2010 Issue 4
LEGAL UPDATES
April 2010
In This Issue
Promoting and
Protecting the
Process of
Competition in
Malaysia
Whether Firm of
Advocates and
Solicitors Has Locus
Standi to Appear for
Body Corporate in
Civil Proceedings
Whether Miscarriage
of Justice Had Been
Occasioned
Legislation
Competition Act 2010
Promoting and Protecting the Process of Competition in Malaysia
It may have been some time in the making, but the recently tabled
Competition Bill 2010 (“the proposed Act”) still puts Malaysia among the
frontrunners with regard to antitrust legislation in Asia. The proposed Act was
tabled for first reading on 7 April 2010, along with the Competition
Commission Bill 2010.
The proposed Act marks the first piece of legislation to address competition in
generic terms, apart from specific legislation with some provisions on antitrust
governing the energy and multimedia communications sectors. The law
governing competition in Malaysia goes no further than common law
principles governing conspiracy and restraint of trade. The one provision in
the Contracts Act 1950 [Act 136] on restraint of trade takes the law no further
than the common law principle of which it is a codification.
Horizontal and vertical agreements
The anti-competitive conduct or practices addressed in Part II of the proposed
Act are horizontal and vertical agreements which have “the object or effect of
significantly preventing, restricting or distorting competition in any market for
goods and services”: clause 4(1).
A horizontal agreement — defined under clause 2 as “an agreement between
enterprises each of which operates at the same level in the production or
distribution chain” — is deemed to be within the prohibition of the proposed
Act if it seeks to accomplish one of the following under clause 4(2):
fix a purchase or selling price;
share market or sources of supply;
limit or control either production, market outlets or market access,
technical development or investment; or
perform an act of bid rigging.
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There does not appear to be a corresponding deeming provision for a vertical
agreement, however, which is defined as “an agreement between enterprises
each of which operates at a different level in the production or distribution
chain”: clause 2.
Abuse of dominant position
Nor does there appear to be any corresponding provision in the proposed
Act, as is provided under sections 137 and 138 of the Communications and
Multimedia Act 1998 [Act 588], that would empower the Competition
Commission (“the Commission”) to identify a particular enterprise as
occupying a dominant position in a market.
Apart from agreements, the proposed Act prohibits an enterprise “from
engaging in any conduct which amounts to an abuse of a dominant position in
any market for goods and services”: clause 10(1).
An illustrative but non-exhaustive list of conduct spells out what may
constitute an abuse of dominant position: clause 10(2)(a) to (g).
Market review
The proposed Act empowers the Competition Commission, on its own
initiative or upon the request of the Minister responsible for domestic trade
and consumer affairs (“the Minister”), to “conduct a review into any market in
order to determine whether any feature or combination of features of the
market prevents, restricts or distorts competition in the market”: clause 11(1).
The Commission is required to publish its findings and recommendations, and
to make the report available to the public: clause 12.
Investigation and enforcement
Part III of the proposed Act sets out the powers of the Commission in respect
of investigation and enforcement. Under clause 14(1), the Commission may
conduct any investigation as it thinks expedient, where there is “reason to
suspect that any enterprise has infringed or is infringing any prohibition under
this Act [i.e. the proposed Act] or any person has committed or is committing
any offence under this Act”.
There is an express provision for the Commission to investigate suspected
infringement on the direction of the Minister: clause 14(2).
In addition, upon a complaint by a person, the Commission has the discretion
to investigate an enterprise, agreement or conduct that has infringed or is
infringing any prohibition under the proposed Act or any person who has
committed or is committing any offence under the proposed Act: clause 15.
Proceedings of the Commission and establishment of the Competition Appeal
Tribunal (“the Tribunal”) to review decisions made by the Commission,
imposition of interim measures to prevent damage and protect public interest
and findings of infringement and non-infringement of prohibitions under the
proposed Act are dealt with under clauses 44, 35, 39 and 40.
The proposed Act creates several criminal offences including the giving of
false information, evidence or document and the destruction or alteration of
records, obstruction and tipping off. It contains provisions for sanctions and
empowers the Minister to make regulations and issue guidelines.
