Lavania & Balan Chambers

Introduction

In Golden Plus Holdings Bhd & Ors v China Idea Development Ltd & Ors [2025] MLJU 3413, the High Court delivered one of the most comprehensive Malaysian judgments addressing corporate fraud, civil conspiracy and breaches of fiduciary duty within a multinational corporate structure.

Following a 33-day trial, the Court uncovered a scheme spanning almost two decades in which more than RMB166 million was diverted from a Malaysian listed company and its shareholders through a network of sham agreements, artificial debts and nominee-controlled entities.

The case illustrates how fiduciary breaches, undisclosed conflicts, artificial debts and manipulated corporate structures can be used to siphon funds and seize corporate control. More importantly, it distils key legal principles on a number of issues including but not limited to the following:-

1. The duty of disclosure
2. Sham transactions and fake debts
3. Civil conspiracy

 

The Parties 

Golden Plus Holdings Berhad operated development projects in China through subsidiaries in Malaysia, the British Virgin Islands, Hong Kong, and mainland China. Its most valuable asset was the Royal Garden Project in Shanghai, a large-scale residential development that generated more than RMB2.4 billion in sales proceeds, substantial portions of which were diverted through opaque contractual arrangements and fabricated debt obligations.

At the centre of the scheme was Teh Soon Seng ("TSS"), Golden Plus's corporate representative for its China operations. TSS exploited his position of trust by causing Golden Plus subsidiaries to enter into agreements with entities he secretly controlled, most notably China Idea Development Ltd ("CIDL"), which received significant management fees and profit participation despite rendering no genuine services. This pattern was repeated through multiple related entities, enabling funds from the Royal Garden Project to be systematically siphoned from the group.

Following TSS's death, his family members and associates created multiple artificial debts to maintain control over Golden Plus, weaponising them through winding-up proceedings, attempts to seize land titles, and a scheme to fraudulently allot 46,196,995 shares to create an artificial majority and defeat the will of the company's legitimate shareholders.

Beneficial Ownership: Looking Beyond the Corporate Veil 

The scheme depended on concealment, requiring the court to determine who truly controlled the relevant entities. The court found TSS was CIDL's beneficial owner from inception. His 2014 Hong Kong Will explicitly bequeathed CIDL's receivables, demonstrating he had long treated these assets as his own. His pattern of control further corroborated this: TSS structured the deal, promoted CIDL to the board, and authorised all payments to CIDL in his capacity as Legal Representative of Yanfull (Shanghai) Co. Ltd. ("YSL"), a company created specifically to enter into the Management Agreement.

This finding proved critical because it established TSS's undisclosed conflict of interest, rendering the Management Agreement void ab initio under both Hong Kong law and equity.

No Board Approval Can Cure Fraud

 

Justice Atan Mustaffa held that non-disclosure “goes to the root of the validity” of the transaction. The court found that TSS and ST Goh, as the only two directors of Yanfull Investments Limited (“YIL”) at the material time, executed board resolutions authorising agreements with CIDL on 17 April 2007, before CIDL was even incorporated on 8 May 2007. Neither disclosed TSS's beneficial ownership to Golden Plus's board. This breach of Section 162(1) of the Hong Kong Companies Ordinance and Article 27 of YIL's Articles of Association rendered the agreements void from their inception.

The court went further, holding that even when board approvals exist, they cannot legitimise transactions tainted by fraud or undisclosed conflicts of interest. Directors cannot abdicate their fiduciary duties by blindly following external advice or relying on professional opinions, particularly when that advice serves impermissible ends.

The court also rejected the argument that a director may rely passively on another. After all, an independent director must exercise independent judgment, applying the objective test from Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] Ch 62 (Chancery Division of the English High Court): could "an intelligent and honest man in the position of the director of the company concerned, in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company."

This approach, while protective of shareholders, raises a conceptual difficulty. The court's reasoning does not clearly distinguish between transactions that were shams ab initio and those that simply turned out badly. Consider: had TSS fully disclosed his ownership of CIDL and the board, believing genuine services would be rendered, approved the Management Agreement, would that approval still be ineffective if CIDL later failed to perform? The judgment applies ex post reasoning to an ex ante decision. A transaction void from inception because no services were ever intended is analytically distinct from one that a reasonable director could have believed, at the time, was in the company's interests. That distinction matters, and the judgment leaves it underexplored.

