The Asset Tracing and Recovery Review: Malaysia
Malaysia is a growing financial hub and is on track to becoming the world's leading global Islamic financial hub.2 There is, therefore, a huge range of assets, including cash and securities, that are commonly held or channelled through its jurisdiction. In recent times, Malaysia has also amended and updated its legislation to better reflect the changing times and adapt to current needs.
Malaysia has a well-functioning legal system to support the country's financial system and to address any legal disputes, including those arising from fraud and financial scams. Malaysia's common law legal system and courts are positioned to determine these disputes and facilitate asset tracing, investigations and recovery efforts. Being a common law system country, the Malaysian courts have a wide discretion to consider and accept any English common law principle or rule of equity. Reference to other common law jurisdictions' cases are also often made as they have persuasive authority in the Malaysian courts. Under the Malaysian court system, victims of fraud and financial scams may obtain redress and compensation through civil remedies that include damages, injunctive relief, tracing orders and restitution. Victims of criminal activity may also receive redress where there is a conviction through statutorily provided restitution such as revesting or restoring of property to its original owner.
The key legislation relevant to fraud-related civil asset recovery includes the Companies Act 2016, Contracts Act 1950, Sale of Goods Act 1957, Trustee Act 1949 (Revised 1978), Evidence Act 1950, Limitation Act 1953 and the Rules of Court 2012. In respect of criminal offences and liabilities, the relevant legislation would be the Penal Code and the Criminal Procedure Code.
Legal rights and remedies
i Civil and criminal remedies
The remedies that a successful party can obtain in a civil court are damages, injunctive relief, tracing orders, accounts, restitution and equitable compensation. In certain cases, for example fraud pertaining to land, the court could declare a land transaction as being defeasible, or null and void, and set it aside.3
To determine the relevant cause of action to be raised in a civil claim, one has to consider first the relationship of the claimant to the fraudster and secondly the subject matter of the claim. For example, if there is a contractual relationship, the innocent party may file a suit to rescind a contract procured by fraudulent misrepresentation.4 However, if the relationship between the fraudster and the claimant is of a fiduciary nature, a claim for breach of fiduciary duty and in constructive trust may be brought by the innocent party. Finally, the subject matter of the claim will require consideration of different aspects of laws; for example, if it is land, the National Land Code will need to be considered, and if it is just movable goods, the Sale of Goods Act 1957 (Revised 1989).
Contract law is codified in Malaysia under the Contracts Act 1950 (Act 136) (Revised 1974). A contract procured by fraud has the effect of vitiating consent to the contract.5 Section 17 of the Contracts Act 1950 defined fraud to include any of the following acts committed by a party to a contract, or with his or her connivance, or by his or her agent, with intent to deceive another party thereto or his or her agent, or to induce him or her to enter into the contract:
- the suggestion, as to a fact, of that which is not true by one who does not believe it to be true;
- the active concealment of a fact by one having knowledge or belief of the fact;
- a promise made without any intention of performing it;
- any other act fitted to deceive; and
- any such act or omission that the law specially declares to be fraudulent.
The Federal Court recently held that an exaggeration of a claim under an insurance contract may amount to fraud if it is dishonestly made or so greatly in excess of the true amount as to be incompatible with good faith or that the exaggeration or over-estimation of loss is so serious as to lead to the inference that the insured must have intended to defraud the insurer.6
A contract procured by fraud is voidable at the election of the innocent party. The innocent party however can elect to sue and claim to be put in the position in which he or she would have been if the representations made had been true.7
A claim for rescission of a contract procured by fraud will result in the party being put into the original position before he or she entered into the contract. This includes the rescinding party returning benefits enjoyed under a contract that has become void.8 A plaintiff may also bring a civil suit for damages. Damages for fraud are awarded on the basis that the innocent party is put in the position it would have occupied had there been no reliance on the fraudulent inducement. The assessment of damages would, therefore, include all expenditure incurred reasonably and properly in consequence of and flowing directly from the deceit, whether before or after the date of the rescission. It may, where appropriate, include exemplary and aggravated damages.9
Law of tort
Common law fraud (tort of deceit) and equitable fraud
The term common law fraud is often used to describe the tort of deceit, or the making of fraudulent misrepresentations. To succeed, a plaintiff must prove that a false representation has been made knowingly; without belief in its truth; or recklessly, carelessly whether it be true or false. There must be a lack of an honest belief in the truth of the representation. There must be proof of an actual intention to deceive.10 A plea of fraud at common law will not succeed in the absence of proof of an intention to deceive. However, such an intention is not an ingredient of equitable fraud, which is, essentially speaking, unconscionable conduct in circumstances where there exists or is implied or imposed a relationship of trust or confidence. If the fraud is committed together with some other party, it is usual for all the participants to be sued jointly in the tort of conspiracy.11
The object of damages for the tort of deceit is to put the injured party into as good a position financially as it would have been in if the tort had not been committed. In the assessment of damages, the court can take into account the value of a property which is the subject matter of the claim as at the date of judgment.12
Conversion and claim for money had and received
A plaintiff must prove the following elements in a claim under a tort of conversion:
- that the defendant's conduct was inconsistent with the rights of the owner (or other person entitled to possession);
- that the defendant's conduct was deliberate, not accidental; and
- that the defendant's conduct was so extensive an encroachment on the rights of the owner as to exclude him or her from the use and possession of the goods.13
Alternatively, there can also be a claim for money had and received. An action for money had and received is an action, based on goods wrongfully converted by another person, to sue for the proceeds.
