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unlimited amount. It is submitted that the ‗contribution‘ in this section refers to the
loss suffered by the company as a result of fraudulent trading 114 while in section
304(1) a director may be responsible for all liabilities or losses incurred from the
date of fraudulent trading.
The punitive element in the Malaysian provision is expected since it originated from
the old UK fraudulent trading section which was based on criminal liability. 115 The
main purpose of imposing a duty on directors at that time was to curb the incidents
where those who had been entrusted with public funds misused them; hence the
punishment.
11.3.4 Civil Liability for Wrongful Trading, Reckless Trading
and Insolvent Trading
The civil effect of breaching wrongful trading in section 214 of the UK Insolvency
Act 1986 is similar to the fraudulent trading in section 213 of the Insolvency Act
1986; namely ‗the court may declare that person is to be liable to make such
contribution (if any) to the company‘s assets as the court thinks proper‘. The New
Zealand reckless trading provisions in section 135 and section 136 (duty in relation
to obligation) of the Companies Act 1993 do not specify any consequences of the
breach and therefore reference has to be made to other provision(s) in the Act.
In Mason v Lewis, 116 the Court of Appeal held that if there is a breach of section 135,
the court has the discretion to decide as to what recovery should be required under
section 301. Hence, it indicates that section 301 should be used to claim for a
remedy. Although sections 135 and 136 are usually initiated when the company is
wound up and creditors are specifically mentioned, the section, in principle, could
114 Courts' interpretation will be looked at later in section 11.3.7 below.
115 This is one of the problems found by the Cork Committee - See Cork Report: Report of the Review
Committee on Insolvency Law and Practice, Cmnd 8558 (1982) at [1776] [―Cork Report‘].
116 [2006] 3 NZLR 225, 234.
334