Khh (Puchong) Hardware Sdn Bhd (Company No.: 1000943-D) v 1. Chong Chee Onn (Nric No.: 720327-14-5099) (WA-22NCC-494-10/2020)

CHONG CHEE ONN (NRIC No.: 720327-14-5099)

CHONG CHEE HOE (NRIC No.: 740508-05-5007)

CHONG YEE YIN (NRIC No.: 790218-14-5114) trading as Yin Metal Works Enterprise

LEE MEI YIN (NRIC No.: 760912-14-5846)

WANG MEI LAN (NRIC No.: 690112-14-5846) trading as Top Perform Marketing & Services

CHEE HOE STEEL & TRADING SDN BHD (Company No.: 0938917-A)

CF2 METAL SDN BHD (Company No.: 1295333-A) …DEFENDANTS GROUNDS OF JUDGMENT 2 Background Facts [1] This judgment deals primarily with the Plaintiff’s claim under Section 540 of the Companies Act 2016 for fraudulent trading. The judgment explores the manner in which the business of the 6th Defendant was being carried on and whether it was carried on to defraud its creditors or for a fraudulent purpose. The other consideration is whether the 1st to the 4th Defendants are persons who are knowingly parties to the carrying on of the business. The Parties [2] The Plaintiff is a company in the business of selling steel plates and steel products. The 6th Defendant (‘CHSSB’) was a customer of the Plaintiff. [3] The 1st to 4th Defendants are family members (‘the Chong Family’).

The 1st Defendant (‘CCO’) is known to the Plaintiff as ‘Ah Onn’. His wife is Ms Wang Mei Lan (‘WML’). They live at No. 14, Jalan 3/149A, Taman Bukit Intan, Sri Petaling, 57000 Kuala Lumpur (‘No. 14 Bukit Intan’).

The 2nd Defendant (‘CCH’) is the 1st Defendant’s younger brother. His wife is the 4th Defendant (‘LMY’). They live at No. 17, Jalan 5/149G, Taman Bukit Indah, Sri Petaling, 57000 Kuala Lumpur (‘No. 17 Bukit Indah’).

The 3rd Defendant (‘CYY’) is the 1st and 2nd Defendants’ younger sister. 3 Sun CF Hardware Sdn Bhd (‘SCF SB’) [4] CCO was a director of SCF SB. CCO and WML operated SCF SB’s bank account whilst CCH and CYY were previously working in SCF SB. [5] Initially, SCF SB was operating from No. 22, Jalan Taming P/1, Taming Jaya, 43300 Balakong, Selangor Darul Ehsan (‘No. 22 Jalan Taming’). Around December 2014, SCF SB moved its entire operation to No. 20 Jalan Taming P/1, Taming Jaya, 43300 Balakong, Selangor (‘No. 20 Jalan Taming’). [6] On 28.5.2018, SCF SB was wound up upon the petition of one Zinco Manufacturing Sdn Bhd. Chee Hoe Steel & Trading Sdn Bhd (‘CHSSB’) [7] CHSSB’s directors and shareholders are CCH and LMY. Initially CCH alone was operating CHSSB’s account with RHB Bank Berhad (‘the RHB Account’), subsequently however, LMY and CYY were made joint signatories to the RHB Account. [8] On records, CHSSB’s business address is at No. 17 Taman Sri Endah where CCH and LMY lived. However, CHSSB operated from No. 20 Jalan Taming, i.e., the same address as SCF SB. CHSSB ceased operation at No. 20 Jalan Taming sometime in the 3rd quarter of 2018. 4 Top Perform Marketing & Services (‘TPMS’) [9] There are several entities known as ‘Top Perform’. One of them is TPMS, a sole proprietorship owned by WML. TPMS’s business address is at No. 14 Bukit Intan where CCO and WML live. CF2 Metal Sdn Bhd (‘CF2 SB’) [10] After CHSSB ceased operation in its factory at No. 20 Jalan Taming, CF2 SB was incorporated on 18.9.2018. On records, CYY is the sole director and shareholder of CF2 SB. [11] CF2 SB’s business address is No. 1 Jalan BJ 2-7, Kawasan Perindustrian Balakong Jaya 2, 43300 Seri Kembangan, Selangor Darul Ehsan (‘No. 1 Jalan BJ 2-7 Balakong’). Yin Metal Works Enterprise (‘Yin Metal’) [12] On records, LMY is also the sole proprietor of Yin Metal. Yin Metal was incorporated on 4.9.2019. Its place of business is at No. 20, Jalan Wan Malini where CCH and LMY lived. Hoe Metal Works Enterprise (‘Hoe Metal’) [13] CCH is the sole proprietor of Hoe Metal. During cross examination, CCH gave evidence that he set up Hoe Metal in 2020 but it was not in operation. 5 Purchases from Plaintiff [14] PW1, the Plaintiff’s director who dealt with CCO knew CCO when PW1 was a salesman serving SCF SB. When PW1 set up the Plaintiff, CCO started purchasing metal products on behalf of SCF SB from the Plaintiff. This was circa 2011. PW1 said the Plaintiff had only liaised with CCO and no one else. [15] By November 2015, SCF SB owed the Plaintiff RM375,985-88 for goods sold and delivered. According to PW1, CCO told the Plaintiff that SCF SB could no longer pay the Plaintiff as it had too many creditors. CCO told the Plaintiff that SCF SB had been reduced to a shell company. CCO sold No. 22 Jalan Taming but did not keep his promise to pay the Plaintiff after selling it. [16] Notwithstanding the aforesaid, CCO continued to buy from the Plaintiff through TPMS. Though TPMS was on record a sole proprietorship owned by WML, the Plaintiff had only liaised with CCO throughout its business dealings with TPMS. [17] Sometime in April 2017, instead of placing orders using TPMS, CCO started placing orders for steel products from the Plaintiff through CHSSB. Although CHSSB did make some payments to the Plaintiff for their purchases, nevertheless, from April 2017 to August 2018 the outstanding debts owed by CHSSB to the Plaintiff had accumulated to RM625,922-44. 6 The Dishonoured Cheque [18] Due to the huge outstanding sum owed, the Plaintiff refused to continue supplying goods to CHSSB in August 2018.

Sometime before 10.8.2018, CCO called PW1 on the telephone, telling PW1 that he needed goods and would hand the Plaintiff a post-dated cheque. PW1 met CCO on a Monday at No. 20 Jalan Taming.

CCO was alone in the office. He passed PW1 a post-dated cheque. It was a RHB Bank Cheque No. 001636 dated 15.8.2018 for RM 50,000.00 (‘Cheque 1636’). CCO requested the goods and told PW1 to bank in Cheque 1636 on 15.8.2018.

The order materialised into Invoice 028413 dated 8.8.2018 for RM1,375-60, Invoice 028421 dated 10.8.2018 for RM8,236-00 and RM9,072-00, Invoice 028430 dated 11.8.2018 for RM3,315-00 and Invoice 028448 dated 11.8.2018 for RM3,000-00.

On the due date, CCO called PW1 requesting the latter not to bank in Cheque 1636 first. The Plaintiff acceded to the request but kept chasing for payments. According to PW1, he begged for payments. These were not refuted by CCO nor any of the other Defendants. [19] In December 2018, the Plaintiff presented the Cheque 1636 for payment, hoping against all odds that it would be cleared. 7 Unfortunately, the cheque was dishonoured. The RHB Account was closed. [20] PW1 checked and found out that CCO’s sister CYY had incorporated CF2 SB on 18.9.2018 to carry out a similar business to CHSSB from No. 1 Jalan BJ 2-7 Balakong. From the documents lodged with the Companies Commission of Malaysia, CF2 SB’s share capital of RM400,000-00 was capitalized from the injection of machineries into the company. These machineries were from CHSSB. [21] On 16.1.2019, the Plaintiff made a police report against CCO. [22] On 8.5.2020, the Plaintiff filed a discovery application for, inter alia, the following documents related to the RHB Account under which the Cheque 1636 was issued (‘Discovery Application’):

The account opening form(s) for the RHB Account bearing account No.: 21407100120764.

CHSSB’s directors’ circular resolution for the opening and operation of the RHB Account.

Document from DCHEQS FI Portal showing the closure of the RHB Account.

The bank statements of the RHB Account in January 2018, February 2018, March 2018, April 2018, May 2018, June 2018, July 2018 and August 2018. 8

Copies or scanned copies of cheques issued from the RHB Account which were presented or “banked-in” in November and December 2017, January 2018, February 2018, March 2018, April 2018, May 2018, June 2018, July 2018 and August 2018. [23] From the documents disclosed, the Plaintiff came to know that during the period when CHSSB’s indebtedness to the Plaintiff had increased from RM286,774-04 in January 2018 to RM625,922-44 in August 2018, nearly half the monies received by CHSSB from the same period were withdrawn via cash cheques issued to CCH. The monies were withdrawn almost immediately after CHSSB received payments from its clients leaving the RHB Account with minimal cash balances to meet CHSSB’s debts. Further investigations revealed that CHSSB had not filed its audited financial statements since 2015 and that CHSSB had defaulted in meeting its obligations to pay income tax and Goods and Services Tax (‘GST’). [24] The Plaintiff further found out that CHSSB had directed its clients to make payments of outstanding sums due to CHSSB to TPMS after the RHB Account was closed by the bank. As stated above, the machineries belonging to CHSSB were ‘injected’ into CF2 SB to continue running similar business as CHSSB. [25] On 8.10.2020, the Plaintiff brought the present action against CCO, CCH, CYY, LMY, WML, CHSSB and CF2 SB. The Plaintiff’s causes of action are predicated upon an action for fraudulent trading under section 540 of the Companies Act 2016 and/or for conspiracy and/or dishonest assistance and knowing receipt. 9 [26] Sometime on 8.3.2021, I allowed the applications filed by the 1st to 4th Defendants, CHSSB and CF2SB vide Enclosures 12, 14 and 16 respectively to strike out the Plaintiff’s claim for RM375,985.88 being owing by SCFSB against them. [27] On the same day, I also allowed WML’s application vide Enclosure 18 to strike out the Plaintiff’s Writ and Statement of Claim against her trading as TPMS. [28] No appeal was filed by the Plaintiff against my decisions to strike out under the Enclosures 12, 14, 16 and 18 above. Court’s deliberation [29] Before this Court proceed with the analysis on the facts, it is useful to first set out the law on fraudulent trading as provided under section 540 of the Companies Act 2016 (‘CA 2016’). Section 540 of the Companies Act 2016 [30] Section 540 of the CA 2016 provides that directors or persons knowingly assisting them can be found liable for fraudulent trading. This section affords creditors of a company a remedy personally against such persons. Section 540(1) is in pari materia with the previous section 304 of the Companies Act 1965. Sections 540(1) and (3) read: ‘(1) If in the course of the winding up of a company or in any proceedings against a company it appears that any business of 10 the company has been carried on with intent to defraud the creditors of the company or creditors of any other person or for any fraudulent purpose, the Court on the application of the liquidator or any creditor or contributory of the company, may, if the Court thinks proper to do so, declare that any person who was knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court directs.’ ‘(3) When the Court makes any declaration under subsection

or (2), the Court may give such further directions as it thinks proper for the purpose of giving effect to that declaration…’ [Emphasis added] [31] Section 540 is similar to section 213 of the English Insolvency Act

In an action for fraudulent trading, a plaintiff must establish 3 elements, namely, (1) that it is a creditor for the purposes of Section 540, (2) that the business of the company has been carried out with an intent to defraud creditors or for any fraudulent purpose, and (3) that the parties being sued were knowingly a party to the carrying on of the business in that manner (see; Huatah Sdn Bhd v Yap Chee Kian & Ors [2020] 8 MLJ 98, paragraph 31 and Linear Profile Sdn Bhd & Ors v Khor Guet Lin [2019] MLJU 1364, paragraph 100. [32] In the present case, there is no dispute that the Plaintiff is a creditor of CHSSB for the purposes of Section 540. A “creditor” is defined in section 464(1)(b) of the CA 2016 to include “contingent and prospective creditors of a company”. The word “creditor” is interpreted in the widest sense. Anyone having a monetary claim 11 against the company and can enforce its claim by an action of debt is a creditor (see; Dato’ Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors [2018] 2 MLJ 693 (FC) at paragraph 73 and Tetuan Sulaiman & Taye v Wong Poh Kun & Anor [2021] 8 MLJ 550). The Federal Court in Dato’ Prem Krishna (supra) quoted the following passage from Premium Vegetable Oils Sdn Bhd v ICG Systems Sdn Bhd & Ors [2006] 7 MLJ 39: ‘[23] The above authorities clearly say that a plaintiff who has a pecuniary claim against the company is a ‘prospective creditor’ to the company and by virtue of the definition in s 217 of the Companies Act 1965, is also a ‘creditor’ for the purpose of winding up process of the company including for the purpose of s 304 of the Act. Being a creditor (or prospective creditor) the plaintiff has the necessary locus standi to institute an action against the fourth defendant under s 304(a) of the Companies Act 1965.’ [33] The meaning of “carrying on of the business” or “business of the company has been carried on” is not limited to the ordinary course of business or trade that the company usually engages in. Any dealing by the company or the company’s alter ego which is for the purpose of defrauding the company’s creditors falls within the meaning of “carrying on of the business” under section 540 of the Companies Act 2016 (see Lama Tile (Timur) Sdn Bhd v Lim Meng Kwang & Anor [2015] 4 MLJ 85). [34] The third element of establishing liability under Section 540 is that of an ‘intent to defraud creditors’ or the carrying on of the company’s business was for ‘a fraudulent purpose’. In Muniandy Nadasan & Ors v Dato’ Prem Krishna Sahgal & Ors [2014] 1 LNS 640, Nallini 12 Pathmanathan J (as she then was) held that in order to establish an intent to defraud creditors, the element of dishonesty is an essential element or ingredient. Her Lordship in her judgment referred to the Hong Kong Court of Final Appeal case of Aktieselskabet Dansk Skibsfinansiering v Brothers and Ors [2001] 2 BCLC 324 which comprehensively reviewed the construction of the phrase “intent to defraud” with Lord Hoffman opining as follows: ‘…While I quite accept that a defendant cannot be allowed to shelter behind some private standard of honesty not shared by the community, I think that there is a danger in expressing that preposition by invoking the concept of the hypothetical decent honest man. The danger is that because decent honest people also tend to behave reasonable, considerately and so forth, there may be a temptation to treat shortcomings in these respects as a failure to comply with the necessary objective standard. It seems to me much safer, at least in the context of an allegation of fraud, to concentrate upon the actual defendants and simply as whether they have been dishonest. Judges or juries seldom have any conceptual difficulty in knowing what is meant by dishonesty’. [35] In the context of being dishonest to creditors, a person has “intent to defraud” when he intends that the company’s creditors shall never be paid or shall only be paid a fraction of what he is owed (see: R v Grantham [1984] 3 ALL ER 166; Tan Hung Yeoh v Public Prosecutor [1999] 3 SLR 93) and acts according to such intent. There must be an element of dishonest conduct involving real moral blame according to current notions of fair trading among commercial men. 13 [36] Fraud need not be a complex concept. An intention to defraud can be inferred and in many cases can only be inferred for the very reason that fraudulent acts are always consciously being concealed.

