CIMB Investment Bank Berhad v Ernst & Young & 1 Lagi (22NCC-422-03/2012)

ERNST & YOUNG (AF 0039) (di dakwa sebagai firma)

SJ ASSET MANAGEMENT SDN BHD … DEFENDAN- 20 (Dalam Likuidasi) DEFENDAN (No. Syarikat: 223993-P) GROUNDS OF DECISION 25 Background [1] Encl. 179 is 1st Defendant, Ernst & Young (‘EY’)’s discovery application dated 11/7/2017 against the 2nd Defendant, SJ Asset Management Sdn Bhd (In liquidation) (‘SJAM’) made pursuant to 30 O.24 r.3 and/or r.7 of the Rules of Court 2012 (‘ROC 2012’) for the following orders: “(1) that the 2nd Defendant do within 21 days from the date of this Oder compile in bundles of documents, the following documents specified or described or any class of documents so specified or 35 described, and file and serve the same on all the parties to the action:

details and/or documents relating to all investigations and/or examinations by the Securities Commission (‘SC’) on the 2nd 40 2 Defendant, including but not limited to the SC’s investigation 5 and/or examination in August 2009;

all reports issued by BDO pursuant to its appointment as independent auditor by the SC on 14/4/2010; 10

documents relating to the SC issuing a notice to show cause on 30/12/2009 and subsequent meetings with the 2nd Defendant following such notice; and

documents relating to the 2nd Defendant responding in 15 writing to SC’s notice to show cause.

that the 2nd Defendant do within 21 days upon filing and service of the bundles of documents in paragraph (1) above permit the 1st Defendant and/or its solicitors, servants and/or agents to inspect 20 the original copies of the documents;

that the SC’s consent for disclosure of the documents listed in paragraph (1) above be dispensed with; 25

that the documents listed in paragraph (1) above shall not be used by any party in the action in any other proceedings or for any other purposes;

that the costs of this application be costs in the cause;

that the 1st Defendant be given liberty to further apply; and

such further and/or other relief deemed fit and proper by this Honourable Court”. 35 I shall refer to the documents sought by EY in para 1(a), (b), (c) and (d) in encl.179 as ‘Discovery Documents’ [2] EY had no objection to the application to intervene by the 40 Securities Commission (‘SC’) in encl.183 dated 22/8/2017 save that they were not admitting the averments in the Affidavit in Support of the said application affirmed by Au Lee Mee on 22/8/2017 (encl.184). On 25/8/2017 I granted O.I.T of paras 1, 2, 3 as follows: 3

That the Proposed Intervener be granted leave to intervene and 5 to be added as a party to the 1st Defendant’s Application for Specific Discovery against the 2nd Defendant (‘Discovery Application’);

That the Proposed Intervener be granted leave to file affidavits and make submissions to oppose the Discovery Application;

