XXXX v Ernst & Young (22NCC-431-03/2012)

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CONTRAIL SDN BHD (Company No.: 0146166-D)

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JOINT GLORY INTERNATIONAL LTD (Company No.: 290127)

BUKIT KIARA CAPITAL SDN BHD (Company No.: 490652-H)

OPTIMAL JOY LIMITED (Company No.: 1037919)

NEW FINANCE ASSETS LIMITED (Company No.: 501854)

ETERNAL SHINE INVESTMENTS LTD (Company No.: 1028682)

FAMOUS PALACE GROUP LTD (Company No.: 1027417)

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COSMOS ELECTRONICS (M) SDN BHD (Company No.: 164785-H)

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VELAPPAN PALANIAPPAN ...PLAINTIFFS

ERNST & YOUNG

TAN WHAI ONN (NRIC No. 600910-07-5001)

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SJ ASSET MANAGEMENT SDN BHD (in liquidation) (Company No. 223993-P) …DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] Before the court is an action brought by a group of investors seeking to recover substantial financial losses following the collapse of a licensed fund management company and the discovery of a massive shortfall in their trust assets due to a sophisticated fraud. The Plaintiffs have initiated this suit against the fund management company, its managing director, and an associated corporate vehicle for fraud, conspiracy, and breaches of fiduciary duties. More significantly, the Plaintiffs have also sued the fund manager’s statutory auditor for professional negligence and breach of statutory duties, alleging that the auditor’s failure to detect the irregularities and raise red flags during their audits caused the investors to unknowingly maintain their investments to their ultimate detriment. [2] In resolving this dispute, the court must grapple with several complex questions of law and fact. Foremost is the threshold legal issue of whether a statutory auditor owes a common law and/or statutory duty of care to third-party investors in a claim for pure economic loss, which necessitates an examination of proximity, direct reliance, and voluntary assumption of responsibility. Should such a duty exist, the court must evaluate whether the auditor breached the expected standard of care of a reasonable practitioner in the profession. The court is further tasked with determining whether the auditor’s acts or omissions were the effective legal and factual cause of the Plaintiffs’ losses, or if the true cause was the underlying fraud. Finally, the court must decide whether the Plaintiffs have sufficiently proven their damages, whether the primary perpetrators are liable for the misappropriation of the trust funds, and whether the investors’ claims are subject to any reductions for contributory negligence if liability is found against the auditor. BACKGROUND FACTS [3] The 4th Defendant, SJ Asset Management Sdn Bhd (In Liquidation) (“SJAM”) was a company incorporated in Malaysia. It was licensed by the Securities Commission of Malaysia (“SC”) as a fund manager pursuant to the Securities Industry Act 1983 (“SIA”) and, from 2007, under the Capital Markets and Services Act 2007 (“CMSA”). In the course of its business, SJAM managed the financial investments of its clients, comprising cash, securities, and other assets held through custodians on behalf of those clients. In most cases, the custodians held client assets on an omnibus basis, meaning that the assets of all SJAM clients were pooled together in a single client account at each custodian. [4] The managing director of SJAM was Tan Whai Onn, the 2nd Defendant in these proceedings. Tan Whai Onn had been assessed by the SC as a “fit and proper” person to act as a representative of a licensed fund manager. Annalong Corporation Ltd (“Annalong”), the 3rd Defendant, is an offshore company which maintained a client account with SJAM. Based on the evidence of BDO Governance Advisory Sdn Bhd (“BDO”), Tan Whai Onn was connected to Annalong and appears to have used the Annalong account as a vehicle for the fraud. [5] The Plaintiffs, who number thirty-five, consist of individuals and corporations who were clients of SJAM. They invested their funds with SJAM for the purpose of investment management. Their investments were managed as part of SJAM’s broader portfolio of client assets. [6] Before EY’s appointment, Arthur Andersen (“AA”) served as SJAM’s statutory auditor. In or around July 2002, AA dissolved and became a member firm of the EY network. EY was thereafter engaged to conduct statutory audits of SJAM pursuant to the Companies Act 1965 (“CA”) for the financial years ended 31.12.2002 to 31.12.2009 (“CA Audits”). In addition, EY was engaged to conduct review engagements pursuant to the SIA for the financial years ended 31.12.2002 to 31.12.2006 (“SIA Reviews”). The SIA Reviews involved carrying out agreed-upon procedures (“AUPs”) agreed between EY and SJAM to verify a checklist prescribed by the SC. Upon the SIA being repealed by the CMSA in 2007, the SIA Reviews were discontinued. EY carried out its CA Audit engagements under Malaysian Approved Standard on Auditing (“MASA”) and its SIA Review engagements involved carrying out all agreed AUPs. [7] In the course of its operations, SJAM maintained two sets of books and records. Discrepancies existed between statements generated from SJAM’s computer systems and hard-copy statements. Tan Whai Onn and others, including SJAM’s finance manager Tan Aik Heang, perpetrated a fraud involving the misappropriation of client funds over a period of many years. The Annalong account, which maintained unusual negative securities balances, appears to have functioned as a balancing-entry account used to conceal the diversion and dissipation of other clients’ funds. BDO has identified the possibility that the fraud began as early as 1993, when the Annalong account was first opened with SJAM. [8] The shortfall between the trust assets recorded by SJAM as being held on behalf of its clients and the actual trust assets confirmed by custodians grew substantially over the years. Based on BDO’s findings, the shortfall at the relevant financial year-end dates was as follows: Year-End Date Trust Assets per SJAM (RM) Actual Trust Assets (RM) Shortfall

31.12.2004 203,499,580 132,312,299 71,187,281 31.12.2005 116,947,633 28,601,966 88,345,667 31.12.2006 327,717,371 181,272,466 146,444,905 31.12.2007 337,702,185 196,696,185 141,006,000 31.12.2008 135,793,638 58,022,261 77,771,378 31.12.2009 203,054,695 92,925,259 110,129,436 [9] BDO determined that the Annalong account carried a total negative balance of USD22.7 million as at June 2010. Of that amount, only USD5.2 million was withdrawn from the Annalong account from 2003 onwards. The remaining USD17.5 million was therefore withdrawn before 2003, i.e., during the period when AA was SJAM’s statutory auditor and before EY’s first engagement. Accordingly, the shortfall of RM71,187,281 as at 31.12.2004, when EY had already commenced its first CA Audit, had predominantly been accumulated prior to EY’s appointment. [10] The SC conducted regulatory examinations of SJAM pursuant to its powers under the Securities Commission Act

An examination was conducted in approximately 2002 or early 2003. A more intensive on-site examination was thereafter conducted from 12.8.2009 to 11.9.2009, spanning seventeen days, during which the SC had access to SJAM’s books, records, and personnel. Fraudulent transactions are known to have taken place during the period of the SC’s second examination. No irregularities were reported to have been detected as a result of either examination. [11] BDO commenced an on-premises examination of SJAM on 21.4.2010, initially reviewing custodian statements from 2006 to 2007, sample client account agreements, and audited accounts. BDO encountered difficulties in obtaining the documents it required. Tan Whai Onn was uncooperative and exchanges were described as involving “strong words.” BDO exited SJAM’s office on 13.5.2010, approximately three weeks into the examination, as SJAM represented that the documents requested were not readily available. BDO reported its difficulties to the SC. BDO agreed to give SJAM three months to furnish the requested documents. [12] On 27.6.2010, a director of SJAM, Dato’ Kamaruddin bin Hamzah, lodged a police report against Tan Whai Onn. Following that police report, the SC imposed conditions and restrictions on SJAM’s activities on 29.6.2010, prohibiting it from soliciting new mandates and requiring it to maintain all records. The SC issued a notice to SJAM to show cause. SJAM’s solicitors, Messrs Raja, Darryl & Loh, replied by letter dated 19.7.2010 stating, amongst other matters, that Tan Whai Onn was the sole licensed representative dealing with SJAM’s clients’ accounts and that SJAM had decided it was not possible to continue in business. On 23.7.2010, the SC revoked SJAM’s licence under section 72(2) of the CMSA with immediate effect. On 28.7.2010, the Kuala Lumpur High Court appointed Dato’ Gan Ah Tee and Mok Chew Yin of BDO as provisional liquidators of SJAM by order in Winding-Up Petition No. D28NCC-579-2010. A winding-up order was made on 14.10.2010. Tan Whai Onn thereafter absconded and his whereabouts remain unknown. [13] Following SJAM’s winding-up, BDO prepared a report dated 6.3.2017 on the losses incurred by the Plaintiffs (“BDO Loss Report”) based on SJAM’s internal records. The Plaintiffs retained Dato’ Jeyaraj Ratnaswamy of MustaphaRaj Sdn Bhd (“MRSB”) as their expert auditor witness. EY retained Mr Kon Yin Tong of Foo Kon Tan LLP as its independent expert. The present suit was commenced on 23.3.2012. The Plaintiffs filed an Amended Statement of Claim (“ASOC”) dated 13.9.2016. EY filed a Re-Amended Defence dated 17.11.2020. RESPECTIVE PARTIES’ PLEADED CASES AND RELIEFS SOUGHT Plaintiff’s case [14] The Plaintiffs’ case against EY, as pleaded in the ASOC, rests on the following propositions. EY, as the statutory auditor of SJAM under the CA and as the SIA reviewer under the SIA and the Securities Industry (Licensing) Regulations 1996 (“SIA Regulations 1996”), owed the Plaintiffs an express and/or implied duty of care and/or a statutory duty not to do any act or omit to do any act the doing or omission of which could foreseeably affect the Plaintiffs and result in damage or loss. [15] The Plaintiffs contend that there was the requisite proximity between EY and the Plaintiffs, arising from: a) the vulnerability of the Plaintiffs as investors whose accounts were held by custodians on an omnibus basis; b) the purpose for which the audit reports were made, which was to protect investors’ interests; c) the fact that the Plaintiffs formed a determinable and ascertainable class; and d) the reliance by the Plaintiffs on, and the assumption of responsibility by, EY through its statutory audits. [16] The Plaintiffs further contend that EY had knowledge or ought to have known that SJAM’s clients would rely on EY to carry out its duties with the appropriate levels of care, skill, diligence, and professionalism, and that those clients would suffer loss as a consequence of any negligence in EY’s conduct. [17] The Plaintiffs allege that EY breached its duties by, amongst other things: failing to adhere to applicable auditing standards; failing to appreciate the higher fraud risk attributable to owner-management dominance in SJAM; failing to audit or verify revenue items in SJAM’s balance sheet; failing to conduct external confirmation procedures with custodians; failing to properly assess going concern; and failing to detect the fraud conducted through the Annalong account. [18] The Plaintiffs claim that they passively and indirectly relied on the unqualified nature of EY’s audit reports and continued to maintain their investments in ignorance of the fraud as a result of EY’s failure. [19] The Plaintiffs claim damages of RM54,858,394 for the 1st to 34th Plaintiffs (the 35th Plaintiff is already deceased), alternatively such sum as the court may assess. [20] The Plaintiffs’ case against SJAM, as pleaded, is that SJAM as trustee and fund manager owed the Plaintiffs a fiduciary duty to manage and deal with their funds and investments in their interests, which duty SJAM breached by the misappropriation of client funds. EY’s case [21] EY’s pleaded defence, as contained in its Re-Amended Defence dated 17.11.2020, is that it owed no duty of care or statutory duty to the Plaintiffs. EY avers that its audit reports were addressed solely to SJAM’s members as a body for the purpose of reporting on SJAM’s financial statements and expressly disclaimed responsibility to any third parties including SJAM’s clients. EY denies any assumption of responsibility towards the Plaintiffs. [22] EY further avers that the Plaintiffs did not read or rely on EY’s reports in making their investment decisions. EY denies that it breached the applicable standard of care, and asserts that its work complied fully with MASA. EY denies causation, contending that the Plaintiffs’ losses were caused by the fraud of SJAM’s management and not by any act or omission of EY. [23] EY further pleads that the Plaintiffs have failed to prove their damages. In addition, EY raises as separate defences: a) limitation under section 6 of the Limitation Act 1953 in respect of causes of action relating to engagements prior to and including the financial year ended 31.12.2004; and b) contributory negligence by the Plaintiffs. Other defendants [24] In its defence, SJAM denies liability to the Plaintiffs, asserting that the massive shortfalls and misappropriation of Trust Assets were entirely orchestrated by its Managing Director, Tan Whai Onn, and his associated corporate vehicle, Annalong. SJAM emphasises that its Liquidators have already successfully obtained a final default judgment against both Tan and Annalong for their fraudulent actions, conspiracy, and breaches of fiduciary duties. Furthermore, SJAM alleges that EY's breach of its auditing duties prevented the early detection of the fraud, and therefore seeks full indemnity or contribution from EY and the other defendants should the court hold SJAM liable for the investors' losses. [25] SJAM appeared through its solicitors throughout the proceedings but did not file written submissions and did not advance any oral submissions at the hearing. [26] Tan Whai Onn and Annalong did not enter appearances, did not file defences, and were not present or represented at the trial. WITNESSES [27] Four witnesses appeared for the Plaintiffs as follows: a) PW1 is Tan Chin Yong, the 5th Plaintiff in this suit, who is testifying on behalf of all 35 Plaintiffs as an appointed Executive Committee member. His testimony mainly concerns the Plaintiffs’ reliance on the “clean and unqualified” statutory and regulatory audit reports prepared by EY, when entrusting their funds to SJAM, and EY’s severe breaches of its duties by failing to adequately audit SJAM’s operations, verify the trust assets held by custodians, or detect the massive fraud perpetrated by SJAM’s managing director, Tan Whai Onn, who utilised the Annalong account to conceal significant shortfalls. He also testified that as a result of the Plaintiffs’ passive and indirect reliance on EY’s negligent audits, they remained ignorant of the ongoing deceitful practices, suffered a massive trust asset shortfall totaling RM55,779,093.00 as tabulated in the BDO Loss Report, a document prepared by SJAM’s liquidators on 6.3.2017 to quantify the Plaintiffs’ total shortfall in trust assets at RM55,779,093 based on SJAM’s internal records, and would not have continued investing their funds via SJAM had EY raised any red flags or uncovered the fraud earlier. b) PW2 is Datuk Tong Nguen Khoong, also known as “Dennis”, the 12th Plaintiff in this suit. His testimony mainly concerns addressing issues raised by EY’s expert, Mr Sajjad A Akhtar, regarding SJAM’s investments in Vietnamese assets and Megaworld securities, which comprised stocks in the Philippine property developer Megaworld Corporation (the 33rd Plaintiff) and its affiliates Alliance Global Group and Empire East Land Holdings. He clarified that he and other linked plaintiffs were merely passive investors who used SJAM as a single fund manager to manage their investments, and asserted that this legal action was initiated against EY for breaching its duty of care by failing to discover the fraud perpetrated within SJAM. He also testified that if EY had raised any red flags earlier, the Plaintiffs would not have continued investing via SJAM, and he verified various Investment Services Agreements for himself and several related corporate plaintiffs. He maintained that the Plaintiffs suffered a massive shortfall in their Trust Assets totaling RM55,779,093.00 as tabulated in the liquidator’s BDO Loss Report. c) PW3 is Mok Chew Yin, an Executive Director at BDO and the court-appointed joint liquidator for SJAM. His testimony mainly concerns the preparation and findings of the BDO Loss Report and the BDO Report on Irregularities, which uncovered a massive RM119.4 million shortfall in SJAM’s Trust Assets as of July 2010, and demonstrated how Annalong’s account was fraudulently used as a “balancing entry account” to conceal the missing client securities through significant negative balances. He also testified that BDO’s agreed scope of work was strictly limited to tabulating these shortfalls and highlighting Annalong’s modus operandi rather than conducting a full forensic reconstruction of the fraud or investigating specific investment anomalies raised by EY, and that BDO had successfully obtained a civil judgment in default in Kuala Lumpur High Court Suit No. D-22NCC-221-2011 against SJAM’s managing director, Tan Whai Onn, and Annalong for the misappropriated funds. d) PW4 is Dato’ Jeyaraj Ratnaswamy, a Chartered Accountant and the Plaintiffs’ appointed expert auditor witness. His testimony mainly concerns his critical assessment of EY’s statutory and SIA audit work for SJAM, wherein he opined that EY failed to conduct their engagements in a “professionally expedited manner” by failing to exercise appropriate professional skepticism, failing to independently obtain external confirmations from custodian banks, and missing clear red flags that could have exposed the massive fraud concealed within the Annalong account. He also testified that he did not actually review EY’s audit working papers before forming his opinions, admitted that he assessed EY’s work against his own standard rather than MASA, and acknowledged that EY’s audit reports contained express disclaimers of responsibility to third parties. [28] Three witnesses appeared for EY as follows: a) DW1 is Mr Kon Yin Tong, the Managing Partner of Foo Kon Tan LLP and the independent expert witness called by EY. His testimony mainly concerns his review of EY’s audit working papers to evaluate whether EY met the standard of care under MASA, his rebuttal of the criticisms raised by the Plaintiffs’ expert (Dato’ Jeyaraj), and his conclusion that EY was strictly engaged to perform a statutory audit of SJAM’s corporate financial statements, not a fund audit of the client trust assets where the actual fraud occurred. He also testified that EY acted diligently, obtained sufficient appropriate audit evidence, and properly executed all agreed-upon procedures, while explaining that the massive fraud perpetrated by SJAM’s management was highly sophisticated, inherently difficult to detect during a standard audit, and actively concealed from EY using carefully forged third-party custodian statements. b) DW2 is Wong Kang Hwee, a retired audit partner at EY who served as the engagement partner for the statutory audits and SIA Reviews of SJAM for the financial years ended 2002 to 2007. His testimony mainly concerns the strict limitations and scope of EY’s engagements, emphasizing that EY was solely appointed to audit SJAM’s own corporate financial statements and perform specific agreed-upon procedures for the SC, rather than conducting a fund audit of the client trust assets or investigating potential fraud within the third-party custodial accounts. He also testified that EY owed no duty of care to the Plaintiffs because the audit reports contained express disclaimers against third-party reliance, that his team had no knowledge of or reason to suspect the massive fraud concealed through the Annalong account, and that the key documents revealing the shortfalls were entirely outside the scope of EY’s mandated work. c) DW3 is Choong Mei Ling, a retired partner at EY who served as the engagement audit partner for the statutory audits of SJAM for the 2008 and 2009 financial years. Her testimony mainly concerns the strictly limited scope of EY’s engagements, emphasising that EY was mandated solely to audit SJAM’s own corporate financial statements for the benefit of its shareholders, and was never engaged to conduct a fund audit of client trust assets, review third-party custodial accounts, or investigate and detect fraud. She also testified that EY owed no duty of care or responsibility to the Plaintiffs because the audit reports contained express disclaimers against third-party reliance, and that her engagement team performed their duties properly without any knowledge of the massive fraud, as the specific client portfolio documents revealing the Annalong account’s negative balances fell entirely outside the scope of their statutory audit work. ISSUES TO BE TRIED [29] The parties filed a Statement of Agreed Issues to be Tried dated 2.10.2023, identifying eleven issues for the court’s determination. These are stated verbatim as follows: a) Issue 1: Whether the 1st Defendant owed an express and/or implied duty of care and/or statutory duty to the Plaintiffs as set out in paragraphs 21(B), 22, 23, 24, and 25 of the Amended Statement of Claim dated 13.9.2016 (“Amended Statement of Claim”)? b) Issue 2: Whether the 1st Defendant would have had, or ought to have ensured that it had, full and unrestricted access to all accounting and other material records of the 4th Defendant in the manner pleaded in paragraphs 27 and 28 of the Amended Statement of Claim? c) Issue 3: Whether the 1st Defendant had knowledge or ought to have known that (a) the clients of the 4th Defendant would rely on the 1st Defendant to carry out its duties and obligations with appropriate care, skill, diligence and professionalism; and (b) the clients of the 4th Defendant would suffer loss as a result of any negligence, fraud or irregularity in the conduct of the 4th Defendant’s licensed fund management business, as pleaded in paragraph 29 of the Amended Statement of Claim? d) Issue 4: Whether the audit reports pursuant to the Companies Act (“CA Audit Reports”) and the review reports pursuant to the Securities Industry Act 1983 (“SIA Review Reports”) were prepared for specific statutory purposes as specified in paragraph 5 of the 1st Defendant’s Re-Amended Defence dated 17.11.2020 (“1st Defendant’s Re-Amended Defence”)? e) Issue 5: Whether the Plaintiffs passively and/or indirectly relied upon the clean and unqualified nature of the CA Audit Reports, SIA Review Reports and SIA Supplementary Statements over the relevant financial years as pleaded in paragraph 30(l) of the Amended Statement of Claim, and if so, whether such reliance was unreasonable as pleaded in paragraph 14 of the 1st Defendant’s Re-Amended Defence? f) Issue 6: Whether, as a result of the 1st Defendant’s alleged failures as pleaded in paragraph 30(II) of the Amended Statement of Claim, the Plaintiffs remained ignorant of the alleged pervasive fraud and/or continued to instruct the 4th Defendant to make fresh investments in ignorance of the alleged fraud as pleaded in paragraph 30(IV) of the Amended Statement of Claim? g) Issue 7: Whether the 1st Defendant

