CASE OF THE WEEK

The plaintiffs were the minority shareholders in Palmco Holdings Berhad ('Palmco'). Between March and June of 1997, the defendants acquired 33.078% of the issued share capital of Palmco. Under Rule 34.1 of the Malaysian Code on Take-Overs and Mergers 1987 ('the Code') any person who, either by himself or together with others acting in concert with him, acquired shares constituting more than 33% of the voting rights in a company was required to make a Mandatory General Offer ('MGO') to purchase the remaining voting shares in that company. The plaintiffs alleged the defendants acted in concert in acquiring the shares and urged the Securities Commission ('SC') to investigate the matter. After seeking explanations from the first and second defendants with regard to the first set of acquisitions made by them, the SC ruled they had breached s. 6(4) of the Code and issued them a public reprimand. The defendants were also required to undertake the MGO but they failed to do so. Under the prevailing legislation at the time, the SC was unable to enforce compliance with the Code. The plaintiffs' attempt to obtain a mandamus order from the High Court against the SC to direct the defendants to undertake the MGO also failed because there was no legislation then that allowed for the grant of such relief. The plaintiffs then filed the instant suit claiming that they had suffered losses as a result of the defendants' failure to undertake the MGO and prayed for damages. The issue that arose for consideration was whether
ss. 33A(9) and (10) of the Securities Commission Act 1993 ('the Act') read together with the Code conferred on the plaintiffs a private law cause of action in tort against the defendants for damages for breach of statutory duty.

Held (dismissing the claim with costs):

(1) The Act and the Code did not confer on the plaintiffs a private right of action against the defendants in tort for damages for breach of statutory duty. (para 88)

(2) Section 33A(9) of the Act envisaged that where proceedings premised on some other cause of action had been instituted, the non-compliance (with the statutory duty) may be used as evidence in those proceedings. The words in the section do not appear to suggest that the fact of non-compliance in itself comprised a basis for a cause of action in tort. (para 72)

(3) While the Code and hence the regulatory provisions were enacted for the benefit of a sub-class of investors such as the plaintiffs, that in itself was insufficient to warrant the conclusion that such a cause of action was conferred by the particular statute. (para 75)

(4) The loss claimed to have been suffered by the plaintiffs (if at all) was either not incurred, or arose as a result of matters other than the breach of the statutory obligation by the defendants. Accordingly, the plaintiffs were not entitled to any damages. (paras 87 & 88)

(5) As the defendants had not, at any stage, challenged the SC's decision that r. 34 of the Code had been breached, the court could not, in the trial, on the ground of estoppel, consider and adjudicate upon the basket of defences put forward by the defendants in an attempt to launch a collateral attack against the SC's decision, more so when the SC was not a party to the proceedings. (paras 91, 92 & 97)

Case(s) referred to:

Asia Commercial Finance (M) Berhad v. Kawal Teliti Sdn Bhd [1995] 3 CLJ 783 SC (refd)

Aun Huat & Brothers Sdn Bhd & Ors v. Sime Darby Bhd & Anor [2003] 8 CLJ 32 HC (dist)

Chin Yew Loy Holdings Sdn. Bhd. lwn. AU Metalvest Malaysia Sdn Bhd [2002] 6 CLJ 141 HC (dist)

Cutler v. Wandsworth Stadium Ltd [1949] AC 398 (refd)

Doe d Bishop of Rochester v. Bridges [1831] 1 B & Ad 847 (refd)

Ex parte Island Records Ltd [1978] 1 Ch 122 (refd)

Extreme System Sdn Bhd v. Ho Hup Construction Company Bhd & Ors [2010] MLJU 486 (refd)

Fytche v. Wincanton Logistics plc [2004] 4 All ER (refd)

Gorris v. Scott [1874] LR Ex 125 (refd)

Henderson v. Henderson [1843] 3 Hare 100 (refd)

Hewitson v. Hewitson [1995] 1 All ER 472 (refd)

Lonrho Ltd v. Shell Petroleum Co Ltd (No 2) [1982] AC 173 (refd)

Melton Medes Ltd and Another v. Securities and Investments Board [1995] 3 All ER 880 (foll)

Monk v. Warbey [1935] 1 KB 75 (refd)

Petaling Tin Bhd v. Lee Kian Chan & 2 Ors [1994] 2 CLJ 346 SC (dist)

Phillips v. Britannia Hygienic Laundry Co Ltd [1923] 1 KB 539 (refd)

Regina v. Deputy Governor of Parkhurst Prison And Others, Ex parte Hague & Weldon Respondent and Home Office Respondent (conjoined appeals) [1992] 1 AC 58 (refd)

Smith v. Linskills (a firm) [1996] 2 All ER 353 (refd)

Tan Chye Choo & Ors v. Chong Kew Moi [1965] 1 LNS 176 FC (refd)

X (Minors) v. Bedforshire CC [1995] 3 WLR 152 (refd)

Legislation referred to:

Companies Act 1965, s. 179(3), (7)(A)

Malaysian Code on Take-Overs and Mergers 1998, s. 6(4)

Motor Vehicles (Construction and Use) Rules 1959, r. 94

Securities Commission Act 1993, s. 33(9), 33(10), 33A(9), 33A(10), 33D(1), (6), (7), (8), (9)

Securities Industry Act 1983, s. 46

For the plaintiff - Robert Lazar (Lai Wai Fong with him); M/s Shearn Delamore & Co

For the 1st defendant - Rutheran; M/s R Sivagnanam & Assoc

For the 2nd defendant - M Pathmanathan; M/s M Pathmanathan & Co

For the 3rd defendant - Loh Siew Cheang (Brian Foong with him); M/s Cheang & Ariff

Reported by Ashok Kumar