Bread & Kaya

Bread & Kaya: Malaysia’s first digital currency court case

By Foong Cheng Leong
December 17, 2019
– Digital currencies can be used to raise funds, make purchases or traded online
– Anyone operating a digital assets exchange platform must obtain approval from the SC

DIGITAL currencies are a form of digital asset. They can be used to raise funds, purchase goods or services and even traded online instantaneously without any border restrictions.

Digital currencies are now traded on the Internet through, among others, digital assets exchange platforms. Due to their popularity, the prices of certain digital currencies such as Bitcoin are volatile.

Bank Negara Malaysia has declared that digital currencies are not legal tender in Malaysia. However, this does not mean that trading of digital currencies is illegal. Trading of digital currencies is legal in Malaysia but any person operating a digital assets exchange platform must obtain approval from the Securities Commission.

Currently, there are three Recognised Market Operators (RMOs) registered by the Securities Commission to operate digital asset exchanges in Malaysia.

In the meantime, the Securities Commission has also issued Public Consultation Paper No. 1/2019 Proposed Regulatory Framework for the Issuance of Digital Assets Through Initial Coin Offerings (ICOs).

The issuance or offering of certain digital assets to the public will require prior approval or authorisation from the Securities Commission and compliance with the relevant laws and regulations.

Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019

The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 was introduced to recognise certain digital currency and digital token as “securities” thus making securities laws such as the Capital Markets and Services Act 2007 applicable to them.

Reg 2 of the Order 2019 has defined digital assets as:

  • Digital Currency: a digital representation of value which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise, that functions as a medium of exchange and is interchangeable with any money, including through the crediting or debiting of an account; or
  • Digital Token: a digital representation which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise.

Not all digital currency or digital tokens are securities under the Capital Markets and Services Act 2007. Reg. 3 of the Order provides the relevant criteria. In respect of a digital currency, a digital currency which: —

  1. is traded in a place or on a facility where offers to sell, purchase, or exchange of, the digital currency are regularly made or accepted;
  2. a person expects a return in any form from the trading, conversion or redemption of the digital currency or the appreciation in the value of the digital currency; and
  3. is not issued or guaranteed by any government body or central banks as may be specified by the Securities Commission,
  4. is prescribed as securities for the purposes of the securities laws.

As for digital token, a digital token which represents a right or interest of a person in any arrangement made for the purpose of, or having the effect of, providing facilities for the person, where: —

  1. the person receives the digital token in exchange for a consideration;
    the consideration or contribution from the person, and the income or returns, are pooled;
  2. the income or returns of the arrangement are generated from the acquisition, holding, management or disposal of any property or assets or business activities;
  3. the person expects a return in any form from the trading, conversion or redemption of the digital token or the appreciation in the value of the digital token;
  4. the person does not have day-to-day control over the management of the property, assets or business of the arrangement; and
  5. the digital token is not issued or guaranteed by any government body or central banks as may be specified by the Securities Commission,
    is prescribed as securities for the purposes of the securities laws

Foreign cases

While laws and regulations are being drafted by Governments to deal with digital assets, digital asset disputes are slowly creeping into Courts and the Courts have been applying existing traditional laws into modern technology.

In the English case of Vorotyntseva v Money-4 Ltd (t/a Nebeus.com) [2018] EWHC 2596 (Ch), the High Court dealt with a freezing order against a cryptocurrency platform operator and its directors to restrain them from dissipating their assess. The claimant in this case had deposited a substantial quantity of Bitcoin and Ethereum cryptocurrencies with the operator and became concerned when the operator in this case become uncontactable.

Similarly, in the Hong Kong case of Nico Constantijn Antonius Samara v Stive Jean Paul Dan [2019] HKCFI 2718, the Hong Kong High Court granted a freezing injunction against a French cryptocurrency trader from disposing of his assets in Hong Kong in a dispute over Bitcoin trading on a trading platform. The Plaintiff in this case had money held by the French cryptocurrency trader in his Citibank account in Hong Kong.

In the Singapore case of B2C2 Ltd v Quoine Pte Ltd [2017] SGHC(I) 11, the Singapore International Commercial Court held that the operator of a virtual currency exchange platform was liable for breach of contract and breach of trust in reversing trades made at an abnormal exchange rate. For the first time, the Singapore International Commercial Court applied the law of contract to virtual currencies, finding that virtual currencies have the hallmark characteristics of property and applying the law of unilateral mistake to a case involving algorithmic trading.

Digital currency dispute finally lands in our Court

In 2018, a cryptocurrency trader was sued by two cryptocurrency-exchange related providers for the return of Bitcoins mistakenly transferred to him.

This case is important to the digital currency industry because our Court has decided for the first time that:

– cryptocurrency trading is not illegal in Malaysia;
– digital currency is a form of an intangible asset; and
– digital currency is a “thing” that that has to be returned if it is mistakenly delivered.

The facts of the case of Luno Pte Ltd & Anor v Robert Ong Thien Cheng (Sessions Court Civil Suit No. BA-B52NCVC-389-12/2017) (Unreported) are as follow.

The 1st Plaintiff conducts its business as an online wallet and exchange of digital currencies, also known as cryptocurrencies including Bitcoin, under the trade name of Luno.

Every registered customer of Luno will be allocated a Luno account known as ‘Luno Wallet’ whereby they are able to buy, sell, send, receive and store cryptocurrencies.

The 1st Plaintiff wholly owns the 2nd Plaintiff and the 2nd Plaintiff acts as the intermediary regional operating centre of the 1st Plaintiff which holds the bank account that accepts deposits from Luno customers in Malaysia.

After the customer deposits a sum to the account held by 2nd Plaintiff, the 1st Plaintiff will allocate the deposit to the customer’s respective Luno wallet for them to utilise to trade cryptocurrencies.

The Defendant is a registered user of Luno and has been allocated a Luno Wallet. On Oct 30, 2017, the Defendant deposited RM300,000.00 into the bank account held by the 2nd Plaintiff which was subsequently transferred into the said Luno Wallet and reflected therein accordingly.

At that juncture, the Defendant had a total of RM300,228.58 and 0.616814 Bitcoin in his said Luno Wallet. On Nov 1, 2017, the Defendant converted RM300,228.00 contained in the said Luno Wallet into 10.70163257 units of Bitcoins, leaving the total number of Bitcoins in his said Luno Wallet to be 11.31844657.

On the same day, the Defendant requested for 11.3 Bitcoins to be withdrawn from the said Luno Wallet to be to his Bitfinex e-wallet account and his request was duly carried out. The Defendant’s Bitfinex account is managed and operated by iFinex Inc. (BVI) (‘Bitfinex’), another third party cryptocurrency online trading platform unrelated to the Plaintiffs.

On Nov 1, 2017, the 1st Plaintiff mistakenly transferred an additional 11.3 Bitcoins onto the Defendant’s Bitfinex Account after having transferred the initial 11.3 Bitcoins on the same day.

The 1st Plaintiff notified the Defendant of the mistakenly transferred additional 11.3 Bitcoins on Nov 2, 2017 via email dated Nov 2, 2017. The 1st Plaintiff requested for 11.3 Bitcoins to be returned to the 1st Plaintiff as it was Bitcoins that were mistakenly transferred into the Defendant’s Bitfinex Account. The Defendant acknowledged and admitted that he is required to return the additional 11.3 Bitcoins that were mistakenly transferred to him. In this regard, the Defendant had offered to pay the 1st Plaintiff cash of RM300,000.00 at the end of November 2017, about one month after the mistaken transfer. However, this was not acceptable to the Plaintiffs as the value of Bitcoins fluctuates day-to-day.

The Defendant, although admitting to receiving the additional 11.3 Bitcoins and acknowledging the need to return them, has failed, refused and/or neglected to do so. The Plaintiffs initiated this action against the Defendant to recover the mistakenly transferred 11.3 Bitcoins by returning the said 11.3 Bitcoins and if the Defendant fails to do so, the sum of RM810,837.00 equivalent to 11.3 Bitcoins calculated based on the Luno exchange market price of RM71,756.00 per Bitcoin at the time of the filing of the action.

