Say No To Hudud

Thursday, July 5, 2012

Malaysia's Corporate Governance Journey; Are we going anywhere at all?

The Securities Commission released its Malaysian Code on Corporate Governance in March this year. It was signed off by the erstwhile Chairman of the SC, just before the mantle of responsibility was passed on to other shoulders.

Malaysia’s Corporate Governance Journey

1. Malaysia recognises the value of good governance and it is for this reason that we are committed to promoting and sustaining a strong culture of corporate governance. Investor confidence in Malaysia was severely affected during the 1997/98 Asian Financial Crisis. Policy makers learnt valuable lessons and focused their attention, amongst others, on the need to raise corporate governance standards. We undertook numerous initiatives including the issuance of the Malaysian Code on Corporate Governance (Code) in the year 2000 to strengthen our corporate governance framework.

2.....The Audit Oversight Board was established to provide independent oversight over external auditors of companies.....

Recommendation 5.2

The Audit Committee should have policies and procedures to assess the suitability and independence of external auditors.


The Audit Committee should review and monitor the suitability and independence of external auditors. The independence of external auditors can be impaired by the provision of non-audit services to the company. The Audit Committee should therefore establish policies governing the circumstances under which contracts for the provision of non-audit services can be entered into and procedures that must be followed by the external auditors. To provide support for an assessment on independence, the Audit Committee should obtain written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.


The Code seems to have been born from noble intentions, but can this Code, or any other Code for that matter, take us on the road to an acceptable standard of Corporate Governance if all we have is more of the same as days go by?

Have we truly learned our lessons from the Financial Crisis of 1997/98? Have the regulatory bodies become true regulators, or are they still toothless tigers when they face the task of regulating the global behemoths, like the Big Four?

The Financial Crisis Inquiry Commission of the United States of America blamed widespread failure of financial regulators, breakdowns in corporate governance, excessive borrowing and risk by both households and financial firms along with "systemic breaches in accountability and ethics" at all levels for the crisis. ~ The Financial Crisis Inquiry Commission (FCIC) is a ten-member commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010.

Time and again governments across the world point their collective fingers at the respective Regulators and the failure of Corporate Governance as among the chief causes for whatever financial crisis is the flavour of the year/decade. But if we look at the commentary on Point 5.2 above, the SC still chooses to leave the method of ensuring the independence of the external auditors, to a written note from the same external auditors.

If the external auditors are little more than a bunch of crooks and scoundrels, can a simple handwritten assurance stop them from being true to their nature? Have we not seen enough evidence that auditors, no matter how prestigious the name they carry, are capable of being as nefarious as any two bit crime syndicate?

Changing the people heading the various regulators, and firms implicated in thievery, will not change much. What we need is clear evidence that the regulators will start upholding the standards they claim to espouse without fear or favour, and go after the transgressors to the full extent of the law.

Of course, after that, we will also need evidence that the Courts of Law themselves are also truly capable of upholding the laws of the land.

Tuesday, July 3, 2012

Is this how discovery of documents is supposed to work in the High Court?

Failure to comply with the rules of discovery may, in more serious cases, result in an action being dismissed, or a defence being struck out and judgment entered accordingly.~ Shearn Delamore & Co

The firm of Shearn Delamore & Co, has published a paper which covers the rules for discovery of documents in the Malaysian High Courts.

6.5 To what extent is pre-trial discovery permitted? If it is permitted, how is discovery conducted? If it is not permitted, what other, if any, mechanisms are available for obtaining evidence from an adverse
party or from third parties


The Rules of the High Court 1980, Order 24 sets out the mechanism for the
discovery and inspection of documents at the pre-trial stage.
First, there is a requirement for the mutual discovery of documents at
the close of pleadings whereby parties to an action shall make and serve on
each other a list of documents which are or have been in their possession or
custody relating to any matter in question in the action.
Second, the High Court is empowered to order the discovery of
documents on the application of any party to an action upon the failure
by another party to comply with the requirements for discovery under the
Rules of High Court 1980. The High Court may further order that the party
make discovery and file an affidavit verifying the lists of documents to be
filed, and a copy to be served on the applicant.
The documents listed by a party to an action for discovery shall be
available for inspection and the taking of copies by the other party. The
High Court is empowered to make an order for such documents to be made
available for inspection and the taking of copies, on the application of any
party to the proceedings, upon the failure of the other party to produce any
documents listed for discovery for inspection and taking of copies.
Failure to comply with the rules of discovery may, in more serious cases,
result in an action being dismissed, or a defence being struck out and
judgment entered accordingly.

The counsel defending PwC Malaysia, in the case which is currently being heard in the Kuala Lumpur High Court, is a partner in Shearn Delamore & Co. So we have to wonder why PwC Malaysia decided to conceal 162 documents at the start of the trial, and why their learned counsel would have thought that this was a good idea?

The High Court will have to take a serious look at the question whether justice is being done when a global behemoth like PwC, or at least its Malaysian avatar, PwC Malaysia, can decide when and how it chooses to allow discovery of documents, and in fact manipulate the rules of discovery to suit itself.

Further, once the action has been instituted and pleadings are
deemed to be closed, it is provided under Order 24 of the
Malaysian Rules of High Court 1980 that parties are to institute
discovery of documents between parties of the action. This order
compels each party to make discovery and give inspection of the
documents which are or have been in their possession, custody
or power relating to the matters in question in the action.
~ This is the answer given by Malaysia to the AIPPI, the International Association for the Protection of Intellectual Property.

Isn't this a case of "cakap tak serupa bikin"? We have a case here where the rules of discovery may as well have disappeared into thin air.

The need for a level playing field becomes incredibly important when we have a case of a David (Malaysian citizen) taking on a Goliath (multi-billion dollar Global Firm), but we seem to not be able to provide that level playing field, despite all the rules and orders which state otherwise.

How many cases involving Goliaths like PwC have gone their way, because they were able to manipulate matters so that the Plaintiffs who have had the gumption to take them to task were not even allowed to have a proper discovery of documents before the trial began?

And when the goliaths are secure in the knowledge that they can forever hide what they wish, and lie as they wish, when they are dragged into the courts in Malaysia, can justice even enter our shores?