Vernon Ong Lam Kiat JC:

[1] On 4 January 2006 the plaintiff obtained judgment against the 5th defendant IDSM Electronics Sdn Bhd ('IDSM') for US$90,585.01 on a trade debt for electronic components sold and delivered by the plaintiff to IDSM. The plaintiff claims that the assets and funds of IDSM were unlawfully dissipated by the 1st, 2nd, 3rd and 4th defendants as directors and/or shareholders of IDSM. The plaintiff is seeking a declaration that the 1st, 2nd, 3rd and 4th defendants as directors of IDSM are personally liable, jointly and/or severally, to the plaintiff for the judgment debt of US$90,585.01 due and owing by IDSM to the plaintiff and other consequential orders.

The Facts

[2] The salient facts as presented by the evidence are as follows:

(1) Between 12 May 203 to 14 November 2003 the plaintiff sold and supplied electronic components to IDSM. IDSM failed to pay the purchase price of the goods amounting to US$90,585.01. On 5 March 2004 the plaintiff filed a civil suit at the Johor Bahru High Court under Civil Suit No: 22.190.2004 ('2004 action') against IDSM claiming the sum of US$90,585.01. IDSM filed a defence and counter-claim for US$26,356.39.

(2) In 2004 all of the physical assets of IDSM including its stocks, plant, equipment and machinery were transferred to its holding company ('China Enersave Ltd') in Singapore.

(3) In 2004 IDSM wrote-off all of its physical assets including its stocks, plant, equipment and machinery costing RM1,462,036.

(4) The 3rd and 4th defendants signed a board resolution dated 29 October 2004 authorising the 4th defendant to sign a deed of assignment for the transfer of trade receivables of US$794,000 (due to IDSM from its trade debtor Perle Systems Ltd) to China Enersave Ltd.

(5) By a deed of assignment dated 31 October 2004 ('Deed of Assignment') IDSM transferred the said trade receivables to China Enersave Ltd.

(6) IDSM's Reports And Financial Statements as at 31 December 2004 ('2004 Audited Accounts') was qualified by its auditor in the following manner:

We would like to draw your attention to the followings (sic):

1. The Company ceased operation in December, 2004 and during the financial year, the Company has significantly written off its physical and tangible assets;

2. The Company made a provision for stocks of RM2,106,859 comprising mainly raw materials which the Company has claimed to be obsolete, damaged and of little resale values;

3. Plant and equipment with net book values of RM308,189 were written off on the ground of their non-functional condition and little disposal value. Included in the written-off plant and equipment are machinery costing RM1,462.036 and accumulated depreciation of RM1,417,179 as at year's end;

4. The Company made a provision for all its debts existing at year end amounting to RM4,527,688. Certain legal actions had been taken against the trade sum of RM1,050,453; and

5. The Company's financial performance was in significant loss position for the current and previous financial years.

In view of the significance of the matters discussed in the preceding paragraphs, we are unable to form any opinion as to whether the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and approved accounting standards in Malaysia so as to give a true and fair view of:

(i) the state of affairs of the Company as at 31 December 2004 and of the results and cash flows of the Company for the financial year ended; and

(ii) the matters required by s 169 of the Companies Act, 1965 to be dealt with in the financial statements. (emphasis added)

(7) On 4 January 2006 the plaintiff entered judgment against IDSM for US$90,585.01 in the 2004 Action after IDSM abandoned its defence and counter-claim.

(8) The 1st and 2nd defendants are directors and shareholders of IDSM; the 1st defendant resigned as director on 1 June 2004.

(9) The 3rd and 4th defendants are directors of IDSM.

(10) The 3rd defendant is also a director of China Enersave Ltd.

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