In the eyes of the law, a company is a separate legal entity from its
members and directors. The acts of a company, including any wrongful
acts are attributable to, and liability therefore rests with, the
company as a separate entity and not with its members or directors. This
principle from the Salomon case, that there is a "corporate
veil" between a company itself and its members or directors, is a
well-entrenched principle of company law and the Malaysian courts are
bound to abide by it unless there are cogent reasons to depart from it.
However, that does not mean that if an injunction order is obtained
against a company – for example to cease infringing IP rights and deliver infringing articles – a director can ignore the injunction with
impunity and assert that it is the company that is liable (and so hide
behind the corporate veil).
A company is an artificial legal person that "can have neither
thoughts, wishes nor intention for it has no other mind than the mind of
the corporators". Hence, the will and directing mind of a company must
be found in a person (usually called the director) and this is the
rationale for the law to hold the persons who direct a company
responsible for its wrongdoings or criminal acts. Judge Syed Ahmad Helmy
in IJM Corporation v Harta Kumpulan (2008) observed that the
courts' approach to the doctrine of separate legal entity has always
been pragmatic. Where the doctrine is used for improper purposes, for
instance to justify a wrong, the courts will treat a company as an
association of persons.
Having said that, a director, whether actively managing the
day-to-day affairs of the company or a mere sleeping partner, is under a
duty to ensure that the company complies with any court order affecting
it. Accordingly, Order 45 rule 5(1)(b)(ii), rule 7(3)(a) and 4(b) of
the Malaysian Rules of the High Court 1980 recognise that directors and
officers are the human agencies responsible for the conduct of the
affairs of companies. They fix a director with liability for the conduct
of the company, including liability for any breach by the company of an
injunction where the director has appropriate notice that he is liable
to have the injunction executed against him if the company disobeys the
order.
It is therefore important to make sure that proceedings are well
drafted so that "appropriate notice" is given to the directors that they
will be pursued personally. In this way, notwithstanding the principle
of the corporate veil, a director of a company can be liable for acts of
infringement of IP rights committed by the company and cannot justify
its wrongful breach of the injunction order.
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| Patrick Mirandah |
Patrick Mirandah Co (Malaysia)
Suite 3B-19-3 Plaza Sentral
Jalan Stesen Sentral 5
50470 Kuala Lumpur
Malaysia
Tel: +603 2278 8686
Fax: +603 2274 6677
malaysia@mirandah.com
www.mirandah.com