The Defendant argued that, among others, Bitcoins are not a “thing” capable of being returned as envisaged under s. 73 Contracts Act 1950, and that transfer was actually a mistake.

S. 73 provides: –

Liability of person to whom money is paid, or thing delivered, by mistake or under coercion
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

The Defendant also alleged that all 22.6 Bitcoins in his Bitfinex account were converted into B2x CST futures on an “automated setting” allegedly prior to his knowledge of the mistakenly transferred additional 11.3 Bitcoins. Therefore, he would not be able to return the Bitcoins.

A counterclaim was filed by the Defendant on the ground that the 1st Plaintiff had ‘colluded’ with Bitfinex and/or ‘interfered’ Bitfinex’s decision in suspending the Defendant’s Bitfinex Account that in turn resulted in his alleged losses of B2x CST futures. He sued for 169,6267258 units of B2x CST futures or the sum of RM806,071.87 being the sum equivalent.

The learned Sessions Court Judge granted the Plaintiffs’ claim and ordered the return of the Bitcoins or its equivalent in Ringgit Malaysia as of the date of filing of the action. He held: –

  1. The Defendant admitted that the mistakenly transferred 11.3 Bitcoins does not belong to him and thus, he is under a duty to return the same. There are also contemporaneous documents to show that the Defendant had agreed to return the mistakenly transferred 11.3 Bitcoins, albeit in the form of cash. In this regard, the Defendant had offered to pay the 1st Plaintiff the sum of RM300,000.00 and this is evident from his email dated Nov 2, 2017 to the Plaintiffs. In another email dated Nov 4, 2017, the Defendant stated that the price of Bitcoin was volatile and high and requested for more time for the Bitcoin to settle at a better rate for him to repay back the mistakenly transferred 11.3 Bitcoins. It is thus obvious to the Court that the reason why he refused to repay back the mistakenly transferred 11.3 Bitcoins was due to the very high rate and it was on that basis he had requested for the price to settle so that he can buy it at a lower rate.
  2. The Defendant claimed that the offer to pay the sum of RM300,000.00 was out of ‘goodwill’ for the mistakenly utilising the mistakenly transferred 11.3 Bitcoins and therefore the Plaintiffs are estopped from claiming it. The Court found that estoppel does not apply herein as the Plaintiffs have never indicated that they are agreeable to the alleged ‘goodwill’ payment.
  3. The Defendant contended that cryptocurrency is illegal in Malaysia and therefore, the Plaintiffs are not entitled to recover the same. The learned Sessions Court Judge dismissed his contention. He held that whilst cryptocurrency is not recognised as legal tender in Malaysia, this does not mean that the Plaintiffs’ operation is illegal. In fact, the 1st Plaintiff is registered as a reporting entity with Bank Negara Malaysia and this is supported by contemporaneous documents. The fact that the 1st Plaintiff is registered as a reporting entity to Bank Negara on cryptocurrency is in itself proof that the 1st Plaintiff’s operations are not illegal. If the 1st Plaintiff’s operations are deemed illegal by Bank Negara, reasonably the 1st Plaintiff would not be registered as a reporting entity. Further, the fact that the Bank Negara Malaysia put forth the initiative to have cryptocurrency exchanges registered as reporting institutions is indicative that the trading of cryptocurrencies is not illegal in Malaysia. Further, this recognises that cryptocurrencies carry value that may be exchanged with real money despite not being recognised as legal tender.
  4. The Defendant argued that the said 11.3 Bitcoins do not belong to the Plaintiffs and therefore the Plaintiffs do not have any locus to commence this action to recover the 11.3 Bitcoins. The Court rejected this argument as the position of the Plaintiffs in “holding” the cryptocurrency (i.e. Bitcoins) is akin to that of the bank where customers deposit the monies. As such, if the bank had mistakenly transferred monies into another person’s account, this does not mean that the bank has no locus to initiate an action to recover the monies.
  5. The Defendant contended that the Malaysian Court has no jurisdiction to hear the Plaintiffs’ claim. In this regard, the Defendant claims that the Plaintiffs’ claim is subject to Singapore law. The Court rejected this contention. The terms and conditions containing the jurisdiction clause in Singapore do not apply to the present case as the new terms and conditions only took effect after the incident. In this regard, the present case is governed by the old terms and conditions which does not contain any jurisdiction clause. Further, there is no basis in the Defendant’s contention as he has now submitted to the jurisdiction of the Malaysian Court by filing his counter claim against the Plaintiffs. In any event, the Court found that the purported terms and conditions that the Defendant is now seeking to rely on does not apply to him as it is expressly stated on Luno’s website that the new terms and conditions are to take effect after the incident.
  6. The Court found that cryptocurrency although is not money in the legal sense, is a form of commodity as real money is used to purchase the cryptocurrency. Accordingly, cryptocurrency falls within the definition of “anything” under s. 73 of the Contracts Act 1950. There is value attached to Bitcoin in the same way as shares do. Bitcoin may not be currency or money per se, but it is a form of commodity, albeit in an intangible form. Accordingly, the Defendant is bound in law and/or equity to return the additional 11.3 Bitcoins to the Plaintiffs that never belonged to the Defendant.
  7. The Defendant claimed that all 22.6 Bitcoins in his Bitfinex account were converted into 82x CST futures on an “automated setting”, allegedly prior to his knowledge of the mistakenly transferred additional 11.3 Bitcoins. The Court did not accept the Defendant’s allegation as it was not substantiated with any reliable evidence.
  8. In view of the Defendant’s actual knowledge and awareness prior to converting 22.6 Bitcoins to B2x CST futures, the Defendant is bound by principles of natural justice and equity to return the mistakenly transferred 11.3 Bitcoins to the Plaintiffs. the Defendant cannot be allowed to be unjustly enriched at the expense of the 1st Plaintiff.
  9. The Defendant is claiming an alleged bona fide change of position on the basis that the 11.3 Bitcoins are no longer available as the B2x CST futures purchased by him did not materialise and its value is now close to nil. However, the Court found that this altered position of the Defendant was self-induced and not bona fide due to the established fact that the Defendant conducted the transaction to convert all 22.6 Bitcoins to B2x CST futures despite realising that something was “amiss”. He cannot claim the defence of bona fide change of position as he utilised the additional 11.3 Bitcoins in his Bitfinex Account to purchase another type of cryptocurrency.
  10. The Court found that when the Defendant became aware of his receipt of the additional 11.3 Bitcoins, the principles of equity comes into play whereby if his conscience would be affected upon learning of the mistake, the Defendant is then imposed a constructive trust by the laws of equity which he is then placed under a fiduciary as a constructive trustee.
  11. The Defendant argued that the Plaintiffs are unable to “recover” the 11.3 Bitcoins due to the Risk Warning which is found on the Luno Exchange website which states that all transactions that occurs under the Luno Wallet of any user is irreversible. The Court found that the Defendant’s interpretation of the Risk Warning is misplaced. It is to be observed that the Risk Warning stating that the transactions is irreversible applies to those transactions between users and the 1st Plaintiff is still entitled and able to ask for the “return” of the 11.3 Bitcoins. The Defendant’s claimed that once monies have been mistakenly transferred to someone, the monies should be left with them and according to the Defendant pursuant to a “common position accepted in the cryptocurrency world”. The Court could not accept the argument as there was no evidence of this “common position accepted in the cryptocurrency world”. It is clear that the Defendant had agreed to return or repay back the mistakenly transferred 11.3 Bitcoins and this argument on “irreversibility” was only raised at this juncture to defeat the Plaintiffs’ claim. At the time when the Plaintiffs demanded the return of the mistakenly transferred 11.3 Bitcoins, the Defendant never raised any issue that the same cannot be returned due to the Risk Warning. the Defendant’s position is an afterthought and he is now estopped from reneging his earlier position.
  12. In respect of the Defendant’s counter claim, the Court found that the Defendant has failed to lead any evidence to substantiate his allegation that the 1st Plaintiff had colluded with Bitfinex and/or interfered in Bitfinex’s decision in suspending the Defendant’s Bitfinex Account that in turn resulted in his alleged losses of B2x CST futures. The 1st Plaintiff have no control or authority over the conduct and management of Bitfinex and/or the Defendant’s Bitfinex Account. All the Plaintiff did was to notify Bitfinex on the mistaken transfer and requested Bitfinex to hold the funds belonging to the Defendant in his Bitfinex account in order to preserve status quo pending negotiations and their attempts to reclaim the 11.3 Bitcoins from the Defendant and nothing more.

