1. Judicial review of penalties imposed by a stock exchange for breaches of listing requirements regarding delayed financial accounts and deviations in financial results. (Para 1 , 4 , 5 , 26 )
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2012 MarsdenLR 1485
HIGH COURT (KUALA LUMPUR)
ROHANA YUSUF, J
Khiudin bin Mohd & Anor – Plaintiff
Versus
Bursa Malaysia Securities Bhd and another – Defendant
APPLICATION FOR JUDICIAL REVIEW NOS R2–25–467 OF 2010 AND R2–25–466 OF 2010
Advocates:
Ambiga Sreenevasan (Yap Chin Ling and Shireen Selvaratnam with him) (Song & Partners) for the applicant in R2–25–466 of 2010.
NS Guok (Simon Hong with him) (Guok, Leong Hong & Fong) for the applicant in R2–25–467 of 2010.
Lim Chee Wee (Ruth Garnet Maran with him) (Skrine) for the respondent in R2–25–466 of 2010.
Lim Chee Wee (Ruth Garnet Maran with him) (Skrine) for the respondent in R2–25–467 of 2010.
Ambiga Sreenevasan (Yap Chin Ling and Shireen Selvaratnam with him) (Song & Partners) for the applicant in R2–25–466 of 2010.
NS Guok (Simon Hong with him) (Guok, Leong Hong & Fong) for the applicant in R2–25–467 of 2010.
Lim Chee Wee (Ruth Garnet Maran with him) (Skrine) for the respondent in R2–25–466 of 2010.
Lim Chee Wee (Ruth Garnet Maran with him) (Skrine) for the respondent in R2–25–467 of 2010.
Regulatory bodies may concurrently pursue enforcement actions with criminal proceedings if the issues differ. Directors cannot discharge their duty of care by solely relying on auditors; they must maintain a fundamental understanding of the company's financial statements to ensure accuracy and compliance.
Headnote:(A) Capital Markets and Services Act 2007; Securities Industry Act 1983; Companies Act 1965, Section 167; Listing Requirements, paragraphs 9.23(b), 9.16(1)(a), 9.22(1), and 16.17(1)(b) - Regulatory proceedings vs Criminal proceedings - Parallel proceedings by a regulatory body and criminal charges do not constitute sub judice if the issues are separate and the regulatory body acts in good faith to protect public interest and maintain market integrity (Paras 8, 16, 17).
(B) Duties of Directors - Reliance on management or auditors does not per se discharge directors from their duties; there is a core requirement for directors to be involved in management, familiarize themselves with the company's financial position, and ensure financial statements are accurate (Paras 22, 23).
(C) Natural Justice - The right to a fair hearing is not equated with an automatic right to an oral hearing; written representations may be sufficient if the party has had ample opportunity to put their case forward (Paras 31, 32, 34).
(D) Bias in Domestic Tribunals - To establish bias in a domestic tribunal, actual bias must be proven; mere non-disclosure of the members of the deciding committee is insufficient to invalidate the decision (Paras 43, 45). (E) Judicial Review of Regulatory Decisions - Courts are reluctant to interfere with the decisions of a regulatory body mandated to promote public interest, provided the body acts within its jurisdiction and in good faith (Paras 53, 54).
Facts of the case:
The chief executive officer and directors of a listed company were imposed with public reprimands and fines by a regulatory body for delays in submitting audited annual accounts and quarterly reports, and for significant deviations between announced financial results and audited accounts. The applicants challenged these penalties via judicial review, alleging prejudice due to simultaneous criminal proceedings, breach of natural justice regarding the lack of oral hearings and non-disclosure of the appeals committee members, and that the penalties were excessive.
Findings of Court:
The court found that the regulatory and criminal proceedings addressed different issues and standards of proof. The directors' claim of reliance on auditors was rejected as they have a non-delegable duty to understand the company's financial statements. The right to be heard was satisfied through written submissions. No actual bias was proven. The penalties were within statutory limits and justified by the scale of financial deviation.
Issues: Whether parallel criminal proceedings preclude regulatory enforcement; whether the absence of an oral hearing and non-disclosure of committee members violated natural justice; whether directors' reliance on auditors absolves them of liability for financial inaccuracies; and whether the court should interfere with the regulatory body's penalties.
Ratio Decidendi: Regulatory bodies must be allowed to act swiftly to maintain market confidence and are not barred by concurrent criminal proceedings. Directors have an irreducible duty of competence to understand financial statements. In domestic tribunals, the standard for proving bias is higher than in courts, requiring proof of actual bias. Courts will not substitute their view for that of a regulatory body acting in good faith.
Result: Applications dismissed with costs of RM2,000 against each applicant.
Act Referred
Rules of the High Court 1980: O.53
Capital Markets and Services Act 2007
Securities Industry Act 1983: S.86(b)
Companies Act 1965: S.167
Listing Requirements: R.9.23(b), R.9.16(1)(a), R.9.22(1), R.16.17(1)(b)
Capital Markets and Services Act 2007
Securities Industry Act 1983: S.86(b)
Companies Act 1965: S.167
Listing Requirements: R.9.23(b), R.9.16(1)(a), R.9.22(1), R.16.17(1)(b)
Legal Category Hierarchy
- administrative law
- securities law
- company law
Table of Contents
2. Challenges based on sub judice due to parallel criminal proceedings, breach of natural justice regarding oral hearings and committee disclosure, and excessive penalties. (Para 2 , 3 , 7 , 20 , 29 , 41 , 46 )
3. Regulatory proceedings are distinct from criminal trials; directors maintain non-delegable duties regarding financial statements; fair hearing does not mandate oral representation. (Para 8 , 9 , 16 , 17 , 21 , 22 , 23 , 24 , 31 , 32 , 34 , 37 , 40 , 43 , 44 , 48 , 51 , 52 )
4. Courts will not interfere with regulatory bodies exercising statutory duties in good faith unless they act in excess of jurisdiction or breach natural justice. (Para 16 , 53 , 54 )
5. Applications for judicial review dismissed with costs. (Para 55 )
6. Does the existence of parallel criminal proceedings preclude a regulatory body from taking enforcement action for listing requirement breaches?
