Mohd Shah Rezza Bin Sam Seli v Syed Faizal Shah Bin Syed Gulzar Ali Shah (WA-12BNCC-11-06/2025)

In the Court below, the Plaintiffs’ case against the 1st and 2nd Defendants (“D1” and “D2” respectively) was that D1 allegedly made negligent misrepresentations that induced them to “invest” in a scheme that involved the Plaintiffs depositing funds into D2’s bank account, with such funds to be used for trading on a foreign exchange (“forex”) Metratrader platform operated by a forex broker called EssenceFX.

The Plaintiffs also pleaded the existence of a contract, allegedly between the Plaintiffs and D2, and which existence is premised solely on the fact that the funds were deposited into D2’s account. D2 did not defend, and a default judgment was entered against him. The trial only proceeded against D1, and the Sessions Court found for the Plaintiffs on 21-5-2025. The Defendant appealed to this Court.

The 1st Plaintiff (“P1”) met D1 on 20-8-2019 after P1 had first communicated with D1’s brother-in-law, Riaz. There were initial WhatsApp communications between P1 and Riaz, and it was Riaz who had sent P1 the link to the EssenceFX website. According to P1 however, he was induced by D1 to invest after he met with D1 on 20-8-2019.

It is not disputed that D1 helped to set up the Plaintiffs’ accounts on the EssenceFX platform in their names and between September and December 2019, P1 paid monies into D2’s account on 4 occasions via cheques drawn according to D1’s instructions and deposited with the assistance of D1. As noted, the funds were used for forex trading on those accounts.

At some point in March 2020, the Plaintiffs were informed of drastic losses on their accounts and by July 2020, D1 sent P1 a WhatsApp screenshot about EssenceFX’s withdrawal from its Asian market operations and advised P1 to end all trade-ins on 16-7-2020. As a result, the Plaintiffs say they lost RM704,729.24 and sought to recover this sum from D1 and D2. Issues to be determined

At paragraph 14 of the Statement of Claim, the Plaintiffs pleaded that they invested in reliance upon the false assurances and representations made negligently by D1. There is no allegation of fraud against D1. The cause of action is also in terms of negligent misstatement, not negligent misrepresentation as a vitiating factor, as they did not assert that a contract existed with D1.

All the statements or representations attributed by the Plaintiffs to D1 can be found in paragraphs 6 to 10 which are reproduced in part as follows: Para 6: “The 1st Defendant had represented to the 1st Plaintiff that he would lead, guide and coordinate the investment process, including but not limited to facilitating how the investments should be made.” Para 9 – “… The 1st Defendant expressed that this 30% commission shall be paid in consideration for his work in leading and facilitating the investment process of the 1st Plaintiff’s funds. The 1st Defendant further assured and represented to the 1st Plaintiff that he had the requisite skill and knowledge to provide advice on when investments should be made.” Para 10 – … “10.1 that Essence FX is a bona fide broker and is regulated by the Ministry of Financial Estonia (EU);

10.2 that Essence FX is registered with the Estonian Financial Supervision Authority and is independent from the

10.3 that Essence FX has a long-established track record and reputation in foreign exchange liquidity in major FX market currency;

10.4 that Essence FX had established its presence in Malaysia through 245 Network Group Malaysia;

10.5 that the investments made through Essence FX is secured and that good returns are promised between 6% - 8% of capital invested;

10.6 that there was a stop and loss procedure in that losses are effectively limited to 1% to 2% of capital invested”

After the trial against D1, the Sessions Court Judge found for the Plaintiffs and entered judgment against D1 for RM704,729.24 with interest and costs. The primary issues are whether the elements of the cause of action in negligent misstatement by D1 were correctly found by the trial Judge. Analysis and findings

In addition to identifying the particular misstatements or misrepresentations and proving that D1 did make them to the Plaintiffs as pleaded, the elements of the tort of negligent misstatement as correctly identified by the trial Judge, are: a) a special relationship existed between the plaintiffs and the maker of the representation; b) that the plaintiffs relied on such representation; and c) the reliance caused damage to the plaintiffs.

Negligent misstatement is a cause of action based on the tort of negligence. Duty of care

As in all cases of negligence, the Plaintiffs must prove, first and foremost, that D1 owes the Plaintiffs a duty of care. The general test to establish a duty of case as enunciated in Caparo Industries Plc v Dickman [1990] 2 AC 605 is applicable to all negligence claims, including claims for negligent misstatement. Following this test, three questions have to be addressed, namely: a) whether the damage suffered by the plaintiff is reasonably foreseeable; b) whether there is a relationship of proximity between the plaintiff and defendant; and c) whether it is fair and reasonable that the defendant should owe the plaintiff a duty of care.