That the costs of this application be costs in the cause; and 10

Pursuant to prayer 4 of encl.183, there be no admission by EY of the averments made in the Affidavit in Support affirmed by Au Lee Mee on 22/8/2017. [3] Some salient facts prior to the filing of encl.179 and the SC 15 intervening in this proceedings as stated by SJAM and EY: [3.1] SJAM prior to the commencement of liquidation proceedings, was in the business of fund management, managing for and on behalf of its clients, assets, funds and financial investment, for investment purposes. SJAM also provided consultancy and advisory 20 services to its client in relation to financial investments. [3.2] EY was the auditor for SJAM prior to SJAM being wound up. [3.3] Upon a petition by SC, SJAM was wound up and liquidators were jointly and severally appointed. [3.4] The Plaintiff, CIMB Investment Bank Berhad in the present 25 action, (‘Suit 422’) and the Plaintiffs, the group of investors in Civil Suit No.22NCC-431-03/2012 (‘Suit 431’) (‘collectively called as ‘Plaintiffs’) claim that EY breached its statutory and common law duties owed to the Plaintiffs and/its clients to exercise professional skill and care in relation to (a) statutory audits under the repealed 30 Companies Act 1965 (‘CA 1965’) for the financial years ended 31/12/2002 to 31/12/2009 and (b) engagements to perform certain procedures relating to the Securities Industry Act 1983 (‘SIA’) for the 4 financial years ended 31/12/2003 to 31/12/2006. The Plaintiffs claim 5 against EY and SJAM, amongst others, for damages. Both these actions have been directed to be tried together. [3.5] On 22/1/2016, EY filed a discovery application against SJAM for numerous documents. [3.6] On 27/7/2016, a consent order was entered between EY and 10 SJAM in respect of the discovery application, including reports issued by BDO pursuant to its appointment as independent auditor by the SC on 14/4/2010. [3.7] The consent order recorded that subject to the consent given by SC and EY paying the Liquidators of SJAM proper and reasonable 15 costs of redaction of confidential information, the Liquidators of SJAM will furnish the reports by the Liquidators of SJAM to the SC and a report prepared by BDO Consulting Sdn Bhd dated 19/7/2010 issued to the SC. [3.8] On 29/5/2017, EY through its solicitors vide letter of even date 20 (exh.YSC-4 in EY’s Affidavit No.1 at p.130) wrote to SJAM’s solicitors requesting for the production of the Discovery Documents. [3.9] In response SJAM opposed EY’s request vide letter dated 8/6/2017 (exh.YSC-5 in EY’s Affidavit No.1 at p.132) stating - “12. In respect of Items 10, 12 and 13 [para 1(a), (c) and (d) in 25 encl.179], our client has in its possession boxes of file with documents related to Securities Commission. However, our client has not gone through the files. In any event, please informed that our client is bound by section 148B of the Securities Commission Malaysia Act 1993 which expressly prohibit our client to disclose any document or information 30 produced by the Securities Commission to any other person, unless authorised by the Commission.

In respect of Item 11 [para 1(b) in encl.179], our client has written to the Securities Commission to obtain their consent to disclose such 35 documents. However, to-date, our client has not received the consent from the Securities Commission”. 5 5 [4] Having considered the written cum oral submissions of the parties, I dismissed encl.179 with costs of RM12,000.00 and RM4,000.00 to be paid by EY to SC and the SJAM respectively. EY has appealed. My reasons are as follows. 10 Parties’ contentions [5] In summary the EY’s grounds in support of the application are -

the Discovery Documents are relevant to the matters in question in the present action;

the Discovery Documents could advance and establish EY’s 15 defence and may lead EY to a series of inquiry which may support its case;

the Discovery Documents are necessary for disposing fairly the matter and will save time and costs;

no authorisation from the SC is required ;

in the alternative, even if the SC’s authorisation is required, the SC has waived this requirement. [6] Summarily, SJAM contended that the Discovery Documents are not relevant; neither are they necessary; in relation to Discovery 25 Documents in para 1(a), (c) and (d) in encl.179, “[BDO] has not gone through the files” and with respect to para1(b) of encl.179, the parties had entered into a Consent Order dated 27/7/2016 that BDO will furnish the reports subject to the consent of SC, since to date the SC has not given its consent, EY cannot now seek dispensation of the 30 consent of the SC. [7] SC opposed encl.179 basically on 3 grounds - 6

procedural ground that EY is seeking disclosure in the wrong 5 forum;

common law principle of privilege and confidentiality; and

statutory provisions of s.148, 148A and 148B of the Securities Commission Malaysia Act 1993 (Act 498) (‘SCMA’). 10 Findings [8] O.24 r.7 ROC 2012 provides that the Court may, on the application of any party, order any other party to give discovery of the documents requested in the application which fall within one of the following descriptions - 15 “(a) a document on which the party relies or will rely;

a document which could -

adversely affect his own case;

(ii) adversely affect another party’s case; or

(iii) support another party’s case; and 25

a document which may lead the party seeking discovery of it to a series of inquiry resulting in his obtaining information which may -

adversely affect his own case; 30

(ii) adversely affect another party’s case; or

(iii) support another party’s case”. [9]

BDO’s Report on Losses incurred by the Group of Investors dated 6/3/2017 (exh.YCS-1);