On appeal to the High Court (Shah Alam High Court Civil Appeal No. 12BNCVC-91-10/2018), the learned High Court Judge dismissed the appeal and upheld the Sessions Court Judge’s decision. In addition, his Lordship held: –

  1. While cryptocurrency is not ‘money’ (i.e.,: legal tender) as we know in the traditional sense, it has been recently defined as a form of ‘security’ by s. 3 of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 which had defined digital currency as a form of “security”. It cannot be disputed that it is a form of ‘commodity’ as real money is used to purchase the cryptocurrency. In this regard, there is indeed value attached to the Bitcoin in the same way as value is attached to ‘shares’. The Contracts Act 1950 having been drafted some seven decades ago ought to be construed to reflect changes in modern technology and commerce. In view of the aforesaid, the High Court held that the term ‘anything’ in s. 73 is plainly wide enough to cover Bitcoins. The mistaken transfer of the 11.3 Bitcoins was a result of a technical glitch and not due to a mistake of fact or law.
  2. In relation to the argument that Plaintiffs lack the locus standi to initiate an action for the recovery of the 11.3 Bitcoins, the learned High Court Judge held that up until the point the Bitcoins are assigned to a specified user, it is just a pool of Bitcoins that Luno has full custody and control of. Hence, it was incorrect to suggest that the Plaintiffs were not the legal and beneficial owners of the 11.3 Bitcoins.
  3. The crux of this appeal turns on the correct interpretation of s. 73 of the Contracts Act, 1952 and the application of s. 73 to the instant facts. The terms are plainly wide enough to be invoked for the return the 11.3 Bitcoins wrongly or mistakenly transferred into the account of the Defendant.
  4. The Plaintiffs’ cryptocurrency online exchange is not illegal and/or contrary to public policy. There was no material or evidence before the Court below that. Although cryptocurrency is not recognised as legal tender in our jurisdiction, the Plaintiffs’ whole operation is not illegal and cannot sustain the claim for restitution.
  5. In respect of the counterclaim, the learned High Court Judge agreed with the Sessions Court Judge that the Defendant’s allegation had not been substantiated on the proven facts and evidence.

Closing

To put this case in simple words, this is a case where the Plaintiff had mistakenly transferred Bitcoins to the Defendant and the former wants the latter to return it. The Defendant on the other hand claimed that he is unable to do so as he no longer has it.

Unlike the usual tangible products, this is a case which deals with digital currency which has very volatile value.

The Plaintiff had also demanded that if the Defendant is unable to return the 11.3 Bitcoins, he had to pay the sum of RM810,837.00 equivalent to 11.3 Bitcoins calculated based on the Luno exchange market price of RM71,756.00 per Bitcoin at the time of the filing of the action.

The Court held that, among others, the Defendant had a duty to return the Bitcoins and there is no evidence that he no longer has those Bitcoins. 

The matter is now pending appeal at the Court of Appeal.




First published on Digital News Asia on 17 December 2019.

Bread & Kaya: 2018 Malaysia Cyber-law and IT Cases PT4 – Commercial cases

By Foong Cheng Leong
May 10, 2019

– 2018 saw the first decision on the liability of online marketplace providers
– Damages can be granted in the case of a software delivery delay

IN THIS last of a four-part series, I will focus on commercial cases in 2018.

Short-term lodging – the Airbnb Effect

An online marketplace for accommodation and hospitality such as Airbnb enables people to lease or rent short-term lodging including vacation and apartment rentals, homestays, hostel beds and hotel rooms.

Currently, there are no specific laws to govern the conduct of these online marketplace providers.  However, joint management bodies and management corporations have taken action to stop apartment owners from operating short-term lodging by, among others, imposing rules to stop this practice.

In Salil Innab & Anor v Badan Pengurusan Bersama Seti Sky Residences & 5 Ors (Kuala Lumpur High Originating Summons No: WA-24NCVC-776-04/2018), the 1st Defendant, the Joint Management Body of Setia Sky Residences, took steps to stop the Plaintiffs’ services of short term rentals. The Plaintiffs, tenant and landlord of an apartment unit at a building, filed an action against the Joint Management Body to stop them from interfering or stopping any owners, tenants of any short term rental and/or any person representing the Plaintiffs from operating a short term rental at Setia Sky Residences.

The 1st Plaintiff is also a director of a company called Innab Trade Sdn Bhd. Through Innab Trade Sdn Bhd, the 1st Plaintiff had also rented other units in Setia Sky Residences for the purposes of sub-letting the same to members of the public.

The 1st Defendant contended that the business operated by the 1st Plaintiff, through Innab Trade Sdn Bhd, at Setia Sky Residences is in reality a hotel business and not merely the business of letting out short-term tenancies.

In so contending, the 1st Defendant made reference to how bookings for the short-term tenancies were made through the internet, how the units were described and marketed by using the name “KL Suites” and how they were portrayed in Innab Trade Sdn Bhd’s website, including the contention that these “KL Suites” could be booked through other websites. It is contended that all of these are similar to and in effect, the management of a hotel service.

The High Court granted an interlocutory injunction to stop the Defendants from interfering or stopping any owners, tenants of any short term rental and/or any person representing the Plaintiffs from operating a short term rental at Setia Sky Residences.

The High Court held that the 1st Plaintiff’s short-term tenants will be adversely affected and they are in reality victims of the conflict between the Plaintiffs and the Defendants. In addition, the continued interference with or obstruction of the 1st Plaintiff’s short-term tenants would also be likely to cause irreparable damage to the goodwill that the 1st Plaintiff would have built in his business.

However, the Court of Appeal allowed the Defendants’ appeal (Civil Appeal No. W-02(IM)(NCVC)-1811-09/2018) on the ground that the injunction order was too wide and damages is an adequate remedy.

In Verve Suites Mont’ Kiara Management Corporation v Innab Salil & 8 Ors (Kuala Lumpur High Originating Summons No: WA-22NCVC-461-09/2017), the Plaintiff, the Management Corporation of Verve Suites Mont Kiara, passed and adopted a resolution in an Extraordinary General Meeting to prohibit the use of residential units in the Verve Suites for business, including paid short-term rentals. The prohibition was then incorporated into the House Rule 3.

House Rule 3.0 states that any unit for short term rental is prohibited. House Rule 3.1(i) states any stay for which a booking was made through services/applications/websites etc, such as AirBnb, booking.com, agoda.com, klsuits.com and other similar services is considered as a short-term rental agreement.

The Defendants had allegedly caused their respective residential units in Verve Suites to be turned into a hotel room with large numbers of guests coming to check in and check out with a flurry of activities interfering with the security, quiet enjoyment and overall wellbeing of the residents in the Verve Suites.

The Plaintiff then initiated an action against the Defendants compelling them to abide by all times and not violate the House Rule and be restrained from advertising, contracting for, booking and/or allowing, dealing with the residential units to be used for business including paid short term rental and/or transient use for tourist, or hotels, among others.  

The High Court held that the Plaintiff can enforce House Rule 3 and prohibited the Defendants from running the short-term rental business.

E-commerce – Suing online marketplace operators

We saw the first decision on the liability of online marketplace providers.

In Nexgen Biopharma Research & Innovation SARL v Celcom Planet Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22IP-3-01/2018), the Intellectual Property High Court had to decide whether an online marketplace provider is liable for trademark infringement for the sale and advertisements of its Merchants’ products published on its website.

