Ta Securities Berhad V Pernas Charter Management Sdn. Bhd.&3lagi


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(Di dalam perkara Mahkamah Sesyen Di Kuala Lumpur Dalam Wilayah Persekutuan, Malaysia Saman No: 2-52-5212-97)






















This was an appeal against the decision of the Sessions Court which dismissed the Plaintiff’s claim against the Respondents for negligence in relation to the issue of Share Certificate No. M00981 for 1000 Kramat Tin Dredging Berhad shares which resulted in a loss of RM42,733.75 to the Plaintiff. I allowed the Plaintiff’s appeal with costs to be taxed here and below, unless agreed, and ordered judgment to be entered for the Appellant against the 1st and 2nd Respondents in terms as prayed in paragraph 30(i), (ii) and (iii) of the Statement of Claim. I was of the opinion that there was a breach of a duty of care to the Plaintiff on the part of the 1st and 2nd Respondents, but I was not satisfied that there could be imputed a similar breach of duty of care between the Appellant and the 3rd and 4th Respondents, who were merely the administrators of the estate of one Ng Chan Hee.


I now provide my grounds for this decision.


Brief Facts


Ng Chan Hee, the deceased, had passed away sometime in December 1988. The 3rd and 4th Respondents became the administrators of his estate whereupon they were granted a Letter of Administration in 1990. The 3rd and 4th Respondents thereafter went through the deceased’s belongings to ascertain his assets. They found a small book listing down some of its assets and among these were included 1000 shares of Kramat Tin Dredging. They could not find the




share certificate for these shares, even after searching all over the house and office of the deceased. They then wrote to the 1st Respondent sometime in April 1994 who were at all material times the Registrar of Kramat Tin Dredging, to enquire whether the deceased was registered as holding shares in Kramat Tin Dredging. There was a positive reply stating that the deceased held 1000 shares represented by Certificate No. M00981. Since the administrators could not locate the share certificate concerned, they thought it had been misplaced and lost and therefore applied to the 2nd Respondent for a duplicate share certificate.


A new Share Certificate No. M06105 was then issued by the 1st Respondent under the name of “the estate of Ng Chan Hee, deceased”.


It appeared that the administrators then distributed the shares together with the rest of his estate to the beneficiaries.


All this happened at a time when the trading of shares listed on the KLSE were transacted on the basis of the transfer of physical share certificates. Scripless trading was to occur only much later. For Kramat Tin, the counter went fully scripless only on 22.9.1994.


On 26.11.1993, the Appellant, a Stockbroking Company, was instructed by its client in Singapore, G.K. Goh Pte Ltd, which was in turn a registered securities company in Singapore, to purchase on block of 1000 units of Kramat shares. The Appellant had in its possession the very same Kramat shares represented by the Share Certificate No. M00981, the shares having been traded sometime in 1984. The said




Kramat Share Certificate had been received by the Appellant sometime in December 1993 together with the Transfer Deed dated 9.8.1984 from Securities Clearing Automated Network Services Sdn Bhd (“SCANS”).


It can be immediately appreciated that the Appellant received the said share certificate before the 1st Respondent had issued the replacement Share Certificate No. M06105 to the 3rd and 4th Respondents.


On 20.3.1995, G.K. Goh then submitted the Kramat shares that it had bought on behalf of its client in Singapore to the Malaysian Central Depository (“MCD”) for registration, but this was rejected by MCD since these very same shares had been reported lost in April 1994.


Consequently, G.K. Goh rejected the said Kramat shares and returned the share certificate to the Appellant. The Appellant was requested by G.K. Goh to replace the said shares with another 1000 Kramat shares by June 1995, failing which G.K. Goh would institute a buying-in against the Appellant.


G.K. Goh exercised this buying-in and proceeded with the purchase of 1000 Kramat shares for its Client’s account against the Appellant, as presented by Contract Note No. 3709 2050 dated 3.7.1995 for the purchase price of RM42,733.75. The sum was the loss occasioned to G.K. Goh, and for which they then claimed against the Appellant.




The Appellant sent a Notice of Demand through their solicitors to the Respondents to demand a sum of RM42,033.75 being the buying-in costs together with interest and costs. The Respondents failed, neglected and refused to settle the claim. Hence the present action was instituted.


