Court of Appeal Issues Ruling on Sections 357(1) and 360 of the Capital Markets and Services Act 2007
22 November 2018
In Lai Soon Onn v Chew Fei Meng & Other Appeals [2018] 10 CLJ 48, the Plaintiff (P) contended that the four Defendants (D1 to D4) and other unknown persons had acted in concert to acquire, jointly and severally, control of 33.74% of the shares in Panpages Bhd (D5) - a listed company. P claimed that in so doing, D1 to D4 had breached their statutory duties under the Capital Markets and Services Act 2007 (CMSA) and the Take-Over Code 2010 (now the Take-Over Code 2016 and the Take-Over Rules 2016) by failing to make a mandatory offer (MO) for the remaining shares in D5.
Among others, P sought –
- a declaration that D1 to D4 had contravened s. 218(2) of the CMSA and para. 9(1) of the Take-Over Code in failing to undertake the MO;
- damages for losses that P had suffered as a result of the alleged breach of statutory duties by D1 to D4; and
- an order to compel D1 to D4 to undertake a MO.
A relevant fact is that at that juncture, the SC had yet to make any ruling on D1 to D4’s alleged breaches of the CMSA and the Take-Over Code.
The Court of Appeal (CA) upheld the decision of the High Court to strike out P’s claims. The CA held that P did not have a cause of action for the following reasons –
- P was not entitled to the reliefs that he was seeking, namely under s. 357(1) (civil liability of person in contravention of securities laws) and s. 360 (power of court to make certain orders) of the CMSA;
- It is not necessary for the Court to adjudicate whether there has been a contravention before s. 357(1) could be applied. What is required is for the SC to first determine whether there was a contravention of the CMSA or any regulation made thereunder – it is not for the civil court to usurp the regulator’s powers in making this determination;
- The SC had not made a determination on whether there has been a contravention of securities laws by D1 to D4;
- S. 360 does not apply as the obligation on the part of D1 to D4 to undertake a GO is not a “relevant requirement” within the meaning of s. 360(13)(c) of the CMSA.
According to the CA, the interpretation of ss. 357(1) and 360 are novel issues.
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