The brand owner was granted an order for summary judgement against the Defendant that operates an online marketplace by the name of “11Street” for infringing their trade mark “MFIII”. 11Street had published the MFIII trade marks and numerous sellers had posted unauthorised MFIII products for sale on 11Street. Besides, 11Street had also advertised the MFIII trade mark together with products bearing the MFIII trade marks on various third-party websites.

Similarly, in Jeunesse Global Sdn. Bhd. v Ecart Services Malaysia Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22IP-16-02/2018), the Plaintiffs, who are in the direct selling business of skin care products and supplements, sued the operator of online marketplace operator, Lazada, for trade mark infringement, passing off, copyright and unlawful interference with their business, among others. The Plaintiffs discovered that Lazada had been selling products bearing the 1st Plaintiff’s registered trade marks and publishing the 1st Plaintiff’s copyright works. However, the parties settled the matter amicably and the matter was withdrawn.

Last year, I reported that a luxury watches brand owner sued a web hosting company for trademark infringement for hosting websites that sold counterfeit products (Officine Panerai AG v Shinjiru Technology Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22IP-2-01/2018)). The interesting question in this case is whether a webhoster is liable for trade mark infringement for what their subscribers do. However, the parties also settled the matter amicably and the matter was withdrawn. 

Contractual matters – Software delivery delay and online agreements

This is an important case for the software industry. Delay in delivering a software is a common occurrence in the industry and in the High Court case of Tex Cycle Technology (M) Berhad v Fact System (Malaysia) Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22NCVC-379-06/2016) provides what a customer can do if there is such delay.

In this case, the Plaintiff sued the Defendant for failing to install a software which could cater for the implementation of Goods and Services Tax (GST) required by the Government within the date of enforcement of GST.

The Defendant had allegedly represented to the Plaintiff in meetings and exchanges of emails that the Defendant could meet the enforcement date of GST and also that two important service requirements of the contract entered into could be fulfilled.

The Plaintiff claimed that due to the Defendant’s failure, they had no alternative but to switch to manually entering the data and generating documents manually and, in the process, incurring significant costs and expenses.

The Plaintiff sued for the loss and damages and the refund of the sum of RM191,572 paid by the Plaintiff to the Defendant for the software. The High Court found in favour of the Plaintiff and ordered the refund of the money paid plus general damages of RM100,000.

On appeal (Civil Appeal No. W-02(NCvC)(W)-1297-06/2018), the Court of Appeal allowed the appeal in part and disallowed the general damages of RM100,000. The Court of Appeal held that the High Court Judge is plainly wrong in allowing RM100,000 as general damages as there were no evidential basis.

In Wong Wei Pin v Malayan Banking Berhad [2018] 6 AMR 933, the High Court dealt with an interesting point whether general terms and conditions published on a website can be incorporated into an agreement.

In this case, the Plaintiff had accumulated credit card points via business and commercial purposes which ran foul of the Defendant’s terms and conditions of the credit card which provides that the cardmember can only use the credit card for purposes of personal consumption only, i.e. non-business and non-commercial related consumption. The Plaintiff argued that the Defendant’s Product Disclosure Sheet (PDS) which did not explicitly state that the terms and conditions of the Credit Card can be found at www.maybank2u.com.

The learned Judge held that although the PDS did not set out that the general terms and conditions are set out at Maybank’s website, it is accordingly the obligation of the Plaintiff to ascertain what the general terms and conditions are as she will be bound by them in the usage of the Credit Card. Accordingly, the High Court held that the Plaintiff is bound by the terms and conditions found on the Defendant’s website, and even if the Plaintiff chose not to read them, she is bound by them by her usage of the card.

In closing

In 2019, we can expect more interesting developments in the cyberlaw and IT sphere –

  1. The Council of Auctioneers Malaysia is challenging a decision by the High Court Registrar to implement electronic bidding or e-Lelong in all courts in West Malaysia (Majlis Pelelong Malaysia v. Pendaftar Mahkamah Tinggi Malaya (Kuala Lumpur Judicial Review Application No. WA-25-313-10/2018). Leave to challenge the High Court Registrar’s decision has been granted by the High Court. The High Court will now hear the substantive application in due course;
  2. Pursuant to the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, digital currencies and digital tokens which are not issued or guaranteed by any government body or central bank, and fulfils other specific features, are prescribed as securities. The effective result of this order is that the digital currencies and digital tokens will now be primarily regulated by the Securities Commission. The Securities Commission’s Guidelines on Recognised Markets has now been amended to regulate digital asset exchange operator;  
  3. The Government will be taxing digital services beginning from Jan 1, 2020 at 6% per annum. Pursuant to the Service Tax (Amendment) Bill 2019, foreign registered persons providing digital services to consumers in the country will need to pay service tax;
  4. The introduction of the new Legal Profession Act 2018 to replace the old Legal Profession Act 1976 will see the introduction of the legal technology provision. S. 35 seeks to regulate the provision of legal technology by legal technology service provider. Legal technology is defined as any technological product or service used or to be used, (1) in the provision of any service or any act which is within any function or responsibility of any advocate and solicitor, or (2) places at the disposal of any other person the services of an advocate and solicitor. The Bar Council is given the power to regulate legal technology; and
  5. Across the causeway, Singapore has introduced the Protection from Online Falsehood and Manipulation Bill 10/2019. This new law seeks to, among others, criminalise false statements, control inauthentic behaviour and other misuses of online accounts and bots and regulate blocking orders. This new law also introduced a new way to punish persons who disseminates false statements i.e by cutting their income and starving them financially.

First published on Digital News Asia on 10 May 2019.

Bread & Kaya: 2018 Malaysia Cyber-law and IT Cases PT3 – Cyber-crimes and -offences

By Foong Cheng Leong
May 3, 2019

  • Laws introduced to regulate e-hailing services
  • Sexual grooming enters the books as a new offence 

IN THIS third of a four-part series, I will discuss cyber-crime cases and other cyber offences.

Communications and Multimedia Act 1998

The establishment of Cyber Courts in the Kuala Lumpur Sessions Court saw the growth of judgements relating to the Communications and Multimedia Act 1998.

In Pendakwa Raya lwn Dato’ Mohd Zaid Bin Ibrahim (Kuala Lumpur Criminal Sessions Court Case No. 63-003-12/2015), the learned Sessions Court Judge gave a comprehensive judgement regarding a charge under s. 233(1)(a) of the Communications and Multimedia Act 1998.

The accused, a former Minister of Law, was charged for publishing a statement which is offensive in nature on his blog with an intent to annoy another person. The statement consists of a transcript of the accused’s speech given at a luncheon relating to the conduct of the then Prime Minister Najib Razak.

The learned Sessions Court Judge acquitted the accused at the prosecution stage based on the following grounds, among others:-

(1) In determining whether the article is offensive in nature, the article must be examined as a whole and not by looking in a few paragraphs or words. This is because the accused was charged for uploading the article and thus the entire article is considered as offensive in character. The prosecutor cannot pick and choose the relevant paragraphs or words favourable to them and conclude that the article is offensive in character.

(2) The learned Sessions Court Judge looked into the object of the Communications and Multimedia Act 1998 set out in s.3 of the said Act. One of the objectives of the Act is to promote a civil society where information-based services will provide the basis of continuing enhancements to quality of work and life. The learned Sessions Court Judge also considered that the said Act addressed the issue of censorship where nothing in the said Act shall be construed as permitting the censorship of the Internet.

(3) None of the Prosecution’s witnesses stated that they found that the entire article is offensive in character. Two (2) of the prosecution’s witnesses referred part of the article and not the whole article. In fact, the complainant’s police report against the accused had only stated that the article is seditious in nature which is different from offensive in character.

(4) Such article must be examined and not taken without further examination without critical thinking. This is one of the objectives that s. 3 of the said Act seeks to achieve. The attitude of receiving news blindly should be avoided and the new culture in accordance with the purpose and objective of the said Act ought to be promoted.

