Ruth Garnet Maran discusses the Syarikat Kayu Wangi cases.

The decisions of the High Court and the Court of Appeal in Syarikat Kayu Wangi Berhad v Bursa Malaysia Securities Berhad & Securities Commission (unreported) have important implications on companies that are listed on Bursa Malaysia Securities Berhad ("Bursa") in two respects. Firstly, they provide guidance on the approach which the Court will take when it is called upon to review enforcement proceedings taken by Bursa, and secondly, whether a denial of oral representations amounts to a denial of a right to be heard.
 
Although proceedings were filed against Bursa and the Securities Commission ("SC"), this article focuses solely on the proceedings against Bursa.
 
BACKGROUND
 
Syarikat Kayu Wangi Berhad (“SKW”) is listed on Bursa's then Second Board. In May 2006, SKW was classified as an Affected Lister Issuer as its shareholders’ equity fell below 25% of its issued and paid-up capital.
 
Consequently, SKW was obliged to submit a Regularisation Plan to the SC and Bursa for approval within 8 months, failing which, Bursa would be entitled to take action, including commencing de-listing proceedings, against it. Although it was granted an extension of time by Bursa to submit its Regularisation Plan for approval, SKW failed to do so within the extended timeline.
 
Bursa issued a Notice to Show Cause requiring SKW to make representations as to why SKW’s securities should not be de-listed. SKW submitted written and oral representations to Bursa’s Listing Committee. As SKW had by this time submitted its Regularisation Plan to the SC for approval, SKW was informed that Bursa would await the outcome of SKW’s application to the SC (including any ensuing appeal) and that Bursa would proceed to de-list SKW if its appeal was unsuccessful.
 
In August 2007, the SC rejected SKW’s Regularisation Plan as it fell short of the required standard. SKW’s appeal against this decision was rejected. In November 2007, Bursa notified SKW that its securities would be de-listed unless SKW submitted an appeal Bursa, which it duly did.
 
After deliberating on the matter, Bursa’s Appeals Committee rejected SKW’s appeal on 30 November 2007. Bursa informed SKW of its decision and that de-listing would be effected on 13 December 2007 ("Delisting Decision").
 
On 12 December 2007, SKW and two of its shareholders, namely Maple Diversified Sdn Bhd ("Maple") and Ng Eng Howe (who later withdrew as a party to the action) simultaneously filed separate suits against Bursa and the SC. SKW filed its suit in the High Court in Shah Alam ("Shah Alam Case") while its shareholders filed their case in the High Court in Penang ("Penang Case").
 
THE SHAH ALAM CASE
 
SKW obtained leave to commence judicial review proceedings against Bursa in respect of the Delisting Decision (Civil Suit MT FLJC 13-6-2007). 
 
On 14 September 2009, Dato’ Hinshawati Binti Shariff, JC dismissed SKW’s application against Bursa on, amongst others, the following grounds:
 
(1)     SKW’s complaints that Bursa had taken into consideration irrelevant matters and had not considered relevant matters in arriving at the Delisting Decision were unsubstantiated;
 
(2)     The Courts will not second-guess the informed judgment of responsible regulators steeped in knowledge of their particular market - R v International Stock Exchange of the UK and Ireland, Ex-parte Else Ltd (1993) 1 QB 534 was cited as authority in support of this proposition; and
 
(3)     SKW’s complaint that there had been a breach of natural justice as it had not been given the opportunity to make oral representations before the Appeals Committee was without merit. The Judge was of the view that the Appeals Committee had every right to refuse a request for oral representations when facts have been sufficiently laid out in the written representations. In the opinion of the learned Judge, SKW had been heard through its written submissions.
 
SKW appealed to the Court of Appeal against the decision of the High Court (Civil Appeal No. B-01-319-2007)("SKW Appeal"). 
 
THE PENANG CASE
 
In the writ filed at the Penang High Court (Civil Suit No. 22-750-2007), Maple sought declaratory relief against and an injunction to prevent Bursa from de-listing SKW on the ground that the rights of the minority shareholders would be infringed.
 
Maple obtained an ex parte injunction to restrain Bursa from taking any action to de-list SKW. Due to a change of judges, an ad interim injunction was granted on the same terms as the ex parte injunction until the conclusion of the inter partes hearing of the injunction.
 
Bursa applied to strike out Maple's writ and statement of claim and to set aside the ad interim injunction ("Bursa's Applications").
 
Maple's application for an inter partes injunction and Bursa's Applications were heard together on 28 April 2010.  
 
