Tetuan Sulaiman & Taye 1. ) Wong Poh Kun 2. ) Wong Poh Lum

Tetuan Sulaiman & Taye 1. ) Wong Poh Kun 2. ) Wong Poh Lum

The Court of Appeal upheld the High Court's factual finding that the directors (Wong Poh Kun and Wong Poh Lum) were knowingly parties to dissipating company funds and carried on the company's business with intent to defraud creditors, satisfying s.304(1) CA 1965/s.540(1) CA 2016; however the High Court erred in ordering payment of the plaintiff's claimed legal fees into the liquidator's pool (thereby treating the plaintiff as a contributory creditor); the proper order is for the delinquent directors to pay the plaintiff directly RM5,907,500 plus interest jointly and severally, and the part of the High Court judgment relating to the IRD/Government debt is set aside.

Citation
W-02(NCC)(W)-980-08/2020 (Mahkamah Rayuan)
Parties
Appellant (ca No.980); Respondent (ca No.982); Plaintiff (hc): Tetuan Sulaiman & Taye; 1st Respondent; Defendant (hc): Wong Poh Kun; 2nd Respondent; Defendant (hc); Appellant (ca No.982): Wong Poh Lum
Court
NCC
Jurisdiction
Malaysia
Judgment Date
5 July 2022
Case Number
W-02(NCC)(W)-980-08/2020 (Mahkamah Rayuan)
Procedural Posture
Civil Appeal (from High Court, Commercial Division; Full Trial) / Court of Appeal Judgment on Appeals Arising From High Court Judgment After Trial
Outcome
Appeal 982 allowed in part (set aside High Court's finding/order insofar as it dealt with Inland Revenue Department/IRD debt and related sums); Appeal 980 allowed in part (set aside order directing payment to liquidator; order defendants to pay plaintiff directly)
Legal Topics
Fraudulent Trading, Directors' Personal Liability, Winding Up, Undue Preference, Liquidator Rights, Evidence and Adverse Inference
Source Language
Malay/English
Company Law Insolvency Law Commercial Law Civil Procedure Fraudulent Trading Directors' Personal Liability Winding Up Undue Preference +2 more

Case Brief

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Parties

Tetuan Sulaiman & Taye

Appellant (ca No.980); Respondent (ca No.982); Plaintiff (hc)

Wong Poh Kun

1st Respondent; Defendant (hc)

Wong Poh Lum

2nd Respondent; Defendant (hc); Appellant (ca No.982)

Procedural Posture

Civil Appeal (from High Court, Commercial Division; Full Trial) / Court of Appeal Judgment on Appeals Arising From High Court Judgment After Trial

Legal Issues

  1. 1 Whether directors carried on the business of the company with intent to defraud creditors under s.304(1) CA 1965 (now s.540 CA 2016)
  2. 2 Whether alleged fraudulent acts must occur during winding up or proceedings against the company to attract liability under s.304/540
  3. 3 Whether directors ordered to pay should pay the creditor directly or pay into the company's assets via the liquidator to avoid undue preference (s.528 CA 2016)

Ratio Decidendi

The Court of Appeal upheld the High Court's factual finding that the directors (Wong Poh Kun and Wong Poh Lum) were knowingly parties to dissipating company funds and carried on the company's business with intent to defraud creditors, satisfying s.304(1) CA 1965/s.540(1) CA 2016; however the High Court erred in ordering payment of the plaintiff's claimed legal fees into the liquidator's pool (thereby treating the plaintiff as a contributory creditor); the proper order is for the delinquent directors to pay the plaintiff directly RM5,907,500 plus interest jointly and severally, and the part of the High Court judgment relating to the IRD/Government debt is set aside.

Court Disposition

Appeal 982 allowed in part (set aside High Court's finding/order insofar as it dealt with Inland Revenue Department/IRD debt and related sums); Appeal 980 allowed in part (set aside order directing payment to liquidator; order defendants to pay plaintiff directly)

Orders

  • Set aside High Court order to pay sums to Liquidator as contribution to company assets; order set aside to that extent
  • Order defendants Wong Poh Kun and Wong Poh Lum jointly and severally to pay Tetuan Sulaiman & Taye RM5,907,500.00 and interest as claimed (direct payment to plaintiff)