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no cause of action because there was no privity of contract between the plaintiffs and
the second defendants.
The plaintiff‟s claim against the second defendant was based on the letters written by
the first defendant to the plaintiffs and though one of the signatories was the director
of both the first and the second defendant, he signed the letters in his capacity as the
director of the first defendant. The defendant further contended that although 60
percent of the issued share capital was owned by the first defendant, the second
defendant remained separate legal entity. The plaintiffs, on the other hand, argued
that the court should lift the corporate veil since all the shares were owned by the
defendant and another company which the defendant had controlled.
Zakaria Yatim J refused to lift the corporate veil on the basis that the first defendant
did not fully own all shares in the second defendant to justify the pledge made to the
plaintiff. The judge referred to his decision in Bank Bumiputra Malaysia Sdn Bhd &
Anor v Lorraine Osman & Ors 189 and noted he refused to lift the veil in respect of
five companies which were not fully owned by Lorraine. 190 The decisions of both
cases indicate absolute control over the subsidiary is essential. In cases where there
is an element of independence on part of the subsidiary, as illustrated in both cases
discussed above, courts would not abrogate the principle of separate legal personality.
The courts require the person who wishes to lift the veil to show evidence that a
holding company exercises sufficient or absolute control over the subsidiary and the
subsidiary is not independent in making its decisions. This can be seen in the case of
189 [1985] 2 MLJ 236.
190 Zakaria Yatim J at 314 stated “It seems to me that the counsel is asking the court to lift the
corporate veil of the second defendant. In Bank Bumiputra Malaysia Sdn Bhd & Anor v Lorraine
Osman & Ors 190 I had the occasion to consider Jones v Lipman & Anor [1962]1 WLR 832…and
in the present case, the situation is different from that in Jones v Lipman. From the evidence
available, the first defendant does not fully own all the shares in the second defendant. In
Lorraine‟s case, I refused to lift the corporate veil in respect of five companies which were not
fully owned by Lorraine. The court will only lift the corporate veil of a company if the justice of
the case so demands. In the instant case, there is no justification for the court to lift the corporate
veil of the second defendant.”
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