The court held that Plaintiffs failed to prove their claims for directors' advances due to insufficient documentary evidence and lack of corroborating testimony.

JUDGMENT

Amelati Parnell JC:

Introduction

[1] This appeal concerns with the decision of the learned Sessions Court Judge given on the 3 September 2018 dismissing the 1st and 2nd Appellants/Plaintiffs' claim against the Respondent/Defendant.

[2] For ease of reference, the parties shall be referred as they were in the Court below.

[3] The 1st and 2nd Plaintiffs' claim relates to monies allegedly advanced by them to the Defendant as "directors' advances". The sum claimed by the 1st Plaintiff is RM53,136.72 whereas the sum claimed by the 2nd Plaintiff is RM517,037.64.

Salient Background Facts

[4] The salient background facts as narrated by the Defendant are that:

a. The Plaintiffs are husband and wife. The Defendant is a private limited company incorporated on 25 April 1994. At all material times, the Defendant is a wholly owned subsidiary of Kwan Chee Hang Sdn Bhd ("KCHSB"). It is a family owned company. KCHSB was started by the late Kwan Chee Hang and his wife, Wong Nyuk Ching.

b. Apart from the late Kwan Chee Hang and his wife, their two sons namely Kwan Hiuang @ Kwan Huang Cheng ("Michael") and the 2nd Plaintiff were also involved in the family business.

c. The family incorporated Zung Zang Holdings Sdn Bhd ("ZZ Holdings") on 13 August 1997 to act as an investment holding company. The family also set up two other companies to undertake oil palm plantation business, namely, Zung Zang Plantation Sdn Bhd and Granright Enterprise Sdn Bhd They were set up as subsidiary companies of ZZ Holdings. At the initial stages, ZZ Holdings was wholly owned by the Defendant but at the insistence of the 2nd Plaintiff, the late Kwan Chee Hang transferred 20,000 ordinary shares of ZZ Holdings to him making the 2nd Plaintiff the holder of 20% shares of ZZ Holdings.

d. On or around 4 June 2003, the 2nd Plaintiff caused or procured the directors of KCHSB to execute a circular resolution to approve the disposal of the Defendant to him. As a result, the Plaintiffs became the 100% shareholder of the Defendant. At that time the 2nd Plaintiff had represented that the resolution was necessary to facilitate the sale of the Defendant since the company had yet to commence wood manufacturing business as originally intended. The directors did not realise that the Defendant was the holding company of the two plantation companies as well at that time as the Plaintiffs were in control of the Board.

e. It was only in year 2006 the family discovered that the Plaintiffs had fraudulently caused KCHSB to lose control over the ownership of the plantation companies. Upon the discovery of the fraud, KCHSB commenced two actions in the High Court at Sandakan under Suit No S22-24 of 2008 and S22-26 of 2008 against the Plaintiffs to regain control of the plantation companies, ZZ Holdings and the Defendant after the Plaintiffs refused to reinstate the status of the companies. After a full trial, the High Court found that the Plaintiffs had acted fraudulently in their actions to take over the plantation companies and ordered the companies to be reverted back to their rightful owners. The grounds of decision of High Court dated 7 January 2011 is reported in [2011] 1 LNS 1838 (Refer R/A Vol 3 p 1173-1233).

f. The Plaintiffs failed to overturn the decision of the High Court in their subsequent appeals to the Court of Appeal and Federal Court. In the Federal Court, the Court ordered that the shareholdings of KCHSB in the subsidiaries be restored to the position before the impugned fraudulent transfers were carried out. The Order made by the Federal Court dated 7 October 2013 is exhibited in R/A Vol 3 p 1325-1327.

g. It is pertinent to note that at the time when the present Suit was filed by the Plaintiffs, the Defendant was still under the control of the Plaintiffs. In fact, in September 2014, the Defendant had filed a Suit against the Plaintiffs in the Sandakan High Court under Suit No. SDK-22NCvC-31/9-2014(HC) to compel them to hand over all the assets and accounting records etc of the Defend