Novartis Corporation (Malaysia) Sdn Bhd v Mahkamah Perusahaan Malaysia (W-01(A)-638-11/2019)

LEONG CHEE KONG ...RESPONDEN-RESPONDEN [Dalam perkara mengenai Permohonan Bagi Semakan Kehakiman No. WA-25-375-12/2018 Dalam Mahkamah Tinggi Malaya di Kuala Lumpur] Dalam perkara Awad Mahkamah Perusahaan No.2195 Tahun 2018 bertarikh 14.9.2018 yang diterima oleh Pemohon pada 24.9.2018 Dalam Kes Mahkamah Perusahaan No.29(13)(25)/4-870/15; Dan Dalam permohonan suatu permohonan untuk Perintah Certiorari; Dan Dalam perkara Seksyen 20 Akta Perhubungan Perusahaan 1967; Dan Dalam perkara mengenai Jadual 1, Akta Mahkamah Kehakiman 1964; Dan Dalam perkara Aturan 53 Kaedah-Kaedah Mahkamah 2012. Antara NOVARTIS CORPORTION (MALAYSIA) SDN BHD PEMOHON

LEONG CHEE KONG ...RESPONDEN-RESPONDEN CORAM HANIPAH BINTI FARIKULLAH, JCA SUPANG LIAN, JCA SEE MEE CHUN, JCA JUDGMENT OF THE COURT Introduction [1] This was an appeal by the Appellant Company (Company) whose application to quash the Industrial Court's award dated 14-9-2018 was dismissed in the High Court by order dated 3-10-2019. Both the Industrial Court and the High Court found that the dismissal of the Appellant's two employees (the $ 2 ^{n d} $ and $ 3 ^{r d} $ Respondents) was without just cause and excuse and ordered reinstatement. [2] We affirmed the High Court order that the dismissal was without just cause and excuse but substituted the order of reinstatement with an order for compensation in lieu of reinstatement. [3] We now give our reasons specifically in relation to the $ 3^{\mathrm{rd}} $ Respondent. Background facts [4] The $ ^{3 rd} $ Respondent was the Chief Finance Officer in the Company commencing duties as such on 15-4-2007. His last drawn salary was RM31,086.00 per month. [5] As of 2010, he became a member of the Company's Pharma Executive Committee (PEC) and was tasked to be one of the authorised signatories along with the $ 2^{\mathrm{nd}} $ respondent, to the Company's CitiDirect online payment. He was handed a token, known as the Safeword token and a PIN number. Both the Safeword token and PIN are required to access and to authorise the CitiDirect transactions. [6] Between 18-10-2013 to 21-11-2013, there were fraudulent transactions conducted in the Company by one Angie Ng (Angie), an Accounts Executive in the Company's Financial Reporting and Accounting Department. The sum involved was approximately RM4.35 million. [7] An investigation was held where it was found that several CitiDirect transactions were apparently approved by the $ ^{3 rd} $ Respondent. A Domestic Inquiry ensued where 10 charges were levelled, all relating to CitiDirect transactions which were approved using the $ ^{3 rd} $ Respondent's Safeword token, username and password. The essence was that the $ ^{3 rd} $ Respondent as one of the approvers for the Company's online banking system had acted negligently and/or without exercising any proper and due care to protect the Company's interest thereby causing financial losses to be suffered by the Company. These charges are found in CCB/39-40. There was a subsequent charge for divulging confidential information regarding the Business Practices Office (BPO) process and breaching confidentiality (CCB/52-53). He was found guilty on all charges and dismissed by letter dated 21-1-2014 (CBB/83-86). [8] We note the $ 2^{\mathrm{n d}} $ Respondent was the Head of Marketing and Sales Operations, Key Accounts Management and Market Access and had similar charges levelled against her. Industrial Court award [9] The primary issue was whether the $ 3^{\mathrm{rd}} $ Respondent had acted negligently i.e. without exercising any proper due care to protect the Company's interest when he failed to secure the Safeword token and password belonging to the Company thereby causing financial losses to the Company (paragraph 42). [10] The Industrial Court had found that it was Angie who was the perpetrator of the fraudulent withdrawals amounting to RM4.35 million between 18-10-2013 to 22-11-2013 (paragraph 99). It found the Company failed to prove that the $ ^{3 rd} $ Respondent's room was unlocked when Angie took his Safeword token for the fraudulent transactions (paragraph 147) and there was no Company Standard Operating Procedure (SOP) to secure the token (paragraph 148). Further, the $ ^{3 rd} $ Respondent had not knowingly divulged the password to Angie and that it was Angie who stole it when she saw the password from the $ ^{3 rd} $ Respondent's back at an angle and that the Company's witness confirmed the Company had no evidence the $ ^{3 rd} $ Respondent had failed to keep the password confidential (paragraph 166). The $ ^{3 rd} $ Respondent was found to have done all that was necessary to ensure the Safeword token was secure and the username and password kept confidential (paragraph 188). Ultimately the root cause of the fraudulent transactions was due to control failures in the payment process as identified in the BPO report that the Company "should perform an immediate assessment of the payment process controls" (paragraphs 176 to 178) and that it was unfair and unreasonable to