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Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn
Law (LAW224)
Universiti Teknologi MARA
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AHMAD ZAHRI BIN MIRZA ABDUL HAMID v AIMS CYBERJAYA SDN
BHD
CaseAnalysis | [2020] MLJU 595 | [2020] 5 MLJ 58
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
[2020] 5 MLJ 58
Malayan Law Journal Reports · 33 pages
FEDERAL COURT (PUTRAJAYA)
TENGKU MAIMUN CHIEF JUSTICE, ZAWAWI SALLEH, IDRUS HARUN, NALLINI PATHMANATHAN AND
ABDUL RAHMAN SEBLI FCJJ
CIVIL APPEAL NO 02(f)-11–02 OF 2019(W)
28 May 2020
Case Summary
Labour Law — Employment — Whether appellant permanent employee of respondent or employed on fixed-term contract — Whether Industrial Court (‘IC’) and High Court (on judicial review) were entitled to lift corporate veils of entities whom appellant worked for to determine who his true employer was — Whether lifting of corporate veil was necessary to determine identity of employee’s true employer to achieve social justice and protect rights and interests of employees — Whether Court of Appeal (‘COA’) had no reason to reverse findings of facts made by IC — Whether COA wrongly held that an expatriate who required work permit to work in Malaysia could never be a permanent employee — Whether employee’s citizenship or fact that he had no valid work permit had no bearing in determining whether or not he was a permanent employee or that he had been dismissed without just cause or excuse
Three months after being appointed as a Consultant in AIMS Data Centre 2 Sdn Bhd (‘ADC’), the appellant, an expatriate, was given a contract for consultancy services by ADC for a fixed term of one year. The contract entitled him to participate in a performance bonus scheme. Simultaneous with the granting of that contract, ADC appointed the appellant as its Vice-President, Product Development. Thereafter, without any change in the terms and conditions of his engagement, the appellant’s contract was renewed annually over three consecutive years during which time ADC’s merger with the respondent saw the respondent being reclassified as Consultant of the respondent and as Vice-President, Product and Solutions. When the time came for the appellant’s contract to be renewed for the fourth year, the respondent decided to remove the appellant’s entitlement to the performance bonus scheme. As this was not agreeable to the appellant, the respondent offered him a three-month work contract which the appellant refused to accept. The three-month contract stated that it would supersede all previous contracts which the appellant had had with ADC and the respondent and that the said contract was determinable by the giving of two months’ notice. In purported exercise of that clause, the respondent gave the appellant two months’ notice of termination of the contract. The appellant complained to the Industrial Relations Department that he had been unfairly dismissed from employment. [*59] His case was referred by the Minister to the Industrial Court (‘IC’) for adjudication. The IC found that the appellant had been a permanent employee of the respondent all along and that he had been dismissed without just cause or excuse; that the purported ‘fixed term contracts’ were shams. The IC lifted the corporate veils of ADC and the respondent and found as a fact that the appellant worked for a group of companies as one enterprise; that his contract of employment had never been for a fixed term but had been a permanent and uninterrupted one which the respondent had renewed annually without the appellant having to apply for its renewal. The IC awarded the appellant back-wages and compensation in lieu of reinstatement. The High Court upheld the IC’s decision and dismissed the respondent’s judicial review application to quash the IC’s award. The Court of Appeal (‘COA’), however, set aside both the High Court’s decision and the IC’s award holding, inter alia, that: (a) the appellant was appointed under a three-month fixed-term contract (the COA disregarded the earlier contracts the appellant had
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
