ADY MARKETING SDN. BHD. v 1. ) EUROLAND & DEVELOPMENT SDN. BHD. 2. ) EURO HOLDINGS BERHAD PIHAK KETIGA 1. ) ADY MARKETING SDN BHD 2. ) Choong Yuen Keong @ Tong Yuen Keong 3. ) Tong Yun Mong 4. ) ALL WAYS BUILDERS SDN BHD 5. ) M SOUTH MARKETING SDN BHD PIHAK TERKILAN YEE CHEW YAN

Case Significance

Illustrates the proof required to establish a conspiracy to defraud and the court's refusal to allow unsubstantiated fraud allegations to defeat a proven claim for goods supplied to a development project.

This High Court decision from the Commercial Division at Kuala Lumpur, one of a group of four related suits heard together arising from the same development project, concerns a supplier's claim for payment for building materials and a conspiracy counterclaim by the project's holding company. The plaintiff, a marketing company, sued the developer of a project known as Damai Vista and its holding company for failure to pay for building materials supplied to the developer, the developer being a subsidiary of the holding company. As in the connected suits, the holding company counterclaimed, alleging a conspiracy said to involve a builder, various former directors and a group operations officer in the management of the Damai Vista project, by which it claimed to have been defrauded. The issues for decision were whether the plaintiff had proved its claim for the goods and services supplied, whether the defendants were liable under the relevant guarantees, and whether the conspiracy pleaded in the counterclaim had been established. The court applied the balanced principle that a court must staunchly refuse to enforce contracts or counterclaims founded on illegality or fraud, yet must not allow a party to avoid legitimate commercial obligations through unsubstantiated allegations of conspiracy or fraud. On the evidence, the court found that the plaintiff had proved its claim and that the alleged conspiracy was not made out, so that the counterclaim failed. It accordingly allowed the plaintiff's claim and dismissed the holding company's conspiracy counterclaim with costs, holding that the holding company could not escape its legitimate commercial obligations through unproven conspiracy allegations. The dismissal of the counterclaim prompted the holding company to appeal. The judgment is a useful illustration of the proof required to establish a conspiracy to defraud and of the court's refusal to let unsubstantiated fraud allegations defeat a proven claim for goods supplied.