(ii) BDO’s Report on Losses incurred by CIMB dated 29/3/2017 exh.YSC-2; and

(iii) BDO’s Report on Irregularities in relation to the funds managed by SJAM dated 14/4/2017, exh.YSC-3. (All the above exhibits are in in EY’s Affidavit No.1, encl.180) 25 (collectively called ‘BDO Reports’). [13] SJAM submitted that BDO had stated that the Discovery Documents were not relied upon in preparing the BDO Reports and the Discovery Documents have not been shown to be of relevance or 30 necessary. 9 [14] With respect I disagreed with SJAM’s submission. I find EY has 5 averred the matters in para 5(a), (b) and (c) above. To that end, EY has adduced evidence that the Discovery Documents are directly relevant to the fraud and the extent the fraud is discoverable. To illustrate, EY has produced an email dated 17/11/2009 from the SC to SJAM (exh.YSC-1 in in EY’s Affidavit No.1), the relevant extract is 10 reproduced - “… the licence is renewed subject to the following conditions and restrictions: i. The company is required to address all the audit findings by the SC 15 satisfactorily within 3 months from the date of the notification of the findings; ii. The company to address any other gaps identified in the findings to our satisfaction; and 20 iii. The company to formally inform LD of its action in addressing (i) and (ii) and to receive expressed [sic] approval prior to the renewal becoming unconditional. 25 iv. The company to register a compliance officer within 3 months from the date of this renewal”. The above email reveals that the SC approved SJAM’s licence renewal application on 17/11/2009 despite noting that SJAM must 30 address certain “audit findings” and “other gaps” identified in the SC’s August 2009 examination. Hence I find the Discovery Documents are relevant and necessary to clarify the nature of the SC’s August 2009 findings and for EY to establish that the SC’s findings did not include any serious irregularities or indications of fraud. 35 [15] I find EY has adduced evidence that one of the 4 fraudulent transactions were in fact carried out during the BDO’s examination in April 2010 as is evident from the BDO Reports, exh.YCS-3 at pp.104- 106 which, amongst others, reads - 40 10 “Section G: Annalong Corporation Limited (cont’d) 5 Vill instruction received from a client to nuy securities but SJAM did not execute the purchase for the client (cont’d)

We have set out below an actual example of a situation whereby instructions were received from three clients to buy bonds but 10 SJAM did not execute the purchase transactions for the clients. Bonds not purchased for clients Reference … m) A summary of the purchase and sale of the Tresor Tranche Bonds is set out in the table below. Reference No. Account number Account Name Buy Sell Quantity Price (RM) Trade Date Settle-ment Date Net Amount (RM) 100413 Bukit Kiara 8 2,000,000 100 28- Apr- 10 30- Apr-10 2,005,000 100507 New Finance 8 2,000,000 100 28- Apr- 10 30- Apr-10 2,005,000 101461 Strategic Shipping 8 6,000,000 100 28- Apr- 10 30- Apr-10 6,015,000 TR035893 05- 100021 Annalong 5 10,000,000 100 28- Apr- 10 30- Apr-10 9,975,000 Source: SJAM’s Purchase Confirmation Advice and Sale Confirmation Advice n) As can be seen from the above, there was no actual purchase of Tresor Tranche Bonds by SJAM despite the instructions from Bukit Kiara, New Finance and Strategic Shipping. However, according to SJAM’s books, the purchases had been executed and reflected in these clients’ MPV statements, the Monthly Cash Statements and the Monthly Transaction Schedules. o) As a result of the above ‘book’ transactions, the Cash Accounts of Bukit Kiara, New Finance and Strategic Shipping had been reduced by a total of RM10,025,000 while Annalong’s Cash Account had been increased by RM9,975,000. Annalong would be entitled to withdraw the cash from its Cash Account which was in credit or to purchase additional securities. L35-37: Purchase Confirmation Advices No. TR035892 L38: Sale Confirmation Advice No. TR035893 Total net amount of purchase was RM10,025,000 as compared to sale amount of RM9,975,000, due to commission charged ” 15 11 Therefore I am inclined to agree with EY the Discovery Documents 5 are necessary to determine whether and the extent in which BDO’s examination in April 2010 showed that the fraud was not reasonably discoverable. [16] Further, I find the BDO Reports are also relevant because the 10 BDO Reports were relied on by BDO and directly referred to the SC’s examination in August 2009 and BDO’s examination in April 2010 as is evident from exh.YSC-1 at pp.22 & 23, exh.YSC-2 at pp.43 & 44 and exh.YSC-3 at pp.70 & 71. 15 [17] In addition I find the Discovery Documents relating to the SC’s examination and BDO’s examination were also referenced in materials produced by SJAM namely -

