No.BA-28PW-204-07/2019 to obtain leave from the Court to proceed with the legal proceeding against Mega Planner. [11] On 5.08.2019, Dakota filed an application to intervene in Plaintiff’s leave application. On 30.10.2019, the Shah Alam High Court dismissed Dakota’s intervener application and allowed Plaintiff’s leave application. [12] On 12.12.2019, Plaintiff obtained a Judgment in Default of Defense against Mega Planner (JIDD). After obtaining the JIDD, Plaintiff BA-22NCC-82-06/2020 5 discovered that Dakota and Mega Planner are related companies and have common shareholders and/or directors and/or ultimate controllers. [13] On 21.01.2020, Plaintiff instructed its solicitors to issue a letter of demand (LAD) to Defendant 1 to Defendant 6. The Defendants have failed to reply to the said LAD and failed to make any payment to the Plaintiff. [14] Therefore, Plaintiff initiated this Suit against the Defendants who are the common directors and/or shareholders and/or ultimate controller of Dakota and Mega Planner. Plaintiff’s case [15] Plaintiff’s cause of action against the Defendants are a breach of section 540 of CA for carrying out business with the intent to defraud the creditors of the company and/or for fraudulent purposes and/or tort of fraud and/or conspiracy. [16] Plaintiff submits that Defendants have jointly and/or severally carried on the business of Mega Planner with the intent to defraud the creditors of the company for fraudulent purposes by using Dakota to wind up the company in order to avoid the repayment of debts due by Mega Planner to the Plaintiff. BA-22NCC-82-06/2020 6 [17] It is an agreed fact that the Winding Up Petition filed by Dakota against Mega Planner was premised on a Judgment in Default of Appearance dated 27.11.2018 vide the Suit No. BA22-42-10/2018 (JID). It is also an agreed fact that Defendants had jointly and/or severally wind up Mega Planner vide Dakota by using the JID. Therefore, Plaintiff submits that the corporate veil ought to be lifted against the Defendants pursuant to section 540 of CA 2016 and/or at common law and the Defendants shall be personally responsible, for all the debts of Mega Planner. [18] Plaintiff called only one (1) witness to testify, namely Chuah Liang Chuan, a director who has been with Plaintiff since 3.09.2012 and has been involved in the Project for Plaintiff and dealt with Defendant 1 (Tay Keong Kok) and Defendant 3 (Chua Choon Yang) for the Project. Defendant’s case [19] Defendants, in their defenses, contend that Plaintiff’s claim against the Defendants individually as directors and shareholders is misconceived and devoid of merits under section 540 of CA. Defendants are directors of properly constituted companies pursuant to and in accordance with the CA. BA-22NCC-82-06/2020 7 [20] Defendants plead that Dakota is a company of its own and is a separate legal entity pursuant to section 41 of CA. Similarly, the individual directors that have been sued by Plaintiff are merely directors of Mega Planner, Vita Resources, Zentrico, Pelantar and Temasek Teguh that has their own entity separate from their personal capacity, respectively. [21] Defendants have relied on the principle of separate legal entity and as they are not party or privy to the Letter of Award to Mega Planner, there is no way that they are liable for Mega Planner’s indebtedness towards Plaintiff. [22] Defendants submit that the winding up of Mega Planner was in accordance with the winding up rules and the Court cannot go behind the Judgment. Further, Plaintiff never files any proof of debt and therefore, is not entitled to the claim. Relationship between the companies [23] For ease of understanding, it is important to lay down facts to show the relationship between the two companies Mega Planner and Dakota, and their directors, which had allegedly conspired to defraud Plaintiff. BA-22NCC-82-06/2020 8 Mega Planner Sdn Bhd (Mega Planner) [24] Mega Planner was the company that awarded Plaintiff the Project that is building and construction works in Taman Melati. [25] Defendant 4 was a director of Mega Planner at the time of filing this Suit and has been a director since 25.01.2017. [26] Defendant 