The lawful declaration of dividends under statutory provisions hinges on companies' solvency at the time of declaration, independent assessment, and proper legal procedures.

Introduction

[1] The two Suits before this Court, namely KLHC WA-22NCC-472-08-2019 ("Suit 472") and KLHC WA-22NCC-210-05-2020 ("Suit 210"), were consolidated to be heard together.

[2] The relief sought by the Plaintiff in Suit 472 against the former directors, current directors and shareholders of the 1st Defendant (interchangeably "the Company") is grounded on an allegation of unlawful declaration and distribution of dividend of the Plaintiff in the sum of RM27,000,000.00.

[3] The relief sought in Suit 210 by the Plaintiff is to claim monies allegedly dissipated to the Defendants premised upon a Supplemental Forensic Report which was completed on 6 May 2020 ("Supplemental Forensic Report") and a Supplemental Liquidator Report dated 21 May 2020. It is the purported finding of the said Reports that RM6,240,000.00 was paid to the Defendants from the Plaintiff's cash flow, therefore enriching themselves without paying compensation for Liquidated and Ascertained Damages ("LAD") made by purchasers pursuant to late delivery of vacant possession by the Plaintiff.

[4] After a full trial lasting 16 days conducted virtually online by using the Zoom video conferencing platform, where the Plaintiff called 6 witnesses whilst the Defendants called 5 witnesses, I had on 9 January 2023 allowed the Plaintiff's claim in part only for Suit 472 and dismissed Suit 210. This judgment contains the reasons for my decision.

Background

[5] The background facts and events are culled from the Parties' Agreed Facts and cause papers.

[6] The Plaintiff was a holding and development Company. It owned a piece of land in Puchong, Negeri Selangor Darul Ehsan ("the said Land") which it developed into a development known as "i-32 Corporate Industrial Park" comprising 32 units of 3 -storey semidetached industrial factories ("the Project").

[7] There were 6 unsold units as follows:

(i) HS(D)296626, No PT 5918, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 1");

(ii) HS(D)296627, No PT 5919, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 2");

(iii) HS(D)296629, No PT 5921, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 3");

(iv) HS(D)296630, No PT 5922, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 4");

(v) HS(D)296644, No PT 5936, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 5"); and

(vi) HS(D)296645, No PT 5937, Pekan Puchong Perdana, Daerah Petaling, Negeri Selangor Darul Ehsan ("Property 6").

[8] Property 2 and Property 6 are small pieces of empty land of 75.99 sq metres (818 sq ft) and 94 sq. metres (1,012 sq ft) respectively in size. They are not factory lots.

[9] As for the Defendants ("D"):

[10] The Project was completed and the Plaintiff delivered vacant possession of the sold units in March 2016.

[11] On 7 December 2016, the Plaintiff declared dividends of RM27 million to its shareholders. The particulars of the dividend payable are:

[12] The dividend declared was distributed partially in cash and in kind with the remaining unsold 6 properties as follows:

[13] D5 nominated its subsidiary, D6 to receive Property 1 to Property 4 by entering into sale and purchase agreements ("SPA") with the Plaintiff at the total purchase consideration of RM17,659,600.00 which was contra with the dividend payable to D5, whilst D3 nominated his company, D7 to receive Property 5 and Property 6 by entering into SPAs with the Plaintiff at the total purchase consideration of RM5,628,600.00 which was contra with the dividend payable to D3.

[14] On 30 October 2017, the Plaintiff was ordered to be wound up.

[15] Some 9 months later, on 19 July 2018, Mr Tan Wai Leng from