JUDGMENT

Hamid Sultan Abu Backer JC:

[1] This is my judgment in respect of the plaintiffs' claim against the 2nd defendant as purchasers of shares through private placement with the 1st defendant. The plaintiffs' action is based on breach of statutory duties, negligent misstatement etc.

[2] At the commencement of the hearing, parties have agreed that the case can be heard by way of: (i) witness statement for examination in chief; (ii) preliminary cross-examination witness statement, with full liberty to further cross-examine orally (for purposes of cross-examination); (iii) preliminary re-examination statement with full liberty to further re-examination if there is further oral examination. The court is extremely grateful to the parties for agreeing to such a mode as the preliminary cross-examination witness statement will save much of the court's time to deal with peripheral matters and for all practical purposes, preliminary cross-examination witness statement will stand as interrogatories and answers thereto only, as the right of oral cross-examination to the litigant is preserved during the whole trial.

Brief Facts

[3] The 2nd and 3rd plaintiffs bought more than 5 million shares of one ringgit each of Energro, the listing vehicle in respect of a restructuring scheme from the 1st defendant by way of Private Placement. One company referred to as KLCS Asset Management Sdn Bhd (KLCS) purchased 1 million shares of one ringgit each from the 1st defendant. By a deed of assignment dated 29 December 2004 KLCS assigned all of its rights claims interest and chose in action, etc to the 1st plaintiff for one ringgit after having knowledge that the listing exercise has collapsed and the shares in practical terms have become worthless. The 2nd defendant was the Merchant Bank and adviser of the restructuring scheme. The restructuring scheme consisted of ten corporate exercises including the injection of one new core business, which will provide immediate and stable source of revenue, profit and cash flow etc; for Energro. On 2 August 2004, Securities Commission announced that the listing of Energro has been revoked after discovering that there was no new core business as represented in the proposal for the restructuring scheme and subsequently reprimanded the 2nd defendant. The 2nd defendant has made public statements by way of announcements, explanatory statements and/or prospectus to reflect the injection of the new core business based on the information of one Kenneth Chow the anchor men of the 1st defendant. The information of Kenneth Chow turned to be untrue. And the plaintiffs in essence complain that the 2nd defendant was negligent in making the statement without proper investigation and more importantly when knowing that the new core business is essential for successful listing of Energro shares. And they complain that they had relied on the 2nd defendant's various statements for the purchase of the shares. And in essence attempts to rely on the reprimand to find the 2nd defendant liable.

[4] It is also part of the pleaded case of the plaintiffs that had instituted a civil suit No: D4-21-51-2004 (Civil Suit) against Omega, 1st defendant and Kenneth Chow and obtained various orders including a declaration that all contracts relating to the sale and offer for sale of Energro shares (which include the plaintiffs' relevant agreement for the purchase of Energro shares) be set aside as void ab initio and that inter alia the 1st defendant, Kenneth Chow repay and restore the monies paid for such Energro shares. The plaintiffs have not received any money from these persons yet and in consequence are mounting a claim against the 2nd defendant.

[5] The defendants in essence say that the cause of action relied on by the plaintiffs is wrong in law; and/or misconceived; and/or cannot be sustained by the facts and evidence. And assert that the plaintiffs and the 2nd defendant have no nexus and the plaintiffs purchased shares by Private Placement and th