THE director and the financial controller of an investment company splurged on BMWs and condominium apartments for themselves – even before their company had made any money.
They even tried to get a refinancing loan for the company, but when another director, Ms Phebe Lian, did not back them on this, they sued her, claiming she cost the firm $15 million.
But the High Court presided over by Justice Lai Siu Chiu threw out the case, and in her grounds of decision published last week, labelled it a “non-starter”.
Now, the Official Assignee, which supervises the affairs of bankrupts, has stepped in to probe whether the financial controller, Mr Sebastian Wong – declared a bankrupt in January 2005 – has breached bankruptcy regulations.
A spokesman for the Insolvency and Public Trustee’s Office said: “The Official Assignee is looking into this case in the light of the findings of the Honourable Justice Lai.”
An undischarged bankrupt is barred by law from acting as a director or taking part in the management of any corporation or business without the permission of the Official Assignee or the High Court. Those convicted of this offence may be fined up to $10,000 or jailed for up to two years or both, she added.
The suit by Maxz Universal Development Group through Mr Wong and Mr Seeto Keong, the company’s chief executive officer-cum-director, among other directors, was filed when the bank refinancing bid failed in 2007.
The plaintiffs claimed that a letter from Ms Lian prompted the bank to reject the company’s application for the $15 million refinancing.
In her January 2007 letter, Ms Lian told the bank she was inquiring into the firm’s financial affairs and that the bank was not to act on instructions of the firm unless it bore her authorising signature.
The High Court found no evidence that the bank was even going to go ahead to grant the refinancing, so “there was nothing to scuttle”; in her judgment, Justice Lai noted that nothing suggested a causal link between Ms Lian’s letter and the failure of the deal to materialise.
She had harsh words for Mr Wong and Mr Seeto, calling them “men of straw”. She also said they were “a proverbial case of a dog that bit the hand that fed it”.
The judge noted, among other things, that Mr Seeto gave himself a monthly allowance of $6,000, and that Mr Wong was paid $5,000 – when no agreement existed for directors to be paid.
The two men each bought a condominium apartment, noted the judge. They also bought new BMWs for themselves on the firm’s tab, although Mr Wong’s car was registered in his daughter’s name because of his status as a bankrupt. His shares in the company were also held through his family for this reason.
Ms Lian, suspicious of her fellow directors’ “newfound” wealth, questioned them on the use of the company’s funds. At first they ignored her queries. Then they stonewalled her, and eventually filed the suit.
Justice Lai said she was right to raise the questions: “Not only did she not breach her director’s duties, she had acted consistently within her duties and responsibilities as a director by sending the letter to the banks.”
