www.ipsofactoJ.com/archive/index.htm  Part 1 Case 14 [HCM]
HIGH COURT OF MALAYA
People's Insurance Co (M) Sdn Bhd
- vs -
People's Insurance Co Ltd
ZAKARIA YATIM J
28 FEBRUARY 1985
Zakaria Yatim J
This is an application by the defendants for an order of the Court that an order made on 11 January 1984 granting leave to the plaintiffs to issue a writ and leave to serve the notice of the writ on the defendants in Singapore be set aside.
The plaintiff company carries on business in Malaysia and its registered office is at No 84, Jalan Ampang, Fourth Floor, Denmark House, Kuala Lumpur. The first defendant is a company which carries on business in Singapore and its registered office is at No 6 Cecil Street, Singapore. The second, third, fourth and fifth defendants are residents in Singapore. In 1978 the plaintiff company was a subsidiary of the first defendant company. The plaintiffs averred that the first defendant company was represented at the board of directors of the plaintiff company by the second, third, fourth and fifth defendants, who were senior officers in the first defendant company.
The third defendant was the Managing Director, the fourth defendant was the General Manager and Director and the fifth defendant was the Executive Director. On 12 January 1978 the third meeting of the board of directors of the plaintiff company was held at the Company’s Board Room at 54, Jalan Pudu, Kuala Lumpur ( “the said meeting”). The second, third, fourth and fifth defendants were present at the said meeting. During this meeting, the auditor expressed the view that the sum of $2,001,725.09 provided in the accounts for claims in respect of policies issued from 1 October 1975 to 30 September 1976 might not be sufficient to meet claims arising from such policies. The second, third, fourth and fifth defendants undertook to be responsible for any shortfall. The plaintiff company averred that the first defendant company was liable to pay the plaintiff company a sum of M$2,817,395.07 being the shortfall by the plaintiff company. The first defendant Company denied any liability.
On 11 November 1984, the plaintiff company filed a writ against the defendants in the High Court, Kuala Lumpur. On the same date, the plaintiffs obtained an order from the Senior Assistant Registrar allowing them to issue a notice of the writ and to serve it on all the defendants in Singapore. The present application is to set aside the order of the Senior Assistant Registrar.
The order granted by the Registrar was made pursuant to Ord. 11 r 1 of the Rules of the High Court, 1980. In their affidavit in support of their application for the order dated 11 November 1984, the plaintiffs averred that they had a good cause of action against the defendants in that their claim arose out of a breach of contract made within jurisdiction. According to the plaintiffs the contract was concluded during the said meeting of the board of directors of the plaintiff company, where the second, third, fourth and fifth defendants were present as representatives of the first defendant Company. Page 8 of the minutes of the said meeting contains the following:
The matter was discussed at length by the Board, Mr. Chow Cheng Hoi informed the Board that before the adjustments on unexpired risks reserve between the parent company and the Company were decided upon several discussions took place between the Directors and the Auditors. Messrs Coopers & Lybrand was consulted on the tax implication on the basis of the adjustments and clarification was also sought from Inland Revenue Department. It appears that the Company should only take over three months of the reserve for the unexpired risks in respect of the policies issued by the former branches of the parent company in Malaysia. On the proposal of Mr. Ong Chay Tong seconded by Mr. Nathan, it was resolved that the parent Company undertake to guarantee any shortfall in excess of $2,001,725.09 as provided in the accounts of the Company so that all liabilities arising from policies issued before 31 December 1976 will be fully met by its parent company.
It was conceded by Counsel for the plaintiffs that the basis of their claim was the above resolution. In their affidavit dated 16 August 1981 (enclosure 18), the plaintiffs averred that "the second, third, fourth and fifth defendants were the representatives of the first defendant company and ..... served on the Board of Directors of the plaintiff Company as agents of the first defendant.” The third defendant, however, in his affidavit dated 8 March 1984 (enclosure 6), stated that the “second, fourth, fifth defendants and I attended the said meeting as Directors of the Plaintiff Company and not as representatives of the first defendant Company”.
