This case demonstrates how a claim of fraudulent trading may be proven through diligent study and creative analysis .
This case demonstrates how a claim of fraudulent trading may be proven through diligent study and creative analysis .
Dishonest Intent With regards to dishonest intent , the Plaintiff ’ s case hinges primarily on the large cash withdrawals from CHSSB ’ s bank account during the material period . The Defendants on the other hand were of the view that the Plaintiff could not prove that they were done to defraud the Plaintiff or for any fraudulent purpose . The Defendants maintained that its debts to the Plaintiff were not due and it was able to meet its payment obligations .
The Court rejected the Defendants ’ arguments and found that the systematic cash withdrawals by CCH from CHSSB during the period CHSSB ’ s debts to the Plaintiff increased were not for legitimate purposes at all in the interest of CHSSB and were questionable , resulting in CHSSB being dependent on cash injections each time debts had to be paid by the company . This showed that CHSSB ’ s business was being carried on in a manner where CHSSB would pay the Plaintiff only intermittently and in sums less than what were due so as to lure the Plaintiff to continue supplying goods .
The Court was convinced that CCO and CCH must have been aware that the post-dated cheque would be dishonoured because the cash withdrawals intensified around the time the cheque was issued and CHSSB already had two dishonoured cheques by the date of the cheque . There were cash cheques issued to CCO signed by CCH , LMY and CYY when CCO told the Plaintiff not to bank in the post-dated cheque . Dishonest intent was further shown by the fact that CHSSB ceased operations and moved to a bigger and newer factory to continue business under a different company owned by WML and took active steps to divert CHSSB ’ s customers and payments to the new entity and its business to other companies also managed by the Defendants .
Moreover , the Court held that CHSSB was being operated without any intention for its continuous survival based on the non-existence of audited accounts and tax payments amongst other corporate obligations , which led to the compelling inference that CHSSB ’ s business was being carried on with intent to defraud its creditors and / or for a fraudulent purpose .
Knowing Parties In considering the liabilities of CCO , CCH , CYY and LMY , the Court found that there was no doubt that CCH as a director of CHSSB was directly involved in the carrying on of CHSSB ’ s business in a fraudulent manner and that the preponderance of evidence was against CCO ’ s contention that he was merely a salesman given that he was intimately involved in the business ’ transactions and manoeuvres . On the other hand , although CYY and LMY both have other full-time jobs , the Court found that they were both aware as to how the business of CHSSB was being carried on by CCH and CCO at least regarding the cash withdrawals and were actively participating in the fraudulent activities by , amongst others , setting up other entities to divert CHSSB ’ s business .
Conclusion
The High Court ’ s analysis and judgment in the instant case were premised upon inferences made by putting together the facts and evidence surrounding the parties and by weighing the strength of the parties ’ submissions . After all , fraudulent acts are often consciously concealed and can only be inferred by putting facts together and finding the most believable story . This case demonstrates how a claim of fraudulent trading may be proven through diligent study and creative analysis . Fraud often leaves marks .
On another note , this case serves as a reminder that companies and the people behind them may not escape liability simply by denying and presenting an empty defence .
Richard Kok successfully represented the Plaintiff in this suit .
35