Quite often, a bank that has made payment on a forged cheque will be sued in the tort of conversion. In such a case, by reason of the forgery the bank has no authority to debit the account of the customer by reason of Section 24 of the Bills of Exchange Act 1949.14 The bank's only defence is to rely on Section 73A of the Bills of Exchange Act 1949 and argue that the forged signature on a cheque is deemed to be that of the person it purports to be if that person had knowingly or negligently contributed to the forgery.15 The bank cannot rely on a contractual term to exclude the effect of Section 24 of the Bills of Exchange Act 1949.16
The principal remedy in a tortious claim is an action for damages. At times, the plaintiff can apply for an injunction restraining any dealing in or with the property obtained by fraud in addition to damages as an interim remedy, and with a final remedy of a declaration of rights or mandatory injunction for the return of the property.
Trust law and breach of fiduciary duties
A trustee owes a fiduciary duty to the beneficiary. A trustee will be liable under the Trustee Act 1949 (Revised 1978) so long as there is wilful default on the part of the trustee.17 The existence of a fiduciary or trustee-like duty is not limited to instances where there is an express trust. A fiduciary relationship exists in employer–employee, company–director and even solicitor–client kinds of arrangements. Normally, a claim by a plaintiff against a fraudster where there is a fiduciary relationship will be a claim under constructive trust. The plaintiff may institute a suit for a declaration that the property is comprised in the trust that belongs to him or her.
Where a trustee or fiduciary has transferred or sold the trust property or the money to some other third parties, the process of tracing will be employed to identify its proceeds and the claim against these third parties is under the accessory liability principle. For third parties who had knowingly assisted in the breach of trust or fiduciary duties, the claim is a claim for knowing assistance.18 For third parties who had received the trust property or proceeds, the claim is for knowing receipt.19
Typically, in such a proprietary claim, the plaintiff, in addition to applying for a freezing injunction restraining further transfer of the trust asset, will also apply for tracing or disclosure orders against third parties such as banks so as to assist in the tracing of funds.20 Tracing is not available against a bona fide recipient for value.21
Misfeasance of officers of a company
A director, secretary, officer or liquidator of a company who misapplies, retains or becomes liable or accountable for any money or property of the company may be guilty of misfeasance or breach of trust or duty in relation to the company. The liquidator, creditor or contributory of the company may apply to the court to compel him or her to be personally liable and to repay, restore or account for the money or property or any part of it with interest at such rate as the court thinks just; or contribute such sum to the company's assets by way of compensation for the misapplication, retainer, misfeasance or breach of trust or duty as the court thinks just.22
In an insolvency situation, it is possible for claims to be brought against directors of an insolvent company for fraudulent and wrongful trading.23 The standard of proof to establish fraud for fraudulent trading is now on a balance of probability.24
Offences under the Malaysian Penal Code
The Penal Code (Act 574) is the principal legislation describing criminal offences relating to fraud. A fraudulent act may give rise to offences of theft, criminal misappropriation of property, criminal breach of trust, cheating, fraudulent deeds and dispositions of property, and forgery under the Penal Code.
Fraud criminal breach of trust and conversion
The Penal Code defines fraudulently, and a person is said to do a thing fraudulently if he or she does that thing with the intent to defraud, but not otherwise.25 The Penal Code also defines dishonesty as doing anything with the intention of causing wrongful gain to one person, or wrongful loss to another person, irrespective of whether the act causes actual wrongful loss or gain.26 As such, Penal Code offences involving an element of dishonesty conviction are possible without proof of actual wrongful loss or gain.
It is an offence under the Penal Code if a person dishonestly misappropriates, or converts to his or her own use, or causes any other person to dispose of any property.27 For criminal misappropriation or criminal breach of trust, it is immaterial whether there was an intention to defraud or to deceive any person.28
The offence of criminal breach of trust is committed by a person who is entrusted with a property, or with any dominion over a property and he or she dishonestly misappropriates, or converts to his or her own use, that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract.29
A fraudster could be guilty of the offence of cheating if he or she fraudulently or dishonestly induces another to deliver any property to any person, or to consent that any person shall retain any property. He or she could also be guilty of cheating if he or she intentionally induces the person so deceived to do or omit to do anything that he or she would not do or omit to do if not so deceived, and that the omission causes or is likely to cause damage to the body, mind, reputation or property.30
Offences relating to property procured by fraud
Property that has been transferred by theft, criminally misappropriated or in respect of which criminal breach of trust or cheating is committed is regarded as stolen property, whether the transfer has been made or the misappropriation or breach of trust or cheating has been committed within or outside of Malaysia.31 However, if the stolen property subsequently comes into the possession of a person legally entitled to its possession, it ceases to be classified as stolen property.32 A person who dishonestly receives or retains such stolen property, knowing or having reason to believe the same to be stolen property, shall be punished with imprisonment for a term that may extend to five years or with a fine, or both.
The court also has the power to order for the revesting or restoring of stolen property. The court can also make such order as to the restitution or delivery of property to the owner and as to the payment of money upon or in connection with the restitution or delivery, which have an effect like a conviction for an offence committed in respect of such property.33
A person who instigates the doing of the thing or conspired in the commission of the thing or intentionally aides any illegal acts or omissions is an abettor within the meaning of the Penal Code.34 Unless expressly provided for, an abettor of an offence, where the act abetted is committed in consequence, is punishable with the same punishment as provided for the offence, unless the Penal Code makes a provision to the contrary.35 The term abetment under the Penal Code includes the abetment of an act in Malaysia that is committed outside Malaysia and that would constitute an offence if committed in Malaysia.
ii Defences to fraud claims
National Land Code
A title to land that has been registered with the land registry is indefeasible.36 If it can be shown that the transfer or registration is procured by fraud, the title is defeasible.37 When a transfer or registration is challenged based on fraud, it must be shown that the person receiving the title has acted dishonestly or in collusion with the fraudster.38 A title to land may be challenged even if it was subsequently transferred by the fraudster to a third party.39 However, the subsequent purchaser has a defence to a claim by the original owner if the subsequent purchaser can show that he or she acted in good faith and paid valuable consideration.40
Sale of Goods Act 1957
The Sale of Goods Act 195741 protects a buyer who, in good faith and without notice of defect in title, purchases an asset without notice of the seller's defect in title to that asset.