 

When loans are not what they seem

 

Another significant feature of the case was the use of fabricated debt arrangements to justify the diversion of funds.

 

First, the transactions lacked any genuine commercial purpose. The defendants relied on various agreements that purported to create management fees, profit-sharing arrangements and repayment obligations, but the Court found they were designed merely to create the appearance of legitimate financial obligations, thereby providing a legal façade for the extraction of funds from the Golden Plus group.

 

Another indicator is where default is inevitable by design. Senior officers acknowledged that Golden Plus had no ability to repay the loans and that no steps were taken toward repayment. The short repayment periods and high interest rates were inconsistent with the company’s financial position and operations, indicating that the loans were structured to trigger default rather than to provide genuine financing.

 

A third indicator is inconsistency in the creditor’s position. CIDL issued a receipt acknowledging settlement to facilitate a share allotment exercise, but later asserted that the loan remained outstanding when seeking to enforce security. This shift confirmed that the alleged debt was being used tactically rather than as a genuine financial obligation.

 

Conspiracy in Civil Cases: Standards, Evidence, and Inference

 

This judgment provides definitive guidance on proving conspiracy in civil proceedings, resolving a conflict in Malaysian case law regarding the applicable standard of proof.

 

Some defendants argued that conspiracy to defraud required proof beyond a reasonable doubt, citing the Court of Appeal decision in Koperasi Permodalan Felda Malaysia Bhd v Icon City Development Sdn Bhd [2023] 2 MLJ 338. The court decisively rejected this position, following instead the Federal Court's authoritative guidance in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1 that the standard of proof for fraud in civil proceedings is on the balance of probabilities, not beyond a reasonable doubt.

 

The court also found the defendants liable on the separate limb of conspiracy to injure by unlawful means, a finding that did not require proof of a predominant intention to injure but was grounded in the use of fraudulent instruments to achieve the common purpose.

 

In conspiracy cases involving sophisticated corporate fraud, direct evidence of agreement is rarely available precisely because conspirators conduct their activities in stealth and secrecy. Requiring proof beyond a reasonable doubt would make it nearly impossible to obtain civil remedies for corporate fraud.

 

The court found the common purpose was "to siphon money from the Gplus Group and to preserve the proceeds of fraud in TSS's estate." This common purpose manifested through overt acts occurring over two decades, with different participants joining at different times but sharing the same ultimate objective.

 

Critically, participants need not join the conspiracy simultaneously. As established in Kuwait Oil Tanker Co SAK v Al-Bader [2000] 2 All ER (Comm) 271, "it is not necessary for the conspirators all to join the conspiracy at the same time, but the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert." This principle allowed the court to find liability across two distinct periods: the First Period during TSS's lifetime involving TSS, ST Goh, TSH, CIDL, Huang, Pacific Victor, Maria, and Yong Chooi Lan; and the Second Period after TSS's death when Andrew, Valarie, and others joined to preserve the fraud and maintain control over the group's assets.

 

The evidence that established a conspiracy was cumulative and circumstantial, drawn from contemporaneous documents, patterns of behaviour, timing of actions, and witness testimony. The fraudulent share allotment scheme exemplified this inferential approach. 

 

Limitation and Fraudulent Concealment

 

The judgment also clarified how Section 29(1) of the Limitation Act 1953 operates in cases of fraudulent concealment, being that the limitation period does not begin to run until the plaintiff discovers the fraud or could with reasonable diligence have discovered it. Therefore, the question becomes not when the fraudulent acts occurred, but when the victim could reasonably have discovered them.

 

The court found that TSS's ownership of CIDL was only discovered through his Hong Kong Will, read in April 2018, more than a decade after the Management Agreement was executed. The Affirmation Verifying Schedule of Assets and Liabilities affirmed by the executrices of TSS's Hong Kong Will on 6 May 2019 confirmed that TSS held 97.5% of CIDL, with Huang holding those shares on trust for him. The suit filed on 10 December 2020 was therefore within the six-year limitation period from the date of discovery.

 

Critical to this finding was the court's analysis of why earlier discovery was not possible despite reasonable diligence. TSS's structural control over information prevented discovery through normal corporate governance channels. As Corporate Representative of Golden Plus's investments in China from 2002 until his death in 2018, and as Legal Representative of YSL and Shanghai Roxy, TSS was the only person authorised to exercise all rights, perform all obligations, and authorise payments on behalf of these Chinese companies. This concentration of power enabled him to control all financial transactions and information flow from these subsidiaries.

