LEE CHIAP HAN v NG WAH LEONG

Case Significance

Applies the separate-legal-personality doctrine, the proper-plaintiff rule and the rule against reflective loss to dismiss individual claims and counterclaims for losses that belonged to a company, which alone could sue to recover them.

This High Court decision at Shah Alam concerns the proper-plaintiff rule and the rule against reflective loss, raised by the court of its own motion under Order 14A of the Rules of Court 2012 in a dispute between two individuals over the affairs of a company in liquidation. On reviewing the pleadings at case management, the Court itself framed a question under Order 14A: whether the parties' pleaded claims and counterclaims for relief could only properly be advanced by the company against the wrongdoer, in respect of losses to the company, and against the company, in respect of salaries and other emoluments due to the parties. The company in question, which was in liquidation, was not a party to the proceedings. The plaintiff's claims and the defendant's counterclaim were founded on allegations concerning the company's funds and assets — the defendant alleging breach of fiduciary duties, breach of trust and fraud in the misappropriation of company funds and assets uncovered by auditors, and further alleging that the plaintiff had broken into the company's premises and removed equipment and goods estimated at RM500,000, while the counterclaim sought a liquidated sum based on a fifty per cent share of the company's alleged losses. The Court applied the doctrine of the separate legal personality of a company, the proper-plaintiff rule and the rule against reflective loss, observing that no special factual relationship had been pleaded that would take the case outside those principles, and that there was no attempt to disguise or displace the company as the proper plaintiff. Because the losses complained of were those of the company, which alone could sue for them, the Court dismissed both the claim and the counterclaim with no order as to costs. The decision illustrates the limits on an individual pursuing, in his own name, losses that belong to a company.