There are other defences available to a buyer depending on the circumstances, including a sale by:
- one of the joint owners;42
- a seller under a voidable contract that has not been terminated at the time of sale;43
- a seller in possession;44 and
- a buyer in possession.45
Limitation Act 1953
Under Malaysian law, a claim in contract and tort must be brought within a period of six years from the date of accrual of the cause of action.46 However, if the action is based upon the fraud of the defendant or his or her agent or there is concealment by reason of fraud, the time starts to run from the date of discovery of the fraud or from the date it could with reasonable diligence have been discovered.47 Where the defence of limitation has been raised, the burden to prove that the action was commenced within the limitation period is with the plaintiff.48 However, the law does not place the onus on the innocent party to constantly be on the lookout for fraudulent dealings where there was no reason to suspect fraud.49
There is no limitation period in respect of an action brought by a beneficiary under a trust in respect of fraudulent breach of trust by a trustee, to recover trust property from the trustee or property in the possession of the trustee, or previously received by the trustee and converted to his or her use.50
Seizure and evidence
i Securing assets and proceeds
In relation to civil proceedings, there are several forms of interim relief available in Malaysia to prevent the dissipation of assets and to secure the same from those alleged to be involved in the fraud complained of.
A Mareva injunction is a court order preventing a defendant from dealing with, moving or disposing his or her assets. Essentially, it means that the defendant's assets are frozen such that any attempt to transfer or to move out his or her assets would be a breach of the court's order and would be subjected to contempt of court proceedings. The freezing order would also be binding on a third party insofar as the third party is served with the order and subsequently assists the defendant in transferring or moving his or her assets. A breach of the order by the third party would also open up the third party to a contempt of court proceeding. In practice, therefore, Mareva injunctions are routinely served on banks, which would result in banks taking immediate steps to freeze the accounts that a defendant may have with them.
In Malaysia, a Mareva injunction would also require the defendant to make disclosure of all assets owned, whether within or outside of Malaysia,51 and may also, in certain circumstances, require third parties to disclose information relating to the defendant's assets held by them.
Because of the far-reaching consequences of a Mareva injunction, the plaintiff must satisfy the following requirements before the court would grant such order:
- the plaintiff must have a good arguable case;
- the defendant must have assets within the jurisdiction;
- there is evidence of a real risk of dissipation or removal of the defendant's assets before judgment;52 and
- the balance of convenience leans in favour of the plaintiff and the granting of a Mareva injunction.53
It is to be noted that the Malaysian courts have accepted that the risk of dissipation of assets is always there where it can be shown that a defendant had acted in want of good faith, maintains foreign accounts and there has been evidence of movement of funds into foreign accounts.54
A Mareva injunction application may be made ex parte but will only be valid for 21 days from the date the order was granted and an inter partes hearing of the application must be scheduled within 14 days from the granting of the ex parte order.55 Where the application is made ex parte, the plaintiff has an obligation to make full and frank disclosure of all relevant material facts, including those that are not in the plaintiff's favour.56 A failure to do so may result in the order being discharged and set aside. A plaintiff seeking a Mareva injunction must also give an undertaking to pay to the defendant any damages that the defendant may suffer as a result of the order if it later transpires that the order ought not to have been granted.57
A plaintiff may also seek to preserve a specific or particular asset of the defendant in which the plaintiff is claiming a proprietary interest.58 To apply for and obtain a proprietary injunction, a plaintiff will have to satisfy the relevant test in the case of American Cynamid v. Ethicon Limited 59 as adopted by the Malaysian courts in the case of Keet Gerald Francis Noel John v. Mohd Noor bin Abdullah,60 which requires the plaintiff to establish the following:
- there is a bona fide serious issue to be tried;
- the balance of convenience leans in favour of granting the injunction; and
- that damages would not be an adequate remedy.
It is not uncommon for a proprietary injunction to be granted to preserve the assets of a victim of a fraudulent scam that had fallen into the hands of a third party, and such an injunction would be granted even though the assets sought to be preserved are monetary in nature.61 A recent High Court decision has recognised62 the availability of a proprietary injunction as a form of interim relief for victims of fraud.
ii Obtaining evidence
Anton Piller order
Where a plaintiff is concerned that a defendant may hide or destroy evidence that is relevant to the plaintiff's claim, the plaintiff may seek an injunction requiring the defendant to permit the plaintiff to enter into the defendant's premises to enable an inspection, seizure and removal of documents relating to the plaintiff's claim. This type of injunction is more commonly known as an Anton Piller order.
To obtain an Anton Piller order, the plaintiff must establish that:
- there is an extremely strong prima facie case;
- the damage, potential or actual, must be very serious for the plaintiff; and
- there must be clear evidence that the defendant has in its possession incriminating documents, and that there is a real possibility that the defendant may destroy such material before any inter partes applications can be made.63
As with the Mareva injunction, the application is to be made with a full and frank disclosure, and an undertaking as to damages must be given. The granting of an Anton Piller order ex parte is subject to a subsequent application to set aside the order and claim for damages that may be filed by the defendant.