 

The evidence established that ST Goh took instructions from TSS and followed the narrative as set by him. According to testimony, only matters that TSS wanted reported were communicated by ST Goh to the board of Golden Plus. This selective reporting created an information asymmetry that prevented the board from discovering TSS's fraudulent actions. TSS actively misrepresented facts to maintain his deception. When the PwC special audit was conducted in 2011, TSS controlled the narrative, telling auditors that CIDL was performing in the RGP and had completed Phase Two by June 2010. Similarly, when responding to BURSA's inquiries about Heng Fat on 26 April 2013, TSS wrote to Golden Plus falsely representing that Heng Fat had introduced CIDL to YIL and that CIDL "had better connections than Heng Fat following the changes and so was better placed to assist with the subsequent development of the Project."

 

TSS and ST Goh further obscured the truth by misrepresenting to the board the status of the Addendum to the Management Agreement. They even altered the accounting treatment of receivables from the RGP through the Addendum, ensuring that profits from YSL at the Shanghai level would no longer be recognised at the Group level. This accounting manipulation further concealed the diversion of funds.

 

The court rejected the defendants' argument that the board approvals of transactions involving CIDL and Heng Fat should have alerted the Plaintiffs to any irregularities. Board approval based on misinformation cannot constitute constructive knowledge of fraud. The Plaintiffs established that TSS deliberately concealed his ownership interest in CIDL, and no amount of reasonable diligence could have uncovered this concealment before the revelation in his Hong Kong Will and the subsequent Affirmation by the executrices.

 

Even more significantly, the court harmonised Section 8(3) of the Civil Law Act 1956, which requires actions against estates to be brought within six months of representation being taken out, with Section 29 of the Limitation Act regarding fraudulent concealment. The court held that "in cases of fraud, the six-month limitation period under Section 8(3) would only commence running from the date of discovery of the fraud, or when representation is taken out, whichever is later." This interpretation prevents the absurd result that a deceased person's estate could benefit from frauds committed by the deceased, provided they remained undiscovered for six months after the grant of representation.

 

 Joint and Several Liability: Holding Conspirators Accountable

 

Where conspirators act in concert, causing indivisible harm, they are jointly and severally liable for the full extent of damages, regardless of when they joined the conspiracy or the specific role they played. The court elaborated further by citing the principle derived from established case law including Lai Soon Onn v Chew Fei Meng [2019] 2 MLJ 103, where the court held that "it is trite law that where there are two or more persons liable for the tort of conspiracy, and where the liability of each person is joint and several, a plaintiff is entitled to sue whomsoever that he wishes."

 

The critical issue is not whether conspirators acted contemporaneously but whether their separate actions caused indivisible harm. As established by the Federal Court in Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon [2006] 2 CLJ1, "joint and several liability on defendants as concurrent tortfeasors is not premised on the contemporaneity of their actions but is determined by deciding whether their separate actions caused the plaintiff indivisible harm."

 

The court found the conspiracy to defraud perpetrated by the Defendants caused indivisible harm to the Plaintiffs. The Defendants, though entering the conspiracy at different points in time and performing different roles, acted toward the common purpose of siphoning monies from the Gplus Group and preserving the proceeds of the fraud. The conspiracy occurred in two periods: the First Period during TSS's lifetime and the Second Period after his demise. Although different participants joined at different times, the conspiracy was continuous, with separate overt acts leading to the common end of perpetrating the fraud and preserving its proceeds.

 

Based on this analysis, the court held all Defendants who were determined to be part of the conspiracy jointly and severally liable for the total amount of damages suffered by the Plaintiffs, established to be RMB166,103,428.00 in special damages, plus general damages totalling HKD10,200,000, USD50,535.01, GBP15,454.01, and RM389,209.90. The Defendants were also jointly and severally liable to provide an account and inquiry for restitution of property and payments of monies found to be due and profits earned.

 

However, the court drew an important distinction regarding costs. Unlike damages, costs were not awarded on a joint and several basis. Instead, costs were apportioned individually against each defendant based on their degree of involvement, ranging from RM150,000 to RM450,000 per defendant.

