Tanjung Teras Sdn Bhd v 1. Mayland Development Sdn Bhd; 2. Malaysia Land Properties Sdn Bhd (WA-12BC-2-03/2016)

MAYLAND DEVELOPMENT SDN BHD

MALAYSIA LAND PROPERTIES SDN BHD (COMPANY NO: 334713-X) ... APPELLANTS AND TANJUNG TERAS SDN BHD … RESPONDENT (NO. SYARIKAT: 263410-D) DALAM MAHKAMAH SESYEN DI KUALA LUMPUR (BAHAGIAN SIVIL) GUAMAN NO. B52C-9-06/2015 BETWEEN TANJUNG TERAS SDN BHD ... PLAINTIFF (COMPANY NO : 263410-D)

MAYLAND DEVELOPMENT SDN BHD

MALAYSIA LAND PROPERTIES SDN BHD (COMPANY NO: 334713-X) ... DEFENDANTS 2 THE JUDGMENT OF YA DATO‘ LEE SWEE SENG [1] The concept and creation of limited liability companies have been touted as a major breakthrough for business and commerce. The enterprising spirit is allowed to soar and hopefully succeed and should failure be one's lot in a business venture, then the risk is contained within the company concerned, its shareholders and directors being shielded from bankruptcy as what is owing by the company would remain the debt of the company and not that of its shareholders and directors. [2] That has been the position of the law since the watershed case of the House of Lords' decision in Saloman v Saloman & Co Ltd [1897] AC 22. With the passage of time, an exception has been allowed where fraud is being perpetrated through the facade of the company to avoid one's legal obligations or liabilities. [3] This case, coming before me on appeal from the decision of the Sessions Court, addresses the issue once again in the context of a debt owing by a Main Contractor to the Plaintiff as a subcontractor where the Plaintiff alleged that the Main Contractor and the Developer/Landowner together with the two Defendants here, operated as a single group 3 enterprise or a single economic unit such that when there is fraud in the submission of the Defendants' Proof of Debt in a creditors' voluntary winding-up exercise of the Main Contractor, then the corporate veil of the Main Contractor should be lifted and the Court should find the Defendants to be jointly and severally liable. Parties [4] The parties must now be introduced for the personae dramatist here and their inter-relationship with one another must be appreciated if one were to attempt to attach the liability of one to all. [5] The Plaintiff is the subcontractor appointed by the Main Contractor Vistanet (M) Sdn Bhd ("Vistanet") for the balance of the works with respect to the construction of apartment units in a high-rise development at Jalan Munshi Abdullah ("Munshi Abdullah Project"). It is not denied that the Letter of Acceptance dated 2 May 2005 for the subcontract works was issued by Vistanet to the Plaintiff. The Developer/Landowner is Mayland Boulevard Sdn Bhd ("Mayland Boulevard"). The Directors and Shareholders of Vistanet are different from those of Mayland Boulevard. There is no contract signed between the Plaintiff and Mayland Boulevard though there were some direct payments from Mayland Boulevard to the Plaintiff for 4 work done, which Vistanet said was at their request and at any rate, not uncommon in the construction industry. [6] The Defendants here are Mayland Development Sdn Bhd (“D1”) and Malaysia Land Properties Sdn Bhd ("D2"). D1 is a subsidiary of D2. Contractually there is no relationship between the Defendants here and the Plaintiff or for that matter Vistanet though the Defendants were prepared to admit that the Defendants and Mayland Boulevard are companies, loosely regarded as part of the conglomerate of Mayland Group of Companies though Mayland Boulevard is not listed as a member of the Group in D2's audited financial statements whilst some other subsidiaries of D2 are. Problem [7] The Project having been completed, the contract sum was mutually agreed between the Plaintiff and Vistanet to be revised to RM15,151,621.48 in the settlement of final accounts in 2012. All in an aggregate sum of RM 14,715,935.53 had been paid by Vistanet to the Plaintiff. There was thus a balance of RM435,685.95 (less than 3% of the final revised contract sum) which was not paid and so the Plaintiff sued for it and obtained summary judgment in the High Court on 30 July 2012. Vistanet's appeal was subsequently withdrawn. 5 [8] The Plaintiff then proceeded to serve a s 218 Notice under the Companies Act 1965 dated 30 August 2012 on Vistanet. Before a Winding-up Petition could be presented, Vistanet served a Notice of Creditors' Meeting dated 6 November 2012 under section 260(1) Companies Act 1965 calling for a meeting of creditors to approve a creditors' voluntary winding-up of Vistanet. In the list of creditors that was attached to the Notice, it was revealed that Vistanet had debts owing to various creditors to the tune of RM 52,010,513.00. [9] The Plaintiff attended the creditors meeting on 6 November 2012 together with other creditors and voted in favour of the winding-up of Vistanet. It transpires later that D1 and D2 had both filed Proof of Debt with the liquidator appointed for the liquidation of Vistanet for the sum of RM19,280,000.00 and RM16,041,322.00 respectively. [10] At the creditors’ meeting that was held on 30 November 2012, Chong Chuan Long of Messrs CL Chong & Co was appointed as the Liquidator of Vistanet. [11] The Plaintiff concluded that based on the size of the debt purportedly owing by Vistanet to the Defendants to the tune of RM35,321,322.00, the Defendants have acted fraudulently to deprive the Plaintiff of any payment 6 from Vistanet. The Plaintiff contended that fraud was perpetrated when Vistanet called for a creditors' meeting for the passing of a resolution to wind-up the company and when the Defendants filed in their purported Proof of Debt. Prayers [12] The Plaintiff decided to commence an action against the Defendants to recover the judgment with interest and costs that they had obtained against Vistanet. They set out a series of facts and circumstances that they said would justify the view that the Defendants together with Mayland Boulevard and Vistanet operated as a single group enterprise or a single economic unit and that the veil of incorporated must be lifted to show that Vistanet had been fraudulently used by the Defendants in the Mayland Group of Companies to avoid its contractual obligations to pay. [13] The Learned Session’s Court Judge ("SCJ") on 25 February 2016, after a full trial, gave the Plaintiff judgment against both the Defendants for the sum of RM548,241.25 together with interest and costs of RM25,000.00. This sum is made up of the judgment sum that the Plaintiff had earlier obtained against Vistanet together with interests. 7 [14] Against that decision the Defendants have appealed to this Court. The parties shall be referred to as Plaintiff and Defendants as they appeared in the Sessions Court. Principles Whether the principle of res judicata applies to prevent the Plaintiff from suing the Defendants for the same debt after it had obtained summary judgment against Vistanet in a separate suit [15] The fact that the Defendants are different in this suit compared to the previous High Court suit where summary judgment had been obtained by the Plaintiff against Vistanet, does not necessarily mean that res judicata would not apply. Different parties in the previous High Court suit and the present High Court suit would not necessarily displace the bar pursuant to the doctrine of res judicata. The doctrine extends not only to the parties in the action but also to their privies, namely persons who share a common interest in the subject matter of the litigation in question. Here the Defendants have privy of interests in that they are said to share a common interest in the subject matter of the litigation namely the debt owing by Vistanet to the Plaintiff. 8 [16] This is illustrated in the case of Dato Sivananthan Shanmugam v. Artisan Fokus Sdn Bhd [2015] 2 CLJ 1062 where the Court of Appeal held: “[21] A pertinent question which may inevitably be asked is whether there is any limit which should be put on the application of the doctrine of issue estoppel. We raise this question because, contrary to the above requirement that the parties to the judicial decision are the same persons as to the parties to the proceedings in which the issue estoppel is raised, the parties in this appeal are completely different from the parties in the HTF suit. [22] Having said that, we digress at this point from the above question to consider the nature of the claims in, and circumstances leading to the HTF suit and the present action and thus the plea of res judicata and estoppel. We will return later to the above question. The HTF suit according to the respondent, is a cheque action based on the Bills of Exchange Act 1955. The claim arose when the cheque dated 30 December 2011, issued for the sum of RM2.3 million to HTF by Cosmotine was dishonoured. The present claim by the respondent against the appellant, on the other hand, was also for the recovery of the said sum but premised on the breach of contract when the 9 appellant and KAH were alleged to have breached the agreement. Clearly the two actions were based on two different causes of action. However, upon careful study of the statement of defence of Cosmotine in the HTF suit and the affidavits in relation to HTF's application to enter summary judgment in respect of the HTF's suit, we have no hesitation in holding that the facts in that case and in the present appeal are identical. Thus in whatever forms the two claims are made or described, be it the cheque action or for the breach of contract, the claims are not fundamentally different as it arose from the agreement where the sum of RM2.3 million was purportedly to have been paid by HTF to Cosmotine, pursuant to the agreement for the purpose which we have dealt at the beginning of our judgment and when the JV agreement failed to materialise, HTF presented the cheque to the bank for payment but was dishonoured. Since the demand for the refund was not met by Cosmotine, HTF commenced the action against Cosmotine while the respondent commenced the action against the appellant and KAH. Both suits claimed for the same amount of money to be paid by Cosmotine in the HTF suit and the appellant and KAH in the present action. It is manifestly clear 10 therefore, that both cases arose from the same set of facts, background, issues and circumstances while the reliefs claimed are consequent to the agreement. On the contrary, we do not detect any real or glaring difference in both cases. There is indeed a mutual or privity of interest between the appellant and Cosmotine in both civil suits. Furthermore, both cases involved same witnesses and same set of documents. [23] Now reverting to the question we raised above, it is important to ask whether it is an inflexible rule that the parties to the judicial decision must be the same persons as the parties to the proceedings in which the estoppel is raised. Before stating our answer to this question consideration of the local and foreign authorities is necessary. [24] In North West Water Ltd v. Binnie & Partners (a firm), supra, three defendants namely the consultant engineers, the water authority and the contractors were sued for negligence but only the consultant engineers were wholly found to be negligent. In subsequent separate proceedings where the water authority issued proceedings against the consultant engineers based on contract and 11 negligence to recover damages, the court stated that consideration of the authorities reveal two schools of thought on the issue of the limits which should be put on the application of the doctrine of estoppel. One approach was called the broad one which held that the true test of an issue estoppel was whether for all practical purposes the party seeking to put forward some issue had already had that issue determined against him by a court of competent jurisdiction, even if the parties to the two actions were different. The conflicting approach was to confine issue estoppel to that species of estoppel per rem judicatam that may arise in civil actions between the same parties or their privies. Drake J in preferring the broader approach to a plea of issue estoppel said: In my judgment, this broader approach to a plea of issue estoppel is to be preferred. I find it unreal to hold that the issues raised in two actions arising from identical facts are different solely because the parties are different or because the duty of care owed to different persons is in law different. However, I at once stress my use of the word 'solely'. I think that great caution must be exercised before shutting out a party from putting forward his case on the grounds of issue estoppel or abuse of 12 process. Before doing so the court should be quite satisfied that there is no real or practical difference between the issues to be litigated in the new action and that already decided, and the evidence which may properly be called on those issues in the new action." (emphasis added) [17] Mr Teo Boon Hing, PW 2, a director of the Plaintiff, testified that he knew about the relationship between the Defendants here and Vistanet when the Plaintiff sued Vistanet but did not think anything was amiss until the proof of debt was filed by the Defendants here in the voluntary creditors' winding up of Vistanet. [18] However estoppel by election would operate in that the Plaintiff had elected to commence action against Vistanet which culminated in a summary judgment. The Plaintiff then proceeded to lodge it's Proof of Debt and participated in the meeting of creditors on 3 November 2012 and voted in favour of the winding up of Vistanet and the appointment of the Liquidator. There has been an election by conduct on the part of the Plaintiff. [19] The Plaintiff cannot now be allowed to take the benefit under the summary judgment and use it against the Defendants here. 13 [20] If the Plaintiff had sued Vistanet together with the Defendants, it would be clear that it would not be a case fit for summary judgment as the Plaintiff would have to allege fraud against all the Defendants in order to lift the corporate veil and to impose liability on all the Defendants. [21] However the Plaintiff's argument seems to be that it is only alleging fraud with respect to the acts of the Defendants after the Defendants filed their Proof of Debt. If that be the case then the action of the Defendants until the filing of their Proof of Debt are not relevant. However the learned SCJ had referred quite copiously to the conduct of the Defendants before the filing of their Proof of Debt. [22] The validity or otherwise of the Proof of Debt filed is within the purview of the Liquidator and there is nothing for the Court to intervene in or interfere with until the matter is brought to the Court. Even if the Proof of Debt has been rejected, it has not been shown how Vistanet with only RM211.43 left in its accounts when the Liquidator was appointed, could be said to have been used by the Defendants to defraud creditors especially the Plaintiff. [23] What is even more material is how a combined debt of RM35 million filed by the Defendants, if rejected, could affect the balance RM16 million 14 debt owing by Vistanet to its other creditors such that there would be no dividends declared at the end of the winding up exercise. [24] Be that as it may, I had rather decide this case based on the merits of the case rather than on the application of the doctrine of res judicata in the event that the Plaintiff may have a valid claim on merits against the current Defendants. Whether the separate personalities of companies has been used by the Defendants to help Vistanet fraudulently evade its liability to pay the Plaintiff [25] The Plaintiff states that there are arrangements and/or a relationship between the related companies which are Vistanet, Mayland Boulevard and the Defendants herein and the conduct and/or arrangement negates the separation of legal personality. The learned SCJ had agreed with that proposition and had lifted the corporate veil to make the Defendants liable to the Plaintiff for the debt of Vistanet on account of the fact that Vistanet was effectively evading its contractual obligation to pay the balance debt owing to the Plaintiff. [26] The learned SCJ appeared to have been persuaded by the Plaintiff that Vistanet and Mayland Boulevard together with the Defendants, at all 15 material times, when dealing with the Plaintiff, have operated as a single group enterprise or a single economic unit with clear evidence of functional integrality. Her reasons for agreeing with that proposition are set out below:

In several projects involving Vistanet, it was evident that high ranking employees of the Defendants, Vistanet and Mayland Boulevard work in one group enterprise with inter relating responsibilities within the group enterprise and have dealt with the Plaintiff as one group enterprise.

Mr Low Gay Teck (GT Low), in his capacity as managing director of the D2 has been the signatory to the cheques of Vistanet and Mayland Boulevard in respect of payments that are due to the Plaintiff. Summary of the details are as follows:

Payment Vouchers issued by Vistanet to the Plaintiff together with a copy of Alliance Bank Cheque which was signed by GT

(ii) Payment made by Vistanet to the Plaintiff via Alliance Bank Cheque which was signed by GT Low;

(iii) Payment made by Mayland Boulevard to the Plaintiff which was signed by GT Low; 16

(iv) Mayland Boulevard's documents stating that the payment was made on behalf of Vistanet ;

Mayland Boulevard has made payment to the Plaintiff by way of cheques signed by GT Low, the payments of which were done on behalf of Vistanet.

Correspondences issued by Messrs Andrew Davis, acting for Vistanet, to the Plaintiff in respect of this dispute (the Munshi Abdullah Project), were copied to the client as “Vistanet c/o Malaysia

Site meetings for the Munshi Abdullah Project were attended by Yeoh Teng Tatt (TT Yeoh), Tan Swee Lee and SY Loh as common representatives of both Mayland Boulevard and Vistanet. Incidentally, TT Yeoh is also the group project director of D2;

Letters from the Plaintiff to Vistanet were issued or copied to GT Low;

The Plaintiff has made claims on the Munshi Abdullah Project on expenses incurred by them which was done by issuing debit notes directly to Mayland Boulevard and had thereafter received payments from Mayland Boulevard, payments of which were made for Vistanet. 17

GT Low has issued letters in his capacity as managing director of D2 to the Architect of the Munshi Abdullah Project informing of the change of key personnel who at all material times are the common representatives of both Mayland Boulevard and Vistanet. The letterhead that was used is that of the Mayland Boulevard.

Kevin Thong, has issued letters on the Munshi Abdullah Project in his capacity as the new project engineer of the Mayland Boulevard and Vistanet.

The Plaintiff has also in the past been involved as the contractor for the group enterprise in a project known as “Cadangan Pembangunan 5 Block Pangsapuri Kos Sederhana 22-26 Tingkat (1220 Unit), 5 Blok Tempat Letak Kereta 4-6 Tingkat Serta Kemudahan Penduduk Di atas Lot 16988, Jalan Kuching, Mukim Batu, Wilayah Persekutuan, Kuala Lumpur Untuk Tetuan Mayland Development Sdn Bhd. (Jalan Kuching, Mukim Batu Project).

Kevin Thong has represented himself as project manager for Vistanet and D1 in the Jalan Kuching, Mukim Batu Project. 18

TT Yeoh has represented himself as group project director of D1;

Eva Hui has represented herself executive director of “Mayland Group of Companies” thereby recognizing the fact that the Defendants, Vistanet and Mayland Boulevard operate as one group enterprise.

Chow Tai Hing (Chow TH), Kevin Thong and Kenneth Chan have represented themselves as project managers of both D1 and Vistanet for the Jalan Kuching Project.