(5) In respect of the element “with intent” to annoy another person, the learned Sessions Court Judge held that that intent has to be proved and no evidence has been adduced to prove the same. As for the element “annoy another person”, the learned Sessions Court Judge found that the complainant did not feel annoyed when he read the article. The learned Sessions Court Judge held that annoyance or anger or dissatisfaction would appear spontaneously when the article is read. The learned Sessions Court Judge found that the article is intended for blog readers to garner support for what it is written for i.e. to give support to Prime Minister Dr Mahathir.

(6) The charge is defective as the prosecution failed to state clearly in the charges sheet who is the person intended to be annoyed by the accused when the article was uploaded. The charge sheet had only stated “with the intent to annoy another person”. The person in the charge sheet must be named clearly.

(7) The Prosecution should have also called the person intended to be annoyed by the article to testify whether the victim felt annoyed by the article. Without evidence from the victim, the Court is left wondering whether the victim felt annoyed by the article.

In Sivarasa Rasiah v Pendakwa Raya (Kuala Lumpur Criminal Sessions Court Case No. 63-001-04/2016 & 63-002-04/2016, Criminal Application No: 64-085-07/2016) and Premesh Chandran a/l Jeyachandran v Pendakwa Raya (Kuala Lumpur Criminal Sessions Court Case: WA-64-155-12/2017), the two accused were charged under s. 233(1) of the Communications and Multimedia Act 1998. They filed an application to refer a few constitutional issues to the High Court pursuant to s. 30 of the Courts of Judicature Act 1964 on the ground that s. 233(1) of the Communications and Multimedia Act 1998 is in contravention of Article 8 and 10(2)(a) of the Federal Constitution.

The Prosecution raised a preliminary objection against this application on the ground that s. 233(1) of the Communications and Multimedia Act 1998 is settled and not in contravention of the Federal Constitution. The same Sessions Court Judge dismissed the application on the ground that the case of Nor Hisham Osman v PP [2010] MLJU 1429 has already determined that s. 233(1) of the Communications and Multimedia Act 1998 is reasonable and not unconstitutional.

Fortunately for the two accused, the charges were withdrawn against them after the change of Government after the 14th General Election.

Sedition – Sex bloggers on trial

In Lee May Ling v Public Prosecutor & Another Appeal [2018] 10 CLJ 742, the Appellant, also known as Vivian of the Alvivi duo, was found guilty by the Sessions Court for an offence under s. 4(1)(c) of the Sedition Act 1948 and sentenced to an imprisonment term of five (5) months and twenty (22) days.

Vivian and her co-accused, Alvin Tan, had published a picture of themselves with the words “Selamat Berbuka Puasa (dengan Bak Kut Teh. wangi,enak, meyelerakan!!!) with the Halal logo on the Facebook page “Alvin and Vivian-Alvivi”.

She appealed against her conviction and sentence. There was also a cross-appeal by the prosecution against the inadequacy of sentence meted out by the Sessions Court Judge.

The co-accused absconded through the trial and was absent until the conclusion of the trial.  

The High Court dismissed the appeals. The learned Judge found that Vivian and Alvin Tan had a common intention to publish the picture, and that Vivian was a willing participant. Although no one saw Alvin or Vivian posting the picture, the learned Judge also made an inference from the evidence showing that the picture was kept in Alvin’s notebook and the Facebook page was registered in the name of Alvin and Vivian.

The High Court however substituted the sentence of five (5) months and twenty (22) days imprisonment with a fine in the sum of RM5,000 in default, imprisonment of six (6) months. The High Court in the same vein dismissed the prosecution’s appeal on the inadequacy of the sentence.

Official Secrets Act 1972 – Liability for receiving forwarded messages

Last year, I reported that one Subbarau @ Kamalanathan (Pendakwa Raya v Subbarau @ Kamalanathan (Court of Appeal Criminal Appeal No. N-06B-55-09/2016) was charged in the Sessions Court under s. 8(1)(c)(iii) of the Official Secrets Act 1972 (OSA 1972) for having possession in his Samsung mobile phone soft copies of 2014 UPSR examination papers.

In the same year, the Court released two more judgements relating to the possession of Ujian Penilaian Sekolah Rendah (UPSR) examination papers which they had received via forwarded messages on WhatsApp.

In Pendakwa Raya lwn Uma Mageswari A/P Periasamy @ Mayandy (Kuala Kangsar Sessions Court Criminal Case No. 61-1-11-2014) and Pendakwa Raya v Anparasu al Kadampiah (Kuala Kangsar Sessions Court Criminal Case No. 61-2-11-2014), the two school teachers were charged with possession of a few pages of examination papers for Ujian Penilaian Sekolah Rendah (UPSR) for Science 018 under s. 8(1)(c)(iii) of the Official Secrets Act 1972. Both were acquitted as the photographs of the examination papers were forwarded to them and stored automatically on their mobile phones, and they had no use for them, among others.

The prosecution of persons who possess information received via forwarded messages is a dangerous precedent. The law should make exception to those who had not knowingly received such information and chose not to delete those information thereafter.

Online and phone scams – Scammer or victim?

Online and phone scams have become common in Malaysia. The authorities had been tracking and arresting these scammers but many of them are based outside Malaysia. Instead, these scammers use the services of Malaysians, whether knowingly or not, to receive and dissipate money.

In Pendakwa Raya lwn Charles Sugumar a/l M. Karunnanithi (Kota Bharu Magistrate Court Kes Tangkap No: MKB (A) 83-43-02/2016), the accused was charged under s. s. 424 of the Penal Code for dishonestly concealing money of a scam victim in his bank account knowing that the said money does not belong to him. The victim had befriended a person by the name of Alfred Hammon from UK through Facebook. Alfred Hammon then made the victim transfer money to the accused’s bank account on the pretence that he needed the money to cash his cheque of three million dollars. Alfred Hammon promised that he will return the money together with interest. However, after transferring the money, the victim realised that she was scammed.

The accused claimed that he is not part of the scam and that when he was working as a tour driver, he was requested by his customer to receive money on the customer’s behalf. The accused claimed that he did it to give his customer the best service so that he can attract more customers. He said that he was informed by the customer that the customer’s friend had to transfer money to him so that the customer can continue his tour in Malaysia. The accused said that he did not make any remuneration or commission from that assistance.

The Magistrate acquitted the accused as the Magistrate found that, among others, the accused’s evidence is consistent and he is a credible witness. The Magistrate agreed that the accused was made a scapegoat by the customer who took advantage of his goodness and sincerity in giving the best service as a tour driver.

In Pendakwa Raya lwn Sabariah Binti Adam (Magistrate Court Criminal Trial No. 83RS – 206 – 08 / 2016), the accused was charged with two counts of knowingly concealing stolen property, an offence under s. 414 of the Penal Code. The victim was duped by a Facebook user by the name of Nasir to bank in her money into the accused’s bank account. The accused claimed that she was a victim of the same trumpery scheme and not the perpetrator. She has no control and custody over her bank account. The Court however drew inference that an account holder must be held responsible for all transaction initiated or authorised using her account number including transaction by another person whom the account holder has given permission to. The Court sentenced the accused twelve (12) months imprisonment for each charge.

However, in Pendakwa Raya lwn Hasimah Binti Aziz (Kuala Lumpur Criminal Sessions Court Case No. WA-62CY-052-08/2017), the accused was charged under s. 4(1)(b) of the Computer Crimes Act 1997 for allowing access without authorisation to her Maybank bank account and thereafter assist a scam against the complainant.

The complainant was tricked into transferring money to the accused to pay for charges to release a present purportedly sent by a person she knew from Facebook. The investigating officer found that the accused had given her automatic teller machine (ATM) card to a person she knew from Facebook. That person claimed he could not open a bank account in Malaysia.

The Court held that based on the evidence produced, it is clear that the complainant and accused were online scam victims themselves. The accused was deceived into giving her account number, ATM card and PIN number. The complainant on the other had was deceived into paying courier charges, among others. If detailed investigation was made, the main character of the scam would be revealed. There was no attempt to obtain the CCTV recording of who had taken the money from the ATM machine. The bank officer had testified that CCTV recording are stored by the bank for three (3) months. If the CCTV recording was obtained, it would reveal who had used the ATM card.

