On 1 April 2022, the Federal Court unanimously dismissed an appeal by three former directors of Cepatwawasan Group Berhad (“Company”), affirming the decision of the Court of Appeal dated 13 February 2017 which found the said former directors to be in contempt of Court for failing to comply with the terms of a Kuala Lumpur High Court Order dated 1 July 2016 (read together with the Court of Appeal Order dated 13 February 2017).¹ Under the terms of the said Order, the former directors were required to restore the total amount of RM 16 million which they wrongfully caused to be paid out by a subsidiary of the Company in breach of the prohibition against financial assistance under the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). In upholding the finding of contempt, the Federal Court granted a further three months for the former directors to comply with the relevant Orders, failing which the former directors will face up to five years imprisonment.
 
This article discusses the events that took place and examines the judgment of the Federal Court.
 
FACTS
 
The Company is listed on the Main Market of Bursa Malaysia. The Appellants were directors of the Company at the material time until they were removed on or around 6 August 2004.
 
Shortly before their removal, the Appellants had caused the Company’s wholly-owned subsidiary, Prolific Yield Sdn Bhd to make payments totalling RM 13 million to a company called Opti Temasek Sdn Bhd, and another RM 3 million to one Sheikh Abdul Rahim, who was the 1^st Appellant’s driver at the material time. These payments were in breach of the financial assistance provisions in paragraphs 8.3, 8.23 and 16.10 of the MMLR at the material time.
 
On 13 October 2005, Bursa Malaysia’s Listing Committee found that the Appellants had breached the MMLR and imposed various penalties on the Appellants (“the Penalties”). The Appellants’ appeal to Bursa Malaysia’s Appeals Committee was dismissed on 12 June 2006.
 
THE APPELLANTS’ JUDICIAL REVIEW PROCEEDINGS
 
Subsequently, the Appellants filed judicial review proceedings vide Kuala Lumpur High Court Judicial Review Application No. R1-25-270-2006 (“Judicial Review Proceedings”) to challenge the decision of Bursa Malaysia’s Appeals Committee. On 18 January 2010, the High Court dismissed the Judicial Review Proceedings.
 
The Appellants appeal to the Court of Appeal against the High Court’s decision was dismissed on 19 March 2013. There was no further appeal to the Federal Court.
 
THE APPLICATION UNDER SECTION 360 OF THE CAPITAL MARKETS AND SERVICES ACT 2007
 
On 25 May 2010, Bursa Malaysia, pursuant to Section 360 of the Capital Markets and Services Act 2007 (“CMSA”), filed Originating Summons No. D-24MCC-168-2010 to seek Court Orders to enforce the Penalties against the Appellants. On 28 December 2010, the High Court granted  the orders sought by Bursa Malaysia in the Originating Summons (“High Court Order”). An oral application by the Appellants for a stay of execution was also dismissed.
 
The Appellants subsequently appealed to the Court of Appeal against the High Court Order through Civil Appeal No. W-02-(NCC)-89-2011. This appeal was dismissed on 16 August 2012. In dismissing the appeal, the Court of Appeal varied the High Court Order to provide that all the payments and acts stated in the High Court Order be carried out within 30 days of the date of the Court of Appeal Order (“Section 360 CMSA Order”).
 
Aggrieved with the Court of Appeal’s decision, the Appellants filed an application to the Federal Court for leave to appeal against the Section 360 CMSA Order through Federal Court Civil Application No. 08(i)-702-09/2012. This application was dismissed by the Federal Court on 28 February 2013.
 
In gist, the relevant terms of the High Court Order dated 28 December 2010 (as varied by the Court of Appeal Order dated 16 August 2012) states that within 30 days of the Court of Appeal Order: 

THE COMMITTAL PROCEEDINGS
 
The Appellants failed to comply with the terms of the relevant Court Orders. Accordingly, Bursa Malaysia obtained leave to commence committal proceedings against the Appellants on 4 November 2014.
 
On 24 March 2016, the High Court granted the committal order (“Committal Order”), stating, among others, that:
 
“[Bursa Malaysia] had proven its case for the order of committal. There are as clearly seen two courts’ orders from the High Court and Court of Appeal which were not obeyed by the said Applicants. No reasons were given why these orders were not complied by the said Applicants. In fact, there is no dispute these orders were not obeyed”.
 
