1
IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
SUIT NO: 22NCC-342-04/2013
KHOR CHUI LEE
v.
SIA YEW HOCK
GROUNDS OF JUDGMENT
Brief Background
The Plaintiff carried on a business under the name and style of
Fortune Choice Enterprise trading in garments, stationery, hardware
and daily use merchandise. The Plaintiff supplied goods to the
Defendant’s company known as SYC Enterprise, a company
trading also in garments and general goods (‘the Company’).
The Defendant is a director of the said Company.
On 31.11.2010 the Plaintiff presented a Winding-up Petition against
the Company through her company Fortune Choice Enterprise
as the Company was indebted to the Plaintiff for the sum of
RM40,000.00 for goods sold and delivered. The said Company was
eventually wound up on 10.3.2011.
2
The Plaintiff filed a Proof of Debt (POD) for the sum of
RM801,297.80 being the amount due and owing as at 10.3.2011.
Pursuant to section 247 of the Companies Act 1965 (CA) the
Plaintiff filed an application to examine the Defendant in relation
to the business, dealings and affairs of the Company. It was
established through the examination that the Defendant had
continued to transact with other suppliers despite the Winding-up
Petition. The Defendant had continued to carry on the business of
the Company under a different entity, Perniagaan Sing Yap Chan
Sdn. Bhd, (PSYC). The business was in fact conducted on the
same premises of the Company.
It is contended by the Plaintiff that the Defendant had continued to
carry on the business of the Company under a different business
entity and committed fraud against the creditors of the Company,
including the Plaintiff by concealing the assets and properties of the
Company through a different business with the intention to defeat
claims by creditors. The particulars of fraud are as particularized in
the Statement of Claim,
“ That the Defendant concealed the assets and properties of the
Company through PSYC with the intention to defraud its creditors.”.
It is further contended that the Defendant is liable and accountable
for any money of the Company or has been guilty of misfeasance
and breach of trust.
The Plaintiff filed this Writ and sought the following reliefs,
(1)
an order under section 305 CA to compel the Defendant to
repay or restore the money or property or any part thereof
with interest at such rate as the Court thinks just, or to
3
contribute such sum to the assets of the company by way of
compensation in respect of the misapplication, misfeasance
and/or breach of trust or duty as the Court thinks just;
(2)
in the alternative, an order that the Defendant pay to the
Plaintiff the sum of RM801,297.80;
(3)
damages for, inter alia, breach of trust;
(4)
interest on such amount and at such rate and for such period
as this Honourable Court deems just and fair; and
(5)
costs.
The trial proceeded for two days on 3.3.2014 and 12.4.2014.
There were a total of six (6) witnesses, that is, four (4) Plaintiff’s
witnesses and two witnesses for the Defendant, including the
Defendant himself. They are as follows:
Plaintiff
i.
Mohd Zamzuri bin Darus
PW1
ii.
Khor Chui Lee
PW2
iii.
Khor Chong Hai
PW3
iv.
Yeoh Chai Cheng
PW4
Defendant
i.
Sia Yew Hock
DW1
ii.
Mohd Azwan bin Zulkifli
DW2
4
The Documents
The documents referred during the trial proceedings are as follow:i.
Bundle of Pleadings;
ii.
Common Bundle of Documents A1; and
iii.
Common Bundle of Documents A2.
Decision
Section 223 CA
The Defendant in this case is a director of the Company that
was wound up, SYC Sdn. Bhd. Despite the financial problems and
the presentation of Petition, the Defendant had continued with the
business in the name of another company, PSYC. The Defendant
brazenly conducted his business at the same premises and merely
changed the signboard. During cross-examination the Defendant
admitted that he had continued with the business. It is the
contention of the Plaintiff that the Defendant had concealed the
assets and properties of the company through PSYC with the
intention to defraud its creditors.