The Decision of the Sessions Court


The issue presented before the Session Court was whether the 1st Respondent owed any duty of care to the Appellant before deciding to issue the replacement share certificate without checking with SCANS. The Sesions Court Judge answered in the negative.


The learned Sessions Court Judge went further to hold that the Appellant did not have to pay damages to G.K. Goh, since its responsibility and duty to the latter ended when it forwarded the share certificate to the latter on 3.12.1993. G.K. Goh bore the risk when it did not register the shares in its name until after the date the shares were reported lost and the replacement share certificate issued by the 1st Respondent on 17.5.1994 (Exhibit D40).


As far as the 1st Respondent was concerned, it had complied with the statutory requirements under Section 102 of the Companies Act, which required the following:


(a) A statutory declaration by the owner that the certificate had been lost or destroyed, and had not been pledged sold or




otherwise disposed of, and if lost, that proper searches had been made;


(b) An undertaking that if the shares were found or received by the owner, they would be returned to the Company;


(c) The Applicant shall cause to be published an advertisement in a newspaper that the share certificate had been lost or destroyed and that the Applicant intended to apply to the company for a duplicate after the expiry of 14 days;


(d) The Applicant furnished a Bond for an amount equal to at least the current market value of the shares to indemnify the company against loss “following on the production of the original certificate.”


The View of KLSE


It was in evidence during the trial that the KLSE took the view the Respondents were negligent and therefore responsible to indemnify the Appellant for the losses. See Exhibit 32 at page 247 of the Appeal Record. This Exhibit, which is a letter written by the Corporate and Legal Affairs Department of KLSE to the Directors of the 1st Respondent, stated:


“…we have looked at all the relevant aspects and it appears to us that you and the Directors of Kramat Tin Dredging Berhad are responsible for indemnifying TA Securities Sdn Bhd for the loss.




This is very clear when you look at Section 102 of the Companies Act and the Indemnity provided to you by the Applicants. With respect there has been negligence on your part and on the part of the Applicants. It is stated in the Indemnity that the certificate has not been dealt with. A check with SCANS would have shown otherwise. In any event the Applicants have given you an Indemnity if there is a claim..”


I also considered the testimony given by SP4, SP5 and SP6, the representatives from KLSE who were called to give evidence, and it bacarne clear that a simple checking with SCANS would have disclosed whether the said shares had been retraded, since SCANS functoned as the clearing house for trades on the KLSE and therefore acted as the intermediary between a buyer and seller of a particular block of shares through the KLSE’s Electronic Trading System. Had the 1st Respondent and/or the administrators bothered to check with SCANS before that date of issuance of the replacement certificate, they would have been able to confirm whether the said Kramat shares had been retraded or lost.


It was in evidence that no such checking was done.


Under the trading system requiring delivery of physical scrips which was in force then, dealing and clearing of trades depended on the delivery of the physical share certificates together with transfer forms. It was not mandatory for the Purchaser to perfect the transfer, but he could retrade the same shares on the same basis. It was not negligent on the part of G.K. Goh not to have immediately transfered and registered the




shares in its name or its Client’s name before the “loss” came to be reported. The clearing would go through SCANS as the clearing house, and SCANS would be able to confirm whether any particular certificate had been retraded.


See the testimony of SP4, former officer of SCANS, at page 183 of the Appeal Record:


“Dalam tahun 1995 SCANS boleh mengesan sesuatu transaksi ke atas sesuatu sijil saham melalui Sistem Komputer SCANS.”


“Maklumat yang diperlukan oleh SCANS untuk membolehkan SCANS mengesan sejarah perdagangan sesuatu sijil ialah nombor sijil saham, nama kaunter, dan jangkamasa yang ingin dikesan.”


It would therefore have been prudent for the 1st Respondent to have inquired from SCANS on the status of the alleged “lost” certificate before deciding to issue the replacement certificate. This was an issue of duty of care and foreseeability. I was of the opinion that the learned Sessions Court Judge had failed to properly evaluate and appreciate this critical and material part of the evidence, despite the testimony given on the share trading system at that time.


