Wong Kian Kheong JCA:

JUDGMENT A. Novel issues

[1]This case discusses whether the court could pierce the corporate veil of one company (Company X) and impose liability incurred by Company X on another company (Company Y) when -

(1) Company Y had developed commercial lots in a shopping mall (Lots) and sold the Lots to various purchasers (Purchasers);

(2) the Purchasers and Company X had entered into tenancy agreements wherein the Purchasers rented the Lots to Company X (Tenancy Agreements);

(3) Company X was liable to the Purchasers for the unpaid rent of the Lots under the Tenancy Agreements (Unpaid Rent);

(4) Company Y was not a party to the Tenancy Agreements;

(5) the Purchasers had obtained a final judgment against Company X for the Unpaid Rent [Purchasers’ Final Judgment (Company X)]; and

(6) Company X is solvent; and

(7) the Purchasers’ Final Judgment (Company X) is not a “paper judgment” and can be executed against Company X.

The above question also discusses the following matters -

(a)with regard to a group of companies [Group (Companies)], in view of the separate legal personality of each member company in the Group (Companies) as well as the right of the Group (Companies) to arrange its corporate affairs among the member companies of the Group (Companies), how should the court exercise its discretionary power to pierce the corporate veil of Company X and impose Company X’s liability on Company Y? In this regard, whether the court can exercise its discretionary power to pierce a company’s corporate veil when -

(i)actual fraud had been committed;

(ii)there existed equitable fraud or unconscionability;

(iii)Company Y was evading its liability for the Unpaid Rent;

(iv)there was an abuse of the corporate personality of Company X;

(v)there existed special or exceptional circumstances;

(vi)it was in the interest of justice to pierce the corporate veil of Company X; and/or

(vii)Company Y controlled, managed and/or directed Company X;

(b)the effect of an entire agreement clause and bilateral written variation clause in the SPAs;

(c)the application of ss 9192Evidence Act 1950EA) as well as the provisos (a) to (f) of s 92EA

(d)whether Company X and Company Y were estopped by s 115EA

(e)the relationship between the application of the doctrine of privity of contract and the court’s discretionary power to pierce the corporate veil of a company.

B. Background

[2]I will refer to the parties as they were in the High Court.

[3]The second defendant company (2^nd Defendant) built a shopping mall named “Capital City Mall” (Mall).

[4]By way of Sale and Purchase Agreements (SPAs), the 2^nd Defendant sold commercial units in the Mall (Units) to various purchasers (Unit Purchasers). The contents of the substantive provisions in the SPAs were identical.

[5]The first defendant company (1^st Defendant) entered into tenancy agreements with the Unit Purchasers wherein the 1^st Defendant rented Units from the Unit Purchasers (TAs). The substantive provisions in the TAs were identical.

C. Proceedings in the High Court

[6]This suit in the High Court (This Suit) was a representative or class action filed by two plaintiffs on behalf of Unit Purchasers of 97 Units (Plaintiffs) against both the 1^st and 2^nd Defendants (collectively referred to in this judgment as the “Defendants”).

[7]In This Suit -

(1)the Plaintiffs claimed that both the Defendants were jointly and severally liable to the Plaintiffs for rent (Rent) which had not been paid by the Defendants for the 97 Units pursuant to the TAs (Original Action);

(2)the 1^st Defendant denied the Original Action and filed a counterclaim against the Plaintiffs for the following relief -

(a) a declaration that the Plaintiffs had breached the TAs [Alleged Plaintiffs’ Breaches (TAs)] by failing to pay various charges due to the 2^nd Defendant pursuant to the SPAs; and

(b) an order for the Plaintiffs to pay damages to the 1^st Defendant as a result of the Alleged Plaintiffs’ Breaches (TAs)

(1^st Defendant’s Counterclaim); and

(3)the Original Action was de