On 7 March 2024, the High Court, in Suriati binti Mohd Yusof v CTOS Data Systems Sdn Bhd [2024] MLJU 437 held, inter alia, that a credit reporting agency (“CRA”) registered under the Credit Reporting Agencies Act 2010 (“the Act”) is “just supposed to be a repository of credit information to which the subscribers have access to.” The High Court further opined that “there is no provision in (the Act) empowering the Defendant to create its own criteria or percentage to formulate a credit score.” This decision undoubtedly raised grave concerns among CRAs, and users of services provided by CRAs as the provision of credit scores is part and parcel of credit information provided by CRAs to their customers.
 
The Defendant, CTOS Data Systems Sdn Bhd, appealed the decision of the High Court to the Court of Appeal.
 
On 9 August 2024, the Court of Appeal issued its judgment in CTOS Data Systems Sdn Bhd v Suriati binti Mohd Yusof (Civil Appeal No: W-02(NCvC)(W)-230-02/2024), allowing the Defendant’s appeal on the grounds explained below.
 
Brief Facts
 
The Plaintiff is at all material times a director and shareholder of a company that operated a beach resort, whilst the Defendant is a CRA registered under the Act.
 
Webe Digital Sdn Bhd (“Webe”) is a subscriber to the services of the Defendant which permits Webe to upload information on debts owed to Webe by third parties in a section known as “trade reference” in the Defendant’s credit information database.
 
The Plaintiff subscribed for internet services provided by Webe. Webe alleged that the Plaintiff had defaulted in payment of monthly subscription fees amounting to RM2,186.60. Webe then lodged information of the Plaintiff’s alleged indebtedness on the Defendant’s database.
 
Sometime in 2019, the Plaintiff’s application for a car loan was rejected. The Plaintiff discovered that the data in her credit report issued by the Defendant included her alleged indebtedness to Webe. The Plaintiff denied owing Webe any money and alleged that this information was inaccurate. She also alleged that the inaccurate information and low credit score assigned to her by the Defendant by reason of the alleged indebtedness to Webe had resulted in financial institutions losing confidence in her and resulted in her suffering personal and business losses.
 
As a result, the Plaintiff commenced proceedings for negligence and defamation against the Defendant in the High Court.
 
Decision of the High Court
 
The High Court examined the role and obligations of the Defendant under the Act and held that the Defendant’s primary role is to collect, record, store and disseminate credit information to its subscribers. However, the High Court dismissed the Defendant’s contention that the recipient of the information has a duty to independently verify the credit information as unfounded and unsubstantiated. The Court held that the Act empowered CRAs, such as the Defendant, to provide accurate credit information to facilitate financial agencies in approving and disbursing financial aid to an applicant. The High Court concluded that the Defendant therefore owed a duty of care to provide accurate credit information not only to the financial institutions but also to persons in respect of whom the information relates to. The Defendant was found to have breached this duty of care by failing to verify inaccurate credit information after being notified by the Plaintiff, which resulted in personal losses.
 
Notably, the High Court ruled that there is no provision in the Act that empowers the Defendant to formulate a credit score or to create its own criteria or percentage to formulate a credit score. According to the learned High Court Judge, the Defendant was just supposed to be a repository of the credit information to which the subscribers have access to. After trial, the High Court allowed the Plaintiff’s claim against the Defendant and awarded the Plaintiff general damages of RM200,000.00 along with interest and costs.
 
Our case note on the High Court’s decision can be read here.
 
Main Issues for Determination by the Court of Appeal
 
According to the Court of Appeal, the main issues for determination in the appeal included the following: 

 Decision of the Court of Appeal
 
After perusing the learned High Court Judge’s grounds of judgment, the notes of proceedings and the submissions by the respective parties in the High Court, the Court of Appeal, by a unanimous decision, allowed the Defendant’s appeal and set aside the order of the High Court.
 
