Polyseed SSD Sdn Bhd (Dalam Penggulungan) v Chong Choong Kong (WA-22NCC-386-06/2023)

court under Order 14A and/or Order 33 Rule 2 and/or Order 33 Rule 5 and/or Order 92 Rule 4 of the Rules of Court 2012.

The Defendants ask that pursuant to the said provisions of the Rules, this Court determines certain questions of law or points of law which the Defendants say will determine the claim in the

The Statement of Claim runs to 100 pages and consists of 316 paragraphs. I find it most cumbersome. The facts needed to sustain well have been pleaded more succinctly. The quote attributed to the French theologian, François S/N 6o4I6BWd3UCp9zfddvMdig Fénelon, "The fewer the words, the greater the profit" ought to be a good guide to advocates drafting pleadings.

In fact, the need for brevity has been spelled out in Order 18 Rule 7(1) of the Rules of Court 2012. Pleadings are to contain only a statement in a summary form of the material facts relied on in respect of the claim or defence. Such statements of facts are also to be as brief as the nature of the case admits.

The following facts, as submitted by the Defendants, and gratefully adopted by me, are not in any serious dispute.

The Plaintiff company is in liquidation. It was wound up by the Shah Alam High Court on 18 January 2019. Mr. Wong Weng Foo was

The 1st, 2nd, and 3rd Defendants are the partners and/or former partners of a licensed audit firm known as Messrs. CK & Associates CK 3rd Defendant ceased to be a partner of CK on or about 26 December 2017.

The Fourth Defendant is the sole proprietor of Sejati Solutions Management ("Sejati").

CK was appointed by the Plaintiff as the auditor to audit the Financial Statements for the Plaintiff for financial year ending 30 April 2015 and Financial Year Ending 30 April 2016 (collectively to be referred to as "the Audited Reports"). These Financial Statements were prepared by the directors of Plaintiff. S/N 6o4I6BWd3UCp9zfddvMdig

This action has been commenced against the Fourth Defendant because Sejati assisted CK in performing the relevant audit groundwork. Sejati was paid certain professional fees for this work.

The Audited Reports were tabled at the Annual General Meeting held on 31 October 2016 ("the AGM").

There was a delay by the Plaintiff in submitting the Audited Report for the Financial Year Ending 30 April 2015 to the Companies Commission of Malaysia.

On 30 May 2023, the Plaintiff, acting through the Liquidator, filed this suit against the Defendants. The Plaintiff alleges that CK has breached its duties and/or was negligent in the preparation of the Audited Reports.

In essence, the Plaintiff alleges that CK was negligent in preparing the Audited Report which purportedly led to the directors of the Plaintiff misusing the Audited Report to misrepresent the public and/or investors that the Plaintiff is a financially stronger company and is a worthwhile investment.

The Plaintiff alleges that due to the purported breach of duties and/or negligence it suffered damages and loss. S/N 6o4I6BWd3UCp9zfddvMdig

conveniently summarised in the following manner. I. Claim for RM 2,289,380.80 by the Illegitimate Subscribers of Illegitimate RCPS issued by the Plaintiff. The Plaintiff alleges that the Defendants were negligent in auditing the Audited Reports. Consequently, the directors of the Plaintiff misused the Audited Reports to misrepresent to investors that the Plaintiff is a financially strong company. In reliance upon such misrepresentation, a few investors invested in the Plaintiff. The Plaintiff uses the terms "Illegitimate RCPS"/ "Illegitimate and/or Unlawful Fundraising Exercise" to describe the investment exercise. investors sustained losses in their investment exercise with the Plaintiff. Some 28 investors then commenced an action against the Plaintiff. There were a series of litigation between the parties. These 28 Illegitimate Subscribers had submitted proof of debt to the Liquidator to claim a sum of RM 2,289,380.80 against the Plaintiff. The Liquidator of Plaintiff rejected the proof of debt. The High Court affirmed the decision of the Liquidator but this was reversed on appeal. The Plaintiff now claims it is liable to refund the sum of RM 2,289,380.80 and the Plaintiff says this is attributable to the negligence of the Defendants. S/N 6o4I6BWd3UCp9zfddvMdig II. Claim for Tax Liability of RM 1,226,361.40 by the Plaintiff to the Inland Revenue Board The Plaintiff avers that the Inland Revenue Board had issued tax due as well as for penalty charges. These notices were issued because the Defendants had "knowingly assisted the directors of the Plaintiff and/or knowingly inflating and ballooned the Plaintiff's revenue" and thereby put the Plaintiff under the duty to pay the income tax. III. Claim for Refund of Audit Fees of RM 19,344.40 The audit fees were paid to Sejati. The Plaintiff avers that these fees ought not to be paid as the Fourth Defendant is unlicensed and therefore, unqualified to render audit services. IV. Breach of statutory duties and/or duties of other governing bodies The Defendants allegedly have breached statutory duties and/or duties of other governing bodies under the Companies Act 1965, common law, "International Standards Auditing 700: Forming an Opinion and Reporting on Financial Statements", "International Standards on Auditing", "Private Entity Reporting Standards", "duty to report to Directors", "Duty to report to the Companies Commission of Malaysia", "Duties under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001" . On S/N 6o4I6BWd3UCp9zfddvMdig account of such breaches, the Plaintiff claims exemplary and/or aggravated damages from the Defendants.

