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2021 MarsdenLR 1231
HIGH COURT MALAYA SHAH ALAM
DEXON ELECTRICAL ENGINEERING SDN BHD – Appellant
Versus
CHIN POOI YEE & ANOR – Respondent
[Civil Suit No: BA-12AC-1-03-2021]
The registration of a business does not grant legal personality, holding proprietors personally liable for business debts.
Headnote:(A) Registration of Businesses Act 1956 – Evidence Act 1950 – Contracts Act 1950 – Construction Contracts – Parties involved included Symphony Union Suites Sdn Bhd (Employer), Setiakon Builders Sdn Bhd (Main Contractor), and AA Flexi Trading (1st Defendant). The 2nd Defendant signed Guarantee and Indemnity to secure performance of sub-contract terms. The plaintiff claimed owed sums as AAFT defaulted on M&E Works. (Paras 2-18)
(B) Legal Personality – RBA does not confer legal personality making 1st Defendant liable for AAFT’s obligations; 2nd Defendant could not evade liability. (Paras 32)
(C) Admissibility of Evidence – Without prejudice communications may be admissible if objections to them are waived. (Paras 30)
(D) Equitable Estoppel – Defendants were estopped from denying the plaintiff's claims due to failure to respond to plaintiff's communications. (Paras 51) (E) Final Decision – Appeal allowed; judgment entered for the plaintiff with the claimed sum. (Paras 56-57)
Key Points: - The 2nd defendant is liable as principal debtor under the Guarantee and Indemnity for all sums due from AAFT; and its liability remains enforceable until full payment, with the G&I constituting a continuing guarantee. (!) (!) (!) (!) (!) - The Registration of Businesses Act 1956 does not confer legal personality on AAFT; the 1st defendant, as sole proprietor, remains personally liable for AAFT's debts. (!) (!) (!) (!) - Equitable estoppel is invoked to support the plaintiff's claim by preventing the defendants from denying the plaintiff's documents and by their failure to respond to the plaintiff's communications. (!) (!) (!) (!)
What is the liability of the 2nd defendant under the Guarantee and Indemnity for AAFT's debts?
What is the effect of the registration of AAFT under the Registration of Businesses Act on its legal personality and the liability of the proprietor?
What is the applicability of equitable estoppel in supporting the plaintiff's claim and preventing denial of the plaintiff's documents?
A. Background
[1] This judgment shall refer to parties as they were in the Sessions Court (SC).
[2] Symphony Union Suites Sdn Bhd (Employer) had appointed Setiakon Builders Sdn Bhd (Main Contractor) as the main contractor for the Employer's construction project in Bandar Sunway, Selangor Darul Ehsan named "Union Suites" (Project).
[3] The plaintiff company (plaintiff) was appointed by the Main Contractor as the "Mechanical and Electrical" (M&E) sub-contractor for the Project.
[4] The 1st defendant (1st defendant) is the sole proprietor of a business registered under the Registration of Businesses Act 1956 (RBA) with the name "AA Flexi Trading" (AAFT).
[5] The 2nd defendant (2nd defendant) is the 1st defendant's husband. According to para 3 of the Defence filed by the 1st and 2nd defendants (referred collectively in this judgment as the "defendants") in the suit instituted by the plaintiff, the 2nd defendant has been authorised by the 1st defendant to handle all matters regarding AAFT.
[6] The plaintiff had sent to AAFT a "Letter of Award" dated 20 December 2018 (LA). According to the LA, among others:
(1) the plaintiff had appointed AAFT as the plaintiff's sub-contractor to do M&E works regarding "Electrical Low Voltage System" in the Project (Works) for a sum of RM2,953,286.00;
(2) clause 3.1 LA had provided that it was AAFT's "duty to carry out site coordination work" and to "ensure proper workmanship";
(3) clause 4.1 LA stated that the "Commencement Date" was 1 September 2018 while cl 4.2 LA stipulated that the "Completion Date" was 28 February 2021. Clause 4.2 LA further provided that "time shall be the essence" of the LA; and
(4) the LA was signed by the 2nd defendant on behalf of AAFT while the 1st defendant signed as a witness who witnessed the 2nd defendant's signature on behalf of AAFT.
[7] On 20 December 2018, the 2nd defendant signed a "Guarantee and Indemnity" in favour of the plaintiff (G&I). I reproduce below the relevant terms of the G&I:
(1) recital (c) to the G&I [Recital (c)] stated that the 2nd defendant had given the G&I as "security for the due observance and performance" of the terms and conditions of the LA by AAFT;
(2) clause 1 G&I (Clause 1) provided, among others, that the 2nd defendant had agreed, undertaken, confirmed and covenanted with the plaintiff that the 2nd defendant "shall" pay the plaintiff on demand;
(3) clause 2 G&I (Clause 2) stated, among others, that the 2nd defendant had agreed, undertaken, confirmed and covenanted with the plaintiff that any demand made by the plaintiff "shall be conclusive and binding, absolute and unequivocal notwithstanding any disputes raised or pending before any Court". Clause 2 also provided that the G&I "shall be a continuing guarantee for all debts contracted" by AAFT with the plaintiff in respect of the Works "without limitation as to the amount together with interest due thereon until the sums due are fully paid" or until the plaintiff discharges the G&I;
(4) according to cl 4 G&I (Clause 4):
(a) the 2nd defendant's liability and obligation under G&I "shall remain in full force under all circumstances until all sums" due from AAFT to the plaintiff have been fully discharged by performance [First Limb (Clause 4)]; and
(b) without prejudice to the generality of the First Limb (Clause 4), the 2nd defendant's liability and obligation under G&I "shall remain enforceable to their full extent notwithstanding anything which but for [Clause 4] would have discharged [the 2nd defendant] (wholly or in part) or which would have afforded [the 2nd defendant] any legal or equitable defence" [2nd Limb (Clause 4)].
(5) the 2nd defendant declared in cl 8 G&I (Clause 8) that his liability to the plaintiff under the G&I "shall" be that as a principal debtor and not merely as a surety and the 2nd defendant had waived all of his rights regarding suretyship which may at any time be inconsistent with any of the provisions of the G&I; and
(6) the 1st defendant witnessed th
