Ali Said Hamdan Al Rawahi v 1. ) Ahmad Bin Hassan (BA-22NCvC-61-02/2025)

ALI SAID HAMDAN AL RAWAHI (NO PASPORT.: RN9010636) [Dalam kapasiti peribadi]

ALI SAID HAMDAN AL RAWAHI (NO PASPORT.: RN9010636) [Dalam kapasiti sebagai seorang Pengarah di Bidara Flour Sdn Bhd] …PLAINTIF

AHMAD BIN HASSAN

MALAYAN BANKING BERHAD (NO. SYARIKAT.: 3813-K) …DEFENDAN

The underlying dispute in this action is between two (2) directors over the operation of company bank accounts maintained with 09/09/2025 11:24:25 BA-22NCvC-61-02/2025 Kand. 74 the 2nd Defendant, Malayan Banking Berhad (the “Bank”). The Plaintiff alleged that there is misappropriation of company funds by the 1st Defendant using forged documents. The company in question is Bidara Flour Sdn. Bhd. who is not a party to this action.

The complaint against the Bank is that it breached its duty of care to the Plaintiff as a director and shareholder of the company, to ensure that all banking transactions are conducted properly and in accordance with the established procedures, including the verification of authorized signatories and the processing of Board Resolutions, in particular one dated 22-8-2017, relating to the authorized signatory for banking transactions for the company's bank account with the Bank.

The Plaintiff is seeking the following remedies against the Bank:

The premise of the Bank’s striking out application is that there is no reasonable cause of action against it because the Bank owes no duty of care to the Plaintiff. This is a threshold question of law since there is no other discernible cause of action against the Bank other than negligence. Analysis and findings 5. The Plaintiff relied on the general test for establishing a duty of care owed by the Bank to him personally as a director and shareholder of the company i.e. reasonable foreseeability, legal proximity, and policy considerations on whether it is fair, just, and reasonable in any given situation to impose a duty of care of a given scope.

Specifically, the Plaintiff relied on Koperasi Sahabat Amanah Ikhtiar Berhad v RHB Investment Bank Berhad [2022] 6 MLJ 722 [CA] and the cases following it, which have held that a financial institution may also owe a duty of care to third parties who are not its customers.

As the Federal Court observed in Lok Kok Beng & 49 Ors v Loh Chiak Eong & Anor [2015] 7 CLJ 1008 on the proper approach to imposing a duty of care in cases of pure economic loss, legal thinking had been divided between the use of general principles as a test for duty, and the incremental approach which calls for the development of the law in incremental stages using precedents as the yardstick.

By adopting the incremental approach, the special relationship of proximity must fall within the category of cases in which the law recognises a duty on the part of a Defendant to take reasonable care to avoid or prevent pecuniary loss to the Plaintiff. This is to avoid the spectre of an indeterminate scope of liability. Special proximity is thus expressed more narrowly in cases of pure economic loss.

Koperasi Sahabat Amanah Ikhtiar Berhad v RHB Investment Bank Berhad [2022] 6 MLJ 722 [CA] is therefore significant for its ratio, except that the Federal Court has overturned the Court of Appeal decision in RHB Investment Bank Berhad v Koperasi Sahabat Amanah Ikhtiar Berhad (“RHB Investment Bank”).

In RHB Investment Bank, the Federal Court answered the question “whether a financial institution owes a duty of care to third parties who are not its customers and to whom it had not assumed any responsibility in a case of pure ecomonic loss” in the negative and found that: a) Damage to the Appellant was not reasonably foreseeable on the facts of that case, but more pertinently, it found no special relationship of sufficient legal proximity between the Appellant and the Respondent to give rise to a duty of care for pure economic care as the Respondent was not a customer; and b) The duty of care must first be established before the Court considers whether there has been a breach, and that the Court of Appeal was wrong to have conflated the issue of duty of care with the standard of care: “[25] At this juncture, we need to emphasize here that non-compliance with any standard operating procedure of the appellant or acting not in accordance with good professional practice if any, are errors made by the appellant’s employees that do not lead to the existence of a duty of care. it only relates to the standard of care but not the creation of a duty of care.”

The broad grounds of Judgment of the Federal Court in RHB Investment Bank are published, and it sets out the apex Court’s complete reasoning for concluding that no special relationship of sufficient legal proximity exists between the Appellant and the Respondent to give rise to a duty of care for pure economic loss. This Court considers itself bound by that decision.

This case involved ordinary banking transactions on a company account. The bank did not act or make any representations that suggest it assumed responsibility to the individual directors and shareholders of the company in relation to the operation of the account. See also Perwira Habib Bank Malaysia Bhd v Samuel Pakianathan a/l Jabamanickam (1993) 3 CLJ 349 [SC], which articulated the same outcome some 32 years ago.

Accordingly, in the absence of any relevant binding precedent to the contrary, this Court finds that the Bank owes no duty of care to the Plaintiff in his personal capacity as a director and shareholder of a corporate customer, as there is no sufficient legal proximity between them.

Moreover, it is clear upon closer examination that the threshold question in this case is not confined to the scope of the banker’s duty of care. The fact that the customer of the Bank was Bidara Flour Sdn. Bhd. also raises the question of the Plaintiff’s locus standi. The finding that the Bank owes no duty of care to the Plaintiff is also consistent with established principles of company law, such as: a) The doctrine of separate corporate personality; b) The proper Plaintiff rule; c) The rule against recovery of reflective loss; and d) The rule in Turquand’s case as it applies to a company.

In short, the Bank owes no duty of care to the Plaintiff as the Plaintiff is not a customer of the bank following RHB Investment Bank, and this outcome also accords with established company law principles since the Plaintiff is not the proper Plaintiff vis-a- vis the Bank in a claim for negligence in the operation of the company’s bank account.

For the reasons set out above, Enclosure 18 is allowed and the Plaintiff’s claim is struck out as against the Bank with costs of the application and for the action in the sum of RM8,000.00.

In relation to the complaint by the Plaintiff that the Bank has denied him access to banking records of the company – it is unclear why the Bank has been uncooperative to the Plaintiff as a director and shareholder of the company. A third party discovery application may be filed if necessary. Bertarikh : 9 September 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam bagi pihak Plaintif: Dato’ Rabinder Singh (with Tok Hong Chen) (Messrs Rabinder Budiman & Associates Peguam bagi pihak Defendan Pertama: Khairul Bakhri (Chambers of Solehuddin & Ozier) Peguam bagi pihak Defendan Kedua: Shantini Koshy a/p Cherian Koshy (Messrs Yong & Rakan-rakan)