“Whether directors of a company can be sued independently and held personally liable for unpaid EPF contributions under section 46 of the EPF Act 1991, without naming the company in the suit.”
CASE:
BRIEF FACTS:
- Lembaga Kumpulan Wang Simpanan Pekerja (“EPF”), filed a claim in December 2022 against Mohd Abdul Karim Abdullah and 3 other Directors (“the Directors”) of Serba Dinamik Group Berhad (“the Company”) for failure to remit outstanding EPF contributions for the period of September 2021 to July 2022 for an amount of RM3.28 million (“the outstanding contributions”) together with dividend and late payment charges.
- However in this suit, only the Directors were named as the Defendants and the Company was not named as a party in the suit.
- The Company was wound up.
- At the HC, the Directors argued that EPF should have made a claim against the Liquidator as a statutory debt stood as a preferential debt, and that it was the Liquidator who failed to take any action to pay the outstanding contribution.
- The Directors also contended that suing directors alone without the Company violated the statutory phrase “shall together with the company” in Section 46 of the EPF Act and constituted selective prosecution.
- EPF relied on Section 46 of the EPF Act, which imposes joint and several liability on directors and companies for unpaid contributions.
DECISION OF THE HIGH COURT (“HC”) & COURT OF APPEAL (“COA”)
- The HC allowed the judgment having found that the Directors did not raise any issues of any merit.
- Aggrieved by the decision of the HC, the Directors appealed to the COA, but the appeal was dismissed.
- The Directors then sought leave to appeal to the Federal Court.
DECISION OF THE FEDERAL COURT (“FC”)
- The FC dismissed the application for leave to appeal.
- The FC reaffirmed that directors can be sued independently of the company under section 46 of the EPF Act.
- The FC referred to Ong Kim Chuan & Anor v Lembaga Kumpulan Wang Simpanan Pekerja [2009] 5 MLJ 807 (“Ong Kim Chuan”) where the COA held that held that section 46 imposed joint and several liability on directors and companies.
- This liability was enforceable notwithstanding any contrary provision in other laws, including the Companies Act.
- Hence, EPF had the discretion to sue the directors alone without including the company.
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