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2011 MarsdenLR 3697
HAMID SULTAN ABU BACKER
MBF HOLDINGS BHD & ANOR – Appellant
Versus
DATO LOY TEIK NGAN & ORS – Respondent
Directors are not personally liable for corporate actions unless they assume personal responsibility; striking out requires clear grounds indicating the actions cannot be maintained.
Headnote:(A) Rules of the High Court 1980 - Orders 18 r. 19(1)(b), (c), (d) and 15 r. 6(2)(a) - Application for striking out action against directors based on negligence - Court examined whether personal liability can be imposed on directors if duty owed and negligence established - Key cases cited include Merrett v. Babb and Williams v. Natural Life Foods emphasizing distinction between personal liability of directors and company - The plaintiffs allege wrongful disposal of assets leading to financial loss due to alleged negligence in advice by directors during restructuring; they assert personal liability on grounds of wrongful joinder and aiding conspiracy. (Paras 1-11)
(B) Striking out application - Courts are cautious in exercising discretion to strike out cases - Personal liability of directors depends on the existence of a duty towards the plaintiff; reliance on the corporate veil to avoid personal responsibility examined in context of available evidence and previous case law. (Paras 12-15)
(C) Limitation Defense - Court considered whether the claim was time-barred, noting that action initiated within 12 years from the discovery of the cause of action as per the Limitation Act - Time starts to run upon discovery of the fraud or negligence. (Paras 10-11)
(D) Judgment - Application to strike out dismissed due to intertwining issues of fact and law necessitating a full trial. Costs awarded against the applicants. (Paras 16)
| Table of Content |
|---|
| 1. judgment summary on defendants' application. (Para 1 , 2) |
| 2. court's reasoning on striking out applications. (Para 3 , 7) |
| 3. plaintiffs' complaint against former directors. (Para 4 , 5) |
| 4. arguments on personal liability and duty of care. (Para 6 , 9 , 10) |
| 5. court's observations on limitation and action dismissal. (Para 11 , 12) |
| 6. discretion of the court in striking out actions. (Para 13 , 14 , 15) |
| 7. final ruling dismissing application with costs. (Para 16) |
Hamid Sultan Abu Backer J:
(1) This is my judgment in respect of the 8th and 9th defendants application (encl. 16) to strike out the plaintiffs action pursuant to O. 18 r. 19(1)(b), (c), (d) and alternatively the name of the 8th and 9th defendants in the writ and statement of claim be struck out pursuant to O. 15 r. 6(2)(a) of the Rules of the High Court 1980 .
(2) The central issue in this case is whether the 8th and 9th defendants who were directors of Arthur Andersen Corporate Advisory Sdn. Bhd. ("AA") and who were involved in the restructuring scheme presentation etc, could be made personally liable in negligence etc.
(3) The parties have relied on the following cases: Lai Yoke Ngan & Anor v. Chin Teck Kwee & Anor ; Merrett v. Babb (2001) QB 1174; Williams v. Natural Life Foods (1998) 2 All ER 577; Lim Soh Wah & Anor v. Wong Sin Chong & Anor & Another Appeal ; Aspatra Sdn. Bhd. & Ors v. Bank Bumiputra (M) Bhd & Anor (1987) 2 CLJ 377 ; (1987) CLJ (Rep) 50 ; Sunrise Sdn. Bhd. v. First Profile (M) Sdn. Bhd. & Anor ; Caparo Industries Plc v. Dickman (1990) 2 AC 605; Ernst & Young v. Maxbiz Corporation Berhad ; Kuala Lumpur Finance Berhad v. KGV & Associates Sdn. Bhd. ; Bank Bumiputra (M) Bhd v. Tetuan Wan Marican Hamzah & Shaik & 2 Lagi ; Trevor Ivory Ltd v. Anderson (1992) 2 NZLR 517; C Evans & Sons Ltd v. Spritebrand Ltd (1985) 2 All ER 415; Credit Lyonnais Bank Nederland NV v. Export Credits Guarantee Department (2000) 1 AC 486; Abdul Manaf Ahmad v. Mohd Kamil Datuk Hj Mohd Kassim .
Brief Facts
(4) The plaintiffs complaint in essence is in respect of the former directors of the plaintiffs for wrongful disposal of land and shares. And assert that AA did not adequately advise against the disposal and thereby facilitated the disposal of the assets when the plaintiffs were insolvent.
(5) The striking out application is premised on time bar under the Limitation Act 1953 (Revised 1981) and wrongful joinder of parties. And the applicants assert that it was AA who was appointed and they were not appointed personally. The learned counsel for the applicants submits as follows:
(i) They do not owe any duty of the case towards the plaintiffs in their personal capacity;
(ii) Alternatively, even if such duty was owed, which is denied, they did not act negligently;
(iii) Even if there was a duty owed and the 8th and 9th defendants have acted negligently, which is denied, the plaintiffs claim is time barred.
(6) The applicants also say that the plaintiffs allegation that the 8th and 9th defendants aided and abetted in the conspiracy carried out by the other defendants cannot be sustained as aiding and abetting are concept in criminal law and has no application in respect of civil claim for conspiracy. In addition the applicants say that the action is time barred as the engagement, transaction and the scheme took place more than 12 years ago. And assert that in the instant case the pleadings do not disclose a cause of action for conceded fraud and what is alleged is inaction on the part of the 8th and 9th defendants and not positive fraudulent conduct. And rely on the case of Abdul Manaf Ahmad (supra) where Gopal Sri Ram JCA had referred to Rustomji on the Law of Limitation and Adverse Possession, 7th edn in which it was stated:
There must be some affirmative act designed to prevent, and which does prevent, the discovery of the cause of action. Mere silence or passiveness (there being no fiduciary relation or act of the party calculated to deceive or lull inquiri