I was of the view that when the standard of the reasonably competent Registrar is applied, there would be a breach of a duty of care owed to the Plaintiff as a class of person who would be within the area of foreseeable injury. The Plaintiff could not be seen as being too




remotely connected with the 1st Respondent so as to avoid liability for breach of this duty of care.


The test of duty of care stated in Jaswant Singh v Central Electricity Board [1967] 1 MLJ 272 summarises the position neatly:


“…the criterion is the foresight of the reasonable man, that is, was the injury to the Plaintiff the reasonably foreseeable consequence of the Defendant’s acts or omissions in all the circumstances of the case? If it was not, then the decision will be that no duty was owned by the Defendant to the Plaintiff. This does not mean, of course, that the Plaintiff must be a person identifiable by the Defendant. What is required is that he should be one of a class within the area of foreseeable injury. As regards what exactly must be foreseen, it is not necessary to show that the particular accident which has happened was foreseeable, anymore than it is necessary to show that the particular damage was foreseeable; it is enough if it was reasonable in a general way to foresee the kind of thing that occurred.”


In the context of the 1st Respondent, it functioned as the Registrar of the shares in the 2nd Respondent, and as such it was an entity expected to have a special skill in the area of share registration. It was expected of them to exercise reasonable care and skill in the conduct of their business. In this position, they would be expected to be familiar not only with the provisions of the relevant laws pertaining to their business, but also the practice and practical aspects of share trading. After all, the 1st Respondent was the Share Registrar of a listed entity whose shares were traded on the stock market. See the case of Ho Kam Seong v




Arab Malaysian Securities Sdn Bhd [2000] 6 MLJ 641, where the court expressed these sentiments in relation to Stockbrokers:


“The Respondent as Stockbrokers professes to have special skills in the purchase and sale of stocks and shares. It is expected that Stockbrokers will exercise reasonable care and skill in the conduct of their business. In their business they are bound to handle hundreds of thousands of Share Certificates. However, they are expected to be familiar with the provisions of the relevant provisions of the relevant laws pertaining to any particular certificates which come into the hands. …”


I was of the opinion that the 1st Respondent could not shelter behind the provisions of section 102 of the Companies Act. These provisions exist to regulate the duties required of an Applicant/Owner who applies to the company for a replacement certificate on the ground of loss or destruction of the certificate. They provide safeguards to the Company (and of course the Registrar) as against the Applicant. I did not believe these provisions were intended to displace the general law of negligence pertaining to the exercise of reasonable care and skill in the conduct of its business.


The 2nd Respondent, being the listed Company, was a principal, and as such must also be held liable to the Plaintiff for the loss. It was reasonably foreseeable, given the system of trading then, if the replacement certificate was issued without checking with SCANS, the said shares could still be traded since they were not lost or destroyed, which was what actually happened in this case.




As far as the 3rd and 4th Respondents were concerned, however, they were mere administrators of the deceased. I did not believe there could, or should, be imputed a sufficient nexus between them and the Plaintiff to render them liable for the loss. For them, the loss would not have been reasonably foreseeable, and they cannot be placed in the same position as a person in possession of special skills in the area of share trading. In any event, their liability was determined by the provisions of Section 102 of the Companies Act, in particular Section (2)(b) which required the furnishing of a bond of indemnity to the Company to indemnify the Company against loss arising from the issuance of the replacement certificate. Such an indemnity was provided as evidenced by Exhibit P6B (statutory declaration) and Exhibit P6C (“Indemnity for Lost Certificate”) at pages 227 – 228 of the Appeal Record. The Company would have recourse against them directly by way of indemnity should it have to make good the loss to the Plaintiff/Appellant.


Based on the above reasons I allowed the appeal as against the 1st and 2nd Respondents with costs to be taxed, but dismissed it as against the 3rd and 4th Respondents and ordered that the Appellant pay the costs of the appeal as against them, here and below, to be taxed unless agreed. I also ordered that the deposit for the appeal be paid to the 3rd and 4th Respondents for account of taxed costs.




Dated 12th May 2009.






For the appellant: Michelle Lai Mei See


Messrs. Tan Hock Chuan & Co.


For the 1st & 2nd respondents: S. Chrishanthini


Messrs. Murali B. Pillai & Associates


For the 3rd & 4th respondents: Leong Sai Hwa


Messrs. C.K. Leong & Co.

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