that the SC issued a notice to show cause on 30/12/2009 and to which SJAM had responded in writing to such notice found in the 20 Notice to Show Cause from the SC dated 15/7/2010, exh.YSC-6 in EY’s Affidavit No.1 at p.135 which reads as follows: “2. In carrying out its statutory functions under the securities laws, the Securities Commission (“SC”) conducted an examination on SJ Asset Management Berhad (“SIAM”) from 12 to 26 August 2009 and 10 to 11 25 September 2009. The SC issued a notice to show cause on 30 December 2009, to which SJAM responded in writing on both 8 and 18 January 2010. The SC subsequently extended its examination through the appointment of Messrs BDO Consulting Sdn Bhd (“BDO”) on 14 April

In the course of that examination, the SC had issued a notice dated 30 29 June 2010 under Section 125 of the Capital Market & Services Act 2007 (“CMSA”) arising from the SC’s concern over the protection of SJAM’s clients’ assets and the company’s inability to meet repayment obligations due to clients”. (Emphasis added)

that the SC held several meetings with SJAM following such notice to show cause on 30/12/2009 found in the letter dated 12 19/7/2010 from Messrs, Raja Darryl & Loh to the SC, exh.YSC-7 in 5 EY’s Affidavit No.1 at p.137 which reads as follows: “2.1 Indeed, as would have been apparent from the several meetings with your officers following your previous show cause letter dated 30 December 2009, Tan Whai Oon (as the sole licensed representative dealing with our clients’ accounts) was at all material times the person 10 who managed the business and the day-to-day of SJ Asset Management Sdn Bhd (Emphasis added) [18] I find there is no merit in SJAM’s argument of “[BDO] has not 15 gone through the files” which is but a bare statement as it BDO’s duty as liquidator and an officer of the Court to review all relevant records and files of SJAM given that SJAM was wound up almost 7 years prior to its appointment (14/4/2010). 20 Whether authorisation/consent from the SC is required [19] Notwithstanding my finding that the EY has shown the Discovery Documents are relevant and necessary, the Court has to consider the merits of SJAM’s and SC’s grounds that SC’s authorisation/consent is required, particularly their common ground 25 under s.148B SCMA, which I shall address together. It is to be remembered that even in the Consent Order dated 27/7/2016, EY acknowledged that Consent of SC is required (see para 3.7 above). It would seem incongruous now for EY to seek dispensation of SC’s consent in encl.179. 30 [20] S.148 SCMA which governs “obligation of secrecy” at the time Suit 422 and Suit 431 were commenced in 2012 (relied on by EY), (‘s.148 at the relevant time’), introduced by the Securities 13 Commission (Amendment) Act 2010 (Act A1369) which came into 5 force from 1/4/2010) reads as follows: “148. Obligation of secrecy.

Except for any of the purposes of the securities law or for the purpose of any civil or criminal proceedings under any written law or where 10 otherwise authorized by the Commission or subject to section 124 of the Evidence Act 1950, any –

member of the Commission; 15

member of the Shariah Advisory Council;

member of the Audit Oversight Board;

member of any committees of the Commission, Shariah 20

officer, servant or agent of the Commission; or

person attending any meeting of – 25

the Commission;

(ii) any committees of the Commission; 30

(iii) Shariah Advisory Council; or

(iv) Audit Oversight Board, Shall not disclose any information which has been obtained by him in the 35 course of his duties and which is not published in pursuance of the securities laws”. [21] The SC in its Written Submission (at “D.1.3 Section 148 of the 40 SCA” at para 33) quoted the following s.148 which is the current position (‘current s.148’), introduced by the Securities Commission (Amendment) Act 2015 (Act A1489) which came into force from 15/9/2015) (I have reproduced the whole section for ease of reference): 45 “148. Obligation of secrecy. 14 5

Subject to section 124 of the Evidence Act 1950, persons specified in subsection (2) shall not disclose any information which has been obtained by him in the course of his functions and which is not published in accordance with the securities laws, except – 10

where the disclosure is authorized under a provision of the securities laws;

for the purposes of assisting or enabling the Commission in the discharge of its functions under the securities laws or 15 any other written law;

in any criminal or civil proceedings by or against the Commission; or 20

where the disclosure is authorized by the Commission.

