TEO YUN HOCK v 1. ) AUTOHOME MOTOR SDN BHD 2. ) GO AUTO SALES SDN BHD 3. ) SHEIKH MOHAMAD AZLI BIN SHEIKH MOHAMAD NASIMUDDIN KAMAL 4. ) SHEIKH MOHAMAD AZRUL BIN SHEIKH MOHAMAD NASIMUDDIN KAMAL 5. ) AHMAD AZAM BIN SULAIMAN 6. ) GO AUTO SERVICES SDN BHD 7. ) GOAUTO GROUP SDN BHD 8. ) INTRO SYNERGY SDN BHD 9. ) NEXV MANUFACTURING SDN BHD 10. ) SPE FOUNDATION 11. ) ASPIRE ARENA SDN BHD 12. ) SMS AUTO WORLD SDN BHD 13. ) PHOENIX PINNACLE SDN BHD 14. ) FAROK BIN MAASOM 15. ) DATO' SHEIKH MOHAMAD SH...

Case Significance

States the three prerequisites for a Mareva injunction and the principle that the corporate veil may be lifted where a company is used for a fraudulent purpose, refusing to strike out a claim that raised an arguable veil-lifting case.

This High Court decision at Kuala Lumpur, in the Commercial Division, concerns an application by one of many defendants to strike out the plaintiff's claim in an action supported by a Mareva (asset-freezing) injunction against a group of companies and individuals. The claim sought, among other things, to hold a web of corporate entities and individuals liable, and the freezing relief was aimed at preventing the dissipation of assets pending judgment. The fifteenth defendant applied to strike out the claim as against it, and this judgment decides that application.

The court restated the principles governing Mareva relief. The sole purpose of a Mareva injunction is to prevent a plaintiff from being cheated out of the fruits of a judgment, and three prerequisites must be satisfied before it is granted: the applicant must show a good arguable case, that the defendants have assets within the jurisdiction, and that there is a real risk of the assets being removed or dissipated before a judgment can be satisfied. The threshold of a "good arguable case" is one that is more than barely capable of serious argument, though not necessarily one with a better than even chance of success.

The strike-out turned on whether the plaintiff had an arguable basis for fixing the applicant with liability, which engaged the principles for lifting the corporate veil. The court applied the rule that the separate legal personality of a company will be disregarded where the company was set up or used for a fraudulent or improper purpose, invoking the maxim that fraud unravels all, and authority holding that the court will pierce the veil where separate corporate personalities are used to enable persons to evade their obligations. It found this issue in the plaintiff's favour, holding that there was an arguable case to lift the veil. The court accordingly dismissed the fifteenth defendant's strike-out application with costs of RM5,000 to the plaintiff, allowing the claim to proceed. The judgment is a useful statement of the Mareva prerequisites and of the veil-lifting principle at the strike-out stage.