The court can lift the corporate veil to hold directors personally liable for fraudulent actions aimed at evading creditors' debts under section 540 of the Companies Act 2016.

JUDGMENT

Rohana Abd Malek JC:

Introduction

[1] This is an application by the plaintiff pursuant to s 540 of the Companies Act 2016 ( CA ) against the defendants who are the common directors and/ or shareholders and/or ultimate controllers of Mega Planner Jaya Sdn Bhd (Mega Planner) and Dakota Engineering Sdn Bhd (Dakota) for jointly and severally carrying out businesses with the intent to defraud the creditors of the plaintiff company by using Dakota to wind up the plaintiff in order to avoid repayment of debts due by Mega Planner to the plaintiff.

[2] After a full trial, I allowed the plaintiff's application with cost of RM50,000.00. Below are the reasons for my decision.

Background

[3] The plaintiff, Eastmont Sdn Bhd, a company involves in the building and construction business, was awarded a project by a company named Mega Planner Jaya Sdn Bhd on 3 August 2012 vide letter of award dated 3 August 2012 (Letter of Award) to carry out sub-structure works for 16 level serviced apartment in Taman Melati, Kuala Lumpur for a sum of RM26,000,000.00 (Project).

[4] The plaintiff had completed its works in accordance with the Letter of Award; however, the Letter of Award was subsequently terminated mutually by the plaintiff and Mega Planner in December 2013 as a result of the default of payment of interim certificate by Mega Planner.

[5] On 10 June 2019, the plaintiff filed a claim against Mega Planner at Kuala Lumpur High Court vide Suit No: WA-22C-51-06-2019 to claim for the outstanding payment in the sum of RM12,551,557.28 due and owing by Mega Planner to the plaintiff.

[6] On 11 June 2019, the Writ of Summons and the Statement of Claim were served to the registered address and business address of Mega Planner. The business address of Mega Planner is the same as the business address of Dakota Engineering Sdn Bhd ("Dakota").

[7] On 21 June 2019, the plaintiff's solicitors Messrs Ricky Tan & Co received a letter from Dakota's solicitors to inform that Mega Planner had been wound up on 14 May 2019 vide Shah Alam High Court Winding-Up Petition No: BA-28NCC-97-02-2019 filed by Dakota.

[8] The winding-up petition filed by Dakota against Mega Planner was premised on a Judgment in Default of Appearance dated 27 November 2018 vide Suit No: 42-10-2018 ("JID").

[9] The 4th defendant was the common director of both companies, ie Dakota and Mega Planner, when Dakota initiated its action against Mega Planner on 3 October 2018. The 4th defendant only resigned as the director of Dakota on 30 November 2018, ie after Dakota had obtained JID against Mega Planner on 27 November 2018.

[10] On 25 July 2019, the plaintiff filed a leave application at the Shah Alam High Court vide Post Winding-Up No: BA-28PW-204-07-2019 to obtain leave from the Court to proceed with the legal proceeding against Mega Planner.

[11] On 5 August 2019, Dakota filed an application to intervene in the plaintiff's leave application. On 30 October 2019, the Shah Alam High Court dismissed Dakota's intervener application and allowed the plaintiff's leave application.

[12] On 12 December 2019, the plaintiff obtained a Judgment in Default of Defence against Mega Planner (JIDD). After obtaining the JIDD, the plaintiff discovered that Dakota and Mega Planner are related companies and have common shareholders and/or directors and/or ultimate controllers.

[13] On 21 January 2020, the plaintiff instructed its solicitors to issue a letter of demand (LAD) to the 1st to 6th defendants. The defendants have failed to reply to the said LAD and failed to make any payment to the plaintiff.

[14] Therefore, the plaintiff initiated this Suit against the defendants who are the common directors and/or shareholders and/or ultimate controller of Dakota and Mega Planner.

The Plaintiff's Case

[15] The plaintiff's cause of action against the defendants is a breach of s 540 of the CA for carrying out business with the intent to defraud the creditors of the company and/or for fraudulent purposes and/or tort of fraud and/or c