In the Amended Defence, the Defendants plead: i. as a whole is barred by limitation pursuant to Section 6 of the Limitation Act 1953. ii. That the issuance of the Illegitimate RCPS was by the Plaintiff and that the Defendants took or played no part in such issuance. The Defendants also say that there is no allegation by any of the Illegitimate Subscribers that they relied on the Audited Reports in subscribing to the Illegitimate RCPS. iii. The Defendants contend that the Plaintiff has no cause of action against them in respect of the tax liabilities. The ons. The audited reports were prepared based on financial information provided by the directors, and any tax provisions were merely estimates not tax consultancy work. In any event, the Plaintiff failed to submit its tax returns to the IRB on time and the Plaintiff is at liberty to appeal against the assessment. iv. The claim for audit fees refund from Sejati is misconceived as the Plaintiff had made the payment to Sejati which is an acknowledgement of audit work carried out by Sejati. If at all S/N 6o4I6BWd3UCp9zfddvMdig Sejati is unlicensed, that is a matter of complaint to the relevant professional body(ies). v. On the breach of statutory duties to other governing bodies, the Plaintiff has no locus to raise the same as that is a matter for the statutory/governing bodies. This is not a matter for a civil claim against the Defendants.

After filing the Defence, the Defendants took out the present application. They posed the following questions of law which they submit will determine the matter in its entirety.

The questions of law posed are: i. Whether the Plaintiff's claim vide the Statement of Claim ought to fail in limine for being too prolix and/or a jangled mass of complaints? ii. Whether the Plaintiff's claim vide the Statement of Claim ought to fail in limine by reason of the Defence of Limitation? iii. Whether the Plaintiff has any locus standi and/or basis to make a claim which is based on its own wrong where the Plaintiff is: S/N 6o4I6BWd3UCp9zfddvMdig a. The party who issued the "Illegitimate and/or Unlawful Fundraising Exercise" to the Illegitimate Subscribers; and b. The party who is responsible to submit its own tax returns and for its own tax liability for the alleged "RM 1,226,361.41 for the unsettled income tax and penalty payable to IRB"? iv. Whether the Plaintiff has any basis to claim based on alleged negligence when there is simply no legal nexus nor causation between any alleged breach of duty of care by the Defendants (which is in any event denied) in respect of the Audited Reports for the year ending 30 April 2015 and 30 April 2016 and the purported damage/losses caused to the Plaintiff to base any cause of action of negligence and/or any claim herein? v. Whether the Plaintiff is estopped from claiming for the refund of audit fees when the Plaintiff had paid the same into the accounts of the 4th Defendant ("Sejati") based on the Invoices by CK & Associates ("CK") (where the 1st to 3rd Defendants were partners at material time) whereas the Plaintiff acknowledges, Sejati was involved in assisting CK on the audit and ultimately CK accepts that the said Invoices were settled and there is no double billing? vi. Whether the purportedly breached statutory duties and/or duties of other governing bodies by Messrs CK & Associates S/N 6o4I6BWd3UCp9zfddvMdig alleged by the Plaintiff under the Companies Act 1965, common law, "International Standards Auditing 700 : Forming an Opinion and Reporting on Financial Statements", "International Standards on Auditing", "Private Entity Reporting Standards", "duty to report to Directors", "Duty to report to the Companies Commission of Malaysia" "Duties under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001" are actionable in the Civil Court and whether there is any civil liability for such purported breach of statutory duties (which are denied) which ought to be within the purview of the statutory/governing bodies concerned?; vii. Whether the criteria for a claim for exemplary and/or aggravated damages is met particularly when the Defendants also did not benefit monetarily from the audit work save for agreed fees and/or remuneration for work done?

categories involving the refund for the redeemable convertible preference shares, the liability of the Plaintiff to pay the tax to Inland Revenue Board and refund of audit fees.

The Defendants submit that the questions posed are suitable for determination under Order 14A and/or Order 33 of the Rules of Court 2012. The Defendants say that the facts are not in dispute and no trial is required to determine the facts in issue. The S/N 6o4I6BWd3UCp9zfddvMdig Defendants also submit that in the event the questions of law are determined in favour of the Defendants based entirely on the documentary evidence as well as the pleaded claim, the entire case against the Defendants will fall and the claim ought to be struck out.

why it ought to be determined in th conveniently summarised as follows. I. Question of Law 1 Whether the SOC is prolix, jumbled, and fails to plead material facts.

Order 18 Rule 7(1) of the Rules of Court 2012 as it is prolix and contains unnecessary evidence, arguments, narrative, as well as immaterial facts. The prolix SOC has oppressed and embarrassed the Defendants where the Defendants are prevented from putting forward an effective Defence.