1 was a Mega Planner director from 29.04.2014 until 26.01.2017. [27] Defendant 3 was a Mega Planner director from 16.04.2012 until 26.01.2017. [28] Mega Planner has three (3) shareholder companies namely Syarikat Pelantar Segar (M) Sdn Bhd (Pelantar), Zentrico Sdn Bhd (Zentrico) and Vati Resources Sdn Bhd (Vati Resources). [29] Pelantar is the main shareholder of Mega Planner. Defendant 2 is a director and also a shareholder of Pelantar from 17.05.2018 until at the time of filing of this Suit. BA-22NCC-82-06/2020 9 [30] Defendant 1 was a director of Pelantar from 7.01.2008 until 19.04.2012. Defendant 1 was also a director of Zentrico from 22.08.2014 until 26.01.2017. [31] Defendant 4 is the current director at the time of filing of this Suit and has been a director in Zentrico since 25.01.2017. [32] Defendant 3 is a current director of Vati Resources and has been a director therein since 29.12.2012. Analysis and Finding of this Court [33] Section 540 of the Companies Act 2016 (CA). S. 540 (1) If in the course of the winding up of a company or in any proceedings against a company it appears that any business of the company has been carried on with intent to defraud the creditors of the company or creditors of any other person or for any fraudulent purpose, the Court on the application of the liquidator or any creditor or contributory of the company, may, if the Court thinks proper so to do, declare that any person who was knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for all or any of the debts or other BA-22NCC-82-06/2020 10 liabilities of the company as the Court directs. [34] In the case of Chin Chee Keong v Toling Corporation (M) Sdn Bhd [2016] 4 MLRA 180, the Court explained the purposes of section 304 which is equivalent to section 540 of the 2016 CA that – “[16] The primary object behind subsection 304(1) of the Companies Act 1965 is to statutorily provide for the lifting of the veil of incorporation in the specific circumstances of fraudulent trading with a view to ultimately pinning personal accountability and liability on the directing minds behind such trading of the company. Subsection 304(1) affords the creditor of the company a civil remedy personally against such persons. [35] It was submitted by the learned counsel for the Plaintiff that it is appropriate for the Court to lift Mega Planner’s corporate veil as it can be shown that the Mega Planner has been set up for fraudulent purpose and in this case, it has the intention to defraud Plaintiff together with several other companies associated with it, in particular, Dakota. As was stated by Richard Malanjun FCJ in the case of Gurbachan Singh Bagawan Singh & Ors v Velasamy Ponnusamy & Ors [2015] 1 MLRA 107 as follows – BA-22NCC-82-06/2020 11 “…[96] But in the event that we should, we are of the view that it is now 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 (see: Prest v Petrodel Resources Limited and others [2013] UKSC 34). …… [97] As to what constitutes fraudulent purposes it has been described so as to include actual fraud in equity (see Law Kam Loy & Anor v Boltex Sdn Bhd and Others). 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…” (see Sunrise Sdn Bhd v First Profile (M) Sdn Bhd & Anor [1996] 2 MLRA 147; [1997] 1 CLJ 529; [1997] 1 AMR per Chong Siew Fai FCJ as he then was) [36] By virtue of the authorities, I am of the view that in order to determine whether based on the facts, this is a fit and proper case for piercing the corporate veils of the companies, I have to consider whether there is an intent to defraud on the part of Mega Planner and Dakota. BA-22NCC-82-06/2020 12 Defendants are aware of debts due by Mega Planner to the Plaintiff [37] It is an agreed fact and as testified by Plaintiff witness 1 (PW 1) that Plaintiff has completed its work in accordance with the Letter of Award provided by Mega Planner. The Letter of Award was subsequently terminated mutually by Plaintiff and Mega Planner in December 2013 as a result of default payment of interim certificate by Mega Planner. After the termination, Plaintiff has submitted Final Account Claim (Progress Claim No 16) to the Quantity Surveyor (QS) for valuation on 12.04.2014. The QS then commented on the draft Final Account and forwarded the same to Mega Planner to the attention of Defendant 1. The Final Account was placed in Part A of the Bundle of Documents as the existence and contents were not disputed by the parties. As such, there should not be any doubt that Defendants knew the debts were due to Plaintiff since

