FEATURE
A Case Study in Fraudulent Trading
By Richard Kok Messrs Richard Kok Advocates & Solicitors
FEATURE
How does one prove that a business was being carried on to defraud its creditors or for a fraudulent purpose ? What has to be shown in order to find a person or several parties liable for carrying on the business in such a manner ? What losses and to what extent can a plaintiff recover from a judgment finding fraudulent trading ? A recent High Court case in KHH ( Puchong ) Hardware Sdn Bhd v Chong Chee Onn & Ors reported at [ 2022 ] MLJU 66 considered a claim under Section 540 of the Companies Act 2016 for fraudulent trading brought by a company against seven related individuals and corporate entities . The judgment explores the manner in which the business of CHSSB , the sixth 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 first to fourth Defendants are persons who are knowing parties to the carrying on of the business . The learned Judicial Commissioner Ong Chee
Kwan allowed the claim against the first to fourth Defendants , who were family members , and held them jointly and severally liable to pay a debt owed by the company controlled by some of them to the Plaintiff .
Brief Facts
The Plaintiff was a company selling steel products . The first to fourth Defendants were family members . The first Defendant is CCO . The second Defendant , CCH , is CCO ’ s younger brother . His wife is the fourth Defendant , LMY . The third Defendant , CYY , is the first and second Defendants ’ younger sister . The sixth Defendant is CHSSB . CHSSB ’ s directors and shareholders are CCH and LMY . Initially CCH alone was operating CHSSB ’ s account but subsequently , LMY and CYY were made joint signatories to the RHB Account . CYY was the sole director and shareholder of the seventh Defendant , CF2 SB .
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