Back
2021 MarsdenLR 909
HIGH COURT MALAYA SHAH ALAM
LEE TECK MENG – Appellant
Versus
PREM KUMAR GANASARATNAM & ORS (ENCL 62) – Respondent
[Writ No: BA-22NCVC-501-10/2018]
A claim of fraudulent trading under Section 540(1) of the Companies Act must include specific factual allegations demonstrating intent to defraud; general non-payment claims are insufficient.
Headnote:(A) Companies Act 2016 – Section 540(1) – The Plaintiff's allegations of fraudulent trading against the 3rd Defendant were deemed unsustainable based on pleaded facts which lacked sufficient particulars to support a claim. (Paras 8, 14-26)
(B) Striking Out Pleadings – Applications to strike out are appropriate when claims are unsustainable, frivolous, or vexatious without reasonable cause of action. (Paras 11-13)
Facts of the case: The Plaintiff engaged two contractors for renovations, both of which failed to complete work and caused additional expenses, leading to a judgment against the second contractor. (Paras 2-7)
Findings of Court: The Court found no basis for the allegations of fraudulent trading against the 3rd Defendant, as the claims did not substantiate the necessary elements of fraud as outlined in Section 540(1). (Paras 14-26)
Issues: The main issues included whether the claim disclosed a reasonable cause of action against the 3rd Defendant under the Companies Act and the nature of the allegations of fraudulent trading. (Paras 14, 26)
Ratio Decidendi: The Court reasoned that general allegations of non-payment without specific fraudulent actions do not meet the pleading requirements under the Companies Act. The claim was found to be frivolous and an abuse of process since it did not substantiate a case under s 540(1). (Paras 14-29)
Result: The Plaintiff's Statement of Claim was struck out and costs were awarded to the 3rd Defendant. (Paras 28-29)
JUDGMENT
Introduction
[1] By way of a Notice of Application dated 4 April 2020 (encl 62), the 3rd Defendant applies to strike out the Plaintiff's Statement of Claim and to have the action against him dismissed.
Salient Facts
[2] The facts relevant to these proceedings, and evident from the Plaintiff's Statement of Claim, are as follows. On 12 January 2016, the Plaintiff engaged IT Design & Builders Sdn Bhd to undertake renovations to his house. Inch Builders & Solutions Sdn Bhd ("Inch Builders & Solutions") was appointed Project Manager to supervise the renovations.
[3] IT Design & Builders Sdn Bhd failed to complete the renovations. The Plaintiff then decided to engage Inch Builders & Solutions instead to undertake the renovations. Both parties agreed on the renovation costs at RM 85,000. Parties also agreed that the payment for the renovation would be made as work progressed.
[4] Up to 10 May 2016, the Plaintiff had paid a total sum of RM101,000 to Inch Builders & Solutions. These payments were made to the 3rd Defendant who was the marketing manager, on behalf of the company.
[5] However, like its predecessor, Inch Builders & Solutions failed to complete the renovation works. As a result of the failure, the Plaintiff was put to additional expense. He had to engage a new contractor to complete the outstanding renovation works, obtain further approval from the local authorities, and incurred other costs and expenses totalling RM131,707.00.
[6] The Plaintiff commenced proceedings against Inch Builders & Solutions in the Shah Alam Sessions Court vide Civil Suit No: BA-A52NCVC-326-08/2017 to recover the sum of RM131,707.00. Judgment in default of defence was obtained on 28 June 2018. The judgment sum was RM138,696.96, inclusive of interest at 5% on RM131,707.00 calculated from 8 August 2017 till 5 July 2018.
[7] The Plaintiff through his solicitors then demanded payment of the sum adjudged from all the Defendants. He received no response, hence the instant suit. The 1st and 2nd Defendants are sued in their capacity as directors of the Inch Builders & Solutions. The 3rd Defendant is sued as the marketing manager and/or director of the company.
[8] The Plaintiff's suit is premised on fraudulent trading pursuant to s 540(1) of the Companies Act 2016.
The 3rd Defendant's Application
[9] The 3rd Defendant's application for striking out is premised on Order 18 r 19(1) (a), (b) and (d), and/or inherent jurisdiction of the Court under O 92 of the Rules of 2012. As no affidavit evidence is admissible for the ground in para 19(1) (a), the affidavit in support filed by the 3rd Defendant is to be considered only for the purpose of paragraphs (b) and (d).
[10] The Defendant claims that the claim of the Plaintiff does not disclose a nexus with the 3rd Defendant, neither does it support a cause of action against him as he was only the marketing manager of Inch Builders & Solutions. He was not a director, as is evident from the records of the company maintained by Suruhanjaya Syarikat Malaysia. The claim against him by the Plaintiff is therefore an abuse of the Court's process.
The Law On Striking Out
[11] The law on striking out of pleadings is settled. This summary power is only to be exercised in plain and obvious cases and where the claim is obviously unsustainable. This principle has been restated in many cases. (See: Bandar Builders Sdn Bhd & Ors v. United Malayan Banking Corporation Bhd, [1993] 3 MLJ 36; Seruan Gemilang Makmur Sdn Bhd v. Kerajaan Negeri Pahang Darul Makmur & Anor; [2016] 3 MLJ 1; [2016] 3 CLJ 1; [2016] 2 AMR 795; See Thong & Anor v. Saw Beng Chong; [2013] 3 MLJ 235; [2013] 3 AMR 385).
[12] The 3rd Defendant relies inter alia, on the ground of no reasonable cause of action. To determine if the ground has merits, this Court would have to peruse the Statement of Claim to see if the material facts pleaded support a factual situation the existence of which entitles the Plaintiff to obtain from the Court a remedy agains
