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2014 MarsdenLR 1796
FEDERAL COURT PUTRAJAYA
CIMB BANK BERHAD – Appellant
Versus
MAYBANK TRUSTEES BERHAD & OTHER APPEALS – Respondent
[Civil Appeals No: 02(f)-27-04-2012(W) 02(f)-28-04-2012(W) 02(f)-29-04-2012(W) 02(f)-30-04-2012(W) & 02(f)-33-04-2012(W)]
A Lead Arranger is not liable for misrepresentations in an Information Memorandum; the disclaimer effectively shields liability, while fraud undermines contractual protections.
Headnote:(A) Securities Commission Act 1993 - Sections 38(4) and 65 - Contractual obligations of Trustees and Lead Arrangers - Duties of care not assumed for misrepresentation in Information Memorandum - Clause restricting liability for fraud outlined; fraud vitiates agreements. (Paras 24, 29, 32, 68, 114)
(B) Standard of Care and Reliance - Court holds Lead Arranger must verify contracts and their compliance but is absolved by disclaimer in Information Memorandum - Distinguished the roles within securitisation transactions. (Paras 20, 25, 34, 88)
Facts of the case:
The case involves five civil appeals regarding the issuance of bonds totaling RM149,300,000 by Pesaka Astana (M) Sdn Bhd, with allegations against KAF Investment Bank Berhad and Maybank Trustees Berhad concerning breach of duty in managing these funds, culminating in significant losses for bondholders. (Paras 4-13)
Findings of Court:
The court determined that KAF did not owe a duty of care to the bondholders regarding the contents of the Information Memorandum, while findings against MTB were confirmed but clarified on liability. Both KAF and MTB were ultimately found liable for losses but distinctions were made on claims. (Paras 20-22, 73-85)
Issues: The main issues revolved around the duty of care owed by the Lead Arranger and Trustee, the validity of disclaimers in Information Memorandum, and obligations when fraud is present, along with contractual interpretations based on the claims of indemnity versus negligence. (Paras 30-32, 64)
Ratio Decidendi: The court reasoned that disclaimers must be respected, particularly regarding sophisticated investors and compliance with actual contract terms. It upheld that KAF was not responsible for verification whereas MTB acted negligently in failing to establish proper accounts. (Paras 33-86)
Result: Appeals from KAF allowed, with liability determined mainly against Pesaka and other related defendants. Indemnity claims were upheld favorably against fraudulent parties with full liability sustained against them. (Paras 88-131)
| Table of Content |
|---|
| 1. introduction of multiple civil appeals. (Para 1 , 1 , 2) |
| 2. background facts regarding the bonds issuance. (Para 3 , 11) |
| 3. facts related to the financing of pesaka through bonds. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 15 , 20) |
| 4. arguments surrounding the need for compliance with conditions precedent. (Para 12 , 13 , 14 , 61 , 90) |
| 5. court observations on bondholder rights. (Para 19 , 21 , 22 , 23 , 24) |
| 6. court of appeal observations regarding claims. (Para 30 , 31 , 32) |
| 7. court's conclusion on compliance with account conditions. (Para 65 , 66 , 86) |
| 8. conclusion regarding liability and indemnity. (Para 80 , 89 , 92) |
| 9. court conclusion on liability for full bond amount. (Para 91) |
| 10. pre-judgment interest and its application. (Para 99 , 101) |
| 11. mtb's claim for indemnity against pesaka. (Para 103 , 121) |
| 12. final orders and conclusions of the court. (Para 158) |
[1] There are five appeals before this court and they are:
(i) Civil Appeal No: 02(f)-27-04-2012(W) with CIMB Bank Berhad as the appellant and Maybank Trustees Berhad as the respondent;
(ii) Civil Appeal No: 02(f)-28-04-2012(W) with Datin Murnina bt Dato Haji Sujak as the appellant and Maybank Trustees Berhad as the respondent;
(iii) Civil Appeal No: 02(f)-29-04-2012(W) with KAF Investment Bank Berhad as the appellant and MIDF Amanah Investment Bank Berhad & 11 others as the respondents;
(iv) Civil Appeal No: 02(f)-30-04-2012(W) with Maybank Trustees Berhad as the appellant and MIDF Amanah Investment Bank Berhad & 20 others as the respondents; and
(v) Civil Appeal No: 02(f)-33-04-2012 (W) with Pesaka Astana (M) Sdn Bhd & 8 others as the appellants and Maybank Trustees Berhad & another as the respondents.
For convenience, we will first deal with the third appeal.
Civil Appeal No: 02(f)-29-04-2012(W) - Appeal No (iii) (KAFS Appeal)
[2] This court had on 5 April 2012 granted leave to appeal to KAF Investment Bank Berhad (KAF) on the following questions of law:
(i) What liability in law is assumed by an Issuer, Lead Arranger,Facility Agent and Issue Agent with respect to matters contained in an Information Memorandum?
(ii) To whom do the Lead Arranger, Facility Agent and Issue Agent owe duties in contract, tort and/or statute, and in light of the express contractual obligations, duties and liabilities either by way of contract or under an Information Memorandum?
(iii) Whether and to what extend are sophisticated investors, with the benefit of independent and professional advice, allowed to expressly apportion their obligations, duties and liabilities either by way of or under an Information memorandum?
(iv) Whether and to what extend is the Lead Arranger allowed to: (a) Place experienced and sophisticated investors on notice as to the extend to which such investors are entitled to rely on information contained in an Information memorandum? and (b)Limit any liability arising from any party reading and relying on the Information Memorandum?
(v) Is an Information Memorandum an agreement within the meaning of s 65 of the Securities Commission Act 1993 , and if so, who are parties to the Information Memorandum and how does the doctrine of privity of contract apply?
(vi) Where a party has benefitted in pecuniary form from its fraudulent actions, in what circumstances will a court of law countenance or permit that party to retain the benefit of that fraud?
(vii) Where parties to a contract provide that a party will indemnify the other in full for any and all expense, loss, damage or liability arising out of the second party carrying out its duties under the contract in question:
(a) Whether a court of law can interfere with the agreed contractual indemnity and order that only a partial indemnity be given?; and
(b) What circumstances will justify a court making such an order in law?
(viii) Whether and to what extend can a court of law, to the exclusion of the Syariah Advisory Council, determine or ascertain Islamic Law for the purpose of Islamic financial business within the meaning of ss 56 a