The group enterprise at all material operated from the same business address at 12th Floor, Menara Multi-Purpose, Capital Square, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur. [27] The Plaintiff states that the facts irresistibly show that there are signs of separate personalities of the Defendants, Vistanet and Mayland Boulevard being used to enable the companies and in particular Vistanet to evade their contractual obligations or duty. [28] The Plaintiff states that the facts give rise to a situation where the notional separateness of the companies can be disregarded and the corporate veil of incorporation be pierced or lifted and an order be given 19 that the Defendants be found liable to pay for the debts that are owing by Vistanet to the Plaintiff. [29] The Plaintiff further states that it is apparent that, by the failure and/or refusal of the Defendants to respond to the queries made by the Liquidator to provide documentation to justify their status as creditors of Vistanet, the exercise undertaken by Vistanet in the pretext of a voluntary winding up appears to be actuated by fraud. This is further evident by the fact that directing minds of Vistanet are common to the Defendants. [30] The Plaintiff states that there exist special circumstances justifying the lifting of the veil of incorporation of the Defendants in order to make them responsible to pay for the debts that are due and owing by Vistanet to the Plaintiff. The Statement of Defence filed by the Defendants is essentially premised on 2 grounds, that there is no privity of contract between the Plaintiff and the Defendants or between the Defendants and Vistanet for the Defendants to pay the Plaintiff the debts of Vistanet. Secondly, that the Plaintiff’s claim against the Defendants is unsustainable on grounds of the doctrine of res judicata. By way of amendment to the original pleadings, the Defendants have further pleaded that there is an arrangement between D1 and 20 Vistanet in respect of the Jalan Kuching Mukim Batu project and between Mayland Boulevard and Vistanet in respect of the Munshi Abdullah project in which there was an understanding whereby Vistanet was permitted to use the workers and facilities of Mayland Boulevard and the Mayland Group of companies. This arrangement further extended to allowing Yeo Chun Sing and GT Low to be signatories to the cheques of Vistanet. [31] The Liquidator appointed was called as a witness (PW1) for the Plaintiff. Following queries by creditors he had, by letter dated 2 January 2013, replied stating that Vistanet is not related to the Defendants, premised on the ground that they have no common shareholders or directors. [32] One Mr G T Low who is a Director of D1 and the Managing Director of D2 was also a Director of Mayland Boulevard at the material time. However the shareholders of Mayland are different from the shareholders of the Defendants. He was a signatory of cheques in Vistanet but there were also other signatories. The learned SCJ considered it rather odd for one who is not a director or shareholder of Vistanet to be made a cheque signatory. The explanation given by Mr G T Low is not totally devoid of merits. Besides the Jalan Munshi Abdullah Project, there were 2 other 21 apartment projects developed by the Defendants where Vistanet was also the Main Contractor. One was on a piece of land in Jalan Kucing owned by D1 as the developer/owner and another by owned by D2 in Jalan Hartamas. I can accept as not being unreasonable for Mayland Boulevard to want to ensure that there are no delayed payments from Vistanet to its subcontractors from progress claims paid by Mayland Boulevard to Vistanet for work done especially when the other signatories of Vistanet's cheques are not around to sign. It can fairly be said that Mayland Boulevard by this method would have some control over the payment out to third parties by Vistanet and so would the Defendants with respect to the other 2 Projects. [33] When the same Main Contractor has been awarded 3 Projects, there is justifiably a concern that the Main Contractor should not fail. In some cases the developer/owner might want to exact a condition that before further payments are made to it, the Main Contractor should show proof of payments having been made to the subcontractor for the simple reason that if the subcontractor stops work for non-payment then the whole Project would be delayed with a possible LAD kicking in once the Completion Date is up. It is also not uncommon in a lot of standard form construction contracts to have a clause for the developer/owner to pay direct to the 22 subcontractors in the event of the Main Contractor failing to pay the subcontractors. [34] To buffer possible losses, most developers would also exact a performance bond or banker's guarantee from the Main Contractor of about 10% of the value of the contract sum. Here there was no evidence adduced that there was such a performance bond or banker's guarantee. [35] At any rate the Plaintiff was aware of this arrangement where the signing of cheque for payment to the Plaintiff was concerned for the Plaintiff had not complained of any late payments and in fact the Plaintiff had been regularly paid for 97% of the contract sum for the Jalan Munshi Abdullah Project. [36] If an award of a main contract involves the Main Contractor agreeing to such a term with the developer/employer, then that arrangement by itself should not be construed as an instrument of fraud on creditors. It would only be fraud on creditors generally and the Plaintiff in particular if it can be shown that payments were made to companies related to the Defendants or Mayland Boulevard, leaving creditors like the Plaintiff high and dry. No evidence has been led in this direction. 23 [37] I would not read too much into this method of control which can only be exercised by consent of the board of Vistanet. The board may also change its mandate to the Bank and remove Mr G T Low as signatory if it wanted to. [38] I must point out at this stage that even in cases of subsidiaries or wholly-owned subsidiaries, it is for the holding company to nominate its directors to be directors of these subsidiaries. In the case of housing development it is not uncommon to award the main contract to one of its subsidiaries, even an wholly-owned subsidiary and they will in turn appoint subcontractors to do the work. [39] Again with respect to developers/owners of landed assets, it is not unusual for these companies to be part of a group of companies, but each having a separate legal entity to manage and contain risk when it comes to a risky business like development. A public listed company for instance may own different plots of land in the name of its subsidiaries that it may develop. In the event that the development project fails, the losses are contained within the company and it would not affect the holding or parent company in the group. A development may fail because of many reasons: poor sales, main contractors or subcontractors delay in completing their 24 works or stop work or even absconded because of lack of financial resources, costs overrun, increase in price of construction materials or shortage in construction materials, late delivery claims from purchasers and the like. Investors in public listed companies or even unlisted public companies would be anxious if every development project would subject the holding or parent company to the maximum risk of the project having failed and the resulting conflagration engulfing the holding or parent company and the other companies in the Group so to speak. In fact that would not be prudent on the part of the holding or parent company. [40] Third parties who deal with these companies would know of the risk involved and some who have no appetite for risk might want a corporate guarantee from the holding or parent company or its listed entity. It cuts equally both ways in that a main contractor or subcontractor who runs short of cash may have problem hiring enough workers to complete the works and may suffer an LAD claim by the developer/owner and if they have no assets to execute on, the developer/owner would be left with the alternative of winding up the company. Little wonder that in a lot of cases a Banker's Guarantee or Performance Bond of about 10% of the contract sum is exacted of the main contractor or subcontractor as the case may be. 25 [41] The fact that a company cannot pay its creditors at the end of the day, does not mean that fraud has been perpetrated. During bad times many a contractor has been pushed beyond the edge of the financial precipice because of cash flow problem and not a few developers too. The number of abandoned projects in housing development is testimony to the trials and tribulations of the development and construction industry in Malaysia. [42] What the creditor like the Plaintiff here needs to show is that what Vistanet has received for work done, it has not pay its subcontractors like the Plaintiff but instead it has paid others or even its own directors or related and associate companies for dubious services rendered in a scheme to defraud creditors. Here the Plaintiff has not produced an iota of evidence in that direction. [43] Having put the problem of non-payment in the construction industry in perspective, I must then consider the factors that had influenced the learned SCJ to come to the conclusion that she did in that the Defendants should then be made to pay the debts of Vistanet to its creditor the Plaintiff here, bearing in mind that the Defendants are not the developer/owner of 26 the Project but one Mayland Boulevard, which at best is only a company in the Mayland Group of Companies. [44] Sharing of premises and even human resources and management and administrative resources are not uncommon for companies within the Group. Wholly-owned subsidiaries do that on a regular basis as part of costs-sharing and optimizing and streamlining of resources. These factors taken together cannot make the other members of the Group liable for the debt a company in the Group that failed. Otherwise the concept of limited liability with incorporation will be lost altogether and the whole concept of a company being a separate entity from its shareholders and directors would have to be completely overhauled. In The Albazero [1977] AC 774 at 807, CA, Roskill LJ described it as a fundamental principle of English law 'long established and now unchallenged by judicial decision....that each company in a group of companies (a relatively modern concept) is a separate legal entity possessed of separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by another company in that group even though the ultimate benefit of the exercise of those rights would ensure beneficially to the same person or corporate body." 27 [45] Robert Golf LJ in Bank of Tokyo Ltd v Karoon [1987] AC 45 at 64 cautioned the modern approach in these words: "Counsel suggested beguilingly that it would be technical for us to distinguish between parent company and subsidiary 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 be abridged." [46] It is only when these companies in a Group so-called are used as a vehicle to perpetrate fraud that the law will allow the veil of incorporation to be lifted and make the parties responsible liable for payment. Short of that the debt of that company, in this case Vistanet, remains that of Vistanet alone. Once a liquidator has been appointed in a creditors' winding-up, the Liquidator is empowered under the law to investigate if fraud has been perpetrated on any creditors and whether there has been fraudulent preference or trading by the company concerned. If there is sufficient evidence he would pursue action against those responsible. [47] The learned SCJ appeared to be troubled by the fact that there was little in terms of useful information that the Liquidator could extract from the Defendants here with respect to the Proof of Debt filed by both the 28 Defendants. The questions raised by the Plaintiff's solicitors are valid questions with respect to how the massive debts have arisen. There was a letter dated 2 January 2013 from Messrs George Varughese, the then solicitors for the Plaintiff, to the Liquidator requesting for information on the following: “ Further to the questions at the Creditors’ Meeting by Tanjung Teras in respect of the existence of related companies of Vistanet as creditors namely Mayland Development Sdn Bhd and Malaysia Land Properties Sdn Bhd, kindly confirm on the following:

It was confirmed that the Company had no business activities for the year 2011 and 2012. Therefore, how is it possible for there to be a substantial increase of Trade Creditors from RM17 million as of 31st December 2011 to RM52 million as of 6th November 2012?

Incidentally, the 2 largest Trade Creditors reflected in the List of Creditors are Malaysia Land Properties Sdn Bhd (RM16,041,322.00) and Mayland Development Sdn Bhd (RM19,280,000.00). 29

Since Vistanet are the contractors for both Malaysia Land Properties (D2) and Mayland Development (D1) in respect of construction works, how is it possible for both these companies to be reflected as trade creditors instead of trade debtors?

