Piercing the Corporate Veil

ONG LEONG CHIOU & ANOR v. KELLER (M) SDN BHD & ORS

FEDERAL COURT, PUTRAJAYA

ROHANA YUSUF PCA; AZAHAR MOHAMED CJ (MALAYA); NALLINI PATHMANATHAN FCJ

[CIVIL APPEAL NO: 02(F)-23-03-2019(W)]

25 MARCH 2021

If it is discovered that fraud has been occasioned, specifically by a director of a company, the director cannot seek refuge from liability by hiding under the veil of incorporation; nor can he utilise the company sitting under his control to protect another company controlled by him from liability for the fraud orchestrated by him. The veil of incorporation can be lifted to unravel the fraudulent acts of the puppeteer in order to find, identify and make him, and the vessel utilised by him, liable.

The law treats the use of a company as a means of evading the law as dishonest. That was precisely the situation here, warranting the court disregarding the corporate personality of: (i) PS Bina, which was created as a 'sham' to defraud Keller; (ii) the use of Perfect Selection to evade payment of a debt and enforcement of the same, by ensuring that this entity was utilised to contract with Bina Puri, such that monies received were placed beyond the reach of Keller; (iii) the perpetration of the scheme by the main controller of the two companies or puppeteer, Tony; and (iv) the companies were utilised as Tony's agents to perpetrate the fraud against Keller and evade liability for the debt. To that extent, the two companies were utilised as engines of fraud. The application of this broad principle founded on the finding of fraud, in itself warranted the corporate personalities of the companies being disregarded. In other words, liability was found against Tony and each of the companies by reason of the fraud alone, without the invocation of the doctrine of the piercing of the corporate veil.

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