ADY MARKETING SDN. BHD. v 1. ) ALL WAYS BUILDER SDN. BHD. 2. ) EURO HOLDINGS BERHAD 3. ) WONG KIN SING 4. ) CHIA CHIW HOON PIHAK KETIGA 1. ) CHOONG YUEN KEONG @ TONG YUEN KEONG 2. ) TONG YUN MONG 3. ) M SOUTH MARKETING SDN. BHD.

Case Significance

Illustrates the enforcement of a proven supply claim and corporate guarantees against an unsubstantiated conspiracy counterclaim, and the insistence that fraud must be proved and not merely asserted to defeat a commercial obligation.

This High Court decision from the Commercial Division at Kuala Lumpur is one of a group of four related suits heard together arising from the Damai Vista development project, and in this suit a supplier sued not only corporate defendants but also individual defendants alongside its conspiracy-laden opponent. The plaintiff, a marketing company, claimed against a builder, the project's holding company and two individuals for failure to pay for building materials supplied to the developer of the Damai Vista project, the developer being a subsidiary of the holding company, and it pursued liability under the relevant guarantees. As in the connected suits, the holding company counterclaimed, alleging a conspiracy said to involve the builder, several present and former directors and a group operations officer in the management of the project, by which it claimed to have been defrauded. The issues were whether the plaintiff had proved its claim for the goods and services supplied, whether the defendants were liable under the guarantees, and whether the conspiracy pleaded in the counterclaim had been established. The court applied the principle that, although it must refuse to enforce contracts or counterclaims founded on illegality or fraud, it must equally not permit a party to escape legitimate commercial obligations by advancing unsubstantiated allegations of conspiracy or fraud. On the evidence the court was satisfied that the plaintiff had proved its claim and that the alleged conspiracy was not made out, the material tending to show the absence of any such conspiracy. It accordingly allowed the plaintiff's claim and dismissed the holding company's conspiracy counterclaim with costs, holding that the holding company must honour its legitimate obligations under the corporate guarantees rather than avoid liability through unproven conspiracy allegations. The dismissal of the counterclaim led the holding company to appeal. The judgment is a useful illustration of the enforcement of a proven supply claim and corporate guarantees against the resistance of an unsubstantiated conspiracy counterclaim, and of the court's insistence that fraud, to defeat a commercial obligation, must be proved and not merely asserted.