The Defendants also submit that prolixity of the pleadings would deprive and/or affect a fair trial of the action as the Court would inevitably face difficulties in determining the material facts that constitutes the real questions in controversy and obscure the reality that the Plaintiff has no reasonable cause of action against the Defendants. S/N 6o4I6BWd3UCp9zfddvMdig II. Question of Law 2 Whether the claim is time-barred under Section 6 Limitation Act 1953.

The Defendants submit that the cause of action of the Plaintiffs is based on the Audit Reports that were tabled on 31 October 2016. The Plaintiff's claim for a refund of the audit fees of RM 19,344.40 is also time-barred because this payment was made to Sejati on 16 May 2016. Hence, the filing of the writ on 30 May 2023 is clearly beyond the 6-year limitation provided in Section 6(1)(a) Limitation Act 1953.

The Defendant submits that the appointment of the Liquidator of the Plaintiff does not postpone the limitation period in favour of the Plaintiff. III. Question of Law 3 & 4 Whether Plaintiff can show breach of duty and causation. Whether the Plaintiff has locus to sue.

The Defendants submit that even if there were indeed errors in the audit reports prepare not attributable to such errors. The issuance of the RCPS was declared illegal by the Court of Appeal vide Appeal Nos B-02(IM)- 2318-12/2021 and B- 02(IM)-2319-12/2021 because there was no prior approval by way of resolution by the Plaintiff company before the RCPS was issued. This is in breach of Section 75(1) of the Companies Act 2016. As a result, the Court of Appeal ordered that the sums invested by the Illegitimate Subscribers with the Plaintiff S/N 6o4I6BWd3UCp9zfddvMdig be restored to them by the Plaintiff pursuant to the specific provision of Section 75(4) of the Companies Act 2016.

In the premises, the Defendants submit that the Plaintiff cannot now shift the blame for such loss, if any, on the Defendants.

The Defendants also submit that in refunding the payments made for the RCPS, the Plaintiff has not suffered a loss. The Plaintiff is only refunding payments received to the Illegitimate Subscribers. The Plaintiff is not economically worse off by refunding the payments by virtue of the order of the Court of Appeal. As the Plaintiff has neither suffered any damage nor injury from the said refund, it follows that the Plaintiff has no standing to sue for the said loss.

Similarly, the imposition of tax liability arose from failure to submit tax returns pursuant to Section 77A(1) of the Income Tax Act 1967. There is no evidence that the imposition of the tax was predicated on the audit reports. The party liable for tax will be the directors of the Plaintiff and not the Defendants who merely provided the tax estimates. Hence, there is no causation between the alleged acts and/or omissions of the Defendants and failure of the Plaintiff to pay the tax imposed. S/N 6o4I6BWd3UCp9zfddvMdig IV. Question of Law 5 Whether Defendants are estopped from denying liability for audit fee refund.

The Defendants submit that the Plaintiff knew all along that Sejati was assisting CK in relation to the audit groundwork. On those premises, Sejati issued an invoice which was duly paid by the Plaintiff. After deducting expenses, the payment was remitted by Sejati to CK.

As the Plaintiff knew all along that payment to Sejati was meant for CK, the Plaintiff is now estopped from claiming the refund of the audit fees, and that too after a period of seven years since the payment was made. V. Question of Law 6 Whether alleged breaches of statutory duties by CK & Associates are actionable in civil court.

In reliance on precedent, the Defendants submit that breaches of professional/accounting regulatory standards do not automatically create civil causes of action. Such breaches may attract penal consequences or disciplinary action by relevant professional bodies where there is one. S/N 6o4I6BWd3UCp9zfddvMdig VI. Question of Law 7 Whether exemplary or aggravated damages are available. The Defendants submit that there is absence of any plea showing oppressive or arbitrary conduct by the Defendants which attracts an award of exemplary or aggravated damages. The pleaded facts do not demonstrate that there is conduct calculated to enable the Defendants to profit themselves.

During the course of oral submissions, Learned Counsel for the Plaintiff confirmed that the seven questions posed relate to the central theme of the claim. However, Learned Counsel submits that there are disputes of facts that requires the matter to proceed to trial.

The Plaintiff submit that the statement of claim ought not to be judged by its sheer length simply due to the reason that the facts needed to sustain the claim for the numerous breaches complained of needed to be set out in full. This was necessary to enable the Court to appreciate the detailed factual matrix of the claim.

As for limitation, the Plaintiff submits that the relevant date to determine this issue must be the date when the Liquidator discovered the breaches of duties or the negligence complained of. In this regard, reliance was placed on Section 6A of the Limitation Act 1953. The Plaintiff submits that the cause of action would have commenced at the earliest on 18 January 2019 when the Liquidator S/N 6o4I6BWd3UCp9zfddvMdig was appointed. Hence, this suit, filed in June 2023, is not barred by limitation.

On the issue of standing to sue, the Plaintiff submits that this is an issue of mixed law and facts. The question of breaches of duties by the Defendants is determined by whether or not the Defendants knew that the directors of the Plaintiff will rely on the unqualified audit reports that were the basis for the public to subscribe to the Illegitimate RCPS and the submission of the same to the tax authorities.

