Yew Huoi, How & Associates | Leading Malaysia Law Firm

COMPANY LAW – FRAUD BY DIRECTORS

I have contracted with a company for service rendered and I will be paid RM1 million. Service was rendered. However, when the company refused to pay, I sued the company. The directors agreed that they will make payment to me when they have received monies from a sale of their land to MH Group. I have withdrawn the case against the company on the directors assurance. These turns out to be a lie. The directors later dissipated the money away to 3rd party.

Can I sue the directors personally for fraud.

  • Yes. You can sue the directors for knowingly and intentionally carried out the business of the company by dissipating the monies under the sale and purchase with MH Group. The monies were assured to be paid to you.
  • The directors of the company had knowing and fraudulent misrepresented to you that you will receive payment upon their sale to MH Group; thus rendering you agreeing to withdraw the case against the company earlier.
  • Section 540 of the Companies Act 2016 provides as follows:

(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.

Can the director of the company claim that they are not in any way personally liable to the company’s debt to you?

  • No. Fraud can be used to pierce the corporate veil to make directors personally liable for their fraudulent act.
  • The directors of the company would have committed the fraud of knowingly carrying out dissipation of the monies and to be a knowing party to the fraud.

What is the burden of proof for fraud?

  • Fraud in civil cases has to be proven on the balance of probabilities and not beyond reasonable doubt in a criminal proceeding.

Case in point : Tetuan Sulaiman & Taye v Wong Poh Kun & Anor and another appeal [2023] 3 MLJ 361

Recent Post

REGULATIONS – GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT 1947 ) – ARTICLE I

This legal update explores key provisions of the General Agreement on Tariffs and Trade (GATT 1947), focusing on Article I (Most-Favoured-Nation Treatment), Article II (Schedules of Concessions), Article XX (General Exceptions), and Article XXI (Security Exceptions). Article I mandates that any trade advantage granted by one contracting party to another must be extended unconditionally to all other parties. Article II ensures that imported goods from contracting parties receive treatment no less favourable than that outlined in agreed schedules, while also regulating permissible taxes and charges. Articles XX and XXI provide exceptions for measures necessary to protect public morals, health, security interests, and compliance with domestic laws. The provisions reflect the foundational principles of non-discrimination, transparency, and fair trade, while allowing for limited, well-defined exceptions. This summary is intended to provide a concise reference for businesses and legal practitioners involved in international trade law.

Read More »

ROAD ACCIDENT – INSURANCE COMPANY STRIKES BACK: HIGH COURT OVERTURNS ROAD ACCIDENT CLAIM

When a motorcyclist claimed he was knocked down in an accident, the Sessions Court ruled in his favor, holding the other rider fully liable. But the insurance company wasn’t convinced. They appealed, arguing that there was no proof of a collision and even raised suspicions of fraud. The High Court took a closer look – and in a dramatic turn, overturned the decision, dismissed the claim, and awarded RM60,000 in costs to the insurer. This case is a stark reminder that in court, assumptions don’t win cases – evidence does.

Read More »

CHARTERPARTY – LIEN ON SUB-FREIGHTS: CLARIFYING OWNERS’ RIGHTS AGAINST SUB-CHARTERERS

In Marchand Navigation Co v Olam Global Agri Pte Ltd and Anor [2025] 1 Lloyd’s Rep 92, the Singapore High Court upheld the owners’ right to enforce a lien on sub-freights under Clause 18 of the NYPE 1946 charterparty, ruling that the phrase ‘any amounts due under this charter’ was broad enough to cover unpaid bunker costs. Despite an arbitration clause between the owners and charterers, the sub-charterer was obligated to honor the lien, as it was not a party to the arbitration agreement. This decision reinforces that a properly exercised lien on sub-freights can be an effective tool for owners to recover unpaid sums, even in the presence of disputes between charterers and sub-charterers.

Read More »

SHIP SALE – LOSING THE DEAL, LOSING THE DAMAGES? THE LILA LISBON CASE AND THE LIMITS OF MARKET LOSS RECOVERY

In “The Lila Lisbon” [2025] 1 Lloyd’s Rep 101, the court ruled that a buyer cancelling under Clause 14 of the Norwegian Salesform Memorandum of Agreement is not automatically entitled to loss of bargain damages unless the seller is in repudiatory breach. The case clarifies that failing to deliver by the cancellation date does not constitute non-delivery under the English Sale of Goods Act 1979, as the clause grants the buyer a discretionary right rather than imposing a firm obligation on the seller. This decision highlights the importance of precise contract drafting, particularly in ship sale agreements, where buyers must ensure that compensation for market loss is explicitly provided for.

Read More »

CRIMINAL – KIDNAPPING – NO ESCAPE FROM JUSTICE: COURT UPHOLDS LIFE SENTENCE IN HIGH-PROFILE KIDNAPPING CASE

A 10-year-old child was abducted outside a tuition center, held captive, and released only after a RM1.75 million ransom was paid. The appellants were arrested following investigations, with their statements leading to the recovery of a portion of the ransom money. Despite denying involvement, they were convicted under the Kidnapping Act 1961 and sentenced to life imprisonment and ten strokes of the whip. Their appeal challenged the identification process, the validity of the charge, and the admissibility of evidence, but the court found the prosecution’s case to be strong, ruling that the appellants had acted in furtherance of a common intention and were equally liable for the crime.

Read More »
en_USEN
× Contact Us