JUDGMENT

Nallini Pathmanathan JCA:

Introduction

[1] Corporate bonds in Malaysias capital market relative to its domestic gross product are ranked the third largest in Asia [See Capital Markets- Discipline & Misconduct by Loh Siew Cheang, Tan Ming-li & Evelyn Chan published by Lexis Nexis, First Edition 2019]. Its rapid growth is attributable in large part, (apart from the economy), to the existence of a comprehensive legislative regulatory framework established initially under the Securities Commission Act (SCA) 1993, and presently under the Capital and Markets and Services Act (CMSA) 2007.

[2] This series of nine appeals relates to the regulation of corporate bonds in the Malaysian capital market, under the previous regulatory regime of the SCA 1993. More specifically, these appeals address the incidence and extent of the duties and liabilities of the various actors in the capital market field more particularly the bond market, both prior to the issuance of corporate bonds, and the situation post-issuance when default occurs, culminating in the failure of the corporate bond issue. This in turn caused sizeable losses, ultimately borne by the investors, ie the bondholders. These issues are considered under the then prevailing statutory regulation regime in 202 and 2003, as well as in contract and negligence.

[3] The actors referred to comprise the various parties to these appeals, namely the issuer and its related parties, the lead arranger, the bond trustee and the accountants. The appeals arise as a consequence of the decision of the High Court, which found these actors, who were defendants before it, liable in varying degrees to the bondholders.

[4] The specific claim of the bondholders arises by reason of losses suffered as a consequence of a catastrophic failure of the Aldwich Bond Programme valued at RM308 million at its inception in 2003. The programme was supposed to span a period of 15 years, from issuance to maturity. The bond issuance was accorded a triple A rating at inception. Notwithstanding this, the bond failed in its sixth year, in 2009.

[5] The trial judge in the Court below accepted and found that a sum of RM265 million in Aldwich Berhads (Aldwichs) income and funds was simply not captured nor ring-fenced as it was meant to under the near infallible design and structure of the Aldwich Bond Programme, both pre- and post-bond issuance. It was also found in the Court below that the Aldwich bonds were considerably overvalued at inception, resulting in the issuance of a far greater value of bonds than actually warranted.

[6] These findings resulted in the trial judge finding complete culpability on the part of the issuer, Aldwich and its related entity and persona (Aldwich Enviro-Management Sdn Bhd (AEM) and Kamalul Arifin Yusof (Kamalul) as the alter-ego of both Aldwich and AEM. The trial judge also found the lead arranger or principal adviser, Maybank Investment Bank Berhad (MIBB) liable to the extent of 50%, the trustee, Mayban Trustees Berhad (Mayban Trustees) liable to the extent of 30% and the auditors, Ernst & Young (EY) liable to the extent of 20%. These findings gave rise to the nine appeals that fall for consideration here.

Part 1

Parties To The Appeals

[7] In the original suit some of the bondholders comprised the plaintiffs who had subscribed for the bonds, namely Aldwich bonds. They held in aggregate bonds having a nominal value of one hundred and seventy-two million Ringgit (RM 172 million). They are the first to seventh respondents in the appeal. They will be referred to as the bondholders.

[8] All of the defendants in the High Court filed appeals against the decision of the learned High Court Judge after a full trial lasting thirty-seven days. The decision of the High Court gave rise to this series of nine appeals, which are dealt with collectively in this single judgment. The appeals were, by consent, heard together over a period of nine days.

[9] The first defendant in the High Court was Aldwich (now in recei