Nutri Dates Sdn Bhd v 1. ) Syarikat Abdul Ghaffar Trading Sdn Bhd (PA-22NCC-12-02/2024)

High Court of Malaysia4 Jul 2025

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Refers toCompanies ActExternal
“ashionable for the said creditor to seek recourse against others to hold them personally responsible for such debt. In this regard, creditors often seek to rely on the provision of Section 540 of the Companies Act 2016 (hereinafter referred to as “CA 2016”) to seek a declaration that the directors of such company are p”
Refers toEvidence ActExternal
“low deal with the abovementioned two (2) issues separately and am mindful that it is trite that he who asserts must prove the particular facts he alleges as provided under Sections 101 and 103 of the Evidence Act 1950. 31. As such, P bears the burden of proving on a balance of probabilities that D2 and D3 are bound by”
Cites[1980] CLJU 31External
“Hsian & Anor v Ketua Pengarah Jabatan Pendaftaran Negara [2017] 8 CLJ 412; Formosa Resort Properties Sdn Bhd v Bank Bumiputra Malaysia Bhd [2010] 6 CLJ 530; International Times & Ors v Leong Ho Yuen [1980] CLJU 31; Live Capital Sdn Bhd v Pioneer Conglomerate Sdn Bhd [2025] CLJU 1308 and Sinnaiyah & Sons Sdn Bhd v. Dama”
Cites[1980] CLJU 31LExternal
“[2010] 6 CLJ 530 International Times & Ors v Leong Ho Yuen [1980] CLJU 31Lai Fee & Anor v Wong Yu Vee & Ors [2023] 3 MLJ 503 Lim Jen Hsian & Anor v Ketua Pengarah Jabatan Pendaftaran Negara”
Cites[1984] QB 675External
“[59] In Rv Grantham [1984] QB 675, a person may be found to be guilty of fraud if he intends by deceit to induce a course of conduct in another which puts that other’s economic interests in jeopardy, even though he does not intend th”

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Cites[2003] BCLC 53External
“carried out with intent to defraud creditors notwithstanding that only one creditor is shown to have been defrauded, and by a single transaction (Re Gerald Cooper; Morphitis v Bernasconi and others [2003] BCLC 53; Prem Krishna Sahgal).” 63. From all the above, it is evident that a critical element to be proven for the”
Cites[2015] AMEJ 1213External
“0; International Times & Ors v Leong Ho Yuen [1980] CLJU 31; Live Capital Sdn Bhd v Pioneer Conglomerate Sdn Bhd [2025] CLJU 1308 and Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd [2015] 5 AMR 497; [2015] AMEJ 1213]. 32. Having set out the above, | will now proceed to analyse the two (2) agreed issues to determine if”
Cites[2025] CLJU 1308External
“LJ 412; Formosa Resort Properties Sdn Bhd v Bank Bumiputra Malaysia Bhd [2010] 6 CLJ 530; International Times & Ors v Leong Ho Yuen [1980] CLJU 31; Live Capital Sdn Bhd v Pioneer Conglomerate Sdn Bhd [2025] CLJU 1308 and Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd [2015] 5 AMR 497; [2015] AMEJ 1213]. 32. Having set”

