The corporate veil can be pierced in cases of fraud where a new entity is created to avoid existing obligations, justifying the recovery of an overpayment for unrendered services.

Introduction

[1] The Appellants as Defendants in the Sessions Court, have filed this appeal against the entire decision of the Sessions Court Judge in allowing the Plaintiff's suit therein.

[2] For ease of reference, the respective parties shall be referred to as the Plaintiff and Defendants as they were in the Sessions Court.

Brief Facts

[3] The Plaintiff is the sales arm of Proton and provides an after sales service to its customers (Members), ie, the 24-hour Proton Auto Assist Programme (Auto Assist Programme). Any member experiencing a breakdown of vehicle can call a hotline for roadside assistance.

[4] The Plaintiff does not operate the Auto Assist Programme, instead it contracted out the services to third parties. In this regard, the Plaintiff appointed the First Defendant (D1) as its service provider pursuant to an Agreement dated 1 September 2012 (Agreement).

[5] Pursuant to the Agreement, D1 has agreed to provide auto-assistance services to the Plaintiff for the Auto Assist Programme (Services). In consideration, the Plaintiff pays D1 for the Services rendered.

[6] The Agreement expired on 31 December 2019. Upon expiry, there was an overpayment of RM277,501.00 (Overpayment) to D1 for Services not rendered. Thus, the Plaintiff issued an invoice to D1 for the said sum.

[7] The Overpayment happened because the Register containing the customer count is issued to D1 based on the Services to be rendered for the entire year. For example, D1 issues an invoice in August 2019 for the Services rendered for a number of Members for August 2019 to August 2020. When the Agreement expired in December 2019, Services from January to August 2020 were not provided by D1 to the Plaintiff, despite the issuance of the invoice, and that portion of the sums has to be refunded.

[8] The Plaintiff then, commenced a Writ action against the Defendants in the Sessions Court claiming for the Overpayment.

[9] In the meantime, D1 ceased operations around July 2020, and according to the Plaintiff, Auto Rescue, the Second Defendant (D2) was established to take over D1's business without change of ownership and directorship.

The Plaintiff's Contention

[10] The Plaintiff claims that D2 was established as a device to defraud the Plaintiff in an attempt to avoid refunding the Overpayment.

[11] The Third Defendant (D3), Fourth Defendant (D4) and Fifth Defendant (D5) respectively were directors and shareholders of D1 and D2.

[12] The Plaintiff sought to lift the corporate veil to enable D3, D4 and D5 to be personally liable for the Overpayment.

The Defendants' Contention

[13] D3, D4 and D5 deny any relationship with the Plaintiff's business and that the Plaintiff has failed to prove the alleged elements of fraud warranting for the lifting of the corporate veil to find D3, D4 and D5 as liable for the sum claimed.

Note

D1 And D2 Have Been Wound Up And D4 And D5 Are Bankrupts During The Hearing Of This Appeal.

Analysis And Findings

Appellate Intervention

[14] The "plainly wrong" test is the applicable test when determining whether an appellate Court should intervene with the lower courts' decisions. The "plainly wrong" test means when the "learned trial Judge had gone plainly wrong ... in the sense that it could not reasonably be explained