Wong Poh Lum Tetuan Sulaiman & Taye

Wong Poh Lum Tetuan Sulaiman & Taye

Directors who were mandatory signatories and could not explain the dissipation of substantial company funds were knowingly parties to carrying on business with intent to defraud creditors; a creditor may recover directly from such directors under s.304 CA 1965 / s.540 CA 2016; ordering payment to the liquidator in this plaintiff-initiated action was erroneous and the plaintiff was entitled to direct payment of RM5,907,500 (plus interest); High Court erred in adjudicating IRD debt as IRD was not a party.

Citation
W-02(NCC)(W)-982-08/2020 (Mahkamah Rayuan)
Parties
Appellant/plaintiff: Tetuan Sulaiman & Taye; Respondent/defendant: Wong Poh Kun; Respondent/appellant/defendant: Wong Poh Lum
Court
NCC
Jurisdiction
Malaysia
Judgment Date
5 July 2022
Case Number
W-02(NCC)(W)-982-08/2020 (Mahkamah Rayuan)
Procedural Posture
Civil Appeal Directors' Liability / Fraudulent Trading Under Companies Act / Court of Appeal Judgment on Appeal From High Court After Full Trial
Outcome
Appeals allowed in part: High Court finding of directors' liability for fraudulent trading affirmed; portion of High Court order directing payment to liquidator set aside; portion concerning Inland Revenue Department's debt set aside; plaintiff entitled to direct recovery of RM5,907,500 and interest from defendants...
Legal Topics
Fraudulent Trading, Directors' Personal Liability, Undue Preference, Payment to Liquidator Vs Direct Recovery, Statutory Interpretation of S.304 CA 1965 / S.540 CA 2016
Source Language
Malay/English
Company Law Insolvency Civil Procedure Evidence Fraudulent Trading Directors' Personal Liability Undue Preference Payment to Liquidator Vs Direct Recovery +1 more

Case Brief

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Parties

Tetuan Sulaiman & Taye

Appellant/plaintiff

Wong Poh Kun

Respondent/defendant

Wong Poh Lum

Respondent/appellant/defendant

Procedural Posture

Civil Appeal Directors' Liability / Fraudulent Trading Under Companies Act / Court of Appeal Judgment on Appeal From High Court After Full Trial

Legal Issues

  1. 1 Whether directors carried on the company's business with intent to defraud creditors under s.304 CA 1965 / s.540 CA 2016
  2. 2 Whether acts constituting fraudulent trading must occur during winding up or proceedings
  3. 3 Whether a successful creditor must be paid via the liquidator to avoid undue preference

Ratio Decidendi

Directors who were mandatory signatories and could not explain the dissipation of substantial company funds were knowingly parties to carrying on business with intent to defraud creditors; a creditor may recover directly from such directors under s.304 CA 1965 / s.540 CA 2016; ordering payment to the liquidator in this plaintiff-initiated action was erroneous and the plaintiff was entitled to direct payment of RM5,907,500 (plus interest); High Court erred in adjudicating IRD debt as IRD was not a party.

Court Disposition

Appeals allowed in part: High Court finding of directors' liability for fraudulent trading affirmed; portion of High Court order directing payment to liquidator set aside; portion concerning Inland Revenue Department's debt set aside; plaintiff entitled to direct recovery of RM5,907,500 and interest from defendants...

Orders

  • Appeal W-02(NCC)(W)-982-08/2020: set aside High Court order insofar as it concerned the Inland Revenue Department's debt; appeal by director allowed in part; each party to bear its own costs for that appeal.
  • Appeal W-02(NCC)(W)-980-08/2020: set aside High Court order that monies be paid to the Liquidator; order respondents (Wong Poh Kun and Wong Poh Lum) jointly and severally to pay Tetuan Sulaiman & Taye RM5,907,500 plus interest as claimed; costs of RM20,000 awarded to the appellant subject to allocator.