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2022 MarsdenLR 2946
HIGH COURT MALAYA KUALA LUMPUR
AGESON BERHAD – Appellant
Versus
DATO FOO CHU JONG & ORS – Respondent
[Suit No: WA-22NCC-116-03/2021]
A holding company cannot sue on behalf of a subsidiary for claims that must be addressed solely by the subsidiary, emphasizing the principle of separate legal entities.
Headnote:(A) Companies Act – Separate Legal Entity Principle – The Plaintiff filed a suit against the Defendants for breach of fiduciary duties related to payments made by PMSB, its subsidiary, which was held as an abuse of the court process because the Plaintiff lacked legal standing. The Court reaffirmed that only PMSB, as the entity allegedly wronged, is entitled to bring action for such claims. (Paras 12-36)
(B)
Locus Standi – The Court ruled that a holding company cannot initiate claims on behalf of its subsidiary as the injuries or breaches, if any, are actionable solely by the subsidiary itself. The Plaintiff's claims were deemed obviously unsustainable due to lack of capacity. (Paras 35-36)
(C)
Corporate Guarantee – The Plaintiff’s underlying cause of action related to a corporate guarantee provided to a bank did not confer upon it any rights against the Defendants, who were unrelated to the guarantee. (Paras 26-28)
(D)
Derivative Action – The Plaintiff, having no capacity to sue as PMSB had been wound up, cannot bring any action as a shareholder. (Paras 23-25)
JUDGMENT
Introduction
[1] The 1st, 2nd, 3rd and 5th Defendant applied to strike out the Writ and Statement of Claim pursuant to O 18 r 19(1) (a), (b) and/or (d) and/or O 92 r 4 of the Rules of 2012 as documented in encl 33, 35 and 37 respectively. This Court allowed the applications and struck out the Plaintiff's claim with costs.
[2] This is the Grounds of Judgment of this Court.
Background Facts
[3] Prinsiptek (M) Sdn Bhd ("PMSB") is a wholly owned subsidiary of the Plaintiff. The 1st and 2nd Defendants were the former directors of PMSB until the date of their resignation on 5 September 2019.
[4] In 2016, PMSB secured a construction contract from Qaiser Harta PMC Sdn Bhd on a fixed and lump sum contract of RM314,856,950 ("Letter of Award") in respect of the project known as "Proposed Construction of 1 Block of 44 Storey Apartments (1,068 units) including 8 Storey Podium Parking and Resident Facilities on Lot 30195 (formerly Lot: 1132), Jalan Dato Senu 3, Mukim of Setapak, Federal Territory, Kuala Lumpur for Messrs. SPNB Aspirasi Sdn Bhd" ("Project").
[5] PMSB engaged several consultants, subcontractors and suppliers to complete the Project to perform and carry out part of the duties and works of the Project. Several of whom, have been named as defendants in this suit.
[6] In essence, the Plaintiff's claims against the Defendants are as follows:
(i) The 1st and 2nd Defendant breached their fiduciary duties towards Plaintiff;
(ii) The breach was dishonestly assisted by the Defendants;
(iii) The Defendants conspired to injure the interests of the Plaintiff.
[7] The Plaintiff's grievances relate to payments made by PMSB between the period of 2016 to 2019 of approximately RM24.175 million to various consultants and sub-contractors. These payments were allegedly wrongfully made by the 1st and 2nd Defendant and Plaintiff claims the payments were bogus and dubious, intended to siphon out monies from PMSB.
[8] The alleged disputed or questionable payments were:
(i) To the 3rd Defendant, the sum of RM3,492,293.37;
(ii) To the 4th Defendant the sum of RM12,678,358.02;
(iii) To the 5th Defendant, the sum of RM6,282,463.02;
(iv) To a supplier named Rumpun Selayang Enterprise, the sum of RM784,500.00;
(v) To a supplier named Chubadak Bino Sdn Bhd, the sum of RM430,000.00;
(vi) To a party named LCC Builders Sdn Bhd, the sum of RM50,000.00;
(vii) To a party named Classic Designer & Beauty Ceil, the sum of RM50,000.00.
[9] Premised on the aforesaid, the Plaintiff claimed to have suffered loss hence the filing of this suit. The 1st, 2nd, 3rd and 5th Defendants then filed these striking out applications.
Parties' Contention
[10] The arguments advanced by the Defendants to justify the striking out applications:
i. The Plaintiff has no locus standi to bring an action on behalf of PMSB against the Defendants. The proper party who is entitled to dispute the validity, the existence of the contracts and the works which have been duly certified as completed for the Project and the said payments is PMSB;
ii. The Plaintiff clearly a separate legal entity from PMSB. If there were any alleged losses suffered, such losses would be incurred by PMSB itself;
iii. The Plaintiff's inclusion of allegations of conspiracy is intended to circumvent the fact that the Plaintiff has no locus standi to bring this suit in the first place.
[11] The Plaintiff in resisting the application, submitted that the pleaded case against the Defendants are not founded in contract but breach of fiduciary duties by the former directors which was dishonestly assisted by the Defendants and the tort of conspiracy where the Defendants have conspired to injure the interest of the Plaintiff. The Plaintiff further argued that there exists a reasonable cause of action against the Defendants which warrant the determination of this Court.
Analysis
[12] The common issue that were raised by the three sets of solicitors in advancing their respective arguments in encl 33, 35 and 37 focuses on whe