Whether or not there is such an intention is a question of fact to be inferred from the surrounding circumstances and the subsequent conducts of the defendants. It does not matter that only one creditor was defrauded or that he was defrauded by only one transaction so long as the transaction is a fraud on a creditor carried out in the course of carrying on business. In LMW Electronics Pte Ltd v Ang Chuang Juay & Ors [2010] 1 MLJ 185, Vernon Ong J (as his Lordship then was), held: “…Notwithstanding the word 'creditors' in s 304(1), for the purpose of s 304(1) it does not matter that only one creditor was defrauded and that he was defrauded by one transaction, provided that the transaction could properly be described as a fraud on a creditor perpetuated in the course of carrying on business (Siow Yoon Keong v H Rosen Engineering BV; Re Gerald Cooper Chemicals Ltd [1978] 2 All ER 49). Whether there was any intention on the part of the defendant' to defraud or to carry out any fraudulent purpose is a question of fact to be inferred from the surrounding circumstances and the subsequent conduct of the defendant, especially the concealment of material facts (Rahj Kamal bin Abdullah v Public Prosecutor [1998] 1 SLR 447).” [Emphasis added]

There need not be evidence of a scheme to defraud the company’s creditors. In the Court of Appeal case of JCT Ltd v 14 Muniandy Nadasan & Ors and another appeal [2016] 6 MLJ 635 at paragraph 42, it was held that a single act in the course of carrying on the company’s business to defraud the company’s creditors is sufficient to amount to fraudulent trading.

Fraud was inferred when a company did not have a profit generating business at the material time but yet placed unusually large orders without explaining how they were going to honour the company’s obligations (see; Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 3 MLJ 479 (CA) at paragraph 58).

When a majority shareholder and director of a company resigned as director and relinquished his shareholdings just over a week after receipt of a winding up notice, and the fact that he was found to be aggressively disposing all the assets of the company after judgment had been obtained but could not account for the proceeds of sales nor explain why the company was left with a measly RM4,335-62, the court held it was far too compelling and overwhelming an inference of fraud (see; Auto Emasjaya Sdn Bhd & Anor v Ng Kong Ngai [2016] MLJU 1194).

Similarly, fraud was glaring during a suit by a creditor for goods sold and delivered, when the directors and shareholders unlawfully dissipated the assets and funds of the company, by writing off stocks, plants, transferring trade receivables, writing off debts and transferring all physical 15 assets of the company including all its stocks, plant, equipment and machinery to a company in Singapore without any consideration. The directors responsible for these acts also resigned as directors and 3 days after the resignation abandoned its defence and counterclaim in the action allowing the plaintiff to obtain a paper judgment against the company. The company was left with no assets or funds to pay the debt owed to the plaintiff by the time the judgment was obtained (see: LMW Electronics Pte Ltd v Ang Chuang Jay [2010] 1 MLJ 185).

Fraud was inferred where the directors knew about an arbitration award and court proceedings against the company but authorized the paying out of dividends knowing very well that by such payments of the dividends, there would not have been sufficient fund left to meet the award which may render or risk the company insolvent, with virtually no monies to pay creditors (see: Dato’ Gan Ah Tee & Anor [In their capacity as liquidators of Par-Advance Sdn Bhd (In liquidation)] v Kuan Leo Choon & Ors [2012] 10 MLJ 706).

Where a managing director used money from the company to invest in shares in the stock exchange under his own name instead of paying to creditors and when he later realised that he was about to incur losses on the investments he arranged for the company to pass a resolution ratifying all his past investments, there was a finding of fraud on the part of the director (see: H Rosen Engineering v Siow Yoon Keong [1997] 1 CLJ 137). 16

Where a company continued to carry on business and to incur debts at a time when there was to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment of those debts, fraud was inferred (see: Re William C Leitch Bros Ltd (No 1) [1932] 2 Ch 71).

Fraud can be inferred when a person who takes part in the management of a company's affairs obtains credit or further credit for the company when he knows that there is no reason for thinking that funds will become available to pay the debts when it becomes due or shortly thereafter (see; R v Grantham).

Fraud was also inferred when a company accepted the purchase price in advance knowing that it would not supply the goods and would not repay the advance paid (see; Re Gerald Cooper Chemicals Ltd [1978] 2 All ER 49).

In Dato’ Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors [2018] 2 MLJ 693, the Federal Court held that the decision to retain the employees’ services was a deliberate action taken by the appellant as managing director when he knew for a fact that the company was no longer a going concern with no prospect of the employees receiving their remuneration. The managing director was found to be personally liable to the employees. It was inferred that the business of the company was carried on with an intent to defraud the creditors of the company or for a fraudulent purpose based on the following facts, namely that the managing director: 17

prepared or issued fictitious invoices to inflate or overstate the company’s revenue so that the company would appear to be a ‘going concern’, or at the very least, not as insolvent as it actually was.

(ii) overstated the value of the plant and machinery of the company.

(iii) siphoned out the company’s funds by way of payment of rental to another company when there was no such tenancy agreement.

(iv) dissipated or channeled out part of company’s assets to the company’s largest shareholder.

issued and encashed cheques.

(vi) failed to cause the company to remit contributions to the Employees Provident Fund (‘EPF’) and Social Security Organisation (‘SOCSO’), and failed to pay income tax despite the requisite deductions having been made.

(vii) dissipated assets out of the reach of provisional liquidators.

(viii) made payments out to preferred unsecured creditors, as well as some shareholders. 18 [37] It is clear that when circumstances point to fraud the courts are willing to and do regularly infer an intent to defraud to keep anyone from benefiting from his dishonest acts. In the recent case of Ong Leong Chiou & Anor v Keller (M) Sdn Bhd [2021] 3 MLJ 622, the Federal Court adopted the Denning LJ’s opinion in Lazarus Estates v Beasley [1956] 1 All ER 341 at page 345 that: ‘No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever…’ [Emphasis added] [38] As illustrated in some of the authorities above, the courts have consistently found defendants to have intended to defraud creditors if they had dissipated assets. What is pertinent to be proven is only the factum of dissipation and disposal of assets which deprives creditors of their rightful payments (see; Auto Emasjaya Sdn Bhd & Anor v Ng Kong Ngai [2016] MLJU 1194). [39] In Kuthubul Zaman Bukhari & Anor v Tsai Su Chu & Ors [2013] 9 CLJ 524, the court found the defendants therein had intended to defraud the creditors when they dissipated the assets of the company. At page 529 the court held as follows: “As pointed out by P, D9 had not faced any downturn in its business or ceased operations. However, the manner in which 19 the assets totalling RM2,900,000 (cash of RM2,400,000 and inventory stock of RM500,000) were dissipated within a short span of time called into question the motive behind the move. There was no plausible reason to deal with remaining assets and funds of D9 in such a suspicious manner other than to deprive P of any claim that may arise in due course.” [Emphasis added] [40] In the recent Court of Appeal case of Tradewinds Properties Sdn Bhd v Zulhkiple bin A Bakar & Ors [2019] 1 MLJ 421, an intention to defraud was inferred from the company’s director act of passing resolutions to reassign the company’s future earnings to another company, resulting in the company becoming dormant, with no assets and was therefore unable to pay the plaintiff. [41] In our present case, in support of his contention that the business of CHSSB were carried on with intent to defraud the creditors of the company or creditors of any other person or for fraudulent purpose, learned counsel for the Plaintiff relied heavily on the cash withdrawals from the RHB Account. The Amount of Cash Withdrawals from January to August 2018 [42] From the evidence adduced, it is undisputed that there were consistent cash withdrawals amounting to RM896,220-09 by CCH from the RHB Account in the period from January 2018 to August

These withdrawals resulted in the RHB Account balance being reduced to a minimum sum or on a few occasions, even caused the said account to be overdrawn. The positions of the RHB 20 Account for January to August 2018 following the cash withdrawals will now be examined. Cash Withdrawal of RM179,300-00 In January 2018 [43] For the month of January 2018, there were 15 deposits from customers amounting to RM329,824-66. There were 8 cash withdrawals totalling RM171,300-00 in favour of CCH. The end balance of the RHB Account as of 31.1.2018 was RM4,057-54. The amount owing to the Plaintiff as at 31.1.2018 was RM389,774-04. Payment Date Cheque Cash withdrawn by CCH (RM) Page No.

1.

3.1.2018 (Wednesday) 001466 18,000-00 243 of Bundle B (263 PDF)

2.

4.1.2018 (Thursday) 001468 9,500-00 249 of Bundle B (268 PDF) 244 of Bundle B (263 PDF)

3.

9.1.2018 (Tuesday) 001477 8,000-00 250 of Bundle B (269 PDF) 244 of Bundle B (263 PDF)

4.

11.1.2018 (Thursday) 001467 10,000-00 248 of Bundle B (267 PDF) 244 of Bundle B (263 PDF) 5 11.1.2018 (Thursday) 001478 79,000-00 244 of Bundle B (263 PDF) 245 of Bundle B (264 PDF)

6.

15.1.2018 (Monday) 001482 30,000-00 258 of Bundle B (277 PDF) 245 of Bundle B (264 PDF)

7.

19.1.2018 (Friday) 001483 7,800-00 259 of Bundle B (278 PDF) 245 of Bundle B (264 PDF)

8.

30.1.2018 (Tuesday) 001487 17,000-00 246 of Bundle B (265 PDF) 179,300-00 21 Cash Withdrawal of RM143,250-00 In February 2018 [44] For the month of February 2018, there were 10 deposits from customers amounting to RM222,410-17. There were 8 cash withdrawals amounting to RM143,250-00 in favour of CCH. The end balance of the RHB Account as of 28.2.2018 was in the negative, i.e., (RM1,636-83). The amount owing to the Plaintiff as at 28.2.2018 was RM383,565-84. Payment Date Cheque Cash withdrawn by CCH (RM) Page No.

1.

2.2.2018 (Friday) 001486 950-00 261 of Bundle B (280 PDF) 264 of Bundle B (283 PDF)

2.

2.2.2018 (Friday) 001490 3,000-00 15 of Bundle C (18 PDF) 264 of Bundle B (283 PDF)

3.

5.2.2018 (Monday) 001493 12,500-00 269 of Bundle B (288 PDF) 265 of Bundle B (284 PDF)

4.

6.2.2018 (Tuesday) 001495 650-00 270 of Bundle B (289 PDF) 265 of Bundle B (284 PDF)

5.

9.2.2018 (Friday) 001497 110,000-00 272 of Bundle B (291 PDF) 265 of Bundle B (284 PDF)

6.

22.2.2018 (Thursday) 001506 5,950-00 267 of Bundle B (286 PDF)

7.

23.2.2018 (Friday) 001507 7,800-00 267 of Bundle B (286 PDF)

8.

26.2.2018 (Monday) 001508 2,400-00 267 of Bundle B (286 PDF) 143,250-00 Cash Withdrawal of RM320,500 In March 2018 [45] For the month of March 2018, there were 8 deposits from customers amounting to RM460,071-14. There were 11 cash withdrawals amounting to RM320,500-00 in favour of CCH. The end balance of 22 the RHB Account as at 31.3.2018 was RM43-40. The amount owing to the Plaintiff as at 31.3.2018 was RM437,097-96. Payment Date Cheque Cash withdrawn by CCH (RM) Page No.

1.

1.3.2018 (Thursday) 001525 25,000-00 286 of Bundle B (305 PDF) 282 of Bundle B (301 PDF)

2.

