Salleh Abas LP:

Avel Consultants Sdn. Bhd. (Avel) is a subsidiary of another company called ELMEC Consultants Sdn Bhd. (Elmec). The first and second respondents were directors of both ELMEC and AVEL, whilst the third respondent is the director of ELMEC only, the parent company. They were appointed to the board of these two companies on 8 December 1981, 28 April 1983 and 7 May 1981 respectively. The managing director of Avel at the material time was the first respondent whilst that of Elmec was one Johari Jaalam. These two companies are carrying on business of consultants and advisers in all kinds of engineering works.

A company called Fleet Group Sdn. Bhd. on behalf of one of its subsidiaries called System Televisyen Malaysia Bhd. (STMB) by a letter dated 13 September 1983 appointed AVEL and ELMEC as consultants in respect of engineering project known as Channel Three. Para. 6 of the letter stipulated a term of the appointment to the effect that in the event of resignation of any key personnel involved in the Channel Three project and/or breakup in partnership in Avel Consultants Sdn. Bhd., AVEL and ELMEC were required to inform Fleet Group of such fact so that it could decide what to do next. For this project on 28 October 1983 AVEL received as first progress payment from STMB a sum of RM305,700.

On 30 November 1983 the three respondents formed a firm called Perunding AJZ with the object of carrying on business of consultant engineers, the same as that of Avel and Elmec. The firm commenced its business on 1 December 1983 and began to canvass for work. It even approached established clients of Avel and Elmec for the purpose of obtaining work.

However, even before Perunding AJZ was registered as early as 1 November 1983 the first respondent as Managing Director of Avel, acting in accordance with para. 6 of Fleet Group's letter of 13 April 1983 informed STMB that three key personnel of Avel, namely, Boon Kok Yong, Mark A Lian and Chee Yuen Foo would resign. It is observed that at that time none of these personnel had given any resignation letter. Chee Yuen Foo handed in his resignation letter at the end of January 1984, whilst Boon Kok Yong gave a similar letter on 6 February 1984. There is no evidence when Mark A Lian had given his resignation letter.

Pursuant to that notification on 18 November 1983 STMB terminated Avel's appointment as consultant engineers and subsequently appointed Perunding AJZ to carry on with the Channel Three project.

On 15 January 1984 Avel and Elmec sued the respondents for breach of fiduciary duties and after the defence was filed they took out summons to enter judgment in their favour praying inter alia, that:

(1) the respondents be declared that they were trustees for Avel and Elmec in respect of all professional charges received by them and/or their firm Perunding AJZ from 30 November 1983 up to 1 March 1984;

(2) the respondents be ordered to furnish an account of all sums so received during the aforesaid period; and

(3) for the said breach the respondents be ordered to pay damages which should be assessed by the Registrar.

George J who heard the summons refused the application and hence this appeal.

The law is clear that a director of a company is in fiduciary relationship with his company and as such he is precluded from acting in a manner which will bring his personal interest into conflict with that of his company. Clearly the formation of Perunding AJZ was carefully planned. The firm is not only a rival of AVEL and ELMEC of which at the material time the respondents were directors. It obtained the very job which was AVEL's job. Not only that, the firm canvassed for work from Avel's and Elmec's established clients, Kontena Nasional Sdn. Bhd. and there is even evidence to show that the Respondents engineered the resignations of the key personnel on Channel Three project. This is borne out by the evidence that the first respondent purporting to act as Avel's managing director informed S