Tiga bulan setelah dilantik sebagai Perunding di AIMS Data Center 2 Sdn Bhd (‘ADC’), perayu, seorang ekspatriat, diberi kontrak untuk perkhidmatan perundingan oleh ADC untuk jangka masa tetap satu tahun. Kontrak tersebut memberi hak kepadanya untuk menyertai skim bonus prestasi. Serentak dengan pemberian kontrak itu, ADC melantik perayu sebagai Naib Presidennya, Pembangunan Produk. Selepas itu, tanpa perubahan terma dan syarat pengambilannya, kontrak perayu diperbaharui setiap tahun selama tiga tahun berturut-turut di mana masa penggabungan ADC dengan responden menyaksikan responden diklasifikasikan semula sebagai Perunding responden dan sebagai Naib Presiden, Produk & Penyelesaian. Apabila tiba masa kontrak perayu diperbaharui untuk tahun keempat, responden memutuskan untuk membuang hak perayu untuk skim bonus prestasi. Oleh kerana ini tidak dapat dipersetujui oleh perayu, responden menawarkan kepadanya kontrak kerja selama tiga bulan yang tidak diterima oleh perayu. Kontrak tiga bulan tersebut menyatakan bahawa ia akan menggantikan semua kontrak sebelumnya yang dimiliki oleh perayu dengan ADC dan responden dan bahawa kontrak tersebut dapat ditentukan dengan notis dua bulan. Dengan menyatakan klausa tersebut, responden memberikan notis dua bulan kepada perayu untuk menamatkan kontrak. Perayu mengadu kepada Jabatan Perhubungan Perusahaan bahawa dia diberhentikan secara tidak adil dari pekerjaan. Kesnya dirujuk oleh Menteri ke Mahkamah Perusahaan (‘MP’) untuk pengadilan. MP mendapati bahawa perayu telah menjadi pekerja tetap responden selama ini dan bahawa dia telah diberhentikan tanpa sebab atau alasan; bahawa kononnya ‘kontrak jangka tetap’ adalah palsu. MP mengangkat tadbir permerbadanan ADC dan responden dan mendapati bahawa hakikat bahawa perayu bekerja untuk sekumpulan syarikat sebagai satu syarikat; bahawa kontrak pekerjaannya tidak pernah untuk jangka masa yang tetap tetapi merupakan kontrak tetap dan tidak terganggu yang mana responden telah diperbaharui setiap tahun tanpa perayu harus memohon pembaharuannya. MP memberikan gaji dan pampasan perayu sebagai pengganti pengembalian. Mahkamah Tinggi membenarkan keputusan MP dan menolak permohonan semakan kehakiman responden untuk membatalkan award MP. Mahkamah Rayuan (‘MR’), bagaimanapun, mengetepikan kedua keputusan Mahkamah Tinggi dan pemberian award MP, antara lain, bahawa: (a) perayu dilantik di bawah kontrak jangka waktu tiga bulan (MR mengabaikan kontrak [*62] sebelumnya yang dimiliki perayu dengan ADC dan responden) yang dapat ditentukan dengan notis dua bulan; (b) perayu tidak pernah mempunyai kesinambungan pekerjaan kerana ADC dan responden adalah entiti undang- undang yang berasingan; (c) dengan ketiadaan tuduhan penipuan atau tingkah laku yang tidak masuk akal, MP dan Mahkamah Tinggi salah dalam mengangkat tadbir permerbadanan ADC dan responden untuk mengetahui bahawa mereka, sebenarnya, adalah satu unit; dan (d) ekspatriat yang memerlukan permit kerja untuk bekerja di Malaysia tidak pernah boleh menjadi pekerja tetap di Malaysia. Perayu diberi kebenaran untuk mengemukakan rayuan ke Mahkamah Persekutuan terhadap keputusan MR mengenai dua persoalan undang-undang, iaitu: (i) sama ada suatu keperluan untuk permit kerja adalah pertimbangan penting dalam menentukan sama ada kontrak pekerjaan adalah kontrak jangka tetap yang betul; dan (ii) sama ada kontrak pekerjaan yang diperbaharui berturut- turut tanpa permohonan oleh pekerja dan tanpa jarak diantaranya, sebenarnya pekerjaan tetap.
Diputuskan , sebulat suara membenarkan rayuan, mengetepikan keputusan MR, mengembalikan award MP, menjawab pertanyaan kebenaran pertama dengan negatif dan pertanyaan kebenaran kedua dengan afirmatif:
(1) Kontrak pekerjaan perayu adalah kontrak tetap dan bukan kontrak jangka tetap. Mahkamah Perusahaan (‘MP’) mendapati bahawa perayu bekerja untuk sekumpulan syarikat sebagai satu syarikat. ADC dan responden adalah sebahagian daripada kumpulan yang sama. Terdapat ‘kesatuan penting kumpulan syarikat’. MR salah dalam memperlakukan ADC dan responden sebagai dua entiti yang berasingan dan gagal memperlakukan kontrak pekerjaan perayu sebagai kontrak berterusan dari ADC kepada responden. Kegagalan MR untuk mengenal pasti hubungan majikan-pekerja bertentangan dengan tujuan asas Akta Perhubungan Perusahaan 1967 (lihat perenggan 44–45 & 85).
(2) MR salah dalam membatalkan penemuan fakta oleh MP dan memutuskan bahawa perayu telah menerima kontrak tiga bulan yang ditawarkan kepadanya pada bulan September 2013. Fakta tersebut dengan jelas menunjukkan bahawa perayu tidak menerima tawaran itu kerana Syarikat telah membuang haknya untuk skim bonus prestasi di mana dia telah mengambil bahagian sejak dia mula bekerja dengan kumpulan syarikat AIMS pada tahun 2009. MR tidak memberikan alasan untuk membatalkan penemuan MP bahawa perayu tidak menerima kontrak tiga bulan yang ditawarkan kepadanya. Tidak ada kesalahan material dalam penemuan fakta MP yang membenarkan MR membatalkan keputusannya. Penemuan fakta oleh MP banyak disokong oleh keterangan dalam rekod. Mahkamah rayuan tidak akan mengganggu penemuan fakta yang dibuat oleh mahkamah bicara mengenai kredibiliti saksi memandangkan kelebihan audio-visual dan penemuan tersebut secara amnya akan diterima atau dipengaruhi kecuali [*63]
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
jika ditunjukkan bahawa keputusan mahkamah bicara adalah jelas salah atau tidak dapat dicapai oleh hakim atau tribunal (lihat perenggan 46–47).