Members, officers, servants or agents of the Commission and of the Tribunal
enjoy immunity under the Public Authorities Protection Act 1948 [Act 198]:
clause 67.
Relief
Provision is made in clause 5 to relieve an enterprise from liability for any
infringing agreement (horizontal or vertical) based on the following criteria:
(a) technological, efficiency or social benefits from the agreement;
(b)
such benefits could not reasonably have been provided without the
agreement having the effect of preventing, restricting or distorting
competition;
(c)
the detrimental effect of the agreement on the competition is
proportionate to the benefits provided; and
(d)
the agreement does not allow the said enterprise to eliminate
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competition completely in respect of a substantial part of the goods and
services.
It is, however, not clearly stipulated whether such relief is to be granted by the
courts or the Commission.
Exemptions
Applying the same criteria, clause 6 permits an enterprise to apply to the
Commission for what is called an “individual exemption”.
The Commission may also take the initiative under clause 8 to issue a “block
exemption” for a particular category of agreements which are, in the opinion
of the Commission, likely to fall within the criteria for relief.
There is a provision on publication of the proposed block exemption, in which
the Commission is to allow members of the public 30 days to make any
submission: clause 9.
The proposed Act does not provide for publication of relief from infringement;
and while individual exemptions are published in the Gazette, there appears
to be no provision for the public to have a say in these areas.
General exclusions
While there appears to be no equivalent provision for relief against abuse of
dominant position, there is a general exclusion from the prohibitions on
vertical and horizontal agreements and abuse of dominant position in the
following areas:
(i)
Agreements/conduct engaged in in compliance with legislative
requirements
(ii)
Collective bargaining and collective agreements involving employers,
employees and organisations established to represent their interests
(iii) Second Schedule item (c).
These are set out in the Second Schedule which may be amended by
ministerial order, subject to prior notice being published and due
consideration given to any submission made by the public.
Other legislation
The proposed Act also does not apply to any commercial activity regulated by
the Communications and Multimedia Act 1998 and the Energy Commission
Act 2001 [Act 610]. These laws are set out in the First Schedule, which may
be amended by ministerial order.
“Commercial activity” in this context does not include, as outlined under
clause 3(4), any activity in the exercise of governmental authority or based on
the principle of solidarity. Nor does it include purchase of goods and services
not for the purposes of offering goods and services as part of an economic
activity.
Conclusion
It will be some time before the impact of this new piece of legislation will be
felt or even understood in any substantial way. As such, it is too early for any
assurance that any particular market will be opened up soon.
As welcome as the proposed Act is in terms of enhancing consumer
protection in Malaysia as a result of unscrupulous trading practices through
cartel activities and monopolies, what is likely to be the focus of attention as
the draft legislation becomes law are the exemptions and exclusions from its
effects.
For the Competition Bill 2010, see
www.parlimen.gov.my/billindexbi/pdf/DR072010E.PDF
For the Competition Commission Bill 2010, see
www.parlimen.gov.my/billindexbi/pdf/DR062010E.PDF
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^Top
Cases
Perbadanan Kemajuan Kraftangan Malaysia v DW
Margaret a/p David Wilson (t/a Kreatif Kraf) [2010] 2
MLJ 713 (FC)
Whether Firm of Advocates and Solicitors Has Locus Standi to Appear
for Body Corporate in Civil Proceedings
Perbadanan Kemajuan Kraftangan Malaysia [the Malaysian Handicraft
Development Corporation (“the Corporation”)] is a body corporate established
under the Perbadanan Kemajuan Kraftangan Malaysia Act 1979 [Act 222]
(“the PKKM Act”). In 2005, it obtained judgment against a tenant, Kreatif Kraf,
to deliver vacant possession of premises it was renting.
Kreatif Kraf, which had been served with an injunction preventing it from
entering the premises, filed an application to set aside the judgment and
obtained an ex parte interim order for stay of execution. This led the
Corporation to file an application to set aside the ex parte order.