What is the exact nature of the purported debts of Vistanet to both Malaysia Land Properties and Mayland Development? We trust that your due diligence exercise and investigation of the company will provide us the answers on the above on an urgent basis.” [48] At the postponed creditors’ meeting of Vistanet held on 15 March 2013, the Liquidator, giving evidence on behalf of the Plaintiff as PW 1, informed that the sums claimed by D1 and D2 are in respect of liquidated ascertained damages (LAD) claims. The Liquidator agreed to furnish the copies of journal entries on how the LAD claims by D1 and D2 are justified. As a follow up to issues raised at this meeting, Messrs Ramakrishnan & Associates, the current solicitors of the Plaintiff, by letter dated 1 April 2013, wrote to the Liquidator requesting amongst others the journal entries on the computation of LAD claims made by D1 and D2. The Liquidator replied by letter dated 3 April 2013. Essentially, the Liquidator lamented 30 that he was not getting the cooperation of the directors to hand over the company records and therefore he has not been able to submit a report to the relevant authorities. The Liquidator further informed that the directors have been served with a notice under Form 33 (Companies Act 1965) [49] By letter dated 27 May 2013, the Liquidator wrote to D1 requesting for the following: “I refer to the above matter and a copy of your proof of debt which I received on 29th November 2012. Please be informed that I require further evidence to substantiate your claim of RM19,280,000 against the Company. To that end, kindly furnish me the following documents within fourteen (14) days from the date of this letter: i. The letter of offer dated 31st May 2004 between Mayland Development Sdn Bhd and the Company regarding the construction and completion of works at Lot 26643, Jalan Kuching, Mukim Batu Dalam, Kuala Lumpur. ii. Documentary evidence proving the delay in completion of the abovementioned works and; 31 iii. Any other related documents or records which may be used to substantiate your claim. “ [50] From the above query it can be surmised that Vistanet was involved in another development project with D1 in Jalan Kucing ("the Jalan Kucing Project"). [51] There was also another development project between Vistanet and D2 in Jalan Hartamas ("the Jalan Hartamas Project") and so the Liquidator by his letter dated 27 May 2013, wrote to D2 asking for the following: “I refer to the above matter and a copy of your proof of debt which I received on 29th November 2012. Please be informed that I require further evidence to substantiate your claim of RM16, 041,322 against the Company. To that end, kindly furnish me the following documents within fourteen (14) days from the date of this letter: i. The letter of offer dated 31st May 2004 between Malaysia Land Properties Sdn Bhd and the Company regarding the construction and completion of works at Lot 48626 (Fasa 2) Plaza Damas, Jalan Hartamas, Mukim Batu, Kuala Lumpur. 32 ii. Documentary evidence proving the delay in completion of the abovementioned works and; iii. Any other related documents or records which may be used to substantiate your claim.” [52] Both the Defendants did not reply to the above queries. It was open to the Liquidator to reject the Proof of Debts filed if he is not satisfied that there are sufficient documents substantiating the claim. Any creditor or contributory dissatisfied with his decision may appeal to the High Court. Appeal against decision of liquidator under s 279 Companies Act 1965 which provides as follows: "Any person aggrieved by any act or decision of the liquidator may apply to the Court which may confirm, reverse or modify the act or decision complained of and make such order as it thinks just." [53] Can the Sessions Court then conclude that there has been fraud on the Plaintiff based on the fact that there is some evidence to show that Vistanet, Mayland Boulevard and the Defendants have held themselves out as operating within the same Group of Companies and that now Vistanet cannot pay its balance debt to the Plaintiff? 33 [54] With respect, I do not think so. The matter of the validity of the alleged debts which the Defendants say Vistanet owe them is a matter that is now before the Liquidator. Assuming for a moment that these 2 amounts which add up to RM35,321,322.00 are rejected, there is still the sum of RM16,689,191.00 owing to other creditors. [55] If these debts are accepted by the Liquidator, it becomes plain obvious that Vistanet is still not able to pay its Creditors, including the Plaintiff to whom it owes the judgment sum of RM435,685.95 for there was only hardly a sum of RM211.43 in its account at the time of the resolution to windup Vistanet. The same result would be arrived at even if the debts of the other creditors are rejected for there was hardly any cash in Vistanet's account. It must not be forgotten that all the Creditors present at the Creditors' Meeting voted in favour of the winding up of Vistanet. The Plaintiff themselves admitted that they would in any event have proceeded with the Court's compulsory winding up of Vistanet had there not been a Creditors' Voluntary Winding Up set afoot. [56] What is sorely lacking in terms of evidence is how Vistanet has conducted its affairs such that it had mounting debts which it was not able to pay and had to suffer a winding up. The burden lies with the Plaintiff to 34 show this for he who alleges must prove and it is the Plaintiff that alleges fraud and a scheme put in place to help Vistanet evade its contractual obligations. [57] It is not unknown for companies in the construction industry especially contractors to have huge debts owing by it and at the same time to have equally if more huge debts owing to it. Cash flow is always a critical problem for downliners in the construction industry and in the absence of evidence from the Plaintiff showing that there was fraud or fraudulent collusion between Vistanet and Mayland Boulevard together with the Defendants, this Court cannot willy nilly lift the corporate veil just because all creditors must justly be paid. [58] The Plaintiff had chosen to sue the Defendants separately from Vistanet apparently on the ground that there was no fraud all along the business relationship even though the Plaintiff admitted that they knew about this close business relationship involving the sharing of offices, the use of common key staff to represent the various parties at meetings, the signing of cheques of Vistanet by a common person who is a director of both Mayland Boulevard and the Defendants. Indeed Vistanet had paid for 35 all the works done by the Plaintiff save for the balance 3% of the contract sum when it went into financial distress. [59] The Plaintiff said it decided to sue only after realizing that the Defendants have put in a proof of debt to the combined sum of RM35 million. The Plaintiff concluded that there must be a massive manipulation and massaging of accounts by the Defendants such that Vistanet is left to sink into liquidation and creditors are left with uncollectible debts. [60] One must then ask, how was the accounts manipulated to make Vistanet, as it were, judgment proof? There is not a shred of evidence before the Court. [61] The burden of proof is on the Plaintiff to show fraud. There is no discovery done with respect to producing cogent evidence before the Court that monies in Vistanet's account had been siphoned off by the Defendants for payment of dubious debts. It is not difficult for the Plaintiff to obtain discovery of documents in the hands of a third party, Vistanet, in this case the bank statements for the relevant period to show how the accounts have been operated fraudulently. Was it a case where Vistanet had made preferential payments to certain creditors perhaps linked to the Defendants? Was it a case where Vistanet had paid their own directors 36 hefty emoluments? Was it a case of dissipation of assets to make itself judgment-proof? Was it a case where its business failed because it could not collect debts owing to it on time? Was it a case where it had failed to carry out the works on time such that LAD claims were imposed by the developer/owner who in turn had a contractual obligation to deliver the apartments on time to purchasers on the pain of having to compensate purchasers for damages for late delivery under the standard Schedule Sale and Purchase Agreement under Schedule H of the Housing Development (Control and Licensing) Regulations 1989 [62] The learned SCJ cannot conclude that there is fraud on the part of the Defendants merely because they have not responded with documents to substantiate their LAD claims against Vistanet. The burden of proof is still with the Plaintiff to show how fraud has been perpetrated on it. [63] In the absence of that, the Liquidator must be allowed to come to his considered decision whether to reject the proof of debt and if in his investigation into the conduct of its activities there is a prima facie case of fraud or fraudulent trading under section 304 Companies Act 1965, then he is at liberty to pursue on behalf of Vistanet to recover back monies wrongly taken out and to sue for monies owing to it by its debtors. 37 [64] That is the process that is prescribed for under the Companies Act 1965 when a company goes into liquidation. In that sense all is not lost because the vehicle of limited liability through incorporation under the Companies Act is not a license to avoid liability through fraudulent means. While the law recognizes that companies may fail and be wound-up in as much as an individual may be made a bankrupt, that is certainly no excuse for avoiding liability by stashing the monies elsewhere so that its fruits may still be enjoyed by the owners of the company. [65] Absent a clear evidence of fraud or fraudulent trading, creditors like the Plaintiff would have to wait for the Liquidator to do his investigative and forensic accounting work in the liquidation exercise. To allow a creditor to have a shortcut in making other companies in the Group liable for the debt of one of its separate entity would be to overhaul the limited liability of companies which are separate entity from its shareholders and other entities in the Group. [66] Here there is no suggestion that the Defendants have represented that they would be liable for the debts of Vistanet. Neither have the Defendants given any corporate undertaking or guarantee that it would be responsible for the debt of Vistanet. 