The Plaintiffs submit there is a legal nexus between the impugned audit reports prepared by the Defendants and the loss suffered by the Plaintiff. The Plaintiffs say that but for the acts and/or omissions of the Defendants, the Plaintiff would neither have to refund the subscription amounts in relation to the Illegitimate RCPS nor incur the tax liability.

As for the audit fees paid to Sejati, the Plaintiff submits that the Liquidator had twice requested CK to confirm any audit fees or invoices issued by CK and confirmed that nothing was owing. CK made no mention of Sejati receiving payments which is contrary to the stand taken by CK in the Defence. In the Defence, CK pleads that there was no double billing because the Plaintiff had paid the submits that this shift in position raises factual issues requiring trial, including why CK issued tax invoices if payment was to be made to S/N 6o4I6BWd3UCp9zfddvMdig role Sejati played in the audit for the relevant financial years despite CK signing the audit reports.

The Plaintiff contends that it is entitled to pursue a claim both under common law as well as breach of statutory duties.

As for aggravated and exemplary damages, the Plaintiff submits that this is a fact sensitive matter; entirely dependent upon the Court based on the conduct of the Defendants.

The position of law on Order 14A and Order 33 has been succinctly expounded in Petroleum Nasional Bhd v. Kerajaan Negeri Terengganu [2004] 1 MLJ 9. The Court of Appeal referred to Korso Finance Establishment Anstalt v. John Wedge (unreported, 15 Feb 1994, CA Transcript No. 14/387), where the English Court of Appeal laid down the following principles on the ambit of Order 14A as follows: i. An issue is "a disputed point of fact or law relied on by way of claim or defence". ii. A question of construction is well capable of constituting an issue. iii. If a question of construction will finally determine whether an important issue is suitable for determination under Order 14A and where it is a dominant feature of the case a court ought to proceed to so determine such issue. S/N 6o4I6BWd3UCp9zfddvMdig iv. Respondents to an application under Order 14A are not entitled to contend they should be allowed to hunt around for evidence or something that might turn up on discovery which could be relied upon to explain or modify the meaning of the relevant document. If these were material circumstances of which the court should take account in construing the document, they must be taken to have been known, and could only be such as were known, to the parties when the agreement was made. In the absence of such evidence the court should not refrain from dealing with the application. The whole case does not have to be disposed of. It is sufficient if substantial matters can be disposed of.

In the same case, the difference between an application under Order 14A and Order 33 was also explained as follows: party has no choice but to accept the risk, and the party is no longer entitled to the benefit of the ordinary process of law and the right to a trial. There is no distinction between as to who applies for such determination and who has not, otherwise the objective and purpose of those Orders will be defeated and will make a mockery of the procedure. With regard to this ground of the learned judge, with due respect we do not agree with it. Clearly it demonstrates the lack of appreciation of the scope and efficacy of Order 14A and Order 33 Rule 2 and the distinction between them. Under the former, the entire cause or matter need not be finally determined. It also permits any claim or issue herein to be so determined, but the question must be purely question of law or construction of document. And the S/N 6o4I6BWd3UCp9zfddvMdig latter caters not only for the question or issue of law arising in a cause or matter to be tried but also of fact or partly of fact and partly of law, and also the entire cause or matter need not be finally determined. In spite of the similarities between the two Orders there are also differences between them otherwise the former would not have been introduced into our civil procedure. It is to be stressed that under both Orders the court can direct the question or issue to be determined or tried without the need for any party having to apply for it and the court may on its own frame or reframe the question or issue for the purpose or recast the question or issue proposed by the applicant or subtract therefrom or add thereto other question or issue. These can be gathered from the provisions of the Orders itself. It is manifestly evident that the court has a wide discretion on the matter. What more in this case, where the applications are pitched under both Orders, the playing field within which for the learned judge to

Hence, when it is manifestly clear that when the Court is moved under Order 33, the Court has a wider discretion to consider questions posed to it and which questions involve an issue of mixed law and fact. I will add that where the question of fact may be determined on incontrovertible evidence placed before the Court, the Court ought to decide that question of fact based on such evidence.

I am also mindful that where a single question may determine the case as a whole, the Court need not answer every question posed to it. S/N 6o4I6BWd3UCp9zfddvMdig

I will take the question pertaining to causation first.

In determining the questions posed, the pleadings of the Plaintiff have to be analysed to determine what is the gravamen of the . In this regard, the following paragraphs of the statement of claim are, to my mind, pertinent.

The significant paragraphs in the statement of claim in this regard are from paras. 310 to 314. These paragraphs set out the thrust of seeks the various reliefs due to the alleged breaches of duty and/or negligence of the Defendants. H. DIRECT

By virtue of paragraphs 58 to 202 above, Plaintiff summarize that due to the negligence and breach of numerous duties from CK, they have rendered the

310.1 did not give a true and fair view of the financial affairs of Plaintiff;

310.2 had not been properly prepared in accordance with

310.3 had not been prepared in accordance with the relevant Financial Reporting Standards; S/N 6o4I6BWd3UCp9zfddvMdig 21 310.4 materially misstated and/or overstated by virtue of the draft audited report prepared by Adrian Yeo; and

310.5 falsely reflected that Plaintiff is a financially stronger company

By virtue of paragraphs 203 to 295 above, Plaintiff summarize that due to the negligence and breach of numerous duties from CK, they have rendered the

311.1 did not give a true and fair view of the financial affairs of Plaintiff

311.2 had not been properly prepared in accordance with PERS and CA 1965;

311.3 had not been prepared in accordance with the relevant Financial Reporting Standards;

311.4 materially misstated and/or overstated by virtue of the revenue records extracted from Customs;

311.5 falsely reflected that Plaintiff is a financially stronger company.

