Court of Appeal upholds dismissal of liquidator’s RM33mil claim

 The appellate court says Golden Affinity Development Sdn Bhd’s distribution of RM27 million in dividends before it was wound up was lawful.

The Court of Appeal agreed with the High Court that the liquidator had failed to act with the necessary degree of objectivity and impartiality.

PUTRAJAYA:

A liquidator has lost his bid to recover more than RM33 million alleged to have been wrongfully paid out by a property developer before it was wound up, after the Court of Appeal unanimously upheld a High Court decision dismissing the claim.

The dispute arose from Golden Affinity Development Sdn Bhd’s liquidation proceedings, in which its court-appointed liquidator sued its major shareholder ES Eng Soon Holding Sdn Bhd, former directors Lee Haw Hann and Lim Boon Kang, and other parties over a RM27 million dividend distribution made before the company was wound up.

The liquidator alleged that the dividend payment and related transactions amounted to fraudulent trading, conspiracy, and wrongful dissipation of the company’s assets.

However, the High Court dismissed the claim after finding that the dividend declaration was validly made and that the company had the financial capacity to distribute the money to its shareholders.

The trial court also found that the liquidator had failed to prove that the defendants acted fraudulently or dishonestly.

A three-member bench chaired by Justice Lim Chong Fong and comprising Justices Lim Hock Leng and Faizah Jamaludin, dismissed two appeals brought by Golden Affinity Development (in liquidation).

Hock Leng, who delivered the judgment, said the liquidator’s conspiracy claim could not succeed because the different forms of conspiracy pleaded required different legal ingredients to be established.

“The different types of conspiracy involve different ingredients making up the respective tort, and a defendant must know the case he is to meet,” he said.

The court also upheld the High Court’s finding that RM1.68 million received by Lim Boon Hung, who was the third defendant in Suit 210, was the lawful repayment of a personal debt owed to him by former director Lee.

Hock Leng said Boon Hung was not a director and did not control the company, adding that the trial judge had found the payment was made pursuant to Lee’s written instructions and came from Lee’s legitimate dividend entitlement.

“Since the dividend declaration was found to be lawful, there was no basis for a claim of fraudulent dissipation. We find no reason to disturb the trial judge’s finding of fact here,” he said.

The court also rejected the liquidator’s argument that the company had failed to pay income tax before declaring the dividends.

Hock Leng said Malaysia’s single-tier dividend system meant dividends were paid from profits that had already been taxed and were not subject to further company tax.

“The Inland Revenue Board’s own officer confirmed that no tax was owing and that the company had overpaid its taxes,” he said.

The Court of Appeal also upheld the High Court’s order requiring the liquidator to personally bear the costs of the proceedings instead of paying them out of the company’s assets.

The liquidator had argued that the order was excessive because he was merely carrying out his statutory duties in good faith and was not pursuing hopeless claims against the respondents.

The appellate court agreed with the High Court that the liquidator had failed to act with the necessary degree of objectivity and impartiality.

The court ordered the liquidator to personally pay RM10,000 in costs to each successful respondent.

Hock Leng said many of the arguments raised on appeal merely repeated those advanced before the High Court. “We find no necessity to impose a higher cost,” he said.

Lawyer KF Ee appeared for the liquidator, Rajan Navaratnam for Boon Kang, S Ravenesan for Boon Hung, Ahmad Ezmeel Ahmad Tarmizi for Lee, and Peter Douglas Ling for fellow respondent See Kok Seng. - FMT