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Content

PA-22NCC-12-02/2024 Kand. 05/08/2025 10:18:24 DALAM MAHKAMAH TINGGI MALAYA DI PULAU PINANG DALAM NEGERI PULAU PINANG, MALAYSIA GUAMAN SIVIL NO. PA-22NCC-12-02/2024 ANTARA NUTRI DATES SDN BHD (No. Syarikat: 201901014796 (1324124-M)) .. PLAINTIF DAN 1) SYARIKAT ABDUL GHAFFAR TRADING SDN BHD (No. Syarikat: 199201017987 (249491-D)) 2) ABDUL MALICK BIN M ABD GHAFFAR (No. K/P: 550420-71-5173) 3) ABDUL GAFFAR BIN ABDUL MALICK (No. K/P: 840220-07-5509) [Defendan Kedua dan Defendan Ketiga disaman di bawah kapasiti sebagai Pengarah kepada Defendan Pertama]. ... DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT INTRODUCTION 1. Itis not uncommon to have a situation where a party is owed money by a company and/ but finds it difficult to recover the same due to various factors, the most often being that the said company is in the process of being wound up or has already been wound up. In such a situation, it now appears to be fashionable for the said creditor to seek recourse against others to hold them personally responsible for such debt. In this regard, creditors often seek to rely on the provision of Section 540 of the Companies Act 2016 (hereinafter referred to as “CA 2016”) to seek a declaration that the directors of such company are personally responsible for the debt on the basis that the business of such company was carried out with the intent to defraud the creditors. 2. This is one such case where the Plaintiff (P) herein has commenced these proceedings against the Defendants as directors of D1, relying on Section 540 CA 2016, seeking the payment of an outstanding sum of USD 648,275.81 due to P for the supply of goods sold and delivered to D1. 3. It is pertinent to state that D1 herein had initially filed a counterclaim against P for the sum of RM2,445,821.83, being a sum allegedly due and owing from P to them in relation to an allegation of supplying defective goods. 4. D2 and D3, in their defence denied any liability to pay P the debt of D1. D2 and D3 mounted no counterclaim against P. D2 and D3 had previously filed an application through Enclosure 16 pursuant to Order 18 rule 19 of the Rules of Court 2012 (hereinafter referred to as “ROC 2012”) to have the claim against them struck out but the Court dismissed such application on 27" June 2024. 5. — The full trial of the main suit and the counterclaim was fixed for May 2025. In the meantime, D1 had been wound up and P has withdrawn its claim against D1 but wishes to proceed against D2 and D3. 6. I will thus set out hereinbelow the salient background facts, the parties’ rival contentions as well as the evidence adduced with my analysis of the same in determining if P has successfully established their claim against D2 and D3. Background Facts 7. Pisa private limited company incorporated under the Companies Act 1965 with the nature of business as import, export, trading, and wholesale of dates and other food items. 8. D1 isa private limited company incorporated under the Companies Act 1965 with the nature of business as import, export and general merchants and selling health food products. 9. The 2" Defendant (D2) and the 3 Defendant (D3) are directors and shareholders of D1. 10. Pursuant to the following purchase orders issued by D1, P sold and delivered semi-dry dates known as ‘Deglet Nour to D1: a. PO 20221201 dated 12‘ January 2022 for the sum of USD 616,250.00; b. PO 20222003 dated 21% March 2022 for the sum of USD 303,750.00; and c. PO 20220504 dated 5" April 2022 for the sum of USD 118,636.00. 11. All the said purchase orders were governed by the terms agreed upon in three (3) sales contracts executed between P and D3 on behalf of D1 dated 12' January 2022 for the contract sum of USD616,250.00, 218' March 2022 for the contract sum of USD303,750.00 and 22™ April 2022 for the contract sum of USD118,636.00 respectively. 12. In particular, Article 15 of the sales contracts dated 12" January 2022 provides as follows: Article -15: Terms of payment and payment schedule As per agreed by both parties, one hundred percent (100%) need to follow the payment schedule table as per below. All payments shall be made without abatement, deduction, discount or setoff. Late payments are subject to a service charge of the lesser of 5% per month or the highest rate permitted under applicable Law. Buyer shall be liable for all costs and expenses related to collection of past due amounts, including, without limitation, attomeys’ fees and costs. If, in Seller’s judgment, the financial condition of Buyer does not justify otherwise adjust the terms including ceasing to supply Buyer. 2 NO MONTH PAYMENT AMOUNT (USD) AMOUNT (RM) (%) RATE 4.2 1 JANUARY 2022 20% $ 123,250.00 RM 517,650.00 2 FEBRUARY 2022 20% $ 123,250.00 RM 517,650.00 3 MARCH 2022 30% $ 184,875.00 RM 776,475.00 4 APRIL 2022 30% $ 184,875.00 RM776,475.00 TOTAL 100% $ 616,250.00 RM 2,588,250.00 13. However, unlike the above payment term in the sales contract dated 12! January 2022, Article 15 of the sales contracts dated 218 March 2022 and 22" April 2022 provided for payment due one (1) month after the date of delivery of goods by P. 14. Itis P’s pleaded case that despite having issued and delivered to D1 the goods and subsequently invoices for the same which were within the full knowledge of the Defendants and acknowledged as received by D1 and/or its representatives, D1 failed to make payment of the sums claimed by P under the said invoices. All P’s delivery orders and invoices have been produced as evidence before this Court and placed in Part B of the common bundle of documents. 