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2011 MarsdenLR 5037
HASNAH MOHAMMED HASHIM
CHIN FOH TRADING SDN BHD & ANOR – Appellant
Versus
SEDIA MAKMUR SDN BHD & ORS – Respondent
Directors have a fiduciary duty to act in the best interest of the company, and claims based on fictitious transactions constitute an abuse of this duty.
Headnote:(A) Contracts - Breach of Contract - Directors' Duties - Allegations of fictitious claims for goods sold and delivered - Plaintiff claimed RM1,969,949.39 for goods sold and RM37,098,914.51 for fictitious Bankers Acceptance claims - Directors abused their position by submitting false claims without goods supplied. (Paras 15-23)
(B) Evidence - The testimonies were consistent and corroborated the Plaintiff's claims of non-existent transactions and the manipulative practices of the Defendants in the management of the first Plaintiff's accounts. (Paras 25-32)
Facts of the case:
The Plaintiff, a subsidiary, alleged that the first Defendant owed it substantial sums for goods that were claimed to be sold despite no actual deliveries, leading to fictitious Bankers Acceptance claims totaling RM37,098,914.51.
Findings of Court:
The court found that the Plaintiff proved its case on a balance of probabilities and established the abuse of directorial duties by the Defendants regarding the disbursement of Bankers Acceptance funds based on false documentation.
Issues: The court addressed whether contracts were fictitiously documented for personal gain by directors and the extent of loss suffered by the Plaintiffs as a result of these actions.
Ratio Decidendi: The court ruled that the Defendants had clearly abused their positions as directors by facilitating the disbursement of funds from fictitious claims, confirming their neglect of fiduciary duties.
Result: Plaintiff's claim allowed with costs.
| Table of Content |
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| 1. counterclaim for goods sold and ba claims. (Para 1 , 2) |
| 2. issues regarding debts and fictitious documents. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9) |
The Plaintiff in its counterclaim against the 1st Defendant claimed a sum of RM1,969,949.39 being the amount for goods sold and delivered. The Plaintiff also claimed the sum of RM37,098,913.51 for fictitious Bankers Acceptance (BA) claims made against the Chin Foh Tradings (CFT) BA facilities. The BA Facilities were duly paid out without actual goods being delivered.
Brief facts
CFT is a wholly own subsidiary of Chin Foh Berhad (CFB). The 2nd Defendant and 3rd Defendant were CFT and CFBs directors and had exercised full control over the said companies. CFT was given numerous credit facilities including the BA facilities from various banks such as Oversea Union Bank, Malayan Banking Berhad, Bumiputra-Commerce, Ambank, Alliance Bank Bank Islam Malaysia. The total amount of credit facilities is at least RM40.5million.
Issues
1. Whether the 1st Defendant owes the Plaintiff a sum of RM1,969,949.39 including interest thereon.
2. Whether the goods totaling RM37,098,914.51 purportedly sold and delivered by the 1st Defendant to the Plaintiff, are merely fictitious documents and/or created without actual goods sold, purchased or ordered.
3. Whether the goods totaling RM37,098,914.51 are created for purposes of claims against the Bankers Acceptance facilities of the 1st Plaintiff by the 2nd and 3rd Defendants with the cooperation, assistance and/or participation of the 1st, 4th, 5th and 6th Defendants.
4. Whether the clams against the Bankers Acceptance were made by the 2nd and 3rd Defendants or upon instructions of the 2nd and 3rd Defendants.
5. Whether the said 1st Plaintiffs Bankers acceptance claim sum of RM37,098,914.51 as particularized in Annexure A to the Defence of the Counterclaim of the 2nd and 3rd Defendant dated 15.5.2007 was refunded to the 1st plaintiff by the 1st Defendant.
6. Whether the money disbursed by the Bankers Acceptance claims is an abuse of the position of the 2nd and 3rd Defendants as directors of the 1st and 2nd Plaintiffs at the material time, for the personal benefit of the 2nd and 3rd Defendant.
7. Whether the monies disbursed by the Bankers Acceptance claims is in breach of the duties and/or fiduciary duties of the 2nd and 3rd Defendants as directors of the 1st and 2nd Plaintiffs at the material time.
8. Whether the 1st and/or the 2nd Plaintiffs suffered loss as a result of the said claims against the Bankers Acceptance.
9. Whether the 1st and/or the 2nd plaintiffs are entitled to the relief sought in the Defence and the Counterclaim dated 23.6.2006.
Sedia Makmur together with the 4th, 5th, 6th and 7th Defendants denies the counterclaim for the goods sold and delivered and of any fictitious BA claims. The 2nd and 3rd Defendants denied the fictitious BA claim or that there was any connivance or participation. It is the contention of the Defendants that the sums of monies paid out from the BA claims have been returned or refunded to CFT by Sedia Makmur. It is further contended that the 2nd and 3rd Defendant did not benefited personally form the claims. It is further submitted that there was no loss suffered by CFT as a result of the BA.
PW1, Cherng Chin Guan, is the Chief Financial Officer of CFB and its group of companies since November 2005. After the restructuring of the CFB group he was appointed as the Chief Financial Officer of CFB Resources Sdn. Bhd. In his Witness Statement he stated that Sedia Makmur owes a substantial sum to CFT for goods sold and delivered by CFT. He showed the statement of account of CFT showing the amount outstanding. He confirmed that the records show that the goods were sold and delivered accordingly. Based on the invoices the total amount owed is RM1,325,673.70. He further testified that CFT had carried out an internal investigation sometime in July 2006 and discovered that the Sedia Makmur purchases
