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2012 MarsdenLR 269
Dato' Ariff Wan Hamzah & Ors – Plaintiff
Versus
HwangDBS Investment Bank Bhd & Anor – Defendant
A financial advisor's duty of care regarding forecasts is limited to assessing calculative methodologies, not guaranteeing profits or knowledge of future financial information.
Headnote:(A) Tort - Negligence - Negligent misrepresentation and misstatement - Claim for RM6,909,940 lost due to investment based on false representations - Duty of care from defendants - Claim dismissed as plaintiffs failed to act independently and relied on their own advisor - Limitation/exclusion clauses in offer letters binding - Successful procurement for investment dependent on financial performance not within D1's duty to assess - Findings substantiate lack of knowledge about financial status until after subscription date. (Paras 1, 76, 88, 183)
(B) Plaintiffs established no reliance on misrepresentation as required for claims of negligent misstatement - Lack of established causation for losses claimed - Filing of winding-up petition contributed to Litespeed's poor financial performance. (Paras 164, 190, 191)
(C) Liability not established for either defendant as duties did not extend to report accuracy of financial forecasts prepared by Litespeed's directors, nor guarantee profits would match projections. (Paras 170, 172)
| Table of Content |
|---|
| 1. nature and basis of the plaintiffs' claims. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. the defendants' denial of liability and their position. (Para 7 , 18 , 19 , 20 , 21) |
| 3. factual background and relationships between the parties. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 4. details surrounding the issuance of the prospectus and representations made. (Para 23 , 24 , 25 , 26 , 27 , 28) |
| 5. the disclaimers and risk factors presented in the prospectus. (Para 33 , 34 , 35 , 36 , 37) |
| 6. letters of offer and contractual obligations acknowledged by the plaintiffs. (Para 38 , 39 , 40) |
| 7. court's findings on liability and statutory duties of care. (Para 41 , 42 , 43 , 44 , 45) |
| 8. final conclusion regarding plaintiff's claims and dismissal order. (Para 46 , 47 , 48 , 49 , 190 , 191 , 192) |
Case Summary
The plaintiffs claimed against the defendants for negligent misrepresentation as well as negligent misstatement. The second plaintiff, Wan Hamimie bt Wan Ariff ('Hamimie'), was the daughter of the first plaintiff while the third and fourth plaintiffs, Dr Syed Ibrahim ('Ibrahim') and Mokhtar Ahmad ('Mokhtar') were business associates or partners of the first plaintiff. The plaintiffs claimed a sum of RM6,909,940 together with loss of earnings and interest which they claimed to have lost as a result of investing in the purchase of placement shares in a company called Litespeed Education Technologies Bhd ('Litespeed'), based on the misrepresentations of the two defendants. It was alleged that the defendants' representations were false, inaccurate and misleading and that they suffered losses and damages as the value of the Litespeed shares plunged soon after Hamimie, Ibrahim and Mokhtar purchased the shares allotted to them under the placement exercise. Further or alternatively, the plaintiffs contended that the defendants each owed them separate duties of care. The first defendant, an agent of Litespeed responsible for statements in the Prospectus, owed a duty to investors such as the plaintiffs, to ensure that all information in the Prospectus was accurate up until the date of their subscription of shares in Litespeed, which the first defendant failed to do. The plaintiffs' claim against the second defendant, who was Litespeed's auditor and reporting accountant, premised on tort of negligent misstatement on the ground that its statements for the relevant financial years as well as the prospective forecast in the Prospectus were reported favourably when they were actually inaccurate, false and misleading. A duty of care was owed, it was contended, to these plaintiffs to ensure that the financial statements set out in the Prospectus were accurate and fair, which the second defendant had breached. In opposing the plaintiffs' claims, the defendants maintained, inter alia, that they made no misleading statements or false representations as alleged; they owed no duty to the purchasing plaintiffs as contended and therefore cannot be responsible for any losses suffered by the purchasing plaintiffs; and that they had cautioned all investors in the Prospectus that there were no guarantees concerning Litespeed's share prices and investors were advised to be careful about the inherent risks of such an investment. The second defendant argued that the plaintiffs were not entitled to rely on any of the statements made by it in the Prospectus and therefore owed no duty of care to the plaintiffs.
Held, dismissing the claim with costs:
(1)The plaintiff's cause of action which premised on negligent misrepresentation by the first defendant failed. The
