Directors owe fiduciary duties to their companies, requiring full disclosure and accountability. Failure to comply results in liability for breach of duty.

Introduction

[1] This case concerns a dispute primarily between related companies involved in the business of trading in household furniture and fittings.

[2] Wescourt Design Sdn Bhd ("WDSB") is a private limited company involved in the design, manufacture and supply of household furniture since its incorporation in 2007 and controlled by a Wan Yin Ney who has extensive experience in the household furniture business.

[3] Wescourt Furnishing (M) Sdn Bhd ("WFMSB") is also a private limited company incorporated in 2010 to venture particularly into the business of retailing in household furniture. The shareholders of the WFMSB are Loh Yew Kong (30%), Ho Kam Chon (30%), Wan Yin Ney (20%) and Wan Kim Hong (20%). All four of them are also directors of WFMSB at the material time. Wan Yin Ney and Wan Kim Hong are siblings.

[4] In this case, WDSB in the original claim sued WFMSB for unpaid household furniture supplied and transferred over to WFMSB as well as for various disbursements such as mobile phone charges, electricity bill, etc incurred by WDSB on behalf of WFMSB.

By counterclaim added pursuant to O 15 rr 2 and 3 of the Rules of 2012, WFMSB sued WDSB, Wan Yin Ney and Wang Kim Hong for conspiracy to defraud and breach of fiduciary director's duty by surreptitiously running WFMSB's retail business to their benefit including failing to properly account to WFMSB's majority shareholders. They further knowingly utilized WDSB to assist their aforesaid torts.

The Trial Process

[5] The trial of the original claim and counterclaim were heard jointly over 4 days on 14 August, 17 October, 22 and 24 December 2014.

[6] For purposes of the trial, the documents were marked as bundles A to I including the documentary evidence in bundles B to D which were consented by the parties at the commencement of the trial to be of unconditional status B. During the course of the trial, exhibits P1 to D17 were also admitted in evidence.

[7] The following witnesses testified at the trial:

i) Choo Oi Fong (PW1), a director of WDSB and wife of Wan Kim Hong;

ii) Wan Kim Hong (PW2), the logistics manager of WDSB and former director of WFMSB;

iii) Ho Kam Chon (DW1), a director of WFMSB;

iv) Chang Siew Foong (DW2), a certified public accountant and director of S F Chang Corporate Services Sdn Bhd; and

v) Loh Yew Kong (DW3), a director of WFMSB.

[8] After the close of trial, the parties simultaneously filed their written closing submission in chief and in reply. By reason of the late completion of the typed notes of proceedings documenting the oral evidence adduced; hence delayed submission of the written submissions. Oral clarifications with counsel were then held on 6 May 2015 and 10 June 2015.

Background Facts

[9] Loh Yew Kong and Ho Kam Chon were interested to invest and venture into the household furniture business but both of them neither have expertise nor experience therein.

[10] On or around March 2010, they met Wan Yin Ney who has in excess of 20 years experience in the furniture business to explore the setting up of a joint business venture company to retail household furniture and fittings. After negotiations, they agreed to the setting up of WFMSB on 10 March 2010. The founding shareholders and directors were Loh Yew Kong, Ho Kam Chon, Wan Yin Ney and Wan Kim Hong.

[11] The joint business venture arrangement was that Loh Yew Kong and Ho Kam Chon would inject as capital the sum of RM1.2 million into WFMSB. Wan Yin Wei and Wan Kim Hong weren't required to make any capital injection but they were to contribute their knowledge and expertise to manage and administer WFMSB's business absolutely subject to the right of the shareholders of WFMSB to ask for account.

[12] WFMSB opened numerous retail outlets particularly at AEON Jusco hypermarkets. In the course of managing WFMSB's business, WDSB has since April 2010 supplied the furniture to WFMSB by way of furniture stock transfer from WDSB as well as Westcourt Furniture World Sdn Bhd. The latter is another comp