This was also admitted by Defendant 3 during cross-examination that Mega Planner had received the draft Final Account from the QS on 28.10.2014 and was aware there was a sum due and owing by Mega Planner but in fact, has intentionally refused to repay the sum. [38] It was in evidence that the Final Account was duly endorsed by the QS in early 2019 upon several requests made by Plaintiff on 8.10.2018 BA-22NCC-82-06/2020 13 and 9.11.2018. The endorsed Final Account was sent to Mega Planner vide Plaintiff’s letter dated 9.01.2019. [39] The amount due stated in the final Account was never disputed by Mega Planner and pursuant to clauses 26.6 and 30.10 of PAM Contract 2006, the Statement of Final Account shall be final and conclusive, which was also admitted by Defendant 3 during his cross-examination. Defendants have planned and framed the Winding Up proceedings against Mega Planner by using Dakota [40] At the outset, this Court noted that it is an agreed fact that Defendants have jointly and/or severally wound up Mega Planner through Dakota. [41] Plaintiff submits that Defendants are the common directors and/or shareholders in Dakota and Mega Planner. In fact, Defendant 4 was the director of both Mega Planner and Dakota during the time that Dakota initiated its action against Mega Planner. Defendant 4 only resigned as a director of Dakota on 30.11.2018 which is after Dakota had obtained the JID against Mega Planner on 27.11.2018. It is clear that Defendants are aware that Mega Planner has debts due to the Plaintiff and has BA-22NCC-82-06/2020 14 intentionally wound up Mega Planner in order to avoid its responsibility to pay the Plaintiff. Dakota and Mega Planner are related companies [42] It is admitted by Defendant 1 and Defendant 3 in their respective witness statements that Dakota is the subsidiary of Mega Planner. It was also admitted by Defendants 1 and 6 during their respective cross-examination. Defendant 1, during cross-examination, admitted and confirmed that Mega Planner and Dakota are related companies and Dakota is the subsidiary of Mega Planner as follows – Now in your Q&A to No 9 you said Mega Planner offered the project work to a subsidiary of Mega Planner known as Dakota, which has the same address as Mega Planner. Yes, so listen to my question. Am I correct to say that both companies are actually related, meaning Dakota and Mega Planner? TAY: Not really because the shareholder is different between, not all the shareholders is same. So you said it’s a subsidiary. TAY: It’s a subsidiary. But you say it’s not related. BA-22NCC-82-06/2020 15 TAY: It’s related but not all the shareholders is not the same. So end of the day related or not? TAY: Is related. The Judgment in Default of Appearance (JID) entered by Dakota against Mega Planner [43] Dakota has initiated a claim against Mega Planner at the Shah Alam High Court on 3.10.2018. A judgment in default of appearance was entered against Mega Planner by Dakota on 27.11.2018 (JID). It is submitted by Plaintiff that Defendants have conspired with each other in framing the suit against Mega Planner and made Dakota enter the JID against Mega Planner so that they can use the said JID to wind up Mega Planner. [44] During cross-examination, Defendant 1 has admitted that he had actually recorded the judgment against his own company – But you have, we have established in Court you were in Dakota, you were in Mega Planner. Similar people occur, come in and out of these two companies. So this judgment, I’m telling you, do you agree this is actually a judgment where you recorded against your own company, which you own also, which is Mega Planner? BA-22NCC-82-06/2020 16 TAY: The…Yes, I have a share in the company. [45] This Court noted that despite not holding the director’s position in Mega Planner, both Defendants 