Had CK performed their duties in accordance with the standard required of a reasonably competent auditor and had not acted negligently and in breach of duties, CK would have: - S/N 6o4I6BWd3UCp9zfddvMdig 22 312.1 Warned the board of directors of Plaintiff that the financial statements: - a. did not give a true and fair view of the financial affairs of Plaintiff; b. had not been properly prepared in accordance with PERS and CA 1965; c. had not been prepared in accordance with the relevant Financial Reporting Standards; d. contained material misstatements.

312.2 Highlighted to the board of directors of Plaintiff that the income tax payable based on the fictitious revenue has far exceeded the actual income tax liable to be paid by Plaintiff for the years 2015 and 2016

312.3 Highlighted to the board of directors of Plaintiff that Plaintiff has failed to settle the income tax for the year 2015 and facing possibility to pay penalty imposed by IRB in 2016;

312.4 In the event the board of directors of Plaintiff refuse to take appropriate action, to issue a qualified audited report for both FYE 30.4.2015 and 30.4.2016 with a disclaimer on its disagreement with the board of directors of Plaintiff; S/N 6o4I6BWd3UCp9zfddvMdig 23 312.5 Report to CCM and/or BNM on the material misstatements contained in the financial statements.

Plaintiff pleads that due to the breach of duties and/or negligence from CK, both Audited Reports which prepared by CK had led to the following: -

313.1 The directors of Plaintiff misused the Audited Reports to misrepresent the public and/or investors that Plaintiff is a financially stronger company and is a worthwhile investment;

313.2 Consequently, the following: - a. Thirty-three (33) Investors invested a total sum of RM285,000.00 (Total investment of RM405,000.00 minus fund from Plaintiff itself of RM120,000.00) into Plaintiff by subscribing the RCPS; b. Thirty-nine (39) parties had invested a total sum of RM2,480,000.00 by subscribing the RCPS in Plaintiff via the Illegitimate and/or Unlawful Fundraising Exercise.

313.3 Plaintiff liable to pay higher income tax to IRB for the years 2015 and 2016 despite the revenue and profits were fabricated and/or fictitious;

313.4 In alternative, Plaintiff has failed to reserve sufficient funds to repay the income tax for the years 2015 as assessed by IRB; S/N 6o4I6BWd3UCp9zfddvMdig 24 313.5 Plaintiff has failed to settle the income tax for the year 2015.

Due to the above, Plaintiff was and is currently facing the following issues and/or litigation proceedings: -

314.1 Twenty-Eight (28) of the Illegitimate Subscribers had submitted proof of debt to the Liquidator of Plaintiff to claim for the sum of RM2,289,380.80 against Plaintiff;

314.2 The Liquidator of Plaintiff rejected the proof of debt filed by the Illegitimate Subscribers on the ground of illegality of the Illegitimate Agreements;

314.3 Vide Shah Alam High Court Post Winding-Up Application No. BA-28PW-5- - the Illegitimate Subscribers applied to the Winding Up Court to reverse the decision of the

314.4 On 16.11.2021, the learned High Court Judge dismissed PW-5;

314.5 Dissatisfied with the decision of the learned High Court Judge, the Illegitimate Subscribers filed an appeal to the Court of Appeal to appeal against the decision of the learned High Court Judge;

314.6 On 6.4.2023, the Court of Appeal allowed the Appeal and decided that Plaintiff is liable to refund the investment of total RM 2,289,380.80 to the Illegitimate Subscribers; S/N 6o4I6BWd3UCp9zfddvMdig 25 314.7 On 14.11.2022, the Liquidator of Plaintiff pplication for leave to appeal to Federal Court, which was subsequently dismissed by Federal Court on 6.4.2023 upon hearing the submissions from both parties;

314.8 As a conclusion of the litigation proceedings commenced by the Illegitimate Subscribers, Plaintiff is now liable to refund the total sum of RM 2,289,380.80 to the Illegitimate Subscribers and they are now be deemed as creditors of Plaintiff;

314.9 Apart from the above, pursuant to the two notices of assessment from IRB, Plaintiff is now liable to pay the income tax and penalty of total RM1,226,361.41 to IRB.