Accordingly, on 1 July 2016 the High Court imposed the following sentence on the Appellants: 

The Appellants appealed to the Court of Appeal on 26 July 2016, while Bursa Malaysia filed a cross-appeal on 15 September 2016 against the sentence imposed by the High Court. On 13 February 2017, the Court of Appeal dismissed the Appellants’ appeal and allowed Bursa Malaysia’s cross-appeal. The Court of Appeal ordered the Appellants to comply with the Section 360 CMSA Order within three months from 13 February 2017, failing which: 

On 16 October 2017, the Appellants were granted leave to appeal to the Federal Court on three  questions of law:
 
Question 1: Where there is a non-compliance of an order for the refund of monies which is a money judgment and not a judgment requiring performance of an act, whether a court can find that there is contempt for the said non-compliance.
 
Question 2: Where proceedings are commenced for orders under section 360 of the CMSA against a bankrupt, whether Bursa Malaysia is obliged to obtain leave pursuant to section 8(1) of the Bankruptcy Act 1967 (“BA 1967”); and
 
Question 3: Where committal proceedings are commenced to enforce an order made under section 360 of the CMSA against a bankrupt whether the applicant is obliged to obtain leave pursuant to section 8(1) of the BA 1967.
 
On 1 April 2022, the Federal Court dismissed the Appellants’ appeal. In doing so, the Federal Court found that the three questions of law posed did not relate to a matter determined by the Courts below and therefore declined to answer the questions posed (see The Minister of Human Resources v. Thong Chin Yoong And Another Appeal [2001] 4 MLJ 225 and Raphael Pura v. Insas Bhd & Anor [2003] 1 MLJ 513).
 
The summary of the grounds of the Federal Court are as follows:
 
Question 1
 
At the outset, the Federal Court recognised that the central issue relates to compliance with the Section 360 CMSA Order.
 
Before deciding this issue, the Federal Court considered the scope of the Section 360 CMSA Order upon which the Committal Order was premised. The Federal Court acknowledged that Bursa Malaysia, as the frontline regulator of the Malaysian capital market, is tasked with maintaining the integrity of the Malaysia’s stock exchange by ensuring compliance with the listing requirements and proper governance. The Federal Court held that Bursa Malaysia had clearly found the Appellants’ conduct in causing Prolific Yield Sdn Bhd to make payments to Opti Temasek Sdn Bhd and Sheikh Abdul Rahim were in breach of the financial assistance provisions in the MMLR. Hence, the Section 360 CMSA Order against the Appellants.
 
The Federal Court recognised that the issue of whether the Section 360 CMSA Order is a monetary judgment which was befitting for committal proceedings to be instituted was not raised in the Courts below. Given that the Judges in the Courts below had not addressed their minds to this issue, the Federal Court opined that it would be presumptuous to guess what the Judges would have decided. In simple terms, Question 1 did not relate to a matter in respect of which a determination has been made by the Court of Appeal or the High Court (see Meidi-Ya-Co Ltd, Japan & Anor v. Meidi (M) Sdn Bhd [2009] 2 MLJ 14, The Minister for Human Resources v. Thong Chin Yong and another appeal [2001] 4 MLJ 225 and Tan Heng Chiew & Ors v. Tan Kim Hor & Ors [2006] 5 MLJ 313).
 
Further, the Federal Court noted that the Appellants under the guise of Question 1 tried to argue that the Section 360 CMSA Order can be challenged collaterally and sought to introduce the following arguments which are outside the scope of this appeal, and were in fact premised on  questions of law which the Federal Court had on 16 October 2017 declined to grant leave on: 

The Federal Court held that as the Federal Court had previously declined to grant leave on these issues, the Appellants were prohibited from raising the same pursuant to Rule 47 of the Rules of the Federal Court 1995 and the Federal Court’s decision in Spind Malaysia Sdn Bhd v. Justrade Marketing Sdn Bhd & Anor [2018] 4 CLJ 705.
 