In his Witness Statement (Q/A35) the Defendant himself had
admitted that PSYC took over the business of SYC,
“S:
Sebagai seorang pengarah PSYC adakah anda tahu mengenai
situasi kewangan PSYC?
J:
Saya tahu. Saya telah menyakinkan keluarga saya untuk
membeli kesemua hutang SYC tidak termasuk Fortune sahaja
di mana kreditor-kreditor telah memasuki satu “arrangement”
untuk mendapatkan kembali bayaran-bayaran mereka menerusi
PSYC. Kreditor-kreditor tidak mahu berurusan dengan pihak
insolvensi. Ada juga kreditor yang ambil stok. Ini adalah
amalan/cara kaum Cina buat perniagaan. Mereka tahu SYC
telahpun digulung. Mereka percaya dengan keluarga kami.”.
5
During the cross-examination the Defendant had also admitted
that he continued to transact with the suppliers of SYC under the
name of PSYC.
PW4, Yeoh Chai Cheng, the accounts receivable officer in Fortune
Enterprises gave evidence confirming the amount owing by
SYC. RM600,223.07 is the sum for goods sold and delivered.
RM201,074.73 is the late overdue payment interest charged.
PW1, Mohd Zamzuri bin Darus is the auditor of the accounts of
PSYC. PW1 brought the audit working papers (P1) in respect of
the audited accounts of PSYC for the year ending 31.12.2011
to Court. It is noted or stated in the working papers that PSYC
had bought over the goods and debt due to supplier from SYC
as at 1.1.2011 and the total considerationis RM1,222,237.78. No
agreement was executed by the parties. PW1 also confirmed that
PSYC had bought over the debts of SYC,
“ Perniagaan Sing Yap Chan ambil alih perniagaan SYC.”.
He had also confirmed that the amount is RM1,222,237.78.
Section 223CA provides as follows,
“ Any disposition of property of the Company including things in action
and any transfer of shares or alteration in the status of the members of
the company made after the commencement of the winding up petition
by the court unless the court otherwise orders to be void.”.
The Court will always have regard as to whether the disposition
made pursuant section 223 of the Companies Act was made
bona fide in the course of the company’s current trade, and if not
6
validated, the trade of the company would be paralysed without any
advantage (as established in BSN Commercial Bank (M) Bhd v.
River View Properties Sdn. Bhd. [1996] 1 MLJ 872). The Court must
also consider the importance of the payments sought to be
validated vis-à-vis the respondent’s business, and whether the
company would be paralysed if validation is refused (see Re
Steares (Bournemouth) Ltd [1950] 1 AER 21). Was the act done
reasonably and in good faith for the benefit of the company? The
general rule in section 223 CA is that it does not shut out bona fide
transactions. In Lian Keow Sdn. Bhd. (In Liquidation) & Anor v.
Overseas Credit Finance (M) Sdn. Bhd. &Ors [1988] 1 LNS 44;
[1988] 2 MLJ 449, Seah, SCJ made reference to a passage by
Vaisey J in Re Steane’s (Bournemouth) Ltd [1950] 1 All ER 21
which states:
“….that each case must be dealt with on its own facts and particular
circumstances (special regard being had to the question of the good
faith and honest intention of the persons concerned), and that the court
is free to act according to the judge’s opinion of what would be just and
fair in each case.”.
In Engtex Marketing Sdn. Bhd. v. Zinma Housing Development
Sdn. Bhd. & Anor [2009] 5 CLJ 759, the issue of whether
disposition of the company’s property after winding up without
sanction of Court arose. The Court held that although section 223
CA would invalidate such transfers, with regard to the bona fide
purchaser, the provision would not apply when there is no allegation
of misrepresentation or fraud or collusion against the purchaser or
that the purchaser acted in concert with the persons in the company
to effect the disposition despite being aware that that person had no
authority to do so.
