Court allows CIMB to drop eight-year-old suit against E&Y and SJ Asset Management

KUALA LUMPUR (June 25): CIMB Group Holdings Bhd has today been allowed by the High Court here to discontinue its eight-year-old suit against auditing firm Ernst & Young (E&Y) and asset management company SJ Asset Management Sdn Bhd (SJAM).

Judicial commissioner Atan Mustaffa Yussof Ahmad allowed the bank's application to stop its legal recourse on the two defendants without liberty to file afresh, according to a ruling sighted by

This followed an application by CIMB dated Jan 16, 2020 for leave to discontinue its action.

SJAM is an asset management company licensed by the Securities Commission (SC) which is being liquidated.

However, a suit filed by Lim Gim Eng along with 34 other companies and individuals, which had named SJAM managing director (MD) Tan Whai Oon, SJAM, E&Y and Annalong Corp Ltd as defendants, remains.

It is understood that the court had fixed July 23 for case management of the second suit, which was filed by 25 individuals and nine companies that had allegedly lost their investments with the company.

The two suits, which were filed separately, were initially ordered to be heard together for trial purposes.

The High Court allowed the SC to continue as an intervener in the second suit, following the order for E&Y to file a fresh discovery application with regards to that suit.

No order is made by the court as to costs of today's matter.

CIMB was represented by counsel Rabindra Nathan, while Gopal Sreenevasan appeared for E&Y, and Datuk Lim Chee Wee for SC.

The cases had progressed on in the Court of Appeal and Federal Court, in respect of several interlocutory orders before it was remitted back to the High Court.

CIMB had in 2012 named E&Y and SJAM as defendants in the suit as SJAM had purportedly breached its contractual duties and obligations following the Management Investment Agreement (MIA) made between the bank and the asset management company in 2003, that resulted in losses suffered by the financial institution.

The bank filed an amendment to its statement of claim in 2016.

The bank further claimed that SJAM had made false representations to induce them into entering the MIA, resulting in the bank's funds flowing to the asset management company for investments, and negligently causing losses suffered by CIMB.

The bank also claimed that E&Y, which had done audits for SJAM between 2002 to 2009, had failed to exercise due diligence and vigilance in ensuring the asset management company complied with the required common law and followed the directives by the authoritative and regulatory bodies.

Hence, the bank was seeking several declarations against the two defendants, damages, interests, costs and other relief deemed necessary by the court.

CIMB was seeking damages from SJAM for fraud, breach of fiduciary duties and losses sustained from its fraudulent misrepresentations, while it was seeking damages from E&Y for breach of common law and statutory duties.

The second suit
Meanwhile, Lim and 34 others who also filed the suit in 2012, are claiming that Tan — as MD of SJAM — had fraudulently caused the company to carry out unauthorised transactions in favour of Annalong Corporation, a company registered in British Virgin Island that was operating out of Hong Kong, in which Tan purportedly had interests.

Among the nine companies which are plaintiffs in the suit are Megaworld Corp, Joint Glory International Ltd and Bukit Kiara Capital Sdn Bhd.

They alleged Annalong was utilised as a vehicle to carry out the unauthorised transactions resulting in losses suffered by them.

The 35 plaintiffs are seeking damages for breach of statutory duty, negligence and Tan fraudulently causing SJAM to carry out the unauthorised transactions, interests, costs and other relief deemed by the court.

E&Y’s defence
Meanwhile, the audit firm, in its defence claimed that it does not have contractual relationships with any of the plaintiffs and that they were not entitled to rely on its audit reports on SJAM.

E&Y further claimed that it does not owe a duty of care to the claimants.

The audit firm was engaged by SJAM to perform, among others, auditing for 2002 to 2009 and each of the reports was prepared for a specific statutory purpose, which is to opine to the SJAM members whether the accounts prepared by its directors were properly drawn up.

The firm further claimed that it fulfilled all the contractual engagements with SJAM.

However, when the case proceeded to the Court of Appeal in 2014, it ruled that auditors owed a duty of care to the company’s investors.

SC intervened in 2017 in respect of a discovery application which sought to dispense with the commission’s consent for disclosure of certain documents.

In 2010, The Edge reported a probe conducted against SJAM by the SC, whereby BDO Consulting Sdn Bhd was appointed as an independent auditor to review SJAM's transactions.

This resulted in BDO finding several irregularities and raising certain concerns over the asset management company.

In 2017, The Edge reported that the suit was back in court following the re-filing of the amendment to the statement of claim, and that SJAM had RM216 million invested, of which RM106 million could not be located.