NYTREX GLOBAL SOURCES SDN BHD v 1. ) DAQ WAREHOUSE SDN BHD 2. ) DAQ LOGISTICS SDN BHD

Case Significance

Reinforces that separate legal personality shields a related company from liability for another's obligations: a claim against a logistics company for goods it did not store cannot stand where the pleadings show no duty or breach and rely only on a 'single economic unit' assertion without pleaded grounds to lift the corporate veil.

This High Court decision at Shah Alam concerns an application to strike out a claim against a second defendant company on the basis that the pleadings disclosed no reasonable cause of action against it, and it turns on the doctrine of separate legal personality. The plaintiff's claim arose from the destruction of goods that had been stored under contractual arrangements involving the defendants. On the plaintiff's own pleadings, the responsibility for the storage and safekeeping of the goods — the subject of the complaint — lay with the first defendant, DAQ Warehouse Sdn Bhd, while the second defendant, DAQ Logistics Sdn Bhd, was described as a logistics service provider whose role was confined to the delivery and transportation of the goods. The second defendant applied under Order 18 rule 19 of the Rules of Court 2012 to strike out the claim against it, contending that it had never assumed custody, control or responsibility for storage, that the statement of claim pleaded no particulars of negligence, duty, breach or causation against it, and that its issuing of invoices and accepting payments did not found liability. The plaintiff sought to implicate the second defendant on the basis that it had issued invoices and accepted payments and that the two companies should be treated as a single economic unit. The court held that separate legal personality is well settled — following Ong Leong Chiou v Keller (M) Sdn Bhd and Pamol (Sabah) Ltd v Joseph bin Paulus Lantip, each company is a distinct entity and the liabilities of one company in a group cannot be visited on another. There were no pleaded facts alleging fraud, sham, façade or any other recognised basis to justify lifting the corporate veil, and the mere assertion of a single economic unit was insufficient in law to found liability. Taking the pleadings at their highest and applying Bandar Builder, the court found no sustainable cause of action against the second defendant, a deficiency of legal foundation that could not be cured by evidence at trial. It allowed the second defendant's application, struck out the claim against it with costs of RM3,000, subject to allocatur.