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It should be noted that Re Cyona Distributions Ltd was decided under section 332 of
the UK Companies Act 1948 which had both criminal and civil liability. Therefore, it
was appropriate to include culpability and the deterrent concept in the order. The
reckless and wrongful trading provision (including fraudulent trading in section 213
of the UK Insolvency Act 1986), on the other hand, involves civil liability and cases
have stated that the aim of these provisions is compensatory. Malaysia adopts the
same compensatory approach and awarded the equivalent to creditor‘s loss although
its provision is derived from section 332 of the Companies Act 1948
The purpose of compensation is to put a person in a position that he or she would
have been in had if breach had not occurred. Hence, the judge in interpreting the
reward order should only look at the creditor‘s loss and not the blameworthiness of
the director. Instead, in Mason v Lewis, 190 the directors were held to be responsible
for monitoring the business and guiding the management, and failure to do so
amounted to recklessness.
The contribution awarded against the director, therefore, should be just deserts,
reflecting the director‘s irresponsible behaviour. It was mentioned in the case that the
court has an equitable character in deciding the issue which gives the indication in
order to give justice to the director, the contribution order should include culpability.
This decision can be reconciled with the view that culpability can used as a
mitigating factor as long as the court is aware that it could not exceed the maximum
amount, namely the loss or damage sustained by creditors owing to the trading. 191
Director‘s culpability was also highly relevant in Lower v Traveller 192 in determining
the contribution award. In that case, there was an element of recklessness when the
190 [2006] 3 NZLR 225.
191 Walters above n186 at 152.
192 [2005] 3 NZLR 479.
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