JUDGMENT

Vernon Ong Lam Kiat FCJ:

Introduction

[1] This appeal relates to a suit filed in the High Court ('s 540 Suit') against three individuals for fraudulent trading pursuant to s 540 of the Companies Act 2016 (CA 2016). The three individuals (defendants) were shareholders cum directors of a company. The company had entered into an agreement with the plaintiffs to purchase all of the plaintiffs' shares in a partnership firm, and having taken over the partnership firm, failed to pay the balance purchase price. The plaintiffs sued and obtained judgment against the company for the balance purchase price. However, the company did not satisfy the judgment debt.

[2] The plaintiffs wanted to make the defendants personally responsible for the unpaid balance purchase price on the ground that the business of the company has been carried on with intent to defraud the plaintiffs. In 2018, the plaintiffs brought the s 540 Suit against the defendants for fraudulent trading to declare the defendants personally liable for the RM2.5 million debt due and owing by the company to the plaintiffs. The Shah Alam High Court dismissed the plaintiffs' claim after a full trial. The plaintiffs' appeal to the Court of Appeal failed. In this judgment, the parties shall be referred to as they were in the High Court.

Leave To Appeal To The Federal Court

[3] On 11 April 2022, this Court granted leave to the plaintiffs to appeal to the Federal Court on three questions of law.

Question 1

Where a vendor agrees to the immediate transfer of an asset to a company relying on the representation of the company that the balance purchase price will be paid in the future and the company subsequently fails to pay the balance purchase price when it falls due, are the directors of the company, ipso facto liable to the vendor under s 540 of the CA 2016?

Question 2

Where a company has been adjudged in a previous suit to be liable for failure to pay the balance purchase price under a sale and purchase and a director of the company is subsequently sued under s 540 of the CA 2016 arising from the said debt: