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civil penalty compensation. As such, an applicant for civil penalty compensation for breach of section 588G(2) has a choice between the two different measures of award. 11.3.7.2 Factors Influencing Quantum of Award There is general consensus in all jurisdictions that the court‘s power to grant a maximum contribution order is based on the net deficiencies between the date of the act and the date of liquidation for insolvent trading, 168 or in the case of fraudulent trading, the amount equivalent to the assets misappropriated. 169 Once the maximum amount has been determined by the court, it is not obliged to make the maximum amount and is given a wide discretion to decide whether to reduce the final award. There are various factors which the court considers when determining the correct sums. Courts in New Zealand rely on three matters in reaching the quantum of relief; causation, culpability and duration. 170 In UK and Malaysia, a similar attitude can be glimpsed from the courts‘ decisions. In Australia, in addition to causation, there has to be a link between the company‘s liquidation and the loss suffered by the company. 11.3.7.2.1 Causation A director‘s liability to contribute to the assets of the company depends on the connection between the carrying on of the business recklessly/wrongfully, and the loss creditors‘ suffer as a consequence. 171 The court in the UK adopted the principle 168 See Re Produce Marketing Consortium (No 2) [1989] BCLC 520, Re Brian D Pierson [2001] BCLC 275 in the UK; for New Zealand see South Pacific Shipping Limited (in liq); Lower v Traveller [2005] 3 NZLR 479; Mason v Lewis[2006] 3 NZLR 225. 169 Morphitis v Bernasconi and others[2003] Ch 552; 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; LMW Electronics Pte Ltd v Ang Chuang Juay & Ors[2010] 1 MLJ 185. 170 Fatupaito v Bates [2001] 3 NZLR 386; Lower v Traveller [2005] 3 NZLR 479; Mason v Lewis[2006] 3 NZLR 225. 171 Lower v Traveller [2005] 3 NZLR 479 at 498. 348
of causation similar to torts in assessing the amount of damages. The court said that the wide discretion given in section 214(1) is intended to enable allowance to be made for questions of causation and to avoid unjust results. 172 The court uses the ‗but for‘ test in order to establish whether there is a link between the director‘s action and the indebtedness which is going to be imposed on him or her. In Nippon Express (New Zealand) Ltd v Woodward, 173 the court emphasized the link between the director‘s conduct and the loss incurred by the company, though creditors may have also contributed to the damage. The duty to the company is owed by the director and not by the creditors. The law expects the director and not the creditor to be the company‘s keeper and not to cause substantial risks which could result in claims against the company. The court, without disregarding the principle of contributory negligence, held although there was evidence to show that the plaintiff creditor‘s action also caused damage to the company, the duty was not owed by the plaintiff to the company. In relation to fraudulent trading, the court in Morphitis v Bernasconi and others 174 concluded there must be some nexus between the loss caused to the company‘s creditor from the trading, and the contribution sought from the party who has breached the section. In this aspect, the remedy awarded to the applicant would depend on the nature of the dishonest act, for example, whether it causes the person to misappropriate the company‘s assets, the amount of the contribution is equal to the value of assets misapplied. If, for example, the person‘s act leads to a claim against the company by those defrauded, such as a creditor, the relief should reflect the amount which would diminish the assets available for distribution to creditors generally. 172 Re Produce Marketing Consortium (No 2) [1989] BCLC 520, 553; See also Re Brian D Pierson [2001] BCLC 275. 173 (1998) 8 NZCLC 261,765 at 261,777. 174 [2003] Ch 552 at 578. 349
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http://researchcommons.waikato.ac.n
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ABSTRACT This study examines the le
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TABLE OF CONTENTS ABSTRACT i ACNOWL
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CHAPTER 5 THEORY OF THE CORPORATION
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7.3.3.3 Distribute its Capital to M
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10.2.5.1 Meaning of Insolvency 10.2
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10.6.2.2 Carrying on of any Busines
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CHAPTER 12 CONCLUSION AND RECOMMEND
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CLC Australian Company Law Cases CL
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Stanford LR Stanford Law Review Ste
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Facia Footwear Ltd (in administrati
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Re Avon Chambers Ltd [1978] 2 NZLR
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Re Produce Marketing Consortium Ltd
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Ultraframe (UK) v Fielding & Ors [2
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Mountford v Tasman Pacific Airlines
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Australia 3M Australia Pty Ltd v Ke
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Linton v Telnet Pty Ltd (1999) 30 A
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Malaysia Abdul Aziz bin Atan v Lada
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Perman Sdn Bhd & Ors v European Com
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Other Jurisdictions Singapore Rahj
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Companies Act 2006 Section 60(3)(c)
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Section 993 Section 993(2) Section
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Insolvency Act 1985 37, 70 Insolven
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Section 251 255 Part II Schedule 6
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Section 52(1) Section 52(2) Section
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Section 272(2) Section 272(2)(a) Se
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Section 385(4)(b) Section 385(4)(b)
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AUSTRALIA Absent Debtors Act (NSW)
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Section 206D(1)(b)(b)(ii) 374 secti
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Section 588FE(2)(a) Section 588FE(2
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section 588H (5) 241 Section 588H(6
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Section 598(3)(b) Section 598(3)(c)
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Bankruptcy Act 1967 MALAYSIA Sectio
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Section 130A(6) 391 Section 131 221
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Companies Regulation 1966 Regulatio
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CHAPTER 1 THE STRUCTURE OF THE THES
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A discussion of directors’ duties
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The far-reaching implication of cor
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2.2.1 The United Kingdom The common
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2.2.3 Australia Australia has been
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CHAPTER 3 LITERATURE SURVEY - AN OV
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shareholders, had failed to mitigat
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was mainly responsible for the chal
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3.3 Interests in the Company-Shareh
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contributed by the shareholders and
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Statutes have attempted to address
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how the matter should be dealt with
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4.2 Development of Corporate and In
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colonies. 14 The emergence of compa
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originally incorporated in order to
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usiness fraud. 42 In 1825, the Bubb
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Companies Act also reveals providin
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Companies Ordinance 1953 of Sabah a
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In 1977, the Cork Committee was app
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the Committee foresaw difficulty du
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operation and termination of a comp
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enforceability of security interest
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procedure, and dispensed with the o
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The creditors‟ protection princip
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shareholders and on personal bankru
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directors as trustees. 162 Members
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4.3.3 Development of Insolvency Leg
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In Australia, the government respon
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appointment of an administrative re
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the current statutes were not effic
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insist on protection to directors i
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and judgment to run the company. 21
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due to the difficulty in obtaining
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The Australian Law Commission in 19
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instead, enacted section 135 253 in
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4.5 Conclusion Malaysia, New Zealan
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CHAPTER 5: THE THEORY OF THE CORPOR
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needs someone to run it on its beha
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The implication of the decision is
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English decisions as guidance and t
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Shareholders who have to incur high
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interests of shareholders by maximi
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situation, directors have a duty to
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concluded purchasing goods from thi
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stipulates directors “may conside
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subsidiary and may continue to pros
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A holding company may use a subsidi
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section 187 of the Australian Corpo
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its holding company), act in a mann
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is just and equitable, to make an o
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Syndicates (NZ) Limited (in liq) 13
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a) Extent to which the Related Comp
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That the management did not differe
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equirement of insolvency and it doe
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The House of Lords in Woolfson v St
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subsidiary. Abdul Malik J held that
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defendant company. During a meeting
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Uniphoenix Corporation Bhd v Raymon
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justice alone is not sufficient; th
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lenders, employees, suppliers and c
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company and as the residual claiman
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The claim that shareholders‟ righ
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particularly lack of effective mana
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management of the companies. Credit
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players‟ interests intertwine wit
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important for directors to build lo
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Despite having included favourable
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at the intersection of a number of
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Directors must weigh any particular
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Directors will also enlist the serv
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Contractarians regard employees in
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terms to their liking, they either
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to boycott the company. 134 The com
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On the other hand, the duty owed to
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and experiences in order to dischar
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CHAPTER 7: A CONCEPTUAL ANALYSIS OF
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Economists divided real capital whi
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the transformation of shares as rea
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the company‟s ability to pay its
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purchase or will not become insolve
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available where special resolution
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The idea that maintaining share cap
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must be satisfied by the company in
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7.4 Conclusion The doctrine of capi
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and once a resolution is passed, to
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The term 'insolvency' has also long
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equivalent to medical negligence ca
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meaning of inability to pay debts.
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It is important to distinguish as t
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long as the accounts give true and
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current assets must be taken stock
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cases the presumption of insolvency
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It is interesting to note in reachi
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CHAPTER 9 THE COMMON LAW DUTIES OF
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Voluntary creditors can be divided
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are not personally liable for any l
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confidence, a trustee who has been
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interests of various parties in the
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overriding duty is to the sharehold
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to look at the directors‟ purpose
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9.3.3 Duty not to Fetter Discretion
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The decisions of the Federal Court
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case, directors should disclose the
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misconception that the case law and
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other reference as to the developme
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Australia and Malaysia have express
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out “ ...the judgment is in the b
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the prospect of success as well as
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judge adopted the principle of iden
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individual trading through a compan
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liability can be imposed on them wh
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liquidators when it is insolvent. C
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CHAPTER 10 DIRECTORS’ DUTY TO PRE
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Malaysia did not make any changes o
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interpretation of these provisions.
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sum of money that is owed or due.
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Hence, action can be brought agains
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Directors in Australia can be held
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to the director to prove that he or
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expect that the company was solvent
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In the case of Secretary of State f
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trading at a deficit. 64 In other w
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maintained in section 213 of the In
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not „a party‟ if he knew that m
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econcile the two judgments with one
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carrying it on (whether because of
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10.3.1.3 For any other Fraudulent P
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company. In this aspect, section 21
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to Australia and New Zealand which
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even though it was evident from the
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the steps taken were with the aim o
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decisions. 150 Therefore, directors
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The Law Commission proposed that th
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to reform the law, namely to reduce
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A similar issue was raised in the E
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The decision was later upheld by th
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10.4.3 Duty in relation Obligation
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fraudulent purpose.” 201 Although
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from the carrying on of the busines
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The first civil version of the inso
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amounts. 223 In Hussein v Good, 224
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of law of contract. The court must
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defendant. 244 Therefore, a directo
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additional capital, as well as a re
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trading without any other action ta
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Another defect of the section is in
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argue that there are reasonable gro
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10.6.2 Responsibility for Fraudulen
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Page 369 and 370: The courts have acknowledged that t
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Page 375 and 376: ability of the company to pay off i
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Page 379 and 380: power to do so is an archaic equita
Page 381 and 382: is for a short period of time. This
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Page 387 and 388: 11.2.3 Winding-up Liquidation is a
Page 389 and 390: 11.2.3.1 Effects of Successful Avoi
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Page 393 and 394: 11.2.3.1.2 Recovery from Third Part
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Page 397 and 398: order. 83 If the value of the asset
Page 399 and 400: Without this class action, the unse
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Page 405 and 406: also be enforced by the company. 11
Page 407 and 408: The court has the power if it think
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Page 413 and 414: Marketing Consortium (No 2) 147 cle
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Page 421 and 422: ecause the court considered that it
Page 423 and 424: It should be noted that Re Cyona Di
Page 425 and 426: 11.3.7.2.3 Duration The court also
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Page 433 and 434: Since section 304(1) originates fro
Page 435 and 436: 11.3.8.2 Problems of Enforcement/Pr
Page 437 and 438: However, extracting promise of inde
Page 439 and 440: In relation to an action against a
Page 441 and 442: Investments Commission is entitled
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Page 445 and 446: Disqualification on the grounds of
Page 447 and 448: As a result of the recommendations
Page 449 and 450: exercised by the Registrar or the O
Page 451 and 452: actions which are committed with a
Page 453 and 454: The court has to deduce evidence of
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Page 457 and 458: 11.4.2.2 Court’s Order Section 6
Page 459 and 460: of disqualification. 322 However, t
Page 461 and 462: mitigating factors considered by th
Page 463 and 464: 11.5 Other Remedies 11.5.1 Mareva I
Page 465 and 466: for under the Act. 348 The action p
Page 467 and 468: of trust or breach of duty in relat
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CHAPTER 12 CONCLUSION AND RECOMMEND
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The separate legal personality conc
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deemed to be an alien concept to Br
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positive action to minimize losses
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insolvent. In Malaysia, there is no
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BIBLIOGRAPHY BOOKS and ARTICLES AHM
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BENNETT, Howard, 'Late Floating Cha
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COBURN, Niall F, 'Insolvent Trading
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http://ssrn.com/abstract=988944 at
Page 487 and 488:
FISHER, Gregory, LEE , Janet and JO
Page 489 and 490:
GUNASEKARA, Gehan and TOY, Alan, 'L
Page 491 and 492:
HOPT, Klaus J., 'Comparative Compan
Page 493 and 494:
KEAY, Andrew and Murray, Michael, '
Page 495 and 496:
McCHESNEY, Fred S., 'Economics, Law
Page 497 and 498:
OTTOLENGHI, S, 'From Peeping Behind
Page 499 and 500:
ROSS, Mike, Corporate Reconstructio
Page 501 and 502:
SCHWARTZ, Alan, ‗A Normative Theo
Page 503 and 504:
WALTERS, Adrian, 'Void Dispositions
Page 505 and 506:
WORTHINGTON, Sarah, 'Subrogation Cl
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REPLIES TO EXAMINERS APPENDIX 1 Pag
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Page 220-it is asserted that direct
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What are the criteria for determini
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addition it provides incentive for
Page 515 and 516:
See also Secretary of State for Tra
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Most jurisdictions in Australia hav
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