blame the employees when the BPO report highlighted the Company's shortcomings as the root cause (paragraph 189). [11] On the additional charge of breach of confidentiality, it was found there was no evidence led by the Company (paragraph 169). [12] The dismissal was held to be without just cause or excuse and reinstatement was ordered. [13] In paragraph 201 it was stated that the $ 3^{\mathrm{rd}} $ Respondent was 55 years old at the time of hearing and at his age, it would be difficult to get a job of similar standing. As there was no proven misconduct, the trust and confidence should not be considered tainted. There were also no exceptional circumstances warranting a departure from the fact that when termination is unjustified and not bona fide, the normal relief is reinstatement (paragraph 202). High Court decision [14] The High Court referred to Ranjit Kaur S Gopal Singh v Hotel Excelsior (M) Sdn Bhd [2010] 8 CLJ 629 on the test in reviewing findings of fact made by an Industrial Court. Essentially, decisions of inferior tribunals may be reviewed on the grounds of illegality, irrationality, and possibly proportionality which allows a scrutiny of a decision not only for process but for substance. Further, a reviewing judge ought not to disturb findings of the Industrial Court unless they were grounded on illegality or irrationality, even where the reviewing judge might not have come to the same conclusion. [15] The High Court stated the Industrial Court had made a finding of fact that Angie was the perpetrator of the fraudulent withdrawals at the material time. There was no SOP in securing the Safeword token, as confirmed by COW-2, the Security Manager. It was the $ 3 ^{rd} $ Respondent's evidence he kept his Safeword token safe under his care and custody in his drawer in his locked room. Both COW-2 and COW-4 (Associate Director, Company Security) agreed that leaving the Safeword token in a locked room was safe and it was confirmed the room was locked. COW-2 had also confirmed the Company had no evidence the $ 3 ^{rd} $ Respondent had failed to keep the password confidential. [16] Breach of confidentiality had not been proved. COW-2 had agreed this was not an issue for dismissal where it was primarily based on divulging the password and the safety of the Safeword token. [17] The High Court was of the view that the Industrial Court had rightly concluded the 3 $ ^{rd} $ Respondent had not acted below the reasonable standard and there was unrebutted evidence that Angie had stolen his password and/or username. [18] Due consideration was given that when the case was pending in the Industrial Court, there was a concurrent proceeding in the Kuala Lumpur High Court vide Civil Suit No 22NcVc-291-06/2015 premised on negligence based on the same facts. The High Court there held the $ ^{3} $ $ ^{rd} $ Respondent was not negligent in discharging his duties and obligations towards the Company. There was no appeal and the Company must be deemed to have accepted the same. [19] The High Court concluded that the findings of the Industrial Court are consistent with the facts and evidence led before it; had taken all relevant considerations in arriving at the decision and the award did not suffer any infirmities of illegality, irrationality or procedure impropriety. [20] The application for judicial review to quash the Industrial Court award was therefore dismissed. Submissions of the Appellant Company [21] Before us, the Company mounted various grounds of challenge. [22] The $ 1^{\mathrm{st}} $ ground related to the failure of the High Court to take into account the admission that the $ 3^{\mathrm{rd}} $ Respondent was a senior officer of the Company and entrusted as an authorised signatory to safeguard the Safeword token and password. [23] It relied on Pearce v Foster [1886] (17) QBD 536 that "where a person has entered into the position of servant, if he does anything incompatible with the due and faithful discharge of his duty to his master, the latter has the right to dismiss him". As per BR Ghaiye in Misconduct in Employment Contract, the servant stands in a fiduciary relation such that an act inconsistent with the fiduciary relationship will be an act of bad faith for which the services can be terminated. [24] It was thus submitted dismissal was warranted. [25] The next ground of challenge concerned the finding that the root cause of the fraudulent withdrawals was the control failures in the payment process. It was submitted that the $ 3 ^{rd} $ Respondent being the Chief Financial Officer was ultimately responsible for all procedures related to finance and cannot therefore, rely on the absence of control failures in the payment process as a defence. [26] A further challenge was that the finding that "it was Angie who stole the password from the $ 3 ^{rd} $ Respondent when she saw the password from the $ 3 ^{rd} $ Respondent's back at an angle" was perverse and unsupported by any evidence. What was relied on was the testimony of COW-4 who did not possess any direct evidence on the issue. [27] The final ground of challenge centred on