15. On 224 June 2022, P sent a letter to D1 seeking the return of the goods that were kept by D1 due to D1’s failure to settle the payment of invoices within the given period. 16. Thereafter, on 18" July 2022, P through their solicitors, issued a notice of demand to D1’s solicitors demanding for among others, the return of goods (amounting to the value of RM1,832,043.62) delivered to D1. 17. Subsequently, on 23% January 2024, P through their current solicitors, sent a final notice to the Defendants demanding a sum of USD648,275.81, being the sums due and owing for the goods sold and delivered as at 9° November 2023. Interestingly, the said letter sets out a settlement proposal via instalments and highlights Section 540 CA 2016 and the possibility of commencing proceedings against the directors of D1. 18. With no response from the Defendants, P thereafter commenced these present proceedings against three (3) Defendants on 14" February 2024, seeking the following reliefs: a. Satu deklarasi bahawa Defendan-Defendan akan menanggung secara bersama dan/atau berasingan dan bertanggungjawab secara sendiri, tidak terhad kepada liabiliti, terhadap kesemua hutang-hutang atau liabiliti-liabiliti Defendan Pertama; b. Satu perintah bahawa Defendan-Defendan secara bersama dan/atau berasingan membayar Jumlah Tertunggak sebanyak USD 648,275-81 (atau sama nilai dalam Ringgit Malaysia pada masa pembayaran) kepada Plaintif dalam tempoh TUJUH (7) HARI daripada tarikh penyerahan Penghakiman termeterai; c. Satu perintah bahawa Defendan-Defendan secara bersama dan/atau berasingan membayar faedah pada kadar 5% setahun atas jumlah USD 648,275-81 (atau sama nilai dalam Ringgit Malaysia pada masa pembayaran) dari tarikh pemfailan saman sehingga tarikh penyelesaian penuh; d. Penghakiman termeterai ini diendorskan dengan satu Notis Penal menurut Aturan 45 Kaedah 7 Kaedah-Kaedah Mahkamah 2012; dan e. Kos tindakan ini atas dasar peguam dan anakguam. 19. On 18 March 2024, the Defendants filed a Statement of Defence and D1 has also filed a Counterclaim against P seeking the following reliefs: a. Jumlah sebanyak RM2, 445, 821.83; b. Faedah pada kadar 5% setahun ke atas jumlah RM2, 445,821.83 tersebut dari tarikh Penghakiman sehingga tarikh penyelesaian penuh; c. Gantirugi am untuk ditaksirkan oleh Mahkamah Yang Mulia ini; d. Kos atas dasar indemniti penuh peguamcara-anakguam dibayar oleh Plaintif kepada Defendan Pertama. 20. Itis pertinent to again note at this juncture that D1 was wound up on 10! July 2024 and during the case management dated 21 November 2024, learned Counsel for P has indicated their intention to withdraw these present proceedings against D1 and proceed against D2 and D3 only. As such, the Court struck off P’s claim as against D1. 21. It has also not escaped the Court’s attention that P did not take any steps to obtain leave of the Winding-Up Court to proceed with these present proceedings against D1 nor is there a Proof of Debt filed against D1 until the completion of the trial. There is also no indication by learned Counsel for D1 as to the status of D1. As such, the Court will not proceed with the counterclaim filed by D1 and has proceeded on the basis that D1 is not interested in pursuing such counterclaim. 22. Under all the circumstances and as agreed to by the parties, the Court will only deal with P’s claim against D2 and D3 only. The Plaintiff's Claim 23. The crux of P’s claim as pleaded against the Defendants can be summarised as follows. Firstly, they set out transactions with D1 and plead/contend that D1 has failed to make payment of a total sum of USD648,275.81 being the sums due and owing for the goods sold and delivered as at 9° November 2023. 24. The P then in relation to D2 and D3, pleads only the following at paragraph 15 of the Statement of Claim as follows: “15. Plaintif memplidkan bahawa Defendan Kedua dan Ketiga adalah turut bertanggungan dan mempunyai liability terhadap pembayaran Jumlah Tertunggak tersebut kepada Plaintif berdasarkan kepada alasan-alasan yang berikut:- a) Defendan Kedua dan Ketiga merupakan ‘directing minds' bagi Defendan Pertama dan mempunyai pengetahuan mengenai keupayaan Defendan Pertama untuk membuat pembayaran kepada pembekal- pembekal Defendan Pertama termasuklah Plaintif; b) Defendan Kedua dan Ketiga yang merupakan ‘directing minds' bagi Defendan Pertama adalah individu yang mempunyai kuasa dan kapasiti dalam membuat keputusan bagi setiap transaksi perniagaan yang dimasuki oleh Defendan Pertama, termasuklah bagi transaksi perniagaan bersama Plaintif bagi pembelian Barang Yang Dijual dan Dihantarserah tersebut; c) Defendan Pertama telah menandatangani dan meluluskan pengeluaran Pesanan Pembelian tersebut dan juga telah menandatangani