1 and 3 testified that Mega Planner had decided not to defend the claim initiated by Dakota as they find that there were no merits in defending the same. Based on this, I am inclined to agree with the learned counsel for Plaintiff to conclude that Defendant 1 and Defendant 3 are the ultimate controllers in Mega Planner. Otherwise, how would they know or have the power to give testimony that Mega Planner has decided there is no merit in defending the claim. Further, there is every possibility that Defendant 1 and Defendant 3 have actually planned for the winding up of Mega Planner. [46] Defendants have also been cross-examined to ascertain the validity of the claim by Dakota against Mega Planner as Defendants have failed to provide the letter of award dated 16.12.2014 and 1.06.2014 and/or any proof to show that Mega Planner was owing to the sum of RM5,890,724.10 to Dakota which are the basis of Dakota’s claim against Mega Planner as stated in paragraph 3 of the Statement of Claim filed by Dakota against Mega Planner on 3.10.2018. BA-22NCC-82-06/2020 17 [47] Defendant 1 is aware of the existence of such documents and such claim against them and yet have failed to tender the same in Court – TAY: There’s a contract because Dakota and Mega Planner different entity. MT: So, you have possession of this contract? TAY: Yes MT: Is it in your possession? TAY: You mean, would I have it or what? MT: In your company. TAY: Yes, should have. MT: You never produce them in trial. Tay: I, because – MT: You never produced them in trial, am I correct, Mr Tay? TAY: Yes. No produce. Where are the resolution? Where is the LA between Mega Planner and Dakota? Where is the payment cert between Mega Planner and Dakota? Where is the interim cert between Mega Planner and Dakota? They are not in Court. You agree? TAY: They terminate themselves – Listen to my question. TAY: OK. BA-22NCC-82-06/2020 18 You said you know what Plaintiff is claiming against you. So I’m telling you that all these documents are not in Court. The LA between MP and Dakota. The payment cert, the interim cert, ok between Mega Planner and Dakota. The resolution where you said that the majority actually decided to wind up. All thee documents are not in Court today. Do you agree? TAY: Should be in the office. So it’s not in Court? TAY: No, I don’t know. There is so much, I don’t know whether which one in Court, which one…I don’t know. You are very evasive. TAY: I don’t know. [48] Due to the failure of Defendants producing and explaining why those documents were not tendered in Court clearly casting doubts as to the validity of the claim. Hence, an adverse inference could be drawn against the Defendants for failing to tender the letter of award or any proof to substantiate Dakota’s claim on Mega Planner. [49] A case in point is Muniandy Nadasan & Ors v Dato’ Prem Krishna Sahgal & Ors [2014] 6 MLRH 91 where the High Court found that 7th Defendant is not a truthful witness and drew an adverse inference on the BA-22NCC-82-06/2020 19 failure of the 7th Defendant to adduce relevant documentary evidence and cited the cases below in paragraph 37 of his judgment: [37] Nonetheless, in civil cases (not criminal matters), the court has the discretion to draw an adverse inference under s 114(g) EA against the 7th Defendant for the 7th Defendant’s failure to adduce relevant documentary evidence as explained above. I rely on the following appellate cases:-

(i) Supreme Court’s Guthrie Sdn Bhd v Trans-Malaysian Leasing Corp Bhd [1990] 1 MLRA 532;

Chin Chee Keong v Toling Corporation (M) Sdn Bhd [2016] 4 MLRA 180 2. Tradewinds Properties Sdn Bhd v Zulhkiple A Bakar & Ors [2019] 1 MLRA 238 3. Gurbachan Singh Bagawan Singh & Ors v Velasamy Ponnusamy & Ors [2015] 1 MLRA 107 4. Prest v Petrodel Resources Limited and others [2013] UKSC 34 5. Law Kam Loy & Anor v Boltex Sdn Bhd and Others 6. Sunrise Sdn Bhd v First Profile (M) Sdn Bhd & Anor [1996] 2 MLRA 147; [1997] 1 CLJ 529; [1997] 1 AMR

Muniandy Nadasan & Ors v Dato’ Prem Krishna Sahgal & Ors [2014] 6 MLRH 91 8. Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 4

Aneka Melor Sdn Bhd v Seri Sabco (M) Sdn Bhd & Anor Appeals [2015] MLRAU 413