38 [67] The other equally important principle that would be seriously violated is that only parties to a contract may sue each other. If the Plaintiff should fail, Vistanet would just have to contend with winding up the Plaintiff unless fraud has been shown on the part of the Plaintiff or its directors and/or shareholders. In the absence of that Vistanet cannot go any further unless it has obtained a personal guarantee from the Plaintiff's directors or perhaps a Bankers' Guarantee in which instance it may call on the BG. Much less can the Defendants here sue the Plaintiff or its directors as not only is there no privity of contract, there is the hurdle of separate legal entities such that even, as here, both Vistanet and Mayland Boulevard had gone into liquidation, there is nothing that the Defendants could do, except to let the loss lies where it falls. Whether in all the circumstances of the case, the corporate veil of Vistanet ought to be lifted to make the Defendants liable to the Plaintiff for the debt of Vistanet [68] I must begin at the beginning with the introduction of the concept of Separate Legal Personality, and with the dicta in the seminal case of the House of Lords in Salomon v Salomon & Co Ltd [1897] AC 22 at page 51, as follows: 39 “… The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act...” [69] This principle was reaffirmed by the Privy Council’s decision in Lee v Lee’s Air Farming Ltd [1961] AC 12; it is trite law that although an individual may have been the controller of the Company in fact, in law they were distinct persons. [70] In the Straits Settlement this principle of separate legal personality has come to be applied in Katz v Yap Boon Seng [1902-03] 6 SSLR 18 (Court of Appeal, Straits Settlement) which held as follows: “The defendant guaranteed to A, B, C and D, trading as Katz Brothers, the faithful service of a cashier. The partners and others incorporated as Katz Borthers Ltd. It was held that the Company was not a person carrying on the business within the meaning of 40 the guarantee, and that the defendant was released from liability under it.” [71] With the passage of time this principle in Saloman v Saloman & Co Ltd (supra) has been tested in the context and crucible of corporate structures often designed to contain exposure to risk especially in projects of heavy capital investment. The Courts have in various instances have been called upon to examine, the relationship between related corporate entities and to find some conduct that negates separation of legal personality. Court's in our jurisdiction and others have expressed these inroads and exceptions to the concept of separate legal entities in different ways: single group enterprise, single economic unit and functional integrality. The exceptions seem to be narrowly restricted to cases where there are some egregious elements of fraud on creditors to a more expansive exception of evading contractual obligations. Whether a case falls within one of these exceptions would be facts-centric in that each case must be decided upon its particular and peculiar facts bearing in mind the general rule. [72] Learned counsel for the Plaintiff cited the case of Sunrise Sdn Bhd v First Profile (M) Sdn Bhd [1997] 1 CLJ 529 (FC). The brief facts of the 41 case involved an agreement that was signed by the Appellant with the holding company in which the Appellant will acquire the shares of the subsidiary. The subsidiary owned a piece of land which is subject to a development order. The holding company tried to terminate the agreement. The Appellant then filed an action for anticipatory breach of contract and for an injunction against the holding company. The subsidiary was subsequently added as a party but the injunction did not cover them. The court held that the fundamental attribute of a corporate personality is that a corporation is a legal entity distinct from its members be they individuals or corporate bodies. 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 will disregard the notional separateness of the companies. Peeping behind the veil is to enable the courts to obtain information on certain features of a company i.e. its composition, the type of company – holding/subsidiary, proportion of shareholding and control. [73] However, in that case the uncontroverted evidence shows that the holding company controlled and managed the subsidiary fully owned by it. Therefore, the composition, type, shareholding and control of the subsidiary stood in front of the veil, and there was no need to lift the veil to unveil 42 them. Therefore, the injunction was granted against the controller and manager. [74] One must not lose sight of the main issue as framed by the Federal Court which was whether an interlocutory injunction could be issued against the holding company in respect of land in the name of its wholly-owned subsidiary. In cases of a wholly-owned subsidiary, its directors are the nominees of the holding company. They are the managers and controllers as in the directing mind and will of the subsidiary. The subject matter of the sale of shares agreement between the Appellant and the 1st Respondent holding company was the land in question owned by the 1st Respondent's wholly-owned subsidiary, the 2nd Respondent. The cause of action of the Appellant was against the 1st Respondent for breach of contract and the subject matter of the contract were the shares of the wholly-owned subsidiary that owned the land. There is no contract between the Appellant and the 2nd Respondent and thus an injunction against the 2nd Respondent would not be possible as the Plaintiff has no contract with the 2nd Respondent and hence no cause of action in contract. Clearly in such a case the 1st Respondent must not be allowed to evade its contractual obligations in the sale of shares agreement and an injunction ought to be issued. 43 [75] It was in that context that that his Lordship Chong Siew Fah CJ (Sabah & Sarawak) opined as follows at pages 539-540: "On the authorities cited above, it is clearly permissible in law to grant an interlocutory injunction restraining the actual controller and manager behind a company (as opposed to the company itself) from evading the contractual obligations or duties undertaken by the company. The fact that the company under control has not been restrained is, in itself, not a necessary bar from granting the relief against the controller and manager behind it. In the instant case under appeal, there was the letter of the holding company dated 13 April 1993 to the plaintiff enclosing the deposit and part payment and purporting to terminate the agreement; there was the uncontroverted evidence that the main assets of the subsidiary are the four pieces of land, and that the directors of the subsidiary were the nominees of holding company which wholly owned and was in complete control of the subsidiary; there was also a singular lack of evidence dispelling the not totally unwarranted fear of the plaintiff that the holding company, being in complete control of the subsidiary, might dispose of the landed property. In the light of all the above evidence and circumstances and applying the principles in American Cyanamid Co. 44 v. Ethicon Ltd. [1975] AC 396, we are of the view that there existed serious questions to be tried and that the balance of convenience lies in favour maintaining the status quo of the situation until the trial of the action." [76] Learned counsel for the Plaintiff then cited the case of Hotel Jaya Puri Bhd v National Union Of Hotel, Bar & Restaurant Workers [1980] 1 MLJ 109. In that case, the undisputed facts show that the hotel and restaurant were inter dependent. There was functional integrality and unity of establishment between the hotel and the restaurant. Functionally, the hotel and the restaurant are in fact one integral whole and management wise they also constitute a single unit. Dato Kularajah who is MD for both the hotel and the restaurant “had ultimate authority over the employees working for the restaurant”. There are number of senior officers such as secretary, personal manager and assistant manager who were common both to the hotel and restaurant. [77] The court held that the veil of incorporation will be lifted when the justice of the case so demands. The courts are coming to recognize the essential unity of a group enterprise rather than the separate legal entity of 45 each company within the group. His Lordship Salleh Abbas FJ (as he then was) observed as follows at p 112: "It is clear therefore that the approach taken by the President of Industrial Court is not without any legal support when he placed an emphasis on the essential unity of group enterprise which in this case consists of the Hotel and the Restaurant, especially when Datuk N.A. Kularajah who is the Managing Director of the Hotel was also the Managing Director and later a Director of the Restaurant and had the ultimate authority over the employees. Thus, the practice of treating the employees of the Restaurant as being separate from the employees of the Hotel such as the Union having been told that they were so, their salaries, their E.P.F. and SOCSO contributions being paid by the Restaurant, does not detract from the fact that the employees in question were in fact working in one group enterprise. In my judgment, by giving recognition to this fact, the President did not cause any violence to the sanctity of the principle of separate entity established in Salomon v Salomon & Co [1897] AC 22 but rather gave effect to the reality of the Hotel and the Restaurant as being in one enterprise. I find nothing unreasonable in the finding of the President by by-passing this 46 principle. He did no more than to comply with the wishes of the Legislature that in the making of an award substantial merits of the case, the public interest and any matters which are necessary or expedient for the purpose of settling the dispute are among the factors which should be taken into consideration by the court. In my view, the finding by the President is in no way against the principle of separate entity and I am therefore not prepared to interfere with the award on this account." [78] His Lordship made reference to the following facts as held by the Industrial Court when it decided not to disturb its findings that the workers were workers of the Hotel at pages 111-112: "(1) The Hotel and the Restaurant were inter-dependent;