the order of reinstatement. There was an error in law as no regard was had for industrial harmony bearing in mind the seniority of position and that 5 years had lapsed since the dismissal. It was submitted this Court's decision in Hong Leong Bank Bhd v Phung Tze Thiam John Phung [2008] 1 LNS 921 had been ignored. It was held in that case there may be circumstances where reinstatement is inappropriate. [28] Regard should also be had to the Supreme Court decision in Kumpulan Perangsang Selangor Bhd v Zaid bin Hj Mohd Nor [1997] 2 CLJ 11 which listed the factors to be considered when ordering reinstatement or otherwise. Submissions of the $ 3^{rd} $ Respondent [29] It was submitted that the Courts will not interfere with the findings of fact made by a tribunal unless on the ground of illegality, irrationality and procedural impropriety, Malaysian Oxygen Bhd v Soh Tong Wah and another appeal [2015] 3 MLJ 730. The High Court had agreed with the findings of the Industrial Court where the findings were supported by evidence and held the allegations against the $ 3^{\mathrm{rd}} $ Respondent had not been proved. [30] With regard to the admission that as a senior personnel there was an absolute duty to keep the Safeword token and password safe, this has to be looked at in the context of the evidence that the duty had not been breached. [31] The root cause of the fraudulent withdrawals was supported by the Company's BPO and the recommendation to perform an immediate assessment of the payment process controls. [32] The finding that it was Angie who stole the password from the $ 3^{rd} $ Respondent came from COW-4 herself. [33] With regard to the order for reinstatement, it was submitted that reinstatement is the primary remedy. The Company had not pleaded any facts or provided any evidence that the $ 3^{rd} $ Respondent's previous position was filled or made any submission why reinstatement was not an appropriate remedy during the Industrial Court proceedings. The Industrial Court had given its reasons for reinstatement. [34] It was finally submitted the Kuala Lumpur High Court Civil Suit No 22NcVc-291-06/2015 against the $ ^{3 rd} $ Respondent was premised on negligence based on the same facts. The High Court there held the $ ^{3 rd} $ Respondent was not negligent in discharging his duties and obligations towards the Company. There was no appeal and the Company must be deemed to have accepted that such a decision is final and binding. Although the claims were different, the subject matter of both suits is the same i.e. whether the $ ^{3 rd} $ Respondent had been negligent and thereby caused the loss of the money fraudulently withdrawn by Angie. Our Decision Dismissal without just cause and excuse [35] It is clear that decisions of inferior tribunals may be reviewed on the grounds of illegality, irrationality, and possibly proportionality, which allows a scrutiny of decision not only for process but for substance. Critically, a reviewing judge ought not to disturb findings of the Industrial Court unless they are grounded on illegality or irrationality, even where the reviewing judge might not have come to the same conclusion. If authority for this proposition is required, one can look no further than Ranjit Kaur where this was stated: "[15]...Historically, judicial review was only concerned with the decision making process where the impugned decision is flawed on the ground of procedural impropriety. However, over the years, our courts have made inroad into this field of administrative law. Rama Chandran is the mother of all those cases. The Federal Court in a landmark decision has held that the decision of inferior tribunal may be reviewed on the grounds of "illegality", "irrationality" and possibly "proportionality" which permits the courts to scrutinize the decision not only for process but also for substance. It allowed the courts to go into the merit of the matter. Thus, the distinction between review and appeal no longer holds." [17] The Federal Court, in Petroliam Nasional Bhd v. Nik Ramli Nik Hassan [2003] 4 CLJ 625, again held that the reviewing court may scrutinise a decision on its merits but only in the most appropriate of cases and not every case is amenable to the Rama Chandran approach. Further, it was held that a reviewing judge ought not to disturb findings of the Industrial Court unless they were grounded on illegality or plain irrationality, even where the reviewing judge might not have come to the same conclusion". [19] It is clear from the above authorities that the scope and ambit of Rama Chandran had been clearly explained and clarified. Decided cases cited above have also clearly established that where the facts do not support the conclusion arrived at by the Industrial Court, or where the findings of the Industrial Court had been arrived at by taking into consideration irrelevant matters, and had failed to consider relevant matters into consideration, such findings are always amendable to judicial review". [36] The same too was said in Malaysian Oxygen Bhd at page 741 where it was stated the test for intervention in