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2025 MarsdenLR 3551
HIGH COURT MALAYA PULAU PINANG
POLYDAMIC SDN BHD – Appellant
Versus
ASPEN GLOVE SDN BHD & ORS – Respondent
[Civil Suit No: PA-22NCC-50-07/2023]
A valid settlement agreement exists only between the Plaintiff and the 1st Defendant, with no privity of contract or grounds to lift the corporate veil regarding the 2nd and 3rd Defendants.
Headnote:(A) Contract Law - Breach of Settlement Agreement - The Plaintiff sought a declaration against the Defendants for breach of a settlement agreement to pay RM2,893,205.00. The 1st Defendant admitted owing a larger sum but was wound up. The Court found no enforceable settlement agreement between the Plaintiff and the 2nd and 3rd Defendants, as the agreement was only with the 1st Defendant. The Court ruled that there was no privity of contract between the Plaintiff and the 2nd and 3rd Defendants and that the corporate veil could not be lifted as they operated as separate legal entities. (Paras 1, 2, 103, 104)
(B) Corporate Law - Lifting the Corporate Veil - The Plaintiff's claim to lift the corporate veil was dismissed as there was no evidence of the Defendants operating as a single economic entity or committing fraud. (Paras 85, 93, 104)
(C) Evidence - Burden of Proof - The Plaintiff failed to prove the existence of a settlement agreement with the 2nd and 3rd Defendants, and the burden of proof lay with the Plaintiff to establish their claims. (Paras 35, 41, 103)
(D) Winding Up - Filing of Proof of Debt - By filing a proof of debt against the 1st Defendant, the Plaintiff submitted to the jurisdiction of the winding-up Court, limiting their ability to pursue claims against the 2nd and 3rd Defendants. (Paras 97, 104) (E) Costs - The Court awarded costs of RM60,000.00 collectively to the 2nd and 3rd Defendants. (Paras 104, 105)
Introduction
[1] The Plaintiff ('P') commenced these proceedings against all three Defendants seeking inter alia a declaration that the Defendants have breached a settlement agreement to pay P a sum of RM 2,893,205.00 and for an order that all three Defendants are jointly and severally liable to pay P the said sum. Alternatively, P seeks an order that the 2nd and 3rd Defendants ("D2 and D3") transfer to them two properties at the value of RM2,893,205.00.
[2] It is undisputed that the 1st Defendant ("D1") as at 30 June 2022 had admitted owing P the sum of RM4,194,511.10 as evident from D1's audit confirmation dated 26 July 2022. However, D1 was subsequently wound up and P has since obtained leave from the winding up Court to proceed with these proceedings against D1. However, after filing a Memorandum of Appearance, D1 thereafter failed to file their Statement of Defence. Thereafter, post-trial and before the Court's decision could be rendered, P filed encl 82 which was its application to enter Judgment in Default of Defence against D1. The Court allowed such application and declared that D1 had breached the settlement agreement where it agreed to pay P the said sum of RM 2,893,205.00 and an order that D1 ought to pay P such amount with interest and costs. At trial, although the representative of the Insolvency Department (KPI) was present, they did not partake in the proceedings at trial which then proceeded against D2 and D3 only.
[3] As such, in relation to P's claim against D2 and D3, I will hereinbelow set out the salient background facts, the parties' rival contentions and my analysis of the same in determining if P has successfully established their claim against D2 and D3.
Background Facts
[4] The facts and chronology of events in this matter are largely undisputed. Learned Counsel for D2 and D3 have aptly summarised the facts and the parties' respective cases as can be gleaned from the pleadings and they are narrated as follows.
P's Claim (Based On The Statement Of Claim)
[5] P has supplied goods, equipment, and labour required for the manufacture and installation of an "online chlorination system" at DTs factory located at Plot 9, Kulim Industrial Park, Phase 4, Kedah Darul Aman.
[6] D1 had made payment of RM 3,474,905.00 for the supply received.
[7] As at the date of filing this action, the outstanding amount due for the supply owed by D1 is RM 4,194,511.10 based on the purchase orders and delivery orders between P and D1.
[8] The Defendants share the same registered address, as well as several common directors and a common secretary and hence can be collectively referred to as the "Aspen Group".
[9] On 14 July 2022, a meeting was held and was attended by the representatives of the Defendants and P. At the said meeting, Aspen Group had represented and admitted that all the staff and employees of D1 had been terminated and that they would take responsibility for settling its outstanding debts. They acknowledged the debt and proposed to settle it either through cash payment, property transfer developed by Aspen Group or a combination of both.
[10] After the meeting and several follow-ups via emails and WhatsApp messages, and after visiting project sites, a settlement was reached whereby P agreed to accept RM 2,893,205.00 through property transfer and selected a shophouse, No 21, Vervea and a condominium unit, E-25-01, Vertu.
[11] P was informed that the Aspen Group agreed to transfer No 21, Vervea but not E-25-01, Vertu. They assured P that if E-25-01, Vertu was not approved, another property could be selected. Despite acknowledging the debt, the Defendants deliberately delayed the property selection and transfer.
[12] On 29 March 2023, P instructed its solicitors to issue a Notice of Demand.
[13] On 6 April 2023, P and Aspen Group held an online meeting, where P was informed that No 21, Vervea had been sold. Instead, they could choose from the Beacon, Vertu, or Vervea projects. However, P was only allowed t