Key Findings
 
The Defamation Claim
 
According to the Court of Appeal, it does not appear in the grounds of judgment that the High Court had granted damages based on defamation but rather on negligence and breach of statutory duty. The appeal court noted that the Plaintiff had admitted to filing a separate defamation suit against Webe in the Sessions Court, where she claimed that she was not indebted to Webe. However, during cross-examination in the High Court, the Plaintiff repeatedly admitted that she was in fact indebted to Webe. The Sessions Court Judge had also found strong evidence of her indebtedness to Webe, which was not contested on appeal.
 
The Court of Appeal said it was trite law that truth or justification is an absolute defence to a libel action. As the Sessions Court Judge’s decision in the defamation suit was not appealed against, the issue of indebtedness of the Plaintiff to Webe is res judicata and cannot be re-litigated.
 
The Court of Appeal further noted that the learned High Court Judge did not indicate in his judgment that he had allowed the Plaintiff’s defamation claim. Accordingly, the Court of Appeal held that there was no merit in the defamation claim raised by the Plaintiff in the appeal.
 
The Negligence Claim
 
As the Court of Appeal was satisfied that the information on the Plaintiff’s indebtedness to Webe was correct, negligence had not been proven.
 
The Court of Appeal further opined that the Defendant did not owe a duty of care to the Plaintiff as a customer as defined in the Act¹. The situation was clear: Webe is an internet service provider, and the Plaintiff was its customer. As a subscriber to the Defendant's services, Webe uploaded information about the Plaintiff's debts to the Defendant’s database.
 
The Court of Appeal held that even if there was a duty of care, there was no breach of this duty as the information provided cannot be said to be inaccurate, incomplete, misleading or irrelevant. The fact that the Plaintiff was indebted to Webe was accurate; therefore the Defendant's actions did not constitute a breach of duty.
 
The Claim for Breach of Statutory Duty
 
As breach of statutory duty had not been specifically pleaded by the Plaintiff, the Court of Appeal held that the learned High Court Judge was not entitled to make any finding on such a claim. The Court of Appeal cited Joseph Paulus Lantip v Tnio Chee Chang & Another Appeal [2020] 4 CLJ 79, where Mary Lim JCA stated that:
 
“[28] The role played by pleadings cannot be overstated. It is a fundamental principle of fair play which extends to the court that all parties are bound by their pleadings. It would be most damaging to our administration and system of justice if parties are allowed to plead a certain complaint, lead evidence on another and the court decides on something entirely different.”
 
Even if there was an implied reference to breach of statutory duty in the pleadings, the Court found that the Defendant had not breached any statutory duty. There was no connection proven between the rejection of the Plaintiff’s car loan application and the contents of the credit report. This was further strengthened by the Plaintiff’s admission under cross-examination in the High Court that there was no evidence of any banks rejecting the facilities she had applied for due to the Defendant’s credit report.
 
Credit Reporting
 
The Court of Appeal was of the view that “credit reporting” as defined in the Act “would include credit information that has any bearing on the eligibility of a customer to any credit. That would entail a reporting which some credit reporting agencies would do by way of a credit score” (emphasis added). In this case, there was no evidence to show that the rejection of the car loan was premised on a low credit score.
 
Having appraised themselves of the relevant documentary evidence produced before the Court, the oral and written submission by counsel, the Court of Appeal unanimously found that there was misdirection on the part of the learned High Court Judge who had erred in his analysis and appreciation of the evidence before him, which warrants appellate intervention. Thus, the Court of Appeal allowed the Defendant’s appeal and ordered the High Court order be set aside.
 
Comments
 
The most significant aspect of this Court of Appeal decision is the Court’s finding that “credit reporting” under the Act includes any credit information that affects a customer’s eligibility to any credit and such reporting may involve the use of credit scoring. In other words, the adoption by CRAs of credit scoring as a means of providing credit information to their subscribers does not contravene the Act.
 
While this is a favourable decision for CRAs, it remains crucial for both subscribers and CRAs to exercise caution to ensure that the information uploaded to their credit reporting databases is accurate and up-to-date, especially since all CRAs may now engage in credit scoring based on the information they receive, which could potentially – and possibly unknowingly - affect a customer’s eligibility for credit.
 
Case Note by Kok Chee Kheong (Partner) of the Corporate Practice and Karen Tan (Senior Associate) of the Dispute Resolution (Banking and Finance) Practice of Skrine.
 

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