This article first appeared in The Edge Malaysia Weekly on March 18, 2024 - March 24, 2024

THE case against Langkawi beach-front resort owner Suriati Mohd Yusof was neither CTOS Digital Bhd’s first brush with defamation nor was it the first legal suit it lost. But the High Court ruling on the case was the first that touched on whether the company had legal grounds to formulate credit scores, casting its business model in the spotlight.

“In the Court’s view, there is no provision in the 2010 [Credit Reporting Agencies] Act empowering the defendant to formulate a credit score or empowering the defendant to create its own criteria or percentage to formulate a credit score. The defendant is just supposed to be a repository of the credit information to which the subscribers have access to,” High Court judge Akhtar Tahir said when ordering CTOS’ wholly-owned subsidiary CTOS Data Systems Sdn Bhd (CDS) to pay RM200,000 in damages to the businesswoman for having “breached the duty of care” and “overstepping the functions they were registered for” under the CRA Act.

In addressing media queries last week after the news broke, CTOS CEO Erick Hamburger said: “We really do not understand the basis for it, and given that it is a defamation case and the ruling is not regarding the defamation, we believe that this is a good basis to win this appeal.”

He said the group had previously won 12 lawsuits, all of which pertained to defamation, and asserted that the only difference in this case with Suriati was the judge’s ruling.

“I think the only difference between this case and the previous ones is that for some reason the judge did not rule on the defamation, rather an argument that CTOS is not allowed to provide scores and so there’s the mismatch between what the case is about, which is defamation, and the ruling,” he added, noting that this discrepancy will be part of the group’s appeal against the High Court judge’s decision.

According to court documents sighted by The Edge, the Suriati case sought to determine whether there was negligence or a breach of duty on the part of CDS over inaccurate information contained in Suriati’s credit report, as well as whether the inaccurate words constituted defamation and caused damages.

At the crux of the suit was the RM2,186 Suriati allegedly owed telecommunications service provider WEBE (formerly known as Packet One Networks (M) Sdn Bhd) that was listed on her credit reports back in 2019. Suriati claimed that she did not owe the debt, while CDS said she was and still is indebted.

When seeking to remove the debt from CDS’ records, Suriati said she had told CDS that she disputed the debt with WEBE. CDS, however, said Suriati had confessed to having the debt when she testified from the witness stand, as well as noted that she had filed a “similar suit” previously against WEBE in the Sessions Court (which was dismissed), thus recognising the debt.

Akhtar did not rule on the accuracy of the information but said CDS should have at least suspended the information pending verification or notified its subscribers or applicants that the information was being verified at the time Suriati reached out to CDS concerning the alleged inaccurate information. The judge said the duty of care was breached because CDS “chose to be indifferent” after being alerted of the disputed information.

Based on checks conducted by The Edge on the court e-filing system and legal journals that cited CTOS-related cases, it was found that CTOS or its subsidiaries were listed as parties in at least eight concluded civil suits. Of these cases, six ended with a decision in favour of CTOS, while the other two went against the group.

Most of the suits against CTOS sighted by The Edge were defamation claims on alleged inaccurate information. In a defamation claim, the plaintiff has to prove three elements — whether the information is untrue or inaccurate, bears defamatory meaning and publication to third parties.

An example of a prior defamation case which CDS won was against YLI Industries Sdn Bhd, which had sued the company in the Ipoh Sessions Court for listing a legal proceeding filed in March 2018 where Indah Water Konsortium Sdn Bhd (IWK) had wrongly named YLI as a defendant. YLI argued that even after the suit was withdrawn by IWK in April 2018, the suit was still listed in CDS’ database until June 2018.

CDS argued that it had removed the listing of the legal suit from its database within three days of being informed of the suit being wrongly commenced — within the 21-day limit provided under Section 31 of the CRA Act. The court agreed with CDS and dismissed YLI’s suit with costs.

An example of cases that did not pertain to defamation are two separate suits filed by one businessman Benjamin Ho against CDS. One filed in 2022 was dismissed while the other filed in 2023 was withdrawn. Both cases pertained to his claims that an imposter had misused his identity to register for a CTOS account to access his credit information.

When asked about two court rulings that The Edge found were not in CTOS’ favour, a CTOS spokesman acknowledged that it had lost the cases against Tan Ah Hong and Soh Chun Seng. Of the two cases, one was before the CRA Act took effect on Jan 15, 2014, according to dates on the court judgments.

In both cases, both the High Court and Court of Appeal (CoA) ruled that CTOS had published inaccurate information in its credit reports on subjects in its database, which are accessible to subscribers or third parties.

In the appeal filed by Tan Ah Hong against CDS, the CoA bench led by Abdul Aziz Abdul Rahim partially allowed Tan’s appeal on Aug 21, 2014, ruling that there was defamation for CDS’ inaccurate information on Tan but only awarded him nominal damages of RM5,000 as he failed to prove “actual damages”.

Meanwhile, in a CoA decision dated Nov 19, 2011, in an appeal by Soh Chun Seng against a High Court decision in favour of CTOS-EMR Sdn Bhd, a bench led by Tengku Baharudin Shah partially allowed Soh’s appeal, ruling there was defamation from CTOS-EMR publication of inaccurate information, but upheld the dismissal of Soh’s claims for damages.

The subject of the case was a credit check report dated April 29, 1997, which contained a creditor’s petition against Soh despite the petition being fully settled four years prior. The High Court had previously deemed inaccurate information as not defamatory to Soh.

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