6.3.2018 (Tuesday) 001527 8,500-00 290 of Bundle B (309 PDF) 282 of Bundle B (301 PDF)

3.

7.3.2018 (Wednesday 001529 5,000-00 292 of Bundle B (311 PDF) 282 of Bundle B (301 PDF)

4.

7.3.2018 (Wednesday) 001530 700-00 293 of Bundle B (312 PDF) 282 of Bundle B (301 PDF)

5.

8.3.2018 (Thursday) 001531 800-00 295 of Bundle B (314 PDF) 282 of Bundle B (301 PDF)

6.

9.3.2018 (Friday) 001532 180,000-00 298 of Bundle B (317 PDF) 283 of Bundle B (302 PDF)

7.

9.3.2018 (Friday) 001533 40,000-00 299 of Bundle B (318 PDF) 283 of Bundle B (302 PDF)

8.

21.3.2018 (Wednesday) 001552 10,000-00 308 of Bundle B (327 PDF) 284 of Bundle B (303 PDF)

9.

23.3.2018 (Friday) 001553 18,500-00 309 of Bundle B (328 PDF) 284 of Bundle B (303 PDF)

10.

27.3.2018 (Tuesday) 001555 1,000-00 310 of Bundle B (329 PDF) 284 of Bundle B (303 PDF)

11.

30.3.2018 (Friday) 001558 31,000-00 311 of Bundle B (330 PDF) 285 of Bundle B (304 PDF) 320,500-00 Cash Withdrawal of RM14,000 In April 2018 [46] For the month of April 2018, there were 7 deposits from customers amounting to RM127,278-43. There was 1 cash withdrawal amounting to RM14,000-00 in favour of CCH. The end balance of the RHB Account as of 30.4.2018 was RM24,060-72. The amount owing to the Plaintiff as at 30.4.2018 was RM513,309-02. 23 No. Payment Date Cheque Amount paid to CCH (RM) Page No.

1.

17.4.2018 (Tuesday) 001563 14,000-00 322 of Bundle B (341 PDF) 313 of Bundle B (332 PDF) 14,000-00 Cash Withdrawal of RM44,000 In May 2018 [47] For the month of May 2018, there were 9 deposits from customers amounting to RM240,489-93. There was 1 cash withdrawal amounting to RM44,000-00 in favour of CCH. The end balance of the RHB Account as of 31.5.2018 was RM55,800-41. The amount owing to the Plaintiff as at 31.5.2018 was RM560,770-46. No. Payment Date Cheque Amount paid to CCH (RM) Page No.

1.

18.5.2018 (Friday) 001595 44,000-00 343 of Bundle B (362 PDF) 328 of Bundle B (347 PDF) 44,000-00 Cash Withdrawal of RM67,852 In June 2018 [48] For the month of June 2018, there were 8 deposits from customers amounting to RM207,878-07. There was 1 cash withdrawal amounting to RM67,852-00 in favour of CCH. The end balance of the RHB Account as of 30.6.2018 was RM52,624-08. The amount owing to the Plaintiff as at 30.6.2018 was RM542,389-84. No. Payment Date Cheque Amount paid to CCH (RM) Page No.

1.

21.6.2018 (Thursday) 001593 67,852-00 358 of Bundle B (377 PDF) 348 of Bundle B (367 PDF) 67,852-00 24 Cash Withdrawal of RM92,800 In July 2018 [49] For the month of July 2018, there were 10 deposits from customers amounting to RM227,066-24. There were 5 cash withdrawals amounting to RM92,800-00 in favour of CCH. RM5,000-00 and RM10,000-00 were paid to CYY via cheque 001628 dated 10.7.2018 and cheque 001611 dated 20.7.2018. The end balance of the RHB Account as of 31.7.2018 was RM5,600-47. The amount owing to the Plaintiff as at 31.7.2018 was RM600,923-84. Payment Date Cheque Amount paid to CCH (RM) Page No.

1.

2.7.2018 (Monday) 001610 17,800-00 359 of Bundle B (378 PDF) 365 of Bundle B (384 PDF)

2.

2.7.2018 (Monday) 001616 15,000-00 368 of Bundle B (387 PDF) 366 of Bundle B (395 PDF)

3.

10.7.2018 (Tuesday) 001629 10,000-00 370 of Bundle B (389 PDF) 366 of Bundle B (395 PDF)

4.

17.7.2018 (Tuesday) 001630 20,000-00 373 of Bundle B (392 PDF) 367 of Bundle B (396 PDF)

5.

17.7.2018 (Tuesday) 001631 30,000-00 374 of Bundle B (393 PDF) 367 of Bundle B (396 PDF) 92,800-00 Cash Withdrawal of RM15,000 In August 2018 [50] For the month of August 2018, there were 6 deposits from customers amounting to RM55,536-68. There were 2 cheques amounting to RM18,000-00 drawn in favour of CCO. The amount owing to the Plaintiff by the end of August 2018 was RM625,922-

25 Payment Date Cheque Amount paid to CCO (RM) Page No.

1.

17.8.2018 (Friday) 001639 15,000-00 395 of Bundle B (414 PDF) 385 of Bundle B (404 PDF)

2.

27.8.2018 (Monday) 001642 3,000-00 398 of Bundle B (417 PDF) 388 of Bundle B (407 PDF) 18,000-00 [51] According to learned counsel for the Plaintiff, the aforesaid withdrawals are clear evidence that the business of CHSSB was being carried on to defraud its creditors and or for a fraudulent purpose. Monies were being dissipated from CHSSB without any regards to the ability of the company to meet its debts owed to its creditors, including the Plaintiff. It must be noted that CHSSB had no proper accounting documents and had not filed any audited financial statements since 2015. This makes it virtually impossible to determine the purposes for the cash withdrawals and for CHSSB’s creditors to trace the withdrawals. The Account Was Overdrawn By Cash Withdrawal [52] Not only did CCH made the numerous cash withdrawals, as I have alluded to briefly above, these cash withdrawals regularly resulted in the RHB Account being in a state of ‘overdrawn’. The RHB Account was not an overdraft account and it should not be in the negative, i.e., overdrawn. However, such overdrawing was a norm instead of an exception over the period of January 2018 to August

As a matter of fact, it happened several times a month. 26 [53] The following are a few examples: Figure 1 - Page 244 Bundle B Figure 2 - Page 249 Bundle B Figure 3 – Page 245 Bundle B 27 Figure 4 - Page 258 Bundle B [54] Every month from January to August 2018 there were several incidences where the RHB Account was overdrawn and CHSSB was required to top up the account. In January 2018, there were 4 incidences of overdrawing, in February 2018, there were 3 incidences, in March 2018, there were 7 incidences, in April 2018, there were 3 incidences, in May 2018, there were 3 incidences, in June 2018, there were 3 incidences, in July 2018, there were incidences and finally in August 2018 there was the final case of overdrawing by the issuance of the RM50,000 cheque to the Plaintiff, which CHSSB did not regularise leading to the closing of the account. [55] The RHB Account was overdrawn not because payments had to be made to business creditors but due to the aforesaid significant unexplained cash withdrawals by CCH. 28 Figure 5 - Page 272 Bundle B (291 PDF) Figure 6 - Page 298 Bundle B (317 PDF) Figure 7 - Page 358 Bundle B (377 PDF) 29 Payment Date Cheque Cash withdrawn by CCH Page No.

1.

3.1.2018 (Wednesday) 001466 18,000-00 243 of Bundle B (263 PDF)

2.

4.1.2018 (Thursday) 001468 9,500-00 249 of Bundle B (268 PDF) 244 of Bundle B (263 PDF)

3.

9.1.2018 (Tuesday) 001477 8,000-00 250 of Bundle B (269 PDF) 244 of Bundle B (263 PDF)

4.

11.1.2018 (Thursday) 001467 10,000-00 248 of Bundle B (267 PDF) 244 of Bundle B (263 PDF) 5 11.1.2018 (Thursday) 001478 79,000-00 244 of Bundle B (263 PDF) 245 of Bundle B (264 PDF)

6.

15.1.2018 (Monday) 001482 30,000-00 258 of Bundle B (277 PDF) 245 of Bundle B (264 PDF)

7.

19.1.2018 (Friday) 001483 7,800-00 259 of Bundle B (278 PDF) 245 of Bundle B (264 PDF)

8.

30.1.2018 (Tuesday) 001487 17,000-00 246 of Bundle B (265 PDF) January Total 179,300-00

9.

2.2.2018 (Friday) 001486 950-00 261 of Bundle B (280 PDF) 264 of Bundle B (283 PDF)

10.

2.2.2018 (Friday) 001490 3,000-00 15 of Bundle C (18 PDF) 264 of Bundle B (283 PDF)

11.

5.2.2018 (Monday) 001493 12,500-00 269 of Bundle B (288 PDF) 265 of Bundle B (284 PDF)

12.

6.2.2018 (Tuesday) 001495 650-00 270 of Bundle B (289 PDF) 265 of Bundle B (284 PDF)

13.

9.2.2018 (Friday) 001497 110,000-00 272 of Bundle B (291 PDF) 265 of Bundle B (284 PDF)

14.

22.2.2018 (Thursday) 001506 5,950-00 267 of Bundle B (286 PDF)

15.

23.2.2018 (Friday) 001507 7,800-00 267 of Bundle B (286 PDF)

16.

26.2.2018 (Monday) 001508 2,400-00 267 of Bundle B (286 PDF) February Total 143,250-00

17.

1.3.2018 (Thursday) 001525 25,000-00 286 of Bundle B (305 PDF) 282 of Bundle B (301 PDF)

18.

6.3.2018 001527 8,500-00 290 of Bundle B (309 PDF) 30 (Tuesday) 282 of Bundle B (301 PDF)

19.

7.3.2018 (Wednesday) 001529 5,000-00 292 of Bundle B (311 PDF) 282 of Bundle B (301 PDF)

20.

7.3.2018 (Wednesday) 001530 700-00 293 of Bundle B (312 PDF) 282 of Bundle B (301 PDF)

21.

8.3.2018 (Thursday) 001531 800-00 295 of Bundle B (314 PDF) 282 of Bundle B (301 PDF)

22.

9.3.2018 (Friday) 001532 180,000-00 298 of Bundle B (317 PDF) 283 of Bundle B (302 PDF)

23.

9.3.2018 (Friday) 001533 40,000-00 299 of Bundle B (318 PDF) 283 of Bundle B (302 PDF)

24.

21.3.2018 (Wednesday) 001552 10,000-00 308 of Bundle B (327 PDF) 284 of Bundle B (303 PDF)

25.

23.3.2018 (Friday) 001553 18,500-00 309 of Bundle B (328 PDF) 284 of Bundle B (303 PDF)

26.

27.3.2018 (Tuesday) 001555 1,000-00 310 of Bundle B (329 PDF) 284 of Bundle B (303 PDF)

27.

30.3.2018 (Friday) 001558 31,000-00 311 of Bundle B (330 PDF) 285 of Bundle B (304 PDF) March Total 320,500-00

28.

17.4.2018 (Tuesday) 001563 14,000-00 322 of Bundle B (341 PDF) 313 of Bundle B (332 PDF) April Total 14,000-00

29.

18.5.2018 (Friday) 001595 44,000-00 343 of Bundle B (362 PDF) 328 of Bundle B (347 PDF) May Total 44,000-00

30.

21.6.2018 (Thursday) 001593 67,852-00 358 of Bundle B (377 PDF) 348 of Bundle B (367 PDF) June Total 67,852-00

31.

2.7.2018 (Monday) 001610 17,800-00 359 of Bundle B (378 PDF) 365 of Bundle B (384 PDF)

32.

2.7.2018 (Monday) 001616 15,000-00 368 of Bundle B (387 PDF) 366 of Bundle B (395 PDF)

33.

10.7.2018 (Tuesday) 001629 10,000-00 370 of Bundle B (389 PDF) 366 of Bundle B (395 PDF)

34.

17.7.2018 (Tuesday) 001630 20,000-00 373 of Bundle B (392 PDF) 367 of Bundle B (396 PDF)

35.

17.7.2018 (Tuesday) 001631 30,000-00 374 of Bundle B (393 PDF) 367 of Bundle B (396 PDF) July Total 92,800-00

36.

17.8.2018 (Friday) 001639 15,000-00 395 of Bundle B (414 PDF) 385 of Bundle B (404 PDF)

37.

27.8.2018 001642 3,000-00 398 of Bundle B (417 PDF) 31 (Monday) 388 of Bundle B (407 PDF)

38.

29.8.2018 Close Account Transfer 11,518-09 388 of Bundle B (407 PDF) August Total 29,518-09 2018 Total 896,220-09 [56] These cash withdrawals took place immediately upon the customers paying leaving nothing for CHSSB to pay its creditors. The following transactions would illustrate this.

On 8.2.2018, EPE Busway banked in RM110,000-00. The next day on 9.2.2018, RM110,000-00 in cash was withdrawn.

On 8.3.2018, EPE Busway banked in RM280,737-86. The next day, on 9.3.2021, RM180,000 and RM40,000 were withdrawn in cash via cheques no. 001532 and 001533 respectively.

