1. Claim for outstanding employees provident fund contributions against company directors under the Employees Provident Fund Act 1991. (Para 4 , 5 )
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2023 MarsdenLR 2629
HIGH COURT (SHAH ALAM)
ROZI BAINON, JC
Lembaga Kumpulan Wang Simpanan Pekerja – Plaintiff
Versus
Mohd Abdul Karim bin Abdullah & Ors – Defendant
BA-22NCvC-496-12/2022
Important Points
Under Section 46(1) of the Employees Provident Fund Act 1991, directors are jointly and severally liable for unpaid contributions. This statutory liability is absolute and not extinguished by a company's subsequent winding up or financial crisis, justifying summary judgment if no bona fide triable issue exists.
Subject
Civil Law - Employment and Statutory Contributions
Act Referred
Rules of Court 2012: O.14
Companies Act 1965
Employees Provident Fund Act 1991: S.2, S.45(3), S.46, S.49, S.64, S.65(1)
Rules of Supreme Court 1975: O.14
Companies Act 1965
Employees Provident Fund Act 1991: S.2, S.45(3), S.46, S.49, S.64, S.65(1)
Rules of Supreme Court 1975: O.14
Headnote
(A) Employees Provident Fund Act 1991 - Section 46(1) - Joint and several liability of directors for unpaid contributions - Statutory law must be given full effect and cannot be stultified, varied, or whittled down by the courts (Paras 31, 36).
(B) Rules of Court 2012 - Order 14 - Summary Judgment - A plaintiff is entitled to summary judgment if the case is proved clearly and the defendant fails to raise a bona fide triable issue (Paras 9, 14, 22) - Bare denials in a defence do not constitute evidence and are merely challenges to the other side to show proof (Para 18).
Facts of the case:
A statutory body initiated a suit against the directors of a company for outstanding employee provident fund contributions for the period from September 2021 to July 2022. The defendants argued that the company had faced a financial crisis and was subsequently wound up with an interim liquidator appointed, contending that they should not be held personally liable for the contributions.
Findings of Court:
The court found that the claim was not made in bad faith but was a pursuit of a statutory duty. The appointment of an interim liquidator after the period of default did not absolve the directors of their joint and several liability under the governing Act, as the defaults occurred during their tenure as directors.
Issues: Whether the claim was made mala fide; whether directors are personally liable for unpaid contributions under Section 46(1) of the Act; and whether the winding up of the company and appointment of a liquidator provided a triable issue to resist summary judgment.
Ratio Decidendi: Section 46(1) of the Employees Provident Fund Act 1991 creates a statutory obligation making directors jointly and severally liable for unpaid contributions. This liability is not extinguished by the company's financial distress or subsequent winding up, provided the default occurred during the directors' tenure. Where the plaintiff provides contemporaneous documentary evidence of the debt and the defendant offers only bare denials or irrelevant facts, summary judgment is appropriate as there are no triable issues.
Result: Application for summary judgment allowed.
(B) Rules of Court 2012 - Order 14 - Summary Judgment - A plaintiff is entitled to summary judgment if the case is proved clearly and the defendant fails to raise a bona fide triable issue (Paras 9, 14, 22) - Bare denials in a defence do not constitute evidence and are merely challenges to the other side to show proof (Para 18).
Facts of the case:
A statutory body initiated a suit against the directors of a company for outstanding employee provident fund contributions for the period from September 2021 to July 2022. The defendants argued that the company had faced a financial crisis and was subsequently wound up with an interim liquidator appointed, contending that they should not be held personally liable for the contributions.
Findings of Court:
The court found that the claim was not made in bad faith but was a pursuit of a statutory duty. The appointment of an interim liquidator after the period of default did not absolve the directors of their joint and several liability under the governing Act, as the defaults occurred during their tenure as directors.
Issues: Whether the claim was made mala fide; whether directors are personally liable for unpaid contributions under Section 46(1) of the Act; and whether the winding up of the company and appointment of a liquidator provided a triable issue to resist summary judgment.
Ratio Decidendi: Section 46(1) of the Employees Provident Fund Act 1991 creates a statutory obligation making directors jointly and severally liable for unpaid contributions. This liability is not extinguished by the company's financial distress or subsequent winding up, provided the default occurred during the directors' tenure. Where the plaintiff provides contemporaneous documentary evidence of the debt and the defendant offers only bare denials or irrelevant facts, summary judgment is appropriate as there are no triable issues.
Result: Application for summary judgment allowed.
Legal Category Hierarchy
- practice and procedure
- employment law
- company law
Advocates:
Adilah Abdul Wahid (Nashili & Co) for the plaintiff.
Amira Nur Nadia bt Azhar (Rajashree) for the defendants.
Adilah Abdul Wahid (Nashili & Co) for the plaintiff.
Amira Nur Nadia bt Azhar (Rajashree) for the defendants.
