1. ) MOHAMED NOR BIN ABU BAKAR 2. ) RAJA SARINAH BINTI RAJA ALIAS v 1. ) XXXX 2. ) MOHD EZMAN BIN ZAMANI 3. ) MOHAMMAD EZWAN BIN ZAMANI 4. ) JAMES GALLOWAY STEVENSON 5. ) NOOR AZEAN BINTI ZAMANI 6. ) HANAFI BIN SULIAMAN 7. ) ROSLINA BINTI IBRAHIM

Case Significance

Illustrates the enforcement of a preference-share redemption obligation against the issuing company under section 72 of the Companies Act 2016 and the reluctance to lift the corporate veil to make directors personally liable absent fraud pleaded and proved with particularity.

This High Court decision at Shah Alam concerns a claim by subscribers to recover the outstanding redemption price of Islamic Redeemable Preference Shares, and the attempt to hold the company's directors personally liable by lifting the corporate veil. The two plaintiffs had subscribed, under subscription agreements with the first defendant company, Radiance Assets Berhad, for Islamic Redeemable Preference Shares (RPS-i), and sued to recover the unpaid balance of the redemption price; they also purported to bring the action in a representative capacity for a number of other subscribers named in the schedules to the writ, and joined the company's directors and former directors as co-defendants. The plaintiffs pleaded conspiracy, fraud and fraudulent misrepresentation, alleging that the defendants had deliberately and in bad faith refused or neglected to perform the contractual obligation to pay the redemption price, that they had used the company to defraud the subscribers, and that the corporate veil should be lifted to make the individual defendants liable. The court had to consider whether the defendants had breached the contractual obligation to redeem, whether a conspiracy to defraud and fraudulent misrepresentation were made out with the particularity that pleadings of fraud require, whether the corporate veil should be lifted, and whether the plaintiffs had standing to sue in a representative capacity for the persons named in the schedules, given differences in their circumstances such as whether their subscription periods had ended. Applying the burden of proof under sections 101 to 103 of the Evidence Act 1950 and the framework governing the redemption of preference shares under section 72 of the Companies Act 2016, the court found that although the investment scheme had originally been genuine, the first defendant had promised early redemption without disclosing its true financial position. It allowed the first plaintiff's claim against the first defendant, awarding the outstanding redemption sum with an extended-period dividend and an amount reflected as RM303,610.00, interest at 5 per cent per annum, general damages of RM100,000.00 and costs of RM20,000.00; it dismissed the second plaintiff's claim with costs, and dismissed the first plaintiff's claim against the second to seventh defendants, declining to lift the corporate veil to fix the directors with personal liability. The judgment is a useful illustration of the enforcement of a preference-share redemption obligation against the issuing company and of the reluctance to lift the corporate veil to make directors personally liable absent proof of fraud pleaded with particularity.