On 30.3.2018, ESTA banked in RM31,053-76. On the same day, RM31,000 was withdrawn in cash via cheque 001558. 32

On 1.3.2018, ESTA banked in RM25,997-56. On the same day, RM25,000-00 was withdrawn in cash via cheque 001525.

On 6.3.2018, a customer by the name of Loke Cheok Wai paid RM7,950. On the same day, RM8,500 was withdrawn in cash via cheque 001527.

On 17.5.2018, EPE Busway banked in RM84,772. On the same day, RM44,000 was withdrawn in cash via cheque 01595.

On 20.6.2018, EPE Busway banked in RM 68,857-62. On 21.6.2018, RM 67,852 was withdrawn in cash via cheque 001595.

On 20.7.2018, Anti Fire banked in RM 96,000. On 21.7.2018, RM 20,000 and RM 30,000 were withdrawn in cash via cheques 001630 and 001631 respectively. Defendants’ explanation for the cash withdrawals [57] At the trial, the testimonies given by CCO, CCH, CYY and LMY were that the cash withdrawals were for CHSSB’s business purposes. More specifically, CCH testified that these cash withdrawals were to pay for the salaries of CHSSB’s employees and other related company expenses. However, no documentary evidence was adduced in support of the averments. 33 [58] For my part, I agree with learned counsel for the Plaintiff that the testimonies that these cash withdrawals were to pay the employees’ salaries cannot be true for the following reasons:

Firstly, based on CHSSB’s Financial Report for 2014 the revenue for the year was RM816,554-00 whilst its operating expenses were RM164,768-00 or 20.18% of the revenue. In 2015, the revenue was RM2,105,618-00 whilst its operating expenses were RM319,954-00 or 15.2% of the revenue.

However, from January 2018 to August 2018, CHSSB’s collection was RM 1,870,000 but the cash withdrawals which the Defendants claimed were for business expenses amounted to RM 896,220-00 or 48% of the collection.

CCH, CYY and LMY said the cash withdrawals totalling RM 896,220-00 were for salaries but such costs for 2015 were only RM 56,247 or 2.67% of the revenue. It is commercially extremely unlikely or unviable that in a period of only 8 months Summary of Payment collection from Bank Statement Customer JAN FEB MAR APR MAY JUN JUL AUG

STERADIAN SDN BHD 00

593.60 1,113.00 1,664.20

850.00 5,015.80 LOKE CHEOK WAI 15,900.00 20,193.00

400.00 36,493.00 LEW JONG BIN (KC MKTG) 1,729.08 1,729.08 EPE BUSWAY SDN BHD 282,032.10 110,000.00 280,737.86 23,567.54 84,772.49 68,857.62 46,805.86 10,986.68 907,760.15

SYNC MOTION (M) SDN BHD 60

466.40 1,314.40

848.00

106.00

160.00 2,450.00 5,779.40 SUN POWER AUTOMATION 10,976.30 12,652.96 4,420.73 5,739.90 30,273.82 49,391.51 27,298.02 140,753.24 ESTA INDUSTRIAL SDN BHD 7,094.58 9,581.61 57,051.32 22,213.36 37,043.08 9,464.74 13,097.36 155,546.05

UHM HARDWARE SDN BHD 50 3,500.00 3,685.50 GELPAG ELECTRIC SDN BHD 3,031.60 3,031.60 JUTA STEEL SDN BHD 1,248.26 1,248.26 ANTI-FIRE ENGINEERING 22,942.64 18,550.00 19,080.00 31,000.00 96,000.00 17,600.00 205,172.64 TECHNOLOTE MAL.AYSIA 1,166.00 1,166.00 CMR ELECTRICAL SDN BHD 17,306.47 17,306.47 MITTRIC SYSTEMS SDN BHD 1,272.00 1,272.00 ENERCHARGER INDUSTRI 9,540.00 18,000.00 9,000.00 36,540.00 BERKAT INSAF (M) SDN BHD 9,400.00 9,400.00 TECHNOCRAFT SOLUTION 17,600.00 17,600.00 CEKPA KUASA DINAMIK 2,405.00 2,405.00 J.E.T. ENGINEERING & 2,240.00 2,240.00 OTHERS-CHQ deposits 10,863.00 61,707.60 77,881.36 55,246.63 49,002.54 29,500.00 20,210.00 12,000.00 316,411.13 TOTAL COLLECTIONS 329,824.66 222,410.17 460,071.14 127,278.43 240,489.93 207,878.07 227,066.24 55,536.68 1,870,555.32 34 in 2018 salaries would increase to account for 48% of the revenue.

There is no plausible explanation as to why salaries were paid in cash, without documentations, paid in the middle of the month, issued a few times in a month and fluctuating between months. Page 349 CYY’s Evidence on 28.9.2021 in the Transcript What was the reason for this cash cheque to Chong Chee Hoe? He told me it was the expenditure for company’s expenditure, salary and et cetera. If I’m not mistaken, he told me that but usually it is for this sort of purposes. Ms Chong, does Chee Hoe still pay salary in the middle of the month? This I’m not sure. Did you ask? So whenever he told me those are for salary, then I will normally check see whether how early before that if other salary were paid. And then usually when he told me it was for salary, then I will agree and then how he arranged it, then I don’t know. Did you ask for documents, Ms Chong? Why didn’t you ask for documents, Ms Chong? Because he told me it was for salary and also salary was also around this figure also. Now why would salary be paid by cash, Ms Chong? 35 I don’t really know of the actual situation but I think maybe his staff only accepts cash payment. Do you know if how many staff he has? Not sure. Do you know if Chee Hoe still has any staff at all? I think he should have staffs. Now this cheque is in April. Just remember the month. Now can I refer you to page 343 of the same bundle, electronically, 362? This is a cheque in May 2018. This is also a cash cheque, isn’t it? Correct. Is this also for salary? I can't really remember but it should be. In one month’s time, Chee Hoe Steel has increased its workers by four times? Not sure. But it may not be entirely for salaries, it could have been also the office expenditures.

The cash withdrawals were not supported by documents. The Plaintiff had sent 2 requests to the Defendants’ solicitors for accounting documents for 2015, 2016, 2017 and 2018 including the payment vouchers for cash cheques. On 30.8.2021, the Plaintiff filed a Notice to Produce and requested for the same.

The Defendants responded that payment vouchers were not prepared for the cash withdrawals of RM896,220-00. This is a convenient excuse. It is difficult to believe that CHSSB did not have payment vouchers or any other form of payment evidence or supporting documents for RM896,220-00 in cash. 36

When cross examined on the foregoing point CCH gave a different version of the story alleging that there were payment vouchers prepared, and that they were prepared by him but they had gone missing when CHSSB moved premises. Page 405 to 406 CCH’s Evidence on 28.9.2021 in the Transcript Those that were missing, were they payment vouchers? HOE Most of them, yes. So the payment vouchers for 2017 and 2018 were missing? HOE Correct. Can I refer you… Sorry, before that, who prepared the payment vouchers? HOE Me. So for every cheque that you issue, you will prepare a payment voucher? So which one you would prepare payment voucher, which one you would not? HOE So the ordinary handwritten vouchers will be prepared for salary payments and subcon. And these payment vouchers would be kept in a file? HOE Yes.

CCH’s version of the story that CHSSB’s documentations of business overheads and expenditures in years 2017 and 2018 were lost when CHSSB moved out from No. 20 Jalan Taming cannot be believed. Conveniently, no police report was made. 37 Without such a police report CHSSB is unable to account or answer to SSM or the inland revenue department. Page 404 CCH’s Evidence on 28.9.2021 in the Transcript Now can you explain to the Court what do you mean by ‘most of the documents were lost’? HOE Because some of the documents were omitted or rather no place to put or during the moving of the factory. … Everything was missing? ‘No’ means, what does it mean by that? HOE Invoices and suppliers documents are, were there. What were missing? HOE Payslips, documents with subcon and also the water bill and also electricity bill. Those were missing? HOE Correct. For which year were these documents missing? HOE 2017, 2018. Only two years were missing? HOE Yes. Those were the documents that the Plaintiff had requested from you, isn’t it? HOE Some of them, yes. Did you make a police report? Why didn’t you make a police report? HOE So actually no point reporting to police also for the handwriting documents. 38

Further, in his witness statement, CCH alleged that whilst CHSSB’s books and records for 2017 and 2018 were lost when CHSSB moved out from No. 20 Jalan Taming, he managed to retrieve some of the documents and included these documents at pages 14 to 20 of Bundle B2. Upon a closer perusal of these documents, they were actually dated 2019, not 2017 or 2018. [59] It is further contended that the books and records of CHSSB are maintained and kept by CCH whom, according to the Defendant was running a “one-man show” business. In this regard, the Defendants submitted that the failure to file Annual Report by CHSSB only goes to show poor management and safekeeping of CHSSB’s books and records by CCH. Such failure to maintain proper accounts had dated back to year 2016. All these omissions and or negligence do not suggest ‘dissipation’ of CHSSB’s assets. [60] It is further submitted that it is improbable that a factory such as CHSSB would not have any business expenses arising from the day-to-day running of the business. At trial, the evidence given by CCH and CYY in relation to the operating expenses of CHSSB are as follows: - a. There were 5 workers on payroll at CHSSB. An average of RM4,000.00 per month was paid to each of them. The salary for the manager was around RM5,000.00 to RM6,000.00. The salaries for two trained workers were around RM3,000.00 to RM4,000.00 with overtime. The salaries for general workers were around RM2,000.00 to RM3,000.00 with overtime. The cumulative total is therefore around RM20,000.00. 39 b. The electricity bill for CHSSB in July 2018 was RM6,701.60. [61] In this regard, in the absence of most supporting documents, learned counsel for the Defendants asked the Court to take judicial cognizance and notice that some expenses must have been involved in the ordinary course of operation of CHSSB’s business, including but not limited to: - a. Rent; b. Payroll for director, workers and contractors; c. Utilities and bills; d. Equipment and inventory costs; e. Maintenance of machineries. [62] With respect, CCH, CYY and LMY’s excuse for not being able to produce CHSSB’s books and records does not mean that the Defendants can escape from satisfying this Court that the cash withdrawals were for proper purposes. It is not appropriate in the instant case for the Court to take judicial notice of the expenses as urged by learned counsel for the Defendants. It is not a universal fact that all companies would incur the expenses referred to by learned counsel for the Defendants. [63] On the contrary, the irresistible inference from the unavailability of such essential business documents is that the Defendant had deliberately suppressed material evidence, despite having received notices to produce. It is also reasonable to infer from the “lost” excuse that such documents were destroyed to prevent the ascertainment of truth. 40 [64] I agree with learned counsel for the Plaintiff that an adverse inference under section 114 of the Evidence Act 1950 ought to be drawn

In Sreedevi Naidu a/p T Sree Ramalu Naidu v Eelasegeran a/l T Nadarajah & Anor [2016] 3 MLJ 263, the Court of Appeal held: ‘[32] Even though the first respondent was served with a notice to produce relating to his income and other financial information, the first respondent has refused to produce any documents. He has even refused to produce his EPF statement; the said non-disclosures are material non disclosures relating to the first respondent’s financial situation. The material non-disclosure indicates that the first respondent is deliberate, dishonest and lacking bona fides. Meanwhile, it is not seriously disputed that the first respondent is also supporting an illegitimate child, a mistress, his mother and a lavish lifestyle of up to RM10,986 a month. In all the circumstances, we think that the court is entitled to draw an adverse inference with regard to the first respondent’s income and other financial information on account of his failure to make full and frank disclosure (s 114(g) of the Evidence Act 1950).’ [Emphasis added]

In Wahab bin Ibrahim & Ors v AET Tanker Holdings Sdn Bhd [2013] 5 MLJ 297, Vernon Ong J (as his Lordship then was) held: 41 ‘[16] As for the remaining plaintiffs, notwithstanding a notice to produce being served on the plaintiffs’ solicitors calling upon them to produce all the plaintiffs’ fishing licences, not all the plaintiffs did so. Instead, the other plaintiffs relied on the adjuster’s reports by City Adjusters. In the absence of any explanation for the failure to produce their licences under ss 8 and 11 of the FA 1985, the court is constrained to invoke the adverse inference under para (g) of s 114 of the Evidence Act 1950 — that those who did not produce their licences did not in fact possess any valid licences under ss 8 and 11 of the FA 1985 at the time of the incident.’ [Emphasis added] [65] In Huatah Sdn Bhd v Yap Chee Kian & Ors [2020] 8 MLJ 98, the High Court held that the destruction of the books and records of the company was in violation of section 245(3) of the Companies Act

An adverse inference was drawn to the effect that the books and records of the company were deliberately destroyed by the defendants to hinder and prevent the liquidator from ascertaining the truth as regards the financial affairs of the company. This case is worth examining in more detail in comparison with the present case.

In Huatah, the plaintiff filed an originating summons against the defendants as directors of Billionz Showcase Sdn Bhd (‘BSSB’) for, inter alia, a declaration that the defendants were jointly and severally liable for all the debts of BSSB to the plaintiff pursuant to section 540 of the Companies Act 2016. The plaintiff claimed that BSSB’s statement of account was not an accurate reflection of its financial affairs and that the 42 defendants had disposed of all the books, records and accounts of BSSB. The plaintiff claimed that the defendants had sought to keep their fraudulent dealings secret by providing inaccurate information to the liquidator and destroying all of the company’s accounts and documents in breach of their statutory duty. On the other hand, the defendants sought to defend themselves, inter alia, by contending that the plaintiff does not have direct evidence to prove the alleged dishonesty.