breached its duties and obligations as pleaded in paragraphs 31.1 to 31.5 of the

can be held liable for negligence for failing to detect the alleged fraud on the trust funds managed by the 4th Defendant in circumstances where the alleged fraud was concealed by collusion within the 4th Defendant’s management and/or where both the SC and BDO were unable to detect such alleged fraud when examining the 4th Defendant’s books and records, as pleaded in paragraphs 14A to 14D of the 1st Defendant’s Re-Amended Defence? h) Issue 8: Whether the Plaintiffs invested with the 4th Defendant in reliance on the fact that the 4th Defendant was investigated and licensed by the SC, and not in reliance on the CA Audit Reports or the SIA Review Reports, as pleaded in paragraph 14 of the 1st Defendant’s Re-Amended Defence? i) Issue 9: Whether the Plaintiffs suffered loss and damage arising from the alleged breach of the duty of care and/or statutory duty by the 1st Defendant as pleaded in paragraph 32 of the Amended Statement of Claim?

9.1: To the extent that the Plaintiffs suffered loss and damage as alleged, whether such loss and damage was caused by the 1st Defendant or fell within the 1st Defendant’s scope of duty to avoid or prevent, as denied in paragraph 37 of the 1st Defendant’s Re-Amended Defence?

9.2: To the extent that the Plaintiffs incurred loss and damage as alleged, whether such loss and damage was caused or contributed to by their own negligence as pleaded in paragraph 15 of the 1st Defendant’s Re-Amended Defence? j) Issue 10: Whether the Plaintiffs’ claims in respect of the 1st Defendant’s engagements prior to and including the financial year ended 31.12.2004 are statute-barred under the Limitation Act 1953 as pleaded in paragraph 16 of the 1st Defendant’s Re-Amended Defence? k) Issue 11: Whether, in view of the possibility that other clients of the 4th Defendant besides Annalong may have been involved in the alleged fraud, the Plaintiffs are not entitled to any damages absent strict proof of the fact and amount of investments made and/or funds deposited with the 4th Defendant and the quantum of loss allegedly suffered by each Plaintiff, as pleaded in paragraph 17 of the 1st Defendant’s Re-Amended Defence? [30] Notwithstanding the above issues, from the facts of the case, defences relied on by EY and the submissions of parties, the court frames the following main issues for deliberation which this court considers pivotal to the resolution of this case. a) Whether EY owed the Plaintiffs as clients of SJAM a duty of care at common law or under statute. b) Whether EY has assumed responsibility to SJAM’s clients so as to give rise to a duty of care owed to the Plaintiffs. c) Whether the Plaintiffs have established sufficient reliance on EY’s audit reports to satisfy the proximity requirement for a duty of care in a claim for pure economic loss. d) Whether this court ought to adopt and apply the concept of “vulnerability” in determining the existence of a duty of care for pure economic loss so as to justify the imposition of such a duty on EY in the circumstances of this case. e) Whether the CA, the SIA, and the SIA Regulations 1996 confer upon the Plaintiffs an independently actionable statutory right against EY for breach of statutory duty. f) Whether the Plaintiffs have discharged their legal burden of proving that EY breached the applicable standards on auditing in the conduct of its statutory audit. g) Whether, if EY owed and breached a duty of care, the Plaintiffs have established on the evidence that, but for EY’s alleged breach, they would have avoided their losses. h) Whether the Plaintiffs have discharged their burden of proving their alleged losses of RM 54,858,394. [31] The court’s analysis will be structured on the framed issues above. The Issues to be Tried as filed will be revisited for determination upon the court’s findings being made on the issues above framed by this court. ANALYSIS AND FINDINGS OF THE COURT Preliminary Observations [32] This case raises fundamental questions about the scope of an auditor’s duty to third parties in the context of a sophisticated and long-running fraud. The court has considered the evidence over twenty-seven days of trial and comprehensive written submissions from both the Plaintiffs and EY. Having weighed all the evidence and submissions, the court finds in favour of EY on all four substantive grounds: duty of care, standard of care and breach, causation, and damages. Ground 1: Duty of Care The Applicable Legal Test [33] The Plaintiffs submit that EY owed them a duty of care both at common law and by statute. EY disputes this entirely. The legal test applicable in Malaysia for determining whether a duty of care exists is well-settled. The foundational authority is Caparo Industries plc v Dickman [1990] 2 AC 605, a decision of the House of Lords constituted by Lord Bridge of Harwich, Lord Roskill, Lord Ackner, Lord Oliver of Aylmerton, and Lord Jauncey of Tullichettle. Lord Bridge stated the governing principle in the following terms, at pp 617–618: “What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.” [34] This three-fold test - requiring (i) foreseeability of damage;

(ii) a relationship of proximity between the parties; and (iii) that it be fair, just, and reasonable to impose a duty - has been consistently adopted and applied by the Federal Court of Malaysia. It was affirmed in Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon & Ors [2006] 2 CLJ 1 (Federal Court), in The Co-operative Central Bank Ltd v KGV & Associates Sdn Bhd [2008] 2 CLJ 545 (Federal Court, per Alauddin Mohd Sheriff CJ (Malaya), Arifin Zakaria FCJ, and Hashim Yusoff FCJ), and in Lok Kok Beng & Ors v Loh Chiak Eong & Anor [2015] 7 CLJ 1008 (Federal Court). The three-fold test represents the controlling test in this jurisdiction, and it is by reference to this test that the Plaintiffs’ claim against EY must be evaluated. [35] The Federal Court has consistently emphasised that where, as here, the claim is for pure economic loss - that is, financial loss not flowing from personal injury or damage to property - a more stringent approach to the imposition of a duty of care is required. This principle was stated by the Federal Court in Lok Kok Beng, and was expressly reaffirmed and applied by the Federal Court in Pushpaleela R Selvarajah & Anor v Rajamani Meyappa Chettiar & Other Appeals [2019] 3 CLJ 441, at paragraph 94, in the following terms: “The most difficult ingredient to prove in establishing a duty of care is the requirement of sufficient proximity between the claimant and the defendant. The court would have to look at the closeness of the relationship between the parties and other factors to determine sufficient proximity based on the facts and circumstances of each case. These factors are likely to vary in different categories of cases. The fact that damages sought by the claimant is pure economic loss not flowing from personal injury or damage to the property is also a factor to be considered. As has often been acknowledged, a more restricted approach is preferable for cases of pure economic loss. As such, the concepts of voluntary assumption of responsibility and reliance are seen as important factors to be established for purposes of fulfilling the proximity requirement. The reason for a more stringent approach taken in the claims involving pure economic loss is because such loss might lead to an indeterminate liability being imposed on a particular class of defendants, thus leading to policy issues.” [36] The claims advanced by the Plaintiffs in this action are unequivocally for pure economic loss. They seek damages representing the value of investment assets placed with SJAM, a claim which does not rest upon any personal injury or damage to tangible property. The more stringent approach mandated by the Federal Court therefore applies in its full rigour. [37] The rationale for this heightened stringency is rooted in the concern, long acknowledged in the common law, that negligence liability for pure economic loss carries the risk of exposing defendants to liability that is indeterminate as to amount, as to time, and as to the class of persons affected. This concern was classically articulated by Cardozo J, delivering the judgment of the Court of Appeals of New York in Ultramares Corporation v Touche (1931) 255 NY 170, in the specific context of accountants’ liability: “If liability for negligence exists, a thoughtless slip or blunder, the failure to detect a theft or forgery beneath the cover of deceptive entries, may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class.” [38] This warning has been consistently acknowledged in Malaysian jurisprudence and was expressly incorporated into the analysis of the House of Lords in Caparo itself. Lord Bridge, at p 621 of the report, observed that to hold an accountant liable to any person who chose to rely on publicly available accounts would be “to subject him, in the classic words of Cardozo CJ to ‘liability in an indeterminate amount for an indeterminate time to an indeterminate class’: see Ultramares Corporation v Touche (1931) 174 NE 441,