 

Remedies in Equity: Tracing, Accounting, and Constructive Trusts

 

The judgment went further, granting a comprehensive range of equitable remedies designed to reverse the diversion of assets and restore the plaintiffs to their proper position.

 

Given the complexity of the multi-jurisdictional transactions and the defendants’ concealment of the money trail through nominee arrangements and incomplete documentation, the court ordered an account and inquiry against all defendants. This required them to account for all monies and property received, as well as any profits derived therefrom, to enable proper quantification of the plaintiffs’ losses, for the purposes of identifying the appropriate remedies.

 

The court further ordered tracing of assets belonging to TSS’s estate valued at not less than RMB166,102,428, directing that such assets be identified and applied towards satisfying the plaintiffs’ claims. Consistent with the principle in Foskett v McKeown [2001] 1 AC 102, the court held that property acquired with misappropriated funds is held on constructive trust for the victim. As the diverted funds never beneficially belonged to TSS, any assets acquired with them likewise remained, in equity, the property of the plaintiffs.

 

The declaration of constructive trust was significant because it conferred proprietary rights rather than merely personal claims. This allowed the plaintiffs to recover specific assets traceable to the misappropriated funds and to take priority over general creditors in the event of insolvency.

 

The court also granted extensive injunctive relief to prevent further harm. The defendants were restrained from pursuing winding-up proceedings, appointing liquidators or receivers, or relying on the alleged loans that formed part of the fraudulent scheme. Additional injunctions prevented TSS’s estate and Andrew from enforcing purported entitlements, including salaries and other payments, which the court found to be part of the broader strategy to create artificial liabilities. The court emphasised that a fiduciary who has committed serious breaches cannot retain or recover benefits arising from the wrongdoing.

 

Exemplary Damages: Punishing Egregious Conduct

 

The judgment makes an important contribution to the law of remedies by confirming the availability of exemplary damages in cases of fraud and breach of fiduciary duty, and by providing guidance on the quantum of such damages appropriate to the misconduct. The court awarded exemplary damages equivalent to twenty-five per cent of the compensatory damages, following the precedent in Sin Heap Lee-Marubeni Sdn Bhd v Yip Sou Shan [2005] 1 MLJ 515.

 

Exemplary damages, also known as punitive damages, serve a dual purpose: to punish the wrongdoer for particularly egregious conduct and to deter similar conduct in the future. The court applied the framework from Rookes v Barnard [1964] AC 1129, which identified categories where exemplary damages may be awarded, including where the defendant's conduct was calculated to make a profit which might well exceed the compensation payable to the plaintiff.

 

The court found the Defendants' conduct fell squarely within this category. The entire scheme orchestrated by the Defendants was designed to siphon monies out of the Gplus Group for their personal benefit, with full knowledge that their gains would substantially exceed any compensation they might eventually be required to pay. The court identified several factors that made the conduct particularly egregious and deserving of exemplary damages.

 

First, the breach of trust was extensive and calculated. The Defendants were not mere third parties but officers and fiduciaries of the Gplus Group, holding positions of significant trust and responsibility. They exploited these positions to execute their fraudulent schemes, betraying the very entities they were duty-bound to protect. This abuse of fiduciary position distinguished the case from ordinary commercial fraud between arm's-length parties.

 

Second, there was clear evidence of premeditation and sophistication in the fraud. The Defendants carefully structured the impugned transactions, created companies specifically for the purpose of executing these frauds, and maintained elaborate facades to conceal their wrongdoing. CIDL and Manfield were incorporated shortly before entering into the fraudulent agreements, with minimal capitalisation, suggesting they were created as vehicles for fraud rather than as legitimate business entities.

 

Third, the Defendants' conduct subsequent to the initial fraud demonstrated a contumelious disregard for the rights of the Plaintiffs and the rule of law. When their control over the Gplus Group was threatened, they resorted to extraordinary measures including attempting to seize control through surreptitious board appointments, abusing court processes to entrench their control, creating artificial debts to wind up Golden Plus, and most egregiously, attempting to allot shares fraudulently in contravention of securities laws to create an artificial majority and defeat the will of over four thousand shareholders.

 

With compensatory damages exceeding RM105 million, the exemplary damages amounted to over RM26 million, a sum sufficient to demonstrate that fiduciary breaches coupled with fraud and conspiracy carry serious financial consequences beyond simple disgorgement of ill-gotten gains.