Subsection (1) shall apply to the following persons:

a member of – 25

the Commission;

(ii) the Shariah Advisory Council; 30

(iii) the Audit Oversight Board; or

(iv) the Capital Market Development Fund Board;

a member of any committee of the Commission, the Shariah 35 Advisory Council, the Audit Oversight Board, or the Capital

an officer or agent of the Commission; or 40

a person attending any meeting of –

the Commission;

(ii) any committee of the Commission;

(iii) the Shariah Advisory Council;

(iv) the Audit Oversight Board, 50

the Capital Market Development Fund Board.

Any person who contravenes subsection (1) shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding one 15 million ringgit or to imprisonment for a term not exceeding five years or 5 to both”. [22] EY argued as follows: “According to s 148, agents of the SC (i.e. BDO in its capacity as 10 independent auditor of SJAM) shall not disclose any information which has been obtained by it in the course of its duties unless one or more of the following 4 exceptions apply. Disclosure of such information is permissible if it is: 15

for any of the purposes of the securities laws;

for the purpose of any civil or criminal proceedings under any written law; 20

authorised by the SC; or

not prejudicial to public interest under s 124 of the Evidence Act 1950. 25 Disclosure of the Documents by BDO is therefore permissible because one or more of the above exceptions apply. In particular:

the Documents are necessary for purposes of the securities laws. The Plaintiffs in both actions rely on the securities laws, i.e. the 30 Securities Industry Act 1983 and the Capital Markets and Services Act 2007, to found their causes of action; and

the Documents are necessary for the purpose of a civil proceeding. The Plaintiffs’ claims in both actions are founded on common law 35 negligence and breaches of statutory duty under the Companies Act 1965”. [23] EY further argued the 4 exceptions (see para 22 above) in the 40 s.148 at the relevant time are preserved pursuant to s.163(1) of the SCMA which states - “(1) Subject to the provisions of this Act, any right, privilege, obligation or liability acquired or accrued under the repealed sections or any legal proceedings or remedy in respect of such 45 right, privilege, obligation or liability shall not be affected and any such legal proceedings or remedy may be instituted, continued or enforced as if this Act had not been made. (Emphasis added) 16 5 [24] With respect in my considered opinion, s.163(1) SCMA does not apply because the definition of “repealed sections” appearing in s.163(1) SCMA is defined in s.161 SCMA as “Sections 5 and 6 of Securities Industry Act 1983 and section 179 of the Companies Act 1965”. 10 [25] In my judgment the applicable law as at 2/10/2017 when encl. 179 was heard will be the current s.148. In other words, subject to the overriding exception of s.124 Evidence Act 1950 (which relates to non-disclosure by a public officer of official communications which 15 he considers in the public interest unless certified by head of department that such disclosure is not prejudicial) which is not applicable in the context of encl.179, BDO as agent of the SC shall not disclose any information which has been obtained by BDO in the course of BDO’s functions and which is not published in accordance 20 with securities laws except “where the disclosure is authorised by the Commission” (s.148(2)(c) read with s.148(1)(d) SCMA) . [26] In addition in my judgment, the documents in relation to meetings with SJAM after the issuance of the SC’s notice to show 25 cause dated 30/12/2009 (para 1(c) in encl.179) are confidential pursuant to s.148 SCMA and cannot be disclosed unless authorised by the SC (s.148(2)(d) read with s.148(1)(d) SCMA) S.148B SCMA 30 [27] EY argued ‘However s.48B[SCMA] is subject to s.148, including the exceptions provided therein. In other words, the exceptions [(see 17 para 22 above)] remain available to BDO. This is made clear in the 5 opening sentence of s.148B: “(1) Without affecting the generality of section 148, where the Commission produces any document or information in relation to –

any rating assigned by the Commission to; or 10

any supervisory assessment made by the Commission on, any person specified under subsection 126(1) [i.e. licensed person], the person, or any of its directors, officers or auditors shall not disclose the 15 document or information to any other person, unless authorized by the Commission …[Emphasis added]”’. [28] With respect s.148B SCMA is not subject to s.148 SCMA as 20 there is no opening words in the likes of “Subject to s.124 of the Evidence Act 1950” appearing in the current 148. In my considered opinion “ without affecting the generality of section 148” means over and above what is provided in s.148 SCMA. 25 [29] The SC as a regulatory body to develop and regulate the Malaysian capital market has functions and powers under the SCMA, the CMSA and the Securities Industry (Central Depositories) Act 1991 (‘SICDA’)(‘the securities laws’). The SC has supervisory and investigative powers pursuant to its statutory functions under s.15 30 SCMA which include, amongst others, the following: “(1) To regulate all matters relating to the capital markets;