444.” The policy concern thus identified provides the principled basis upon which the law has declined to extend the duty of care of auditors to the world at large, and it is a concern that is fully engaged on the facts of the present case. [39] In cases involving auditors and third parties who have suffered pure economic loss, the essential touchstone for establishing the requisite legal proximity is the existence of a “special relationship” between the auditor and the third party. That special relationship, in turn, requires two cumulative elements to be satisfied: (a) that the auditor specifically assumed responsibility towards the third party; and (b) that the third party actually and reasonably relied upon the auditor’s work. The rationale for insisting upon both elements is one of policy as much as principle. If a duty of care were to arise wherever a professional’s advice or report might foreseeably come to the attention of a third party, the consequences for professionals would be severe and unjust. As the Federal Court of Malaysia stated in KGV & Associates, at paragraph 34, quoting Griffiths LJ in Smith v Eric Bush [1990] 1 AC 831: “It would impose an intolerable burden upon those who give advice in a professional or commercial contract if they were to owe a duty not only to whom they give the advice but to any other person who might choose to act upon it.” [40] The Plaintiffs have put in issue both elements of the special relationship, alleging that EY assumed responsibility towards them and that they relied on EY’s audit work. EY denies both allegations. The analysis that follows addresses each element in turn against the evidence adduced at trial. Assumption of Responsibility [41] The Plaintiffs submit that EY assumed responsibility to the Plaintiffs as clients of SJAM because EY was aware, or ought to have been aware, that its audit reports would be made available to SJAM’s investors and that those investors would rely on those reports. The Plaintiffs invoke the assumption of responsibility test adopted in Hedley Byrne & Co v Heller [1964] AC 465, a decision of the House of Lords, and applied in subsequent House of Lords cases including White v Jones [1995] 2 AC 207 and Spring v Guardian Assurance [1994] 3 All ER 129. In White v Jones, Lord Browne-Wilkinson acknowledged “assumption of responsibility” in the law of negligence to extend to cases of “special relationships” between the parties, holding that in cases where a special relationship exists, the defendant is assumed to have a duty to be careful in circumstances where, apart from such relationship, no duty of care would exist. [42] The Plaintiffs further argue that reliance is not a necessary requirement or ingredient for the imposition of such a duty, relying on the pronouncements of Lord Browne-Wilkinson in White v Jones and the decision in Hines v King Sturge LLP [2010] CSIH 86 (Court of Session, Inner House), and that the intention of the defendant to assume responsibility is irrelevant, relying on Yue Xiu Finance Co Ltd v Dermot Agnew [1996] 1 HLKR 137. The Plaintiffs also invoke the SC’s guideline titled “Guidelines on Compliance Function for Fund Managers,” which provides at paragraph 7.03(a)(ii) that a fund manager shall disclose or make available to clients information on the financial condition of its business, and contend that this guideline reinforces EY’s assumption of responsibility towards the Plaintiffs. [43] EY submits that there was no assumption of responsibility to the Plaintiffs whatsoever. None of the Plaintiffs contracted with, communicated with, or received any representations from EY. EY’s engagement letters with SJAM and its audit reports contained express disclaimers of responsibility to any third party, including SJAM’s clients. The fact that SJAM might make its audited accounts publicly available, or that SJAM was subject to regulatory obligations to provide information to its clients, cannot convert EY’s statutory engagement into one that carried responsibility to SJAM’s entire client base. EY submits that a disclaimer of responsibility negatives an assumption of responsibility. [44] The court finds in favour of EY on this issue. The principle that a duty of care requires the defendant specifically to have assumed responsibility to the plaintiff is squarely established in the Malaysian authorities. The Federal Court in The Co-operative Central Bank Ltd v KGV & Associates Sdn Bhd accepted the five general observations set out in the speech of Bingham LJ in Her Majesty’s Commissioners of Customs and Excise v Barclays Bank plc [2007] 1 AC 181 (House of Lords), which included the observation that the assumption of responsibility test must be applied objectively and is not based on what the defendant thought or intended. In applying that test to the particular facts of each case, the Federal Court through Justice Alauddin Mohd Shariff CJ Malaya (as His Lordship then was) held that “the ultimate question is whether the detailed facts and circumstances of the case support the finding of a duty of care.” Mere foreseeability that third parties might read an auditor’s reports and might be influenced by them is insufficient. If it were sufficient, then the auditors of every public company whose accounts are publicly available at the Companies Commission of Malaysia would owe a duty of care to the world at large, a proposition that has never been and could never be accepted. As Lord Bridge stated in Caparo, the purpose of annual accounts is to enable shareholders as a body to exercise their class rights in relation to the management of the company, and “the statutory requirement for the audit of company accounts has no relation whatever to any question whether a potential investor is entitled to rely on the audited accounts for the purpose of deciding whether to buy shares.” [45] The evidence of EY’s assumption of responsibility is unambiguous. EY’s audit reports stated that EY’s responsibility was to report its opinion to the members of SJAM as a body and for no other purpose. Dato’ Jeyaraj Ratnaswamy (PW4), the Plaintiffs’ own expert witness, acknowledged these disclaimers in cross-examination. When asked “So, EY expressly and in writing never accepted that it would be responsible to third parties like SJAM’s clients, yes?”, Dato’ Jeyaraj answered: “Yes, that’s correct.” Dato’ Jeyaraj further acknowledged that any member of the public reading the audit report would know that they could not rely on it. When it was suggested to him: “What I’m suggesting to you is that any member of the public reading the audit report and reading EY’s words at page 131, they will know that they cannot rely on the audit report. That’s the point I’m making,” Dato’ Jeyaraj responded: “Ok. They ought to know.” Dato’ Jeyaraj also accepted that EY’s legal responsibility under the CA was to report to the members of SJAM, that none of the Plaintiffs was a member of SJAM, and that EY therefore did not prepare its audit reports for SJAM’s clients. These concessions from the Plaintiffs’ own expert are decisive against a finding of assumption of responsibility. The position is no different from that in Hedley Byrne, where, as is evident from the authorities cited by the Plaintiffs themselves, the House of Lords held that but for the endorsement with the words “without responsibility” which negatives an assumption of responsibility, the defendants would have been liable. [46] The SC’s guidelines on compliance for fund managers impose obligations on SJAM as the fund manager to make information available to its clients. They say nothing about the auditor’s responsibility to those clients. Paragraph 7.03(a)(ii) of the Guidelines on Compliance Function for Fund Managers provides that a fund manager shall “disclose or make available to clients, information on the financial condition of its business.” This provision operates to regulate the conduct of the fund manager, not the auditor. Compliance with those guidelines remained SJAM’s responsibility, not EY’s. The argument that such guidelines give rise to a duty of care on the part of EY towards SJAM’s clients is a non sequitur. A coexisting duty on EY towards the Plaintiffs cannot be inferred from a regulatory obligation imposed on SJAM. The fact that EY was aware of the SC’s guidelines does not convert SJAM’s statutory obligation to disclose information to its clients into EY’s obligation to assume responsibility towards those clients. As DW2, Wong Kang Hwee, testified, EY was aware of the guidelines set by the SC, but that awareness does not extend the scope of EY’s contractual engagement with SJAM or create an assumption of responsibility to third parties. [47] As to the SIA Reviews, these were limited-scope agreed-upon procedures performed for the purpose of enabling SJAM to comply with its statutory reporting obligations to the SC under Section 40B of the SIA. The SIA Review engagement letters expressly stated: “Our report will be addressed to you as directors of the Fund Manager and is solely for use in connection with your submission of the Lampiran A and Appendix A to the SC as required under Section 40B of the Securities Industry Act 1983. Our report should not be used or reproduced, in part or in whole, or relied upon for any other purposes.” [48] This limitation was repeated in the SIA Reports themselves, which stated: “This report is intended solely for use in connection with your submission of Lampiran A to the Securities Commission as required under Section 40B of the Securities Industry Act 1983 and should not be used for any other purposes.” [49] Dato’ Jeyaraj acknowledged in cross-examination that SJAM was required by the SC to obtain its auditors’ confirmation that the information provided in the Lampiran A Checklist is correct, and that EY’s role arose solely from its contractual engagement with SJAM. The sufficiency of the agreed-upon procedures for purposes of the SC was solely SJAM’s responsibility, not EY’s, as expressly stated in the engagement letters. SJAM was responsible for the design, implementation and maintenance of control procedures and for the proper representations to be made in Lampiran A. [50] Dato’ Jeyaraj further accepted that based on the engagement letter, EY could not be held responsible for the state of the custodian accounts or the client investments, and that it was not within EY’s scope to provide an opinion on the investments by the clients. This was the evidence in his cross-examination: Now, we’ll come back to this, but we have also seen from the letter that it was also not within EY’s scope to provide an opinion on the investments by the clients, yes? Yes. Now, would you accept therefore, given the terms of engagement, that EY cannot be responsible for the state of the custodian accounts or client investments based on this letter. Shall I repeat that again? Yes. Based on this letter, EY cannot be held responsible for this state of the custodian accounts or the client investments. Yes.” [51] The SIA Reports were prepared for SJAM’s Board of Directors to be submitted to the SC, and to the knowledge of EY’s witnesses, they were never provided to third parties, including the Plaintiffs, prior to the commencement of this suit. They were not addressed to, and were not intended for, SJAM’s clients. They cannot support a duty of care owed by EY to the Plaintiffs. [52] The Plaintiffs’ reliance on the decisions in White v Jones and Hines v King Sturge LLP for the proposition that reliance is not a necessary ingredient to establish a duty of care does not assist them. Those cases concerned fundamentally different factual circumstances. In White v Jones, a solicitor was instructed by a testator to amend his will but failed to do so before the testator’s death, resulting in economic loss to the intended beneficiaries. The House of Lords held that the solicitor owed a duty of care to the beneficiaries notwithstanding the absence of a contractual relationship and notwithstanding that the beneficiaries did not rely on the solicitor’s work, because by taking on the testator’s retainer, the solicitor had assumed to act in relation to the beneficiaries’ affairs. That is a case of a fiduciary-like relationship giving rise to an assumption of responsibility which does not depend on any mutual dealing between the parties. The present case involves no such fiduciary relationship. The Plaintiffs were not beneficiaries of any trust created by EY, nor did EY assume to act in the Plaintiffs’ affairs. EY’s engagement was solely with SJAM, and EY’s express disclaimers of responsibility to third parties, acknowledged by the Plaintiffs’ own expert witness, negative any assumption of responsibility. [53] The imposition of liability on auditors in circumstances such as the present would expose them to “liability in an indeterminate amount for an indeterminate time to an indeterminate class,” as classically stated by Cardozo CJ in Ultramares Corporation v Touche. Such indeterminate liability runs contrary to public policy and was expressly rejected by the Federal Court in Pushpaleela a/p R Selvarajah & Anor v Rajamani d/o Meyappa Chettiar at paragraph 94, where the court observed: “The reason for a more stringent approach taken in the claims involving pure economic loss is because such loss might lead to an indeterminate liability being imposed on a particular class of defendants, thus leading to policy issues.” Reliance [54] A further essential element for the establishment of the requisite proximity in a pure economic loss case is actual reliance by the plaintiff on the defendant’s conduct. The Plaintiffs contend that they passively and/or indirectly relied on the unqualified nature of EY’s audit reports, in the sense that the continued issue of clean audit opinions gave them comfort that SJAM’s affairs were in order, and that this form of reliance is legally sufficient. The Plaintiffs further submitted that they were members of an identifiable class of investors who would foreseeably rely on the audit reports as the only publicly accessible source of information about SJAM’s financial position, and that it was reasonable for them to rely on the fact that SJAM, as a regulated fund manager, was being audited by a reputable firm. EY, in opposition, contended that the Plaintiffs did not rely on its reports in any sense, and that, in any event, only direct and actual reliance, in the sense that the reports exerted a specific influence on the minds of those who read them, can satisfy the proximity requirement in a case of pure economic loss. [55] The governing legal standard is well established. Reliance, for the purposes of proximity in a pure economic loss case, is not a general or abstract concept; it demands proof that the plaintiff actually read the defendant’s work product and that the work product exerted a specific influence on the plaintiff’s mind. In Dato’ Ariff Wan Hamzah & Ors v HwangDBS Investment Bank Bhd & Anor [2013] 1 MLJ 526 (High Court), this court held at paragraph 105 that “a general reliance is insufficient” and that “The plaintiffs are bound to show that the information issued by the accountants worked so as to exert a specific influence on their minds and as a consequence of which they were induced to purchase the shares.” That decision followed the reasoning of the New Zealand Court of Appeal in Boyd Knight v Purdue [1999] 2 NZLR 278, where the court held that a duty of care cannot be imposed on an auditor in respect of a person who has not actually read and relied upon the underlying financial statements: “…The record shown by the financial statement speaks for itself. The true and fair view may be one of prosperity or poverty. The report therefore has no context for anyone who has not read the accounts. Without such a reading the report tells the reader nothing except that the company has a set of accounts which comply with the regulations and present a true and fair view... It must follow, it seems to me, that in so certifying the accounts the auditors cannot be taken to have accepted an obligation to an investor who has not read and relied upon them.” The learned authors of Jackson & Powell on Professional Liability state in similar terms that “[i]t is not sufficient for an investor to show merely that he relied on the fact that the accountant had written a report; the claimant has to go further and show that he read the accounts and relied on the report which certified that they gave a true and fair view.” [56] The court is satisfied that the evidence conclusively establishes that none of the Plaintiffs relied on EY’s reports. The principal fact witness called by the Plaintiffs as a representative to give evidence on their behalf was Tan Chin Yong (PW1), the 5th Plaintiff. He admitted in cross-examination that he had never seen, read, requested, or relied on EY’s audit reports either directly or indirectly. He further acknowledged that he had no evidence as to whether any of the other Plaintiffs had done so. He testified that in deciding to invest with SJAM, he relied primarily on SJAM itself, on Tan Whai Onn, and on the fact that SJAM held a licence from the SC. Tan Chin Yong had no personal knowledge of the investments of the remaining thirty-four Plaintiffs. While the Plaintiffs also called Datuk Tong Nguen Khoong (PW2, the 12th Plaintiff) to give factual evidence on limited issues, similar admissions regarding a lack of reliance on EY were established. The evidentiary record on the question of reliance is wholly adverse to the Plaintiffs’ case on this element. [57] The Plaintiffs sought to overcome the evidentiary deficit in several ways. They contended that their reliance need not be direct and that it was sufficient that EY knew, or ought to have known, that its audit reports would be relied upon by investors in SJAM. They relied on the decision of the Supreme Court of Canada in Deloitte & Touche v Livent Inc. (Receiver of), [2017] S.C.J. No. 63 for the proposition that an auditor’s clean audit opinion can give rise to a proximate relationship where the plaintiff relied on that opinion for the purpose for which it was provided. They also invoked the observations of Deane J in Hawkins v Clayton (1988) 78 ALR 69 (High Court of Australia) that in cases of pure economic loss the requisite proximity will commonly, though not necessarily, be characterised by “known reliance (or dependence) or the assumptions of responsibility or a combination of the two.” [58] The court has weighed these submissions but they do not assist the Plaintiffs. The Canadian decision in Deloitte & Touche v Livent Inc is distinguishable; in that case the plaintiff was the audited company itself, which had actually relied on the clean audit opinion for the purpose for which it was provided. That is a materially different situation from the present case, where no Plaintiff read EY’s audit reports or was influenced by them in any way. The passage from Hawkins v Clayton confirms that reliance, or some equivalent element, remains a necessary ingredient; it does not establish that reliance may be presumed or inferred in the absence of any evidence. [59] The argument that passive or indirect reliance is legally sufficient is unsustainable on the Federal Court’s authorities. In The Co-operative Central Bank Ltd v KGV & Associates Sdn Bhd, the Federal Court adopted and applied the warning articulated in the English authorities that indirect reliance is not sufficient because “[i]t would impose an intolerable burden upon those who give advice in a professional or commercial contract if they were to owe a duty not only to whom they give the advice but to any other person who might choose to act upon it.” Indirect reliance, in the sense that an investor might have felt some comfort from the existence of audited accounts without ever reading them, is too remote and too diffuse to give rise to the required proximity. The principle in Boyd Knight v Purdue reinforces this position: an audit report “has no context for anyone who has not read the accounts” and “Reliance, and a consequential duty of care, cannot be asserted, as it were, in a vacuum.” The Plaintiffs did not read EY’s reports. Their investment decisions were made on the basis of representations by SJAM and Tan Whai Onn, and on the regulatory fact of SJAM’s licence from the SC. EY had no knowledge of the individual Plaintiffs, made no representations to them, and addressed its reports solely to the members of SJAM. If indirect or passive reliance of the kind asserted by the Plaintiffs were sufficient, the auditor of every licensed fund manager in Malaysia would owe a duty to all of that fund manager’s clients, past and present, in circumstances where none of them had ever read an audit report. This cannot be the law. [60] The court also notes the significance of the fact that SJAM had hundreds of clients, whose composition fluctuated as clients entered and exited over the years. This is not a case involving a defined and finite class of identifiable persons towards whom EY could sensibly be said to have assumed responsibility. The Plaintiffs relied on the submission that the size of the class and the foreseeability of reliance were factors pointing towards the existence of proximity. The court rejects this submission. The existence of a large and fluctuating body of potential claimants, far from supporting the imposition of a duty, is precisely the circumstance that courts have consistently declined to treat as sufficient. It would be productive of the very indeterminate liability against which the Federal Court cautioned in KGV & Associates, in Lok Kok Beng and in Pushpaleela, to hold that an auditor owes a duty to an open-ended class whose membership it cannot identify and whose reliance on its reports has not been established. For all these reasons, the court finds that the element of reliance is not made out and that no sufficient proximity exists between EY and the Plaintiffs. The Australian Vulnerability Concept [61] The Plaintiffs place considerable reliance on the Australian concept of “vulnerability” as a basis for establishing proximity. They invoke the High Court of Australia’s decision in Perre v Apand Pty Ltd (1999) 164 ALR 606, in which McHugh J observed that what is likely to be decisive in determining whether a duty of care is owed is the answer to the question: “How vulnerable was the plaintiff to incurring loss by reason of the defendant’s conduct?” His Lordship stated: “The degree and the nature of vulnerability sufficient to found a duty of care will no doubt vary from category to category and from case to case. Although each category will have to formulate a particular standard, the ultimate question will be one of fact. The defendant’s control of the plaintiff’s right, interest or expectation will be an important test for vulnerability.” [62] The Plaintiffs submit that vulnerability was recognised by the Federal Court of Malaysia in Majlis Perbandaran Ampang Jaya v Steven Phoa Cheng Loon & Ors and Tenaga Nasional Malaysia v Batu Kemas Industri Sdn Bhd, in which the Federal Court cited Perre and stated that “the incremental approach of Perre might be followed” when courts articulate policy reasoning rather than relying on bright lines excluding liability. [63] The Plaintiffs further submit that the Federal Court of Australia’s decision in Dartberg Pty Ltd v Wealthcare Financing Planning [2007] 244 ALR 552 provides a good precedent for how vulnerability can be applied in an auditor’s negligence case. In Dartberg, the applicant invested in a company in reliance on financial advice from the respondent financial planner. The respondent sought contribution from KPMG, who were the company’s auditors. The Federal Court of Australia found that there was reasonable cause to believe that the statutory auditor of the company owed a duty of care to investors in promissory notes issued by the company. [64] The Plaintiffs submit that they were vulnerable because their funds were held by custodians on an omnibus basis, they lacked direct access to information about the state of their own investments, and they could not protect themselves without access to information that only EY could verify. The Plaintiffs contend that, like the promissory note holders in Dartberg, they were vulnerable to a negligent statutory audit because EY stood in a position of control, having the ability and power to detect and report any irregularities that would put their investments at risk, whilst the Plaintiffs had no means of checking or ensuring the safety of their investments held by SJAM. [65] EY submits that the vulnerability concept has never been adopted by the Federal Court of Malaysia as a criterion in the duty of care analysis and that there is no basis for this court to depart from the governing Malaysian authorities. EY contends that the concept of vulnerability as a relevant criterion in the duty of care analysis is an anomaly in Commonwealth jurisprudence and arises only from a few Australian cases. [66] EY further submits that on the facts the Plaintiffs were not vulnerable. EY points out that Dartberg is distinguishable on three grounds: first, whereas the promissory note holders in Dartberg constituted a defined and known class, the Plaintiffs in the present case were among hundreds of clients of SJAM that fluctuated throughout the years, constituting an indeterminate class; second, in Dartberg, the very purpose of the company being audited was to finance a specific project using the promissory note holders’ funds and the auditor had a relationship with the note holders and was specifically aware of and considered their interests, whereas the evidence in this case is the opposite; third, whereas the promissory note holders in Dartberg, as investors in the company, were found to be vulnerable to a negligent statutory audit of the company, the Plaintiffs in the present case were not actually investors in the entity being audited, SJAM. The Plaintiffs invested in funds, none of which were audited by EY. [67] The court declines to apply the vulnerability concept. The Federal Court has not adopted it. The controlling test in Malaysia remains the three-fold Caparo test, applied with appropriate stringency in cases of pure economic loss. It would not be appropriate for this court to depart from the Federal Court’s consistent jurisprudence by importing an Australian doctrine that the highest court in this jurisdiction has not endorsed. In Pushpaleela, the Federal Court, quoting its earlier decision in Lok Kok Beng, confirmed that a “more stringent” approach is required in cases of pure economic loss, stating: “The reason for a more stringent approach taken in the claims involving pure economic loss is because such loss might lead to an indeterminate liability being imposed on a particular class of defendants, thus leading to policy issues.” The Federal Court further emphasised that “the concepts of voluntary assumption of responsibility and reliance are seen as important factors to be established for purposes of fulfilling the proximity requirement.” The vulnerability concept, as articulated in the Australian authorities, would introduce a more permissive test than the Federal Court has consistently required. The references to Perre in Steven Phoa and Batu Kemas do not amount to an endorsement of vulnerability as a freestanding criterion for establishing proximity. Rather, those cases adopted the three-fold Caparo test itself. [68] On the merits, the evidence does not support the Plaintiffs’ characterisation of themselves as vulnerable in any legally relevant sense. These are sophisticated investors, several of them corporate entities with their own obligations to maintain financial records and prepare audited accounts. The Plaintiffs include Contrail Sdn Bhd, Bukit Kiara Capital Sdn Bhd, Joint Glory International Ltd, Optimal Joy Limited, New Finance Assets Limited, Eternal Shine Investments Ltd, Famous Palace Group Ltd, Strategic Shipping Inc, Cosmos Electronics (M) Sdn Bhd, and Megaworld Corporation. Datuk Tong Nguen Khoong (12th Plaintiff) had investments worth over RM6 million at one point. These are not unsophisticated retail investors lacking the commercial acumen or resources to protect their own interests. In cross-examination, Tan Chin Yong (PW1) accepted that his investment agreement with SJAM did not prevent him from requesting a fund audit. DW3 Choong Mei Ling, a partner of EY, confirmed that investors could request such an audit. When questioned about whether only SJAM could initiate a fund audit given that trust assets were held on an omnibus basis, DW3 testified: “The investors can request. Although investors could be on an omnibus basis, which I think some funds do, they do have an allocation ... I believe that they can, right? Unless, you know, on the onset of investment, they do not have such requirements or terms.” [69] She explained further: “When you do a fund audit, there are a couple of areas. The funds managed by the fund manager can be made ex-fund analysis. So, they can actually direct or appoint an auditor, who need not be EY to conduct an audit on that particular fund, that main fund. Or if they don’t have a pool, they can also get another auditor to do an audit on that fund ... it’s not like the investors cannot request ... investors can request on confidentiality basis.” [70] The Plaintiffs had contractual avenues available to them to verify the state of their investments and chose not to pursue them. The Plaintiffs explicitly accepted that their funds would be held in omnibus accounts. A party who can take steps to protect its own interests but elects not to do so cannot claim vulnerability. As McHugh J observed in Perre, there would normally be no reason to impose a duty on a defendant where it was reasonably open to the plaintiff to take steps to protect itself, the rationale being that the more able a plaintiff is to protect itself, the less vulnerable it is. Dartberg is in any event factually distinguishable. In that case, the auditor stood in a direct relationship with a defined and finite class of note holders, the very purpose of the company being audited was to finance a specific project using the note holders’ funds, and the auditor was specifically aware of and considered their interests. Here, EY had no relationship whatsoever with the Plaintiffs, who were merely a subset of an indeterminate, fluctuating class of hundreds of SJAM clients whose composition changed over the years as clients entered and exited. The imposition of a duty of care in such circumstances would be precisely the indeterminate liability warned against in the authorities. Statutory Duty [71] The Plaintiffs contend that the CA, the SIA, and the SIA Regulations 1996 confer on the Plaintiffs a right of action against EY for breach of statutory duty. In their written submissions, the Plaintiffs cite section 174 of the CA, sections 47C, 47D, 48(1), 48(3), 49(1) and 50 of the SIA, and Forms 9 and 10 of the SIA Regulations 1996 to argue that the SIA framework is intended to protect investors. [72] The Plaintiffs submit that as auditor of a company that held funds and investments on trust for vulnerable beneficiaries, the duties owed by EY were wider than those imposed under a strict analysis of the CA framework alone, such that they extended to the Plaintiffs. The Plaintiffs further submit that the SIA constitutes a distinct statutory framework from the CA and accordingly warrants separate audit procedures encompassing a broader scope of audit than the CA Audit. [73] EY contends that no such right of action arises on a proper reading of those statutes. EY submits that the Amended Statement of Claim does not particularise or refer to any specific provision that is alleged to have been breached or that confers a private right of action on the Plaintiffs, and that this failure to plead specific statutory provisions is fatal to the statutory duty claim. On the merits, EY submits that the provisions cited do not confer a private cause of action to investors and that Parliament could have, but did not, provide such a right. [74] The court notes EY’s submission that the Plaintiffs’ pleading is highly deficient. It is well established that in a claim for breach of statutory duty, the plaintiff should specifically disclose and plead the relevant statutory provisions. The rationale is clear: as the statutory provision is the very basis of the claim of statutory breach, failure to specifically plead it prejudices the defendant. In Abdul Aziz bin Lebai Milin & Ors v Suruhanjaya Pengangkutan Awam Darat [2016] MLJU 1873 (High Court), the court stated: “…based on my understanding of the above case... in regard to a cause of action based on a breach of statutory duty, the plaintiffs must plead that they are within the class of persons intended to be protected... whereby, the affected legal provision must be disclosed... This is because a failure to disclose the affected legal provision will cause the defendant to be caught by surprise and to the affected legal provision be prejudiced in its defence.” [75] The Plaintiffs’ reliance on generic references to “securities laws” and broad statutory titles without identifying the specific provisions they say were breached is highly unsatisfactory. However, the Plaintiffs correctly point out that the Federal Court in Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290 recently clarified that a failure to expressly plead the specific statutory provision is not automatically fatal “so long as the facts as pleaded give rise to a cause of action in a breach of statutory duty.” Therefore, giving the Plaintiffs the benefit of the doubt on this pleading deficiency and their objection to the timing of EY’s complaint, the court proceeds to consider the substantive question of whether the statutes in question confer a private right of action. [76] The law is well established that a breach of statute, even a statute that is intended to protect a class of persons, is not actionable by those persons unless Parliament clearly intended to confer a private cause of action. In Shahidan bin Shafie v Atlan Holdings Sdn Bhd & Anor [2015] MLJU 1944 (High Court), citing the House of Lords in X (Minors) v Bedfordshire County Council [1995] 3 WLR 152, the court stated: “The basic proposition is that in the ordinary case a breach of statutory duty does not by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.... If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action...” [77] Applying that principle to the statutes relied upon by the Plaintiffs, the court finds that none of them confers a private right of action on the Plaintiffs. Section 174 of the CA requires a company to appoint an approved auditor and to lay audited accounts before its members. The primary obligation of the auditor under that provision is set out in section 174(1), which reads: “Every auditor of a company shall report to the members on the accounts required to be laid before the company in general meeting and on the company's accounting and other records relating to those accounts and if it is a holding company for which consolidated accounts are prepared shall also report to the members on the consolidated accounts.” [78] The statutory obligation on the auditor under that Act is therefore to report to the company's members. Section 174(8), the only provision invoked against EY, requires an auditor to report to the Registrar only where the auditor is “satisfied” that there has been a breach that cannot be adequately dealt with by comment in the auditor's report. The full text of section 174(8) provides: “If an auditor, in the course of the performance of his duties as auditor of a company, is satisfied that—

