The High Court in FGV Holdings Bhd v Mohd Isa bin Abdul Samad & Anor [2024] 12 MLJ 503 recently reaffirmed a hard truth for directors – misusing company assets for personal gain carries serious legal and financial consequences. This decision serves as a reminder of the fiduciary duties incumbent upon directors and senior executives to act in the best interests of their company.
 
Brief Facts
 
The Plaintiff, a public-listed company, sued its former Chairman (1^st Defendant) and CEO/Group President (2^nd Defendant) for breach of fiduciary duties. The Defendants, by virtue of their high-ranking positions, were both obligated to act in the best interests of the Plaintiff.
 
The 2^nd Defendant proposed that the Board of Directors (“the BOD”) approve the purchase of 2 luxury condominium units in Kuala Lumpur as an investment and for hosting business associates. The BOD approved the acquisition and passed a resolution authorising the purchase of two units at RM5.1 million and RM3.3 million each (“the Units”).
 
However, the Defendants and their families occupied the Units as private residences, using company funds for renovations, furnishings and maintenance – all without BOD approval.
 
The BOD had also approved the lease of five luxury vehicles as a corporate carpool system for senior management. The 2^nd Defendant abused the carpool system by keeping three of those vehicles at his residence for personal use and restricting two vehicles to select directors. He also misused the Plaintiff’s petrol card and failed to return it after resignation.
 
The Plaintiff sued the Defendants for breach of fiduciary duties, alleging that their conduct had resulted in significant financial losses to the Plaintiff.
 
The High Court’s Findings
 
The Court ruled in favour of the Plaintiff, finding that the Defendants had breached their fiduciary duties and caused financial losses.
 
Although the Defendants did not wrongfully cause the acquisition of the Units (as the BOD had approved the purchases), the Court found that they had unlawfully occupied the Units without disclosure, improperly used company funds for renovations and maintenance, and treated the Units as personal property, violating their fiduciary obligations.
 
The 2^nd Defendant was also found liable for misusing the carpool vehicles and petrol card, further breaching his duties.
 
Penalties and Damages
 
The 1^st Defendant was ordered to compensate the Plaintiff for rental loss, furnishing costs and maintenance expenses. The Court also imposed RM300,000 in exemplary damages and RM200,000 in legal costs.
 
The 2^nd Defendant was ordered to compensate the Plaintiff for rental loss, furnishing costs, maintenance expenses, misuse of company vehicles and petrol card abuse. He was also ordered to pay RM500,000 in exemplary damages, RM200,000 in legal costs and RM50,000 for restricting access to company vehicles.
 
In arriving at its decision, the Court emphasised the gravity of the Defendants’ misconduct, stating that exemplary damages were necessary. The 2^nd Defendant, as CEO, bore greater responsibility for preventing misuse of company assets, justifying higher penalties.
 
Legal Takeaways 

Malaysian law holds directors accountable for not acting in the company’s best interests¹. Misusing company assets isn’t just unethical – it’s a breach of fiduciary duties with severe legal and financial consequences.
 
The Charterbridge Principle, established in Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] Ch. 62, provides the objective test for determining whether a director has upheld their fiduciary obligations. The standard is not subjective intent. Would a reasonable, intelligent and honest director have approved this transaction? If not, the courts may find a breach of duty.
 
In FGV Holdings Bhd, the Defendants’ personal use of corporate assets without disclosure or approval failed this test, constituting a serious breach of their fiduciary duties. The case serves as a reminder that directors must not only act in good faith but also ensure their actions can withstand objective scrutiny.
 
Corporate benefits and perquisites are sometimes granted to directors/ executives, but any use beyond approved limits requires transparency. However, in this case, the Defendants failed to inform the Board of their personal occupation of the luxury condominium units, resulting in legal and financial liability.
 
Insight: Fiduciary duties are not just legal obligations – they are corporate imperatives. Conflicts of interest must be avoided, and company assets must be safeguarded for legitimate business purposes only.  

Weak governance is an open invitation for asset misuse² and fraud. The 2^nd Defendant misused the corporate carpool system, reserving some vehicles for personal and family use while restricting others to select directors. Even after resigning, he continued to use the company’s petrol card, reflecting a failure of internal controls, as there were no proper governance in place.

Insight: Corporate resource misuse thrives in weak governance environments. Companies should implement strict monitoring systems, conduct regular audits and enforce accountability mechanisms to detect and prevent abuse. 

The High Court imposed hefty financial penalties on the Defendants whom it found misused the Company’s assets. In other words, those who misuse company resources will pay the price.
 
Insight: Directors who abuse corporate assets face not just civil liability but reputational damage and potential criminal exposure. The financial and legal consequences far outweigh the temporary benefits of misusing company resources.

 
Comments
 
The FGV Holdings Bhd case serves as a stark warning – directors must uphold fiduciary duties or face legal and reputational fallout. Similarly, companies should regularly assess internal controls and governance policies to prevent costly missteps or find themselves in the courtroom.
 
If you require legal advice on corporate governance, fiduciary duties and/or misuse of corporate assets, contact Siva Kumar Kanagasabai (Partner) or Dhanyaa Shreeya (Senior Associate) of the Fraud and Asset Recovery Practice of Skrine.
 
 

---