Introduction / Summary
An employee’s success in the Industrial Court for unfair dismissal does not always translate into receiving compensation or remedy awarded. In some instances, the employer company may be wound up, leaving the employee with no avenue to enforce the award. This raises a difficult question: Can such injustice be cured simply by lifting the corporate veil and allowing the employee to enforce remedies against the sister or parent companies in the same corporate group?
A thorough discussion is found in Hubline Berhad v Intan Wazlin An Wahab & 39 Ors [1], where the Court of Appeal clarified that the Industrial Court cannot override or ignore the doctrine of separate legal personality to impose liability on a non-employer company, even though justice/sympathy/compassion demands so. On such basis, the appellate court reversed the High Court decision that upheld the Industrial Court decision.
Background Facts
The Respondents were former employees of Hub Shipping Sdn Bhd (“Hub Shipping”) or EM Shipping Sdn Bhd (“EMS”). Following the retrenchment, they filed representations to the Industrial Court for unfair dismissal.
Pending the disposal of the dispute, Hub Shipping was wound up. Consequently, the Respondents applied under Section 29(a) of IRA [2] for: –
- • Substitution of Hub Shipping with Hubline Berhad (“Hubline”); and
- • Joinder of Highline Shipping Sdn Bhd (“Highline”) as a party to the proceedings.
The basis of the application was that there is nexus between Hub Shipping, Hubline and Highline, having common shareholders, addresses and directors. Without the substitution of Hubline and joinder of Highline, any eventual Award would be unenforceable given that Hub Shipping had ceased operations after being wound up.
The Industrial Court agreed with the Respondents and allowed the substitution and joinder. Hubline and Highline sought judicial review for an order of certiorari to quash the Awards. Both applications were dismissed by the High Court, leading to the present appeals.
Issues To Be Tried
The issue before the Court of Appeal are: –
- • whether Section 29(a) of the IRA [3] , which empowers the Industrial Court to join or substitute any party to the proceedings, could be invoked to substitute or join of a non-employer corporate entity merely because the actual employer is insolvent and the companies have common shareholders, directors, addresses or management, even though the proposed party had no role in the dismissal claim?
- • Whether the Industrial Court, relying on its equitable powers under Section 30(5) of the IRA [4] , may ignore the doctrine of separate legal personality in Salomon v Salomon and impose liability on a company which was not an employer?
The Court of Appeal Decision & Analysis
The Court of Appeal allowed the appeals, with the consequential order allowing the Judicial Review and quashed the Awards of substitution and joinder.
In doing so, the Court rejected the legal positions established in the following cases: –
- • Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers & Anor [5], which permitted lifting of the corporate veil when the justice of the case so demands, notwithstanding the separate existence of subsidiary and parent companies.
- • Asnah Ahmad v Mahkamah Perusahaan Malaysia & Ors [6], which endorse a low threshold for joinder, applying the test of whether there was any “reasonable factual or legal nexus” between the respondents.
- • Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd [7], which applied the single economic unit test, allowing the lifting of corporate veil when 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.
In furtherance of the above, the court clarified that the principle of separate legal personality in Salomon v Salomon remains trite. Once incorporated, a company becomes its own legal person distinct from its shareholders, directors or related entities. The court relied on the Federal Court decision in Ong Leong Chiou v Keller (M) Sdn Bhd & Ors [8] and held that this principle equally applies uniformly across all fora and the Industrial Court is not at liberty to override this foundational doctrine.
The Court emphasised that Section 29(a) of the IRA is procedural, not substantive. It cannot be used as a tool to pierce the corporate veil. The proper test for joinder is that there must be a reasonable factual or legal nexus between the proposed joinee and the dispute which is before the Industrial Court and that the proposed joinee is amongst the persons/parties who is/are responsible for termination of employment.
The mere fact that the actual employer is wound up or devoid of assets cannot justify the imposition of liability on third parties who are legally distinct and not privy to the employment contract. The law does not allow courts to rewrite legal identity of the employer merely to ensure that an award does not become a paper judgment. To do so is to rewrite the legal principle at the altar of practical convenience.
In light of the above, the Court also observed that the current trend in Industrial Court proceedings risk turning Section 29(a) into a backdoor for ignoring corporate separateness. The on Section 30(5) that the court is to act according to equity and good conscience further blurs the line.
Conclusion
In conclusion, the Court of Appeal’s decision in this matter serves as a resounding reaffirmation of the sanctity and foundational doctrine of separate legal personality enshrined in Salomon v Salomon. The judgment underscores that procedural provisions in the Industrial Relations Act, including Sections 29(a) and 30(5), cannot be stretched to circumvent core principles of company law unless there are extremely special circumstances. Liability cannot be inordinately and/or indiscriminately imposed on entities that are legally distinct from the actual employer merely for reasons of convenience or practical enforcement.
[1] [2025] CLJU 2677
[2] Industrial Relations Act 1967, Section 29(a).
[3] Industrial Relations Act 1967, Section 29(a).
[4] Industrial Relations Act 1967, Section 30(5).
[5] [1980] 1 MLJ 109
[6] [2015] 4 MLJ 613
[7] [2020] 5 MLJ 58
[8] [2021] 3 MLJ 622
About the author
Thoo Yee Huan
Partner
Dispute Resolution
Halim Hong & Quek
yhthoo@hhq.com.my
Tan Zec Kie
Associate
Dispute Resolution
Halim Hong & Quek
zk.tan@hhq.com.my
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