Bankers Trust order
In Malaysia, a plaintiff may also apply for a disclosure order against a third-party bank for information pertaining to a defendant's bank account known as a Bankers Trust order, named after the English case that established the jurisdiction and power of a court to make such a disclosure order.64 This disclosure would also be a permitted disclosure pursuant to Section 134 of and Schedule 11 to the Financial Services Act 2013 and Order 24 Rule 7A of the Rules of Court 2012. This disclosure order is most commonly applied by the plaintiff in aid of the plaintiff's tracing exercise to discover the whereabouts of monies claimed by the plaintiff as forming part of its claim against the defendant.65
Norwich Pharmacal order
Before commencing an action in court, a proposed plaintiff may apply for what is commonly called a Norwich Pharmacal order66 from the court to obtain documents from a third party with the aim of identifying the wrongdoer if the plaintiff was uncertain as to the parties that may be involved in the wrongdoing committed against the plaintiff.
Strict conditions must be satisfied to ensure that such disclosure application do not become a fishing expedition. In Infoline Sdn Bhd v. Benjamin Lim Kheng Hoe,67 the Court of Appeal had elaborated and held that:
[T]he respondent must show that the discovery is necessarily required even before an action is initiated as it is precisely to enable the respondent to decide whether he can even commence action against the appellant in particular, to start with. And if the information revealed from that discovery can determine or assist in reaching an answer to that predicament, then the order ought to be made.68
The procedures and documents that are required for such application have now been embodied into the Rules of Court 2012 and are as set out in Order 24 Rule 7A of the Rules of Court 2012. To obtain such an order, the proposed plaintiff must satisfy the requirement under Order 24 Rule 7A(3) of the Rules of Court 2012,69 and must essentially state the following in the proposed plaintiff's affidavit in support of the application:
- the documents sought for discovery;
- sufficient and material facts to show that the defendant is in possession, power or custody of the documents concerned, or is likely to have the documents;
- sufficient facts to show the likelihood of the defendant being a party named in the subsequent legal action; and
- the relevance of the documents sought for discovery.70
Order 24 Rule 7A (9) of the Rules of Court 2012 further provides that where the order is made by the court, the person against whom the order was made shall be entitled to his or costs of the application and of complying with any order made on an indemnity basis unless the court orders otherwise.
Fraud in specific contexts
i Banking and money laundering
The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFA) is the primary legislation dealing with anti-money laundering activities in Malaysia. The offences relating to fraud such as theft, criminal misappropriation of property, criminal breach of trust, cheating, fraudulent deeds and dispositions of property, and forgery under the Penal Code would all come within the meaning of money laundering, unlawful activities or serious offences within the meaning of AMLATFA.71 In a bid to prevent money laundering, measures such as the imposition of reporting obligations on reporting institutions as described in the First Schedule to the AMLAFTA for the reporting of transactions exceeding a specified threshold and suspicious transactions, as well as customer due diligence, are mandated.
In any prosecution for a money laundering offence, the court has the power to order the forfeiture of any property that is proved to be subject matter or evidence relating to the commission of such offence, terrorist property, proceeds of an unlawful activity or the instrumentalities of the offence.
The enforcement agency will usually issue a freezing order to freeze further dealings with the property followed by a seizure order.72 The public prosecutor, upon the information given to him or her by an investigating officer of an enforcement agency, may, after consultation with Bank Negara Malaysia, the Securities Commission or the Labuan Financial Services Authority, order a party not to part with, deal in or otherwise dispose of any movable property (including a money instrument or any accretion to it) that is the subject matter of an offence under Section 4(1) of the AMLATFA or a terrorism financing offence.73
An order for seizure of immovable property may be made by a notice of seizure issued by the public prosecutor.74 Section 54(1) of the AMLATFA provides any dealing with the property after seizure shall be null and void. Section 56(3) of the AMLATFA provides that where any property has been seized, and no application for forfeiture of the property has been made, the property shall be released to the person from whom it was seized.
If in the course of winding up a company it appears that any business of the company has been carried on with the intent to defraud the company's or other person's creditors or for any fraudulent purpose, the liquidator, any creditor or contributory of the company may apply to the court for an order that the persons who were knowingly parties to the carrying on of the business in that manner be personally responsible for all or any of the debts or other liabilities of the company.75 Not only the company's directors are liable under this section, but all persons, including other companies and officers of the company76 that were knowingly parties to the fraud, can be held liable to make contributions.
Fraudulent trading requires proof of dishonesty. This may be inferred where the directors continue to trade the company despite knowing there is no reasonable prospect of the company's debts being paid. The dishonest conduct must involve real moral blame according to current notions of fair trading among commercial people.
Fraudulent trading is also a criminal offence punishable by a term of imprisonment of up to 10 years or a fine of one million ringgit, or both.77
In the course of winding up, the liquidator, creditor or contributor of the company may apply to court for an order that the director of the company be personally responsible without any limitation of liability for the payment of the whole or part of a debt if:
- it appears that before the commencement of the winding up, an officer of the company (including a director or shadow director) was knowingly a party to the contracting of the debt;
- that officer of the company knew at the time the debt was contracted that there would be no reasonable or probable ground of expectation of the company being able to pay the debt (after taking into consideration all other liabilities of the company at that time); and
- upon the person being convicted of an offence of wrongful trading.78
Proof of the ability of a company to pay its debt is not necessarily limited to showing that the company's liabilities exceeded its assets. The ability to pay must be determined by taking into account the extent and nature of the assets and liabilities of the business, cash available, whether it can be expected to pay by borrowing or realising assets, and any promises of new finance.
The test to assess the knowledge of a director that a company cannot pay its debt is an objective one. It does not require proof of fraud or dishonesty. Therefore, it is easier to find a director liable for breach of wrongful trading as compared to fraudulent trading.
Where an order is made against more than one director, the directors will usually be held jointly and severally liable for the whole sum.
Under the Arbitration Act 2005, the making of an award that is induced or affected by fraud or corruption is contrary to public policy and is a valid ground to set aside the award.79
iv Fraud's effect on evidentiary rules and legal privilege
In a criminal proceeding, the standard of proof for offences relating to fraud is that of beyond reasonable doubt. In a civil case, previously, there were some distinctions made between civil fraud and criminal fraud and their bearing on the standard of proof of fraud for civil proceedings.80 This confusion has now been resolved by the Federal Court,81 which declared that the standard of proof for fraud in civil proceedings is on a balance of probability. The Federal Court is of the view that the seriousness of an allegation or consequences should not make any difference to the standard of proof to be applied. This position of law is now in line with authorities in Commonwealth jurisdictions like the UK and Singapore.
Privilege applies to communications between a solicitor and his or her client when legal advice is rendered (legal advice privilege) and also communications in contemplation of litigation or during litigation (litigation privilege).
However, there is always an exception to the application of the legal professional privilege, and that is the fraud exception or 'communication made in furtherance of any illegal purpose'.82 As such, legal professional privilege does not extend to communications that are part of a criminal enterprise or a fraudulent proceeding.83 It also does not extend to a case where a solicitor is a prime suspect in a kidnapping case of his or her client when he or she has refused to divulge the whereabouts of the client.84
The court will not simply lift the protection of professional privilege on a bare assertion of the prosecution or police of a solicitor being involved in a commission of a crime or fraud. Strong evidence is required to do so, and the court is entitled to look at the sworn information or evidence by way of admission or affidavit and the allegation of facts in deciding this issue.85
i Conflict of law and choice of law in fraud claims
High Courts have jurisdiction to try all civil proceedings where:86
- the cause of action arose within its local jurisdiction;87
- the defendant or one of several defendants resides or has his or her place of business in its local jurisdiction;
- the facts on which the proceedings are based exist or are alleged to have occurred in its local jurisdiction; or
- any land, the ownership of which is disputed, is situated within its local jurisdiction.
The two subordinate courts, namely the Sessions Courts88 and Magistrates' Courts,89 have the jurisdiction to hear and determine any civil matter arising within the local limits of jurisdiction assigned to it. Malaysian courts may also assume jurisdiction where the court has jurisdiction to grant leave for service of an originating process outside of Malaysia.90
Where a claim relates to assets obtained through unjust enrichment, the applicable law is the law where the enrichment occured.91 Therefore, claims for money had and received is governed by the laws of the place where the asset is received.92 Where the claim is that the recipient holds the property transferred fraudulently on trust for the plaintiff, then the applicable law is the lex situs, that is, where the trust property is located.93
ii Collection of evidence in support of proceedings abroad
A plaintiff may apply to the High Court for an order for the examination or attendance of a witness, or both, and for the production of documents in relation to a matter pending before a court or tribunal in a place outside the jurisdiction.94 The application is to be filed on an ex parte basis by a person duly authorised to make the application on behalf of the foreign court or tribunal in question, and shall be supported by affidavit.95 The affidavit in support shall exhibit the letter of request, certificate or other document evidencing the desire of the foreign court or tribunal to obtain for the purpose of a matter pending before it the evidence of the witness to whom the application relates to the production of any documents.96
The Attorney General may also apply for an order for the examination or attendance of a witness, or both, and for the production of documents in relation to a matter pending before a court or tribunal in a place outside the jurisdiction. The application by the Attorney General may be made where a letter of request, certificate or other document requesting that the evidence of a witness within the jurisdiction in relation to a matter pending before a foreign court or tribunal be obtained is received by the Minister and sent by him or her to the High Court Registrar, or that this letter of request, certificate or other document is received by the High Court Registrar in pursuance of a Civil Procedure Convention, which provides for the taking of the evidence of any person in Malaysia for the assistance of a court or tribunal in the foreign country.
In granting the application for obtaining evidence in support of a matter pending before a foreign court or tribunal, the High Court may order the examination to be taken before any fit and proper person nominated by the person applying for the order, or before the Registrar or such other qualified person that the High Court seems fit.97 The evidence of the witness would be recorded by way of deposition.98
In relation to criminal matters, the Mutual Assistance in Criminal Matters Act 2002 sets out the legal procedures involved in mutual assistance in criminal matters between Malaysia and other countries. A prescribed foreign state99 may make a request to the Attorney General for assistance in a criminal matter.100 The request for assistance may be made for the taking of evidence101 or the production of any particular thing for the purpose of any criminal matter in that prescribed foreign state.102
iii Seizure of assets or proceeds of fraud in support of the victim of fraud
The interim relief mechanisms as described in Section III are generally available to victims of fraud, provided that the requisites are satisfied. Victims of fraud may pursue a worldwide Mareva injunction to freeze a defendant's assets globally.
With respect to criminal offences, the Mutual Assistance in Criminal Matters Act 2002 provides for cross-border seizure and forfeiture of property in Malaysia in connection with a criminal offence that has been committed outside Malaysia. The request is to be made to Malaysia's Attorney General for assistance in the enforcement and satisfaction of a foreign forfeiture order against property that is reasonably believed to be located in Malaysia.103
Similarly, the Attorney General may also make a request to the authorities of a foreign state to enforce and satisfy a forfeiture order or to restrain the dealing in any property against which the forfeiture order may be enforced or made available to satisfy the forfeiture order made in a criminal proceeding in Malaysia.104
iv Enforcement of judgments granted abroad in relation to fraud claims
Foreign judgments can be enforced in Malaysia through either the Recognition or Enforcement of Judgments Act 1958105 (REJA) or common law.
