TSR BINA SDN BHD v 1. ) LEE CHEE KAY 2. ) LEE CHEE ONN

Case Significance

Holds that an undertaking given to the court carries the force of an injunction whose breach is contempt, and that directors who give a personal undertaking may have the corporate veil pierced under the evasion principle so as to be summarily liable when they renege.

This High Court decision in Kuala Lumpur concerns the enforcement of an undertaking given to the court and recorded in a consent order, and the circumstances in which the corporate veil may be pierced to hold directors personally liable. A comprehensive consent order had been recorded at the Court of Appeal to settle a long-standing dispute involving the plaintiff and a private limited company wholly owned by the two defendants, who were its directors. The plaintiff applied for summary judgment to enforce the undertaking after the defendants failed to honour it. The Court's reasoning proceeded from the principle that an undertaking given to the court has the same force as an injunction made by the court, so that a breach of the undertaking is misconduct amounting to contempt. Because the undertaking had been given by the directors, the Court treated it as a personal undertaking on their part, and held that the existence of the company's separate corporate personality was irrelevant to their personal exposure on that undertaking. Drawing on the evasion principle enunciated by the Federal Court in Ong Leong Chiou & Anor v Keller (M) Sdn Bhd, the Court held that the wrongdoing warranted piercing the corporate veil to impose liability on the directors who had given the personal undertaking. Finding it plain and obvious that the defendants had breached the undertaking contained in the consent order, and that they had raised no triable issue in answer, the Court concluded that this was a clear-cut case suitable for summary judgment. It allowed the plaintiff's application, compelling the defendants to pay forthwith. The decision illustrates that directors who give personal undertakings to the court cannot shelter behind the company's separate legal personality when they renege on them. The Court underscored that litigants who give undertakings to the court cannot treat them lightly, and must expect swift enforcement should they renege, since the solemnity of an undertaking is what allows the court to accept it in place of a contested order or injunction.