 

Fiduciary Duties of Senior Officers

 

The judgment also makes a finding that Fai Fong, as General Manager of Finance, owed fiduciary duties to Golden Plus despite not being a director. The decision extends fiduciary obligations beyond the statutory framework of the Companies Act 2016 to senior officers who occupy positions of trust and confidence within the corporate structure.

 

Relying on Zainol Zakaria v UEM Builders Berhad [2019] MELRU 2695, the court affirmed that the employer-employee relationship at senior levels is fiduciary in nature, carrying an implied duty of fidelity and an obligation to provide accurate and complete information to management. As General Manager of Finance overseeing the financial affairs of Golden Plus’s Malaysian entities, Fai Fong held a position involving substantial discretion, access to sensitive information, and responsibility for financial planning, accounting and treasury matters.

 

Notwithstanding her awareness of the financial irregularities flowing through Golden Plus's accounts, Fai Fong failed to report or escalate these concerns to the Board. She instead continued to process and facilitate transactions she knew, or ought to have known, were not in the company's interests.

 

As the officer responsible for financial oversight, her silence deprived the Board of the opportunity to assess the risks. These actions were inconsistent with her duty of loyalty and her obligation to act in the company’s best interests.

 

The decision underscores that fiduciary responsibilities are not confined to directors. Senior officers such as finance heads, company secretaries and other key managerial personnel must act independently, disclose material information, and prioritise the company’s interests over loyalty to individual directors or management.

 

Practical Implications: Lessons for Corporate Governance

 

The judgment highlights several practical lessons for companies operating complex corporate structures, particularly across multiple jurisdictions.

 

First, transactions involving entities connected to directors or senior officers require heightened scrutiny. Red flags include recently incorporated counterparties, minimal capitalisation, lack of track record, unusual payment structures, and the absence of independent verification. Directors cannot rely solely on representations from dominant individuals without conducting their own inquiries. This notion is reflected within the court's criticism of ST Goh for his "willful disregard for whether Manfield existed at the time GCE authorised entering into the Manfield Lease Agreements, Manfield's capacity to perform under the agreement, and Manfield's overall track record".

 

Second, independent directors must exercise genuine independent judgment. The court rejected the notion that a director may act merely as a “supporting” signatory. The objective Charterbridge standard applies: whether an intelligent and honest director could reasonably have believed the transaction was in the company’s interests.

 

Third, those with financial oversight responsibilities must actively investigate and escalate irregularities rather than defer to dominant individuals. The court's findings regarding Fai Fong illustrate this clearly: silence in the face of known irregularities is itself a breach of fiduciary duty. Explanations provided by management must be independently verified, and concerns must be communicated upward even where doing so creates internal friction.

 

Finally, the case underscores the need for robust governance controls in cross-border structures. Concentration of operational and financial control in a single individual, without independent oversight, creates significant risk.

 

Conclusion: A Watershed Moment for Corporate Accountability

 

The decision in Golden Plus Holdings represents a significant development in Malaysian commercial jurisprudence. It demonstrates the court’s willingness to examine the commercial substance of transactions, pierce complex corporate structures, and hold all participants accountable where fraud and breach of fiduciary duty are established.

 

The judgment also reinforces that concealment through corporate structures will not shield wrongdoers from liability. As the findings on beneficial ownership and the invalidity of board approvals demonstrated, courts will look beyond formal arrangements to the substance of what was done and why. Equity will not permit the corporate form to be used as an instrument of fraud, and that principle applies with equal force whether the concealment is achieved through nominee ownership, sham agreements, or the selective flow of information to a compliant board.

 

For directors, officers, and advisors, the message is clear. Fiduciary duties require active oversight, independent judgment, and proper inquiry where concerns arise. For shareholders, particularly in public listed companies, the decision affirms that Malaysian courts are prepared to unwind even long-running and sophisticated schemes.

 

 

This article is authored by Lavinia Kumaraendran (Partner) and Sulakhni Kaur Khosa (Pupil-in-chambers) of the Commercial Litigation Practice of Lavania & Balan Chambers. It contains general information only. The contents are not intended to constitute legal advice on any specific matter nor is it an expression of legal opinion and should not be relied upon as such.