A foreign judgment is capable of recognition and enforcement under REJA if the judgment is a monetary judgment, a judgment of a superior court from a reciprocating country under REJA and is final and conclusive.
A foreign judgment is capable of recognition and enforcement under common law through the initiation of a fresh suit in the court to obtain a summary judgment based on such foreign judgment. The requirements for an action based on a foreign judgment at common law are similar to those under REJA, with the only difference being that the judgment need not be a judgment of a superior court from a reciprocating country under REJA.
v Fraud as a defence to enforcement of judgments granted abroad
The registration of a foreign judgment under REJA may be set aside if the foreign judgment was obtained by fraud. Fraud is also a defence for common law recognition of foreign judgment.
i Injunction against 'Persons Unknown'
The High Court in the recent case of Zschimmer & Schwarz GmbH & Co KG Chemische Fabriken v. Persons Unknown & Anor106 had the opportunity to decide on the available recourse that a victim of a cyber fraud may have against an unknown person. In this cyber fraud case, the High Court granted a Mareva injunction and a proprietary injunction against 'Persons Unknown' for the first time in Malaysia. Briefly, the plaintiff, a German company, had been in communication with its South Korean counterpart through emails. The plaintiff was under the impression that it was making a commission payment to the South Korean company. However, a fraudster, whose identity was unknown, was able to infiltrate the email communication and fraudulently deceived the plaintiff to mistakenly pay the commission payment into the second defendant's bank account in Malaysia. Upon realising the fraud, the plaintiff commenced an action in Malaysia to obtain an urgent ex-parte Mareva injunction and a proprietary injunction against the fraudster, whose identity was unknown as well as against the second defendant, whose identity was known. The High Court, in granting the injunction orders, confirmed that it has the jurisdiction to grant such interlocutory orders against Persons Unknown and that there was nothing in the Rules of Court 2012 that prohibits an action from being filed against Persons Unknown. Such reliefs would be beneficial and would serve to assist a plaintiff in obtaining further ancillary relief with regard to other third parties in securing the amounts that are the subject matter of the fraud and to obtain the identity of the alleged fraudsters. This case is also demonstrative of the willingness of the Malaysian courts to grant reliefs to assist victims of cybercrimes and to develop this area of law to keep pace with cross-border recovery efforts of a fraud.
ii Self-identification order against person unknown
In Zschimmer & Schwarz Gmbh & Co Kg Chemische Fabriken v. Persons Unknown & Anor,107 the High Court also granted an order requiring persons unknown to identify himself or herself and to provide an address for service to the plaintiff in a case where the identity of the fraudster is unknown.
iii Injunction in the 'less drastic form' of an Anton Piller Order
The High Court in the recent case of Centek Ltd & Ors v. Farrah Dheeba bt Shaiful Ridzuan & Ors108 granted an order in the less drastic form of an Anton Piller Order that was described as a 'Doorstep Delivery Order', which essentially required the defendant to deliver up documents and material consisting of the confidential information belonging to the plaintiff in the defendant's possession. In granting such an order, the High Court acknowledged that an Anton Piller order is highly draconian and as such, the courts have developed a similarly strong, but albeit less stringent variation of the Anton Piller order.
iv Enforcement of foreign judgment
The High Court, in the case of United Overseas Bank (China) Ltd, Chengdu Branch v. Siow Kwang Joon @ Siow Kwong Shang,109 in allowing the defendant's application for a stay of execution pending the defendant's appeal against the summary judgment, considered the fact that the plaintiff was a foreign entity in China and the fact that that there was no reciprocal enforcement of judgment agreement between China and Malaysia to be factors that would support the defendant's contention that there was a real risk that the defendant would not be able to recover the judgment sum from the plaintiff, in the event the defendant was successful in its appeal.
1 Jack Yow, Daphne Koo and Kwong Chiew Ee are partners at Rahmat Lim & Partners.
2 According to Thomson Reuters' Islamic Financial Development Report in 2018, Malaysia remains the leader among 56 countries for Islamic financial institutions.
3 Section 340(2) of the National Land Code (Act 828) (Revised 2020). In Al Rashidy Kassim & Ors v. Rosman Roslan  3 CLJ 361, following the successful claim by the beneficiaries of the estate of a deceased person, the Federal Court ordered that the memorial in favour of the fraudster in the issue document of title and the register document of title be deleted and a memorial in favour of the deceased be reinstated therein.
4 Section 19 of the Contracts Act 1950 (Act 136) (Revised 1974).
5 Section 14(c) of the Contracts Act 1950 (Act 136) (Revised 1974).
6 ALW Car Workshop Sdn Bhd v. AXA Affin General Insurance Bhd  7 CLJ 667 at 682, para 37.
7 Section 19(2) of the Contracts Act 1950 (Act 136) (Revised 1974).
8 Section 66 of the Contracts Act (Act 136) (Revised 1974).
9 Abdul Razak Datuk Abu Samah v. Shah Alam Properties Sdn Bhd  3 CLJ 231.
10 Takako Sakao v. Ng Pek Yuen & Anor  1 CLJ 381.
11 Kontron Asia Pacific Sdn Bhd v. Quah Sin Chye & Ors  8 CLJ 490.
12 Datuk Jagindar Singh & Ors v. Tara Rajaratnam  1 MLJ 105.
13 Zung Zang Wood Products Sdn Bhd & Ors v. Kwan Chee Hang Sdn Bhd & Ors  2 CLJ 445.
14 Section 24 Bills of Exchange Act; United Asian Bank Bhd v. Tai Soon Heng Construction Sdn Bhd  1 MLJ 182, Prima Nova Sdn Bhd v. Affin Bank Bhd  9 CLJ 442.