(3) Berdasarkan matriks fakta rayuan ini, kontrak pekerjaan perayu bermula dengan ADC sehingga pemberhentiannya di bawah responden bukan pekerjaan sekali, bermusim atau sementara; ia adalah pekerjaan yang berterusan tanpa jarak dari tahun 2009 hingga 2013. MR terkhilaf kerana tidak menyedari prinsip undang-undang industri untuk mengangkat/menembusi tadbir permerbadanan dalam keadaan dan sifat kontrak kerja perayu yang sedang berjalan dengan kedua-dua syarikat (lihat perenggan 67).
(4) Keputusan MR bahawa warganegara asing tidak dapat memiliki kontrak pekerjaan tetap tidak dapat menahan penelitian kehakiman dan boleh diketepikan. Fakta bahawa perayu adalah orang asing tidak relevan dalam menentukan sama ada pemecatannya hanya dengan alasan adil atau sebaliknya. Kewarganegaraan perayu tidak ada kaitan dalam memutuskan sama ada dia bekerja tetap atau bekerja di bawah kontrak jangka tetap. Akta Perhubungan Perusahaan 1967 tidak membezakan antara warganegara Malaysia dan bukan warganegara. Tambahan lagi, sejak Malaysia menjadi anggota Konvensyen Pekerja Asing ILO (Peruntukan Tambahan) 143 tahun 1975, semua pekerja harus diperlakukan dengan adil, bermaruah dan sama rata tanpa mengira mereka adalah penduduk tempatan atau orang asing. Ini juga sesuai dengan perkara 8(1) Perlembagaan Persekutuan yang memperuntukkan bahawa semua orang sama di hadapan undang-undang dan berhak mendapat perlindungan undang-undang yang sama (lihat perenggan 72, 80–84 & 87).
(5) Permit kerja perayu adalah bukan isu dalam rayuan ini. Perkara itu tidak diajukan dalam pernyataan balas responden, dan juga tidak dikemukakan dalam hujahannya di hadapan MP. Keterangan perayu di hadapan MP bahawa dia mempunyai pas kerja Malaysia yang sah dan tidak memerlukan permit kerja dari responden tidak dicabar. Selanjutnya, saksi responden, COW1, mengakui bahawa responden tidak pernah memohon permit kerja untuk perayu. Oleh kerana isu permit kerja tidak pernah diteliti atau disuarakan, adalah tepat bagi MP dan Mahkamah Tinggi untuk tidak mempertimbangkan isu tersebut. Oleh itu, MR sama sekali tidak harus menangani isu itu, yang, dalam keadaan apa pun, tidak ada kaitan dalam menentukan sama ada perayu adalah pekerja tetap atau bekerja dengan kontrak jangka tetap (lihat perenggan 86).]
[*64]
Cases referred to
Ang Beng Teik v Pan Global Textile Bhd, Penang [1996] 3 MLJ 137 ; [1996] 4 CLJ 313, CA (refd)
Assunta Hospital v Dr A Dutt [1981] 1 MLJ 115 , FC (refd)
Audrey Yeoh Peng Hoon v Financial Mediation Bureau [2015] 3 ILR 371 (refd)
Bagby v Gustavson International Drilling Co Ltd [1980] 24 AR 18, CA (refd)
Chandler v Cape Plc [2012] 3 All ER 640 ; [2012] EWCA Civ 525 , CA (refd)
Charles Aseervatham Abdullah v The Zenith Hotel Sdn Bhd [2018] 2 LNS 2349, IC (refd)
Chow Yee Wah & Anor v Choo Ah Pat [1978] 2 MLJ 41 , PC (refd)
Dixon and another v British Broadcasting Corporation [1979] QB 546 , CA (refd)
Downtown Eatery (1993) Ltd v Ontario [2001] OJ No 1879, CA (refd)
Esterhuizen v Million-Air Services CC (in liquidation) & Others [2007] 28 ILJ 1251 (refd)
Footwear Trading CC v Mdlalose [2005] 5 BLLR 452 (refd)
Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1 , FC (refd)
Han Chiang High School/Penang Han Chiang Associated Chinese School Association v National Union of Teachers in Independent Schools, West Malaysia & Industrial Court of Malaysia [1990] 1 ILR 473 (folld)
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
Toko Inomoto & Ors v Malaysian Philarmonic Orchestra [2017] 1 LNS 201, HC (refd)
Wiltshire County Council v National Association of Teachers in Further and Higher Education and another [1980] ICR 455 , CA (refd)
Legislation referred to
Federal Constitution art 8(1)
Industrial Disputes Act 1947 [IND]
Industrial Relations Act 1967 ss 2, 20, 30(5)
Interpretation Acts 1948 and 1967 s 3
Appeal from: Civil Appeal No W-02(A)-287–02 of 2017 (Court of Appeal, Putrajaya)
Alex De Silva (VK Raj and Tan Yang Qian with him) (Bodipalar Ponnudurai De Silva) for the appellant. Vijayan Venugopal (Jamie Goh Moon Hoong with him) (Shearn Delamore & Co) for the respondent.
