XSPEC RESOURCES SDN BHD v 1. ) THADDEUS INTELLIGENCE PTE. LTD 2. ) ALFIAN DANIEL BIN MUSTAFA

Case Significance

Illustrates that a company director is protected by separate legal personality under section 20(a) of the Companies Act 2016 and by privity of contract, and that the corporate veil will not be lifted where no particulars of fraud or unlawful purpose are pleaded.

This High Court decision at Shah Alam concerns the striking out of a claim against the former director of a struck-off foreign company and the reach of the corporate veil. The plaintiff, Xspec Resources Sdn Bhd, which had been offered a contract for the procurement of technical equipment for the Special Branch of the Royal Malaysia Police, sued the first defendant, a Singapore-incorporated company that had since been struck off by the Singapore regulator, and the second defendant, that company's former director, a Malaysian resident. The defendants applied under Order 18 rule 19 of the Rules of Court 2012 to strike out the statement of claim, and the Sessions Court allowed the application with costs; the plaintiff appealed. The court examined whether the second defendant could be held personally liable for obligations of the first defendant company. It applied the principle of separate legal personality under section 20(a) of the Companies Act 2016, under which a company has a legal personality distinct from its members and directors, referring to Tenaga Nasional Bhd v Irham Niaga Sdn Bhd, and held that the corporate veil should not be lifted against the director because the plaintiff had not pleaded any particulars of fraud, dishonesty or unlawful purpose as required, citing Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd and Ong Leong Chiou v Keller (M) Sdn Bhd. It further held that the second defendant was protected by privity of contract, not being a party to the contract between the first defendant and the plaintiff, so that as a general principle no contractual liability could be fixed on him as a stranger to the contract. Concluding that this was a suitable case for summary striking out under Order 18 rule 19, the court upheld the striking out of the claim. The judgment is a useful illustration of the protection of a director by separate legal personality and privity of contract where no fraud is pleaded.