The High Court allowed the plaintiff’s claim and held that based on the destruction of the books and records of BSSB, an adverse presumption should be inferred against the defendants, namely that the exorbitant expenses incurred by BSSB, the alleged payments made to all creditors and the writing off of debts owed to BSSB, were manifestation of fraudulent trading by the defendants. The inference to be drawn was that the books and records of BSSB were deliberately destroyed by the defendants to hinder and prevent the liquidator from ascertaining the truth as regards the financial affairs of BSSB and to verify the balance sheet and the reasonableness of the expenses that were incurred: ‘[62] There is no evidence to substantiate the averment that the documents and accounts of BSSB had been destroyed due to the relocation of BSSB’s offices. There is also no evidence to show that the documents and accounts could not have been kept on the premises or offices of the defendants, or on the number of documents and accounts being held by BSSB from its operations which were only for approximately two to three years. … 43 [64] Further, the liquidator cannot take action against BSSB’s debtors to recover monies to satisfy the SC judgment since the relevant evidence to substantiate any claim have all been destroyed at the hands of the defendants. Consequently, based on all the circumstances attendant upon the conduct of the defendants as described herein, it is clear that there is no corroborative evidence of the defendants’ stand or justification on the necessity and reasonableness of the expenses incurred by BSSB, the payment to all of the creditors of BSSB (except the plaintiff), the ‘fire-sale’ assets and the writing off of the debts. [65] In my view, based on the destruction of the books and records of BSSB (in violation of s 245(3) of the Companies Act 2016) it is only proper in the circumstances that an adverse presumption should be inferred against the defendants, namely that the exorbitant expenses incurred by BSSB, the alleged payments made to all creditors, (except the plaintiff) and the writing off of debts owed to BSSB, are manifestation of fraudulent trading by the defendants. Taking all of the circumstances into account, the inference to be drawn here is that the books and records of BSSB were deliberately destroyed by the defendants to hinder and prevent the liquidator from ascertaining the truth as regards the financial affairs of BSSB and to verify the balance sheet and the reasonableness of the expenses that were incurred.’ [Emphasis added] [66] Hence, based on the aforesaid, this Court concludes that the cash withdrawals by CCH from CHSSB during the period from January to August 2018 were not for the legitimate purposes of CHSSB at 44 all. At the very least, a substantial portion of the cash withdrawals were questionable. Dishonest Intent [67] Notwithstanding the aforesaid, learned counsel for the Defendants contended that the cash withdrawals alone do not evince and or establish the existence of any dishonest intent on the part of the Defendants to defraud the Plaintiff, specifically with regard to the materials supplied to CHSSB between March to August 2018, amounting to RM625,922.44. [68] Bearing in mind that CHSSB started ordering materials from the Plaintiff in year 2017, it could not be said that the Defendants had dishonestly intended for Annual Reports not to be filed since 2015 in anticipation of the purported scheme to defraud the Plaintiff by year 2018. Cash withdrawals by CCH – Defendants’ case [69] The Plaintiff’s case for fraudulent trading against the Defendants hinges primarily on the cash withdrawals from CHSSB’s RHB Account between January to August 2018. The Defendants are said to have made large cash withdrawals from CHSSB’s RHB Account such that the business had become unable to pay the Plaintiff the RM50,000.00 vide Cheque No. 001636 which had eventually caused the bank to close the account which in turn led to CHSSB having to cease from operating after August 2018. 45 [70] Notwithstanding the aforesaid, learned counsel for the Defendants submitted that the Plaintiff has not proven that the cash withdrawals were made for any fraudulent purpose. [71] During trial, PW1 gave evidence that he did not know the purpose of the cash withdrawals by CCH between January to August 2018. Below is an excerpt of PW1’s evidence in relation to the month of February 2018. Cross-examination of PW-1 Mr Tan, I put it to you that you do not know the purposes of this withdrawal of RM143,250 from Chee Hoe Steel’s account by Chee Hoe. Do you agree? [72] It is also submitted that the issue of whether the whole debt to the Plaintiff has fallen due between January to August 2018 did not arise at all. PW1 agreed that the Plaintiff had never made any demand to CHSSB for the total owing between January to August 2018. Cross-examination of PW-1 Mr Tan, I put it to you that as of 31.01.2018 KHH Puchong did not demand Chee Hoe Steel to pay the total owings amounting to RM336,352.16. Do you agree? [73] PW1 also agreed that CHSSB did not need to pay the total owing to the Plaintiff between January to August 2018. 46 Cross-examination of PW1 Mr Tan, I put it to you that as of 31.01.2018, Chee Hoe Steel did not need to pay the total RM336,352.16 to KHH Puchong. Do you agree? [74] Thus, based on the aforesaid, learned counsel for the Defendants contended that whilst CCH did make such cash withdrawals between January to August 2018, CHSSB was still able to meet their monthly payments to the Plaintiff and the other creditors. [75] Based on the pattern of orders and payments by CHSSB to the Plaintiff, CHSSB was in fact paying more monies to the Plaintiff in year 2018 as compared to year 2017. For instance, the highest value of orders made was in January 2018, which was RM166,005.54. It must be noted that in January 2018, the payment made to the Plaintiff was also the highest, at RM112,583.66. A table of payments made by CHSSB to the Plaintiff in year 2018 is reproduced below: - Month (in 2018) Value of Orders Payments January 166,005.54 112,583.66 February 67,702.42 73,910.62 March 116,218.40 62,686.28 April 136,211.06 60,000.00 May 128,329.96 80,868.52 June 93,928.00 112,308.62 July 143,534.00 85,000.00 August 24,998.60 - 876,927.98 587,357.70 47 [76] If it is true that CHSSB continues to order materials from the Plaintiff with no intention to pay, surely CHSSB would not have continued to make such substantial payments on a monthly basis to the Plaintiff in year 2018. This negates any dishonest intention from CHSSB and CCH when ordering the materials from the Plaintiff. [77] Further, during cross-examination, PW1 agreed that the payments in year 2018 were more consistent than the payments in year 2017. Cross-examination of PW-1 No, the question is that during the year 2018, from January to July 2018, the payments were more consistent than in the year 2017. TAN Agreed. [78] There was also no sudden hike in orders from CHSSB to the Plaintiff during the period from January to August 2018. In fact, CHSSB stopped ordering from the Plaintiff in August 2018 and the value of orders were much lower, at only RM24,998.60. Relying on CCO’s relationship with the Plaintiff as well as the credit limit at RM500,000.00 afforded by the Plaintiff to CHSSB, it was submitted that CHSSB could have taken advantage of the same and ordered more if there was indeed a dishonest intent to defraud the Plaintiff as contended. [79] The Defendants therefore submit that the facts of the present case could be distinguished from the case of Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 3 MLJ 479 (CA) where the Court of Appeal held that the intention to defraud could be inferred from the 48 fact that the company did not generate profit at the material time but placed unusually large orders. [80] There is also no evidence from the Plaintiff to suggest that CHSSB and/or CCO and/or other Defendants had made any representations to induce the Plaintiff to continue supply more materials. The decision to continue supplying to CHSSB was made solely by the Plaintiff. [81] Furthermore, finding of fraud should be based on the basis that there was no reasonable prospect of the Plaintiff being paid by CHSSB. There must be “something else” in relation to the cash withdrawals between January to August 2018. In support, reliance was placed on the following passage in the case of Aktieselskabet Dansk Skibsfinansiering v Brothers FACV No. 25 of 1998 @ page 12-13 ‘The question of whether a person carrying on the business was dishonest must depend, as Barnett J. said, upon an assessment of all the facts. In cases in which fraud is inferred, there is almost always, as Menzies J. said, "something else": a misrepresentation to creditors of the company's position or their prospects of payment or a dishonest intent to gain some personal advantage. In Re William C. Leitch Brothers Ltd [1932] 2 Ch. itself, Maugham J. did not find fraud solely on the basis that there was no reasonable prospect of the creditors being paid. The defendant director, at a time when the company could not pay its debts, had ordered goods greatly in excess of the company's normal requirements so that they would be subject to the bank's floating charge and reduce the amount for which he would be personally liable on his guarantee of the company's overdraft. On 49 these facts, it was not difficult to find that he had been dishonest. In R. v Grantham [1984] Q.B. 675, a case much relied upon by Mr Purle, the company had ordered potatoes from a supplier on 28 days credit for a total of ￡88,000. The company had no assets and no credit facilities. It sold the potatoes for ￡68,000 and distributed most of the proceeds among the directors. Lord Lane C.J. said: ‘it was open to the jury to find, if not inevitable that they would find, that whoever was running this business was intending to deceive or was actually deceiving [the supplier] into believing that he would be paid in 28 days or shortly thereafter, when they knew perfectly well that there was no hope of that coming about.’ So there was both an intention to gain a personal advantage and deception of the supplier. The judge had directed the jury as follows: ‘Members of the jury, if a man honestly believes when he obtains credit that although funds are not immediately available he will be able to pay them when the debt becomes due or within a short time thereafter, no doubt you would say that is not dishonest and there is no intent to defraud but if he obtains or helps to obtain credit or further credit when he knows there is no good reason for thinking funds will become available to pay the debt when it becomes due or shortly thereafter then, though it is entirely a matter for you this question of dishonesty, you might well think that is dishonest and there is an intent to defraud.’ [Emphasis added] 50 [82] It is an undisputed fact that the supply of materials from the Plaintiff to CHSSB was on credit basis. It was PW1 evidence that the credit limit was RM500,000.00. It is also undisputed that CHSSB had continued to order from the Plaintiff and the Plaintiff continued to supply materials to CHSSB until August 2018. [83] In this regard, in the absence of any demand for full payment from the Plaintiff between January to August 2018, the total owing had yet to crystallise into a debt due and owing to the Plaintiff from CHSSB. In the circumstances, it would be unfair to suggest that CHSSB ought to have set aside sufficient monies in the RHB Account in anticipation that the debt would fall due and owing immediately at some point of time. This is contrary to the ordinary business practice of companies which allowed payments on credit terms. [84] Furthermore, the bank statements of CHSSB’s RHB Account actually showed that CCO, CCH, CYY and LMY had all transferred money into the account, as evidenced by the bank statements. On this fact, learned counsel for the Defendants submitted that it is improbable for CCO. CCH, CYY and LMY to transfer more monies into CHSSB if their common goal is to wind down CHSSB’s business to the deprive the creditors of their payments. In fact, CYY had continued to provide financial assistance to CHSSB as late as July 2018, by paying CHSSB’s electricity bill. [85] In the Singapore case of Amrae Benchuan Trading Pte Ltd (in liquidation) v Tan Te Teck Gregory [2006] 4 SLR(R) 969 at 970, Sundaresh Menon JC was of view that it would not make sense for 51 the Defendant to channel money back into the company if they had believed the company was heading for insolvency: ‘(3) The fact that the defendant did not know or could not be expected to know that the company would be wound up pointed away from the probability that those making the payments were doing so with the relevant desire. Additionally, after the company’s directors and the defendant had been repaid moneys due from the company to them, they had proceeded to pump substantial sums of money into a related company which was then channelled back into the subject company. If they had believed that the plaintiff [sic] was heading for insolvency, it would not have made sense for them to do so…’ [Emphasis added] Court’s deliberation [86] After evaluating the facts of this case, I must respectfully reject the submissions of learned counsel for the Defendants. Whilst I accept that in this case, the Plaintiff had not made any demand for the payment of the entire outstanding sums during the period from January to August 2018 and that there had been occasions where some monies were paid into CHSSB’s RHB Account in order to meet the company’s expenses, nevertheless, it cannot be ignored that cash were systematically taken out from CHSSB resulting in the company being dependent on cash injections each time debts had to be paid by the company. [87] The cash withdrawals were effected without due regards to the needs of CHSSB to meet its financial obligations to its creditors, in particular, the Plaintiff who was CHSSB’s largest supplier. Indeed, 52 the business of CHSSB were carried on in a manner where CHSSB would pay the Plaintiff only intermittently and in sums less than what were due and owing so as to lure the Plaintiff to continue supplying the goods to CHSSB. This had led the sum outstanding to the Plaintiff to accumulate to the tune of RM 625,922-44 by August 2018, exceeding the Plaintiff’s RM 500,000.00 credit limits. In fact, CHSSB’s indebtedness to the Plaintiff increased three-fold from RM286,774-04 in January 2018 to RM625,922-44 in August 2018. [88] To my mind, the dishonest intent is established when one looks at the events leading to the dishonour of the RHB Cheque 1636 and the subsequent actions taken by the Defendants thereafter. The Defendants Knew Cheque 1636 Would Be Dishonoured [89] From the evidence adduced at the trial, there are good grounds for holding that both CCO and CCH must have been aware that the Cheque 1636 which was issued to the Plaintiff sometime on 10.8.2018 but post-dated to 15.8.2018 would be dishonoured. Since early July 2018, the cash withdrawals from the RHB Account had intensified: No. Payment Date Cheque Amount Payee Written by Signed by Page No.

1.