Kontrak Jualan tersebut. d) Walaupun Defendan Kedua dan Ketiga mempunyai pengetahuan bahawa Defendan Pertama tidak mempunyai kemampuan kewangan dan/atau tiada prospek munasabah untuk Plaintif menerima pembayaran daripada Defendan Pertama, Defendan Kedua dan Ketiga selaku Pengarah dan/atau Pemegang Saham kepada Defendan Pertama tetap menjalankan urusan perniagaan dengan Plaintif dan meluluskan pengeluaran Pesanan Pembelian kepada Plaintif dan penerimaan Barang Yang Dijual dan Dihantarserah tersebut daripada Plaintif. e) Dengan pengeluaran berterusan Pesanan Pembelian oleh Defendan Pertama kepada Plaintif, Defendan- Defendan telah memberi representasi yang salah kepada Plaintif seolah-olah Defendan Pertama adalah mempunyai keupayaan dan/atau akan membuat pembayaran kepada Plaintif bagi Barang Yang Dijual dan Dihantarserah tersebut.” The Defendants’ Defence 25. The crux of the Defendants’ defence is that D2 and D3 are separate legal entities from D1 and thus do not owe any liability towards D1 and its alleged debts. D2 and D3 further plead that in any event, the alleged debt against D1 is not proven. Trial 26. A full trial took place with the following witnesses testifying: The Plaintiff's Witnesses a. Youcef Boussouf [SP1] - who testified via Zoom with the agreement of the parties; and b. Perrinba Raj A/L Ramamoorthy [SP2] The Defendants’ Witness c. Abdul Gaffar Bin Abdul Malick [SD1] Issues to be Tried 27. Both parties have agreed on the following issues for judicial determination as stated below: a. Whether the terms in the three (3) sales contracts entered into by D1 bind D2 and D3; and b. Whether D2 and D3 are liable to pay P the outstanding sum of USD 648,275.81 for the sale and delivery of semidry dates known as ‘Deglet Nour to D1. Parties’ Respective Contentions/Submissions The Plaintiff's Contentions/Submissions 28. Pin their submission contends as follows: a. that D1 failed to make payment of the sums claimed by P under the invoices as at 9° November 2023; b. that the terms in the three (3) sales contracts entered into by D1 bind D2 and D3 respectively; c. that D2 and D3 are not shielded by the corporate personality of D1, as their conduct in directing and executing the sales contracts renders them personally accountable for the obligations arising therefrom, particularly when viewed in the context of fraudulent intent or gross misuse of the company as a vehicle to avoid liability; d. that D2 and D3 are also liable for the outstanding sum due to P as they were the ‘directing minds’ of D1 and had knowledge of D1’s inability to pay P; and e. that the Defendants jointly and/or severally failed, refused, and/or neglected to make payment as stipulated under the sales contracts agreed upon by the parties, thereby causing loss to P. The Defendants’ Contentions/Submissions 29. D2 and D3 conversely contend/submit as follows: a. that P has failed to prove the alleged debt against D1; b. that the terms in the three (3) sales contracts entered into do not bind D2 and D3 respectively; c. that D2 and D3 are a separate legal entity from D1; d. that P did not plead fraud under Section 540 CA 2016; and e. that D2 and D3 are not liable for the outstanding sum due to P, even assuming that D3 was the ‘directing mind’ of D1. Burden of Proof 30. ! will hereinbelow deal with the abovementioned two (2) issues separately and am mindful that it is trite that he who asserts must prove the particular facts he alleges as provided under Sections 101 and 103 of the Evidence Act 1950. 31. As such, P bears the burden of proving on a balance of probabilities that D2 and D3 are bound by the terms of the three (3) sales contracts and thus liable for the outstanding sum due and owing to P. P also has the burden of proving its claim under Section 540 of the CA 2016 on a balance of probabilities only. [See the cases of Lim Jen Hsian & Anor v Ketua Pengarah Jabatan Pendaftaran Negara [2017] 8 CLJ 412; Formosa Resort Properties Sdn Bhd v Bank Bumiputra Malaysia Bhd [2010] 6 CLJ 530; International Times & Ors v Leong Ho Yuen [1980] CLJU 31; Live Capital Sdn Bhd v Pioneer Conglomerate Sdn Bhd [2025] CLJU 1308 and Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd [2015] 5 AMR 497; [2015] AMEJ 1213]. 32. Having set out the above, | will now proceed to analyse the two (2) agreed issues to determine if P has successfully proven their claim against D2 and D3. 33. However, before | proceed with the analysis on the two (2) agreed issues, | will briefly deal with another matter/issue that had been raised by the Defendants in their submission. In this regard, the Defendants submit that in light of the fact that D1 had been wound up and P withdrawing their claim against D1, the alleged debt against D1 has not been proven and that the non-filing of any Proof of Debt by P must necessarily lead to a conclusion that P has failed to establish any liability of D1 and as a consequence thereof, P’s cause of action against D2 and D3 must fail in limine. Learned Counsel for P in their submission in reply do not specifically respond to this contention, save for them submitting that they have discharged their burden against D2 and D3 under Section 540 CA 2016. 