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The decisions of the Federal Court illustrated some matters to be considered:
a) The court has resorted to the directors‟ position as trustees in order to
allow creditors to attach the property for the purpose of execution of
judgment;
b) Directors did not breach their duty to the creditors when the transfer
of land was made because the court in Malaysia had not
acknowledged that directors owe a duty to creditors even when the
company is insolvent. The fact that the company is insolvent or on the
verge of insolvency was apparent when the company failed to settle
the judgment sum and there was an execution order being made
against it.
Recently, there is an indication by the court that directors have a duty
to consider the interests of creditors when the company is insolvent. 70
This tendency can be seen from the decision in Kawin Industrial (in
liquidation) v Tay Tiong Soong 71 where it was held that “a duty is
owed by the directors to the company and to the creditors of the
company to ensure that the affairs of the company are properly
administered and that its property is not dissipated or exploited for the
benefit of directors themselves to the prejudice of the creditors.” The
court then decided that the purported ratification was ineffective
because the company was insolvent.
to the land is indefeasible but the creditor is able to attach the land because the court regarded the
position of the directors in this situation as trustees who held the land for the company.
70 In other jurisdictions, however, the duty to creditors when the company is insolvent was established
earlier in 1976 in an Australian case of Walker v Wimborne (1976) 3 ACLR 529; see other cases
Kinsela v Russel Kinsela Pty Ltd (1986) 10 ACLR 395; for New Zealand see Nicholson v
Permakraft (N.Z) Ltd [1985] 1 N.Z.L.R 243; see generally Andrew Keay “The Director‟s Duty to
take into Account the Interests of Company Creditors: When is it Triggered?” (2001) 25 MULR
315[“Duty‟].
71 [2009] 1 MLJ 723 at 734.
203