judicial review is "whether there was abuse of the power or unfair treatment by the Industrial Court for example illegality, procedural impropriety, unreasonableness or possibly proportionality". [37] In this instant case, it cannot be gainsaid the fraudulent withdrawals for the period between 18-10-2013 to 21-11-2013 were all done by Angie and not the $ ^{3 rd} $ Respondent or the other $ ^{2 n d} $ Respondent. These were transacted using their Safeword token and password. The $ ^{3 rd} $ Respondent had kept the Safeword token in his drawer in his room which is locked. Viewed in the light of COW-2's evidence there was no SOP on the safety of the Safeword token, it is reasonable to conclude that it is safe for it to be left in the locked room. There was also no evidence that the $ ^{3 rd} $ Respondent had disclosed his username and password to Angie and the fact of COW-2's evidence that the Company had no evidence the $ ^{3 rd} $ Respondent had failed to keep such username and password safe. In fact, COW-4 had given evidence that Angie had said she saw the $ ^{3 rd} $ Respondent's password from the back when she went to seek his signature for online transactions. This was what led the Industrial Court to conclude Angie stole the $ ^{3 rd} $ Respondent's password as she saw it from his back by looking at an angle. [38] Under the circumstances, even if the $ 3^{\mathrm{rd}} $ Respondent admitted to having a duty to keep the Safeword token and password safe and a master-servant relationship requires the performance of a duty faithfully or in a manner of a fiduciary duty such that there can be dismissal if the duty is breached, that duty has not been breached by the $ 3^{\mathrm{rd}} $ Respondent. [39] The root cause of the fraudulent withdrawals was correctly attributed to the lack of controls in the Company. This was evident from the Company's own BDO report on the recommendation to perform an immediate assessment of the payment service controls and the absence of a SOP on safety of Safeword token and password. [40] In particular, in the absence of such a SOP as referred to above, we find it does not lie on the Company to say that the $ 3^{\mathrm{rd}} $ Respondent being the Chief Financial Officer was ultimately responsible for all procedures related to finance and cannot avail himself to the absence of control failures in the payment process as a defence. [41] We were also inclined to accept that the outcome of the Kuala Lumpur High Court Civil Suit No 22NcVc-291-06/2015 against the $ ^{3 rd} $ Respondent had a bearing on these proceedings. Although the claims were different, the subject matter of both suits is the same i.e. whether the $ ^{3 rd} $ Respondent had been negligent and thereby caused the loss of the money fraudulently withdrawn by Angie. The High Court there held the $ ^{3 rd} $ Respondent was not negligent in discharging his duties and obligations towards the Company. There was no appeal and the Company must be deemed to have accepted that such a decision is final and binding. [42] We conclude on this point by finding there was nothing unreasonable about the decision of the High Court in dismissing the application to quash the Industrial Court award. The Industrial Court had made findings of fact pertaining to the $ 3^{\mathrm{rd}} $ Respondent safely keeping the Safeword token in a drawer in his locked room, had not disclosed his username or password to Angie, that it was Angie who stole the password, as it were, the absence of SOP on safety of Safeword token and password, and the root cause being the lack of controls, and these were unassailable and supported by evidence. Order for reinstatement [43] We are however of the view that based on the facts and circumstances of the case, the High Court had erred in granting reinstatement. We do recognise that reinstatement is the usual remedy that is awarded but there may be circumstances where such a usual remedy is not appropriate. [44] The Industrial Court had this to say of the $ 3^{\mathrm{rd}} $ Respondent at CCB/146-147: [200] The 2nd Claimant was 55 years of age at the time of hearing. The 2nd Claimant has served the company well for almost 7 years at the time of his dismissal. The 2nd Claimant is gainfully employed at a Buddhist Association but only earning a fraction of what he used to earn. At his age it would be difficult to get a job of similar or equivalent standing. There being no proven misconduct, the trust and confidence the company had in the 2nd Claimant over the years should not be considered tainted. [201] There were no exceptional circumstances warranting a departure from the fact where the termination of service is unjustified and not bona fide, the normal relief is reinstatement. The burden to establish exceptional circumstances is on the Company which the Company has failed to do. In addition there was no evidence before the Court that the relationship between the parties had broken down so badly that it would not be conducive to industrial harmony to return the Claimants to their place of work. [202] In the circumstances the remedy of