34. In the Court's view, at first blush, there appears to be merit in the Defendant's contention that the debt against D1 has not been established by P, especially since they chose to withdraw their claim against D1 and have not filed a Proof of Debt. However, the Court is mindful that P has in the bundle of documents adduced all evidence which would appear to substantiate D1’s liability. This evidence, among others, is the purchase orders, the invoices, the delivery orders duly acknowledged by D1, the statement of account and the various letters of demand which were not replied to. 35. In addition, the Court notes that Section 540 CA 2016 refers to a “creditor” and no reference is made to a judgment creditor or any reference to a pre-condition that the debt of the company must be proven or established before Section 540 CA 2016 can be invoked. Whilst creditors normally would utilise Section 540 CA 2016 once they have obtained a judgment against the company, the Court is unable to conclude that the debt against the company must first be established against the company. In the Court’s opinion, while it is desirable for a creditor to first establish its debt against the company, the crucial element of Section 540 CA 2016 is still to establish that the business was carried out with the intent to defraud the creditors. Section 540 CA 2016 is a claim against persons and not a claim against the company. 36. In any event, as highlighted above, the Court is of the view that there is ample evidence of the goods being delivered and the debt due from D1 to P. As such, the Court will proceed to determine the two (2) agreed issues. Issue No.1: Whether the terms in the three (3) sales contracts entered into bv D1 bind D2 and D3 37. In determining this issue as to whether the terms in the three (3) sales contracts entered into by D1 bind D2 and D3, it is apt that | peruse and delve into the contents of the said sales contracts. 38. It is an undisputed fact that D1 is the named contracting party under the three (3) sales contracts dated 12 January 2022, 218 March 2022 and 22™ April 2022 respectively for the supply of semi-dried dates ‘Deglet Nour to D1. The list of purchase orders and sales contracts is reproduced below as follows: No. | Purchase Orders No. Date of Date of Sales | Total (USD) Purchase Contract | Orders Signed 1. | 20221201 12.1.2022 | 12.1.2022 616,250-00 2. | 20222003 20.3.2022 21.3.2022 303,750-00 3. 20220504 5.4.2022 22.4.2022 118,636-00 Total (USD) | 1,038,636-00 39. P then contends that the sales contracts were all signed by D3 on behalf of D1, who was at the material time the director and shareholder of D1. SIN 8A2LnS/rl0S/ICuCpTGDIQ 15 40. 41. 42. 43. 44. 45. P further contends that this act of signature evidences that D3, and by extension D2, were actively involved in the business decisions of D1. In addition, P further submits that the execution of the sales contracts by D3, combined with the issuance of the purchase orders in accordance with the sales contracts, clearly reflects D2 and D3’s knowledge and acquiescence of the contractual terms being the directing minds and decision-makers for every contract entered into by D1 including the sales contracts. P finally submits that D3’s signature on the sales contracts supports their contention that he acted not merely as an agent, but as a person exercising effective control and decision-making authority. With respect, | do not find favour with the contentions of P for several reasons. Firstly, having perused all the sales contracts, whilst it can be observed that D3 has executed the same on behalf of D1 in his capacity as a director of D1, | am satisfied that there is no clause or term which expressly or implicitly states that D2 and D3 are personally bound by the terms of the sales contracts. Further, D2 and D3’s alleged knowledge and acquiescence of the contractual terms being the directing minds and decision-makers of D1 does not, in my view, render D2 and D3 bound by the terms of the sales contracts. Interestingly, | note that D2 did not sign the sales contracts or any other documents. In fact, the subsequent purchase orders were also signed only by D3 as CEO and director of D1. D3 had testified in no uncertain terms that D2 played no role whatsoever in the transactions with D1 and this was never challenged in cross- examination. Additionally, there is nothing at all to evidence D2's involvement in the transactions, and as such, the Court has no hesitation in concluding that the terms of the sales contracts do not bind D2. 46. In any event, | am not satisfied that P has successfully adduced any contemporaneous documents or evidence to support the contentions that D2 and D3 are bound by the terms of the sales contracts. 47. Further, it is trite that D2 and D3, as directors of D1, are deemed as separate legal entities from D1 and thus, D2 and D3 cannot be deemed to be bound by the terms of the sales contracts. 48. | will now proceed to deal with P’s reliance on Section 540 CA 2016. Section 540 of the Companies Act 2016 49. P had referred to the Supreme Court decision in Aspatra Sdn Bhd & 21 Ors v Bank Bumiputra Malaysia Bhd & Anor [1988] 1 MLJ 97, where it was held that the Court would generally lift the corporate veil in order to do justice, particularly when an element of fraud is involved. 