Further, the Federal Court concluded that Question 1 was essentially a collateral attack on the Section 360 CMSA Order, in particular on whether the High Court and Bursa Malaysia have the authority and jurisdiction to order restitution. The Federal Court found that the High Court has such authority and jurisdiction, but did not make a ruling on Bursa Malaysia’s contention that it had the same powers, as the Federal Court was of the view that it was superfluous for the Appellants to raise this issue as the High Court has already issued the Section 360 CMSA Order. The Federal Court also held that it was trite law that an order of court cannot be collaterally attacked in a separate proceedings without it being set aside (see Ann Joo Steel Bhd v. Pengarah Tanah Dan Galian Negeri Pulau Pinang & Anor and another Appeal [2020] 1 MLJ 689 and Tenaga Nasional Bhd v. Bandar Nusajaya Development Sdn Bhd [2017] 1 MLJ 689).
 
The Federal Court accordingly declined to answer Question 1.
 
Question 2
 
This question only relates to the 1^st Appellant as he was already adjudged a bankrupt at the time the Section 360 CMSA Order was made. Here the Federal Court noted that the 1^st Appellant had failed to disclose his bankruptcy status during the judicial review, and the proceedings concerning the Section 360 CMSA Order, and did not seek sanctions to appoint solicitors to represent him in the said proceedings.
 
The Federal Court agreed with Bursa Malaysia’s submissions that this question also essentially seeks to challenge the validity of Section 360 CMSA Order. The Federal Court observed that as the current appeal related to the determination of the compliance with the Committal Order it was not for the Court to consider whether the Section 360 CMSA Order was valid or not. As this issue was not addressed at all in the Courts below, the Federal Court took the view that it was not for them to reverse a decision on an issue which was never raised, canvassed, or addressed at the Courts below. The Federal Court found that Question 2 was also a collateral attack on the Section 360 CMSA Order. The 1^st Appellant had exhausted all avenues to challenge validity of the Section 360 CMSA Order and failed. Hence the Section 360 CMSA Order remains valid and binding. (see Ann Joo Steel Bhd v. Pengarah Tanah Dan Galian Negeri Pulau Pinang & Anor and another Appeal [2020] 1 MLJ 689).
 
The Federal Court accordingly declined to answer Question 2.
 
Question 3
 
Question 3 relates to Section 8(1) of the BA 1967 and is only applicable to the 1^st and 3^rd Appellants who were adjudged bankrupts at the time the Committal Order was made. Section 8(1) of the BA 1967 provides amongst others that “…no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall proceed with or commence any action or other legal proceeding in respect of such debt unless with the leave of the court and on such terms as the court may impose”.
 
The Federal Court found that Section 8(1) applies to a creditor with a debt provable in bankruptcy under Section 40 of the BA 1967, and that Bursa Malaysia was not a creditor in this sense. The Section 360 CMSA Order which directs the Appellants to restore monies to the Company does not create a creditor-debtor relationship provable in bankruptcy as set out in Section 40 of the BA 1967. Hence Section 8(1) of the BA 1967 had no application whatsoever.
 
The Federal Court accordingly declined to answer Question 3.
 
COMMENTS

This is one of only two reported Federal Court decisions involving Bursa Malaysia. The decision is significant as it re-affirms the functions of Bursa Malaysia as a frontline regulator against market participants who breach the listing requirements of Bursa Malaysia.
 
This decision is interesting as the Federal Court found that the Section 360 CMSA Order, which directs the Appellants to restore a sum amounting to RM 16 million to the Company, does not create a debt provable in bankruptcy under Section 8(1) read together with Section 40 of the BA 1967. This is as Bursa Malaysia did not stand as a creditor and/or was not entitled to receive the said RM 16 million. However, a distinction should be drawn with fines imposed by the Listing Committee and/or Appeals Committee of Bursa Malaysia which is a debt owing by the said persons to Bursa Malaysia pursuant to Rule 16.28 of the MMLR.
 
The judgment is also significant as the Court has emphasised the long and established principle of law that a valid and binding court order must be obeyed unless it is set aside by proceedings brought specifically for that purpose, and that the order cannot be collaterally attacked in separate and ancillary proceedings.
 
Bursa Malaysia Securities Berhad was represented by Preetha Pillai (Partner), Nimalan Devaraja (Partner) and Muhammad Suhaib bin Mohamed Ibrahim (Senior Associate) of Skrine.
 
Case summary by Nimalan Devaraja (Partner) and Muhammad Suhaib bin Mohamed Ibrahim (Senior Associate) of Skrine. 

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