Sexual grooming – A new offence

In Syed Naharuddin Bin Syed Hashim v Etiqa Takaful Berhad (Award No.: 3143/2018), the Claimant was dismissed after the Company received an anonymous email alleging that the Claimant had been operating as a sexual predator and targeting girls as young as thirteen-years-old.

The anonymous author also alleged that the Claimant, using the pseudonym, “KBoy”, carried out his meetings with girls. It was also alleged that the Claimant’s conversations had been recorded and featured in an undercover expose by the Star newspaper team of journalists know as STAR R.AGE Team. An investigation by the Company revealed that there were two video recordings featuring K-Boy which had been uploaded onto the STAR R.AGE online website and the videos had gone viral on YouTube. The Claimant admitted that he was the individual in the video.

The Industrial Court held that the actions of the Claimant can amount to a sexual communication under the Sexual Offences Against Children Act 2017. The facts of the case which are largely admitted to by the Claimant, are that he communicated with the intended “victim” in social media and then met up with the person (who informed him that she was a young girl of 15). The setting, the time and the locale were such that a person of his standing in society and representing an insurance company should have been wary of. Further, the conversations were explicitly related to sex and sexual exploits which a man of his age has no business to discuss with a young lady, notwithstanding her real age.

The Court found that the termination was with just cause or excuse and the Claimant’s case is therefore dismissed.

E-hailing services – Naughty GrabCar driver

In Pendakwa Raya lwn Muhamad Izuwan Bin Kamaruddin (Mahkamah Magistrate Ampang No Kes: 85-55-09/2017, 83JS-16-09/2017 dan 83-780-09/2017), a GrabCar driver was charged under ss. 323, 354 and 506 of the Penal Code for assaulting his passenger. He pleaded guilty and was sentenced to a total of 3 years and five (5) months.

In deciding the sentence, the learned Magistrate took into account of the negative effect on the e-hailing provider GrabCar which may cause difficulty to female passengers to trust a GrabCar driver. The learned Magistrate imposed a deterrence sentence to send a message to all drivers so that they will drive ethically and treat their passengers with respect and not take advantage of then.

On another note, the Commercial Vehicle Licensing Board (Amendment) Act 2017 and Land Public Transport (Amendment) Act 2017 came to force on 12 July 2018.

These new laws introduced the licensing of intermediation business. Intermediation business is defined as “business of facilitating arrangements, booking or transactions of e-hailing vehicle (pursuant to the new amendment to CVLBA) and for the provision of land public transport services (pursuant to the new amendment to LPTA). These amendments were introduced to regulate e-hailing services such as Grab and also e-hailing vehicles.

Part 4 which focuses on commercial cases will be published on May 10.

First published on Digital News Asia on 3 May 2019

Bread & Kaya: 2018 Malaysia Cyber-Law And IT Cases – Cyber-Defamation


By Foong Cheng Leong
April 26, 2019

  • In cyber-defamation cases, the High Court has granted damages between RM50K to RM100K
  • Court assumes that you have published something if it originates from your email, Facebook, etc

IN THIS second, of a four-part series, I will talk about the rise of cyber-defamation. The number of cyber-related tort cases filed in the Kuala Lumpur High Court in 2018 increased to 60 over from over 50 cases. Most of these cases were related to cyber-defamation.

The Court dealt with numerous defamatory online postings that went viral. In these cases, the High Court has granted damages between RM50,000 to RM100,000.

In Datuk May Phng @ Cho Mai Sum & 2 Ors v Tan Pei Pei [2018] 4 AMR 784, HC, the High Court was tasked to assess the damages to be granted to the Plaintiff against the Defendant for publishing defamatory statements in an email to at least four recipients.

It was not disputed that the said email has been circulated among the public via the internet to as many people as possible and the Defendant invited the recipients to read and spread its contents as widely as possible.

The Court held that the said e-mail was not an ordinary email directed to one person, but the said e-mail was written in the context to address the public, to have the said e-mail widely circulated among the public. Therefore, the Court was of the view that the said e-mail had been widely circulated and/or presumed to be so.

The Defendant’s attempt to prove that the e-mail was sent only to the four individuals named therein or five individuals as a whole as contemplated by the Plaintiffs does not change the scenario or fact that such publication in the internet via email is deemed to be wide circulation because the Defendant intended the wide circulation of the said e-mail based on her statements in the said e-mail where the Defendant requested the public to circulate the said e-mail.

The Court held that it is practically impossible to prove exactly to whom the said e-mail had been circulated, there is a presumption by law that such circulation over the internet is presumed to be wide publication and the onus is on the Defendant to prove the limited publication as alleged.

The High Court granted RM80,000 as general damages.

In Mohamed Hafiz Mohamed Nordin v Eric Paulsen and Another Appeal (Court of Appeal Civil Appeal No. W-02(NCVC)(W)-1668-08/2017), the Plaintiff filed an action against the Defendant for defamation arising from an article published on the internet via the website of Portal Islam & Melayu at www.ismaweb.net which went viral on social media.

The Plaintiff is the executive director of ‘Lawyers for Liberty’, a human rights lawyers’ non-governmental organisation, and a well-known human rights lawyer and activist in Malaysia.

The Defendant is a member of the Pertubuhan Ikatan Muslimin Malaysia (Isma), a non-governmental organisation established in 1997. Isma’s main focus is Islamic propagation in the country.

The Plaintiff alleged that the Defendant had uttered a defamatory statement which was published in an article entitled “Jangan Biar Eric Paulsen bebas tanpa perbicaraan” on www.ismaweb.net.

The High Court found that the Plaintiff had failed to prove that the impugned statement was defamatory as he had failed to prove that his reputation has been adversely affected and tainted. The High Court also dismissed the Defendant’s defence of justification and fair comment.

On appeal, the Court of Appeal found that the impugned statement is derogatory, calculated to incite hatred and anger amongst the multi-religious groups and ethnicity in Malaysia.

The impugned statement not only described the Plaintiff as a fraudster, a liar who incites hatred of the Islamic religion, but also as a person funded and supported by foreign entities, such as the United States of America and the European Union.

In their natural and ordinary meaning, impugned statement meant and was understood to mean by reasonable and ordinary readers of the article that the Plaintiff is anti–Islam. Therefore, taking the bane and the antidote of the article published the defamatory statement had only one purpose, that is, to tarnish the plaintiff’s character and reputation.

The Court of Appeal granted damages of RM100,000.00.

In Mohd Khaidir Ahmad v. Mohd Iqbal Zainal Abidin [2018] 1 LNS 1150, the Court of Appeal upheld the High Court’s decision in finding the Defendant liable for defaming the Plaintiff on his Facebook page.

The Defendant had alleged that the Plaintiff, an Assistant District Officer of Temerloh, had abused his power and was corrupt, among others. One of the Facebook postings had an uploaded photograph of the Plaintiff, his son and car together with defamatory statements.

The Facebook postings attracted responses, negative ones at that, on his Facebook page. The allegation of abuse of power and corruption appeared to resonate with the netizens who posted their comments, generally agreeing with the same.

The Defendant denied that the words were defamatory of the Plaintiff, that they were fair comments and disclaimed responsibility for the negative comments by the netizens.

The Court of Appeal upheld the High Court’s decision in dismissing the Defendant’s defence and also upheld the damages of RM50,000 granted by the High Court. The Court of Appeal agreed with the High Court that the Defendant failed to prove that the Plaintiff had received bribes, and rejected the defence of qualified privilege as the postings were made without there being a duty to do so for they were done for his own interest, not that of the public.

Pre-action discovery – Finding out who defamed you

A pre-action discovery application is an action filed in Court against parties who are in possession of information of a wrongdoer. In usual cases, such an action is filed against a website operator, whose users had published defamatory comments, to divulge the identity of their user.

This is what had happened in the case of Kopitiam Asia Pacific Sdn Bhd v Modern Outlook Sdn Bhd[2018] MLJU 1450. The Plaintiff filed a pre-action discovery application against the three Defendants after it discovered a defamatory article relating to it on the websites connected to the Defendants. The Plaintiff stated that it intends to file an action for slander of goods against certain parties and required particulars of the said parties from the Defendants.

