COMPANY 1-TUTORIAL ANSWER SHEET

MAZLI JUSOH -1229023

FARIZ YAZID-1312743
HANNAN ABDUL RAZAK- 1320763
NUR IMAN-1418349

APPENDIX 1A(B)

The issue is whether Jem or Printjob Sdn Bhd can be held liable for the breach of contract for
not to solicit the customer of Cetak Bhd in the period of 12 months? This issue were govern by
virtue of Section 20 Of The Companies Act 2016 which stated that a company incorporated
under the Act shall have separate legal personality and its existence continue until it was
removed from the register.

Lifting Corporate Veil can be done, as it is the exception of the general rule that a company has
a separate legal entity from its members. In lifting up the veil, the court will look behind the
curtain to make the company be liable. This is an exception to the Section 20 of the Companies
Act 2016, which stated that a company is a separate legal entity. By referring to the Act, the
court will rather look upon the purpose of the company for their establishment. There are
certain requirements or circumstances that the laws or the court will look upon before lifting up
the veil.

Firstly, they will look at the attribution of some physical and mental state or the characteristic
of the company. For example the law will look into the nationality of the company and its
member. Secondly, the law will look at the uses of the company as a sham or to commit fraud.
Thirdly, the law will determine the company was employed as an agent. Fourthly, the
corporation and lastly is the other circumstances.

Applying it to the case, Bun gives the list of customer of Cetak Bhd to PrintJob Sdn Bhd without
the knowledge of Cetak Bhd. This is solely the breach of the clause of the contract that he made
with Cetak Bhd earlier. Looking to the circumstances that connected towards the issue that
Cetak Bhd wants to sue PrintJob Sdn Bhd for soliciting their customer, Cetak Bhd must look
whether PrintJob Sdn Bhd was under the five conditions or not in order to lift up the veil. In this
case, PrintJob Sdn Bhd was not under any of the condition for lifting up the corporate veil. In
the case of Aspatra Sdn Bhd & Ors v Bank Bumiputra Malaysia Bhd & Anor, Lorrain Osman who
is the controller of the company was being sued for the payment of about M$27.6 million
received by him as a secret profit whilst acting as the director of the bank. The Mareva
Injunction was applied was applied for and the court found that there was an element of fraud
in the receipt of the said moneys and this is sufficient for the court to lift up the corporate veil
in order to determine whether the assets of the company were his.
In conclusion, Bun will be personally liable for breach of the contract entered by him with Cetak
Bhd to not solicit their customer for period of 12 months as PrintJob Sdn Bhd does not have the
knowledge about the contract and this will made PrintJob Sdn Bhd will not be liable for the
breach of the contract.

APPENDIX 1B

The issues in this case are whether East Berhad can be sued by the customers of its subsidiary,
SouthW Sdn Bhd for the security breach from the credit cards transactions and whether East
Berhad can be liable for the debts of its subsidiaries?

In this situation, the court will apply the “directing mind and will” test and also the “attribution
of liability” rule in order to ascertain the mental state whose should be considered to make the
company liable. In the “directing mind and will” test, the court will look at who is the person
that is directing the mind and will of the company in order to see whether the company is liable
or not. Basically, the director, the CEO and other senior executives has the power to control the
state of mind of the company. In the case of Tesco Supermarket s Ltd v Nattrass, the employees
who occupies subordinate position and who carry out the orders of the company cannot be
considered as the company’s directing minds and wills and their mental state will not be
attributed to the company. The House of Lords held that the branch manager who is in default
was not the company’s directing mind and will thus the company could rely on the defense that
the offence was due to the conduct of another person.

Applying to this situation, East Berhad is the parent company as it incorporated a subsidiary,
SouthW Sdn Bhd in order to handle its online sales portal. However, the defect was caused by
the defective security system of its subsidiary. Thus, East Berhad could rely on the defence that
the defect was caused by its subsidiary itself, which is another person than the company even
though they shared the same registered address and company secretarial firm.

As for the second issue, the court can check whether the corporate form was used in order to
avoid an existing legal duty or to commit fraud. As in the case of Jones v Lipman, Lipman has
agreed to sell his land to Jones. However, he subsequently transferred the land to a company.
Jones sued Lipman for the breach of the contract and wanted the contract to be performed.
This was not possible as the specific performance can only be done if the property is in the
possession of Lipman. Jones argued that Lipman controlled the company, as he is the majority
shareholder of the company. The court agreed to lift up the corporate veil and the contact is
binding to the company. The court took the view that Lipman incorporated the company as a
device to avoid his existing contractual obligations.

Applying to the second situation occurred between NorthEast Sdn Bhd and Rare Bhd where
East Berhad removed all their assets in their subsidiary in order to avoid the debts incurred by
NorthEast Bhd can be argued by Rare Bhd as East Berhad incorporated NorthEast Sdn Bhd in
order to acoid his obligations to pay the debts.