CASE REVIEW

Citec International Sdn Bhd v Yeam Sai Meng

HIGH COURT (KUALA LUMPUR) — SUIT NO S7–22–187 OF 2003
AZMAN ABDULLAH JC
Malaysian Law Journal vol 8 (Page 640-649)
18 JANUARY 2008

FACTS

 The summary judgment in the favor of the plaintiff (a company carrying on business as
manufacturers of close control air-conditioning equipment, a technology product licensed by
the Ministry of International Trade and Industry) was based upon plaintiff’s claims against
the defendant, the executive director in the plaintiff’s company for breach of fiduciary duty
for transferring a sum of RM1, 262,324.92 belonging to the plaintiff to his own personal
account. And he also used the money for other uses other than for paying plaintiff’s taxes.

The defendant however, said that Terrence Lee, the managing director of the plaintiff’s
company knew and approved to use the monies.

 The defendant further contended that he had withdrawn the monies upon Terrence Lee’s
instruction and that part of the said withdrawn monies were utilized according to Terrence
Lee’s instructions for the purpose of his personal use.

 The main issue is whether the plaintiff can claim against the defendant for breach of
fiduciary duty.

JUDGEMENT
 The defendant’s accusation against the plaintiff, that the plaintiff did authorize, ratify and
approve the misappropriation of monies wrongfully encashed by the defendant for different
purposes other than their original purpose were not substantiated with evidence

 It was unreasonable to claim that the plaintiff would approve and authorize, ratify or agree to
something which does not benefit the plaintiff but in fact would put the plaintiff to the risk of
being fined by the Customs Department

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 In addition, Terrence Lee and the plaintiff company were separate legal entities of one
another. Thus, the defendant’s contention that Terrence Lee had knowledge of the
defendant’s actions and authorized or approved such payments was irrelevant for this court to
consider. Knowing to Terrece Lee doesn’t mean that the plaintiff has approved the use of
monies. In fact, the defendant had breached his fiduciary duties as a director in the plaintiff
company and had caused conflict of interest in the course of the plaintiff’s businesses.

RATIO DECIDENDI

It is a fiduciary duty of a director to act for proper purpose and to disclose any conflicts in the
interest. However, the defendant has used plaintiff’s monies for his own personal use without the
approval of the plaintiff. This has caused a disturbance in the course of plaintiff’s business and as
a result plaintiff suffered losses.

Section 132 of companies Act 1965 says that a director should act honestly and use reasonable
diligence in the discharge of the duties of his office. Also in the section 132C, directors should
not carry in to effect any transaction for acquisition of an undertaking or property of a substantial
value or the disposal of substantial portion of the company’s property which would adversely
and materially affect the financial performance or position of the company, unless the proposal
or transaction has been approved by the company in general meeting.

According to the defendant, it was only known to the Terrence Lee, the managing director of the
plaintiff’s company and was not approved by the general meeting. Knowing and approval by
Terrence Lee does not mean it is disclosed to the company.

As such, based on the defendant’s actions that were not for a proper purpose I am of the view
that the defendant had breached his fiduciary duties as a director in the plaintiff company and
had caused conflict of interest in the course of plaintiff’s businesses.