The 1st Defendant is a company dealing with activities related to payment and to up services via the internet portal industry. The 2nd Defendant is a company providing website registration services. The 3rd Defendant is the provider of the server where the website where the defamatory article was placed.

The 2nd Defendant did not object to the application subject to the information to be released being confined to only information in their possession and/or the release of the said information is within the ambit of law in particular the Personal Data Protection Act 2010.

The High Court granted the order against the 1st and 3rd Defendant as the Plaintiff had indeed stated the material facts pertaining to the intended proceedings which relates to a cause of action for slander of goods. They have also identified the persons against whom the order is sought and is likely to be a party in the subsequent proceedings in the High Court apart from specifying and describing the documents needed.

Other than a website operator, the High Court held that a domain name reseller can be compelled to divulge information of their customer.

In Nik Elin Zurina Binti Nik Abdul Rashid v Mesra.net Sdn Bhd (Kuala Lumpur High Court Suit No. WA-24NCvC-179-02/2018) (Unreported), the Plaintiff sought a pre-action discovery order against the Defendant, who was a reseller of Mynic Berhad, the sole administrator for web addresses that end with .my in Malaysia. The Defendant had assisted in the registration of the domain name Menara.my and the Plaintiff claims that Menara.my had defamed her through a few articles. The Plaintiff wanted the Defendant to divulge the identity of the owner, operator and registrant of the domain name.

The High Court allowed the Plaintiff’s application and ordered the Defendant to divulge the identity of the owner of the website.

Interlocutory injunction – Stopping a person immediately

An interlocutory injunction is an order restraining a person from doing an act pending the disposal of the matter in trial. A trial date is usually fixed a few months after a legal suit is filed. If a person wants a tortfeasor to stop publishing further defamatory statements immediately pending the disposal of the matter in trial, he can file such an application with the Court.

Any person who does not adhere to a Court order can be cited for contempt. In Maria Faridah Atienza v. Hadijah Mohamaed Mokhtar & Anor [2018] 3 CLJ 655, the High Court fined the 1st Defendant RM30,000 and sentenced the 1st Defendant to prison for two weeks after she had failed to pay the fine. The Defendant breached the Court’s injunctive order restraining her from making or publishing any statement against the Plaintiff. She had done so by publishing certain statements on her Instagram account.

In Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak v Tony Pua Kiam Wee (Kuala Lumpur High Court Suit No. WA-23CY-17-04/2017), the Plaintiff, the former Prime Minister of Malaysia, sued the Defendant, a member of Parliament of Malaysia, for defamation. The Defendant had allegedly uttered and published defamatory statements on a live video which was published as a post entitled “BN Govt abandons all Bills to give precedence to PAS RUU355 Private Member’s Bills” on his Facebook account. 

The Facebook post went viral with 82,434 video views. The Defendant has 310,256 Facebook followers. The Plaintiff also filed an application was interlocutory injunction to stop the Defendant from uttering or publishing the defamatory statement.

The High Court granted the said application and held that the Defendant did not deny that he had published those alleged statements, and such statements are indeed defamatory.

On appeal, the Court of Appeal in Tony Pua Kiam Wee v Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak [2018] 3 CLJ 522 upheld the High Court’s decision.

[Edit: 29 April 2019 – Leave to appeal to the Federal Court (Civil Appeal No. 08(i)-107-03/2018(W)) has been granted for the following questions-

(i) Whether the test for an interim injunction in defamation proceedings laid down in The News Straits Times Press (M) Bhd v Airasia Bhd [1987] 1 MLJ 36 is good law given the freedom of expression guaranteed by Article 10(1)(a), Federal Constitution?

(ii) Whether in light of Article 10(1)(a), Federal Constitution, an application for an interim injunction in defamation proceedings to restrain the further publication of impugned statements must be dismissed where the defendant has:

(a) pleaded and particularized the defences of justification and fair comment on matters of public interest in his Defence; and/or

(b) stated, on oath, his belief as to the truth of the impugned statement, and his ability and willingness to justify the impugned statement?

(iii) Whether the fact that the Speaker of the House of Representatives had ex facie exercised powers under the Standing Orders of the Dewan Rakyat, precludes the entitlement of a plaintiff to establish at trial, the fact that the exercise of such powers was not bona fide, in private law proceedings that refer to such exercise of power?

(iv) Whether a court is entitled in private Jaw proceedings to treat the fact of the Attorney General not having commenced prosecution under Article 145(3), Federal Constitution and/or the explanation for such decision as exonerating the impugned conduct, and such as to allow the court to further conclude by way of judicial notice under section 56, Evidence Act 1950 that no wrongdoing was committed?

Electronic evidence

Presumption of publication – Court assumes that you’ve published it

In Thong King Chai v. Ho Khar Fun [2018] 1 LNS 374, the Plaintiff sued the Defendant for defaming him via email and a closed Facebook Group.

In determining whether the statements were published, the High Court applied the presumption of publication under s. 114A of the Evidence Act 1950. The High Court held that pursuant to s. 114A, the presumption of fact is that the email was published by the Defendant as it had originated from his email address. Similarly, there is also a presumption of fact that the Facebook posting was published by the Defendant through his Facebook account.

The High Court also applied the presumption of fact raising a prima facie inference that postcards and telegrams, in the ordinary course of events, have been published to third parties unless the Defendant proves otherwise (as held in the case of Matchplan (M) Sdn Bhd & Anor v. William D Sinrich & Anor [2004] 2 MLJ 424). Applying the decision in Matchplan to the internet age of publication by email and Facebook, the High Court found that the email and the Facebook posting were published to the persons named in the email’s address list and cc list and also to the persons who had access to the Facebook Group. The Defendant did not provide any evidence to rebut this presumption of fact.

However, the High Court dismissed the action on the ground that the statements were not capable of bearing defamatory meaning and are in fact not defamatory of the Plaintiff. Even if the statements are defamatory of the Plaintiff, the Defendant would be able to rely on the defence of justification and/or the defence of fair comment.

Admissibility of Screenshots

In Norazlanshah Bin Hazal v Mohd Dziehan Bin Mustapha (Kuala Lumpur High Court Suit No. WA-23CY-14-03/2017), the Plaintiff sued the Defendant for defaming him on Facebook.

The Defendant disputed the authenticity of the screenshots which contained the alleged defamatory Facebook posting. However, the learned Judicial Commissioner refused to admit the screenshots as evidence as no evidence was led as to the maker of the contents of these screenshots and none were called to testify, no testimony as to how the screenshots were produced although there as admission that the documents were computer generated and no attempt to admit those screenshots under s. 90A of the Evidence Act 1950.

Part 3 which focuses on cyber-crime cases and other cyber offences will be published on May 3.

First published on Digital News Asia on 26 April 2019

Bread & Kaya: 2018 Malaysia Cyber-Law And IT Cases – Fake News, Private Information & Instant Messaging

THE change of Government after the 14th General Election saw changes to our sphere of cyber and IT laws. The new Government withdrew numerous charges under s.233 of the Communications and Multimedia Act 1998, especially against those who had allegedly spoke against the previous Government.

The Anti-Fake News Act 2018 that was introduced before the 14th General Election was quickly shipped away by the House of Representatives via The Anti-Fake News (Repeal) Bill 2018, but was thwarted by the Senate. One person has been charged and sentenced under this Act.

There has also been an array of interesting cyber- and IT-related cases in our Courts.

An employee was dismissed from his job as his conduct could amount to sexual grooming under the Sexual Offences Against Children Act 2017. His action was recorded and featured in an undercover expose by the Star newspaper team of journalists know as The STAR R.AGE Team.

We saw the first decision on the liability of online service providers i.e whether they are liable for trademark infringement for the sale and advertisement of their Merchants’ products published on their website.

We also saw a greater adoption of the electronic service of Court documents. In 30 Maple Sdn Bhd v Noor Farah Kamilah Binti Che Ibrahim (Kuala Lumpur High Court Suit No: WA-22IP-50-12/2017), the Intellectual Property High Court granted an application to serve a Writ and Statement of Claim via email and WhatsApp messenger after it could not locate the Defendant at her last known address.