There was a functional integrality and unity of establishment between the Hotel and the Restaurant. In other words, functionally the Hotel and the Restaurant are in fact one integral whole and management-wise they also constitute a single unit. Dato' N.A. Kularajah who is the Managing Director for both the Hotel and the Restaurant, although later he became only the Director of the Hotel, "had the ultimate authority over the employees working for the Restaurant". 47

A number of senior officers such as the Secretary, Personnel Manager and Assistant Manager were common both to the Hotel and the Restaurant.

32 employees whose letters of appointment are those in Bundles A and B were appointed by the Hotel although 8 employees whose letters of appointment are in Bundle C were appointed by the Restaurant. Thus taking all these findings into consideration, the President said: — "in the light of all the above, the court concludes that in the peculiar circumstances of this dispute the Hotel is the employer of the workers in question." (emphasis added) [79] It is not uncommon for senior officers in the case of a wholly owned subsidiary like the Restaurant above to be also serving under the parent company, the Hotel in that case. Moreover when there were letters of appointment from the Hotel to the employees that was a contract between the Hotel and the employees. Further in the Industrial Relations context, the Industrial Court is enjoined to decide on a dispute having regard to equity and good conscience and the substantial justice of the case. 48 [80] Learned counsel for the Plaintiff further referred to the case of Epic Quest Sdn Bhd v Sheila Elenor De Costa [2011] 8 CLJ 518 (COA). In that case, Shiela, a lawyer exercised a lien over documents that belonged to her clients, Epic Quest. Epic Quest was part of the Titijaya Group of companies and Shiela had rendered services to the group in particular Titijaya (M) Sdn Bhd, Prestine Valley Sdn Bhd and Titijaya Hotel Sdn Bhd. There were unpaid bills in respect of the 3 companies and Shiela proceeded to obtain judgment against the 3 companies. She then exercised her lien over the documents of Epic Quest on which she did not have a judgment. The Court held that it is not open to the Courts to disregard the corporate veil purely on the ground that it is in the interest of justice to do so. Something more must be shown such as special circumstances which would include cases where there is either actual fraud at common law or some inequitable or unconscionable conduct amounting to fraud in equity. [81] Based on the evidence, the court held that the plaintiff had laid sufficient evidential foundation to support the contention that special circumstances had existed for lifting the corporate veil of the Appellant and the 3 companies at the Titijaya Group of companies. Having themselves ignored the fact that they operated as one group enterprise when dealing 49 with the Respondent, the Appellant could not be allowed to insist on their separate corporate personality to defeat the Respondent’s general lien whereby it would be inequitable or unconscionable to do so. The corporate veil could not be used as an instrument to evade a contractual obligation. Unconscionable or inequitable conduct amounts to fraud in equity. [82] In that case, the evidential trail revealed that the deponents of all affidavits were filed by one Bay Nut Soo – “Setiausaha syarikat Titijaya Group of companies. It also revealed that SP Lim was a director of almost every one of them or through companies controlled by him or by close family of business associate. Further, instructions from one company came from another. There was use of letterheads by Titijaya in respect of bills issued to Epic Quest. Existence of a letter from Titijaya (M) Sdn Bhd stating that Titijaya had made payment for bills issued to Logic Marine. The payment of legal charges for Sheila being paid by the group companies. It was in that context that the Court of Appeal held that: "[9] From what is set out above it was evident to us that when dealing with the respondent, the Titijaya Group of Companies including the appellants and SP Lim had deliberately ignored the separate corporate personalities of the companies, and operated as one group enterprise. The payment of the respondent's legal charges 50 also reflected this where it can be seen that when the respondent rendered her charges to a company within the group, the respondent's charges would be paid by any one of the Titijaya Group of Companies even though the paying company did not directly receive the respondent's services. Having themselves ignored it when dealing with her, the appellants cannot now be allowed to insist on their separate corporate personality to defeat the respondent's general lien. In Sunrise Sdn Bhd v First Profile (M) Sdn Bhd & Anor [1997] 1 CLJ 529 Chong Siew Fai (CJ Sabah & Sarawak) said that the corporate veil cannot be used as an instrument to evade a contractual obligation. [83] The case of Atlas Maritime Co Sa v Avalon Maritime Ltd; The Coral Rose (No 1) [1991] 4 ALL ER 769 was also referred to in support of the proposition that the notional separateness of companies should be disregarded. In this case, the Defendant who was a wholly owned subsidiary of a Swiss company purchased a damaged vessel and made repairs to it by using funds advanced to it by its parent company. The Defendant sold the vessel to the Plaintiff and later canceled the sale. The Plaintiff filed an action seeking a declaration that there was a valid oral contract and damages for wrongful repudiation of contract and mareva 51 injunction. The Defendant sold the vessel to a 3rd party and transferred the proceeds of the sale and less the amount which was subject to the injunction to the parent company. The Defendant applied for a discharge of the injunction to enable it to transfer the frozen funds to the parent company “as a business debt owing to its creditors “. [84] The court refused to discharge the injunction. The reasons are succinctly summarized in the headnotes: "(2) The court would not exercise its discretion to vary or discharge a Mareva injunction to enable the party enjoined to repay a loan to a creditor out of frozen assets where, having regard to the nature of the relationship between the two parties and the nature of the debt itself, it was clear that the party subject to the injunction was a wholly-owned subsidiary of the creditor and that repayment of the loan was not repayment in the ordinary course of business or a payment to trade creditors in the ordinary way but repayment of loan or trading capital which would effect an evasion of the purpose underlying Mareva relief by placing assets which would otherwise be available to satisfy a judgment in favour of the plaintiff out of the plaintiff's reach. On the facts it was clear that, looking behind the corporate veil, the creditor was the ultimate parent 52 of the defendant company as to 100% of the ownership, that the sum owed to the parent company was not a debt incurred in the course of ordinary routine trading but represented funds advanced to the defendant as trading capital and that the defendant was seeking by the proposed repayment to take action designed to ensure that subsequent orders of the court were rendered less effective than would otherwise be the case or desired to use assets frozen by the injunction merely to evade its underlying purpose. It followed that the variation sought by the defendant company would be refused and that its appeal would therefore be dismissed (see p 775 e, p, 776 c, d h, j, p 777 a, e to p 778 a, p 779 j, p 780 c to j and p 781 b c, post); dicta of Danckwerts LJ in Merchandise Transport Ltd v British Transport Commission [1961] 3 All ER 495 at 518 and of Robert Goff J in Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The Angel Bell [1980] 1 All ER 480 at 487 applied."(emphasis added) [85] Having considered the above cases and how they can be distinguished on their particular and peculiar facts, I must now consider whether there is evidential foundation and sufficient justification to pierce the corporate veil of the Mayland Group of Companies for the purpose of 53 treating the property of the principal company as the property of its subsidiaries, related companies or vice versa. The following cases were also referred to on the need for evidential foundation: - Law Kam Loy v Boltex Sdn Bhd [2005] 3 CLJ 355 (COA) - Solid Investment Ltd v Alcatel-Lucent (M) Sdn Bhd (Previously Known As Alcatel Network System (M) Sdn Bhd) [2014] 3 MLJ 785 (FC) [86] It is vital to reproduce paragraph 34 of the Amended Statement of Claim (p 53 of Record of Appeal (Part A&B)): “The Plaintiff further states that it is apparent that, by the failure and/or refusal of the 1st and 2nd Defendants to respond to the queries made by the liquidator to provide documentation to justify their status as creditors of Vistanet, the exercise undertaken by Vistanet in the pretext of a voluntary winding up appears to be actuated by fraud. This is further evident by the fact that directing minds of Vistanet are common to the Defendants. [87] The cross-examination of the Plaintiff's Director (SP2) at pp 87A-88A of Record of Appeal (Part A & B) is pertinent and is reproduced below: 54 “PD: Now, you were saying just now and also in your witness statement where you said that these 4 companies, when I say 4 companies, I’m referring to the two defendants, Mayland Boulevard as well as Vistanet. You said that these 4 companies operated as a one group enterprise. That’s what you said? SP2: Yes. PD: If I may just refer to your WS at Q&A 27 at page 11, your answer to question 27, meaning item (a) all the way until paragraph (o) at page 15. So these are your justification to show that these companies had work as one single group enterprise, right? PD: Wouldn’t you agree with me that you were aware of all this situation as stated at WS item 27(a) until 27(o) way before hand? PD: When Tanjung Teras first commenced the suit against Vistanet in 2012, at that point of time you were already aware of all these? 55 PD: And to you at that time when you are aware of it, you thought that there is nothing wrong, it’s okay? PD: And it is only when Vistanet has been wound up and then the first meeting of creditors, it was only at that point of time you thought that the two defendants have committed some fraud to prevent Vistanet from claiming the Judgment sum. Is that what you are saying? PD: So if at all the fraud that took place, would have taken place at the time in relation to the voluntarily winding up of Vistanet, that’s what you are saying, am I right? PD: So, again to sum up all what you have said just now, all the answers at Q&A 27 (a) until (o). To you, these are not the improper conduct, the improper conduct came in when you realized or suspect that two defendants had something to do with the voluntarily winding up of Vistanet. Am I right to say that? 56 PD: Your allegation of fraud in respect of the voluntarily winding up of Vistanet, that to you, is evidenced by the fact that the two defendants did not respond to the liquidator’s request to substantiate the proof of debt, correct? PD: By virtue of that failure you said that these two defendants, they are behind the voluntarily winding up of Vistanet and hence they prevented Vistanet from paying money according to the summary judgment, that’s what you are saying? SP2: Yes.” (emphasis added) [88] I agree with learned counsel for the Defendants that in essence, the Plaintiff’s contention is that the corporate veil ought to be lifted because the Defendants had fraudulently caused Vistanet to be wound up to frustrate the Summary Judgment obtained by the Plaintiff against Vistanet. [89] As such, the fact in issue is – “Whether the Defendants had fraudulently caused Vistanet to be wound up to frustrate the Summary Judgment obtained by the Plaintiff against Vistanet” (“Fact In Issue”). 57 [90] I further agree that the most appropriate way to resolve the Fact In Issue is by way of an application pursuant to section 274 of the Companies Act 1965, and not by filing the present action. Section 274 reads: Application to Court to have questions determined or powers exercised.

The liquidator or any contributory or creditor may apply to the Court—

to determine any question arising in the winding up of a company; or

to exercise all or any of the powers which the Court might exercise if the company were being wound up by the Court.