there has been a breach or non-observance of any of the provisions of this Act; and

the circumstances are such that in his opinion the matter has not been or will not be adequately dealt with by comment in his report on the accounts or consolidated accounts or by bringing the matter to the notice of the directors of the company or, if the company is a subsidiary, of the directors of its holding company, he shall forthwith report the matter in writing to the Registrar. Penalty: Imprisonment for two years or thirty thousand ringgit or both.” [79] There is no dispute that EY was not aware of the fraud. The duty to report under section 174(8) is accordingly not engaged. The clear statutory intent is, further, that any breach of section 174 is to be prosecuted through penal sanctions via public law mechanisms by the Registrar or with the written consent of the Minister. Section 174(8) itself provides a criminal penalty. Section 369(2) of the CA provides: “A person who is guilty of an offence against this Act shall be liable on conviction to a penalty or punishment not exceeding the penalty or punishment expressly mentioned as the penalty or punishment for the offence, or if a penalty or punishment is not so mentioned, to a penalty not exceeding five thousand ringgit.” [80] Section 371 of the CA further provides: “Except where provision is otherwise made in this Act proceedings, for any offence against this Act may be taken by the Registrar or, with the written consent of the Minister, by any person.” [81] The CA was not intended to confer a private right of action on third parties, such as the company's clients or creditors, against the auditor. [82] Sections 47C to 49 of the SIA do not apply to or impose any duties on auditors; they apply only to the “fund manager” or “relevant person.” The scope of Division 2 of Part VII of the SIA — under which sections 47C to 49 fall — is prescribed by section 47A, which reads: “This Division applies to and in relation to a fund manager.” [83] The term “relevant person” within that Division, while embracing a fund manager, does not extend to an auditor. The distinction is made explicit by section 48(3), which provides: “Notwithstanding the provisions of the Companies Act 1965, a relevant person shall appoint an auditor to carry out for the year in respect of which he is appointed an audit of the accounts of the relevant person.” [84] An auditor is thus the appointee of, and distinct from, the “relevant person.” Section 49(1) of the SIA — which governs the lodging of the auditor's report with the Securities Commission — is the obligation of the relevant person, not the auditor. It provides: “A relevant person shall, within three months after the close of each financial year, or such further period as the Commission may permit under subsection (2), lodge with the Commission, the auditor's report containing information on such matters as may be prescribed.” [85] Forms 9 and 10 of the SIA Regulations 1996 are the prescribed forms for purposes of SJAM's duty under section 49 of the SIA to submit forms to the SC — Form 9 being the “Auditor's Report For A Fund Manager” and Form 10 being the “Supplementary Statement To Be Prepared by A Fund Manager.” Accordingly, like section 49 of the SIA, Forms 9 and 10 do not impose any duties on EY. [86] Section 50 of the SIA requires an auditor to report to the SC only if the auditor becomes aware of certain irregularities. The full text of section 50(1) reads: “Where, in the performance of his duties as auditor for a relevant person, an auditor becomes aware—

