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have, in the circumstances, adopted the compensatory approach by awarding the
creditors the amount they have suffered as a result of fraudulent trading.
In Siow Yoon Keong v H Rosen Engineering BV, 152 the court granted an order
against the director of the company to be personally liable for the judgment sum
obtained by Rosen against the company. Likewise, in Kawin Industrial Sdn Bhd (in
liquidation) v Tay Tiong Soong, 153 a company applied for a declaration against its
director the defendant, for the sum of RM115,000, the amount being the judgment
sum entered against the company by its creditor for non-payment of the purchase
price. However, the court in this instance found the director liable for the amount
under section 132(1) for breach of director‘s duty for failure to act in the best
interests of the company instead of the fraudulent trading section in section 304(1).
The court did not make any order of contribution under section 304(1) despite
finding that fraud existed under the provision. It can be presumed from the decisions
that the court did not grant any contribution order under section 304(1) because to do
so would have overcompensated the company. The court‘s refusal to make an order
under the section indicates the court‘s attitude towards inserting a punitive element
into the order despite having the authority to declare the person ‗personally
responsible without any limitation of liability.‘ Punitive orders signify an element of
punishment and therefore require strict interpretations of the section, but in these
cases the court applied the civil standard.
Although section 304(1) was originally derived from section 332 of the UK
Companies Act 1948, there is a slight difference in the wordings of the former,
namely the additional requirement ―… or in any proceedings against a company…‖.
Therefore in Malaysia, the application of the fraudulent trading provision is not
limited to situations where the company is insolvent; liquidators, creditors or
contributors of the company may bring an action if during the proceeding it was
152 [2003] 4 MLJ 569.
153 [2009] 1 MLJ 723.
344