The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just."(emphasis added) [91] Teo Boon Hing (PW2), who is the director of the Plaintiff, was the other witness for the Plaintiff. The Defendants led evidence through 3 witnesses, Andrew Raj Davis (DW1), who was the lawyer acting for 58 Vistanet, Low Gay Teck (GT Low) (DW2), who is the director of the Defendants and Syed Atitila Aidid (DW3), who is the group legal manager of the Mayland Group of companies. [92] PW2's evidence is that Mr GT Low (DW2) signed the cheques of Vistanet and Mayland Boulevard in his capacity as Managing Director of D2 in respect of payments that were due to the Plaintiff. As PW2 was a Director of Mayland Boulevard there was no need to assert or assume that he was a signatory of Mayland Boulevard's cheques by virtue of he being the Managing Director of D2. The fact that he was a Director of Mayland Boulevard would qualify him to be a signatory of the cheques of Mayland Boulevard if the shareholders or the Board of Directors of Mayland Boulevard would authorise him to be a signatory. [93] So too with Mr GT Low being a signatory of the cheques of Vistanet. There was nothing to suggest that he had signed the cheques of Vistanet in his capacity as Managing Director of D2. Any banks would be foolhardy to accept a "outsider" as a signatory of the cheques of a company without the resolution of the board of the company authorizing the "outsider" to sign the cheques of the company concerned. 59 [94] At any rate with respect to the 3 cheques of Vistanet, it was signed by Mr GT Low and one Mr Yeo Chun Sing of Vistanet (see pp 244-246 of Record of Appeal Part C Volume 1/4). If there had not been a mutual understanding or arrangement supported by a resolution from Vistanet to the bank concerned, the bank would not have honored the cheques. As explained by Mr G T Low as DW2 the mutual understanding and arrangement was so that when the other authorized signatories of Vistanet were not around to sign, the payments would not be delayed as hopefully there would be one signatory of Vistanet around. PW2 also clarified that it was the employees of Vistanet who were the ones who prepared the cheques and payment vouchers and that there were many other cheques that were signed by the employees of Vistanet (see Q&A 11 to 14 of DWS2(i) - p 148 of Record of Appeal (Part A&B). In fact, under cross-examination, PW2 conceded that apart from these 3 cheques signed by DW2, there were other cheques which were signed solely by the employees of Vistanet. [95] In respect of Mayland Boulevard's cheques in favour of the Plaintiff (see pp 247-250, 252-258 and 260 of Record of Appeal (Part C - Volume 1/4), Mr G T Low DW 2 explained that he signed the cheques at the requests of Vistanet and the Plaintiff whereby Mayland Boulevard made the 60 cheque payments on behalf of Vistanet to the Plaintiff. This is evidenced from Mayland Boulevard's payments advice at pp 249, 250, 252, 253 and 255 of Record of Appeal (Part C - Volume 1/4). This of course is not uncommon in the construction industry and in fact some developers/employers would do this at the direct request of the subcontractors to the developer/employer for if the subcontractors are not paid, it would be difficult for them to continue to work. In fact most standard form construction contracts would have such a clause as well. [96] Taken as a whole the evidence adduced cannot be worse than a case where the main contractor is a wholly owned subsidiary of the developer/employer where it has complete control over the subsidiary. That by itself does not make it liable for the debts of its wholly owned subsidiary. I would also consider in the same light the fact that site meeting for the Munshi Abdullah Project was attended by TT Yeoh, Tan Swee Lee and SY Loh as common representatives of both Mayland Boulevard and Vistanet. It was also argued that Mr G T Low in his capacity as director of Mayland Boulevard had informed the architect of the project of the change of key personnel who were the common representatives of Mayland Boulevard and Vistanet and signed off the letter on behalf of D2. I am prepared to accept that Mayland Boulevard is a member of the Mayland Group of 61 Companies and there is nothing wrong and not uncommon for a developer/owner to engage its subsidiary or associate company to be its Main Contractor. [97] The Plaintiff argued that another senior personnel of the group, Chow Tai Hing, has signed off letters for Vistanet by using D1's name. Even legal letters from the lawyer acting for Vistanet, Messrs Andrew Davis have been attentioned to D2. The explanation given by DW1 Mr Andrew Davis was that the person instructing him, Siew Chee Keong directed him to attention the letters to D2. This was purportedly due to past incidences where the documents and correspondences have gone missing or unattended to when it was sent to Vistanet’s address at Plaza Damas. However, Siew Chee Keong did not testify in the trial and no reasons were given for his absence. Further, none of the letters that were purportedly sent by Messrs Andrew Davies to Vistanet at their Plaza Damas address was produced. In cross examination, DW1 admitted that he has also been instructed in the past to act for D2 and the instructions were given by one SK Han and Syed (DW3) who are the legal managers of the Mayland Group of Companies. 62 [98] Assuming for a moment that Vistanet is part of the Mayland Group of Companies, the evidence adduced at the trial does not lay the foundation for the piercing of the corporate veil of Vistanet. [99] As for the sharing of premises, Mr GT Low further stated that Vistanet was allowed to operate from the Group’s business premises at Capital Square in the Munshi Abdullah project because the project site was an earshot from Capital Square and therefore was practical. I would not read too much into this arrangement of sharing of same premises as even in the case of a wholly owned subsidiary, this factor is not significant; what more of Vistanet which is not a wholly owned subsidiary. [100] The Plaintiff’s director, Mr Teo Boon Hing (PW2) gave evidence stating that he had personal knowledge of all the dealings the Plaintiff had with the Mayland Group of Companies, including the Defendants, Mayland Boulevard and Vistanet. He testified that Mr GT Low (DW2) had an integral role in the negotiations at the tender stage in all the contracts involving the Plaintiff with the Mayland Group of companies. Essentially, he stated that when dealing with Vistanet, all dealings were done by the Group of companies. That is not uncommon too as in cases of nominated 63 subcontractors, the developer/employer might want a say in the choice and contract sum of the subcontract. [101] Then there was the question of claims for LAD that Vistanet had delayed completing projects that were awarded to them by the Defendants. Both DW2 and DW3 said that they did not receive the faxed request from the Liquidator PW1. The Plaintiff expressed bewilderment as to how is it possible for Vistanet to be responsible for lengthy delays in the completion of the projects resulting in huge LAD claims (241 days delay – Vistanet vis-a-vis D1 – page 512 Appeal Record; 655 days delay – Vistanet vis-à-vis D2 – page 517 Appeal Record). Whether or not these are genuine LAD claims can be easily ascertained by the Liquidator from the documents that have to be submitted to him such as the Certificate of Non Completion and Extension of Time if any given by the Architect. The Liquidator would be at liberty to reject the Proof of Debt if it is unsubstantiated. [102] The Plaintiff submitted that the Defendants should have pursued with these LAD claims as the Letters of Demand were issued in 2007 and 2009, long before Vistanet was wound up. Much would also depend on whether the Defendants can successfully recover from Vistanet if they were to pursue with litigation. 64 [103] The Plaintiff also argued that DW2 was unsure as to whether the debt owing by Vistanet to the Defendants are reflected in the financial statements of the Defendants. The Liquidator on the other hand confirmed that such a debt was not reflected in the financial statements of Vistanet. All that can be concluded is that Vistanet did not accept the debt or disputed the claim by the Defendants for LAD against them. [104] Even if these Proofs of Debt are rejected, I cannot see how fraud has been perpetrated on the Plaintiff. There is still the sum of RM16,689,191.00 owing to other creditors. There was no evidence adduced as to how the Proofs of Debt that the Plaintiff said ought to have rejected, is related to the scheme of disabling Vistanet from the Plaintiff's claim, if there was such a scheme to begin with. [105] Therefore, with the greatest of respect, I cannot say that there has been a manipulation of the corporate structure of Vistanet by the Defendants. Neither could I agree with the conclusion reached by the Plaintiff that it can be reasonably drawn from the facts that Vistanet was a mere façade concealing the true facts and that the alter ego of Vistanet is without doubt both the Defendants as part of the Mayland Group of companies. 65 [106] The Plaintiff further highlighted that Mayland Boulevard was allowed to be wound up in respect of a small debt of RM40,000.00 in circumstances where no provisions were made to collect debts that were owing to the said company. The documents show that there were uncollected debts that were owing to Mayland Boulevard by Hayworth Holdings, who incidentally is a shareholder of Mayland Boulevard to the tune of RM2.1 million and by Vistanet, to the tune of RM1.15 million. However, compelling evidence show that Mayland Boulevard had contingent liabilities in respect of LAD claims from purchasers for sums more than RM9 million. [107] If that be so, then it does not quite matter if Mayland Boulevard was wound up for a debt of RM40,000.00 or by purchasers to the combined tune of RM9 million which is much more than what is owing to it by its debtors. There is nothing to show a pattern that both these companies, Vistanet and Mayland Boulevard, assuming they are controlled by the Defendants, were allowed to be dissolved without having settled debts owing to creditors. While we do not know of other creditors, we do know that Vistanet has settled its debts to the Plaintiff save for the balance sum of about RM500,000.00 which represents about 3% of the contract sum. 66 [108] Vistanet only had a meagre sum of RM211.43 in its account and no business activity at the point of winding up. No attempts were made to show that monies were channeled out of Vistanet to frustrate the Summary Judgment obtained by the Plaintiff against Vistanet. [109] Even by applying the standard of proof on the balance of probabilities in proving fraud in civil cases, this Court finds that it has not been proved on the balance of probabilities. See Sinnayah & Sons V Damai Setia Sdn Bhd [2015] 5 MLJ 1 (FC). [110] Based on the evidence that had unfolded in the trial, there was nothing that pointed to the Defendants being actuated by fraud or that there was any cogent evidence of the manipulation of the corporate structures of the companies in the Group. [111] At the risk of stating the obvious, the burden of proof for fraud rested solely on the Plaintiff. Section 101 of the Evidence Act 1950 provides as follows: “(1) Whoever desires any court to give judgment as to any legal right or liability, dependent on the existence of facts which he asserts, must prove that those facts exist. 67

When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.” [112] Further section 103 of the Evidence Act 1950 reads: “The burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.” [113] When dealing with the standard of proof for fraud in civil claims, the Federal Court in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1 said that ‘burden of proof’ – “relates to the burden or obligation of proving a fact on the party who asserts the existence of any fact in issue and wishes the court to believe in its existence: ss 102 – 103 of the Evidence Act (‘the Act’). The burden of proof of a party never shifts.” (emphasis added) [114] During cross-examination, Vistanet’s Liquidator conceded that the winding up exercise had complied with the law. He also confirmed that up until his appointment he never knew of the Defendants and their key personnels. It was not as if the Defendants as creditors of Vistanet had arranged for a friendly Liquidator to carry out the voluntary liquidation 68 exercise to make sure that no action may be taken by the Liquidator against the Defendants. [115] As the Plaintiff's stand is that there was fraud when the Defendants filed their Proofs of Debt, the Defendants submitted that even if it was proven that the Defendants are not the creditors of Vistanet, the Plaintiff still cannot satisfy the test for lifting the corporate veil. With that I agree. [116] Recently, the Supreme Court in Prest v Prest [2013] 4 All ER 673 decided that the doctrine permitting the court to pierce the corporate veil, should be given its quietus. Lord Sumption giving the first judgment first acknowledged that such doctrine must be limited to cases where there was a “relevant wrongdoing”. He acknowledged the difficulty in identifying what is a “relevant wrongdoing”. He then examined the various cases based on two distinct principles, namely the “concealment” principle and the “evasion” principle where the former does not involve piercing the corporate veil as opposed to the latter. Finally he concluded with the following formulation – “[35] I conclude that there is a limited principle of English law which applied when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he 69 deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality.” (emphasis added) [117] Even in an earlier case involving tortious liability in Adams and others v Cape Industries Plc and another [1991] 1 All ER 929, the English Court of Appeal had debunked the concept of linking a single economic unit to liability of the parent company for the debt of its subsidiaries. Lord Slade LJ said at page 1016 as follows: "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'. ..." [118] Further at pp 1019-1020 it was clarified as follows: 70 "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 Salomon v A Salomon & Co Ltd [1897] AC 22, [1895–9] 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. In deciding whether a company is present in a foreign country by a subsidiary, which is itself present in that country, the court is entitled, indeed bound, to investigate the relationship between the parent and the subsidiary. In particular, that relationship may be relevant in determining whether the subsidiary was acting as the parent's agent and, if so, on what terms. In Firestone Tyre and Rubber Co Ltd v 71 Lewellin (Inspector of Taxes) [1957] 1 All ER 561, [1957] 1 WLR 464 (which was referred to by Scott J) the House of Lords upheld an assessment to tax on the footing that, on the facts, the business both of the parent and subsidiary were carried on by the subsidiary as agent for the parent. However, there is no presumption of any such agency. There is no presumption that the subsidiary is the parent company's alter ego. Scott J refused an invitation to infer that there existed an agency agreement between Cape and NAAC comparable to that which had previously existed between Cape and Capasco (see p 971, ante) and that refusal is not challenged on this appeal. If a company chooses to arrange the affairs of its group in such a way that the business carried on in a particular foreign country is the business of its subsidiary and not its own, it is, in our judgment, entitled to do so. Neither in this class of case nor in any other class of case is it open to this court to disregard the principle of Salomon v A Salomon & Co Ltd merely because it considers it just so to do." (emphasis added) [119] On lifting the corporate veil Slade LJ observed as follows: "...Whether or not such a course deserves moral approval, there was nothing illegal as such in Cape arranging its affairs (whether by 72 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 Salomon v A Salomon & Co Ltd [1897] AC 22 [1895–9] All ER Rep 33 in the ordinary way." (emphasis added) 73 [120] I agree with learned counsel for the Defendants that applying the formulation, the issue of interposing a company under the Defendants’ control does not arise because the Defendants were not under any existing legal obligation or liability or subject to any existing legal restriction to the Plaintiff in the first instance. Such existing legal obligation or liability or legal restriction was strictly between the Plaintiff and Vistanet. [121] No discussion on this subject of lifting the corporate veil of subsidiaries or companies in the same Group would be complete without considering the case of Tenaga Nasional Bhd v Irham Niaga Sdn Bhd & Anor [W]-02(NCC)(W)-2339-10/2012. The Irham Niaga's case followed the principles laid down in Adams and others v Cape Industries Plc and another (supra). The Court of Appeal, after examining the authorities, held that:

