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The defendant in the case relying on the decision in Re Sarflax Ltd 296 contended
that the company might discharge its liability in any order it pleased and such an
act could not constitute fraud. The court distinguished the facts of both cases and
held that the facts in Re Sarflax Ltd 297 involved bare facts of preferring one
creditor over the other, while the present case concerned a series of
interconnected transactions from the purchasing of the machinery to its
subsequent sale and the usage of the proceeds of sale to pay off the defendant in
preference to the other creditors, including those who had priority. These events,
the court noted, took place while the company was already insolvent and
therefore the obvious conclusion to be deduced from these was intention to
defraud.
In Siow Yoon Keong v H Rosen Engineering BV 298 the court found that there was
intention to defraud creditors as well as that the business was carried on for
fraudulent purposes. The defendant/appellant in the case caused a resolution to be
passed to ratify an investment which was initially made under his own name after
it was clear that loss was inevitable. The effect was to transfer the loss to the
company and the use of the company funds to bail himself out, enabling him to
escape personal loss. Consequently, there were no funds left to pay off the
plaintiff/respondent.
In LMW Electronics Pte Ltd v Ang Chuang Juay & Ors 299 , the court used the
commercial concept of fair trading when ascertaining whether intent to defraud or
fraudulent trading existed. The court held that when the transaction was made,
the directors must have known that was no reasonable prospect of the plaintiff
ever receiving payment for the purchase price. This is due to the fact that the
company was already downsizing at the time of the transaction and the
company‟s physical assets and trade receivables were later transferred to the
296 [1979] 1 Ch 592.
297 [1979] 1 Ch 592.
298 [2003] 4 MLJ 569.
299 [2010] 1 MLJ 185 at 203.
301