In Lok Kok Beng & 49 Ors v. Loh Chiak Eong & Anor [2015] 7 CLJ 1008, the Federal Court also held: “[60] Recovery of pure economic loss in tort was allowed in very limited situations. Following the House of Lords' decision in Hedley Byrne v. Heller [1964] AC 465, an exception was made to the law restricting claims for pure economic loss in negligence action. This exception is only applicable in the existence of "special relationship" or proximity between the parties giving rise to an assumption of liability. In the absence of a contract, a defendant can be made liable for negligence if it could be proved that there was active intervention on his part in the form of advice or conduct amounting to representation which had been relied upon by the plaintiff.” [Emphasis added]

The existence of that “special relationship” is therefore a requisite feature of the relationship of proximity in cases of negligent misstatements resulting in pure economic loss, as in this case, and per Sim Thong Realty Sdn Bhd v Teh Kim Dar @ Tee Kim [2003] 3 MLJ 460, the existence of that special relationship must be pleaded and proved to establish that a duty of care exists.

In this case, the precise nature of the relationship between the Plaintiffs and D1 was not pleaded other than that D1 would: “lead, guide and coordinate the investment process, including but not limited to facilitating how the investments should be made.”

The considerations necessary to conclude that there is a duty of care were not articulated in the Judgment of the Sessions Court including, in particular, whether there was assumption of responsibility and reliance such that it would be fair, just and reasonable to impose a duty of care. The conclusions of the trial Judge were as follows: “… ..” The above was then followed by the reproduction of excerpts of WhatsApp messages from D1 adduced at the trial, including the following: “Thank you again for your interest in our investment product” “For withdrawal, the rate is 4.30 and kita x charge anything…Just trading charges 30% from profit” “Just to let u know that we pay using diff account every month. Just nak avoid lhdn kejar u…” “As per told earlier, we don’t trades everyday. Becoz we try to manage the risk. But don’t worry, u’ll get something by end of this month” “Alhamdulilah bro, kita dah recover from losses. More to come insyaallah” “Waalakumsalam. I akan reinvest ur profit this month and will let u know how much u need to topup as spoken earlier”

Having reviewed the Judgment of the Sessions Court, it appears that the trial Judge proceeded to evaluate the oral testimony and WhatsApp evidence adduced to find that D1 had represented himself as an agent of EssenceFX, made representations about EssenceFX and gave assurances in the course of the period in which the funds were invested, that they were safe and well managed.

If this was the basis for the conclusion that there was a special relationship between D1 and the Plaintiffs, the evidence offered as the alleged misstatements or misrepresentations made by D1 had been conflated as evidence to prove the existence of a duty of care. This is an error and misdirection, because if no duty of care exists then D1 cannot be held legally responsible for his statements to

As to whether such a special relationship ought to have been found, this Court had noted in Ali Said Hamdan Al Rawahi & Anor v. Ahmad Hassan & Anor [2025] CLJU 2255 that the proper approach to imposing a duty of care in cases of pure economic loss should use precedents as a yardstick to develop the law incrementally: “[8] 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.”

It is also instructive to consider OSK & Partners Sdn Bhd v Assets Investments Pte Ltd [2008] 2 CLJ 660 where the Court of Appeal considered that the principle in Hedley Byrne v. Heller [1964] AC 465 calls for the question to be asked, if the circumstances were such that a reasonable man in D1’s position would know that he was being trusted, or that his skill or judgment was being relied on. As explained: “[34] … If in the ordinary course of business or professional affairs, a person seeks information or advice from another, who is not under contractual or fiduciary obligation to give the information or advice, in the circumstances in which a reasonable man so asked would know that he was being trusted, or that his skill or judgment was being relied on and the person asked chooses to give the information or advice without so clearly qualifying his answer as to show that he does not accept responsibility then the person replying accepts a legal duty to exercise such care as the circumstances require in making his reply; and for a failure to exercise that care an action for negligence will lie if damage results.”

It was neither pleaded nor proved that D1 was an agent of EssenceFX, or that D1 was under a contractual or fiduciary obligation to give information or advice to the Plaintiffs. In this case, neither party offered any meaningful submissions or cited prior decided cases on whether a duty of care ought to be imposed in circumstances similar to the present.

Considering the totality of the unchallenged evidence and the nature of the statements attributed to D1 on the set up and operation of the Plaintiffs’ trading accounts on EssenceFX, this Court is of the view that the circumstances were not such that a reasonable man in D1’s position would know that he was being trusted, or that his skill or judgment was being relied on.

It was not established that D1 had in fact given any “investment advice” to the Plaintiffs or that he had executed the trades on the Plaintiffs’ accounts or that he had any exhibited judgment, expertise or skill in that regard. It is true that D1 did not qualify his statements to P1, but there no circumstances suggest that he assumed responsibility for the integrity of EssenceFX.