The reliefs sought against the Defendants in the statement of claim are: i. A declaratory order that 1st to 3rd Defendants had breached their duty of care to the Plaintiff and/or acted negligently in auditing the financial statements and issuing the unqualified Audited Reports for both FYE 30 April 2015 and 30 April 2016; ii. An order that the Defendants are jointly and severally liable to pay the sum of RM 1,226,361.41 for the unsettled income tax and penalty payable to IRB; S/N 6o4I6BWd3UCp9zfddvMdig viii. An order that the 4th Defendant to refund payment wrongfully made by Plaintiff to the 4th Defendant in respect of the professional audit service fees charged by the 4th Defendant, including but not limited to the sum of RM 19,344.40; and iv. Damages to be assessed against the Defendants, Aggravated and exemplary damages to be assessed against Defendants, Costs and Interest on sums awarded.

It will immediately be seen that while the loss to the Plaintiff is prefaced to two items, namely, the refund of payments to the Illegitimate Subscribers and the income tax payment as well as the penalty imposed by the IRB, the reliefs claimed relate only to refund of income tax and fees paid to Sejati. Losses in relation to the Illegitimate Subscribers are then to come under damages to be assessed.

Thus, and in any event, questions of law 3 and 4, that is, whether the Plaintiff can show breach of duty and causation and whether the Plaintiff has locus to sue will have a determinant factor on whether or not the matter ought to proceed to trial. Absent causation and/or locus, the Plaintiff will be unable to link the losses to the Defendants. Consequently, the Defendants are not to be held liable for the aggravated, thus, does not arise.

While ordinarily the issue of causation is to be decided in a trial of the action, in the present case, I am of the view that this issue may be decided on the affidavit evidence available. S/N 6o4I6BWd3UCp9zfddvMdig

In Wu Siew Ying t/a Fuh Lin Bud-Grafting Centre v. Gunung Tunggal Quarry & Construction Sdn. Bhd. & Anor [2011] 2 MLJ 1, the Federal Court held that: essential for him to prove among others that the injury caused to him was due to the defendant's negligence. There must be link between the wrongdoing and the damage caused. The burden of proving this link is upon the plaintiff (see: Bonnington Casting Ltd v. Wardlaw [1956] AC 613). In establishing this link between wrongdoing with injury there can be other possible causes. In such a situation, some courts have adopted the 'but for' test. Here the approach is not to identify all of the possible causes of a particular incident but focus on the effective cause of the resulting damage in order to assign responsibility for that damage caused. As confirmed by the authoritative text of Clerk & Lindsell on Tort (17th Ed) at paras 2 12, in majority of the cases this 'but for' test in practice operates well. But in situations where there are combined causes or several causes contributing to the wrongdoing then this 'but for' test may not be a satisfactory approach to determine causation.

In the present case, my task is made easier in that the causa causans is only the Audit Reports. Hence, I need only determine whether, but for the Audit Reports, would the Plaintiff suffer the losses it is claiming in the present action.

Causation is a question of law guided to some extent by common sense (see: Maybank Trustees Bhd (formerly known as Aseambankers Malaysia Bhd) v. Amtrustee Bhd & Ors and other appeals [2020] 4 MLJ 405). S/N 6o4I6BWd3UCp9zfddvMdig

I will take the first issue on the refund to the Illegitimate Subscribers. The Plaintiff submits that the refund was made because of the misstatements in the Audit Reports.

I disagree for two reasons.

First, having perused the judgment of the Court of Appeal, I find that the only reason the Court of Appeal ordered the refund of the money collected to the Illegitimate Subscribers was because the issuance of the RCPS was illegal and contravened Section 75 of the Companies Act 2016. There is nothing mentioned to show that the refund was due to the Audit Reports.

The judgment of the Court of Appeal, reported as Chong SH Hua & Ors v. Wong Weng Foo (sebagai pelikuidasi bagi Polyseed Sdn. Bhd. (dalam likuidasi)) [2022] MLJU 3446, held, as follows: S/N 6o4I6BWd3UCp9zfddvMdig

Second, in none of the Illegitimate Subscribers' affidavits in the action taken by them against the Plaintiff company for the refund was there any averment that the subscribers relied on the Audited Report as a basis for their investment in the Illegitimate RCPS.

Such being the case, on the evidence, I do not see how the Plaintiff is able to circumvent the judgment of the Court of Appeal and present viva voce evidence during trial to demonstrate that the Audit Reports are now the predominant or proximate cause for the Illegitimate RCPS. The Plaintiff is also disentitled to furnish evidence that there is some nexus between the Audit Reports and the Illegitimate RCPS. The findings of the Court of Appeal on this issue disentitle the Plaintiff from revisiting the same issue in the present action.

On the issue of payment of tax and the penalty, the sum of RM 1,226,361.41 was imposed by the IRB as a result of the Plaintiff's failure to submit the tax returns pursuant to Section 77A(1) Income S/N 6o4I6BWd3UCp9zfddvMdig Tax Act 1967. Due to the failure by the Plaintiff to submit the tax return, the Director General proceeded to assess the chargeable income based on his own estimation according to Section 90(3) of the Income Tax Act 1967 and imposed the penalty under Section 112(3) of the Income Tax Act 1967.

Section 77A(1) of the Income Tax Act 1967 reads as follows: 77A Return of income by every company, trust body or cooperative society

Every company, trust body or co-operative society shall for each year of assessment furnish to the Director General a return in the prescribed form within seven months from the date following the close of the accounting period which constitutes the basis period for the year of assessment.