2.7.2018 001610 17,800 359 of Bundle (378 PDF) 2 20.7.2018 001611 10,000 CYY 379 of Bundle (398 PDF) 53 [90] It can be seen from the above, the cash withdrawals in July 2018 totalling RM 107,800.00 were cash payments made out to CCH and CCY. The end balance of the RHB Account as of 31.7.2018 was RM5,600-47. The amount owing to the Plaintiff as at 31.7.2018 was RM600,923-84. [91] The closure of the RHB Account was triggered by cheque 1621 for RM7,000 banked in 13.8.2018 and returned on 14.8.2018. Subsequently another cheque 1637 issued by CCO was also dishonoured the next day, 15.8.2018. By this time, CHSSB would know its account had 2 dishonoured cheques and would inevitably be closed.

3.

2.7.2018 001616 15,000 CCO 368 of Bundle (387 PDF) 4 10.7.2018 001628 5,000 CYY 369 of Bundle

5.

10.7.2018 001629 10,000 CHH 370 of Bundle

6.

17.7.2018 001630 20,000 373 of Bundle

7.

17.7.2018 001631 30,000 374 of Bundle (393 PDF) 54 Figure 9 - Page 387 Bundle B [92] Cheque 1636 was given by CCO to PW1 sometime before 10.8.2018 at No. 20 Jalan Taming. It was post-dated to 15.8.2018. On due date, i.e., 15.8.2019, CCO would have known cheque 1621 and 1637 were dishonoured and the inevitable closure of the RHB Account. However, he kept silent and proceeded to called PW1 not to bank in the cheque first. Figure 10 - Page 393 Bundle B (412 PDF) 55 Figure 11 - Page 395 Bundle B Figure 12 – Page 398 Bundle B [93] Then, on 17.8.2018 and 27.8.2018, CCO issued two further cheques 1639 and 1642 for RM15,000 and RM3,000, signed by CCH, LMY and CYY to himself. This is notwithstanding that the RHB Account had insufficient cash to meet the Cheque 1636. However, it would seem that instead of injecting cash into RHB Account, CCH, CCO, LMY and CYY were in fact withdrawing further cash from the account to themselves. None of them had intended Cheque 1636 to clear. It was issued merely to procure further goods from the Plaintiff. 56 [94] Further, in the middle of the night in August 2018, CHSSB ceased operation in No. 20 Jalan Taming and moved to a bigger, newer and better factory rented by TPMS at No. 1 Jalan BJ. No one knows they had moved. It then sought to continue its business under TPMS instead. Figure 13 - No. 20 Jalan Taming - page 4 Bundle C Figure 14 - No. 1 Jalan BJ page 1 Bundle C 57 [95] Not only did CHSSB seek to continue its business via TPMS, it took active steps to divert the monies due from its customers to be paid to TPMS instead. [96] CCH admits that the Plaintiff was CHSSB’s largest supplier. The orders placed by CCO for CHSSB from January to August 2018 were RM165,005-54, RM67,702-42, RM116,218-40, RM136,211- 06, RM128,329-96, RM93,928-00, RM143,534-00 and RM24,998.60 respectively. Its collection over the same period on the other hand averaged around RM233,819-42 per month. As its actual collection in August 2018 was only RM55,536-68, it means there were monies due from CHSSB’s customers which had not been collected. [97] Based on the bank statement of RHB Account, CHSSB’s largest customers were EPE Busway Sdn Bhd (‘EPE Busway’), Sun Power Automation (‘Sun Power’) and Esta Industrial Sdn Bhd (‘ESTA’). The Plaintiff subpoenaed the account manager of EPE Busway, i.e., PW3 and the general manager of ESTA and Sun Power, i.e., PW4. [98] PW3, the accounts manager from EPE Busway gave evidence that:

From June 2018 to August 2018, EPE Busway had purchased goods amounting to RM74,099-00 from CHSSB. The purchases were reflected in the following 10 invoices. Date Invoice No.

Bundle E

6.2018 3842 RM10,011-48 Page 5 58

28.6.2018 3843 RM21,923-01 Page 6 29.6.2018 3844 RM14,620-09 Page 7 29.6.2018 3845 RM6,755-36 Page 8 12.7.2018 3875 RM75-12 Page 9 12.7.2018 3874 RM1,349-67 Page 10 25.7.2018 3891 RM250-00 Page 11 29.6.2018 3841 RM12,204-27 Page 12 23.8.2018 3962 RM6,750-00 Page 13 23.8.2018 3963 RM160-00 Page 14 Total

At CCH’s request, on 24.9.2018 EPE Busway paid RM74,099-00 for the 10 invoices to TPMS, instead of CHSSB. Figure 8 - page 15 Bundle E 59 [99] Sun Power and ESTA are related companies. PW4, the general manager for both companies gave evidence that in September 2018, CCH requested Sun Power and ESTA to make payments to TPMS for goods purchased from CHSSB. In page 215 of Enclosure 108 ‘LIANG Ok. So actually somewhere in September 2018, so we receive a letter from Chee Hoe Steel and Trading, so Mr Chong Chee Hoe told us that the payment for, because the account has been suspended for Chee Hoe Steel and Trading. So he want us to make payment to this Top Perform Marketing and Services with this black and white and the signature from I think both of the director.” [Emphasis added] [100] In relation to Sun Power, PW4 gave evidence as follows.

By a letter dated 26.9.2018 from CHSSB signed by CCH and LMY to Sun Power, CHSSB “agreed” that Sun Power pay RM77,426-10 for purchases from June to August to TPMS’ bank account. Figure 15 - Page 16 Bundle E 60

On 11.10.2018, Sun Power issued payment of RM19,408-50 to TPMS for CHSSB’s invoices in June 2018. An example of the payment is shown below.

On 23.10.2018, Sun Power issued payment of RM23,676-85 to TPMS for CHSSB’s invoices in July 2018.

On 26.11.2018, Sun Power issued payment of RM34,340-75 to TPMS for CHSSB’s invoices in August 2018. 61 [101] In relation to ESTA, PW4 gave evidence as follows.

By a letter dated 18.9.2018, ESTA confirmed that it would issue a cheque to CCH personally for the May 2018 outstanding and requested for an official receipt. This letter was acknowledged receipt by CCH and LMY.

On 21.9.2018, CHSSB issued an official receipt to ESTA acknowledging payment of RM10,002-16 on 19.9.2018 from ESTA. Figure 18 - page 30 Bundle E 62

On 11.10.2018, ESTA issued payment of RM5,434-00 to TPMS for CHSSB’s invoices in June 2018. Figure 19 - Page 17 and 18 of Bundle E [102] After hearing the evidence of PW3 and PW4, the Defendants admitted during cross examination, that after August 2018, they had asked CHSSB’s customers to make payment for whatever that was due to CHSSB into TPMS’s bank account. 63

CCH admitted that he and his wife, LMY instructed CHSSB’s customers to pay monies due to CHSSB into TPMS’s account. CCH further admitted that CCO was in the know about these covert transactions. Page 415 and 416 of CCH’s Evidence on 28.9.2021 in the Transcript Did you ask your customer, did you ask Chee Hoe Steel’s customer to pay whatever due to Chee Hoe Steel into Top Perform Marketing & Services? Yes. And this was signed by both you and your wife. Yes. Your wife is fully aware that this money belongs to Chee Hoe Steel & Trading. At that point of time she knew. And she signed it, she signed this document? Yes. … And if you turn to page 18, you asked for these invoices to be paid to Top Perform Marketing & Services. Agree? Correct. Chong Chee Onn knew about this, isn’t it? … Chong Chee Onn knows. … Chong Chee Onn knew that you were using Top Perform Marketing & Services, isn’t it? Agree.” [Emphasis added] 64

LMY admitted that she knew TPMS’s involvement in the business of CHSSB. Pages 418 and 419 LMY’s Evidence on 30.9.2021 in the Transcript Ms Lee, just now you mentioned, your testimony was that you had to help, you wanted to help your husband because Chee Hoe Steel’s account was closed. Therefore, you incorporated Yin Metal Works. Now Chee Hoe Steel’s account was closed and you knew this was in August 2018. Yin Metal Works was incorporated in 2019, end of 2019. In between that period, how did your husband, Mr Chong Chee Hoe, carry out business? LEE What I know was his sister-in-law did help him in the business ke, trading ke, went to Top Perform.” [Emphasis added] [103] Quite apart from diverting the payments due to CHSSB to TPMS, after August 2018, the Defendants also diverted CHSSB’s business to TPMS, Yin Metal Enterprise and CF2 SB.

According to PW4, the general manager of Sun Power and ESTA, after August 2018, instead of purchasing from CHSSB, CCH sold to PW4’s companies using other companies such as TPMS, from September 2018 to June 2019, KP Metal after June 2019 and Yin Metal Enterprise from October 2019 to August 2020. 65

PW4, produced documents to show an example of Sun Power’s business with CHSSB that had been diverted to TPMS.

On 21.9.2018, Sun Power sent a purchase order to TPMS. On 4.10.2018, TPMS responded with Tax Invoice No. 00012012 for RM5,555-60 and Delivery Order No. 00012012 to Sun Power. Figure 20 - Page 23 Bundle E Figure 21 - Page 21 Bundle E 66 Figure 22 - Page 22 Bundle E

On 21.9.2018, Sun Power sent a purchase order to TPMS. On 6.10.2018, TPMS responded with Tax Invoice No. 00012013 for RM1,435-45 and Delivery Order No. 00012013 to Sun Power.

On 9.11.2018, Sun Power prepared a payment voucher for invoices issued in October 2018 in the sum of RM20,707- 94 to TPMS. Payment for the said RM20,707-94 was made to TPMS on 13.11.2018. 67 Figure 23 - Page 28 Bundle E

PW4, also produced ESTA’s “vendor account statement” to show payment made from ESTA to Yin Metal Enterprise between 2019 and 2020. [104] CCO and CCH admitted to these diversions of CHSSB’s businesses after August 2018. In page 297 Evidence of CCO on 27.9.2021 in the Transcript Do you know if Top Perform Marketing & Services has any business relationship with Sun Power Automation Sdn Bhd? CHONG This, I know, there was. How do you know? CHONG Because Chee Hoe Steel told me, Chong Chee Hoe told me. What did Chong Chee Hoe tell you? 68 CHONG That, he told me that now this company, this Sun Power business will be, Sun Power’s business will be given to Top Perform Marketing & Services. Were they selling to Sun Power Automation the same thing that Chee Hoe Steel was selling? CHONG Most of them are the same. And they were manufactured in factory No.1, Jalan BJ2-7? CHONG Correct.” [Emphasis added] Pages 418 and 419 CCH’s Evidence on 28.9.2021 in the Transcript Can you now turn to page 21 of the same bundle, Bundle E? In October 2018, you started using Top Perform Marketing & Services to sell to your customer. Agree? Using its name, correct. Using its name? Yes, correct. Who collect the money? Me. How did the money get to you? Transfer. Transfer from where to where? From customer transfer to Top Perform.” [Emphasis added] [105] As a matter of fact, even the invoices from TPMS to Sun Power appear to be a reproduction of a computer ‘cut and paste’ job with the tracks not properly covered as they refer to CHSSB’s GST number. 69 Figure 9 - page 13 Bundle E Figure 10 - page 21 Bundle E Pages 299 and 300 CCO’s Evidence on 27.9.2021 in the Transcript Why does it have two numbers then, Mr Chong? Witness is pointing to Bundle E, page 21. Here, the GST number of Top Perform Marketing & Services. So, put here, did not change, it used back the same number of Chee Hoe Steel. Same GST number of Chee Hoe Steel? Is that the case? Witness is pointing to page 21 of Bundle E. So, this GST number here wasn’t amended when this document was issued. So, the number, number put here was wrong.” [Emphasis added] 70 [106] Apart from the GST number, TPMS’s tax invoices also used the same business address that CHSSB was using, even though CHSSB was no longer renting No. 20 Jalan Taming and neither TPMS nor CHSSB was operating at the same. Misappropriation of Machineries belonging to CHSSB [107] During cross examination, CCO conceded that after CHSSB ceased operation at No. 20 Jalan Taming in August 2018, he rented No. 1 Jalan BJ using TPMS. CCH admitted that CHSSB’s machine was moved to No. 1 Jalan BJ. Page 469 of CCH’s Evidence on 28.9.2021 in the Transcript How many machines do you have? … Two units, like that. Two units? Where were these machines after August 2018? Ok, some of them were sold and one unit was moved to the No.1, the address No.1 there, Top Perform there.” [Emphasis added] [108] Less than a month later, in 18.9.202018, CYY incorporated CF2 SB. CF2 SB’s business address in SSM’s records was at No. 1 Jalan BJ. CF2 SB’s General Ledger Report as at 30.9.2019 shows an entry for machinery on 27.2.2019 valued at RM404,000-00 as its share capital. 71 Figure 24 - Page 78 Bundle C [109] The following are sufficiently reliable circumstantial evidence which led to the irresistible conclusion that the RM404,000-00 machineries were machineries belonging to CHSSB which CCH had moved to No. 1 Jalan BJ. In short, the Defendants had misappropriated CHSSB’s machineries to CF2 SB.