It was not disputed that the second, third, fourth and fifth defendants were members of the board of directors of the plaintiff company. According to page one of the document exhibited by the plaintiff in enclosure 18, the second defendant was the Chairman of the plaintiffs’ board of directors. The third and fifth defendants were members of the said board of directors. The fourth defendant was the general manager of the plaintiff company. At the said meeting of the plaintiff company the second, third, fourth and fifth defendants sat as members of the board. This is clearly shown at page 1 of the minutes of that meeting. The relevant part of the minutes is quoted below:
THE PEOPLE’S INSURANCE CO (MALAYSIA) SDN BHD
(Incorporated in Malaysia)
Minutes of the Third Directors’ Meeting of the Company held at the Board Room, Second Floor, 54 Jalan Pudu, Kuala Lumpur on Thursday, 12 January 1978 at 6.00pm.
Datuk Wan Salaidin Alhaji Wan Ismail
Mr. Ng Eng Kiat
Mr. Ong Chay Tong
Mr. VP Nathan
Mr. Ng Hee Teck
Mr. Ooi Beng Whye
Mr. Lee Chee Chow
Mr. Henry Loo
Mr. Lai Yeow Kwang
representing the Auditors,
Messrs Lai Yeow Kwan & Co
It is clear that the second, third, fourth and fifth defendants attended the said meeting of the plaintiff company in their capacity as members of that Board. They were not present at the meeting by invitation or as representatives of the first defendant company or any other companies, but when they sat at the said meeting of the plaintiff company, they were there only as members of the board of directors of the plaintiff company.
The plaintiff company is a legal entity by itself. Although it is a subsidiary of the first defendant company, the plaintiff company maintains its own separate entity. In Ebbw Vale Urban District Council v South Wales Traffic Area Licensing Authority  2 KB 366 Cohen LJ said:
Under the ordinary rules of law, a parent company and subsidiary company, even a 100% subsidiary company, are distinct legal entities...
Since the plaintiff Company is a separate legal entity, its board of directors is one of its organs and all members of the board are the agents of the plaintiff company. In Northern Counties Securities Ltd v Jackson & Steeple Ltd  1 WLR 1133 Walton J clearly said:
... a director is an agent, who casts his vote to decide in what manner his principal shall act through the collective agency of the board of directors.
In the instant case, when the members of the board met and passed resolution, they were therefore, acting on behalf of their principal, viz, the plaintiff company. Thus, the second, third, fourth and fifth defendants were acting solely as agents of the plaintiff company when they set at the said board meeting and passed the resolution in question. The said resolution cannot constitute a contract as a contract can be only concluded between at least two parties. Section 10(1) of the Contracts Act, 1950 clearly states:
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
In the present case the plaintiffs have failed to satisfy any of the requirements under s 19(1).
In order to obtain leave from the Court to serve their writ out of jurisdiction under Ord. 11 r 1, it is necessary for the plaintiffs to show that they have a cause of action. See Mallal’s Supreme Court Practice, 2nd Ed vol 1 p 56. In the instant case they have failed to satisfy this requirement. In any event, even if there is cause of action, I do not think this is a proper case for service out of jurisdiction to be granted under Ord. 11 on the facts of this case. See Amin Rasheed Shipping Corp v Kuwait Insurance Co  2 WLR 250.
In the Circumstances, I allow the application and set aside the order of the Senior Assistance Registrar dated 11 January 1984. The costs of, and incidental to this application shall be paid by the plaintiffs to the defendants.
South Wales Traffic Area Licensing Authority  2 KB 366; Jackson & Steeple Ltd v Northern Counties Securities Ltd  1 WLR 1133; Kuwait Insurance Co v Amin Rasheed Shipping Corp  2 WLR 250
Companies Act, 1965: s. 16(5).
RHC 1980: Ord. 11 r 1.
Authors and other references
Mallal’s Supreme Court Practice, 2nd Ed vol 1
SS Muker for the plaintiffs/respondent.
DP Naban for the defendants/applicants.
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