50. P contends that D2 and D3 are not shielded by the corporate personality of D1, as their conduct in directing and executing the /N 8A2LnS/rl0S/ICuCpTGDIQ 7” sales contracts renders them personally accountable for the obligations arising therefrom, particularly when viewed in the context of fraudulent intent or gross misuse of the company as a vehicle to avoid liability. 51. To this end, P refers to Section 540(1) CA 2016 which reads as follows: “Responsibility for fraudulent trading 540. (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 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 so to do, 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.” 52. P contends that D2 and D3’s actions in signing the sales contracts and issuing purchase orders while being aware of D1’s inability to pay clearly fall within the ambit of Section 540(1) CA 2016 by fraudulently trading, thus making the terms of the sales contracts binding upon them, which renders D2 and D3 to be personally liable for the debts incurred under the sales contracts. 53. However, quite apart from the fact that D2 did not sign the sales contract and/or purchase orders, once again, | do not find favour with the contentions of P for several reasons. 54. Firstly, and crucially, as can be seen earlier, fraud was never pleaded by P in their Statement of Claim, nor were there any attempts made to amend it by pleading particulars of fraud. The Court finds that P has failed to comply with Order 18 rule 12 ROC 2012 as P has failed to plead particulars of fraud on the part of D2 and D3 nor plead particulars of fraudulent trading on the part of D2 and D3, enabling P to effectively invoke Section 540(1) CA 2016. In fact, the Court agrees with the Defendant's submission that P’s pleaded cause of action against the Defendants is an allegation of misrepresentation of having the capacity to pay for the goods sold and delivered. Further, as fraudulent misrepresentation has not been pleaded, the complaint must then be one of innocent misrepresentation for which damages may not be recovered. [See the case of Sim Thong Realty Sdn Bhd v Teh Kim Dar (2003) 3 CLJ 227]. 55. In fact, P have in their written submissions confirmed and clarified that P’s cause of action against D2 and D3 is founded on fraudulent trading under Section 540 CA 2016 and not on fraudulent misrepresentation. 56. Further, and in any event, the Court is also not satisfied that D3’s conduct of merely signing the sales contracts and issuing purchase orders ipso facto comes within the ambit of Section 540(1) CA 2016. To hold so without anything more would set a dangerous precedent as directors and management staff very often execute contracts and purchase orders and surely they cannot be personally liable if such debt remains unpaid by the company at the end of the day. 57. In the Court's view, to succeed in a claim against Directors for fraudulent trading pursuant to Section 540 CA 2016, the following elements have to be established: (a)that the business of the company has been carried out ‘with intent to defraud creditors or for any fraudulent purpose’; and (b)that the Defendant was knowingly a party to the company’s carrying on of the business in that manner with intent to defraud creditors or for any fraudulent purpose. 58. P submits that there is cogent and convincing evidence to suggest that D2 and D3 had from the beginning, the intention of not paying or seeing to P being paid. Despite having knowledge that D1 was already in financial difficulties and in debt and had no reasonable prospect of paying P for the purchases made, D2 and D3, who are the only directors of the company, proceeded to place unusually large orders from P during the material period which amounted to USD 1,038,636.00. 59. As such, based on the provisions of law and notwithstanding the Defendants’ assertion that D2 and D3 are separate and distinct entities from D1, P submits that D2 and D3, as the directors of D1, can still be held personally liable without any limitation of liability towards the payment of the outstanding amount due and owing to P. 60. The Court finds it necessary to refer to some of the decided cases in relation to the application of Section 540 CA 2016. Firstly, in the case Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 6 CLJ 666, the Court of Appeal there found that the company was not ina position to pay its creditors when the debts would fall due and that the company had no reasonable prospect of paying its debts. Despite knowing about this situation for three years running, the company continued to place large orders of raw materials which it would be unable to pay for. It was regardless of the fact that there may have been only one transaction placed during the time when there was no prospect of the creditor being paid. The reasonable inference was that the directors, having direction and control of the company, were knowingly a party to the fraudulent trading of the company. The Court of Appeal held as follows:

... The intention of the defendants to defraud the plaintiff can be reasonably inferred from the circumstances: the company did not have a profit generating business at the material time yet the defendants placed these unusually large orders, and the defendants were unable to explain how they were going to honour the company’s obligations. On the contrary, the defendants never even suggested that there was a reasonable prospect of the company paying the plaintiff. Under such conditions, the court was entitled to infer that the defendants knowingly were parties to the fraudulent trading of the company.

In Rv Grantham [1984] QB 675, a person may be found to be guilty of fraud if he intends by deceit to induce a course of conduct in another which puts that other’s economic interests in jeopardy, even though he does not intend that actual loss should ultimately be suffered by that other. Since it has been shown that the company placed orders despite knowing that it could not pay or that there was no reasonable prospect that the plaintiff would be paid, it does appear that the business of the company ‘has been carried out with intent to defraud’ the plaintiff, a creditor of the company’. There is further ample evidence that proves that the defendants were knowingly parties to the carrying on of the business in that manner’. Consequently, the order of the High Court making the defendants personally responsible for the company’s debt to the plaintiff is proper and within the ambit of sub-s 304(1).” 61. Based on the above, P submits that D2 and D3, as directors of D1, were aware of D1’s inability to settle the outstanding amount with P under the abovementioned sales contracts and purchase orders. It is further contended that the conduct of D3 in signing the abovementioned sales contracts and purchase orders demonstrates that D3 as the director and directing mind of D1, possessed the authority and capacity to make decisions regarding all business transactions undertaken by D1, including those with P for the goods sold and delivered to D1. 62. P further seeks to refer to the case of Lai Fee & Anor v Wong Yu Vee & Ors [2023] 3 MLJ 503 wherein the Federal Court there held that it is not necessary to establish a scheme to defraud to trigger the invocation of Section 304 of the Companies Act 1965 and that a single act of doing business to defraud a creditor would be sufficient to trigger the invocation of Section 304 of the Companies Act 1965. The Federal Court held as follows: “[24] That responsibility for fraudulent trading under s 540 of the CA 2016 is the statutory exception to the corporate personality doctrine has been the subject of extensive discussion in a line of cases. Accordingly, it might be useful and desirable to set out a synopsis of the well-established principles which govern the application of this statutory exception which are: (xi) it is not necessary to establish a scheme to defraud to trigger the invocation of s 304 of the Companies Act 1965. The wordings of s 304 do not lend itself to be read in such a manner — a single act of doing business to defraud a creditor would be sufficient to trigger an action for compensation against the errant person in his personal capacity. A business may be found to have been carried out with intent to defraud creditors notwithstanding that only one creditor is shown to have been defrauded, and by a single transaction (Re Gerald Cooper; Morphitis v Bernasconi and others [2003] BCLC 53; Prem Krishna Sahgal).” 63. From all the above, it is evident that a critical element to be proven for the invocation of Section 540 CA 2016 is the intent to defraud and in this case, P is contending that there was such an intent due to the knowledge that the Defendants knew at the time of the purchases that there was no prospect of paying for the same. In this regard, the Court is of the view that P has failed to show or prove on a balance of probabilities that there was such an intent. Critically, P has produced their statements of accounts from 2021, which set out in detail the various invoices issued to D1 as well as the payments received from D1 from 2021 until 2023. From the same statement of account, it can be gleaned that payment has been consistently made by D1 to P from January 2021 until October 2023. Bearing in mind that the three purchase orders and sales contracts in this matter were all in January 2022 to March 2022, this would necessarily mean that payments were consistently being made by D1 to P. In fact, the payments made were in the amount of USD 1 million from the total invoicing of approximately USD 1.7 million. This fact of substantial payment by D1 after the sales contracts were issued does not support P’s contention that there was an intent to defraud P. 64. Assuch, the Court is unable to agree and conclude that the business of D1 has been carried out by D2 and D3 with the intent to defraud P. 65. In relation to D2’s lack of involvement, P now purports to rely on Section 213 CA 2016 which relates to the duties and responsibilities of directors and contends that although D2 was not at all involved in any of the transactions, he should still be held liable as he allowed D1 to be run without proper supervision or control. With respect, quite apart from the fact that a breach of Section 213 CA 2016 has not been pleaded, there is certainly insufficient evidence before the Court that D2 failed to exercise reasonable care as a director of D1. 66. In the upshot and in conclusion of this issue, the Court is of the considered view that D2 and D3 are not bound by the terms of the sales contracts. 67. Therefore, the first question is answered in the negative. Issue No.2: Whether D2 and D3 are liable to pay P the outstanding sum of USD 648,275.81 for the sale and delivery of semidry dates known as ‘Deglet Nour’ to D1. 68. Having answered the first question in the negative, i.e. that D2 and D3 are not bound by the terms of the sales contracts, the inevitable result is that this issue should also be answered in the negative. However, on this issue, P then places reliance on the company's financial statements for the years 318' December 2016 to 31 December 2020, wherein the SSM searches, which contain the financial results for the said years, have been produced in Part B of the common bundles of documents. In this regard, P highlights that the comparison of D1’s financials for all these five (5) years will /N 8A2LnS/rl0S/ICuCpTGDIQ es demonstrate that the current liabilities of D1 increased from RM 26,175,313.00 as at 315 December 2016 to the amount of RM 64,117,432.00 as at 315t December 2020. The same document also indicates that D1’s revenue of RM62,222,332.00 in 2019 had decreased to RM36,854,972.00 in 2020 and that there was a loss suffered in 2020. P also highlights that the company search indicates ten outstanding debts owed to banks, which were unsatisfied and that it would appear that there is no financial report post 2020. As such, P submits that the financial information would suggest that D1 were in financial difficulties with knowledge of no reasonable prospect of paying P when they placed the orders. 69. In relation to the financial information, the Court firstly notes that the information available is only up to the year 2020, whereas the transactions in this case were in 2022. The Court is therefore not able to conclude with any certainty that D1 was in financial difficulties and in debt at the time the purchases were made. On the contrary, as highlighted earlier, D1 had in fact made payments in excess of USD 1 million to P from 2021 to 2023. This fact alone, in the Court's view, is not indicative of a company in financial difficulties. Such payment made in the Court’s view also demolishes P's contention that there was an intention not to pay at the time the purchases were made. 70. Finally, P contends that the corporate veil ought to be lifted and relies on the case of Panasonic Appliances Air-Conditioning (M) Sdn Bhd v Top Square Sdn Bhd & Ors (Shanmugam A/L Ramasamy & Ors. Third Parties) [2021] 8 MLJ 363. However, in that case, the High Court there had enunciated that the corporate veil ought to be removed when the directors have abused their position or misused the veil. On the facts of this case, the Court is of the view that P has failed to prove any such abuse or misuse warranting the lifting of the corporate veil. 71. In conclusion, the Court is constrained to answer this issue in the negative and to hold that D2 and D3 are not liable to pay P the outstanding sum owed by D1. Conclusion 72. Based on the totality of the evidence before me and my findings/analysis above, | am of the considered view that P has failed to prove on a balance of probabilities their claim against D2 and D3 respectively. 73. As such, P’s claim is hereby dismissed with costs of RM 15,000.00 to be paid by P to D2 and D3 subject to allocator. Date: 5 August 2025 ANAND PONNUDURAI Judge High Court Georgetown Pulau Pinang. /N 8A2LnS/rl0S/ICuCpTGDIQ a Counsel(s): Mr. G K Soh from Messrs. G K Soh & Partners for the Plaintiff. Mr. Thayalan Retanavalu from Messrs. R Thayalan & Co for the 2" and 3 Defendants. Case(s) referred to: Aspatra Sdn Bhd & 21 Ors v Bank Bumiputra Malaysia Bhd & Anor [1988] 1 MLJ 97 Chin Chee Keong v Toling Corp (M) Sdn Bhd [2016] 6 CLJ 666 Formosa Resort Properties Sdn Bhd v Bank Bumiputra Malaysia Bhd