Zawawi Salleh FCJ (delivering judgment of the court):
INTRODUCTION
[1] The key issue in this appeal is whether the appellant/claimant was employed on a fixed term contract or was a permanent employee of the respondent at the material time. The Industrial Court and the High Court found that the appellant/claimant was a permanent employee of the [*66] respondent and his dismissal from his employment was without just cause or excuse. On appeal, the Court of Appeal set aside the decision of the High Court and allowed the respondent’s appeal.
[2] On 7 January 2019, this court granted the appellant/claimant leave to appeal on the following questions of law:
(a) whether a need for work permit is a material consideration in determining whether an employment contract is a genuine fixed term contract; and
(b) does a contract of employment which is renewed successively without application by the employee and without any intermittent breaks in between, is in reality a permanent employment.
THE FACTUAL BACKGROUND AND ANTECEDENT PROCEEDINGS
[3] We do not propose to narrate the detailed factual background and antecedent proceedings of the case. They may be recounted in chronological order as follows:
E n d o f 2 0 0 8 The appellant/claimant was invited to join, invest and then became a shareholder of the AIMS Data Centre 2 Sdn Bhd (‘ADC’).
2 7
The appellant/claimant received a letter of appointment from ADC for the position of the Consultant. The letter was signed by Gan Te-Shen, the Chief Executive Officer (‘CEO’) of ADC.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
M a y 2 0 0 9 2 6 A u g u s t 2 0 0 9
The appellant/claimant received a contract for consultancy services from ADC for a fixed term ie, from 1 October 2009– September 2010 (‘original contract’). On the same day, the appellant/claimant received a letter of appointment as Vice President Product Development of ADC, from 1 October 2009. According to this original contract, the appellant/claimant would be entitled for performance bonus scheme. The contract and the letter were signed by Gan Te-Shen, the CEO of ADC.
2 4 S e p t e m b e r 2 0 1 0 The appellant/claimant received a renewal contract for a further period of 12 months from 1 October 2010–30 September 2011. All the terms and conditions of the contract remained unchanged. The letter was signed by Chiew Kok Hin, the CEO of ADC.
8 O c t o b e r 2 0 1 1 The appellant/claimant received a renewal contract for a further period of 12 months, from 1 October 2011–30 September 2012. All the terms and conditions of the contract remained unchanged. The letter was signed by Chiew Kok Hin, the CEO of ADC.
1 1 O c t o b e r 2 0 1 The appellant/claimant received a renewal contract for a further period of 12 months, from 1 October 2012–30 September 2013. All the terms and conditions of the contract remained unchanged. The letter was signed by Chiew Kok Hin, the CEO of ADC.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
8 S e p t e m b e r 2 0 1 3 2013. The terms and conditions of the contract still remained unchanged ie excluding the performance bonus scheme. The letter was signed by Chiew Kok Hin, the CEO of the respondent.
1 O c t o b e r 2 0 1 3 The appellant/claimant informed the respondent that he was unable to accept their offers, via an email.
1 8 O c t o b e r 2 0 1 3 The appellant/claimant received a letter notifying him that the respondent gave him two months’ notice of expiry of his contract from 1 November–31 December 2013. The respondent also informed the appellant/claimant that they had decided to grant him an early release from his employment with effect from 19 October 2013. The appellant/ claimant made a representation under s 20 of the Industrial Relations Act 1967. The reconciliation attempts before the Industrial Relations Department failed and the matter was subsequently referred to the Industrial Court for adjudication.
1 A p ri l 2 0 1 6
The Industrial Court held that the appellant/claimant was a permanent employee of the respondent and the purported ‘fixed term contracts’ were not genuine fixed term contracts and the appellant’s/claimant’s dismissal was without just cause or excuse. The Industrial Court awarded back wages of 24 months and compensation of one and a half (1 1/2) month salary for each year of the appellant’s/claimant’s service in lieu of reinstatement.
