Written by Farah Aqila
Background
The Court of Appeal has delivered a significant decision reining in the Industrial Court’s power to join or substitute non-employer companies in employment disputes. The ruling firmly restores the primacy of the doctrine of separate legal personality, clarifying that s 29(a) of the Industrial Relations Act 1967 is procedural, not a gateway to impose liability on corporate affiliates. This case concerns the doctrine of separate legal personality, a firmly embedded and well entrenched principle of company law, since the case of Salomon v A Salomon & Co Ltd [1897] AC 22.
In this case, a total of 36 employees, who were previously employed by either Hub Shipping Sdn Bhd (‘HS’) or EM Shipping Sdn Bhd (‘ES’) had filed claims in the Industrial Court alleging unjust retrenchment by their respective employers.
During the proceedings, HS was wound up. As a result, the employees submitted a Joinder Application to substitute two other companies, Hubline Berhad (‘HB’) and Highline Shipping Sdn Bhd (‘HLS’), on the basis that they shared common directors and shareholders with HS and ES.
The Industrial Court allowed the application, and the High Court upheld it on judicial review.
The Court of Appeal’s Decision
The Court of Appeal however, ruled that the Industrial Court was wrong to include HB and HLS in the case.
It emphasised a key principle of company law: every company is a separate legal entity. That means one company cannot be held responsible for another’s actions unless there’s a clear legal reason to do so.
The separate legal entity doctrine, which allows for lifting the corporate veil only in limited circumstances, cannot be disregarded and/or ignored:
“The Industrial Court cannot disregard or ignore the separate legal personality doctrine merely because the true employer is insolvent.”
Although s 29(a) of the Industrial Relations Act 1967 has enabled the Industrial Court to extend its application in ways that conflicted with the fundamental company law principle that each company was a separate legal entity. This section was merely procedural, not substantive as it was never intended as a mechanism to collapse the walls of corporate separateness or to impose liabilities on third parties in the absence of a contractual or statutory basis.
The High Court in dismissing the judicial review application had applied the principles enunciated by the Court of Appeal in Asnah Ahmad v Mahkamah Perusahaan Malaysia & Ors [2015] 4 MLJ 613 (‘Asnah‘) whereby the approach enjoined by the Court of Appeal in Asnah’s case invites judicial overreach and enables the Industrial Court to circumvent the separate legal personality doctrine.
Conclusion
The Appeals were about protecting the sanctity of the doctrine of separate legal personality which is a firmly embedded and a well entrenched principle of company law since Salomon v A Salomon & Co Ltd [1897] AC 22 and remains the cornerstone of protecting individual corporate entities from the liabilities of their affiliates.
The proper legal position is that the entity to be added to the dispute must be among the persons or parties responsible for terminating the affected employee’s employment.
The full grounds of judgment, click here.
Published on 22 December 2025