Introducing The Malaysian Lawyer

Marcus van Geyzel and I have just launched The Malaysian Lawyer website. It is a collaborative blog between two lawyers, and we’ll share our experience on a variety of legal and non-legal matters. Marcus is a co-founder of his corporate boutique  law firm and is a corporate lawyer. On the other hand, I will share more from my perspective as a corporate litigator.

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Malaysia: New Test for Fiduciary Duties of Employee

In the recent Court of Appeal decision with grounds of judgment dated 9 September 2015 by Tan Sri Idris Harun, the Court of Appeal set out the test for the imposition  of fiduciary duties on employees.

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Unlike a director, an employee of a company would ordinarily not owe any fiduciary duties to the company.An employee may owe contractual duties as well as the common law duty of fidelity to the employer, but this is far removed from the stricter fiduciary duties.

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Court of Appeal Rules Petra Perdana Directors in Breach of Duties

I highlight the recent Grounds of Judgment dated 27 August 2015 by Justice Dr Prasad Abraham in the Petra Perdana Court of Appeal decision.

The case involved the former directors of Petra Perdana Bhd being sued for breach of their duties in selling down the company’s stake in Petra Energy Bhd. The High Court had dismissed the suit finding that they had not acted in breach of their duties. They had exercised their business judgment in selling off those shares due to liquidity and cash flow problems (see Petra Perdana Bhd v Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra & Ors [2014] 11 MLJ 1).

At the Court of Appeal, the Court focused on the interplay between the directors’ powers of management (including the power to deal and dispose assets of the company) and the shareholders right to make resolutions to intrude on those powers of management.

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Fraud in Civil Claims: Balance of Probabilities

The Federal Court in its grounds of judgment dated 10 August 2015 in the case of Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd has made a significant clarification on the law. The standard of proof of fraud in a civil claim is now only based on a balance of probabilities and not beyond a reasonable doubt. The Federal Court overturned its earlier  decisions in Ang Hiok Seng [1997] 2 MLJ 45 and Yong Tim [2005] 3 CLJ 229.

The Federal Court examined the different authorities in the UK, Canada, Australia, and Singapore. The Federal Court emphatically adopted the English position as set out in the House of Lords decision in In re B (Children) [2008] UKHL 35. At law, there are only two standards of proof: beyond reasonable doubt for criminal cases and on the balance of probabilities for civil cases. As such even if fraud is the subject in a civil claim, the standard of proof is on the balance of probabilities.

There is no other hybrid or third standard. Neither the seriousness of the allegation nor the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts.

The Federal Court made it clear however that the judgment only applied to the appeal in question and to future cases, and should not be utilised to set aside or review past decisions involving fraud in civil claims.

From Star Chamber to Celestial

I write about the Singapore Court of Appeal decision on the liquidator’s ability to obtain audit working papers. This article was originally published in Skrine’s Legal Insights Issue 2/2015.

The Singapore Court of Appeal in PricewaterhouseCoopers LLP and others v Celestial Nutrifoods Ltd (in compulsory liquidation) [2015] SGCA 20 laid down important guidelines on the grant of an Order to summon persons connected with the wound up company and to produce documents. The liquidator had successfully compelled the former auditors of the company to hand over all the audit-related documents including the audit working papers.

The statutory provision is far from being a “Star Chamber” clause (as originally described in In re Greys Brewery Company (1884) 25 Ch D 400 at 408), referring to the secretive Elizabethan court proceedings where prisoners were forced to answer self-incriminating questions.

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Guarding against Champerty: Litigation Funding in Insolvency

The Singapore High Court in its decision in Re Vanguard dated 9 June 2015 dealt with the interesting issue on whether to approve a litigation funding arrangement in insolvency.

Background

It is common in the winding up of a company, there may not be enough money left in the company for the liquidator to fund litigation. This litigation in turn could successfully lead to more assets being paid back to the company, for the benefit of the general pool of creditors. The liquidator may therefore need to obtain funding to fuel this litigation.

This may then sail dangerously close to breaching the common law doctrines of maintenance and champerty. Maintenance is the giving of assistance to a party in litigation by a party who has no interest in the litigation while champerty is the maintenance of an action in exchange of getting a share of the proceeds. These common law doctrines, still existing here in Malaysia, are meant to protect the purity of litigation.

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