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2026 MarsdenLR 759
HIGH COURT MALAYA JOHOR BAHRU
NORADURA HAMZAH, JC
POWER KK RESOURCES SDN BHD – Appellant
Versus
PEARL AMRIN SDN BHD & ORS – Respondent
[Civil Suit No: JA-22NCvC-26-02/2021]
A non-performing party in fundamental breach of a commercial contract cannot recover security deposits, and the court will not lift the corporate veil absent specific allegations of fraud, especially where the parties' conduct confirms an accepted commercial arrangement.
Headnote:(A) Contracts Act 1950 - Section 40 - Breach of contract - Repudiation - Lawful termination - Right to retain deposits - Unjust enrichment - Principle of estoppel.
(B) Pandemic Legislation - Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Act 2020 - Statutory threshold for relief - Section 7 - Burden of proof for non-performance.
(C) Company Law - Lifting of corporate veil - Alter ego - Controlling mind and will - Requirement to plead with specificity - Estoppel by conduct.
(D) Contractual Interpretation - Interpretation of written agreement - Harmonious construction - Duty to give effect to agreement as a whole rather than isolated clauses. (Paras 13, 26, 31, 33, 73, 79, 88)
Facts of the case:
This dispute arises from a mining agreement spanning several years. The party seeking relief claims wrongful termination of the mining contract and seeks a refund of deposits, alleging that its failure to meet financial obligations was a result of pandemic-related restrictions. The counterpart argues the termination was lawful due to fundamental breaches, including persistent non-payment for resources extracted, exceeding contractual depth limits, and failure to restore the site. The claiming party further seeks to lift the corporate veil of its counterparty, alleging it is a mere facade for other entities. The counterpart counterclaims for outstanding dues and retention of deposits to cover site restoration costs.
Findings of Court:
The Court determined that the termination was lawful due to the fundamental breach of non-payment. The claim for relief under special pandemic legislation failed as the party did not meet the statutory threshold of proof. The Court affirmed that while deposits serve as security, they are subject to deductions for damages and restoration costs incurred by the innocent party. The attempt to lift the corporate veil was rejected due to a lack of pleaded fraud and the existence of long-standing conduct showing acceptance of the business structure.
Issues: The main issues were 1) whether the contract termination was lawful given the non-payment, 2) whether the deposits were refundable despite contractual breaches, and 3) whether there were grounds to lift the corporate veil based on alter ego arguments.
Ratio Decidendi: A party in fundamental breach through non-performance cannot rely on pandemic legislation without strict proof of inability. A deposit paid as security is not merely a part-payment but a guarantee for performance, and the innocent party may lawfully retain it to offset losses and restoration costs. Furthermore, in the absence of specific pleadings regarding fraud, the corporate veil remains intact, especially where the party's prior conduct estops it from asserting a new understanding of the business arrangement.
Result: Plaintiff's claim dismissed in its entirety; Defendant's counterclaim allowed.
| Table of Content |
|---|
| 1. summary of claims, counterclaims, and undisputed material background facts. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11) |
| 2. breach of contract via non-payment despite extraction activities. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 3. strict interpretation of covid-19 act 2020 regulatory relief. (Para 24 , 25 , 26 , 27 , 28) |
| 4. lawfulness of contract termination based on breach and repudiation. (Para 29 , 30 , 31 , 32 , 33 , 34 , 50) |
| 5. evidential burden regarding contract scope and operative mining depth. (Para 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49) |
| 6. right to forfeit performance deposits and restrict refund claims. (Para 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75) |
| 7. requirements for piercing the corporate veil on alter ego claims. (Para 76 , 77 , 78 , 79 , 80 , 81) |
| 8. final orders, damages assessment, and adjudication of the counterclaim. (Para 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91 , 92 , 93) |
JUDGMENT
Introduction
[1] The Plaintiff claims against all three Defendants jointly and severally for:
(a) damages to be assessed by this Honourable Court;
(b) an order that the deposits in the sum of RM2.1 million and RM1.4 million paid by the Plaintiff under the Agreement be returned to the Plaintiff;
(c) interest at the rate of 5% per annum on the total sum of RM3.5 million from the date of filing of the Writ until the date of judgment;
(d) interest at the rate of 5% per annum from the date of judgment until full satisfaction;
(e) costs of this action; and
(f) any other relief deemed fit by this Honourable Court.
[2] The Plaintiff also seeks a declaration that the corporate veil of D1 be lifted in the interest of justice.
[3] In turn, D1 counterclaims for, inter alia:
(a) a declaration that the termination of the Agreement is valid in law;
(b) the outstanding sum of RM190,204.80 as at 14 September 2020 together with all payments due under the Agreement until the cessation of mining activities;
(c) that the deposits held by D1 be applied to offset all costs and losses suffered in restoring the mining site;
(d) that the Plaintiff bear all costs of engaging a third-party specialist contractor to close the holes, after deduction of the deposits;
(e) special and general damages;
(f) costs; and
(g) interest at 5% per annum from the date of judgment until full satisfaction.
[4] The trial was conducted on several dates from December 2025 to January 2026 (8 December 2025, 9 December 2025, 10 December 2025, 11 December 2025, 5 January 2026, 7 January 2026 & 21 January 2026).
[5] The Plaintiff called three (3) witnesses at trial:
[6] The Defendants called three (3) witnesses:
Background
[7] This civil action arises from a sand mining agreement dated 2 January 2017 ("the Agreement") entered into between the Plaintiff and the 1st Defendant ("D1"). Under the Agreement, the Plaintiff was appointed as the sole sub-contractor to carry out sand extraction and sale at an area known as Ladang Felda Kledang 2, Mukim Penggerang dan Pantai Timor, Daerah Kota Tinggi, Negeri Johor, covering an agreed area of approximately 350 acres ("the said Area"). D1 had been appointed by FELDA as the main contractor for sand extraction activities in the said Area.
[8] The Plaintiff claims that D1 wrongfully terminated/repudiated the Agreement via its solicitor's letter dated 3 December 2020 and seeks the return of deposits totalling RM3.5 million (comprising RM2.1 million under cl 6.1 and RM1.4 million under cl 6.2 of the Agreement), together with damages to be assessed, interest at the rate of 5% per annum and costs.
[9] The Defendants deny that the termination was wrongful. D1 contends that the Plaintiff committed fundamental breaches of the Agreement by:
(a) failing to make payment for sand extracted from May 2020 onwards;
(b) mining beyond the contractual depth limit of 15 feet contrary to cl 4.14; and
(c) failing t
