I had the distinct pleasure (an acquired taste, no doubt) of being involved in a matter where a petition wasn’t a petition. I acted for a member (LABH) together with Edward Kuruvilla, who acted for the company (LABHKLCC).
The Court of Appeal made a specific finding that a petition was an abuse of the Court process, filed for the collateral purpose of scuttling an ongoing suit.
The CA’s Grounds are carried at Le Apple Boutique Hotel Sdn Bhd v Keen Solution Sdn Bhd [2023] MLJU 1729.
The Le Apple saga
PGCG Assets Sdn Bhd (“PGCG”) owned a building (“No. 160”, Jalan Ampang).
A company was formed called Le Apple Boutique Hotel (KLCC) Sdn Bhd (“LABHKLCC”). LABHKLCC consisted of 2 members:
1. Le Apple Boutique Hotel Sdn Bhd (“LABH”) (55%, 3 directors); and
2. Keen Solution Sdn Bhd (“Keen”) (45%, 2 directors).
The CA made a finding that Keen was the alter ego of PGCG. They shared, inter alia, a common business and registered address.
Suit 832
LABHKLCC initiated Suit 832 against PGCG Assets. The crux of Suit 832 was a sum of ~RM20m, which had been expended by LABHKLCC to develop No. 160.
LABHKLCC secured a sum of RM1.65m via a summary judgment (vide [2021] 11 MLJ 268). It was actively prosecuting Suit 832 to recover the balance.
To put this pictorially:
Enter the (dragon) Petition
Despite Suit 832 being to LABHKLCC’s benefit, Keen filed a Petition to wind-up LABHKLCC (after the Summary Judgment of RM1.65m had been secured by LABHKLCC). Keen alleged that there existed an oral JV between Keen and LABH, which had broken-down. Keen further alleged that there was a breakdown of mutual trust.
The findings of the High Court
At the High Court stage ([2022] MLJU 1348), the Judicial Commissioner found that the Petition was purportedly bona fide. The JC purportedly found that the “oral agreement” JV was valid (despite specific findings made by the CA in Choong Eng Joo v Live & Taste The Heritage Sdn Bhd [2021] MLJU 1568, which implored Courts to be cautious in dealing with allegations of an oral JV).
The High Court refused to pierce the corporate veil and ordered that LABHKLCC be wound-up.
The Court of Appeal
[25] Now, this piercing of the corporate veil to reveal the Petitioner’s concealment is not one lifting without merits. There is a barrage of facts and documents which would explicitly show the link between the Petitioner and PGCG:
a. It is not mere coincidence that the Petitioner and PGCG share identical business and registered addresses;
b. It is not mere coincidence that the Majority Shareholder of the Petitioner (Chai Sook Tieng) is also a director and shareholder of PGCG;
c. It is not mere coincidence that the Petitioner’s Majority Shareholder is the wife of PGCG’s Director (Wong Weng Kung);
d. It is not mere coincidence that PGCG’s parent company, PGCG Inc, explicitly confirmed it in its filing to the Securities Exchange Commission of the United States (“SEC”) that the group derived rental income from the Petitioner.
The CA further made a specific finding that the Petition was presented with a mala fide intention of scuttling Suit 832:
[26] The above considered, it is astoundingly plain to see that it would be in the Petitioner’s and PGCG’s interest to keep LABHSB from gaining any shares in the monies the Petitioner and PGCG collectively held as related companies. In the simplest sense, although the Petitioner might gain from suit 832 vide its 45% shareholding in LABHKLCC, in actuality the Petitioner and PGCG (as a collective) would have to relinquish and lose 55% of their collective interest in the monies to LABHSB (due to LABHSB’s shareholding in LABHKLCC). This was actually the real and actual mala fide ulterior motive incentivising the Petitioner’s ‘self-harming’ Petition. If not for this mala fide design, there is simply no rhyme, reason, or logic in the Petitioner’s self-harming Petition.
[27] And even more revealing of the Petitioner’s unclean hands was the fact that the Petitioner (via its representative and deponent, Thum May Yin) had deliberately concealed the fact that the Petitioner had in another Industrial Court Suit involving LABHKLCC appointed a solicitor (Mayley Gan Suat Lee - who is also acting for and is a Director of PGCG Inc) to curiously defend LABHKLCC.
[28] It is certainly suspicious that the Petitioner would seek legal counsel for the sake of LABHKLCC from a solicitor who is in direct conflict of interest with LABHKLCC (albeit for the other industrial court suit). It is compelling to see that the Petitioner by its own hands has been trying to position PGCG’s interest at the forefront and ahead of LABHKLCC’s legal interest. It is as though the Petitioner is deliberately trying to put PGCG in the driver’s seat of LABHKLCC’s proverbial legal manoeuvring.
[29] Thus, we are in agreement with the Appellants that indeed the learned JC has erred in failing to find that the Petition was instead an abuse of process for the Petitioner to achieve the collateral purpose of stifling LABHKLCC’s suit against PGCG, (which is the Petitioner’s related company).
The CA’s Judgment
The CA made further findings on the validity of the purported “oral JV” and the findings made by the JC on Suit 832. The CA disregarded any such “oral JV” and made a finding that the JC should not have delved into the issue of Suit 832.
The CA allowed the appeals and set-aside the winding-up order. Collective costs of RM80,000.00 were ordered against Keen for both appeals.
Key takeways
The decision above underscores the need for one’s gravamen to be genuine. The Petition, being an engine of abuse, ought to have been dismissed outright. It behoves practitioners to be diligent and cautious in the filing of such Petitions.
Dissatisfied, Keen has filed a motion to the Federal Court for leave to appeal. On 17.10.2023, the Federal Court dismissed the application for leave, thereby leaving the findings of the CA intact.
Overcoming a finding of abuse is a Herculean effort; this was Keenly appreciated by the Federal Court.
GAVIN JAYAPAL
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