The Federal Court clarified that directors’ liability for company debts under the EPF Act is joint and several irrespective of the judgment's specific wording.

Nallini Pathmanathan FCJ:

Introduction

[1] The issue before the Federal Court turned on what is meant by "joint liability" as opposed to "joint and several liability". In the instant appeal, judgment was obtained against the appellant here, and one other, premised on their personal liability as directors for the failure of the employer company to make Employment Provident Fund payments to its employees. The order of the High Court, the Court of first instance, did not expressly specify the type of liability imposed upon two debtors, one of whom is the appellant. The provisions of the Employees Provident Fund Act, more particularly s 46, expressly provides for the joint and several liability of directors of an employer company, where there is a failure to make the requisite employer's contribution.

[2] The issue before the courts below was the nature of the liability against each of the two debtors, given that the order of the trial Court adjudging liability against them did not expressly specify whether each debtor was liable for the full quantum or not. Both the courts below were of the view that the failure to include the phrase "jointly and severally" in a Court order would mean that each defendant would be only liable for a portion of the judgment sum, proportionate to his share/interest/obligation.

[3] We reversed the decisions of the courts below and now give our reasons for doing so.

Salient Facts

[4] The Employees' Provident Fund Board ('the Board') filed a Sessions Court suit against a company, Fix Interior Collections Sdn Bhd ('the company') and its directors, two siblings named Edwin Cassian Nagappan @ Marie ('Edwin') and Bernard John Nagappan @ Marie Alphonso Michael, premised on the company's failure to make employer contributions on behalf of its employees.

[5] The parties recorded a consent judgment dated 24 April 2013, where each of the three defendants agreed to pay the Board the arrears amounting to RM133,697.00 for the period from October 2010 until January 2012 in 24 installments, together with dividends and interest as well as legal fees of RM800.00. The subject of contention in the subsequent enforcement proceedings was that the consent judgment did not include the phrase that the defendants would be "jointly and severally" liable for the judgment sum.

[6] The defendants failed to comply with the terms of the consent judgment as they only made part-payment, leaving an outstanding balance of RM90,857.00 with dividends and interest.

[7] The Board then issued a bankruptcy notice against Edwin alone. It was served by way of substituted service. Likewise, the creditor's petition which the Board presented against Edwin was also served by way of substituted service.

The High Court

[8] Subsequently, Edwin applied to set aside the bankruptcy notice and the creditor's petition. The Senior Assistant Registrar of the High Court allowed the application to set aside both the bankruptcy and the creditor's petition. Dissatisfied, the Board appealed to the judge in chambers. The Board's appeal was dismissed by the judge of the High Court.

[9] The High Court judge affirmed the decision of the Senior Assistant Registrar which relied on the Court of Appeal case of Sumathy Subramaniam v. Subramaniam Gunasegaran & Anor, 2017 MarsdenLR 2513 ('Sumathy') which held that in a case where bankruptcy proceedings were initiated simultaneously against two judgment debtors, they could not both be held liable for the whole judgment sum.

[10] The High Court therefore ordered them to pay the sum in equal proportions, stating that it was bound by Sumathy. It further held that if the words "jointly and severally" liable were not inserted into the consent judgment, the Court cannot look behind the judgment.

The Court Of Appeal

[11] The Board's appeal to the Court of Appeal was similarly unsuccessful and was dismissed on 29 April 2019. The Board contended before the Court of Appeal that its action against Edwin was filed pursuant to s 46 of the Empl