Table of Contents
2. Whether directors are personally liable for unpaid contributions despite company winding up and appointment of an interim liquidator, and whether the claim is mala fide. (Para 23 , 24 , 25 , 26 , 29 , 30 , 47 , 49 )
3. Statutory liability of directors is joint and several; company winding up is irrelevant to contributions due during the directors' tenure. (Para 28 , 31 , 32 , 33 , 36 , 40 , 41 , 43 , 44 , 53 , 55 , 56 )
4. Under Section 46(1) of the Employees Provident Fund Act 1991, directors are jointly and severally liable for unpaid contributions due during their tenure. (Para 31 , 36 )
5. Application for summary judgment allowed. (Para 59 , 60 )
6. Are company directors personally liable for unpaid employees provident fund contributions?
Yes, under Section 46(1) of the Employees Provident Fund Act 1991, directors of a company are jointly and severally liable with the company for contributions that remain unpaid. (Para 31 , 36 )
7. Does the winding up of a company or appointment of a liquidator exempt directors from liability for prior unpaid contributions?
No. Liability is based on the period during which contributions were due. If the unpaid contributions accrued while the defendants were directors, the subsequent appointment of a liquidator is irrelevant to that liability. (Para 33 , 40 , 55 )
8. What is the threshold for granting summary judgment under Order 14 of the Rules of Court 2012?
Summary judgment is granted if the plaintiff establishes a prima facie case and the defendant fails to raise a bona fide triable issue. Bare denials or unsubstantiated assertions do not constitute a triable issue. (Para 9 , 10 , 18 , 22 , 56 , 57 )
Rozi Bainon JC:
GROUNDS OF JUDGMENT
Introduction
[1]The interlocutory application filed by the Plaintiff before me is for a summary judgment under Order 14 Rules of Court 2012
[2]On 31-5-2023, I allowed the Plaintiff’s application with costs. The Defendants are aggrieved and appeal to the Court of Appeal.
[3]This judgment contains the reasons for my decision.
The background facts
[4]The Plaintiff instituted a suit against all the 4 Defendants for the outstanding employees provident fund contributions. The outstanding amounts are as follows:
(a)against the First, Second and Third Defendants, jointly or severally, is RM2,951,000.00 for the period from September 2021 till July 2022 together with the dividend and late payment charge.
(b)against the Fourth Defendant, is RM330,776.00 for the period of July 2022 together with the dividend and late payment charge.
[5]In the defence, the Defendants admit as below −
(a)the Defendants are the registered directors of Serba Dinamik Group Berhad (No. Pendaftaran: 200401024953/663460-T) [after this is refer to as “the Company”]. Based on the record, the First, Second and Third Defendants are the directors of the Company from 12-9-2006 till now and the Fourth Defendant is the director of the Company from 9-6-2006 till now.
(b)the Company is incorporated under the Companies Act 1965. On 23-8-2022, the Company has been winding up at the Kuala Lumpur High Court and a Licensed Liquidator was appointed as the Interim Liquidator for the Company.
(c)under section 2Employees Provident Fund Act 1991 (Act 452)vide reference no.: 16264504 and is responsible for the monthly payment of the EPF contribution for the employees to the Plaintiff. Section 2Act 452
“employer” means the person with whom an employee has entered into a contract of service or apprenticeship and includes –
Provided that no such officer shall be personally liable under this Act for anything done or omitted to be done in good faith by him as an officer of such employer;
(a)a manager, agent or person responsible for the payment of salary or wages to an “employee”;
(b)any body of persons whether or not statutory or incorporated; and
(c)any Government, department of Government, statutory bodies, local authorities or other bodies specified in the Second Schedule and, where an employee is employed with any such Government, department, authority or body or with any officer on behalf of any such Government, department, authority or body, the officer under whom such employee is working shall be deemed to be an employer:
(d)the Defendants denied and put the Plaintiff of a strict proof pertaining to the outstanding EPF contribution amount.
(e)the Defendants pleaded as follows:
Defendan-Defendan tidak pernah menerima sebarang notis dan/atau dokumen dan/atau butiran berkaitan dengan baki tunggakan amaun taksiran caruman KWSP tersebut.
Plaintif diletakkan atas beban pembuktian bahawa –
(i)baki tunggakan amaun taksiran caruman KWSP tersebut adalah bagi pekerja-pekerja yang bekerja dan/atau masih bekerja dengan Defendan Pertama bagi tempoh September 2021 hingga Julai 2022 seperti mana yang dituntut.
(ii)baki tunggakan amaun taksiran caruman KWSP tersebut adalah tidak jelas dan/atau tidak tepat dan/atau tidak terperinci seperti mana yang dituntut.
kadar caj lewat yang didakwa adalah berlebihan, tidak berpatutan dan tidak menepati undang-undang.
Serba Dinamik Group Berhad menghadapi krisis kewangan pada/sekitar tahun 2021 lagi.
pada 10-2-2022, Serba Dinamik Group Berhad memohon di Mahkamah Tinggi Kuala Lumpur bagi syarikat diletakkan di bawah pengurusan kehakiman dan bagi pelantikan pengurus kehakiman.
Serba Dinamik Group Berhad berniat untuk melaksanakan kewajipan statutori mereka termasuk membayar caruman KWSP bagi pekerja-pekerjanya. Sepanjang November 2021, Serba Dinamik Group Berhad sebagai majikan telah membayar caruman KWSP bagi pekerja-pekerjanya.
sejak 23-8-2022, Serba Dinamik Group Berhad digulungkan dan diletakkan dalam kuasa dan kawalan Interim Liquidator, segala uru