To ensure that the provisions of the securities laws are complied with;

To take all reasonable measures to maintain the confidence of investors in the capital markets by ensuring adequate protection for such investors; 40 18

To license, register, authorize, approve and supervise all persons 5 engaging in regulated activities or providing capital market services as may be provided for under any securities law; and

To promote and maintain the integrity of all licensed persons, registered persons, approved persons and participants in the 10 capital market”. [30] The SC may appoint investigating officers with powers for carrying out investigation of any offence under the securities laws (s.125 SCMA). 15 [31] Pursuant to its supervisory functions, the SC conducted an examination on SJAM and issued the notice to show cause on 30/12/2009. BDO which was appointed by the SC under s.130 SCMA was required to make reports to the SC pursuant to s.132 20 CMSA. [32] Given that the Discovery Documents under para 1(a) and (c) in encl.179 are documents and/or information prepared, produced and /or obtained pursuant to the SC’s investigative and supervisory 25 powers stated above, they fall with the ambit of s.148B SCMA, and therefore ought not to be disclosed without the authorisation of the SC. [33] In addition the confidential nature of these documents would 30 necessarily cover the documents which form the same chain of correspondences following the persuasive authority of Commerce Commission v. Air New Zealand Ltd [2011] NZCCLR 21 where the Court of Appeal at paras 90, 91 and 92 as summarised in the Intervener’s submission - 35 19 “held that even though Section 100 of the Commerce Act 1986 only 5 provides for confidentiality in terms of answers given to the Commerce Commission, questions posed should be confidential as well given that the questions posed would be “inherently linked” to the answers given. Further, it was held that in any event, the questions are “essential to understanding the answers given” that had been put to him”. 10 [34] For the foregoing reasons I disagreed with EY’s submission that s.148B does not prohibit BDO from disclosing the Discovery Documents without the SC’s authorisation. 15 S.148A SCMA [35] I am inclined to agree with EY that SC’s reliance on s.148A SCMA to argue that the Discovery Documents are not disclosable is untenable because s.148A SCMA only applies in civil enforcement proceedings by the SC. Since both S422 and Suit 431 are not civil 20 enforcement actions, therefore s.148A SCMA is not applicable in these proceedings. Whether even if the SC’s authorisation is required, the SC has waived this requirement. 25 [36] EY submitted even if authorisation is required, the SC has waived this requirement because - “(a) First, the SC was completely silent when SJAM wrote to them as early as August 2016 for its formal consent to disclose documents relating to BDO’s April 2010 examinations of SJAM. The SC also 30 failed to respond to several follow-up written reminders in October 2016, January 2017, and June 2017.