First CYY admitted that these machineries were at the “factory”. CF2 SB only has 1 business address i.e., No. 1 Jalan BJ, which is a factory. Hence “factory” would refer to No. 1 Jalan BJ. Pages 382 CYY’s Evidence on 28.9.2021 in the Transcript Ms Chong, my question is you bought the machine in February 2019. Where did you keep the machine? 72 I put it in the factory factory. What was the address of that factory? I can't remember the address. You cannot remember the address of your factory? I need to check. Please do. Witness referring to Bundle B, page 46. Witness reading from the address column. We'll put it on screen. Is this, put page 46. Bundle B. Is this the address? Yes.” [Emphasis added]

CYY has a full-time job with an advertisement company known as Innity Sdn Bhd. During cross examination, it was clear that CYY did not have a clue about CF2 SB’s nature of business and the manufacturing steel products. Pages 372 to 373 CYY’s Evidence on 28.9.2021 in the Transcript Can you refer to page, Bundle B, page 28? I will enlarge it to show you the company name, CF2 Metal Sdn Bhd. … What does this company do? YIN oing steels. Ms Chong, what is the meaning of doing steel? Manufacturing steel. How do you manufacture steel, Ms Chong? Machine.” 73

However, CYY claimed that she had “purchased” the machineries worth RM404,000-00 despite insisting that she had CF2 SB never carried out any businesses and was a dormant company. Despite allegedly spending such a large sum, she does not know when, where and from whom she bought the machines from. She did not even have an invoice. Pages 379 to 381 CYY’s Evidence on 28.9.2021 in the Transcript What was the month when you bought this RM400,000 machine? Can’t really remember already. This machine or so-called – Hold on, Mr Wong, can you remind the witness that she is giving evidence on oath. Sorry, I’m sorry. I just want her to be reminded that she is giving evidence on oath. Yes, witness remind still under former oath. Dengan izin. … Now, Ms Chong, do you have an invoice for the purchase of this machine? Who did you buy it from? Second-hand dealer. What is the name of the shop? I can't remember. Where was the location of the shop? Can't remember. 74 You cannot remember where did you buy the 400,000 machine that you paid in cash. Is that what you are telling the Court? Because it was in different transaction. Different, few machines, all in cash. So can't really remember. New… a few machine. Correct. How many machines? I can't remember how many machine. It should be five to six.” [Emphasis added]

When asked why anyone would spend so much money on machineries when they had not even started the business or did not know how to operate the machines, CYY said she was trying to figure out who were the target customers and would learn how to operate the machines. Page 374 LMY’s Evidence on 30.9.2021 in the Transcript Who are the target customer, Ms Chong? Those who are doing business in relating to steel, with, who processing metals. Can you give me the name, please? No.” Pages 374 to 375 LMY’s Evidence on 30.9.2021 in the Transcript Who do you have in mind to carry out the business of CF2? Hope that is clearer. 75 Me myself. You yourself? Yes. You can operate the machines? Learn lah. Because my father had connection, so even during in Sun CF also we have connection and then we approach our old customers.”

CYY said she wrote them off 4 months later on 30.6.2019 by selling the machines as scraps for RM40,000-00! When probed further CYY said she cannot remember the names and telephone numbers of the persons who she sold the machines as scrap to. Page 388 CYY’s Evidence on 28.9.2021 in the Transcript So where are the machines now? Disposed by other people already. Who are the other people? Those who collect scrap metal. Scrap metal collector? Actually witness started with yes. I left it to other people to handle it, there was (12:47:49PM inaudible) the agent. So I left it to the agent and then I did not deal with it anymore. How much did you get back for the machines? About 40,000 only. Four zero? Yes. You disposed of your few months old machine that you bought for 400,000 for 40,000? Yes. 76 Can you give me the telephone number of your agent? Because I rushing for writing off the company. So I have to dispose this asset. This is the time that I dispose.” [Emphasis added]

It was only on 4.6.2018 that CYY sent WhatsApp messages to CCH declaring her impecuniosity and announcing that she had taken loans from her employer. It is bewildering how several months later, in February 2019, CYY “purchased” the machines for RM404,000-00 in cash. Pages 377 to 379 CYY’s Evidence on Enclosure 108 “PTJ English. ‘Issue one cheque of RM10,000 to me … I don’t have enough money to use already’. Ok. Ms Chong, this was your message to Chong Chee Hoe. Correct? Yes. Can I – What date is the message?

04.06.2018, My Lord. … You borrowed money from your employer to lend to Chong Chee Hoe? Yes. What machines were these? Metal fabrication machines. Who bought it? Me. How was it purchased? In cash or with a loan? Cash.” [Emphasis added] 77

CHSSB’s last financial report was in 2015 however its auditor said it was 2016. The point is there was no financial report before the court from 2016 onwards. Page 8 of Auditor’s Evidence in Transcript 2 in Enclosure 109 Mr Chan, just to clarify, your subpoena is only to produce documents and not to testify. The documents that the Plaintiff has requested from you is Form GSP03 for Chee Hoe Steel & Trading Sdn Bhd for the financial year 2017, 2018 and 2019. Do you have those documents? CHAN Now, we are auditor. Mister. CHAN Normally we don’t have this form. And by the way, the last audited accounts that I did for this company Chee Hoe Steel & Trading is for the year ended 30.06.2016. That was the last set of accounts that we did. So, as for your subpoena you ask for 2017, 2018, 2019, I would have nothing.” 78

CHSSB did not update its business address with the Companies Commission of Malaysia. On records, CHSSB’s business address is at No. 17, 5/149G, Taman Sri Endah, Sri Petaling, 57000 Kuala Lumpur (‘No. 17 Taman Sri Endah’). According to LMY during her cross examination, she lived in No. 17 Taman Sri Endah with CCH 5 to 6 years ago prior to moving to No. 20 Jalan Wan Malini. Thereafter, they had sold No. 17 Taman Sri Endah and had not been there for a very long time. Nonetheless, this address remains in CHSSB’s records with the Companies Commission of Malaysia until the trial of this action.

CHSSB had not pay income tax after 2016. It was established during the trial that CHSSB was being sued by the Government 79 of Malaysia in the Magistrates Court Suit No.: BC-A71NCVC- 146-06/2021 for non-payment of income tax. Pages 443 and 444 CCH’s Evidence on 29.9.2021 in the Transcript Mr Chong, did you pay the income tax for D6 in 2016, 2017 and 2018? Paid until 2016. Did you pay for 2017? Not yet. Did you pay for 2018? Not yet.”

CHHSB did not pay for GST for year 2017 and 2018. CCH admitted to this. Page 445 CCH’s Evidence on 29.9.2021 in the Transcript Did you pay the GST for 2017 and 2018? And you’re on oath Mr Chong. Not yet.”

CHSSB had under-calculated its profit after taxation in its audited report for year 2015. Page 443 CCH’s Evidence on 29.9.2021 in the Transcript Thank you so much My Lord. Mr Chong, if I deduct 1.5 from 2.1, the exact figure there, you will get a gross profit of RM588,961 and not RM498,961. It is RM588,961 not RM498,961. Do you agree with me? You can do a quick calculation. 80 Agree. So you have… according to this statement, underestimated… under calculated your profit after taxation. Your gross profit which will affect your taxation by close to RM100,000. Agree? Agree. I agree but this is not my problem, right?” [Emphasis added]

CHSSB also could not show any evidence that it had paid any EPF for its employees [111] The aforesaid, taken together, lead to an irresistible and compelling inference that the business of CHSSB were being carried on with the intent to defraud its creditors and or for a fraudulent purpose. Persons knowingly parties to the fraudulent trading [112] In the present case, the Plaintiff is seeking to hold CCO, CCH, CYY, LMY and WML to be liable under section 540 of the CA 2016 as persons who were knowingly parties to the carrying on of the business by CHSSB in a fraudulent fashion. [113] There is no doubt that CCH as a director of CHSSB was directly involved in the carrying on of CHSSB’s business. He was a cheque signatory to the RHB Account and almost all the cash withdrawals were made by him. [114] As regards CCO, learned counsel for the Defendants contended that CCO was a mere sale person for CCHSB and was not involved in the management of the company. 81 [115] With respect, the preponderance of evidence shows that CCO was intimately involved in the management of CHSSB. CCO had been purchasing steel products from the Plaintiff via SCF SB, TPMS and lastly CHSSB. There is no dispute that CCO placed the orders with the Plaintiff. [116] More significantly, there were many occasions every month when the RHB Account was overdrawn, CCO banked in monies into CHSSB to regularise the RHB Account. More specifically:

CYY’s evidence that CF2 SB had purchased “5 or 6 machines” for RM404,000-00 is also in direct contradiction with there being only one entry for RM404,000-00 in CF2 SB’s General Ledger Report. [110] Quite apart from the aforesaid misappropriation and diversion of its business and assets, CHSSB was also being operated without any intention for its continuous survival. It did not audit its accounts, file its annual returns, pay Custom for GST that it had collected, pay income tax as well as EPF.

When the RHB Account’s balance was RM2,571-97, cheque 001580 for RM10,000 was issued causing the account to be overdrawn by RM7,128-03, CCO banked in RM2000 on 15.5.2018;

When the RHB Account’s balance was RM5,418-84, cheque 001600 for RM40,000 was issued causing the account to be overdrawn by RM34,581-64, CCO banked in RM4000 on 14.6.2018;

When the RHB Account’s balance was RM24,983-74, cheque 001608 for RM45,000 was issued causing the account to be overdrawn by RM20,016-26, CCO banked in RM1,000 and RM4,000 on 16.7.2018;

When the RHB Account’s balance was RM38,971-35, cheque 001634 for RM40,000 was issued causing the account to be overdrawn by RM1028-65, CCO banked in RM2,000 on 23.7.2018. 82 [117] Further, although CCO was not a bank signatory to the RHB Account, CCO issued many cheques from the said CHSSB’s accounts to suppliers and debtors of CHSSB. Cheques in July 2018 and all the cheques in August 2018, except one post-dated cheque were written by CCO. These cheques were dated 2.7.2018, 8.8.18,

10.8.2018, 15.8.2018, 17.8.2018, 20.8.2018 and 27.8.2018. CCO admitted to this. The following are several examples. Figure 26 - Page 383 Bundle B Figure 27 - Page 390 Bundle B 83

The cheques issued by CCO included cash cheques to CCH and cheques to himself and his sister CYY. Figure 29 - Page 368 Bundle B [PDF 370] Figure 30 - Page 395 Bundle B 84 Figure 31 - Page 398 Bundle B [118] To my mind, whether the monies paid by CCO into CHSSB were intended as ‘friendly loans’ as contended is beside the point. What is clear is that CCO was not a mere ‘sale person’ in CHSSB. More importantly, not only was CCO fully aware of the state of the RHB Account, including the withdrawals, he was an active participant in the carrying on of CHSSB’s business in the dishonest manner. [119] CCO issued all the cheques in August 2018. He also issued Cheque 001636 for RM50,000 dated 15.8.2018 to the Plaintiff. He personally handed over this cheque to the Plaintiff and asked for more goods for CHSSB. This resulted in the sales in invoices 28413, 28421, 28430 and 28448. CCO knew that the Cheque 001636 would be dishonoured. There was simply insufficient funds in the account to meet the payment. [120] After the Cheque 1636 was dishonoured, PW1 constantly chased CCO for payment. In response to these persistent pleading for payments, CCO took the following actions. 85

CCO took the initiative to issue a RM5,000-00 cheque from TPMS to pay to the Plaintiff to reduce the amount owing by CHSSB. CCO admitted during cross examination that he “issued” the cheque even though it was his wife who signed it. In pages 281 to 282 Evidence of CCO on 27.9.2021 in the Transcript Mr Chong, go back to the cheque issued by Top Perform, and that’s at Bundle B page 427. This cheque was issued by Top Perform to the Plaintiff to reduce the amount owing by Chee Hoe Steel. Correct? … CHONG Dengan izin. Because, sorry, Plaintiff kept chasing me for D6 debt. So this was the repayment, so I issued to repay the owing by D6 and this 5,000 actually I was even borrowed from my wife’s company that is the Top Perform to reduce the debt owing by D6.” [Emphasis added] In pages 272 Evidence of CCO on 27.9.2021 in the Transcript CHONG This is cheque of Top Perform Marketing & Services. RK This is your wife’s company, you said? PTJ Wife’s business, counsel? CHONG Yes. RK Is that her signature? CHONG Correct. RK And she asked you to write this cheque? CHONG Correct. RK So, you are a professional cheque writer? CHONG No.’ 86