Based on the notices issued by IRB, the penalty was due to the failure to comply with Section 77A(1). There is no evidence furnished that the Director General of IRB purportedly relied on the Audited Reports in the Notices of Assessments. Additionally, the Defendants are not tax consultants who handled the tax computation for the Plaintiff.

Given the Director General of IRB issued the assessment based on his own judgment of chargeable income and was not based on the Audited Report S/N 6o4I6BWd3UCp9zfddvMdig

In those circumstances, I do not see how the Plaintiff is able to link the tax assessment to the Audit Reports.

Based on my findings on those issues, it follows that the losses allegedly suffered by the Plaintiff on the Illegitimate RCPS and the tax payment as well as penalty are not related to the Audit Reports. Hence, any loss or damage concerning the Audit Reports must necessarily be related to the Audit Report per se.

As such, damages if any will arise when the Audit Report was tabled at the Annual General Meeting of the Plaintiff held on 31 October

This is where the issue of limitation becomes relevant.

show that the cause of action, premised upon the negligently prepared Audit Reports.

In this regard, parties are in agreement that the cause of action against the Defendants is on negligence. The negligence in question pertains to the acts and/or omissions of the Defendants arising from the contents of the audit reports prepared by the Defendants.

The audit reports were tabled at the Annual General Meeting of the Plaintiff on 31 October 2016. The audit fees were paid to Sejati on 16 May 2016. The Defendants submit that those are the dates when the cause of action arose. S/N 6o4I6BWd3UCp9zfddvMdig

The Plaintiff meanwhile says that the earliest date the cause of action could have arisen is when the Liquidator had knowledge of the breaches of duties and/or negligence of the Defendants. This knowledge was had on one of the following dates: i. 18 January 2016 when the Liquidator was appointed; OR ii. 25 March 2016 when the Liquidator received relevant documents from the Defendants; OR iii. Sometime in May 2023 when the Liquidator reviewed the audit reports concerned after having extracted the financial records submitted by the Plaintiff to the Royal Malaysian Customs Department.

In this regard, reliance was placed on Section 6A of the Limitation Act 1953.

I have no hesitation in rejecting the notion that the cause of action arose ONLY after the Liquidator had reviewed the audit reports. If such be the case, limitation period may never run until a Plaintiff in a negligence action has had time to review documents relied upon to commence an action. Limitation periods can then be extended ad infinitum much to the chagrin and prejudice of the Defendants. S/N 6o4I6BWd3UCp9zfddvMdig

As for Section 6A of the Limitation Act 1953, this is how the provision reads:

Notwithstanding subsection 6(1), this section shall apply to any action for damages for negligence not involving personal injuries, where the starting date for calculating the period of limitation under subsection (2) falls after the date on which the cause of action accrued.

An action to which this section applies shall not be brought after the expiration of three years from the starting date if the period of three years expires later than the period of limitation prescribed in subsection 6(1). ILLUSTRATION a) C bought a house from D in 2000. In 2010, C discovered a crack which damaged the walls badly. A building report made by a consultant revealed that the cracks had occurred in 2002, two years after C moved into the house. C has three years from 2010 to file an action in court against D for damages. b) C bought a house from D in 2000. In 2006, C discovered a crack which damaged the walls badly. A building report made by a consultant revealed that the cracks had occurred in 2002, two years after C moved into the house. C has three years from 2006 to file an action in court against D for damages. c) C bought a house from D in 2000. In 2005, C discovered a crack which damaged the S/N 6o4I6BWd3UCp9zfddvMdig walls badly. A building report made by a consultant revealed that the cracks had occurred in 2002, two years after C moved into the house. C has three years from 2005 to file an action in court against D for damages.

Notwithstanding subsection (2), no action shall be brought after the expiration of fifteen years from the date on which the cause of action accrued. ILLUSTRATION C bought a house from D in 2000. In 2017, C discovered a crack which damaged the walls badly. A building report made by a consultant revealed that the cracks had occurred in 2001, one year after C moved into the house. C cannot commence an action because he has already exceeded the fifteen-year limitation period.

For the purposes of this section-a) "starting date" means the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such action; b) "knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge of-i. the material facts about the damage in respect of which damages are claimed; S/N 6o4I6BWd3UCp9zfddvMdig ii. other facts relevant to the current action: A. that the damage was attributable in whole or in part to that act or omission which is alleged to constitute negligence; B. the identity of the defendant; and C. if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant, and iii. includes the knowledge which the plaintiff or any person in whom the cause of action was vested before him might reasonably have been expected to acquire-A. from facts observable or ascertainable by him; or B. from facts ascertainable by him with the help of appropriate expert advice which is reasonable for him to seek, but the plaintiff or the person in whom the cause of action was vested before him shall not be limited under this subparagraph to knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all S/N 6o4I6BWd3UCp9zfddvMdig reasonable steps to obtain and, where appropriate, to act on that advice.

Knowledge that any act or omission did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (4).

