POH HENG HAULAGE SDN BHD v 1. ) PERNIAGAAN USAHASAMA MEMBALAK SDN. BHD. 2. ) Ng Yong Chee-telah Dikeluarkan Melalui O.18 3. ) NG YONG SIONG 4. ) Azis Satar Bin Satari-telah Dikeluarkan Melalui O.18

Case Significance

Confirms that a director is not automatically liable for a company's debts and that lifting the corporate veil for fraud or fraudulent trading under section 540 of the Companies Act 2016 requires specific, detailed pleading of particular facts; a claim resting on general veil-lifting assertions was struck out as disclosing no reasonable cause of action.

This High Court decision concerns an application to strike out a claim against two individual defendants under Order 18 rule 19(1)(a), (b) and (d) of the Rules of Court 2012, in a suit brought by Poh Heng Haulage Sdn. Bhd. against a company, Perniagaan Usahasama Membalak Sdn. Bhd., and several individuals connected to it. The individual defendants are natural persons referred to here by their procedural roles. The case is a useful illustration of the pleading standard required to fix personal liability on directors through the corporate veil and the fraudulent-trading provision of the Companies Act 2016.

The core of the plaintiff's claim was that the first defendant company owed it a debt arising from a disputed transaction. To reach the individuals, the plaintiff pleaded that the company had traded with intent to defraud and that the second and fourth defendants should bear personal liability through the lifting of the corporate veil under section 540 of the Companies Act 2016. The applicants contended that their status as directors did not automatically create personal liability, that the statement of claim disclosed no reasonable cause of action against them, that the allegations of fraud and fraudulent trading were "tidak diplidkan secara khusus dan terperinci" (not pleaded specifically and in detail) as the law requires, and that their inclusion was an abuse of process.

The court agreed. It found that the amended statement of claim was "cacat dari segi prinsip" (defective in principle), disclosing no reasonable cause of action against the two applicants, and that the pleaded allegations of fraud and veil-lifting were "bersifat umum, tidak terperinci" (general in character and lacking in detail), failing to meet the pleading standard the law demands. Absent specific facts supporting personal liability, their joinder was an abuse of process. The court therefore allowed the application, struck out the action against the second and fourth defendants, and ordered costs in the cause.

The judgment is a valuable statement that a director is not automatically liable for a company's debts, that allegations of fraud and fraudulent trading under section 540 must be pleaded specifically and in detail, and that a claim built only on general assertions of veil-lifting will be struck out as disclosing no reasonable cause of action.