Tsr Bina Sdn Bhd v 1. ) Lee Chee Kay (WA-22NCvC-469-07/2024)

LEE CHEE KHAY (No. K/P: 620102-10-6541)

LEE CHEE ONN (No. K/P: 671218-10-5583) …DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT Introduction [1] Litigants, who flippantly give undertakings to the court, must be prepared to face swift enforcement proceedings if and when they renege on their undertaking – such as in this case. [2] In this case, it is plain and obvious that the Defendants had breached their undertaking contained in a Consent Order which was recorded at the Court of Appeal on 14th April 2023. Since the Defendants failed to show any triable issue, I decided that this Court ought to allow the Plaintiff’s application for summary judgment to compel the Defendants to pay up forthwith. 14/04/2025 22:51:06 WA-22NCvC-469-07/2024 Kand. 34 Background Facts [3] On 14th April 2023, a comprehensive consent order was recorded by the Court of Appeal to settle a long outstanding dispute between the Plaintiff and a private limited company wholly owned by the two Defendants, namely Hiform (M) Sdn Bhd (“Hiform”). [4] Both Defendants are directors and shareholders of Hiform. [5] In two related appeals at the Court of Appeal pending in April 2023, the Plaintiff herein was the appellant while Hiform was the respondent. [6] At the Court of Appeal on 14th April 2023, the Defendants instructed their counsel to convey their personal undertaking to the Court of Appeal, which is unequivocally recorded in the said comprehensive consent order (‘the said Consent Order”). The said Consent Order settled both the aforesaid appeals. [7]

… It is the essence of incorporation that the shareholder/controller of the company limits his liability in respect of the future conduct of the company's affairs. There is nothing wrong with that. Advantage is taken of limited liability to avoid personal liability if things go wrong. (see Persad v. Singh per Lord Neuberger [2017] UKPC 32). However, the limitation of liability envisages that such future conduct of the company's business is to be conducted honestly and with integrity - the law is predicated on that assumption. Once honesty is abandoned and the company is utilised as a vehicle for dishonest conduct, or fraud, or unconscionable conduct, then the basis for the separate corporate personality is jeopardised and undermined. It no longer serves the purpose it was intended for. As such it is only correct that a court investigating the injury or loss suffered by reason of the wrongful utilisation of the corporate personality, or the abuse of the corporate personality, is allowed to both look behind the façade to ascertain the true facts and also impose liability against the persons perpetrating such wrongdoing as is required on the facts of a particular case. This body of law relating to fraud subsists outside of the doctrine of 'piercing' the corporate veil as explained in Prest;

(ii) I would respectfully concur with the legal rationale prescribed by Lord Sumption in Prest, which explains that in order to ascertain whether the veil of incorporation ought to be 'pierced', the nature of the wrongdoing in issue ought to be analysed to ascertain whether it falls within the purview of the 'concealment' principle or the 'evasion' principle.

(iv) If the wrongdoing warrants the application of the evasion principle, the consequence is that the corporate veil is pierced, so as to enable liability to be imposed on a person, seemingly unconnected to the transaction in dispute.” [17] In this case, there is dishonesty and lack of integrity (to paraphrase the words of the Federal Court) in the conduct of the Defendants as directors and shareholders of Hiform. They expressly gave an undertaking which was unequivocally recorded in the said Consent Order by three judges of the Court of Appeal but when the trigger events have occurred, they lack the honour to fulfill their undertaking after delaying. Instead, they have the audacity to attempt to hide behind the corporate veil of Hiform. [18] Since the undertaking jointly given by the Defendants was a personal undertaking, there is in fact no need to pierce the corporate veil of Hiform to impose liability on them personally. In any event, this court would be well justified to pierce the corporate veil of Hiform by applying the principle enunciated by the Federal Court in ONG LEONG CHIOU (supra) as it is a wrongdoing that warrants the application of the evasion principle: “the consequence is that the corporate veil is pierced, so as to enable liability to be imposed on a person, seemingly unconnected to the transaction in dispute.” [19] In my view, in cases where directors of limited companies have given personal undertakings to the court – with their names stated in the undertaking and recorded in court – for the purpose of securing a consent order for their respective company, they must not be allowed to hide behind the corporate veil of their company. Their undertakings, which are conveyed by their company’s counsel to the court, are to be regarded as personal undertakings that may be enforced by the other parties in the proceedings. Otherwise, there would be no difference between a promise uttered flippantly in a coffee shop and an undertaking encapsulated in a consent order recorded by no less than three judges of the Court of Appeal. [20] In Chung Onn v Wee Tian Peng [1996] MLJU 386, Low Hop Bing J had occasion to discuss the effect of breach of undertakings given to the court. The learned judge relied on the following passage from Halsbury’s Laws of England which states: “An undertaking given to the Court by a person or corporation in pending proceedings, on the faith of which the Court sanctions a particular course of action or inaction, has the same force as an injunction made by the Court and a breach of the undertaking is misconduct amounting to contempt”. [21] In the present case, it is crystal clear that the Defendants had given their personal undertaking to the Court of Appeal solely for the purpose of convincing the Plaintiff to agree for a sum of RM1,000,000 – which belongs to the Plaintiff – to be paid out forthwith to Hiform, i.e. to the company controlled by the Defendants. To borrow the words from Halsbury’s Laws of England: on the faith of the Defendants’ personal undertaking, the Plaintiff had agreed and the Court of Appeal sanctioned that particular course of action for the RM1,000,000 belonging to the Plaintiff to be disbursed to Hiform. [22] The law governing the application for summary judgment under Order 14 Rules of Court 2012 is trite and does not require any authority. This case, of the Defendants having the audacity to renege after having given the Court of Appeal their personal undertaking which was unequivocally conveyed by their company’s counsel and recorded in the said Consent Order, is an example of clear-cut cases that warrant the prompt entry of summary judgment. I reiterate that it is a clear-cut case because there is no ambiguity at all about the events that would trigger liability for the Defendants’ undertaking that was given to the Court of Appeal. Counsel for the Plaintiff: Lee Kai Jun (Sia Chee Shan with him) SOLICITORS FOR THE PLAINTIFF: MESSRS WAYNE SIANG, KAI & CO. Advocates & Solicitors B-2-3, Melawati Corporate Centre, Jalan Bandar Melawati, Taman Melawati, 53100 KUALA LUMPUR. Counsel for the Defendants: Cheong Su Yin (Tan Zhi Ching with him) SOLICITORS FOR THE DEFENDANTS: MESSRS CHEONG SU YIN & CO. Advocates & Solicitors B-6-11, Plaza Mont Kiara, No.2, Jalan Kiara, Mont Kiara, 50480 KUALA LUMPUR. CASES REFERRED TO:

Ong Leong Chiou & Anor V. Keller (M) Sdn Bhd [2021] 4 CLJ 821

Chung Onn v Wee Tian Peng [1996] MLJU 386 LEGISLATIONS REFERRED TO:

Halsbury’s Laws of England

Order 14 Rules of Court 2012