Corporate veil lifting requires evidence of fraud; contractual obligations cannot be evaded through inter-company maneuvers without proper legal foundation.

Introduction

[1] On 10 December 2013, this court granted leave to the appellant, the plaintiff in the action, to appeal on the following questions:

a. Where Company A and Company B are family companies belonging to the same family, whether it is permissible for Company A (the 1st respondent/1st defendant) to escape its contractual obligation to sub-contract construction works to the appellant/plaintiff by claiming that Company B (the 2nd respondent/2nd defendant) and not itself was awarded the main sub-contract?

b. Whether the separate legal character of limited companies can be recognised where it is used to avoid or frustrate legal obligations?

c. Whether it is appropriate to lift the corporate veil in a group of family companies and treat them as a single business unit where one company in the group seeks to evade its contractual obligation by relying on the actions of another in the group?

d. Whether it is appropriate to treat the family companies in the group as a single business unit where a dominant individual is its alter ego and is seeking to perform the contract under Company B rather than Company A, thereby denying the appellant/plaintiff its contractual rights?

e. Where Company A and Company B (the 2nd respondent/2nd defendant) are in substance a single business unit, whether they are bound by the principles of good faith and fair dealing to honour the obligation entered into by Company A with the appellant/plaintiff?

[2] This appeal is only against the 1st and 2nd respondents who were the 1st and 2nd defendants in the action. The appeal against MMN Bina Sdn Bhd, the 3rd defendant in the action, was discontinued at the court of Appeal. As such, any claim against the 3rd defendant is no longer relevant before us.

[3] For ease of reference, in this judgment, the appellant will be referred to as the plaintiff while the 1st and 2nd respondents will be collectively referred to as the defendants and/or as the 1st and 2nd defendants, where the context so require. For convenience, MMN Bina Sdn Bhd will be referred to as the 3rd defendant.

[4] The plaintiff is dissatisfied with the dismissal of its claim against the 1st, 2nd and 3rd defendants by the High court which was upheld by the court of Appeal. The counterclaim by the 1st defendant against the plaintiff was allowed by the High court but on appeal, was reversed by the court of Appeal. There is no appeal against the dismissal of the counterclaim.

Background Facts

[5] The plaintiff is a company incorporated under the Companies Act 1965 ('the Act'). It is engaged in the business of building and civil engineering construction.

[6] The 1st and 2nd defendants are companies incorporated under the Act. Both are also involved in the same activities as the plaintiff but with the 1st defendant principally engaged in earthworks.

[7] The 3rd defendant is also a company registered under the Act, but with Bumiputera status. It too, is involved in the business of building construction.

[8] There was a project of the Jabatan Bekalan Air Negeri Pahang Darul Makmur, which was known as the "Rancangan Bekalan Air Greater Kuantan Fasa II - Pakej 3 Membina dan Menyiapkan Empangan serta Kerja-kerja Berkaitan di Sungai Chereh, Kuantan, Pahang Darul Makmur" ('the project').

[9] The 2nd and 3rd defendants teamed up to form a joint venture known as AAY-MMN Joint Venture ('the AAY-MMN Joint Venture') in order to tender for the project.

[10] After completion of the tender documents, the AAY-MMN Joint Venture submitted its bi