FELIX RELOCATIONS (M) SDN BHD v 1. ) IVS ITECHNICS (M) SDN BHD 2. ) DATO' VICNESVARAN a/l RAJAMANIKKAN 3. ) DATIN GIRIJA a/p SUBRAMANIAM

Case Significance

Illustrates how a disputed advance is characterised as a friendly loan rather than an investment on the balance of probabilities, and the circumstances in which misrepresentation justifies lifting the corporate veil to impose personal liability on a company's controlling director.

This High Court decision concerns whether a sum of RM2,000,000.00 advanced between parties who were friends and business acquaintances was a friendly loan or an investment, and whether the corporate veil could be lifted to hold an individual personally liable. The advance had passed from the plaintiff's side to the defendants at a time when the relationship was one of trust, which later broke down. The plaintiffs contended that the money was lent as a friendly loan repayable in full, while the defendants maintained that it had been contributed as an investment in the first defendant company's business, so that repayment did not fall due in the same way. The action was framed as a breach of contract. The corporate first plaintiff acted through its director, and a third plaintiff, joined only because she held a joint bank account, pursued no independent factual role; on the defendants' side, the first defendant was a company and the second defendant its director and controlling mind, who had dealt directly with the plaintiff, the claim against a third defendant having been discontinued. After hearing the evidence, the court found on the balance of probabilities that the money was intended as a loan rather than an investment, and that the defendants had failed to establish otherwise. It further found that there had been misrepresentation on the part of the defendants, which justified lifting the corporate veil so that the action could be pursued personally against the controlling director. The court entered judgment for the plaintiff, ordering the first and second defendants to pay the RM2,000,000.00 to the corporate plaintiff, granting a declaration lifting the corporate veil, awarding general damages for fraudulent misrepresentation to be assessed, with interest at 5% and costs of RM50,000.00. The judgment is a useful illustration of how the courts characterise a disputed advance as a loan rather than an investment, and of the circumstances in which misrepresentation will justify lifting the corporate veil to fix a controlling individual with personal liability.