1 J u l y 2 0 1 6 Dissatisfied with the award of the Industrial Court, the respondent filed a judicial review application to quash the Industrial Court’s award.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
6 J a n u a r y 2 0 1 7 The High Court dismissed the respondent’s application for judicial review.
2 7 J a n u a r y 2 0 1 7 The respondent then appealed to the Court of Appeal.
3 0 N o v e m b e r 2 0 1 7 The Court of Appeal allowed the respondent’s appeal and set aside the decision of the High Court and the award of the Industrial Court.
2 6 D e c e m b e r 2 0 1 7 The appellant/claimant then filed the notice of motion for leave to appeal to the Federal Court.
7 J a n u
Leave to appeal to the Federal Court was granted on twoquestions of law. The two questions of law are as stated in para [2] of this judgment.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
fact a permanent employee and there was continuity of employment from ADC.
[8] The High Court affirmed the decision of the Industrial Court’s award. On appeal, however, the Court of Appeal allowed the respondent’s appeal. The Court of Appeal held, inter alia, that this was not a case where the corporate veil of the respondent ought to be lifted/pierced to reveal that the appellant/claimant was at all material times a permanent employee of the company since joining AIMS group of companies in 2009 as opposed to an employee on a fixed term contract.
[9] The nub of the Court of Appeal’s reasoning is captured as follows at paras [16]–[17]:
[*70]
[16] Established authorities have held that there must be special circumstances, where there is either actual fraud at common law or some inequitable or unconscionable conduct amounting to fraud in equity that warrants the lifting of the corporate veil by either the Industrial Court or the High Court (refer to Law Kam Loy & Anor v Boltex Sdn Bhd & Ors [2005] MLJU 225 ; [2005] 3 CLJ 355).
[17] There is no evidence that the facts of the instant case demonstrate fraud or unconscionable conduct of the Applicant and neither did the Learned High Court address this matter in her ‘Grounds of Judgment’. Thus, there are no grounds for the Industrial Court or the Learned High Court Judge to lift the corporate veils of AIMS Data Centre 2 Sdn Bhd and the applicant, AIMS Cyberjaya Sdn Bhd to treat the two separate entities as one ie the applicant, AIMS Cyberjaya Sdn Bhd.
LIFTING/PIERCING THE CORPORATE VEIL
[10] Learned counsel for the appellant/claimant vehemently argued that the Court of Appeal had erred and/or failed to appreciate that the Industrial Courts would, in appropriate cases, more readily lift/pierce the corporate veil to reveal the true employer and prevent the employer from disclaiming responsibility for an employee. In support of his submission, reliance was placed on the Federal Court’s decision in Hotel Jaya Puri Bhd v National Union Of Hotel, Bar & Restaurant Workers & Anor [1980] 1 MLJ 109 (‘ Hotel Jaya Puri case’).
[11] Learned counsel further submitted that in the industrial jurisprudence, the mere description of a contract as a fixed term contract is not conclusive of whether an employee was indeed employed as such. The court is duty bound to enquire from the evidence adduced what was the real nature of the appellant’s/claimant’s employment and if there is a need to lift/pierce the corporate veil of the company, then this ought to be done to reveal the true nature of the appellant’s/claimant’s employment.
[12] Based on the evidence adduced before the Industrial Court, it was submitted that the Court of Appeal erred when it held that the veil of incorporation of ADC and the respondent could not be lifted/pierced to reveal that the appellant’s/claimant’s employment was in fact a continuous employment from the time he was employed in 2009 until his termination in October 2013.
OUR DECISION ON THE SECOND LEAVE QUESTION
[13] Put simply, ‘lifting/piercing the corporate veil’ means disregarding the dichotomy between a company and a natural person behind it and attributing liability to that person where he has misused or abused the principle of corporate personality. Since the decision of the House of Lords in Salomon v A Salomon & Co Ltd [1897] AC 22 , which affirmed the legal principle that, upon incorporation, a company is generally considered to be a new legal entity [*71]
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
separate from its shareholders, the courts in Malaysia, England and other Commonwealth jurisdictions have found exceptions to the general principle stated in Salomon and have lifted/pierced the corporate veil to reveal those who controlled the company.
[14] The application of the doctrine of veil lifting/piercing the corporate veil is far from clear from case law. Professor Farrar has described the Commonwealth authority on piercing the corporate veil as ‘incoherent and unprincipled’ (see: J Farrar, Fraud, Fairness and Piercing the Corporate Veil (1990) 16 Canadian Business Law Journal 474, 478). It would appear that the circumstances in which the corporate veil may be lifted/pierced are greatly circumscribed and the courts tend to take a fact-based approached on the matter.
[15] Courts have recognised a number of factors that may lead to lifting/piercing of the corporate veil. Generally speaking, grounds under general law for lifting/piercing the corporate veil may be grouped into the following categories:
(a) agency;
(b) fraud;
(c) sham or façade;
(d) group enterprise; and
(e) unfairness/injustice.
