Fraudulent trading under section 304 of CA 1965 requires evidence of intent to defraud, and the corporate veil can be lifted upon showing such intent.

[1] This is an appeal from a judgment of S Nantha Balan J, sitting in the High Court of Kuala Lumpur, dismissing the appellant's claim after full trial.

[2] We heard the appeal on 11 April 2018. After hearing both counsel for the appellant and the respondent, we accordingly, at the end of the arguments, allowed the appeal with costs of RM45,000.00 here and below subject to payment of allocator fees. Our reasons for doing so now follow.

[3] For the purpose of the judgment, the parties will be referred to as they were in the High Court.

Brief Facts

[4] The pertinent facts are as follows:

4.1 On or about 16 February 2009, the plaintiff commenced an action against the 1st defendant and 2nd defendant vide Kuala Lumpur High Court Civil Summons No: S-22-93-2009 ("Suit 93"). At the material time, the 1st defendant was one of two directors and held 100% shareholding in the 2nd defendant.

4.2 A Consent Judgment ("CJ") was entered between the parties on 9 February 2011. Pursuant to the CJ, the plaintiff together with the 1st defendant and 2nd defendant agreed to settle the Suit 93. The material terms of CJ are as follows:

(a) The 1st defendant and 2nd defendant shall pay RM1,150,000.00 to the plaintiff as full and final settlement ("Settlement Sum"). The 1st defendant's liability is discharged after the first RM500,000.00 is paid.

(b) The Settlement Sum is to be paid by instalments in accordance with a schedule set out in the CJ.

(c) In the event of a default on the terms of payment, the plaintiff must first issue a notice to the 1st defendant and/or the 2nd defendant (whichever is applicable), giving a five (5) months period to remedy the default ("5-Month Notice").

(d) In the event the 1st defendant and/or the 2nd defendant still fail to remedy the default, the plaintiff can execute the CJ for the sum of RM1,450,000.00 ("Full Judgment Sum") together with interest at 5% per annum from the date of default until full realisation, minus the sums already paid under CJ.

4.3 The 1st defendant and/or the 2nd defendant paid a total of RM654,000.00 in accordance with the terms of the CJ and towards satisfaction of the Settlement Sum. At that stage, the obligation to pay the balance of the Settlement Sum, ie RM496,000.00 was solely on the 2nd defendant.

4.4 Subsequently, the 2nd defendant breached the CJ when it failed, refused and/or neglected to pay the instalments for the months of March 2013 to June 2013 as prescribed under the CJ. To this end, the plaintiff issued 5-Month Notices in respect of each of these breaches, all of which expired without any of the default being remedied.

4.5 The Full Judgment Sum of RM796,000.00 (RM1,450,000.00 + interest of 5% per annum - the sum already paid by the 1st defendant/2nd defendant under the CJ (ie RM654,000.00)) remains outstanding and due to the plaintiff.

4.6 The plaintiff became aware three (3) Consultancy Projects that the 2nd defendant was engaged with PLB-KH Bina Sdn Bhd, Tech-Art Sdn Bhd and Putrajaya Holdings Sdn Bhd ("the 3 Projects"). In 2011, the 2nd defendant passed 3 resolutions ("the Resolutions") to reassign the consultancy fees due to the 2nd defendant for the 3 Projects to the 3rd defendant, a company incorporated on 4 September 2009 (of which the 1st defendant is a director).

4.7 The plaintiff contended that the Resolutions were made to defraud the plaintiff as a creditor the payment of the balance sum due under the terms of the CJ.

4.8 The plaintiff then initiated an action against 1st defendant, 2nd defendant and 3rd defendant in Kuala Lumpur High Court on 3 November 2016,