the corporate veil could be lifted in exceptional circumstances; and

those exceptional circumstances must involve: (a) actual or equitable fraud and (b) the use of the company whose corporate veil was to be lifted as the means to conceal the true facts behind the facade of the company." 74 [122] The facts in the above case were that Tenaga Nasional Berhad's (TNB) wholly owned subsidiary TNBT entered into various agreements with the respondents for the storage or certain equipment belonging to TNB which TNBT was supposed to manage. A dispute arose and TNBT terminated the agreements. Thereafter TNB and TNBT commenced a court action against the respondents. As there was an arbitration clause the respondents managed to obtain a stay of proceedings and referred the matter to arbitration. TNB was excluded from the arbitration. The respondents were successful in the arbitration and proceeded to register the award in the High Court. The respondents then found out that TNB had declared to the stock exchange and financial analysts that the arbitral award would not affect its financial performance because TNBT was a dormant company. Consequently the respondents commenced an action against TNB for the payment of the arbitral award now registered as a judgment of the court. [123] Just as the Plaintiff here, the respondents in Irham Niaga pleaded that TNB and TNBT operated as "one economic unit and there was functional integrality". It further contended that TNB was the controlling and directing mind, the alter ego of and the party who has control of TNBT and 75 as such the veil of incorporation must in the interest of justice be lifted to hold TNBT liable for the unpaid arbitral award. [124] The respondents there adduced facts that were more reprehensible that the facts in this case:

The set-up of TNBT was designed so that there would be total control by TNB;

The Managing Director of TNBT was the Vice President of TNB, sitting at the same desk, in the same premises;

TNBT had no funds of its own and was dependent on TNB;

TNBT operated from within TNB's building; and

TNBT did not have its own employees. [125] TNB on the other hand contended that:

TNBT operated as a subsidiary with duties and functions of its own and had an entity separate from TNB;

The sharing of employees and resources such as audit and legal services of TNB by TNBT was a common feature or conglomerates;

TNBT's lack of own funds was known to the respondent as the financial records of TNBT had shown that it operated on the basis 76 of reimbursable operating costs from TNB, but evidence showed that payments to the respondents were made by TNBT itself, not

TNB and this indicates the separation between TNBT and TNB and While there were instances when the Managing Director of TNBT signed off letters using his designation as TNB, he had explained this sufficiently. [126] The Court of Appeal, upon a careful examination of the evidence, allowed TNB's appeal and held that there was no fraud and that there was no basis for the corporate veil of TNBT to be lifted. It observed as follows: "[49] In our considered view, the evidence was crystal clear that TNBT, which was formed long before the Agreements were entered into, was not formed as a means to conceal the true facts in order to avoid contractual liability. The Plaintiff's knew very well the true nature of TNBT and the mode of operations." [127] Learned counsel for the Defendants, Mr Simon Hong, has helpfully set out the similarities/dissimilarities between Irham Niaga's case and the present case as follows: 77 Irham’s case

Present Action TNBT was formed long before the agreements were entered with Irham. Similarity Vistanet was formed (1998) long before the agreement (2005) were entered with the Plaintiff.

From the outset, Irham knew that they were entering into the agreements with TNBT and not TNB. Similarity From the outset, the Plaintiff knew that they were entering into the agreement with Vistanet and not the Defendants.

TNBT shared TNB’s employees, resources and premises, and Irham knew the true nature of TNBT and its mode of operations. Similarity The Defendants, Boulevard and Vistanet shared resources and premises, and the Plaintiff knew the true nature of Vistanet and its mode of operations.

There was a danger that TNBT could be wound up and being a company with no assets of its own, TNBT would be in no position to make any payment to Irham or any other creditor. Similarity The Plaintiff had served a section 218 Notice on Vistanet. There was a danger that Vistanet could be wound up and given that Vistanet only had RM200 in its account, Vistanet would be in no position to pay the Plaintiff or any other creditor. 78 [128] The Court of Appeal had refused to lift the corporate veil and by the same force of argument, with the dissimilarities (as stated in items (4) to (8) in the table above), a fortiori, there is no basis for the corporate veil to be lifted in this instant case.

TNBT was TNB’s wholly owned subsidiary. Dissimilarity The Defendants and Vistanet do not have common directors and shareholders.

There were instances when the Managing Director of TNBT signed off letters using his designation at TNB. Dissimilarity GT Low never signed off Vistanet’s letters.

TNBT did not have its own employees. Dissimilarity Vistanet had its own employees.

TNBT had no funds of its own and was dependent on TNB. Payments were made from TNBT to Irham using the funds from TNB. Dissimilarity The Defendants never paid the Plaintiff for the Munshi Abdullah Project. All payments were made to the Plaintiff by Vistanet and Boulevard, which is not uncommon.

TNB had resolved to deal with the legal, contractual and financial commitments to third parties upon collapsing back but failed to take steps in this direction. Dissimilarity The Defendants had no such resolution. 79 [129] The sum obtained by the respondents in the arbitral award was for RM106,888,499.33 in favour of the first respondent and RM6,102, 922.50 in favour of the second respondent. [130] Whilst the respondents in Irham Niaga's case have not been paid at all for the arbitral award, the Plaintiff had received payment in the aggregate sum of RM14,715,935.53 out of a final revised contract sum of RM15,151,621.48. Prior to the commencement of the High Court Action, Vistanet owed the Plaintiff RM435,685.95 (less than 3% of the final revised contract sum). If indeed Vistanet was formed or used as a tool to avoid contractual liability, the Plaintiff would not have received more than 97% of the payment claims. Just like Irham Niaga's case, Vistanet was formed (in 1998) long before it entered into the contract with the Plaintiff (in 2005), and the Plaintiff knew very well the true nature of Vistanet and its mode of operations. [131] The factors itemized by the learned SCJ from (a) to (o) had already been known by PW 2 when the Plaintiff took against Vistanet. PW2 by his own admission stated that fraud took place during the voluntary winding up of Vistanet when the Defendants could not substantiate how the Defendants were combined creditors of Vistanet to the tune of RM35 80 million. PW2 stated that the Defendants are behind the voluntary winding up of Vistanet and that they acted fraudulently in disabling Vistanet from making payment under the summary judgment. Even if the proofs of debt were to be a sham, there is still no connection between this and the inability of Vistanet to pay its debts to the Plaintiff as there is still a sum of about RM16 million owing to other creditors with a balance of about RM211.43 left in its account at the time when the Liquidator was appointed. If there is fraud that has been perpetrated, it is perpetrated against the Inland Revenue Board ("IRB") for which it will have to be answerable to the IRB. [132] I am conscious of the fact that an appellate court should not interfere with findings of facts of a trial Judge. Here I have taken the findings of facts as they are and I have for the reasons given above, arrived at a different conclusion based on a proper judicial appreciation of the evidence as adduced at the trial. Appellate intervention of this nature is permitted to correct wrong conclusions arrived at or wrong inferences made from the findings of facts of the trial Judge based on the Supreme Court decision in Sundram v Arujunan & Anor [1994] 3 MLJ 361 at p 373 where it was observed as follows: By way of postlude, we must add a final point regarding this part of the case lest we be accused of an oversight. We recognise, as we 81 must, that a Court of Appeal will naturally be reluctant to interfere with a finding of fact by the trial judge who has had the inestimable advantage of watching the demeanour of the witnesses, 'their candour or their partisanship, and all the incidental elements so difficult to describe which make up the atmosphere of an actual trial' (per Lord Macmillan in Watt v Thomas [1947] AC 484 at pp 490–491; [1947] 1 All ER 582 at p 590). But, having said that, we would draw attention to the familiar principle that there is a distinction between the finding of a specific fact and the finding of a fact which is really an inference drawn from the facts specifically found. In the latter case — and the present case is such a case — the appellate court will be far more ready to reverse his decision founded as it is on inferences drawn from admitted or undisputed facts (see Benmax v Austin Motor Co Ltd [1955] AC 370; [1955] 1 All ER 326; [1955] 2 WLR 418). [133] See also the Court of Appeal case of Lee Ing Chin @ Lee Tuck Seng & Ors v Gan Yook Chin & Anor [2003] 2 MLJ 97 which was affirmed by the Federal Court. It was held that a decision arrived at without judicial appreciation of the evidence before it runs the risk of the decision being set aside on appeal. 82 Pronouncement [134] I am more than satisfied that the Plaintiff had not proved fraud on the part of the Defendants to justify the lifting of the corporate veil and to make the Defendants liable for the debt of Vistanet. Neither has the Plaintiff proved that the corporate structure of the Defendants here have been used as a means to help Vistanet evade its contractual liability. [135] I had therefore allowed the appeal and set aside the judgment of the Sessions Court. [136] I also ordered costs below of RM25,000.00 to the Defendants/Appellants here and costs of this appeal of RM15,000.00 to the Defendants/Appellants. Allocatur to be paid before the extraction of the order of costs. Dated: 28 October 2016. Y.A. LEE SWEE SENG Judge Construction Court High Court Malaya 83 For the Appellants/Defendants: Mr Simon Hong (Messrs Donny & Hong) For the Respondent/Plaintiff : Mr S Ramesh (Messrs Ramakrishnan & Associates) Date of decision: 28 June 2016