Legal Update 4 of 2018

CASE

AKIRA SALES & SERVICES (M) SDN BHD v. NADIAH ZEE ABDULLAH & ANOTHER APPEAL [2018] 2 CLJ 513

ISSUE

  • Can a Director of a Company sue for wrongful termination in the Industrial Court?
  • Must a misconduct complained amount to a criminal offence before action to terminate an employee is justified?

BRIEF FACTS

  • Nadiah & her colleague were the directors/minority shareholders as well as employees of Akira and they were responsible for the day-to-day management of the company. 
  • In March 2000, Akira terminated their employment on the ground that they were operating a bank account under the company’s name without proper approvals. 
  • Subsequently, they made representation to the Industrial Relations Department which eventually referred the matter to the Industrial Court ('IC') for determination whether Nadiah and her colleague were wrongfully terminated.
  • At the IC there were 2 main issues that needed to be determined: -  Were Nadiah and her colleague employees of Akira considering that they were directors and shareholders; [if they were not employees they cannot bring the case to IC]; 
  • Must an act of misconduct amount to a criminal offence before termination of the employee is justified; 
  • At the IC, the employees were asked whether they were aware that their operation in handling the bank account amounted to a criminal breach of trust ('CBT').
  • Nadiah and her colleague defended their action by relying on a resolution passed pursuant to art. 90 of the articles of association of the company. 
  • But they admitted that the operation of the bank account was to prevent the parent company from transferring the company's funds to Singapore. 
  • The matter eventually reached the Federal Court for decision.

DECISION: Federal Court decision 

  • In this case although Nadiah and her colleague were directors and shareholders, there were also employees of the Akira.
  • And their actions in opening the separate bank account were done in the day to day management of the company and as such their termination was as an employee. Therefore, they can ventilate their dispute in the IC.
  • Nadiah and her colleague were wearing 2 hats. One as Director/Shareholder and the other as employee. This action was in relation to their role as employees.
  • Misconduct which occurs in an employment generally need not amount to a crime to justify the dismissal of the employee.
  • If an employee places funds of his employer beyond the reach and control of the employer this alone warrants a dismissal. Although the actions did not amount to a crime, this dismissal was done with just cause.
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