Sometime on or about 23.11.2018, CCO sent back some of the steel products which the Plaintiff had sold to CHSSB in invoices no. 1-028430 dated 11.08.2018, invoice no. 1-028034 dated 6.7.2018 and invoice no. 1-027588 dated 26.5.2018. The fact that the goods belonged to CHSSB and were returned by Top Perform Services and Trading, a company controlled by CCO, meant that CCO was in involved in the management of CHSSB as otherwise he would not have access to CHSSB’s inventories or able to make the decision to return the goods. [121] It is not insignificant that CCO was a director of SCF SB. This entity was controlled by CCO and his wife WML. They were the signatories to the cheques even though WML was not a director of SCF SB. [122] SCF SB had operated from No. 22, Jalan Taming P/1, Taming Jaya, 43300 Balakong, Selangor Darul Ehsan (‘No. 22 Jalan Taming’). Its telephone and fax numbers at No. 22 Jalan Taming and No. 20 Jalan Taming were 03-8961 0737 and 03-8961 0757. [123] When SCF SB could not pay the Plaintiff the outstanding sum of RM375,985-88, CCO started using TPMS to purchase from the Plaintiff. TPMS was an entity registered by CCO’s wife who is an employee with a company known as Fook May. She signed the cheques for TPMS. [124] CCO used 2 addresses for TPMS. First was his residential address where he lived with WML at No. 14 Jalan Bukit Intan as well as No. 20 Jalan Taming. He also used SCF SB’s telephone and fax 87 numbers for TPMS’s businesses. CHSSB subsequently took over No. 20, Jalan Taming from SCF SB and TPMS. In the account opening form for RHB Bank, CHSSB’s introducer was SCF SB. It was noted down by the bank that CHSSB was a ‘related company’ of SCF SB. After the dishonoured Cheque 1636 to the Plaintiff in August 2018, CHSSB moved to No. 1 Jalan BJ, a premise rented by TPMS which was also the business address of CF2 SB. [125] The irresistible conclusion from the aforesaid is that CCO had a hand in the ‘moving’ of SCF SB’s business to TPMS, CHSSB and CF2 SB. He was knowing party to purchases of goods by CHSSB from the Plaintiff. He knew that as the outstanding debts to the Plaintiff were increasing, CHSSB had continued to withdraw cash from its RHB Account resulting in the said account to be overdrawn. CCO was directly involved in inducing the Plaintiff to continue to supply to CHSSB in August 2018, knowing that the RHB Account had insufficient funds to meet the Cheque 1636. In setting up TPMS through his wife, CCO was also involved in diverting the business of CHSSB to TPMS and procuring payments of debts due to CHSSB to TPMS. [126] Accordingly, there is no doubt that CCO is a person knowingly a party to the carrying on of business of CHSSB in a dishonest and fraudulent manner. Were CYY and LMY are Parties to the Fraudulent Trading [127] According to LMY, CCH was the director in charge of managing the business of CHSSB whereas she was just a sleeping director. 88 [128] Both LMY and CCH gave evidence that the reason why LMY was named as a director of CHSSB was due to the requirement under the old Companies Act 1965 to appoint two (2) directors in order to incorporate a company. [129] In relation to CHSSB’s RHB Account, the documentary evidence showed that prior to April 2018, the cheques issued by CHSSB were signed by CCH only. [130] It was only after CCH asked CYY and LMY to become joint signatories of CHSSB’s RHB Account beginning April 2018 that the cheques issued by CHSSB must be signed by all joint signatories, namely, CCH, CYY and LMY. This is evidenced by the latest signatories’ form lodged with RHB Bank and the signatures appearing on all cheques issued by CHSSB as of April 2018. [131] Both CYY and LMY testified that they signed the cheques issued by CCH only after being briefed by CCH as to the purposes for the cheques. According to them, CCH had informed them that the cheques were used to pay for CHSSB’s expenses including the payment of salaries to its employees. [132] Both CYY and LMY have other full-time jobs and were never present at CHSSB’s premises. [133] Notwithstanding the aforesaid, it would appear that both CYY and LMY were aware as to how the business of CHSSB were being carried on by CCH and CCO prior to April 2018, at least as regards the cash withdrawals. In fact, the evidence disclosed that CYY had 89 made advances to CHSSB at CHH’s requests to help pay for CHSSB’s expenditures, including payment of rental, salaries of workers and electricity bill. This was probably the reason why both CYY and LMY were made signatories to the RHB Account as they were concern of the cash withdrawals by CCH from the company. [134] After CYY and LMY became joint signatories of CHSSB’s RHB Account, there were no unusually large cash withdrawals from the account. From the records, for the period from April to June 2018, there were only 1 cash withdrawal made for each of the month unlike the previous occasions when CHH was the sole signatory to the RHB Account. [135] However, in July 2018, there were 5 cash withdrawals amounting to RM92,800-00 made in favour of CCH, RM5,000-00 and RM10,000- 00 were paid to CYY via cheque 001628 dated 10.7.2018 and cheque 001611 dated 20.7.2018. The withdrawals were made at a time when there were still substantial debts due and owed to the Plaintiff. The withdrawals resulted in the balance of the RHB Account as of 31.7.2018 to be only RM5,600-47. [136] In fact, CYY was one of the signatory to the Cheque 1636 which was later dishonoured. As alluded to above, at the time the Cheque 1636 was issued, it was clear that the RHB Account had insufficient funds to meet the cheque. Yet, CHSSB was able to continue purchasing more from the Plaintiff because of the assurance that the Cheque 1636 would be paid. 90 [137] CYY was also instrumental in setting up CF2 SB in September 2018 to take over the business of CHSSB and in transferring CHSSB’s machineries into CF2 SB without making any payments to CHSSB. [138] The aforesaid transfer of the machineries cannot be otherwise than a blatant act to siphon the assets of CHSSB from the grasp of its creditors, including the Plaintiff. This constitutes a clear case of the director of CHSSB carrying on the business of the company to defraud its creditors and or for a fraudulent purpose. By assisting the dissipation, CYY is a person who knowingly a party to the carrying on of CHSSB’s business to defraud its creditors. [139] The evidence tending to show that the machineries ‘injected’ to CF2 SB were that of CHSSB’s is compelling. CCH himself conceded that CHSSB had moved its business to No. 1 Jalan BJ from No. 20 Jalan Taming. This was the same address from which CF2 SB was operating. CCY could not produced any documents from whom she claimed she had ‘bought’ the machineries. Neither could CHSSB show the whereabout of its machineries. It is also incredulous that CF2 SB was said to have sold the machineries for only about 10% of the value after only 3 months. No documents were adduced in support. [140] As regards LMY, she registered Yin Metal on 4.9.2019 and was signed letters under Yin Metal’s letterhead together with CCH to customers of CHSSB directing that they made payments of debts due to CHSSB to TPMS. 91 [141] Whilst CHSSB still owed substantial sums to the Plaintiff, LMY through Yin Metal had conducted CHSSB’s business with CHSSB’s customers with the view to divert the payments from CHSSB. [142] Based on the aforesaid, it is my judgment that both CYY and LMY are also persons who were knowingly parties to the carrying on of the business by CHSSB and CCH to defraud its creditors or for a fraudulent purpose. Both of them were actively participating in the fraudulent activities and not mere bystanders with knowledge of the dire financial state of CHSSB. Conspiracy [143] In a claim of conspiracy, the defendants are liable if it can be established that there was a combination, that the combination must be to use unlawful means, that there must be an intention to injure the claimant by the use of those unlawful means, and that the use of those unlawful means had caused the claimant to suffer loss or damage as a result (see; Elite Property Holdings Ltd & Anor v Barclays Bank plc [2019] EWCA Civ 204 para 71; WT Development Sdn Bhd v Chow Cho Tai & Ors [2019] MLJU 1691 para 91). [144] Learned counsel for the Plaintiff submitted that if fraudulent trading of the Defendants is proven, the elements of conspiracy between the Defendants will also be satisfied and thus rendering them liable. [145] With respect, I do not think that merely because this Court has found fraudulent trading as against CCH, CCO and CYY in this case that 92 it must necessarily follow that the cause of conspiracy against them has also been established. [146] Whilst fraudulent trading under Section 540 of the Companies Act 2016 is in effect a general fraud offence comparable to conspiracy to defraud, it requires the use of a company instead of the element of conspiracy. Further, an element of dishonesty is required for fraudulent trading in the manner the business of the company is being conducted. The words ‘person knowingly a party to the carrying on of the business to defraud or for a fraudulent purpose’ has been opined by Hoffman J in Re Augustus Barnett & Sons Limited [1986] BCLC 170 to be wide enough to cover ‘outsiders who could not be said to have carried on or even assisted the carrying on of the company’s business, but who nevertheless in some way participated in the fraudulent acts’. [147] In Maidstone Buildings Limited [1971] Ch 1085, Sir John Pennycuick V-C said: ‘The expression ‘parties to the carrying on of the business’ is not I think a very familiar one, but so far as I can see the expression ‘party to’ must on its natural meaning indicate no more than participates in, takes part in, or concurs in and that, it seems to me, involves some positive steps of some nature. I do not think it can be said that someone is party to carrying on a business if he takes no positive steps at all, so in order to bring a person within the section you must show that he has taken some positive steps in the carrying on of the company’s business in a fraudulent manner.’ 93 [148] Further, the degree of knowledge of the dishonest intent under Section 540 may include what is common known as the ‘Nelsonian’ knowledge [See: Morris v. Bank of India [2004] EWHC 528 (Ch)]. [149] On the other hand, for the tort of conspiracy to defraud by unlawful means, there is a need to establish a common intention formed to injure the claimant by the use of the unlawful means. The elements and the principles are different from that required for fraudulent trading. [150] Hence, I would respectfully decline to find that the Plaintiff has established its cause of action based on conspiracy to defraud against CCH, CCO, CYY and LMY on the footing that I have found against them to be liable under Section 540 of the Companies Act 2016. Conclusion [151] Accordingly, it is my judgment that the Plaintiff has successfully discharged the burden that the necessary elements required for fraudulent trading under Section 540 of the CA 2016 have been established to the satisfaction of this Court and for the reasons stated above, I hereby order that CCO, CCH, CYY and LMY to be jointly and severally liable to pay the sum of RM625,922-44 being monies owed by CHSSB to the Plaintiff with interest at 5% per annum from 8.10.2020 until full payment. 94 [152] Finally, CCH, CCH, CCY and LMY are jointly and severally liable for pay costs to the Plaintiff fixed at RM 75,000.00. Dated the 7th day of January 2022 ONG CHEE KWAN Judicial Commissioner High Court of Kuala Lumpur, NCC2 Counsel:

Richard Kok Chi Wei, Tan Ko Xin and Edwin Chan for Plaintiff

Carly Yap Fui Yin and Khaw Chern Wei Jonathan for 1st, 2nd, 3rd, 4th, 6th and 7th Defendants

Huatah Sdn Bhd v Yap Chee Kian & Ors [2020] 8 MLJ 98 2. Linear Profile Sdn Bhd & Ors v Khor Guet Lin [2019] MLJU 1364 3. Dato’ Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors [2018] 2 MLJ 693 4. Tetuan Sulaiman & Taye v Wong Poh Kun & Anor [2021] 8 MLJ 550 95

Premium Vegetable Oils Sdn Bhd v ICG Systems Sdn Bhd & Ors [2006] 7 MLJ 39 6. Lama Tile (Timur) Sdn Bhd v Lim Meng Kwang & Anor [2015] 4 MLJ 85 7. Muniandy Nadasan & Ors v Dato’ Prem Krishna Sahgal & Ors [2014] 1 LNS 640 8. Aktieselskabet Dansk Skibsfinansiering v Brothers and Ors [2001]

R v Grantham [1984] 3 ALL ER 166

Tan Hung Yeoh v Public Prosecutor [1999] 3 SLR 93 LMW Electronics Pte Ltd v Ang Chuang Juay & Ors [2010] 1 MLJ 185

JCT Ltd v Muniandy Nadasan & Ors and another appeal [2016] 6

13.

Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 3 MLJ 479 (CA)

Auto Emasjaya Sdn Bhd & Anor v Ng Kong Ngai [2016] MLJU 1194

LMW Electronics Pte Ltd v Ang Chuang Jay [2010] 1 MLJ 185 Dato’ Gan Ah Tee & Anor [In their capacity as liquidators of Par-Advance Sdn Bhd (In liquidation)] v Kuan Leo Choon & Ors [2012]

H Rosen Engineering v Siow Yoon Keong [1997] 1 CLJ 137

Re William C Leitch Bros Ltd (No 1) [1932] 2 Ch 71

Re Gerald Cooper Chemicals Ltd [1978] 2 All ER 49

Dato’ Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors [2018] 2

21.

Ong Leong Chiou & Anor v Keller (M) Sdn Bhd [2021] 3 MLJ 622

Lazarus Estates v Beasley [1956] 1 All ER 341

Auto Emasjaya Sdn Bhd & Anor v Ng Kong Ngai [2016] MLJU 1194 Kuthubul Zaman Bukhari & Anor v Tsai Su Chu & Ors [2013] 9 CLJ 524

Tradewinds Properties Sdn Bhd v Zulhkiple bin A Bakar & Ors [2019] 1 MLJ 421 96

Sreedevi Naidu a/p T Sree Ramalu Naidu v Eelasegeran a/l T

Nadarajah & Anor [2016] 3 MLJ 263 Wahab bin Ibrahim & Ors v AET Tanker Holdings Sdn Bhd [2013] 5

28.

Huatah Sdn Bhd v Yap Chee Kian & Ors [2020] 8 MLJ 98

Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 3 MLJ 479 (CA)

Aktieselskabet Dansk Skibsfinansiering v Brothers FACV No. 25 of 1998 Amrae Benchuan Trading Pte Ltd (in liquidation) v Tan Te Teck

Gregory [2006] 4 SLR(R) 969 Elite Property Holdings Ltd & Anor v Barclays Bank PLC [2019]

EWCA Civ 204 WT Development Sdn Bhd v Chow Cho Tai & Ors [2019] MLJU 1691

Re Augustus Barnett & Sons Limited [1986] BCLC 170

Maidstone Buildings Limited [1971] Ch 1085

Morris v. Bank of India [2004] EWHC 528 (Ch)

Sections 245, 304 and 540 of the Companies Act 2016 2. Section 213 of the English Insolvency Act 1986 3.