2010

6 CLJ 530 International Times & Ors v Leong Ho Yuen [1980] CLJU 31Lai Fee & Anor v Wong Yu Vee & Ors [2023] 3 MLJ 503 Lim Jen Hsian & Anor v Ketua Pengarah Jabatan Pendaftaran Negara

2017

8 CLJ 412 Live Capital Sdn Bhd v Pioneer Conglomerate Sdn Bhd [2025] CLJU 1308 Panasonic Appliances Air-Conditioning (M) Sdn Bhd v Top Square Sdn Bhd & Ors (Shanmugam A/L Ramasamy & Ors. Third Parties) [2021] 8 MLJ 363 Sim Thong Realty Sdn Bhd v Teh Kim Dar (2003) 3 CLJ 227 Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd [2015] 5 AMR 497;

2015

AMEJ 1213 Legislation(s) referred to: Evidence Act 1950, Section 101; 103 Companies Act 1965, Section 304 Companies Act 2016, Sections 213; 540 Rules of Court 2012, Order 18 rule 12

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Malaysian judgment

Case metadata

Court: High Court of Malaysia
Decision date: 4 Jul 2025
Case number: PA-22NCC-12-02/2024
Coram: YA Dato' Anand Ponnudurai
Practice area: - Section 540 Companies Act – claim by Plaintiff against Directors of a company for debts of the company. - Issues – a) whether the terms of the sales contracts bind the Directors b) whether the Directors are liable to pay the Plaintiff the outstanding sum owed by the company c) whether the conduct of the Plaintiff in withdrawing the claim against the company which has since been wound up with no proof of debt filed renders the claim against the Directors fatal as the debt itself has not been proven. - Held - a) there is no pre-condition in Section 540 that the debt against the company must first be proven. All that is required to invoke Section 540 is the intend of the Directors to defraud creditors. b) On the fact of this case the Directors are found to not to be bound by the sales contracts. c) the Plaintiff has failed to prove that the Directors had no intention of paying the Plaintiff at the time the contracts were enter into especially since the company had paid a large portion of the debt. - Plaintiff’s claim dismissed with costs
Version: Alasan Penghakiman 1
Published: 5 Aug 2025
Source ID: 9d8b0df0-eb2f-4497-bf20-2b82a5318321

Catchwords

- Section 540 Companies Act – claim by Plaintiff against Directors of a company for debts of the company. - Issues – a) whether the terms of the sales contracts bind the Directors b) whether the Directors are liable to pay the Plaintiff the outstanding sum owed by the company c) whether the conduct of the Plaintiff in withdrawing the claim against the company which has since been wound up with no proof of debt filed renders the claim against the Directors fatal as the debt itself has not been proven. - Held - a) there is no pre-condition in Section 540 that the debt against the company must first be proven. All that is required to invoke Section 540 is the intend of the Directors to defraud creditors. b) On the fact of this case the Directors are found to not to be bound by the sales contracts. c) the Plaintiff has failed to prove that the Directors had no intention of paying the Plaintiff at the time the contracts were enter into especially since the company had paid a large portion of the debt. - Plaintiff’s claim dismissed with costs

Parties

NUTRI DATES SDN BHD - plaintiff - ejudgment_parties
1. ) SYARIKAT ABDUL GHAFFAR TRADING SDN BHD - defendant - ejudgment_parties
2. ) ABDUL MALICK BIN M ABD GHAFFAR - defendant - ejudgment_parties
3. ) ABDUL GAFFAR BIN ABDUL MALICK - defendant - ejudgment_parties

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