Second, as stated above, BDO has already produced certain other documents obtained by it under its appointment as the independent 35 auditor of SJAM without the prior authorisation of the SC. However, the SC never took issue with such disclosure”. 20 [37] EY further submitted that silence or failure to act may 5 constitute waiver and/or estoppel citing Boustead Trading (1985) Sdn Bhd v. Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 (FC) at 346. EY cited Public Textiles Bhd v. Lembaga Letrik Negara [1976] 2 MLJ 58 where at p. 60D the Federal Court held that silence by itself will not operate as an estoppel unless it is 10 coupled with a duty to speak or act. EY then submitted that the SC as the regulator with oversight of the securities regime being aware of the requirements of s. 148 SCMA has a positive duty to speak or respond to requests for disclosure. 15 [38] With respect I find there is no merit in EY’s submission as O.53 r.2(4) ROC 2012 provides - “(4) Any person who is adversely affected by the decision, action or omission in relation to the exercise of the public duty or function shall be entitled to make the application”. 20 (Emphasis added) [39] In Shahidan bin Shafie v. Atlan Holdings Sdn Bhd & Anor [2015] MLJU 1944, concerned an appeal by the appellant/plaintiff against the decision of the High Court in which the learned Judge 25 dismissed the appellant’s claims for an order that the respondents/ defendants jointly and severally make a Mandatory Take-Over offer to all the shareholders of Naluri Berhad (except Danaharta) at an offer price of RM 1.98 per ordinary share as per the terms set out in the Securities Commission Act 1983 and the Take-Over Code. 30 David Wong JCA (delivering the judgment of the Court of Appeal) in para 29, amongst others, opined - “From the Record of Appeal, it is undisputed that the Securities Commission was aware of the allegation of the Defendants having “acquired control” of Naluri and had sought clarification from the Board of 35 21 Directors of Naluri. The Securities Commission after considering 5 Naluri’s clarification took no further action. As intimated above, the Plaintiff should have sought a review of the Securities Commission decision in Court. This he did not do”. (Emphasis added) 10 [40] Following Shahidan’s case (supra), in my judgment, EY‘s remedy for the omission /inaction on the part of the SC lies in seeking a judicial review of SC’s omission in relation to the exercise of its public duty or function. 15 Whether the disclosure of the Discovery Documents is injurious to public interest [41] EY submitted -

disclosure of the Discovery Documents would not affect the SC’s future investigations as the SC had already discharged its 20 regulatory function by taking enforcement action to wind up SJAM in 2010 and there is no evidence of any ongoing or forthcoming investigations by the SC involving SJAM;

disclosure of the Discovery Documents would benefit the public interest as it would assist all the parties in the development of their 25 respective cases, including the Plaintiffs who are members of the investing public;

there is no merit in the SC’s claim that allowing the application would result in a floodgate effect of subsequent litigation seeking disclosure;

EY has prayed that in this application the Discovery Documents shall not be used by any party in any other proceedings or for any other purposes; and 22

EY is willing to accept the terms of a reasonable confidentiality 5 order if appropriate. [42] There are 2 categories of documents which disclosure may be refused:

where the disclosure of the contents of such document would 10 be contrary to the public interest; and

(ii) where the contents ought to be withheld (see High Court case of Brunei of Zainuddin Dato Seri Paduka Haji Masrai v. Pengiran Putera Negara Pengiran Haji Umar & Anor [1997] 4 MLJ 135 at 137 (Held (2) 15 [43] The rationale for the protection of documents as a class is succinctly laid in the UK House of Lords case of Conway v. Rimmer [1988] AC 910 at p. 952 D-G as follows: “I do not doubt that there are certain classes of documents which 20 ought not to be disclosed whatever their content may be. Virtually everyone agrees that Cabinet minutes and the like ought not to be disclosed until such time as they are only of historical interest. But I do not think that many people would give as the reason that premature disclosure would prevent candour in the Cabinet. To my mind the most important 25 reason is that such disclosure would create or fan ill-formed or captious public or political criticism. The business of government is difficult enough as it is, and no government could contemplate with equanimity the inner workings of the government machine being exposed to the gaze of those ready to criticise without adequate 30 knowledge of the background and perhaps some axe to grind. And that must, in my view, also apply to all documents concerned with policy making within departments including, it may be, minutes and the like by quite junior officials and correspondence with outside bodies. Further it may be that deliberations about a particular case 35 require protection as much as deliberations about policy. I do not think that it is possible to limit such documents by any definition. But there seems to me to be a wide difference between such documents and routine reports. There may be special reasons for withholding some kinds of routine documents, but I think that the proper test to be applied is to ask, in the 40 language of Lord Simon in Duncan’s case, whether the withholding of a 23 document because it belongs to a particular class is really 5 “necessary for the proper functioning of the public service”. (Emphasis added) [44] The Federal Court case in Suruhanjaya Sekuriti v. Datuk Ishak bin Ismail [ 2016] 1 MLJ 733 at 758 [42] emphasised on the 10 “effective functioning of departments or organs of central government” as a ground of non-disclosure of documents or information on public interest and cited a passage from Lord Diplock’s judgment in D v National Society for the Prevention of Cruelty to Children [1978] AC 171 (at pp.220-221) with approval: 15 “I see no reason and I know of no authority for confining public interest as a ground for non-disclosure of documents or information to the effective functioning of departments or organs of central government. In Conway v Rimmer [1968] AC 910 the public interest to be protected was the effective functioning of a county police force; in In re D (Infants) [1970] 1 WLR 599 20 the interest to be protected was the effective functioning of a local authority in relation to the welfare of boarded-out children. In the instant case the public interest to be protected is the effective functioning of an organisation authorised under an Act of Parliament to bring legal proceedings for the welfare of children. I agree with Croom-Johnson 25 J. that this is a public interest which the court is entitled to take into consideration in deciding whether the identity of the NSPCC’s informants ought to be disclosed. I also agree that the balance of public interest falls on the side of non-disclosure”. 30 [45] The Federal Court in Datuk Ishak bin Ismail also cited with approval the UK House of Lords case of Lonrho Ltd v. Shell Petroleum Co Ltd [1980] 1 WLR 627 wherein at 758 [44] the House of Lords disallowed the disclosure of documents in connection to an inquiry conducted by a statutory body pursuant to its 35 investigation functions on the basis that “it is necessary for the proper and efficient functioning of such an investigation that the [documents] should be withheld from production”. 24 [46] The Discovery Documents as alluded to before are documents 5 and/or information prepared, produced and/or obtained in the course of the SC’s investigative and supervisory powers pursuant to its statutory functions under the securities laws are privileged and not disclosable. Based on all the authorities cited above, I am inclined to accept the SC’s submission that the balance of public interest 10 tilts on the side of non disclosure to protect the effective functioning of the SC pursuant to the SCMA for the following reasons: “(a) It is in the interests of public that the Discovery Documents be protected as a class to fully protect the investigative and supervisory powers of the SC given that it is inevitable that each 15 document will be based on, or contain references to other similar investigation/supervisory documents.