of any matter which in his opinion may constitute a breach of any provision of the securities laws;

of any irregularity that may have a material effect upon the accounts of the relevant person, including any irregularity that jeopardises or may jeopardise the funds or property of the clients of a relevant person, where applicable;

that losses have been incurred by the relevant person who is a dealer or a fund manager which renders the relevant person to be unable to meet the minimum financial requirements as may be prescribed in the regulations made under this Act; or

that the auditor is unable to confirm that the claims of clients or creditors of the relevant person are covered by the assets of the relevant person, the auditor shall immediately report the matter to— (aa) in the case of a participating organization, the stock exchange and the Commission; or (bb) in any other case, the Commission.” [87] There is no dispute that EY was never aware of any irregularities. This is a “whistle blowing” provision to enable the SC to decide whether it should appoint an independent auditor to carry out an investigative report. This reporting duty in section 50(1) of the SIA is an incidental duty of an auditor, contingent upon actual awareness. [88] The SIA Review regime imposed prescribed procedures on SJAM to enable it to discharge its regulatory obligations to the SC. It did not impose obligations on EY in favour of SJAM’s clients. While the general purpose of the SIA regime is to protect the integrity of the capital markets, that does not mean that investors in the market have a cause of action against EY. Parliament could have, but did not, provide such a right. In the absence of clear language in the relevant statutes conferring a right of action on the Plaintiffs against EY, no such right can be implied. For all of the foregoing reasons, the court finds that EY owed no duty of care to the Plaintiffs, whether at common law or under statute. This finding is in itself sufficient to determine the Plaintiffs’ claim against EY. The court nonetheless proceeds to address the remaining issues. Ground 2: Standard of Care and Breach The Legal Burden [89] It is trite law that in professional negligence cases the burden of proving breach of the applicable standard of care lies with the plaintiff. The plaintiff must lead evidence to show that the standard of care was breached. The Court of Appeal in Shearn Delamore & Co v Sadacharamani a/l Govindasamy [2017] 1 MLJ 486 held that it is “well settled” that the plaintiff has the legal burden of proving breach of the duty of care, citing jurisprudence that has been affirmed by the Federal Court: “it is well settled that in professional negligence, the burden is on the plaintiff to establish the standard of care has been breached before the defendant is required to call his witness to rebut the same (see Dato’ Dr V Thuraisingam & Anor v Sanmarkan a/l Ganapathy & Anor [2016] 3 MLJ 227; [2015]8 CLJ 248).” [90] The Court of Appeal therefore overturned the High Court judgment for the “grave error” and “grave miscarriage of justice” of failing to appreciate that the plaintiff had not satisfied his evidentiary burden, holding: “What is obvious in this case is that the learned trial judge has failed in law to appreciate the elements of negligence and professional negligence. In our view, the learned trial judge on the face of the judgment fell into grave error of law when the judge dealt with the case as it was a negligence case without taking into consideration the elements and the burden placed on the plaintiff’s in professional negligence cases.” [91] The Court of Appeal further held at paragraph 15: “In the instant case, the failure of the learned trial judge to take cognisance of the pleading rules as to ‘standard of care’ and failing to appreciate the respondent has not satisfied the requirement of the elements of standard of care principles by way of evidence at the stage of the plaintiff case warrants the judgment to be set aside as of right.” [92] In professional negligence cases, expert evidence on the standard of care is a very important element for the plaintiff to succeed. This is because the court has no expertise in technical or specialised matters outside the field of law. As the Court of Appeal explained in Batu Kemas Industri Sdn Bhd v Kerajaan Malaysia & Anor [2015] 7 CLJ 849 at paragraph 33: “Apart from the field of law the court itself has no other expertise. For that reason, in cases involving technical, scientific or medical issues which require specialised knowledge such as forgery, intellectual property, medical negligence and other like cases the court frequently has to rely on the evidence of experts. As such, this is a case in which the court has no expertise. Therefore, the evidence of an expert is called upon to assist the court in arriving at a correct decision.” [93] The Court of Appeal in Shearn Delamore found that expert evidence is necessary because, unlike the “reasonable man on the Clapham omnibus” standard of care for negligence simpliciter cases, the standard of care in professional negligence cases is “that of a reasonable practitioner in that profession and not merely that of an ordinary reasonable man.” The Court of Appeal stated: “However, when the Court is concerned with professional negligence, the standard of care applicable has necessarily to be adjusted. In such cases, the Court needs to be guided by evidence led by members of the profession in question.” [94] The Court of Appeal in Shearn Delamore therefore found that the plaintiff did not discharge his legal burden because no expert or professional was called to give evidence on the standard of care. [95] The Plaintiffs submit that EY breached its duties as auditor by failing to detect the fraud, relying primarily on the expert evidence of Dato’ Jeyaraj Ratnaswamy (PW4). During cross-examination, Dato’ Jeyaraj confirmed that aside from the two reports that he filed, the Plaintiffs have not tendered any other report assessing EY’s work on its engagements with SJAM. While the Plaintiffs have tendered two reports by BDO, those reports were limited to factual findings on the fraud and purported shortfall of client assets. Mok Chew Yin (PW3), a representative of BDO and Joint Liquidator of SJAM, acknowledged in cross-examination that BDO was not called to give an opinion on EY’s conduct: No. You’ve written two reports. Let’s base it upon those two reports. On those two reports, you are not here to give an opinion on EY’s conduct of their audit. Based on the two reports, I just stated the facts, yes.” [96] Similarly, the Plaintiffs’ factual witness, Tan Chin Yong (PW1, the 5th Plaintiff), alleges in his witness statement that EY breached its duties, but he admitted during cross-examination that these allegations were provided by his lawyers and taken from the statement of claim. Dato’ Jeyaraj’s evidence is therefore the Plaintiffs’ sole evidence on the standard of care. [97] EY submits that the Plaintiffs’ claim of breach fails at the threshold because of the fundamental deficiencies in Dato’ Jeyaraj’s evidence. As the only witness to speak to the quality of EY’s work, Dato’ Jeyaraj was required to provide admissible expert evidence to enable the Plaintiffs to discharge their legal burden of proof. EY submits that Dato’ Jeyaraj lacks the relevant expertise and the necessary independence to provide expert evidence, that he did not even review EY’s work, and that he applied the wrong standard in purporting to assess EY’s performance. EY further submits that the only credible expert evidence before the court is that of Mr Kon Yin Tong (DW1), which establishes that EY met the applicable standard of care. The Evidence of Dato’ Jeyaraj Ratnaswamy (PW4) [98] Dato’ Jeyaraj is a chartered accountant and the Plaintiffs’ sole expert witness on audit standards. The court has carefully considered his two expert reports dated 18.10.2021 and 13.5.2021, totalling 352 pages, and his oral evidence. For the following reasons, his evidence cannot be given any weight and must be disregarded. [99] First, Dato’ Jeyaraj lacks independence. His firm, MRSB, was engaged under a retainer dated 7.8.2020 entitled “Appointment as Facilitation Consultants.” The retainer included a success fee provision entitling him to additional remuneration in the event of a successful settlement of the litigation. It also provided for fees for litigation support services, which encompassed his role as expert witness. The fee structure set out a mobilisation fee of RM20,000 upon acceptance, a success fee (the quantum of which was redacted and never disclosed to the court), and hourly rates ranging from RM250 to RM2,000 per hour for additional work including litigation support. The existence of this success fee arrangement means that Dato’ Jeyaraj had a direct financial interest in the Plaintiffs succeeding in this litigation. This conflict was not disclosed to the court at the outset; it only emerged in the course of cross-examination. In cross-examination, Dato’ Jeyaraj confirmed that he never disclosed in his reports to the court either the retainer, the fees, or any financial interest he would have had in any settlement. The following exchange is telling: Nor did you disclose the fees or indeed any financial interest you would have had in any settlement, correct? Yes. When you point that out and reading your report, the Court will think, will they not, that you are coming to this dispute as a neutral party with no prior interest, fair? Yes.” [100] An expert witness who stands to benefit financially from the outcome of the case cannot be regarded as independent. This alone is disqualifying. [101] In cross-examination, Dato’ Jeyaraj further confirmed that his engagement included settlement facilitation and that the appointment was to facilitate the resolution of this litigation: And as the representative for the Plaintiffs, your job was to collect money from EY. It must be. To discuss with them. Yes, the possibility of collecting money from EY. The possibility of course. …….. ……..Let’s be very clear about this. The appointment was to settle this litigation, correct? If you put it that way, yes. “ [102] The Plaintiffs contend that the success fee was a standard clause that did not affect Dato’ Jeyaraj’s independence, and that his expert opinions were formed on the basis of his professional expertise rather than any financial interest. The court does not accept this submission. A success fee, by its nature, ties the expert’s remuneration to the outcome. No amount of professional expertise can neutralise the conflict that arises when an expert stands to earn a financial reward from a particular litigation outcome. The relevant principles are well established. The Court of Appeal in Batu Kemas Industri Sdn Bhd emphasised that an expert witness has an overriding duty to the court under Order 40A, rule 2 of the Rules of Court 2012 and should not only be independent, but should also be seen as independent. The Court of Appeal stated: “It cannot be overemphasized that this duty overrides any obligation to the party from whom the expert has received instructions or by whom he is paid (O. 40A r. 2 of the Rules of Court 2012). Therefore, the evidence of an expert should not only be independent but should also be seen to be independent.” [103] The Court of Appeal further held that expert witnesses must provide independent assistance to the court by way of objective unbiased opinion and that “an expert witness in the High Court should never assume the role of an advocate.” [104] The Federal Court in U Television Sdn Bhd & Anor v Comintel Sdn Bhd [2017] 10 CLJ 580 warned that witnesses with an interest in the case should be disqualified as independent expert witnesses, holding that: “As members of the plaintiff’s senior management team they should have been treated as having an interest in the case. This fact by itself should have disqualified them as truly independent witnesses.” [105] Second, Dato’ Jeyaraj’s credibility as an auditing expert is significantly undermined by the Bursa Malaysia sanctions against him. He was publicly reprimanded and fined by Bursa Malaysia on three occasions: in 2009, 2011, and 2016, for “serious” contraventions relating to auditing and financial reporting issues. The total fines imposed against him personally amount to RM456,400. In 2016, Dato’ Jeyaraj was fined RM239,200 in his capacity as Audit Committee Chairman of Golden Plus Holdings Berhad for serious contraventions of Bursa Malaysia’s Main Market Listing Requirements relating to auditing and financial reporting issues. The court permitted this evidence to be adduced following an earlier ruling delivered on 30.5.2024 on the Plaintiffs’ application to exclude it, in which the court found that the Bursa Malaysia sanctions are plainly relevant to the question of Dato’ Jeyaraj’s credibility and expertise as an expert witness opining on audit standards. These sanctions are directly relevant to his competence in the very domain in which he purported to serve as an expert. The Plaintiffs contend that these matters concerned different audits and are irrelevant to these proceedings. That submission is not accepted. Sanctions by a securities regulator for serious auditing contraventions speak directly to the auditor’s judgment, professionalism, and adherence to auditing standards, which are precisely the qualities at issue in these proceedings. It is also notable that EY has never been criticised or reprimanded by any regulator in connection with its work on SJAM, while the Plaintiffs’ expert has been fined almost half a million ringgit for his own serious audit-related contraventions. [106] Third, and most fundamentally, Dato’ Jeyaraj admitted in cross-examination that he never reviewed EY’s audit working papers before forming his opinions criticising EY’s audit work. EY’s working papers are the documentary record of the audit procedures performed, the evidence obtained, and the judgments exercised in the course of each audit engagement. The English High Court (Commercial Court) in Carillion plc (in liquidation) v KPMG LLP and another [2020] EWHC 1416 (Comm) described the audit working papers as “core documents” in any audit negligence claim. An expert who has not examined the working papers cannot properly assess whether the auditor performed adequate procedures or exercised adequate judgment. The following exchange in cross-examination illustrates the position starkly: Not the statutory audit? So, your evidence is that now you did not look at EY’s working papers to determine whether or not they complied with the relevant standards? If your question is did I look at their working papers, the answer is no. All I can say is I’m astonished, I really am, that you can sit there and say, we didn’t do our job and you didn’t even bother to see what we did.” [107] Because Dato’ Jeyaraj did not look at EY’s working papers, he admitted that he did not know whether EY’s audit procedures followed EY’s standard audit programme or even the size of EY’s audit team. He also did not know that there were two partners involved in the audit of SJAM, one between 2002 and 2007 and another partner for 2007 to 2009. [108] The Plaintiffs respond that Dato’ Jeyaraj was able to form a reliable opinion on the basis of EY’s audit reports, SJAM’s financial statements, and the BDO reports, without needing to look at the working papers. This response is unconvincing. The BDO reports were limited to factual findings on the fraud and did not assess EY’s work. The audit report sets out the auditor’s conclusion; the working papers set out the work done to reach that conclusion. One cannot assess the adequacy of the work without examining what was done. As EY submitted, it is analogous to a professor who graded an essay without even reviewing it. Because Dato’ Jeyaraj did not review the working papers before forming his opinion, he is purporting to give an opinion on the quality and completeness of EY’s work without actually examining that work. The implications are obvious: he has no knowledge of the details or extent of EY’s work. [109] Fourth, Dato’ Jeyaraj did not apply MASA. These are the standards that were expressly incorporated by reference in EY’s engagement letters as the basis upon which EY undertook its audit work. They represent the benchmark against which EY’s compliance with its professional obligations must be assessed. MASA comprises International Standards on Auditing approved by the Malaysian Institute of Accountants (“MIA”) and Malaysian Standards on Auditing issued by the MIA. The preface to MASA expressly recognises that when assessing the adequacy of the work of an auditor, a court will likely look to MASA as indicative of good auditing practice. Dato’ Jeyaraj acknowledged in cross-examination that MASA is the applicable general standard, but testified that he disregarded it and instead applied a self-invented standard he described as a “professionally expedited” audit. The following exchange is the clearest possible expression of this: And the standard that you have applied is, in your words, I’m using your words, ‘a professionally expedited manner.’ That’s the standard that you have— That I’ve applied. That you’ve applied. Yes. So, my third and last question on this point is, there isn’t any other relevant standards which uses the word ‘professionally expedited manner.’ Correct? No, of course not.” [110] Dato’ Jeyaraj also admitted in cross-examination that the words “professionally expedited manner” do not appear in any auditing standard. When asked what he was referring to when he used this phrase, he stated: “These words specifically do not appear in any of the standards. My reference point is the fact that at the end of the day, when you do the audit, any form of audit, you must do it professionally and in a manner that is expected of you. Not just following the letter of any standards.” [111] He could not articulate with precision what his standard required or how it was to be applied. An auditing standard invented by an expert witness, which is neither derived from nor consistent with any recognised professional framework, cannot serve as the yardstick against which a practitioner’s conduct is to be assessed. The doctrine of res ipsa loquitur does not apply in professional negligence cases. The Court of Appeal in Shearn Delamore & Co v Sadacharamani a/l Govindasamy, citing Shalini a/p Kanagaratnam v Pusat Perubatan Universiti Malaya (formerly known as University Hospital) & Anor [206] 3 MLJ 742 (which was affirmed by the Federal Court), held: “In cases of professional negligence and/or medical negligence, the appellant has to prove that there was: (i) duty of care; (ii) breach of standard of care;