There was insufficient appreciation on the part of the trial Judge that the evidence clearly pointed to D1 being part of an investment group known as 245 Network Group Malaysia, that created and managed trading accounts on MetaTrader platforms connected to EssenceFX for people who wished to participate in unregulated forex trading. It was not known who in the 245 Network Group Malaysia or otherwise, was executing the trades.

Further, the Plaintiffs were aware or ought to have been aware that the EssenceFX platform was not regulated or licensed to operate in Malaysia. As there were obvious red flags about the questionable legality of the activities of the 245 Network Group, this Court could find no good policy reason to give special protection to those like the Plaintiffs who choose to participate. As also noted, there was no claim of fraud against D1 and neither was it alleged that the Plaintiffs had been preyed upon as part of a vulnerable group.

In the result, this Court does not think it is fair and reasonable to impose a duty of care on D1 for statements he might have made about EssenceFX to the Plaintiffs. Reasonable reliance

This Court also found merit in the argument that the learned trial Judge did not properly evaluate the evidence on whether there was any inducement or reliance by the Plaintiffs on the representations attributed to D1 and the correlation between his statements and the actions taken by the Plaintiffs. In this case, the Plaintiffs “invested” funds in 4 separate tranches: Date Amount 4-9-2019 31-10-2019 RM47,000.00 RM117,500.00 31-10-2019 RM282,000.00 27-12-2019

Based on the contemporaneous documentary evidence, P1 was first engaged with Riaz who introduced the investment scheme to P1 and based on that exchange, P1 appeared to have committed to invest even before meeting D1 as Riaz followed up with P1 to ask how much P1 was planning to invest, to which P1 said “How about I try wit 10k usd first?.”

By P1’s own evidence, he held D1 liable in the main because it was his understanding that D1 and not Riaz allegedly gained the commission:

The only representation that bear any correlation to what ultimately caused the Plaintiffs’ loss was the integrity of EssenceFX as an offshore exchange broker regulated in Estonia, but the trial Judge made no findings on the representations set out in paragraph 10 of the Statement of Claim that were pleaded as a key inducement.

In relying principally if not exclusively on the various WhatsApp about the set up of the MetaTrader accounts, and responses by D1 to questions from P1 on the funds had been deployed for trading on the Plaintiffs’ accounts, the learned trial Judge found that D1 was knowledgeable and a part of EssenceFX with had control over the accounts and the Plaintiffs’ investments.

However, the above findings were not the specific pleaded representations in the Statement of Claim, and did not correlate in time with P1’s decision to participate in the investment scheme in the first place. The trial Judge relied on evidence of communications between D1 and P1 on the operation of the trading accounts when the negligent misstatements in question as pleaded, must precede actions of the Plaintiffs in reliance thereof and to their detriment.

In the final analysis, it was unclear what alleged representation or assurance induced what action on the part of the Plaintiffs, or whether, e.g. it was the fact that profits were initially being shown on the accounts that induced the Plaintiffs to continue transferring fresh funds to D2. Of the RM752,000.00 deposited into D2’s account, RM35,912.91 in profits were allegedly gained from the trading, of which RM25,139.04 (70%) was successfully withdrawn in February 2020. Other appealable errors

There were also other problems with the Judgment of the Sessions Court Judge, like the tacit finding that P2 had an independent cause of action against D1 for negligent misstatement despite there being no evidence that she was in any form of contact with D1, and that the Plaintiffs should be entitled to “restitution” under: a) section 71 of the Contracts Act 1950 [on the obligation to compensate on receipt of benefits of non-gratuitous acts]; and/or b) section 25 of the Contracts Act 1950 [on contracts with an unlawful object or consideration] when there is no vitiated contract as between the Plaintiffs and D1.

Incidentally, this Court noted that the 30% profit share was referred to by D1 as trading charges in the WhatsApp excerpts and there was no evidence that D1 benefitted from the same. There was certainly no evidence that D1 benefitted from the sums adjudged to be payable by D1, which included:

General damages suffered by both the 1st and 2nd Plaintiffs as a result of the negligent misrepresentation made by the 1 st Defendant, to be assessed by the Court; and

Repayment of capital invested amounting to RM704,729.24 or AS$149,123.08 by the 1 st and 2nd Defendants, on a joint and several basis to the 1st and 2nd Plaintiffs with interest and costs.

For the above reasons, the appeal is allowed, and the Judgment of the Sessions Court is set aside with costs of RM20,000.00 here and below. Bertarikh: 24 April 2026 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR Peguam Untuk Perayu: Muniandy a/l Vestanathan (Bani Prakash bersamanya) Tetuan Andy & Co Untuk Responden: Rajwinjit Kaur Khalae a/p Ajit Singh Khalae Tetuan Rajwinjit, Asyraf &