I have set out the reason why I do not find the Audit Reports to have caused losses pertaining to the Illegitimate RCPS or the tax liability of the Plaintiff. As such, losses, if any, on the Audit Reports are quantifiable only as general damages related to the negligence in preparing the allegedly erroneous Audit Reports. Such general damages arise on the date the Audit Reports were tabled and the cause of action will crystalise on the date of the tabling of the Audit Reports and not later. The cause of action vests in the Plaintiff on 31 October 2016. The Liquidator being appointed on a later date does not make a jot of a difference to the accrual of the right of action to the Plaintiff.

In any event, in the present case, the Liquidator also did not rely on any expert report before he concluded that there was negligence on the part of the Defendants sufficient for him to commence an action against them. Correspondingly, that would mean the Plaintiff was already in a position to commence action when the report was tabled on 31 October 2016. ection 6A of the Limitation Act 1953 is misplaced. There was nothing latent in the report that enabled the Plaintiff to rely on Section 6A of the Limitation Act 1953. S/N 6o4I6BWd3UCp9zfddvMdig

Even if the Plaintiff wished to rely on Section 6A of the Limitation Act 1953, it is imperative that the basis for such reliance is pleaded in the Reply to the Defence to enable the Court to consider the plea. The Plaintiff did not plead how and in what manner Section 6A applies in the Reply. Learned Counsel for the Plaintiff conceded that the submission on the applicability of Section 6A is a submission from the Bar. I therefore rejected that submission.

Hence, the period of limitation for a cause of action founded on the tort of negligence will be based on Section 6 of the Limitation Act 1953 which provides that a claim must be brought within 6 years from the date the cause of action arose.

Lastly, the claim for the refund audit fees. The cause of action for this claim is premised unmistakeably upon the law of contract.

Hence, the period of limitation for causes of action founded in contract will also be based on Section 6 of the Limitation Act 1953 which provides that a claim must be brought within 6 years from the date the cause of action arose.

In the present case, limitation sets in on 31 October 2022. The claim filed on 2 June 2023 is clearly beyond the six-year limitation period.

Given that the facts on which limitation may be assessed are clear, I see no reason why the same ought not be answered under the present application. S/N 6o4I6BWd3UCp9zfddvMdig

Following from the above, I find there is no necessity to consider the question of damages.

I will answer the questions in the following manner: i. Whether the Plaintiff has any basis to claim based on alleged negligence when there is simply no legal nexus nor causation between any alleged breach of duty of care by the Defendants (which is in any event denied) in respect of the Audited Reports for the year ending 30 April 2015 and 30 April 2016 and the purported damage/losses caused to the Plaintiff to base any cause of action of negligence and/or any claim herein? ANSWER: NEGATIVE ii. Whether the Plaintiff's claim vide the Statement of Claim ought to fail in limine by reason of the Defence of Limitation?

Given my findings on the two pivotal issues, I do not find the need to answer the other questions posed by the Defendants. S/N 6o4I6BWd3UCp9zfddvMdig

I , dismissed with costs. Dated the 3rd day of December 2025 -sgd-MUHAMMAD ADAM @ EDWARD BIN ABDULLAH Judicial Commissioner High Court (Commercial Division NCC 4) High Court of Kuala Lumpur In the Federal Territory, Malaysia Counsel for the Plaintiff : Muhillan Sivanathan together with Steven Tan Chee Qian, and Max Chuah Chern Tee Messrs. Chuah Qian & Partners Counsel for the Defendants : Justin Voon Tiam Yu together with Victor Pang Chee Siong Messrs. Justin Voon Chooi & Wing S/N 6o4I6BWd3UCp9zfddvMdig

Petroleum Nasional Bhd v. Kerajaan Negeri Terengganu [2004] 1 MLJ 9 2. Korso Finance Establishment Anstalt v. John Wedge (unreported, 15 Feb 1994, CA Transcript No. 14/387)

Wu Siew Ying t/a Fuh Lin Bud-Grafting Centre v. Gunung Tunggal Quarry & Construction Sdn. Bhd. & Anor [2011] 2 MLJ 1 4. Bonnington Casting Ltd v. Wardlaw [1956] AC 613 5. Maybank Trustees Bhd (formerly known as Aseambankers Malaysia Bhd) v. Amtrustee Bhd & Ors and other appeals [2020] 4 MLJ 405 6. Chong SH Hua & Ors v. Wong Weng Foo (sebagai pelikuidasi bagi Polyseed Sdn. Bhd. (dalam likuidasi)) [2022] MLJU 3446

Order 14A; Order 33; Order 33 Rule 2; Order 33 Rule 5; Order 92 Rule 4 and Order 18 Rule 7(1) of the Rules of Court 2012 2. Companies Act 1965 3. Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 4. Section 6(1)(a); Section 6A and Section 6 of the Limitation Act 1953 5. Section 75; Section 75(1) and Section 75(4) of the Companies Act 2016 6. Section 77A(1); Section 90(3); Section 112(3) of the Income Tax Act 1967 S/N 6o4I6BWd3UCp9zfddvMdig