In the course of the hearing of the applications, counsel for Kreatif Kraf raised
a preliminary objection to law firm Messrs Zain & Co representing the
Corporation, on the basis that the said firm lacked locus standi to do so in
view of s.35 of the PKKM Act, which addresses the issue of legal
representation in civil proceedings for or against the Corporation. That section
provides:
Civil proceedings
35 Notwithstanding the provisions of any other written law —
(a) any person holding the appointment of Federal Counsel and authorized
by the Attorney-General for the purpose; or
(b) any officer of the Perbadanan authorized by the Chairman or Deputy
Chairman of the Perbadanan for the purpose,
may institute any civil proceedings on behalf of the Perbadanan or a
subsidiary corporation and may, on behalf of the Perbadanan or a subsidiary
corporation, appear in and conduct any such proceedings by or against the
Perbadanan or the subsidiary corporation and make and do all appearances,
acts, and applications in respect of such proceedings.
The objection was overruled by the High Court, but sustained by the Court of
Appeal. The Corporation was granted leave to appeal to the Federal Court,
which then had to determine whether s.35 of the PKKM Act means that:
(i) the Corporation, being a body corporate, can only be represented in a
civil proceeding by either a person holding the appointment of a Federal
Counsel and authorized by the Attorney General for the purpose; or any
officer of the Corporation authorized by the chairman or deputy chairman of
the Corporation for the purpose;
or
(ii) the Corporation, like any other body corporate, may appoint a firm of
private solicitors when it decides to either institute or defend itself in any civil
proceedings but, over and above this general principle, retains its discretion to
appoint the persons as stated in (i) above should it deem necessary in the
circumstances to either institute or defend itself in a civil proceeding.
Of the two interpretations, the Court of Appeal was inclined towards the first
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and ruled in Kreatif Kraf’s favour on the basis that the Corporation is a body
corporate, and, in light of the general scheme of the PKKM Act, the word
“may” in s.35 must be construed to mean “shall”. Consequentially, the
Corporation lacked the power to appoint solicitors to conduct or institute legal
proceedings on its behalf. It must instead rely on the services of a counsel as
authorized by the Attorney General, or the Corporation’s own officers as
authorized by its chairman or deputy chairman.
In allowing the appeal, the Federal Court held that the Corporation being a
body corporate had to be represented by an individual person. Section 35 of
the PKKM Act is worded in such a way as to enable or empower an officer of
the Attorney General, such as a federal counsel, to represent the Corporation
in any civil litigation. Without such a provision, the Attorney General or his
officers would lack the authority to do so.
The Federal Court could not agree with the Court of Appeal that in the context
of interpreting s.35 of the PKKM Act, recourse need only be made to the
“intention of the legislature” in order to discern its interpretation. Section 35
was the only provision to address the issue of legal representation in civil
proceedings for or against the Corporation. The other provisions of the same
Act elaborated or expanded on the Corporation’s powers to attain the objects
and purposes for which it had been established.
There was undue emphasis on the word “may” in s.35 of the PKKM Act and
on the term “intention of the legislature”, while scant regard had been paid to
the opening words of the section that also govern the application of the rest of
s.35, “Notwithstanding the provisions of any other written law”.
There was also a need to read s.35 of the Legal Profession Act 1976 [Act
166] (“the LPA”) and to consider the words “subject to this Act [the LPA] and
any other written law” therein. The words “subject to” and “notwithstanding”
were not to be interpreted in vacuo in the instant case.
Section 35 of the PKKM Act is a very specific section that enables the two
categories of persons to appear on behalf of the Corporation in civil
proceedings, but without imposing any interdiction on an advocate and
solicitor to appear on its behalf. While the Corporation could resort to the two
categories of persons to appear on its behalf, it is not precluded from
engaging the services of any advocate and solicitor.
Kreatif Kraf’s approach in interpreting one legislation so as to create a
precedent for purposes of interpreting another was untenable as the
legislation relied upon were not in pari materia. Each piece of legislation has
its own scheme adopted for the purposes to be attained. The issue of legal
representation has to be ascertained from the exact provisions found in each
piece of legislation.
The word “may” in the context of s.35 of the PKMM Act was to be construed
as directory in nature. Thus, like any other body corporate, the Corporation
could appoint private solicitors when it instituted or defended itself in civil
proceedings. It also retained the discretion to be represented by a federal
counsel authorized by the attorney general or by one of its officers authorized
by its chairman or deputy chairman.