These categories are probably not exhaustive. For the purpose of this instant appeal, categories (d) and (e) are relevant.
[16] A court may lift/pierce the corporate veil where the relationship between companies in the same group is so intertwined that they should be treated as a single entity to reflect the economic and commercial realities of the situation. An argument of ‘group enterprise’ is that in certain circumstances a corporate group is operating in such a manner as to make each individual entity indistinguishable, and therefore it is proper to lift/pierce the corporate veil to treat the parent company as liable for the acts of the subsidiary. Lifting/piercing the corporate veil is one way to ensure that a corporate group, which seeks the advantages of limited liability, must also accept the corresponding responsibilities.
[17] In the employment law perspective, the application of the ‘single economic unit’ test or ‘functional integrality’ test is particularly significant in ascertaining the continuity of employment for the scope of dismissal [*72] protection (see Manley Inc v Fallis [1977] 2 BLR 277). It recognises the complexity of modern corporate structures and that the corporate veil must only be pierced in exceptional circumstances. On the other hand, such complexity should not be an obstacle to defeat the legitimate entitlements of wrongfully dismissed employees. This approach has its root on the general notions of fairness, equality and proportionality in the treatment of vulnerable employees. It serves to balance fairness with evolving commercial realities.
[18] One of the seminal cases in Malaysia on lifting/piercing the corporate veil is the Hotel Jaya Puri case. It was a decision in respect of judicial review application for certiorari against the decision by the Industrial Court ordering Hotel Jaya Puri Berhad (‘the Hotel’) to pay compensation of two months salaries plus fixed allowances in favour of workmen employed in the business of Jaya Puri Chinese Garden Restaurant Sdn Bhd (‘the restaurant’). the restaurant, which was a fully owned subsidiary of the Hotel had 56 workers employed and operated its business at the hotel premises by paying a rental. Subsequently, the restaurant closed its business due to financial losses and
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
in Law Kam Loy had endorsed that the Industrial Court may, in special and appreciate circumstances, lift of the corporate veil to reveal who is the proper employer, such as in a situation where there is actual fraud at common law or some inequitable or unconscionable conduct amounting to fraud in equity. Gopal Sri Ram JCA (as he then was) stated as follows:
... But that is not to say that the court in the Hotel Jayapuri case was wrong in lifting the veil of incorporation of the facts of that case. The Hotel Jayapuri case was concerned with the Industrial Relations Act 1967 which requires the Industrial Court to disregard the technicalities and to have regard to equity, good conscience and the substantial merits of a case. Accordingly, in industrial law, where the interests of justice so demand, it may, in particular cases be appropriate for the Industrial Court to pierce or to disregard the doctrine of corporate personality. That is what happened in the Hotel Jayapuri case and no criticism of that case on its facts may be justified. (Emphasis added.)
[24] In our considered opinion, the case of Law Kam Loy simply stands for the proposition that whilst the approach of the Supreme Court in the Hotel Jaya Puri case may not be suitable in present times (vis a vis current company law principles), the practice of the courts in lifting/piercing the corporate veil [*74] may still be accepted in the realm of industrial relations as the correct approach to reveal who is the employer in the given case in order to achieve social justice so that the workmen are not adversely affected. In addition s 30(5) of the Industrial Relations Act 1967 provides that the court shall act according to ‘equity, good conscience and the substantial merits of the case without regard to technicalities and legal form’.
[25] In this connection, perhaps it would be useful to embark on a voyage cross other Commonwealth jurisdictions to look at persuasive authorities relevant to the issue under discussion.
SOUTH AFRICA
[26] In the South Africa, particularly in industrial and labour court matters, there has been willingness to pierce the veil. In the circumstance where the company is the agent or alter ego of its shareholders and directors, the courts are concerned with reality of the situation and not its form. In essence, what is important is the manner in which the company operated and with the individual’s relationship to that operation. In the case of Footwear Trading CC v Mdlalose [2005] 5 BLLR 452 (LAC), Nicholson JA noted that:
The abuse of juristic personality occurs too frequently for comfort and many epithets have been used to describe the abuse against which the courts have tried to protect third parties, namely puppets, shams, masks and alter ego. However, the general principle underlying this aspect of the law of lifting the veil is that, when the corporation is the mere alter ego or business conduit of a person, it may be disregarded. The lifting of the veil is normally reserved for instances where the shareholders or individuals hiding behind the corporate veil are sought to be responsible. I do not see why it should not also apply where companies and close corporations are juggled around like puppets to do the bidding of the puppet master.
[27] The Labour Appeal Court concluded that although Fila (PTY) Ltd and Footwear Trading CC were separate legal personalities, an expose of both entities would show that they were controlled by the same individuals and were inextricably interlinked, confirmed that they were in effect joint or co-employers.