(iii) breach of duty of care; and (iv) the breach caused the damages. Therefore, the appellant had to lead evidence to show that the standard of care had been breached. The doctrine of res ipsa loquitur will not ordinarily apply as the appellant will have to discharge the legal burden.” [112] The mere fact that the fraud went undetected cannot be a substitute for proof of breach by reference to the applicable professional standards. [113] Fifth, as a consequence of these fundamental deficiencies, the Plaintiffs largely abandoned Dato’ Jeyaraj’s evidence in their written submissions on the standard of care, making virtually no reference to his testimony. As EY’s written submissions observe, the Plaintiffs’ written submissions contain no references or citations to Dato’ Jeyaraj’s evidence, save for two passing references to the alleged “going concern” issue and a general statement that his evidence should be preferred over EY’s evidence. In EY’s Reply Submissions dated 8.9.2025, EY submitted at paragraph 63 that the Plaintiffs have now substantially abandoned Dato’ Jeyaraj’s evidence. [114] The court has reviewed the Plaintiffs’ submissions and found that the references to Dato’ Jeyaraj’s evidence are as follows: a) The Plaintiffs cite PW4’s findings that EY failed to verify SJAM’s “going concern” status, pointing out that PW4 discovered SJAM had been facing severe cash flow deficits (negative net cash from operating activities) for many of the relevant years between 2002 and 2009. b) The Plaintiffs highlight that PW4, upon reviewing EY’s working papers, found a forged Morgan Stanley statement where the bank’s name was misspelled as “Morgan Stanely”. They use this to argue that EY failed to exercise professional skepticism, as PW4 found this obvious error in EY’s own working papers. c) The Plaintiffs refer to PW4’s review of the 2006 SIA working papers, where he found legend symbols drawn by EY next to Annalong’s balances, which indicated work was supposedly performed, despite EY failing to properly verify these balances against custodian statements. [115] Although slightly more than what EY claims to have identified, EY’s observation is mainly correct. Dato’ Jeyaraj’s evidence was the only evidence in these proceedings that was critical of EY’s work. The Plaintiffs have not tendered any other evidence assessing EY’s work. This abandonment is itself a tacit concession that his evidence cannot sustain the claim. Given that Dato’ Jeyaraj’s evidence constituted the entirety of the Plaintiffs’ evidence assessing EY’s work, having now substantially abandoned his evidence, the Plaintiffs’ case is bereft of any evidence on the standard of care. This is fatal to their claim. [116] The court further observes that Dato’ Jeyaraj is not registered with the Audit Oversight Board (“AOB”) established under the Securities Commission Act 1993. Since 2010, section 31N of the Securities Commission Act 1993 has prohibited any person from acting as an auditor of an asset manager such as SJAM unless they are registered with the SC’s AOB. Neither Dato’ Jeyaraj nor his firm is registered with the AOB. His lack of registration means that he does not possess the minimum legal qualification to audit companies in the category of SJAM and, by extension, to opine authoritatively on the standards applicable to such audits. During re-examination, when asked about this lack of registration, Dato’ Jeyaraj explained: “Very intentionally, Mustapha Raj, we did not register with AOB because at that point in time, we were concentrating on internal audits.” This deliberate decision not to register with the AOB further undermines his suitability to serve as an expert witness on the audit of asset management companies. The court notes that in stark contrast, EY’s expert witness, Mr Kon Yin Tong, is registered with the AOB to audit fund management companies in Malaysia and actually reviewed EY’s audit working papers in detail before forming his opinions. The Evidence of Mr Kon Yin Tong (DW1) [117] EY’s expert witness is Mr Kon Yin Tong (DW1), the Managing Partner of Foo Kon Tan LLP. Mr Kon has over thirty years of experience in the accounting profession. He devotes more than half his professional time to audit work, including audits of fund management companies. He is a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow and President of the Institute of Singapore Chartered Accountants. From 2006 to 2012, he served as a board member of the Accounting and Corporate Regulatory Authority and the Public Accountants Oversight Committee of Singapore, the bodies responsible for the review, control, and regulation of the public accounting profession in Singapore and for prescribing standards, methods, and procedures for audits of financial statements. He is registered with the AOB in Malaysia. He has given expert evidence before the Singapore High Court and the UK High Court on auditing standards and practices. His firm, Foo Kon Tan LLP, is also registered with the AOB to audit fund management companies in Malaysia. [118] The applicable professional benchmark against which EY’s conduct is to be measured is MASA which comprises the International Standards on Auditing designated and approved by the MIA, together with the Malaysian Standards on Auditing issued by the MIA. It was not in dispute between the parties that MASA governs EY’s statutory audit work for SJAM, the same standards having been expressly incorporated by reference into EY’s engagement letters. Contrary to the submission of the Plaintiffs’ expert that MASA represents the “bare minimum” of audit practice, Mr Kon explained that the International Standards on Auditing component of MASA is designed to achieve a high-quality audit and has been adopted in over 100 countries, having been established by the International Auditing and Assurance Standards Board through rigorous due process and public consultations. Importantly, the Preface to MASA itself recognises the role of these standards as the benchmark for judicial assessment: “Members are also advised that a court of law may, when considering the adequacy of the work of an auditor, take into account any pronouncements or publications which it thinks may be indicative of good auditing practice. Approved Standards on Auditing are likely to be so regarded.” [119] Mr Kon reviewed EY’s actual audit working papers in detail before forming his opinions and applied the relevant MASA throughout. This methodological foundation gives his evidence an objectivity and rigour that was entirely absent from the evidence of Dato’ Jeyaraj. [120] Having reviewed the working papers and applied MASA, Mr Kon formed the unequivocal opinion that EY’s work complied with the applicable standard of care. His evidence is set out in his first expert report dated 10.2.2022. He was appointed to review EY’s working papers and to respond to the expert report of MRSB, the Plaintiffs’ expert. In that report, Mr Kon stated: “1.23 I was appointed by EY as an independent expert to review EY’s working papers and to respond to the MRSB Report. I disagree with MRSB’s conclusions. I am of the view that EY’s audit opinions were supported by sufficient appropriate audit evidence in all years. What is sufficient appropriate audit evidence is a matter of judgement.

1.24 As described further in this report, MRSB’s criticisms of EY’s work are incorrect, unreliable, and based on fundamental misunderstandings of EY’s scope of work and audit practice.” [121] In relation to the SIA Reviews, Mr Kon concluded: “9.25 From my review of the SIA Engagement working papers, I conclude that EY followed a methodical approach in carrying out all of the agreed-upon procedures and documenting its factual findings.” [122] Mr Kon further addressed MRSB’s assertion that MASA represented a “bare minimum” standard that required EY to perform additional procedures beyond those mandated by MASA itself. He firmly rejected that characterisation, explaining that MASA is designed to achieve a high-quality audit, based on internationally recognised frameworks. [123] Regarding the specific matter of the Annalong account, Mr Kon’s second expert report dated 7.7.2022 explains that EY properly carried out the sample-based testing procedures required in relation to that account. For the purposes of the AUPs under the SIA Engagements, EY selected a sample of 30 client accounts based on the largest client account balances. Annalong was selected for testing in the financial year ending 31.12.2006. Mr Kon found that EY agreed the Client Reconciliation List with custodian statements in order to ensure that figures were extracted correctly, and that EY did not identify any material discrepancy. He explained that EY did not detect the negative balance in the Annalong account in all likelihood because SJAM had presented forged custodian statements to EY for the purposes of those procedures. He stated: “It is likely that EY did not identify any material discrepancy because SJAM presented forged custodian statements to EY for purposes of these procedures. In short, EY properly carried out the procedures that it was required to carry out in relation to the sample-based testing of Annalong’s account. The fact that EY did not detect Annalong’s negative balance is likely due to fraud and forgery by SJAM’s management. There is no indication of any failure by EY to properly carry out the procedures. As I explained in the KYT Initial Report, failure to detect fraud is not uncommon where there is collusion and forgery and does not imply any lack of care by EY.” [124] In examining the custodian statements contained in EY’s working papers, the expert evidence identified two specific documents that bore indicia of forgery: Mr Kon concurred with Dato’ Jeyaraj’s observation that the 2004 Morgan Stanley statement contained a misspelling of “Morgan Stanley” in the header itself; and Mr Kon further identified the 2006 Merrill Lynch statement, which contained a garbled address placing Petaling Jaya in Hong Kong and misspelling “Holiday Villa” as “Holeday Villa”. These were the very documents that SJAM’s management had presented to EY in order to conceal the Annalong negative balances. Their use is consistent with the broader pattern of deliberate and sophisticated concealment that characterised the fraud throughout the period of EY’s engagement. [125] The Plaintiffs subjected Mr Kon to extensive cross-examination in an endeavour to undermine his conclusions. The Plaintiffs contended that EY ought to have selected Annalong for testing throughout all years between 2002 and 2009 by reason of its being the account with the highest value of investment, and that EY ought to have sought external confirmations directly from custodian banks rather than relying on the statements furnished by SJAM. Mr Kon’s response to these contentions was clear and consistent. He explained that there was no information in EY’s working papers at any material time to put EY on notice that Annalong required specific attention beyond what sample selection methodology dictated. He explained that the failure to detect the negative balance was attributable to two principal factors: inherent sampling risk, and the fact that SJAM presented forged custodian statements to EY. [126] When pressed on whether external confirmation from custodian banks would have detected the fraud, Mr Kon conceded, as a matter of logic, that it would have. However, he maintained that EY was not required under its engagements to obtain external confirmations directly from custodians, and that the AUPs required only that EY verify figures extracted by SJAM into the Client Reconciliation List against the custodian statements as presented. That is precisely what EY did. Mr Kon’s evidence on these points was measured, technically grounded, and consistent with the applicable professional standards. The court accepts his evidence on these matters. [127] The Plaintiffs further contend that Mr Kon’s evidence should be discounted on the grounds that he was instructed and paid by EY and that his evidence was “largely defensive.” The court does not accept this submission. All experts in adversarial litigation are engaged by one of the parties. The test of reliability is whether the expert applied a proper methodology, reviewed the relevant materials, and expressed honest opinions consistently with the evidence. Mr Kon reviewed the working papers. He applied the recognised MASA standards. He gave coherent explanations for his conclusions. His evidence is clearly superior to, and more reliable than, that of Dato’ Jeyaraj in every material respect. In contrast to Dato’ Jeyaraj, Mr Kon had no financial interest in the outcome of these proceedings. He disclosed no success fee arrangement. His independence cannot seriously be impugned, and the court declines to treat the fact of his engagement by EY as a basis for discounting his evidence. The court accepts Mr Kon’s evidence and preferred his account of EY’s compliance with the standard of care. [128] The court further notes that EY’s CA statutory audit was not a fund audit. EY was engaged to audit SJAM’s corporate financial statements, namely its revenues, expenses, assets, and liabilities as a corporate entity. The client funds held by custodians on behalf of SJAM’s clients did not appear on SJAM’s own financial statements and were not within the scope of EY’s CA audit engagement. In essence, the Plaintiffs’ case on breach requires EY to have performed work that it was never engaged to do. As the evidence of DW2 (Wong Kang Hwee, a retired EY partner who oversaw the SJAM audit) and DW3 (Choong Mei Ling, the EY partner who signed the last two audit reports) established, a statutory audit of a fund manager’s own accounts is not an audit of the fund manager’s clients’ accounts held at custodians. [129] DW3’s evidence on this point was unequivocal. When it was suggested in cross-examination that EY failed to independently confirm management fees receivables with custodian banks, she replied: “We do not have a requirement for getting statements from the custodian banks, because that would be part of a fund audit.” Similarly, DW2 explained that when there is collusion within SJAM, the risk of fraud becomes unauditable through the ordinary procedures of a statutory audit, and that the appropriate remedy for investors concerned about such risks would have been to obtain a fund audit. A fund audit is a distinct and separate engagement requiring specific instructions and scope. EY was neither asked nor engaged to conduct one. [130] On the foregoing analysis, the Plaintiffs have not discharged their burden of proving breach of the applicable standard of care. The only admissible and credible expert evidence before the court is that of Mr Kon Yin Tong (DW1), which establishes that EY’s work complied with MASA and that EY’s failure to detect the fraud is attributable to the sophisticated and deliberate concealment of that fraud by SJAM’s management, including the use of two sets of books and the presentation of forged custodian statements, rather than to any failure on EY’s part. Ground 3: Causation [131] Even if the court had found that EY owed a duty of care and had breached the applicable standard of care (which it has not), the Plaintiffs’ claim would still fail on causation. As the Court of Appeal stated in Ngan Siong Hing v RHB Bank Bhd [2014] 2 MLJ at para 101, it is trite law that in an action for negligence the plaintiff must establish a causative link between the defendant’s act and the injury suffered; without such a link, the claim cannot succeed. The Plaintiffs must prove both factual causation (the “but for” test) and legal causation, being two distinct and cumulative requirements. The “but for” test requires the plaintiff to demonstrate that it would not have suffered its loss but for the defendant’s breach. This was confirmed by the Court of Appeal in Tetuan Theselim Mohd Sahal & Co & Ors v Tan Boon Huat & Anor [2017] 4 MLJ 207 at paragraphs 32 to 33, where the court stated: “The law requires a causal connection between breach of duty and injury suffered before liability is established in an action for negligence. ... In this respect, the courts look to the test of causation known commonly as the ‘but for’ test ... The ‘but for’ test simply means that ‘but for’ the defendant’s negligent act, the harm would not have occurred.” [132] As the learned authors of Jackson & Powell on Professional Liability observe, the “but for” test is “necessary but not sufficient” and is “an exclusionary test serving only to filter out non-causal occasions for the loss.” Accordingly, even if the “but for” test were satisfied, it would remain necessary for the Plaintiffs to establish that EY’s alleged negligence was the legal or effective cause of the loss. The Competing Positions [133] The Plaintiffs submit that if EY had conducted its audits properly, it would have detected the fraud, issued qualified or adverse audit opinions, those opinions would have been communicated to or become known to the Plaintiffs, and the Plaintiffs would then have withdrawn their investments in SJAM, thereby avoiding their losses. The Plaintiffs further submit that their reliance on EY was passive and indirect in nature and that such reliance is a sufficient basis for causation. [134] In reply, EY submits that this chain of causation is wholly unsupported by the evidence, that the Plaintiffs did not read or rely on EY’s work product, that the great majority of client assets had been dissipated before EY was ever appointed, and that the true and effective cause of the Plaintiffs’ losses is the fraud perpetrated by Tan Whai Onn and others within SJAM’s management. [135] The court is satisfied that the “but for” test is not satisfied, for three independent and mutually reinforcing reasons. Those reasons are examined in turn below. First Reason: Absence of Reliance [136] The first reason is that the Plaintiffs did not read, were not aware of, and did not rely on EY’s audit reports or SIA Reviews at any material time. For factual causation to be established, the plaintiff must have actually read and relied on EY’s work product in the sense that the work product had a specific influence on and induced the relevant decision. General or indirect reliance is insufficient. In Dato’ Ariff Wan Hamzah & Ors v Hwang DBS Investment Bank Bhd & Anor at paragraph 105, the High Court held: “The plaintiffs, particularly the second to fourth plaintiffs did not rely in a specific way upon any of the information set out in the prospectus. As stated above a general reliance is insufficient. The plaintiffs are bound to show that the information issued by the accountants worked so as to exert a specific influence on their minds and as a consequence of which they were induced to purchase the shares. That has not been made out in the instant case which is another reason why the plaintiffs’ claim against D2 in this regard fails.” [137] The evidence in the present case compels the same conclusion. Tan Chin Yong, who gave evidence on behalf of the Plaintiffs, admitted in cross-examination that he made his investment decisions by relying on SJAM (and specifically on Tan Whai Onn) and on the fact that SJAM was licensed and regulated by the SC. In cross-examination he confirmed this position: And I’m going to suggest to you Tan, if you relied on anyone, there were two primary sources of reliance insofar as you were concerned when you decided to invest in SJAM. The first is Tan himself, you felt comfortable with him. Ok. And the second is the Securities Commission. Yes. I’m going to suggest to you that if you relied on anyone it was the SC and SJAM. In principle, yes.” [138] He further admitted in his evidence in chief that the losses were “directly attributable to Tan’s actions” and that EY was “not primarily responsible” for any loss. He did not rely on EY directly or indirectly. In those circumstances, it is impossible to conclude that the Plaintiffs would have made different investment decisions, or taken any protective action, had EY issued different audit opinions. The necessary causal link between EY’s audit opinions and the Plaintiffs’ investment decisions does not exist. Second Reason: Prior Dissipation of Client Funds [139] The second reason is that the overwhelming majority of the loss had already been dissipated before EY was appointed. The evidence establishes that the fraud commenced well before EY’s first engagement. According to BDO, the Annalong account maintained a total negative balance of USD22.7 million as at June 2010. Of that amount, only USD5.2 million was withdrawn from the Annalong account from 2003 onwards; the remaining USD17.5 million had therefore been withdrawn before 2003, that is, before EY conducted its first audit. This was accepted by both of the Plaintiffs’ witnesses. When it was suggested to Mok Chew Yin in cross-examination that monies over and above the USD5.2 million were taken out in the years prior to 2003, and that the fraud went back well beyond 2003, he agreed it was possible. [140] Dato’ Jeyaraj Ratnaswamy similarly accepted the proposition that most of the shortfall was taken out before