15 Public Bank Berhad v. New Ace Digital Sdn Bhd  3 MLJ 421.
16 Public Bank Bhd v. New Ace Digital Print Sdn Bhd  5 CLJ 1 at 21, para 46.
17 Section 35 of the Trustee Act 1949 (Revised 1978); Khor Phaik Ean & Anor v. Chiew Sien Lup  9 CLJ 507.
18 Kuan Pek Seng @ Alan Kuan v. Robert Doran & Ors  2 MLJ 174; and Kontron Asia Pacific Sdn Bhd v. Quah Sin Chye & Ors  8 CLJ 490.
19 Tan Sri Dato' (Dr) Rozali Ismail & Ors v. Chua Lay Kim (P) & Ors  3 CLJ 84; and Kontron Asia Pacific Sdn Bhd v. Quah Sin Chye & Ors  8 CLJ 490.
20 Meridien Asset Management Sdn Bhd v. Ong Kheng Hoe & Ors  7 CLJ 1.
21 Luster Industries Berhad v. Citi-Champ International Limited & ors; Lim See Chea (Third Parties)  3 MLRH 116.
22 Section 541 of the Companies Act 2016; Simpang Empat Plantation v. Ali bin Tan Sri Abdul Kadir  1 MLJ 193; Re Puncak Seputih Sdn Bhd (In Liquidation)  1 LNS 2369.
23 Section 540 of the Companies Act 2016
24 Wong Chu Lai v. Wong Ho Enterprise Sdn Bhd (In Liquidation) & Anor  4 CLJ 120 at 128, para 29
25 Section 25 of the Penal Code (Act 574); Jariah Hamzah v Pembangunan Tanah dan Perumahan Sdn Bhd  1 LNS 2224.
26 Section 24 of the Penal Code (Act 574).
27 Section 403 of the Penal Code (Act 574).
28 Explanation to Section 24 of the Penal Code (Act 574).
29 Section 405 of the Penal Code (Act 574).
30 Section 415 of the Penal Code (Act 574).
31 Section 410 of the Penal Code (Act 574).
32 Section 410 of the Penal Code (Act 574).
33 Section 173A(4) of the Criminal Procedure Code (Act 593) (Revised 1999).
34 Section 107 of the Penal Code (Act 574).
35 Section 109 of the Penal Code (Act 574).
36 Section 340(1) of the National Land Code (Act 828) (Revised 2020).
37 Section 340(2) of the National Land Code (Act 828) (Revised 2020); Subramaniam Muniandy v. Letchumi Thasan & Ors  5 CLJ 331, CA.
38 Tai Lee Finance Co Sdn Bhd v. The Official Assignee of the Property of Ngan Kim Yong & Ors  1 CLJ 183.
39 Section 340(3) of the National Land Code (Act 828) (Revised 2020).
40 Proviso to Section 340(3) of the National Land Code (Act 828) (Revised 2020) and Pushpaleela a/p R Selvarajah & Anor v. Rajamani d/o Meyappa Chettiar and other appeals  2 MLJ 553.
41 Section 27 of the Sale of Goods Act 1957 (Act 382) (Revised 1989).
42 Section 28 of the Sale of Goods Act 1957 (Act 382) (Revised 1989).
43 Section 29 of the Sale of Goods Act 1957 (Act 382) (Revised 1989).
44 Section 30(1) of the Sale of Goods Act 1957 (Act 382) (Revised 1989).
45 Section 30 of the Sale of Goods Act 1957 (Act 382) (Revised 1989).
46 Section 6(1) of the Limitation Act 1953 (Act 254) (Revised 1981).
47 Section 29(1)(a) and (b) of the Limitation Act 1953 (Act 254) (Revised 1981).
48 Shiva Kumar Day v. Allianz Life Insurance Malaysia Bhd & Anor  MLJU 823.
49 Mohd Aslam Khan Syed Gulam v. C Mageswary Chandran & Ors  1 CLJ 402.
50 Section 22(1) of the Limitation Act 1953 (Act 254) (Revised 1981).
51 Khidmas Capital v. NRB Building  3 CLJ 63, CA at p. 66, where the Court of Appeal upheld a worldwide freezing order that was granted against a foreign company because the defendant could 'dissipate its assets across the globe'.
52 Creative Furnishing Sdn Bhd v. Wong Koi  1 CLJ (Rep) 22, SC.
53 Toyota Tsuho (Malaysia) Sdn Bhd v. Lau Kum Foon & Ors  4 CLJ 110, HC.
54 Securities Commission v. Lee Kee Sien, Albert & Ors  8 CLJ 70, HC. See also the case of Jasa Keramat Sdn Bhd v. Monatech (Malaysia) Sdn Bhd  4 CLJ 430 at p. 38 h-i where the Court held that 'On the risk of dissipation of the defendant's assets, the probity and conduct of the defendant are relevant.'
55 Order 29 Rules 2B and 2BA of the Rules of Court 2012.
56 Motor Sports International Ltd & Ors v. Delcont (M) Sdn Bhd  3 CLJ 483, CA; Larut Consolidated Bhd & Anor v. Khoo Ee Bee & Ors  5 MLJ 77, HC.
57 Metrowangsa Asset Management Sdn Bhd & Anor v. Ahmad B Hj Hassan & Ors  1 MLJ 654, HC; Tsoi Ping Kwan v. Loh Lai Ngoh & Anor  3 MLJ 165, HC.
58 Commercial Injunctions, Steven Gee (6th edition, Sweet & Maxwell) at 7-012.
59  AC 396. See also the case of Yossioff v. Donnerstein  All ER (D) 213 (Nov) at paragraphs 29 and 42 and Polly Peck International plc v. Nadir and others (No. 2)  4 All ER 769 at p. 784.
