Polyseed SSD Sdn Bhd (Dalam Penggulungan) v 1. ) Chong Choong Kong 2. ) Soong Kit Kong Julian 3. ) Seah Tiong Gee 4. ) Foo Wai Quen

Case Significance

Illustrates the use of Order 14A to dispose of an auditor's-negligence claim without trial, on limitation and on the liquidator's inability to found a cause of action on the company's audited reports.

This High Court decision in the Commercial Division at Kuala Lumpur concerns the determination of preliminary questions of law that disposed of a professional-negligence claim against auditors. The plaintiff, a company in liquidation, had sued individuals in their capacities as partners or former partners of an audit firm, and a sole proprietor of another firm, alleging negligence in relation to audited financial statements. The defendants applied under Order 14A and Order 33 rules 2 and 5 of the Rules of Court 2012 for the court to determine certain questions of law that they said would dispose of the claim. The court first observed that the statement of claim, running to 100 pages and 316 paragraphs, was cumbersome and offended the requirement of brevity in pleadings under Order 18 rule 7(1). It then addressed two pivotal questions. The first was whether the liquidator could rely on the audited reports for the years ending 30 April 2015 and 30 April 2016, and the damage said to flow from them, to found a cause of action in negligence; the court answered that question in the negative. The second was whether the claim should fail in limine by reason of the defence of limitation; the court answered that question in the affirmative, holding the claim to be statute-barred. Having decided those two dispositive issues against the plaintiff, the court found it unnecessary to answer the remaining questions posed by the defendants. It accordingly dismissed the claim with costs. The judgment is a useful example of Order 14A being used to dispose of an auditor's-negligence claim on limitation and on the liquidator's inability to found a cause of action on the audited reports, without the need for a full trial. The decision illustrates that a claim doomed by limitation and by the absence of a sustainable cause of action need not be sent to a full trial, and may be disposed of economically on preliminary questions of law under Order 14A.