[28] In Esterhuizen v Million-Air Services CC (in liquidation) & Others [2007] 28 ILJ 1251 (LC), the applicant had referred a constructive dismissal dispute to the Commission of Conciliation, Mediation and Arbitration (‘CCMA’) in 2001. The employer (first respondent) failed to appear at both conciliation and arbitration hearings. The CCMA found in favour of the applicant and awarded compensation. A warrant of execution was issued.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
[*75]
[29] When the deputy sheriff tried to execute the writ, he was informed by third respondent, the manager of Million- Air Services Carletonville (Pty) Ltd (second respondent) which had been incorporated in 2003, that the first respondent had been liquidated.
[30] The applicant applied to the Labour Court to declare that the second respondent was the same business operations as the first respondent and was liable, jointly and severally with the third respondent, to pay the amount awarded to the applicant in a CCMA award. Further, that it be declared that the third respondent was the real employer of the applicant and that he is liable, jointly and severally with the second respondent, to pay the amount awarded to the applicant in the CCMA award.
[31] The Labour Court of South Africa found that there were policy considerations allowing the corporate veil be pierced to reveal who the true employer was. Francis J, in delivering the judgment of the court, held that the conduct of the third respondent was ’gravely improper’. The court found that the liquidation of the first respondent was a stratagem of the third respondent, in a deliberate attempt to thwart the employee’s right to compensation. The third respondent had absolute control over both of the companies involved. He was the common denominator in the applicant’s dismissal, the liquidation of the company, and the incorporation of the second company. The third respondent was the real employer and was liable, jointly and severally with the second respondent, to pay the amount awarded to the applicant in the CCMA award.
CANADA
[32] The Canadian law recognises a doctrine known as the common employer doctrine. Under the doctrine, two or more legal entities can be employers of a person in relation to the same work where there is a sufficient degree of relationship between the different entities that act as common employers. What counts as a sufficient degree of relationship is determined on a case by case basis but includes ‘factors such as individual shareholdings, corporate shareholdings, and interlocking directorships the essence of that relationship will be the element of common control’ (see: Sinclair v Dover Engineering Services Ltd [1988] 49 DLR (4th) 297).
[33] The idea of common employers was first recognised in Bagby v Gustavson International Drilling Co Ltd [1980] 24 AR 18, but the test was not clearly stated until Sinclair. In Sinclair , the plaintiff was a professional engineer who wanted to bring a wrongful dismissal claim against two companies. One company, Dover Engineering Services Ltd (‘Dover’), held itself out as his employer. Another company, Cyril Management Limited (‘Cyril’), was [*76] responsible for paying the plaintiff. Cyril also deducted all payments from the plaintiff’s salary for income tax, unemployment insurance and his pension plan. Dover was owned by Mr Vernon Gould and Mr Donald Keenan. Cyril was effectively a management company that paid everyone who worked for Dover and the other companies owned by the Gould partnership.
[34] The court held both companies were the common employers of the plaintiff and it did not matter that the companies were in this complex business relationship with one another. Wood J stated:
- I see no reason why such an inflexible notion of contract must necessarily be imposed upon the modern employment relationship. Recognizing the situation for what it was, I see no reason, in fact or in law, why both Dover and Cyril should not be regarded jointly as the plaintiff’s employer. The old-fashioned notion that no man can serve two masters fails to recognize the realities of modern-day business, accounting and tax considerations.
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
these steps due to the parent’s knowledge of the working condition and its superior knowledge about the risks. Her Ladyship summarised her judgment in para [69] as follows:
[I]n appropriate circumstances the law may impose on a parent company responsibility for the health and safety of its subsidiary’s employees. Those circumstances include a situation where, as in the present case, (1) the businesses of the parent and subsidiary are in a relevant respect the same; (2) the parent has, or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry; (3) the subsidiary’s system of work is unsafe as the parent company knew, or ought to have known; and (4) the parent knew or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employees’ protection.
Although her approach could have the same effect as piercing the veil, Arden LJ rejected the view of this approach as ‘veil-piercing’.
[*78]
[41] In Thompson , the possibility of a direct duty of care owed by the parent company was again recognised with the criteria proposed by Chandler. However, the claim by the employee was rejected due to lack of sufficient evidence. Tomlinson LJ stated that the four factors mentioned by Arden LJ in Chandler were descriptive rather than exhaustive. Although the degree of fairness was as high as in Chandler , Thomlinson LJ rejected the claim of the plaintiff as there was no evidence of the parent’s knowledge and control related to foreseeability and proximity. Hence, the parent company’s direct duty of care could not be recognised.