Consistent with those concessions, the shortfall as at 31.12.2004, by which time EY had completed its first CA Audit, was already RM71,187,281. According to BDO, the fraud may have begun as early as 1993, when the Annalong account was first opened with SJAM. Even taking the most conservative view, the evidence is that the great bulk of client assets had been irreversibly dissipated before EY assumed its engagement. EY cannot be held responsible for losses that were already incurred before its engagement began and the Plaintiffs would have suffered the great majority of their loss regardless of any alleged negligence on EY’s part. Third Reason: Sophistication and Concealment of the Fraud [141] The third reason is that the fraud was of such a degree of sophistication and concealment that it went undetected by multiple parties with greater access to SJAM’s books and records than EY, and in those circumstances EY’s failure to detect the fraud is consistent with the exercise of a proper standard of audit care. AA was SJAM’s statutory auditor during the period when the majority of the fraud was perpetrated; it too failed to detect any irregularity. The SC conducted two separate on-site examinations of SJAM, the first in approximately 2002 or early 2003 and the second over seventeen days from 12.8.2009 to 11.9.2009, during which it had access to all of SJAM’s books, records, and personnel; neither examination resulted in the detection of any irregularities, and the SC in fact renewed SJAM’s licence on 17.11.2009 following the conclusion of its second examination. BDO, despite conducting an on-premises examination from 21.4.2010 to 13.5.2010 specifically directed at identifying irregularities, did not detect the fraud and was unable to complete its examination because SJAM failed to produce the requested documents. The reason that none of these parties detected the fraud is that SJAM maintained two sets of books, presented forged custodian statements, and employed deliberate and systematic concealment over a period of many years. In cross-examination, Mok accepted that the example shown to him indicated that SJAM was possibly maintaining two sets of records: So, what we can also conclude from this exercise is that there were two sets of records that SJAM was maintaining, based upon that one example I have shown you, yes? Possible, yes.” [142] In those circumstances, EY’s failure to detect the fraud does not constitute negligence. The Plaintiffs’ Theory of Causation Is Unsupported [143] The Plaintiffs’ theory of causation, namely that EY’s clean audit opinions enabled the fraud to continue and allowed SJAM to attract fresh investment, is not supported by the evidence. As has been found above, the Plaintiffs invested with SJAM on the basis of Tan Whai Onn’s reputation and SJAM’s SC licensing, not on the basis of EY’s audit opinions. Even if EY had issued qualified or adverse opinions, there is no evidence that the Plaintiffs would have seen those opinions, understood their implications, or acted upon them. The Plaintiffs have not identified any mechanism by which a qualified audit opinion would have reached them, still less have they adduced any evidence that they monitored or consulted SJAM’s filed accounts in the course of managing their investments. The Plaintiffs’ suggestion that the mere existence of a clean audit opinion permitted the fraud to persist and grow does not establish the specific causal link that is required in law between EY’s alleged breach and the Plaintiffs’ loss. Legal Causation: The Fraud as Effective Cause and Novus Actus Interveniens [144] Even if factual causation were established (which it is not), legal causation is also not made out. As Harmindar Singh Dhaliwal J (as he then was) stated in MIDF Amanah Investment Bank Berhad v Pesaka Astana (M) Sdn Bhd [2015] MLJU 685: “The law is clear that liability is attributed to the effective cause of the Plaintiff’s loss, and not ‘all possible causes’. The material contribution of the damage needs to be identified.” [145] The English Court of Appeal in Galoo v Bright Grahame Murray [1994] 1 WLR 1360 held, in the context of an auditor’s failure to detect fraud, that even where a breach of duty is established, it does not follow that the auditor is the legal cause of the plaintiff’s losses: “How does the Court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss? The answer in the end is ‘By the application of the Court’s common sense’.” [146] Applying common sense to the facts of this case, the effective and proximate cause of the Plaintiffs’ losses is the fraud perpetrated by Tan Whai Onn and others within SJAM. That fraud constitutes a novus actus interveniens that breaks any causal chain that might otherwise have connected EY’s audit work to the Plaintiffs’ investment losses. The fraud was deliberate, sophisticated, and carefully orchestrated over many years. It involved the collusion of SJAM’s management, the fabrication of documents, and the maintenance of two sets of books. It is not the kind of consequence that falls within the scope of EY’s duty as a statutory auditor. Legal Causation: Scope of Duty [147] In any event, legal causation can only be established if the loss suffered falls within the scope of the defendant’s duty of care. This is the principle articulated by the House of Lords in South Australia Asset Management Corporation v York Montague Ltd [1991] AC 191 (“SAAMCo”): “A plaintiff has to prove both that he has suffered loss and that the loss fell within the scope of the duty. The fact that he cannot recover for loss which he has not suffered does not entitle him to an award of damages for loss which he has suffered but which does not fall within the scope of the valuer’s duty of care.” [148] In Tunku Dato’ Sri Iskandar Tunku Abdullah v Ahmad Kamil Abdullah & Ors [2009] 6 CLJ 359, the High Court applied the SAAMCo principle to the analogous situation of a statutory auditor whose failure to detect a fraud was alleged to have caused losses arising from that fraud, and held: “Considering the factual matrix of the case, I am of the view that the loss suffered and claimed by the plaintiff is not the kind of loss which is attributable to the breach of duty and the negligence of the third defendant in their carrying out of the audit work. There is no causal link between that loss and the third defendant’s breach of duty. In the circumstances, I hold that the said loss/damage suffered by the plaintiff is not claimable from the third defendant.” [149] The present case stands on materially identical facts. EY’s duty as statutory auditor was to express an opinion on SJAM’s financial statements for the benefit of SJAM’s members, and to carry out the agreed-upon procedures prescribed by the SIA Reviews for submission to the SC. Neither engagement was directed at the detection of fraud on client funds held at custodians, nor at the protection of individual investors. The Plaintiffs’ alleged loss, arising from the fraudulent misappropriation of client funds, falls outside the scope of EY’s duty to prevent. EY is not an insurer against the consequences of fraud perpetrated by SJAM’s management. Conclusion on Causation [150] The court accordingly finds that causation has not been established. The Plaintiffs have failed to satisfy either the “but for” test or the requirement of legal causation. The three independent reasons set out above, namely the absence of reliance, the prior dissipation of the overwhelming majority of client assets before EY’s appointment, and the sophisticated and deliberate nature of the fraud that went undetected by multiple parties better placed than EY to have discovered it, each independently defeat the Plaintiffs’ case on causation. Taken together, they lead inevitably to the conclusion that EY’s audit work was not the cause, factual or legal, of the Plaintiffs’ losses. Ground 4: Damages The claim and the parties’ positions [151] The Plaintiffs claim damages of RM54,858,394 in respect of the 1st to 34th Plaintiffs, representing the alleged shortfall of their Trust Assets as at 28.7.2010 after accounting for distributions already made in the course of the liquidation of SJAM. Their primary evidence of loss is the BDO Loss Report dated 6.3.2017, prepared by Mok Chew Yin (PW3), a partner of BDO and one of the joint liquidators of SJAM. EY contests both the adequacy of the Plaintiffs’ evidence of loss and the reliability of the BDO Loss Report. [152] The Plaintiffs submit that the BDO Loss Report provides a systematic and methodical calculation of their losses and that the court may adopt that calculation even in the absence of individual source documents from each plaintiff, relying on the Court of Appeal decision in Lembaga Kemajuan Tanah Persekutuan (FELDA) & Anor v Awang Soh bin Mamat & Ors [2009] 4 MLJ 610. The Plaintiffs further contend that BDO did not rely solely on SJAM’s internal records but conducted independent verification by confirming balances with custodian banks and with the Plaintiffs themselves. They also point to the court-approved distribution order made in the liquidation proceedings, which, they submit, validates both the list of investors and their respective entitlements, and constitutes independent confirmation of the losses claimed. [153] EY submits that the Plaintiffs have failed entirely to produce source documents establishing the existence or amount of their investments with SJAM, and that this failure is fatal to their claim. EY further submits that the BDO Loss Report is inherently unreliable because BDO’s loss calculations were derived from SJAM’s own internal records generated from SJAM’s computer systems, which BDO itself acknowledges were likely manipulated and forged. EY also submits that BDO is not independent by reason of the multiple conflicting roles it simultaneously occupies in these proceedings, and that BDO’s express disclaimer of responsibility for the accuracy of its own calculations renders the report incapable of founding an award of damages. The applicable legal principles [154] The applicable legal principles are well settled. The burden of proving both the fact and quantum of damages lies on the party claiming damages. This was confirmed by the Federal Court in Datuk Mohd Ali Hj Abdul Majid & Anor v Public Bank Bhd [2014] 6 CLJ 269, where the court affirmed the words of Lord Goddard CJ in Bonham-Carter v Hyde Park Hotel (1948) 64 TLR 177 (a statement also cited with approval by Edgar Joseph JR FCJ in Tan Sri Khoo Teck Puat v Plenitude Holdings Sdn Bhd [1992] 3 MLJ 777): “Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and, so to speak, throw them at the head of the court, saying: ‘This is what I have lost, I ask you to give me these damages.’ They have to prove it.” [155] This principle was reaffirmed by the Court of Appeal in CIMB Bank Bhd (formerly known as Southern Bank Bhd) v Goh Ah Thiam [2023] 3 MLJ 764, which stated in unequivocal terms that “the damages must be proved with real or factual evidence. Mere particulars, summaries, estimations or general conclusions will not suffice.” The Plaintiffs’ claim must be assessed against these requirements. Failure to produce source documents [156] Applying those principles, the court finds that the Plaintiffs have entirely failed to prove their damages. [157] Not one of the thirty-five Plaintiffs produced a single source document evidencing the existence or amount of any investment with SJAM. This failure is all the more striking because the evidence establishes that SJAM’s clients regularly received, in the ordinary course, deposit receipts, monthly portfolio valuation statements, securities transaction confirmations, and cash withdrawal confirmations. Indeed, the Plaintiffs’ own fact witnesses admitted in evidence that they had received such documents. Despite this, not a single Plaintiff produced a single deposit receipt, monthly statement, transfer record, or trade confirmation. Even the corporate Plaintiffs, who are legally required to maintain financial records and to prepare audited accounts, produced nothing. There is no explanation for this complete absence of primary documentary evidence. The total failure to produce source documents, without any reasonable explanation, deprives the court of the means to assess whether the Plaintiffs made the investments they allege, in what amounts, and over what periods. EY was equally unable to test the claimed losses without such documents. The Plaintiffs cannot discharge their burden of proof in those circumstances. The BDO Loss Report [158] The BDO Loss Report does not fill this evidentiary gap. BDO’s calculations purport to determine what each Plaintiff was “supposed to hold” in their portfolio with SJAM, by reference to SJAM’s internal records, specifically documents generated from SJAM’s computer systems. This was confirmed by Mok Chew Yin in cross-examination. The calculation is therefore entirely dependent on the accuracy of SJAM’s own internal records. However, as Mok admitted in cross-examination, those records were likely to have been manipulated and forged, and for that reason BDO expressly disclaimed responsibility for their accuracy. The BDO Loss Report states: “Please note that in preparing our report, the primary sources of information were from SJAM’s internal management reports, documents and other records made available to the Liquidators. Therefore, the Liquidators shall not be responsible for the accuracy and reliability of the information derived from the aforesaid sources.” [159] The report further states: “...the Liquidators do not make any representation or give any warranty expressed or implied as to the truth, accuracy or completeness of any information given to the Liquidators in this report or of any information contained in this report.” [160] A report whose authors expressly disclaim responsibility for its accuracy, and which is derived from records the same authors acknowledge to be tainted by manipulation and forgery, cannot provide the foundation for an award of more than RM54 million in damages. The court-approved distribution order relied upon by the Plaintiffs likewise does not assist them. That order addressed distribution among investors and was not directed at EY, which was not a party to it. It does not resolve the fundamental question of whether the Plaintiffs have discharged their burden of proof against EY. BDO’s conflicts of interest [161] Furthermore, BDO itself faces irreconcilable conflicts of interest that preclude it from serving as an independent and impartial source of evidence on the Plaintiffs’ losses. Mok Chew Yin confirmed in cross-examination that BDO simultaneously occupies three conflicting roles in these proceedings: first, as independent auditor appointed by the SC to examine SJAM’s accounts and report to the SC; secondly, as the court-appointed liquidator of SJAM acting as an officer of the court and as a representative of SJAM (including as a party to an arbitration claim brought against EY that has been stayed); and thirdly, as the witness quantifying the Plaintiffs’ losses in this civil suit. These roles are structurally incompatible. A party who owes duties to the court as liquidator of SJAM, and who has a stake in an arbitration against EY, cannot at the same time serve as an independent witness quantifying the losses of the Plaintiffs against EY. [162] The incompatibility of these roles produces specific and concrete conflicts. BDO is simultaneously acting for directly opposing interests in the same suit: as liquidator it represents SJAM, which has pleaded in its Defence that it denies liability to the Plaintiffs for the losses alleged, whilst also giving evidence on behalf of the Plaintiffs to establish those very losses against SJAM. Furthermore, in its capacity as liquidator, BDO is a party to an arbitration against EY for alleged breaches of duties, yet purports at the same time to give impartial evidence in support of the Plaintiffs’ claim against EY in these proceedings. Mok Chew Yin confirmed in cross-examination that he had not informed or sought directions from the winding-up court before assisting the Plaintiffs in their claim against SJAM. He also confirmed that no conflict check was documented before accepting the Plaintiffs’ retainer. There was no acknowledgment in BDO’s engagement letter with the Plaintiffs of BDO’s overriding duty to the court as its officer. BDO’s evidence cannot in these circumstances be treated as independent. Inadequacy of BDO’s own procedures [163] The deficiencies in the BDO Loss Report are compounded by the inadequacy of BDO’s own procedures in preparing it. Mok Chew Yin confirmed in cross-examination that the loss calculations were performed entirely by members of his staff, none of whom was called to give evidence in these proceedings. He confirmed that he did not personally check the calculations: Verified by you? Or do you just depend on the person who is doing it? I believe my team have done it right.” [164] He further confirmed that he had not personally verified any of the source documents used by his team to prepare the calculations: But you can confirm to His Lordship that you did not check any of the source documents that were used to prepare these tables, correct? Personally. Personally, no.” [165] BDO did not request source documents from the Plaintiffs to verify the portfolio balances independently, and did not require statutory declarations from the Plaintiffs confirming the accuracy of the figures. BDO’s purported “confirmation” with the Plaintiffs amounted to no more than sending letters to the Plaintiffs asking whether they agreed with the balances as derived from SJAM’s own records. This procedure could not verify the accuracy of the underlying figures; it could only confirm that the Plaintiffs did not object to them. These are not the procedures of a reliable independent assessment of loss. Distinguishing the Felda case [166] The Plaintiffs rely on the Felda case for the proposition that systematic calculations may be accepted even without full documentary evidence from each plaintiff. In that case, the Court of Appeal (Putrajaya), comprising James Foong FCJ, Abdull Hamid Embong JCA and Abdul Malik Ishak JCA, held that, in the face of adequate and comprehensive oral testimony by PW3 who had systematically and methodically worked out the amount of losses, the court was not inclined to disturb the finding of the trial judge notwithstanding the absence of documentary evidence from each plaintiff. That case is clearly distinguishable from the present. As submitted by EY, in the Felda case, there was no issue of fabricated documents, no two sets of books, no fundamental unreliability in the underlying records, and no express disclaimer by the witness as to the accuracy of the calculations. None of those features obtains in the present case. In contrast, the BDO Loss Report expressly disclaims responsibility for the accuracy of its calculations, and BDO’s witness admitted in evidence that BDO relied on internal documents that were tainted by manipulation and forgery. Furthermore, the calculations were not performed by the witness himself. The Felda case provides no support for accepting the BDO Loss Report as proof of the Plaintiffs’ losses in these circumstances. Conclusion on damages [167] The court accordingly finds that the Plaintiffs have failed to prove their loss and damage. They have produced no source documents, no reliable independent evidence, and have relied solely on a report that expressly disclaims the accuracy of its own calculations and is derived from records acknowledged to be tainted by manipulation and forgery, prepared by a party whose multiple conflicting roles preclude it from serving as an independent witness, and whose calculations were not personally verified by its own representative. The conclusion is that, even if EY had been liable (which it is not), the Plaintiffs’ claim for damages would in any event fail. ADDRESSING THE ISSUES TO BE TRIED [168] The court will now expressly address the eleven Issues to Be Tried as agreed between the Plaintiffs and EY. Issue 1 [169] Issue 1 is set out as follows: Whether the 1st Defendant owed an express and/or implied duty of care and/or statutory duty to the Plaintiffs as set out in paragraphs 21(B), 22, 23, 24, and 25 of the Amended Statement of Claim dated 13.9.2016 (“Amended Statement of Claim”)? [170] This is answered in the negative. For the reasons set out above, neither the common law nor any relevant statute imposed a duty of care on EY in favour of the Plaintiffs. Issue 2 [171] Issue 2 is set out as follows: Whether the 1st Defendant would have had, or ought to have ensured that it had, full and unrestricted access to all accounting and other material records of the 4th Defendant in the manner pleaded in paragraphs 27 and 28 of the Amended Statement of Claim? [172] This issue does not determine liability given the finding on duty of care. In any event, the evidence does not establish that EY was denied access to documents that it requested and was entitled to see within the scope of its engagement. Issue 3 [173] Issue 3 is set out as follows: Whether the 1st Defendant had knowledge or ought to have known that (a) the clients of the 4th Defendant would rely on the 1st Defendant to carry out its duties and obligations with appropriate care, skill, diligence and professionalism; and (b) the clients of the 4th Defendant would suffer loss as a result of any negligence, fraud or irregularity in the conduct of the 4th Defendant’s licensed fund management business, as pleaded in paragraph 29 of the Amended Statement of Claim? [174] While it was foreseeable in a general sense that fund managers have clients, foreseeability alone is insufficient to establish the requisite proximity under the Federal Court’s authorities. The specific elements of assumption of responsibility and actual reliance are absent. Issue 4 [175] Issue 4 is set out as follows: Whether the audit reports pursuant to the Companies Act (“CA Audit Reports”) and the review reports pursuant to the Securities Industry Act 1983 (“SIA Review Reports”) were prepared for specific statutory purposes as specified in paragraph 5 of the 1st Defendant’s Re-Amended Defence dated 17.11.2020 (“1st Defendant’s Re-Amended Defence”)? [176] This is answered in the affirmative. The CA Audit Reports were prepared pursuant to the CA for the purpose of reporting to SJAM’s members as a body. The SIA Review Reports were prepared pursuant to the SIA and the SIA Regulations 1996 as agreed-upon procedures for submission by SJAM to the SC. Neither was intended for, or addressed to, the Plaintiffs. Issue 5 [177] Issue 5 is set out as follows: Whether the Plaintiffs passively and/or indirectly relied upon the clean and unqualified nature of the CA Audit Reports, SIA Review Reports and SIA Supplementary Statements over the relevant financial years as pleaded in paragraph 30(l) of the Amended Statement of Claim, and if so, whether such reliance was unreasonable as pleaded in paragraph 14 of the 1st Defendant’s Re-Amended Defence? [178] The court finds that the Plaintiffs did not rely on EY’s reports whether passively, indirectly, or otherwise. This is established conclusively by the evidence of Tan Chin Yong (PW1). In any event, passive or indirect reliance is insufficient under Malaysian law to establish proximity. Issue 6 [179] Issue 6 is set out as follows: Whether, as a result of the 1st Defendant’s alleged failures as pleaded in paragraph 30(II) of the Amended Statement of Claim, the Plaintiffs remained ignorant of the alleged pervasive fraud and/or continued to instruct the 4th Defendant to make fresh investments in ignorance of the alleged fraud as pleaded in paragraph 30(IV) of the Amended Statement of Claim? [180] This is not established. The Plaintiffs did not make investment decisions by reference to EY’s audit opinions. There is no evidential basis for concluding that the Plaintiffs would have read or acted upon qualified or adverse audit opinions had EY issued them. Issue 7(a) [181] Issue 7(a) is set out as follows: Whether the 1st Defendant