Dato’ Abdul Halim bin Aman, J allowed Maple's application and dismissed all of Bursa's Applications. The learned Judge rejected Bursa's contention that Maple, as a shareholder of SKW, did not have any contractual relationship with Bursa and therefore did not have locus standi to make a claim against Bursa and held that Maple had locus standi for various reasons including the following:
 
(1)     Maple had a cause of action against Bursa based on the implied contract between Maple and Bursa whereby SKW was listed on Bursa and Maple was a general investor who purchased SKW's shares on the stock exchange operated by Bursa;
 
(2)     Maple would be an 'aggrieved party' if Bursa proceeds with its de-listing of SKW as Maple was an innocent party who would suffer great loss; and
 
(3)     Maple's action fell within an exception to the rule in Foss v Harbottle (1843) 2 Hare 461 which permitted aggrieved shareholders to bring an action on their own behalf when wrongdoers were in control of the company.
 
His Lordship was also satisfied that Maple had fulfilled the requirements set out in Keet Gerald Francis Noel John v Mohd Noor @ Harun bin Abdullah & 2 Ors [1995] 1 CLJ 293 for an injunction to be granted in its favour.
 
The Judge dismissed Bursa's application to strike out Maple's writ of summons and statement of claim as he was satisfied that, based on the facts of the case, Maple's claim was not one which plainly and obviously ought to be struck out. The Court also held that Maple had successfully shown that there were triable issues that ought to be decided in a full trial and not through affidavit evidence. The action by Maple was also not an abuse of process as alleged by Bursa.
 
As His Lordship had granted Maple's application for an injunction to be issued against Bursa, the application by Bursa to set aside the ad interim injunction was dismissed.  
 
Bursa appealed to the Court of Appeal against the decision of the High Court to dismiss Bursa's Applications ("Bursa Appeal").
 
THE APPEALS
 
Given that both matters arose from the same set of facts, the SKW Appeal and the Bursa Appeal were fixed for hearing together on 28 April 2011.
 
The parties agreed to proceed with the SKW Appeal. With regard to the Penang Case, it was further agreed that if the Court of Appeal ruled in favour of SKW in the SKW Appeal, Bursa would withdraw the Bursa Appeal and conversely, that if the Court of Appeal ruled in favour of Bursa in the SKW Appeal, Bursa would withdraw the Bursa Appeal on condition that Maple withdraws the writ in the Penang Case.
 
Bursa contended that the court should be slow to interfere with the decisions of Bursa in the exercise of its duties under the Capital Markets and Services Act 2007. The Court of Appeal's decision in Bursa Malaysia Securities Berhad v Gan Boon Aun [2009] 6 MLJ 695 (which held that the court should intervene only where the enforcement actions are in excess of statutory authority or are so erroneous as to warrant judicial intervention) and the High Court's decision in Tengku Dato' Kamal ibni Sultan Sir Abu Bakar & Ors v Bursa Malaysia Securities Berhad [2010] 6 CLJ 581 (which held that judicial intervention is warranted only when there is a lack of good faith by the regulator in the exercise of its discretion) were cited in support of this proposition.
 
After hearing the submission of all parties, the Court of Appeal ruled in favour of Bursa and dismissed the SKW Appeal. The New Straits Times reported on 7 May 2011 that the Court of Appeal agreed with Bursa's submissions that the courts should be slow to interfere in the decisions made by the capital market regulator on listing matters. It was further reported that their Lordships had remarked that market stability would suffer if the courts were to unreasonably intervene with decisions of the regulator as this would lead to uncertainty in the market.
 
COMMENTARY
 
The Court of Appeal decision in the SKW Appeal affirms the principle laid down in Gan Boon Aun and Tengku Dato’ Kamal that the courts should only exercise their powers of judicial review sparingly when reviewing enforcement decisions of Bursa.
 
The decision of the High Court in the Shah Alam Case also establishes that in relation to Bursa's enforcement proceedings, the right to be heard can be by way of written representations and the denial of a right to oral representation does not necessarily result in a breach of the rules of natural justice.
 
The Bursa Appeal was withdrawn as per the agreement between the parties before the hearing of the SKW Appeal. It is regrettable that the Bursa Appeal did not proceed as there appear to be good grounds to argue that Maple, as a shareholder of SKW, did not have locus standi to commence proceedings against Bursa in relation to the Delisting Decision and that the learned Judge had erred in applying the exception to the rule in Foss v Harbottle in the Penang Case.
 
THE SAGA CONTINUES ...
 
Notwithstanding the Court of Appeal's decision, SKW has remarkably managed to avoid de-listing as it had on 11 May 2011, a mere 2 days before Maple withdrew its writ in the Penang Case, procured an ex parte injunction, restraining Bursa from de-listing SKW pending the disposal of a new judicial review application to quash a decision by Bursa Malaysia not to consider a New Regularisation Plan announced by SKW on 19 January 2011.
 
This application for judicial review by SKW has been fixed for hearing on 12 July 2011.