[42] From a short review of cases above, it would appear that although the principle of separate legal entity is at the core of the company law, there are a number of situations in which a corporate group and its members can be treated the same. In other words, while the dicta in Hotel Jaya Puri case is correct in substance particularly in the context of industrial jurisprudence, the approach of ‘common employer’ taken by the Canadian, South African and English courts better explains the rationale in industrial law terms in order to achieve equity and social justice. This is in keeping with the tenor and purpose of the Industrial Relations Act 1967.
[43] In sum, insofar as employment law is concerned, the circumstances which are believed to be most peculiar basis under which the court would lift/pierce the corporate veil and find a group of companies to be common employers include:
(a) where there is ‘functional integrality’ between entities;
(b) unity of establishment between the entities.
(c) the existence of a fiduciary relationship between the members of the entities and/or the extent of control;
(d) there was essential unity of group enterprise; and
(e) whenever it is just and equitable to do so and/or when the justice of the case so demands.
But these circumstances are just guidelines and are by no means being exhaustive. The circumstances for which the court may lift/pierce the corporate veil are never closed.
[44] Reverting back to the mainstream of the present appeal, we are of the considered opinion that ADC and the
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
respondent were part and parcel of the same group. There was ‘an essential unity of group enterprise’. The uncontroverted evidence established that: [*79]
(a) the appellant’s/claimant’s original contract of employment with ADC was dated 26 August 2009;
(b) vide letter dated 11 October 2012, ADC informed the appellant/claimant that his contract as consultant will be renewed for another 12 months from 1 October 2012 to 30 September 2013;
(c) however, vide letter dated 18 October 2012 from the respondent, the appellant/claimant was informed that his contract as a consultant will be renewed under the respondent, instead of ADC. Further, it was expressly stated that there will be no change in his designation, grade and other terms and conditions of his contract dated 26 August 2009;
(d) in the letter dated 18 October 2012, the respondent expressly stated that the appellant’s/claimant’s contract is being renewed under the respondent instead of under ADC in view of the phasing out of ADC;
(e) the chief executive officer of ADC who signed the letter dated 11 October 2012 and the Chief Executive officer of the respondent who signed the letter dated 18 October 2012 (ie seven days later) were one and the same — Mr Chiew Kok Hin;
(f) it was a finding of fact by the Industrial Court that ADC was consolidated into the respondent and vide a letter dated 7 January 2013, in view of the new company structure, the appellant/claimant had been re- designated to assume the post of VP, Product and Solutions with effect from 1 January 2013;
(g) it was a finding of fact by the Industrial Court that the appellant/claimant continued to report to Mr Chiew Kok Hin before and after the letter dated 18 October 2012; and
(h) it was a finding of fact by the Industrial Court that according to the testimony of the respondent’s witness (COW1) the appellant’s/claimant’s contract with ADC allowed for the appellant/claimant to be moved to any of its subsidiaries and/or associate companies. Thus, the appellant/claimant was asked to assume the position of VP, Product & Solutions with the respondent on 7 January 2013.
[45] For all the aforesaid reasons, we are of the considered view the Court of Appeal was wrong when it held that ADC and the respondent were two separate legal entities and failed to treat the appellant’s/claimant’s contract of employment as a continuous one from ADC to the respondent. In our view, the doctrine, whether is categorised as ‘essential unity group enterprise’ or ‘common employer’, its purpose is to permit the corporate veil to be pierced in order to establish or identify the true labour relationship between parties in terms of the existing labour relation realities. The Court of Appeal’s failure to identify the employer-employee relationship runs contrary with the [*80] fundamental purposes of the Industrial Relation Act 1967.
[46] Further, the Court of Appeal was wrong in reversing the findings of fact by the Industrial Court and ruled that the appellant/claimant had accepted a three months contract that was offered to him in September 2013. The facts clearly showed that the appellant/claimant did not accept the offers because the company had removed his entitlement to the performance bonus scheme in which he was a participant at all material times since he was in employment with AIMS group of companies in 2009.
[47] It is an established rule, enunciated in a long line of decisions, that the appellate court will not disturb the findings of fact made by the trial court as to the credibility of witnesses in view of its opportunity to observe the demeanor and conduct of witnesses while testifying and the said findings will generally be accepted or acted upon unless it can be demonstrated that the trial court’s decision is plainly wrong or the decision is one that no reasonable judge or tribunal could have reached (see: Tay Kheng Hong v Heap Moh Steamship Co Ltd [1964] 1 MLJ 87 ; Chow Yee Wah & Anor v Choo Ah Pat [1978] 2 MLJ 41 ; Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1 ; Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd and another appeal [2018] 2 MLJ 177 ; [2018] 2 CLJ 641, Henderson v Foxworth Investments Ltd and another [2014] 1 WLR 2600 ; McGraddie v McGraddie and another [2013] 1 WLR 2477 ). We observe that the Court of Appeal did not
Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn
Course: Law (LAW224)
University: Universiti Teknologi MARA
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