7
The Court of Appeal in the case of Ernest Cheong Yong Yin
v. Mohammed Jamal IncheIm Salleh & Ors; Tetuan MahKamariyah & Partners (Intervener ) [2014] 1 CLJ 1026 held,
“…that once a winding-up petition is commenced (i.e. when it is filed in
the High Court) the second respondent as a company in question is not
free without order of the court to dispose of its property in whatever form
and by whatever means. This is to prevent the improper alienation and
dissipation of the company’s asset before the winding-up petition is
heard and determined.”.
It was further held by the COA in the aforesaid case that it is settled
law that in determining whether section 223 CA applies, the time
of disposition of asset is obviously crucial. This principle was laid
down by the Federal Court in the case of Pekan Nenas Industries
Sdn. Bhd. v. Chang Ching Chuen & Ors [1998] 1 CLJ 793, and
followed by the Court of Appeal in Ong Ban Chai & Ors v. Seah
Siang Mong [1998] 3 CLJ 637 and Engtex Marketing Sdn. Bhd.
v. Zinma Housing Development Sdn. Bhd. & Anor [2009] 5 CLJ
759, that the material time for the disposition is the time of the
transaction.
In the instant case, the Winding-up Petition was presented on
30.11.2010 by the Plaintiff and the Company was eventually wound
up on 10.3.2011. The Defendant was at all time aware of the
Petition that was presented. However, despite the presentation
of the Petition proceeded to transfer the asset of the Company
to the other entity, PSYC. Therefore, guided by the principles
enunciated by the cases mentioned above and by virtue of section
223 CA the disposal of the asset on 1.1.2011 by SYC is clearly
void as it was transacted when the winding up has commenced.
8
Section 305 CA
Section 305 CA provides inter alia, that if in the course of the
winding up of a company it appears that an officer has misapplied
or retained or become liable or accountable for any money or
property of the company or been guilty of any misfeasance or
breach of trust or duty, the Court may, on the application of any
creditor examine into the conduct of that officer and compel him
to repay the money or property to the company,
“ (1) If in the course of winding up it appears that any person who has
taken part in the formation of the company or any past or present
liquidator or officer has misapplied or retained or become liable or
accountable for any money or property of the company or been guilty
of any misfeasance or breach of trust or duty in relation to the
company, the Court may on the application of the liquidator or of
any creditor or contributory examine into the conduct of that
person, liquidator or officer and compel him to repay or restore the
money or property or any part thereof with interest at such rate as the
Court thinks just, or to contribute such sum to the assets of the
company by way of compensation in respect of the misapplication,
retainer, misfeasance or breach of trust or duty as the Court thinks
just.”.
In the instant case the Defendant blatantly transferred assets
of SYC to PSYC. The Defendant failed to adduce any oral or
documentary evidence that the transfer of asset and the payments
were made to any of the suppliers pursuant to contractual
obligations before the presentation of the winding-up.
Conclusion
I have considered the evidence adduced in its entirety together
with the submissions of both Counsels as well as authorities
9
tendered in support of their respective cases I am satisfied
that the Plaintiff have proven their claim against the Defendant
on a balance of probabilities. Accordingly, based on reasons
mentioned above I allowed the Plaintiff’s claim against the
Defendant for an order under section 305 CA to compel the
Defendant to repay or restore the money in the sum of
RM1,222,237.78. Costs to be paid by the Defendant to the
Plaintiff.
Cost
After submissions by both Counsels on costs, I awarded cost of
RM20,000.00 to the Plaintiff.
sgd.
( HASNAH BINTI DATO’ MOHAMMED HASHIM )
Judge
High Court of Malaya
Kuala Lumpur.
13th October 2014
10
Counsels:
For the Plaintiff/Respondent:
Messrs. Michael Chow
- C.H. Cheong
- C.H. Chia
- Michael Chow Keat Thye
For the Defendant/Appellant:
Messrs. Rejendra Palany Chambers
- Geetha Eithurajoon
- Jothi Mathi Palany
- Fairus
\