(Bandar Seri Begawan, 2nd) On December 17th of last year, the Court of Appeal ruled that because Putratec Sdn Bhd could not afford its own litigation costs, the company's two directors must personally bear the expenses of the legal dispute.
The case revolves around Aker Solutions Sdn Bhd's application for litigation costs against the two directors, as Putratec was unable to fulfill its obligations due to financial difficulties.
The dispute originated from Aker Solutions' application requesting the directors of Putratec to personally bear the litigation costs.
Aker Solutions argued that Putratec was unable to fulfill its financial commitments, essentially serving as a facade, while the directors were personally financing the litigation in an attempt to benefit from its outcome.
Putratec opposed the application, claiming it was inappropriate to file the application in the same form under the lawsuit and disputed the assertion that the directors personally controlled or funded the litigation.
Putratec's legal team, represented by two lawyers from Raed Lim Law Firm, argued that Aker Solutions failed to personally notify the two directors regarding the application and pointed out service issues with the documents.
Putratec also argued there was no evidence the directors personally funded the lawsuit or benefited from it. However, the judge dismissed these arguments, finding the directors' involvement in this case to be substantial.
The case was heard on May 30th last year, and a ruling was made on June 13th, dismissing Putratec's objections and ruling in favor of the defendant.
The judgment highlighted Putratec's precarious financial situation and noted that the directors were paying litigation costs in their personal capacity. As Putratec did not provide other evidence for explanation, the judge concluded that the directors must have control over the litigation.
The judge stated, "The court is convinced that the appellant's (Putratec's) financial situation is sufficient to support its directors in funding this litigation."
"In such circumstances, where the appellant company (Putratec) is unable to pay the costs and provides no other financial explanation, the directors will benefit from the outcome of the litigation and should bear personal responsibility."
The court also discussed the issue of lifting the corporate veil, which Putratec had objected to.
The judge decided that in this case involving the two directors, lifting the corporate veil was appropriate, as Putratec's financial transactions and the involvement of the directors justified lifting the veil.
The judge further pointed out that while no allegations of fraud were made, the directors' conduct in managing the litigation and their direct financial involvement made the judgment reasonable.
Putratec's claim that the directors had not been properly served with key documents was rejected. Even though the directors did not provide direct evidence during the litigation, the court believed the directors were fully aware of the application since they had legal counsel representing them and received Aker Solutions' opinions.
Although Putratec's legal team argued the application was unfair and the directors should not bear personal responsibility for funding the case, the judge ruled that the directors' roles and responsibilities in the litigation were clear. Thus, charging them with personal responsibility for the costs was deemed appropriate.
As a result, the court dismissed Putratec's appeal and upheld the original judgment, requiring the directors to personally bear the costs of the original case and litigation.
Putratec was also ordered to pay for the appeal costs, which will be levied if no agreement is reached between the parties.