reinstatement is therefore the only reasonable just and proper remedy that is appropriate to meet the facts and circumstances of the present case. [203] Due to the factors above, an order or reinstatement would be appropriate as it not only ensures the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Claimant did not lose seniority of service and benefits flowing there from but also more importantly dignity and standing within the Company and externally." [45] It had earlier stated the following: "[198] ... Past record of the employee, the nature of their alleged lapse, conduct of the Claimants and the ground on which the order of the Company is set aside are relevant factors for consideration. (see Kumpulan Perangsang Selangor V Zaid bin Hj Mohd Noh [1997] I AMR 108)." [46] We find that no consideration was given to Hong Leong Bank Bhd. In that particular case, this Court examined the circumstances under which reinstatement may not be ordered. It had this to say: [19] In the present case, the Industrial Court found that it was not practical for reason of industrial harmony to reinstate the respondent. The High Court was of a different view and ordered reinstatement. With utmost respect, we are unable to agree with the learned High Court judge. No doubt reinstatement is the usual remedy that is awarded in industrial law. But there may be circumstances where the reinstatement is inappropriate. The present case is such a case. [20] The respondent held reasonable high ranking position. He was the head of the appellant's branch in Tawau. On the facts of this case, mutual trust and confidence is lacking between the parties. There is no useful purpose, for reason of industrial harmony to thrust the respondent upon the appellant. More so in this case, the respondent had left the services of the appellant for five and a half years when the order of reinstatement was made by the High Court. Taking into account all the facts and circumstances of the case, we are of the view that the proper remedy in this case is compensation in lieu of reinstatement as ordered by the Industrial Court." [47] The considerations for reinstatement were high-rank position, lack of mutual trust and confidence, no useful purpose to thrust the respondent upon the appellant and the lapse of time since the appellant left the service of the bank. [48] Kumpulan Perangsang Selangor was given due consideration in Hong Leong Bank Bhd at paragraph 17 where the factors required to be taken into account when considering whether to order reinstatement were as follows: “(i) the past record of employee;

(ii) the nature of his alleged lapse;

(iii) the conduct of the workman ie whether he had contributed to his own dismissal;

(iv) nature of relations between the employer and the employee;

the nature of duties performed by the employee; and

(vi) the nature of industrial establishment." [49] We pause to note that in that case, it was considered that the respondent performed an executive position in a recreational club and reinstatement was not the appropriate remedy. [50] Similarly in our case, the $ 3^{\mathrm{rd}} $ Respondent was a high-ranking officer in the Company holding the position of Chief Financial Officer which is an executive post. It has been 5 years since he left the service of the Company when the order for reinstatement was made when he was then 55 years old. It may also be inferred that in the intervening period of 5 years, such a senior position of Chief Financial Officer would have been filled. There was also evidence the $ 3^{\mathrm{rd}} $ Respondent was gainfully employed although earning a fraction of his previous salary. The Industrial Court found that the trust and confidence the Company had in the $ 3^{\mathrm{rd}} $ Respondent was not tainted as there was no proven misconduct and there was no evidence that the relationship of parties had broken down so badly that it would not be conducive to industrial harmony to return the $ 3^{\mathrm{rd}} $ Respondent to work. Be that as it may, it can be said to be reasonable to infer that given his position in the Company's hierarchy, there is no useful purpose for reason of industrial harmony to thrust the $ 3^{\mathrm{rd}} $ Respondent upon the Company. [51] We would thus adopt the principle and approach in Hong Leong Bank Bhd and hold that reinstatement is not the appropriate remedy for the reasons we have given above. Conclusion [52] The appeal is therefore allowed in part where the order for reinstatement is substituted with an order for compensation In lieu of reinstatement. The order of the High Court that the dismissal of the $ 3 ^{rd} $ Respondent is without just cause and excuse, is affirmed. We exercise our discretion and make no order as to costs. Bruce Chun (SEE MEE CHUN) Judge Court of Appeal Malaysia Dated: 2-6-2022 For the Appellant Thavalingam C. Thavarajah (David Tan Seng Keat and Rebecca Sonali Alfred with him) Messrs T. Thavalingam & Co For the 3rd Respondent Kuala Lumpur Alex De Silva (Ponnie Govindasamy with him) Messrs Bodipalar Ponnudurai De Silva Kuala Lumpur Date of decision: 4-10-2021