RAFENA EZANEE BINTI RAMLI v RUSLI BIN ZAMAN

Case Significance

A personal claim over dealings between two companies struck out for want of locus standi, applying separate corporate personality to bar one director from suing another individually.

This High Court decision concerns an application by the defendant to strike out the plaintiff's writ and statement of claim under Order 18 rule 19(1)(a), (b), (c) and/or (d) of the Rules of Court 2012, which the Court allowed. The dispute had its origin in agreements and transactions between two companies — one of which the plaintiff was a director, the other of which the defendant was a director. Under the first agreement, one company was said to have invested RM1,170,000 in the other, of which a portion had been paid. When the arrangement soured, the plaintiff sued the defendant personally.

The decisive question was one of legal standing rooted in the separate legal personality of a company. A company is a distinct legal entity from its directors and shareholders, and contracts entered into between two companies are the companies' contracts, not those of the individuals who direct them. The Court had to decide whether the plaintiff and the defendant were separate legal entities from their respective companies, and whether the plaintiff therefore had locus standi to sue the defendant personally in respect of an agreement and transaction entered into between the two corporate entities. The answer followed from settled company-law principle: absent a basis to look behind the corporate form, the plaintiff, as a director of one company, had no standing to pursue the defendant, a director of the other, for what were in substance the companies' dealings.

Concluding that the claim as framed disclosed no reasonable cause of action against the defendant personally and could not be sustained, the Court struck out the writ and statement of claim. The judgment is a useful illustration of the principle of separate corporate personality and of how a claim founders for want of locus standi where an individual sues personally on a contract that belongs to a company.