PUTRAJAYA (July 9): The Court of Appeal (COA) on Tuesday overturned a High Court decision that required CTOS Data Systems Sdn Bhd (CDS), a subsidiary of CTOS Digital Bhd (KL:CTOS), to pay RM200,000 damages to a businesswoman earlier this year.
A three-member bench, led by judge Datuk Lee Swee Seng, in allowing CDS’ appeal, ruled that there was no defamation, no negligence, and no breach of statutory duty by the credit-reporting agency.
The bench also ruled that the High Court decision or ruling made earlier this year that gave businesswoman Suriati Mohd Yusoff the damages was erroneous.
In addition, Lee, who sat with judges Datuk Azimah Omar and Datuk Azmi Arifin, ordered Suriati to pay costs of RM65,000.
In a bourse filing later, CTOS said the COA had also unanimously ruled that credit reporting agencies do not owe a duty of care in common law, and that they may formulate and publish credit scores as part of their business of credit reporting, under the provisions of the Credit Reporting Agencies Act.
CDS was represented by Datuk Malik Imtiaz Sarwar, Ashok Kandiah, and Khoo Suk Chyi. They separately confirmed the decision and brief broad grounds to The Edge. Suriati, 43, was represented by Nizam Bashir.
Imtiaz said the decision on Tuesday is an important decision for the credit-rating industry.
Shares in parent company CTOS rose seven sen or 5.07% to RM1.45 following the court ruling, giving the group a market value of RM3.35 billion. The stock previously dropped to as low as RM1.06 in March after the High Court's ruling , which favoured Suriati.
In his March judgement, High Court judge Datuk Akhtar Tahir ruled that CDS is not legally empowered to formulate credit scores, and ordered it to pay RM200,000 together with RM50,000 costs for an inaccurate negative credit rating.
Akhtar ruled that CDS had overstepped its statutory functions under the Credit Reporting Agencies Act 2010 (CRA) in formulating a credit score for Suriati, when it was merely a database of credit information for its subscribers.
“In the court’s view, there is no provision in the [CRA] empowering the defendant (CDS) to formulate a credit score, or 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,” the judgement dated March 7 read.
“By formulating a credit score, the defendant has gone beyond its statutory functions, and the plaintiff (Suriati) has suffered a loss as a result of being labelled as a delinquent by the defendant when they have no right to do so,” Akhtar added.
In the suit, Suriati alleged that CDS had given her a negative credit rating based on inaccurate information, collated by CDS, which resulted in her being considered not creditworthy, leading to personal and business losses.
'Suriati not entitled to claim'
Imtiaz and CDS argued that Suriati was not entitled to make the claim for defamation, as she only acted on behalf of the resort Keranji Beach Resort Sdn Bhd.
The senior counsel said that losses suffered by Keranji Beach following the purported rating could only be claimed by the said company, and not Suriati.
He further argued that Suriati’s witness, a bank officer, had testified that the intended applicant for the loan was Keranji Beach and not Suriati, who is a director of the resort.
The officer confirmed that there was no written application for the loan, and hence there was no rejection of the loan.
“The losses allegedly suffered by Keranji Management (the company managing the resort) were consequential to that of Keranji Beach, and was equally not claimable without a claim by the company. In any event, no such loss was proven.
“Further, the evidence did not establish any negligence on the part of CDS,” Imtiaz said, as Suriati had admitted she had no knowledge as to why her loan application was rejected, and there was no evidence before the court that her loan application was rejected because of her credit report.
Either way, Imtiaz argued the entity filing the suit should be Keranji Beach and not Suriati, as she does not have a locus standi (legal standing) to file the claim.
Imtiaz said the High Court decision, which was wrong, had severely affected the credit-reporting industry as a whole, and put doubt on the regulatory scheme of the CRA.
Nizam in reply said his client was entitled to claim for reputational loss owing to the negligence of CDS in misreporting a purported loan she had taken, which had been paid but was reported as unpaid.
He added that the coming into force of the CRA did not preclude Suriati’s right in law to make the claim for negligence.
“This presumes that the CRA owes a duty of care under common law,” he added.