No. Regulatory and criminal proceedings are separate issues with different standards of proof. A statutory body acting in good faith is not in contempt of court, and courts are slow to interfere unless there is a real risk of serious prejudice. (Para 8 , 9 , 16 , 17 , 18 )
7. Can directors discharge their duties regarding financial statements by relying solely on the advice of management and auditors?
No. Directors have a core, irreducible requirement to be involved in management and a duty of competence to read and understand financial statements. Reliance on experts does not per se discharge these duties. (Para 21 , 22 , 23 , 24 , 27 )
8. Does the right to natural justice automatically entitle a party to an oral hearing in regulatory proceedings?
No. The right to a fair hearing is not equated with a right to an oral hearing. If fair opportunities to be heard are provided, such as through written representations, the rule of audi alteram partem is observed. (Para 31 , 32 , 34 , 37 , 39 , 40 )
9. What is the standard for establishing bias in a domestic tribunal compared to a court of law?
The burden of proof is more stringent in domestic tribunals. Actual bias, rather than mere apprehended bias, must generally be established to vitiate the proceedings. (Para 43 , 44 , 45 )
10. Does the resignation of a director terminate the imposition of daily penalties for breaches of listing requirements?
No. Penalties for daily breaches run until the breaches are remedied. Allowing resignation to escape liability would encourage shirking of responsibilities and defeat the purpose of enforcement proceedings. (Para 51 )
Rohana Yusuf J:
[1]There are two applications for judicial review. Suit No R2–25–466 of 2010 is an application by Gan Boon Aun, who was the chief executive officer (CEO) of Transmile Group Bhd. The applicants in Suit R2–25–467 of 2010, Khiudin bin Mohd and Shukri Abdul Tawab were directors and members of the Audit Committee of the board of directors of the same company. Both applications arise from the same set of facts and are heard together. The applications for judicial review are made of the respondent's decision in imposing penalties including public reprimands and fines on all the applicants as directors of Transmile Group Bhd ('Transmile'). Transmile was a company listed on Bursa's official list. There were allegations of breaches of Listing Requirements by Transmile resulting on the punishment meted out by the listing Committee on the applicants. On appeal the Appeals Committee upheld the decision of the listing Committee.
[2]The applicants now seek the following orders, pursuant to O 53 of the Rules of the High Court 1980 :
(a)an order of certiorari to remove into the High Court and to quash the decision of the Appeals Committee of Bursa Malaysia Securities Bhd dated 6 September 2010 which disallowed the applicant's appeal to the Appeals Committee and upheld the decision of the listing Committee dated 23 February 2010;
(b)an order of mandamus to compel the Appeals Comittee of Bursa to allow the applicant's appeal;
(c)in the alternative to para (a) above, an order that the applicants appeals be remitted to Bursa to be heard/deliberated upon de novo by a different Appeals Committee on the merits and in accordance with law; and
(d)an order that enforcement of the decision of the Appeals Committee of Bursa dated 6 September 2010 be stayed until the final disposal of the application herein.
[3]These two applications are premised on the following grounds:
(a)that Bursa erred in law and acted in excess of or without jurisdiction in the Appeals Committee's decision when it proceeded to deliberated on the breaches against the applicants despite the ongoing criminal proceedings against them which could cause a real risk of prejudice;
(b)that Bursa had breached the rules of natural justice in failing to accord the applicants, oral submissions/representations;
(c)that Bursa had breached the rules of natural justice in failing to disclose the members of the Appeals Committee, thus depriving the applicants the opportunity to determine if there was potential bias;
(d)that Bursa had demonstrated bias by singling out the applicants to be penalised for the delay and deviation breaches;
(e)that Bursa had failed to take into account and/or fully appreciate relevant facts in relation to the delay;
(f)that Bursa had failed to fully appreciate that the applicants could not have known of the seriousness of the audit issue on 15 February 2007 because D&T had not at that time completed its review of certain transactions and therefore could not themselves have known of the seriousness of the audit issues then;
(g)that Bursa failed to consider sufficiently or at all the applicants position in Transmile and that the applicants had at all times exercised reasonable care and diligence in the circumstances of the case;
(h)that Bursa failed to take into account and/or fully appreciate relevant facts in relation to the deviation issue;
(i)that Bursa erred in law, acted in excess of or without jurisdiction when after arriving at the erroneous and perverse decision, Bursa went on to impose penalties that are arbitrary, unjust and without regards to precedent; and
(j)that the AC had therefore arrived at a decision that was unreasonable in the circumstances of the case and which was so perverse or devoid of plausible justification that no reasonable person/body of persons could have arrived at the same decision.
[4]There are two alleged breaches by the applicants. Firstly, there was a delay in the submissions of accounts and secondly there was deviation between the fina
