Chew Soo Ho JC:

THE PARTIES

[1]When this suit was filed on 9 October 2007, the liquidator at the material time was Datuk Tan Kim Leong. By an Order of the High Court dated 7September 2010 vide Companies Winding Up No MT4–28–122 of 2004, both the plaintiffs were substituted as liquidator in place of Datuk Tan Kim Leong, the initial liquidator appointed for Par-Advance Sdn Bhd.

[2]The first to ninth defendants were the directors of Par-Advance while the third to seventh defendants and tenth to 13th defendants were the shareholders at all material time. However, as at 25 April 2001 and 2 May 2001, it was agreed that the directors of the company comprised only the first and third defendants. This is the admitted or agreed fact as shown in bundle J tendered to court.

[3]On 1 December 2011 ie the second day of the trial, the plaintiffs withdrew the claim against the second and fifth to 12th defendants with the consent of each party bearing their own costs and upon that withdrawal, the claim against the second and fifth to 12th defendants were accordingly struck out with no liberty to refile and with an order that the costs will be borne by respective parties. The fourth defendants had passed away, his case was withdrawn and struck out accordingly. This suit is consequently proceeded against the first, third and 13th defendants only ('the defendants' unless otherwise named).

FACTUAL MATRIX OF THE CASE

[4]The plaintiffs' claim is premised on s 304(1)

[5]As against the first and third defendants who were the directors of the company at the material time, the plaintiffs alleged that the two defendants by passing the directors' resolutions dated 25 April 2001 and 2 May 2001 respectively to pay the said dividends, had wilfully paid or permitted to be paid dividends to shareholders out of what they knew were not profits of the company thereby in breach of s 365

[6]As against the third and 13th defendant, the plaintiffs alleged that both defendants had received the second and third dividend payments when they knew fully well that the same were effected unlawfully and hence the plaintiffs contended that the third and 13th defendants were liable as constructive trustees for all the payments of dividends received.

[7]The first defendant denied his liability and averred that he was not involved in the decisions to declare the two dividend payments nor was he personally involved in the management of the business of the company; he merely signed the said resolutions on the instruction of the third defendant. Personally, the first defendant had not received any of the dividends as he was not a shareholder.

[8]The third and 13th defendants contended, inter alia, that the dividend payments were made to the shareholders out of the profits of the company after the provisions had been made for contingent liabilities in respect of Kemas' claims against the company and denied the plaintiffs' claim.

THE ISSUES

[9]The issues as agreed by the parties to be tried are contained in bundle Q. With the withdrawal by the plaintiffs of the claim in respect of the first dividend payment of RM9m, the issues remained for trial are as follows:

(a)whether the first and third defendants as directors of the company, in passing the directors' circular resolutions of 25 April 2001 and 2 May 2001 respectively and in paying or permitting to be paid to shareholders these second and third dividend payments amounting to RM2.5m and RM1.8m respectively, had done so wilfully knowing that what they paid or permitted to be paid were not profits of the company and/ or had carried on the business of the company with the intent to defraud the creditors of the company thereby liable under s 365(2)(b)s 304(1)

(b)whether the third and 13th defendants as shareholders of the company and recipients of the second and third dividend payments well knew that such payments to them were effected in the circumstances as stated above in breach of s 304(1)s 365(2)(b)

(c)whether the plaintiffs are entitled to the re