TAY KEONG KOK & ORS vs EASTMONT SDN BHD & ANOTHER APPEAL

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

COURT OF APPEAL PUTRAJAYA
TAY KEONG KOK & ORS – Appellant
Versus
EASTMONT SDN BHD & ANOTHER APPEAL – Respondent

Petitioner Advocates:M Rajenthirakumar R Malaiapan,Moses @ Moses Pillai R Susayan,Hiu Yeat Fong ,Respondent Advocate: Marcus Tan Seng Peng,Eunice Kwong Sook Wen

Judgement Key Points

What is the scope of courts that may hear a fraudulent trading action under s540 CA 2016? What must be proven to establish fraudulent trading under s540 CA 2016, including whether intent to defraud can be inferred and whether dishonesty is required? What constitutes "knowingly a party to the carrying on of the business" under s540 CA 2016 and how can liability be imposed on directors or related parties?

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What is the scope of courts that may hear a fraudulent trading action under s540 CA 2016?

What must be proven to establish fraudulent trading under s540 CA 2016, including whether intent to defraud can be inferred and whether dishonesty is required?

What constitutes "knowingly a party to the carrying on of the business" under s540 CA 2016 and how can liability be imposed on directors or related parties?

JUDGMENT

Mohd Nazlan Mohd Ghazali JCA:

Introduction

[1] This appeal arises from the decision of the High Court which allowed the respondent's claim of fraudulent trading under the Companies Act 2016 and of the tort of conspiracy to injure against the appellants (the defendants at the High Court ).

[2] When a company is wound up, its creditors will take steps to recover their money. However, it is usually the case that there would be insufficient remaining assets of the company to ensure full repayment. In such a situation, the creditors will try to achieve repayment by extracting funds from the directors of the company, more so when there are allegations that the business of the company was being carried on for fraudulent purposes. The fraudulent trading prohibition as presently contained in s 540 of the Companies Act 2016 has been designed to combat such corporate misconduct as it enables the entire course of the director's conduct to be examined. If proven, the corporate veil of the company may be lifted as a crucial statutory exception to the common law doctrine of separate legal entity and the limited liability principle, thus making those in default personally responsible w

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COURT OF APPEAL PUTRAJAYATAY KEONG KOK & ORS – AppellantVersusEASTMONT SDN BHD & ANOTHER APPEAL – Respondent

What is the scope of courts that may hear a fraudulent trading action under s540 CA 2016?

What must be proven to establish fraudulent trading under s540 CA 2016, including whether intent to defraud can be inferred and whether dishonesty is required?

What constitutes "knowingly a party to the carrying on of the business" under s540 CA 2016 and how can liability be imposed on directors or related parties?

Cases Referred (3)

COURT OF APPEAL PUTRAJAYA
TAY KEONG KOK & ORS – Appellant
Versus
EASTMONT SDN BHD & ANOTHER APPEAL – Respondent