Moses Susayan J:

GROUNDS OF JUDGMENT

Introduction

[1]This appeal involves an investment that went awry and made more complicated by the Sessions Court’s error in interpreting the law regarding sole proprietorships. The appellant invested RM100,000.00 into the respondent’s business under a written agreement, however the Sessions Court dismissed the claim on the basis that payment was not made to the respondent personally. The issues of personal liability, unjust enrichment, and admissibility of documentary evidence under Section 73AEvidence Act

Background facts

[2]The appellant is the wife of Tarmezee bin Johari, who was a bankrupt at the time. The respondent is a sole proprietor trading under the name ERUL TAPAH MOTOR SPARE PARTS. The parties were known to each other from their village.

[3]On 16.05.2022, an investment agreement was entered into between the appellant and the respondent, under which the appellant agreed to invest RM100,000.00 in the respondent’s motorcycle spare parts business.

[4]The Sessions Court accepted the validity of the investment agreement. However, it dismissed the appellant’s claim on the grounds that the RM100,000.00 was not paid directly to the respondent but was instead spent on business-related expenses. In doing so, the court effectively treated “Erul Tapah Motor Spare Parts as a separate legal entity, distinct from the respondent., It concluded that the respondent could not be held personally liable for sums expended on the business.

ISSUES

[5]The following issues arise for consideration in this appeal:

a)Whether the learned Sessions Judge erred in finding that the agreement did not refer to the respondent a sole proprietor of ERUL TAPAH MOTOR SPARE PARTS.

b)Whether the judge wrongly treated ERUL TAPAH MOTOR SPARE PARTS as a separate legal entity.

c)Whether the judge failed to appreciate the documentary and oral evidence showing that the RM100,000.00 investment was made for the respondent’s sole proprietorship.

d)Whether the judge erred in dismissing the claim on the basis that the investment was not paid to the respondent personally.

Findings of the courtIssue (a): Whether the learned Sessions Judge erred in finding that the agreement did not refer to the respondent a sole proprietor of ERUL TAPAH MOTOR SPARE PARTS?

[6]The Agreement dated 16.05.2022 explicitly states:

“Nama: Muhammad Al-Nazirul bin Muhammad Shahrir Dalam hal ini bertindak untuk dan atas nama Erul Tapah Motor Spare Parts...”

[7]The judge’s conclusion that the Agreement did not refer to the business name is plainly contradicted by the precise wording of the document. The parties identified themselves as “Pihak Pertama” and “Pihak Kedua,” which is a conventional drafting practice. The express mention that the respondent was acting for and on behalf of ERUL TAPAH MOTOR SPARE PARTS precludes any ambiguity.

[8]It is well established in law that a sole proprietorship is not a legal entity distinct from its proprietor. The Supreme Court in Wong Yoon Yar v Lin Yin Thai Companies Act, a business operating under a firm or chop name does not enjoy distinct legal personality. Liability attaches directly to the individuals behind the name, whether they are a sole proprietor or the partners. The use of such a name does not create a corporate veil or confer independent legal status. In the words of His Lordship Lee Hun Hoe CJ:

“We would like to make one observation on the legal status of a firm or “chop” tenant as loosely described by many in the country. There is still a popular misconception prevalent amongst illiterate tradesmen in the country that a firm or “chop” is an entity. That is not so. Unlike a company registered under the Companies Act which is itself a legal entity, a firm or “chop” although it may be registered under other legislation is nothing more than a convenient name or label for a number of persons carrying on a business in a partnership or for that matter for a sole proprietor carrying on a business. Those persons could use their own indi