MAH SAU CHEONG v 1. ) SOUTH MALAYSIA INDUSTRIES BERHAD 2. ) HONSIN APPAREL SDN BHD 3. ) DATUK AU YEE BOON 4. ) CHONG FU SHEN PENCELAH 1. ) LEOW THANG FONG 2. ) DATO DR. ABDULLAH BIN SEPIEN 3. ) LATIFAH BINTI ABDUL LATIFF 4. ) DATO ZAINUDDIN BIN YAHYA 5. ) DATO SRI MOHD MOKHTAR BIN MOHD SHARIFF 6. ) SOUTH MALAYSIA INDUSTRIES BERHAD

Case Significance

Instructive on the primacy of the Securities Commission in first determining a contravention of the takeover-code provisions of the Capital Markets and Services Act before a civil claim founded on that contravention can proceed.

This High Court decision at Johor Bahru concerns an interlocutory application to strike out a shareholder's claim under Order 18 rule 19(1)(a) and (d) of the Rules of Court 2012. The plaintiff, a substantial shareholder in the first defendant, a public listed company, sued the company, a second corporate defendant and two individual defendants, alleging that behind a series of nomination notices for the appointment of additional directors there lay a concert-party arrangement among some of the defendants and others not named to effect a hostile takeover of the listed company. The plaintiff contended that because the concert party's cumulative voting shareholding exceeded 33.3% of the voting shares in the company, the concert party was obliged to make a mandatory general offer for the remaining voting shares, and the claim invoked provisions of the Capital Markets and Services Act. The fourth defendant applied to strike out the claim against him. The court, per Noor Hisham bin Ismail J, allowed that application and struck out the claim against the fourth defendant with costs. The essential reason was jurisdictional: the court held that whether there had been a contravention of the Capital Markets and Services Act is, in the first instance, a matter for the Securities Commission to determine, and that a person who has suffered loss from such a contravention may bring a civil action to recover it only after the Commission has determined that a contravention occurred; it is not for the courts to adjudicate whether the Act has been contravened before that statutory mechanism is engaged. The court also drew on authority that declaratory relief is civil in essence and that the takeover-code machinery should be left to operate as the statute provides. The judgment is instructive on the primacy of the Securities Commission in determining contraventions of the takeover-code provisions of the Capital Markets and Services Act before a civil claim founded on such a contravention can proceed.