breached its duties and obligations as pleaded in paragraphs 31.1 to 31.5 of the Amended Statement of Claim; and [182] This is answered in the negative. For the reasons set out in the analysis of the standard of care, the Plaintiffs have not proved breach by EY of any relevant duty. Issue 7(b) [183] Issue 7(b) is set out as follows: Whether the 1st Defendant

can be held liable for negligence for failing to detect the alleged fraud on the trust funds managed by the 4th Defendant in circumstances where the alleged fraud was concealed by collusion within the 4th Defendant’s management and/or where both the SC and BDO were unable to detect such alleged fraud when examining the 4th Defendant’s books and records, as pleaded in paragraphs 14A to 14D of the 1st Defendant’s Re-Amended Defence? [184] This is answered in the negative. The fraud was sophisticated and well-concealed. AA, the SC in two separate examinations, and BDO in a three-week on-premises examination all failed to detect it. EY’s failure to detect the fraud does not establish negligence. Issue 8 [185] Issue 8 is set out as follows: Whether the Plaintiffs invested with the 4th Defendant in reliance on the fact that the 4th Defendant was investigated and licensed by the SC, and not in reliance on the CA Audit Reports or the SIA Review Reports, as pleaded in paragraph 14 of the 1st Defendant’s Re-Amended Defence? [186] This is answered in the affirmative. The evidence of Tan Chin Yong (PW1) establishes that the Plaintiffs relied on Tan Whai Onn and on the fact that SJAM held an SC licence, and not on EY’s audit reports. Issues 9, 9.1 and 9.2 [187] Issues 9, 9.1 and 9.2 are set out as follows: Whether the Plaintiffs suffered loss and damage arising from the alleged breach of the duty of care and/or statutory duty by the 1st Defendant as pleaded in paragraph 32 of the Amended Statement of Claim?

9.1: To the extent that the Plaintiffs suffered loss and damage as alleged, whether such loss and damage was caused by the 1st Defendant or fell within the 1st Defendant’s scope of duty to avoid or prevent, as denied in paragraph 37 of the 1st Defendant’s Re-Amended Defence?

9.2: To the extent that the Plaintiffs incurred loss and damage as alleged, whether such loss and damage was caused or contributed to by their own negligence as pleaded in paragraph 15 of the 1st Defendant’s Re-Amended Defence? [188] In view of the findings on duty, breach, and causation, these issues do not arise. The Plaintiffs have not proved that EY caused their loss. The court further notes that the Plaintiffs are sophisticated investors who had the means and contractual right to request a fund audit but did not do so. Issue 10 [189] Issue 10 is set out as follows: Whether the Plaintiffs’ claims in respect of the 1st Defendant’s engagements prior to and including the financial year ended 31.12.2004 are statute-barred under the Limitation Act 1953 as pleaded in paragraph 16 of the 1st Defendant’s Re-Amended Defence? [190] This issue does not require determination given the dismissal of the claim in its entirety. The court notes, however, that the limitation point has force, given that the suit was commenced on 23.7.2012 and the applicable limitation period under section 6 of the Limitation Act 1953 is six years. Issue 11 [191] Issue 11 is set out as follows: Whether, in view of the possibility that other clients of the 4th Defendant besides Annalong may have been involved in the alleged fraud, the Plaintiffs are not entitled to any damages absent strict proof of the fact and amount of investments made and/or funds deposited with the 4th Defendant and the quantum of loss allegedly suffered by each Plaintiff, as pleaded in paragraph 17 of the 1st Defendant’s Re-Amended Defence? [192] This is answered in the negative. The absence of any source documents from any of the thirty-five Plaintiffs, combined with the inherent unreliability of the BDO Loss Report and BDO’s express disclaimers of accuracy, means that damages have not been proved. Claims Against the 2nd, 3rd, and 4th Defendants [193] The Issues to Be Tried as between the Plaintiffs and SJAM are: a) Whether the 4th Defendant owed the Plaintiffs a fiduciary duty, as trustee, to manage and deal with the Plaintiffs’ funds and financial investments placed with the 4th Defendant, as described in paragraph 16 of the Amended Statement of Claim? b) If the answer to Issue 1 is in the affirmative, whether the 4th Defendant breached the fiduciary duty in the manner particularised in paragraph 17 of the Amended Statement of Claim or otherwise? c) Whether the Plaintiffs suffered loss and damage resulting from the 4th Defendant’s breach of fiduciary duty, in the manner particularised in paragraph 17 of the Amended Statement of Claim or otherwise? [194] On 28.11.2025, when the decision of the court was given, SJAM through its counsel Michelle Louis indicated that it had no objection to judgment being entered against it. The facts as found by this court plainly establish that SJAM, as a licensed fund manager holding client assets in a fiduciary capacity, owed the Plaintiffs such a duty, that SJAM through Tan Whai Onn and others breached that duty by misappropriating client funds over many years, and that the Plaintiffs suffered loss as a consequence. Judgment is accordingly entered against SJAM in favour of the Plaintiffs. [195] Tan Whai Onn (2nd Defendant) and Annalong (3rd Defendant) did not enter appearances, did not file defences, and did not appear at the trial or on 28.11.2025. The evidence before the court, including BDO’s findings that Tan Whai Onn perpetrated the fraud and used the Annalong account as its central vehicle, establishes the liability of both. Judgment is accordingly entered against both. CONCLUSION AND ORDER [196] For all the reasons set out in these grounds of judgment, the court makes the following orders: a) The Plaintiffs’ claim against the 1st Defendant (Ernst & Young) is dismissed in its entirety. The claim fails on each of four independent grounds: EY owed no duty of care to the Plaintiffs; even if a duty existed, the Plaintiffs have not proved breach of the applicable standard of care; even if breach were established, causation has not been proved; and in any event the Plaintiffs have not proved their damages. b) Costs of RM400,000 are awarded to EY, to be borne jointly and severally by the Plaintiffs, save for the 35th Plaintiff who is deceased, subject to allocator fees. In fixing costs at this figure, the court has regard to: the twenty-seven days of trial; the multiple interlocutory applications in which costs were ordered in the cause; the complexity and length of the proceedings; and the costs quantification principles discussed in Amtrustee Berhad & Ors v Aldwich Berhad & Ors [2018] MLRHU 206 (HC). c) Judgment is entered against the 2nd Defendant (Tan Whai Onn) in favour of the Plaintiffs. Costs of RM20,000 are awarded against the 2nd Defendant, payable to the Plaintiffs, save for the 35th Plaintiff who is deceased. d) Judgment is entered against the 3rd Defendant (Annalong) in favour of the Plaintiffs. Costs of RM20,000 are awarded against the 3rd Defendant, payable to the Plaintiffs, save for the 35th Plaintiff who is deceased. e) Judgment is entered against the 4th Defendant (SJ Asset Management Sdn Bhd, in liquidation) in favour of the Plaintiffs, with no objection from that Defendant. Costs of RM20,000 are awarded against the 4th Defendant, payable to the Plaintiffs, save for the 35th Plaintiff who is deceased. f) The 35th Plaintiff, Velappan Palaniappan, who is deceased, is excluded from all costs orders. 6 March 2025 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiffs: Fiona Bodipalar, Allan Ng, Hanna Mathews and Tirasak Chua (Messrs Bodipalar & Partners) For the 1st Defendant: Gopal Sreenevasan, Kelvin Seet Wan Nam, Lim Lay Yee and Lee Yie Shyuan (Messrs Cheang & Ariff) For the 4th Defendant: Michelle Louis (Messrs Lee Hishamuddin Allen &