ALL WAYS BUILDER SDN. BHD. v 1. ) EUROLAND & DEVELOPMENT SDN. BHD. 2. ) EURO HOLDINGS BERHAD PIHAK TERKILAN 1. ) ALL WAYS BUILDER SDN. BHD. 2. ) Chia Chiw Hoon 3. ) Wong Kin Sing 4. ) Choong Yuen Keong @ Tong Yuen Keong 5. ) Tong Yun Mong 6. ) Tong Kah Hoe

Case Significance

Illustrates the consequences for a claim where the claimant company is wound up mid-trial and the Official Receiver declines to continue, and the demanding standard of proof required to establish a conspiracy to defraud.

This High Court decision from the Commercial Division at Kuala Lumpur, one of a group of four related suits heard together arising from the Damai Vista development project, concerns principally the fate of a conspiracy counterclaim brought by the project's holding company, together with the striking out of the main claim after the plaintiff was wound up during the trial. The plaintiff, a builder, had sued the developer and its holding company in connection with the project, but midway through the trial the plaintiff company was wound up and the Official Receiver informed the court that it did not wish to continue with the claim, so that the main claim was struck out. What remained for decision was the holding company's counterclaim, which pleaded a conspiracy said to involve the builder, several directors and former directors, and a group operations officer, in the management of the project. The issue was whether that conspiracy to defraud had been established on the evidence. The court applied the principle that, while it must refuse to enforce claims founded on illegality or fraud, it must equally not permit a party to escape legitimate commercial obligations through unsubstantiated allegations of conspiracy or fraud. The court examined whether the pleaded combination of parties, and the acts attributed to them in the management of the project, disclosed the agreement and the intention to injure that a conspiracy to defraud requires, or whether the allegations were no more than assertions unsupported by evidence. Finding that the holding company had failed to prove a case of conspiracy, the court dismissed the counterclaim with costs, holding that the holding company must honour its legitimate commercial obligations under the corporate guarantees rather than avoid liability through unproven conspiracy allegations. The holding company appealed against the dismissal of its counterclaim. The judgment is a useful illustration of the consequences for a claim where the claimant company is wound up mid-trial and the Official Receiver declines to continue, and of the demanding standard of proof for a conspiracy to defraud.