^Top
Formosa Resort Properties Sdn Bhd v Bank
Bumiputra Malaysia Bhd [2010] 2 AMR 807 (FC)
Whether Miscarriage of Justice Had Been Occasioned
Housing developer Formosa Resort Properties (“Formosa”) maintained a
current account with the Melaka branch of Bank Bumiputra Malaysia (“the
Bank”). It had a standing instruction with the Bank that for any cheque issued
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by the developer, it must be signed by two of four authorised signatories from
Formosa — among them Ong Ah Sim @ Ong Swee Hoe (“Ong”, since
deceased) and accounts clerk Vong Ai Foon (“Vong”).
Over a two-year period, the Bank honoured 67 cheques amounting to
RM411,024.70 and purportedly signed by Ong and Vong. Formosa then
instituted a claim against the Bank, the main allegation being that the
purported signatures of Ong on those 67 cheques had been forged by his cosignatory Vong or persons unknown and, in honouring them, the Bank was in
breach of its mandate to Formosa.
The Bank denied the allegation, and the High Court dismissed Formosa’s
claim, on the grounds that Formosa had failed to prove on the balance of
probability that the signatures of Ong on those cheques were forged and that
estoppel had arisen against Formosa to make any claim on the cheques.
Formosa appealed to the Court of Appeal, which affirmed the decision of the
High Court. The Court of Appeal held that the evidence adduced had been
“demonstrably appreciated” by the trial judge who gave cogent reasons for
his decision.
In June 2009, Formosa was granted leave to appeal to the Federal Court on
the following question: “Does the Evidence Act 1950 draw a distinction
between relevance and admissibility of evidence?”
Formosa took a two-pronged approach, contending that:
(i) the case should be remitted to the Court of Appeal for rehearing as a
miscarriage of justice had been occasioned in the earlier hearing; and
(ii) the High Court judge erred in refusing to admit crucial evidence adduced
in another case involving the same parties.
The Federal Court was of the view that the substratum of the submission for
Formosa did not relate to the question posed. While it is trite law that all
admissible evidence are relevant evidence, the converse is not necessarily
true. A piece of evidence may be relevant, but may be inadmissible because
it is hearsay evidence or its prejudicial effect outweighs its probative value.
An answer to the question posed would neither address Formosa’s real
grievance nor resolve the dispute between the parties. Even if the question
were answered in the affirmative, it would not give Formosa any advantage.
The Federal Court agreed with the Bank that even if the Court of Appeal had
committed an error, this was only to be found in the additional reason for its
dismissal of the appeal. The main reason behind its decision was that there
was proper and accurate appreciation of the evidence by the trial judge
before he made the necessary findings of fact and ultimately his conclusion.
The alleged error in according the proper description to the evidence in
question did not play a critical and determinative role in the trial judge’s final
decision. There was more than sufficient evidence upon which he could rely
to come to the conclusion as he did. Indeed, the fact that Formosa only
requested that the matter to be remitted to the Court of Appeal for rehearing
and not to the High Court for retrial was self-evident.
Even if there were errors as alleged by Formosa, these did not amount to a
miscarriage of justice so as to warrant the remission of the matter to the Court
of Appeal for rehearing before another panel. Formosa did not suffer any
injustice or prejudice as claimed.
For these reasons, the Federal Court declined to exercise its inherent power
to order a rehearing of the appeal before another panel.
The Federal Court judgment can also be viewed at
202.75.7.131/portal/index.php?option=com_docman&task=doc_view&gid
=780&tmpl=component&format=raw&Itemid=177&lang=en
Page 6 of 7
For the Court of Appeal judgment, see
[2009] 5 AMR 488; [2009] 1 LNS* 228; [2009] MLJU^ 0243
(highlighted in Legal Updates, November 2009)
^ Legal Network Series — Cases available online on the Current Law
Journal website but which have not been published in CLJ
^ Malayan Law Journal Unreporteds — Cases available online on the
LexisNexis website but which have not been published in MLJ
^Top
Compiled by knowledge@lh-ag.com
Lee Hishammuddin Allen & Gledhill
Advocates & Solicitors
© 2010. Lee Hishammuddin Allen & Gledhill. All Rights Reserved.
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