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objective reasonable grounds and the establishment of liability is not dependent
on personal elements. 315 The standard of proof of section 592(1) is the criminal
standard, beyond reasonable doubt. 316 It is not clear as to the position in Malaysia
because there is no decided case under section 303(3). However, in decided cases
under section 304(1), the courts noted that the section only uses the words „if it
appears‟ and concluded that it indicates that a lower standard of proof is
required. 317 It should also be noted that the fraudulent trading provisions contain
both civil and criminal liability. It is submitted, therefore, that the court may
apply the same lower standard to section 303(3) because it also uses the phrase „if
it appears.‟
Australia has since reformed section 592(1) and replaced it with section 588G of
the Corporations Act 2001. However, despite the changes in some wording of the
section, the essences of insolvent trading provisions remain the same. The current
section uses „reasonable grounds for suspecting insolvency‟ in place of
„reasonable grounds for expecting that the company will not be able to pay all its
debts…‟ Insolvency is defined under the Act as the inability to pay off debts as
and when they become due and payable. 318 In terms of procedures, the section
provides for civil penalty which is no longer contingent upon criminal conviction
although there is, in addition, a criminal penalty for dishonesty. The reform is
deemed as appropriate considering that civil and criminal liabilities have different
objectives. The civil liability has the aim of compensating creditors while the
purpose of criminal conviction is to punish the offenders.
In addition to the criminal sanction and personal liability in Malaysia, a director
who has been a director of a company which at any time has gone into liquidation
315 Metropolitan Fire Systems Pty Ltd v Miller (1997) 23 ACSR 699 at 704.
316 Ross McConnel Kitchen & Co Pty Ltd v Ross (1985) 3 ACLC 326.
317 Siow Yoon Keong v H Rosen Engineering BV [2003] 4 MLJ 569; Kawin Industrial Sdn Bhd
(in liquidation) v Tay Tiong Soong [2009] 1 MLJ 723 and in LMW Electronics Pte Ltd v Ang
Chuang Juay & Ors [2010] 1 MLJ 185.
318 Section 95A of the Australian Corporations Act 2001 defines insolvency as: “A person is
solvent if and only if the person is able to pay all the person‟s debts as and when they become
due and payable.”
306