60  1 MLJ 195 at pp. 206–207.
61 Zimmer Sweeden AB v. KPN Hong Kong Ltd & Anor  HKCU 1058; Golden Brothers, Inc v. Medicare Asia Ltd  HKCU 2467 and Pacific Rainbow International Inc v. Shenzhen Wolverine Tech Ltd and Others  HKCU 1076.
62 Zschimmer & Schwarz GMBH & Co. KG Chemische Fabriken v. Persons Unknown and Mohammad Azuwan bin Othman (t/a Premier Outlook Services)  7 MLJ 178.
63 CMA CGM v. Ban Hoe Leong Marine Supplies Sdn Bhd & Ors  8 CLJ 601, HC.
64 Bankers Trust Co v. Shapira and Others  1 WLR 1274 at p. 1275 recognised in Tey Por Yee & Anor v. Protasco Bhd & ors  5 CLJ 216 at 251.
65 A and Another v. C and Others  2 WLR 629 at p. 634.
66 Which takes its name from the English case of Norwich Pharmacal Co v. Commissioners of Customs and Excise  AC 133.
67  6 MLJ 363, CA.
68 ibid. at p. 380.
69 Bandar Utama Development Sdn Bhd & Anor v. Bandar Utama 1 JMB  10 CLJ 516.
70 Tatiana Nandha Kumar Krishnasamy v. Meridian Surf One Sdn Bhd & Anor  1 LNS 1207.
71 Section 4 read together with the Second Schedule to the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613).
72 Section 46(1) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613).
73 Section 50(1) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613).
74 Section 51(1) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613).
75 Section 540(1) of the Companies Act 2016 (Act 777).
76 Section 541(1) of the Companies Act 2016 (Act 777); Wong Chu Lai v. Wong Ho Enterprise Sdn Bhd (in liquidation) and anor appeal  5 MLJ 762.
77 Section 540(5) of the Companies Act 2016 (Act 777).
78 Section 539(3) and 540(2) of the Companies Act 2016 (Act 777).
79 Section 37(2)(a) of the Arbitration Act 2005 (Act 646).
80 Ang Hiok Seng @ Ang Yeok Seng v. Yim Yut Kiu (Personal representative of the estate of Chan Weng Sun, deceased)  2 MLJ 45.
81 Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd  7 CLJ 584.
82 Section 126(1) Proviso (a) of the Evidence Act 1950.
83 The Attorney General of Hong Kong v. Lorrain Esme Osman & Ors  2 MLJ 347.
84 Leonard Teoh Hooi Leong v. Public Prosecutor  3 MLJ 373.
85 Prof Dr Mohd Akram Shair Mohamad & Zulfakar Ramlee, 'Displacement of Legal Professional Privilege; Facilitation of Crime or Fraud Exception'  8 CLJ(A)i.
86 Section 23(1) of the Courts of Judicature Act 1964.
87 Section 3 of the Courts of Judicature Act defines local jurisdiction as in the case of the High Court in Malaya, the territory comprised in the states of Malaya, namely, Johore, Kedah, Kelantan, Malacca, Negeri Sembilan, Pahang, Penang, Perak, Perlis, Selangor, Trengganu and the Federal Territory of Kuala Lumpur; and in the case of the High Court in Sabah and Sarawak, the territory composed of the states of Sabah, Sarawak and the Federal Territory of Labuan.
88 Section 65 of the Subordinate Courts Act 1948.
89 Section 76 of the Subordinate Courts Act 1948.
90 Order 11 Rule 1 of the Rules of Court 2012.
91 Sumitomo Bank Ltd v. Kartika Ratna Thahir & Ors And Another Matter  1 SLR 735 at 786.
92 Re Jovia (a bankrupt)  2 All ER 328; Chase Manhattan Bank NA v. Israel-British Bank (London) Ltd  3 All ER 1025; Star Cruise Services Ltd v. Overseas Union Bank Ltd  2 SLR 412 at  to .
93 Macmillan Inc v. Bishopsgate Investment Trust plc and others (No. 3)  1 All ER 58.
94 Order 66 Rule 1 of the Rules of Court 2012.
95 Order 66 Rule 2(1) of the Rules of Court 2012.
96 Order 66 Rule 2(2) of the Rules of Court 2012; note that the document is to be translated if it is not in the English language.
97 Order 66 Rule 4(1) of the Rules of Court 2012.
98 Order 66 Rule 5(1) of the Rules of Court 2012.
99 Under Section 17(1) of the Mutual Assistance in Criminal Matters Act 2002, the Minister may by order declare a foreign state to be a prescribed foreign state if there is in force a treaty or other agreement between Malaysia and that foreign state under which that foreign state has agreed to provide assistance in criminal matters to Malaysia.
100 Section 19(1) of the Mutual Assistance in Criminal Matters Act 2002.
101 Section 22(1) of the Mutual Assistance in Criminal Matters Act 2002.
102 Section 23(1) of the Mutual Assistance in Criminal Matters Act 2002.
103 Section 31(1) of the Mutual Assistance in Criminal Matters Act 2002.
104 Section 13(1) of the Mutual Assistance in Criminal Matters Act 2002.
105 Applicable only if the foreign judgment is from a superior court of a reciprocating country under the First Schedule of REJA. The list of reciprocating countries is the United Kingdom, Hong Kong Special Administrative Region of the People's Republic of China, Singapore, New Zealand, the Republic of Sri Lanka, India (excluding the states of Jammu and Kashmir, the state of Manipur, tribal areas of the state of Assam, scheduled areas of the states of Madras and Andhra) and Brunei Darussalam).
106  7 MLJ 178.
107  MLJU 187.
108  9 MLJ 748.
109  8 MLJ 704.