It would be injurious to public interest if the Discovery Documents were ordered to be disclosed by this Court as this would impede 20 the proper functioning of the SC i.e. there is a risk that future investigations carried out by the SC may be affected and public confidence in the SC be undermined.

The protection from disclosure afforded to the SC is not limited to a 25 one-off situation involving merely SJAM, as condified in the SCA. On the other hand, a precedent in allowing disclosure of the SC’s investigation papers would be established if this Discovery Application is allowed, resulting in a floodgate effect i.e. large amounts of subsequent litigation seeking for such a disclosure.

Further, third parties may be discouraged from coming forward to give evidence or from giving evidence fully and freely and likewise it would be important to preserve the integrity and independence of reports made pursuant to the investigations conducted by the SC”. 35 Conclusion [47] For the reasons stated above, I found -

the Discovery Documents are relevant and necessary;

notwithstanding (a), the Discovery Documents ought not to be 40 disclosed due to public interest; 25

the Discovery Documents are subject to the authorisation of the 5 SC under the current s.148 and s.148B SCMA;

there is no waiver of the SC’s consent as EY’s remedy to challenge the SC’s omission ( silence) is by way of judicial review. [48] EY’s application in encl.179 was accordingly dismissed with 10 costs of RM 12,000.00 and RM4.000.00 to be paid by EY to the SC and SJAM respectively. Dated: 8/4/2018 15 SGD. (LAU BEE LAN) Judge 20 Counsel for the 1st Defendant: Encik Kelvin Seet together with 25 Cik Lim Lay Yee Messrs Cheang & Ariff Advocates & Solicitors 39 Court @ Loke Mansion 273A Jalan Medan Tuanku 30 50300 Kuala Lumpur Counsel for the 2nd Defendant: Encik Ang Hean Leng together with 35 Encik Wong Te Jie Messrs Lee Hishammuddin Allen & Gledhill Advocates & Solicitors Level 16, Menara Tokio Marine Life No.189, Jalan Tun Razak 40 50400 Kuala Lumpur 26 5 Counsel for the Intervener: Y.Bhg. Dato’ Lim Chee Wee together with Cik Sharon Chong, Cik Joyce Lim and 10 Encik Aerie Rahman for Securities Commission Messrs Skrine Advocates & Solicitors Unit No.50-8-1, Tingkat 8 Wisma UOA Damansara 15 50 Jalan Dungun Damansara Heights 50490 Kuala Lumpur 20