Traditionally, when a Defendant cannot be located, a Plaintiff would normally ask the Court to allow a notice relating to the lawsuit to be published in the newspaper, among others. The current Rules of Court 2012 does not expressly recognise the electronic service of Court documents notwithstanding that people are more mobile these days. Furthermore, the chance of being able to communicate with someone online is much higher than in person.

PKR communications director and Member of Parliament for Lembah Pantai, Fahmi Fadzil’s civil suit against the Malaysian Communications and Multimedia Commission and Nuemera (M) Sdn Bhd (Ahmad Fahmi Bin Mohamed Fadzil v Suruhanjaya Komunikasi dan Multimedia & Anor (Kuala Lumpur Sessions Court Suit No. WA-A52-2-02/2018)) for allegedly failing to protect his personal data which resulted in the leakage of his personal data together with the personal information of 46.2 million mobile subscribers has now been settled. This was one of Malaysians’ biggest data leaks. However, the terms of settlement were not disclosed.

Nevertheless, the lawsuit by Nuemera (M) Sdn Bhd against Malaysian Communications and Multimedia Commission (Nuemera (M) Sdn Bhd v Malaysian Communications and Multimedia Commission(Kuala Lumpur High Court Originating Summons No. WA-24NCC(ARB)-14-04/2018)) over its suspension of their services to the Commission due to the data leakage is pending before the Court of Appeal (Civil Appeal No. W-01(NCC)(A)-318-05/2018). The details of the lawsuit are unknown as the Court documents have been sealed by the Court.

I will summarise all these over four articles as part of my yearly tradition of what happened in the preceding year.

Anti-Fake News Act 2018 – Taking down fake news

The Anti-Fake News Act 2018 was quickly passed by the previous Government prior to the 14th General Election.

According to the explanatory note of the Anti-Fake News Bill 2018, the law was introduced to seek to deal with fake news by providing for certain offences and measures to curb the dissemination of fake news and to provide for related matters. As technology advances with time, the dissemination of fake news becomes a global concern and more serious in that it affects the public.

The Act seeks to safeguard the public against the proliferation of fake news whilst ensuring that the right to freedom of speech and expression under the Federal Constitution is respected. The provision on the power of the Court to make an order to remove any publication containing fake news serves as a measure to deal with the misuse of the publication medium, in particular social media platforms. With the Act, it is hoped that the public will be more responsible and cautious in sharing news and information.

S.4 of the Anti-Fake News Act 2018 makes it is an offence for any person who, by any means, maliciously creates, offers, publishes, prints, distributes, circulates or disseminates any fake news or publication containing fake news.

“Fake news” is defined as any news, information, data and reports, which is or are wholly or partly false, whether in the form of features, visuals or audio recordings or in any other form capable of suggesting words or ideas.

It was reported that one Salah Salem Saleh Sulaiman was charged and punished under s. 4(1) of the Anti-Fake News Act 2018, which carries a punishment of up to six years in prison and a fine of up to RM500,000, for maliciously publishing fake news in the form of a YouTube video under the user name Salah Sulaiman. He pleaded guilty and was sentenced to a week’s jail and fined RM10,000.

Online news portal, Malaysiakini.com, tried to challenge the constitutionality of the Act but failed in the High Court. In Mkini Dotcom Sdn Bhd v Kerajaan Malaysia & Anor (Kuala Lumpur Judicial Review Application No. WA-25-111-04/2018), Justice Azizah Nawawi held that the application should be dismissed as neither Malaysiakini nor its reporters had been charged under the law. She allowed the objection by the Government to refuse the leave application as the applicant is not adversely affected and the action is premature. Malaysiakini appealed to the Court of Appeal (Civil Appeal No. W-01(A)-399-06/2018) but the appeal was subsequently withdrawn.

As soon as Pakatan Harapan took over the Government, the Anti-Fake News (Repeal) Bill 2018 was introduced to repeal the Anti-Fake News Act 2018. The explanatory note of the Bill stated that fake news may be dealt with under existing laws such as the Penal Code, the Printing Presses and Publications Act 1984 and the Communications and Multimedia Act 1998. As such, the Act is no longer relevant. The House of Representatives passed the said Bill. However, the Senate rejected the Bill. As of the date of this article, the Anti-Fake News Act 2018 still stands.

Family disputes

Private Information – Leaked nudes

As video recording and photography become easily accessible, our Courts are now stating to deal with electronic files containing intimate and/or private materials.

In Datuk Wira S.M Faisal Bin SM Nasimuddin Kamal v Datin Wira Emilia Binti Hanafi & 4 Ors[2018] 7 CLJ 290, the 1st Defendant, the ex-wife of the Plaintiff, had taken into possession mobile phones and USB Flash Drives belonging to the Plaintiff. It was alleged that one of the flash drives contains files which featured intimate and/or private audio-visuals.

The Plaintiff sued the 1st Defendant and her other family members for the return of the devices. The High Court held that there had been no denial that the devices belonged to the Plaintiff. In view of the aforesaid, the High Court ordered the return of the devices.

In M v S (Joint Petitioners) (Sabah and Sarawak High Court), the High Court had to deal with the expungement of nude pictures allegedly of the wife. The husband and wife were fighting over the custody of their children. Custody was earlier granted to the husband and the wife applied to vary the custody order.  

In opposing the application, the husband exhibited in his affidavit nude photographs of the wife taken from her computer and hand phone without her consent and stated she is a “wild woman” and an unfit mother. The wife applied to expunge several paragraphs and related nude pictures in the said affidavit under Order 41 Rule 6 of the Rules of Court 2012.

The High Court found that the wife did not release the pictures into the public domain. She had stored them privately in her hand phone and laptop computer. It is the husband who accessed them without her permission and gave access to others including law firm staff and court staff by exhibiting them in the affidavit in opposition without any sort of censoring whatever.

Thus, the exhibition of the said pictures of the wife in the affidavit in opposition was a gratuitous and malicious act to embarrass and humiliate her. The exhibition of the uncensored pictures in the husband’s affidavit was therefore scandalous and oppressive. Under these premises, the discretionary power vested in the court under Order 41 rule 6 of the Rules of Court 2012 should come to the aid of the wife.

The High Court also held that, in this day and age, private intimate photographs of a person stored in the computer or handphone should not suggest that person in question is immoral or an unfit parent.

Instant messaging – “WhatsApping” your children

In Lee Chui Si v Teh Yaw Poh (Sabah & Sarawak High Court Divorce Petition No. KCH-33JP-234/7-2017), the High Court found ways to soften the blow of a divorce by introducing the use of electronic messaging. The husband and wife fought over the custody of their children but two of their children do not wish to see their father.

Nevertheless, the learned Judge was of the view that a window of opportunity should be left open for the father to make amends to his two children. As such, in lieu of physical access, access to their father can be given by way of communicating with them via mobile phones (WhatsApp, phone calls, SMS or WeChat). In view of the present strained relationship between the two children and their father, the communication between them should be limited in the early stage and the Judge limited it to one phone call not exceeding ten minutes and two text messages a week. If the said two children respond and feel comfortable with communicating with their father, the number of phone calls and texting can be more than what the court has decreed.

Part 2 which focuses on cyber-defamation will be published on April 26

First published on Digital New Asia on 19 April 2019.

Bread & Kaya: Layperson’s guide to the Chatime v Tealive dispute

-By Foong Cheng Leong | Jul 17, 2018
– Trouble started brewing when La Kaffa alleged that Loob had breached RERA
– Case began in the High Court, went to the Court of Appeal, pending a hearing at the Federal Court

MUCH has been said about the dispute between the owners of the Chatime and Tealive bubble tea businesses. The dispute, however, is not as straightforward as the media has reported it to be. This article seeks to guide readers, especially laymen through this technical legal dispute.

Background

La Kaffa International Co Ltd (La Kaffa) is the registered franchise owner of the Chatime bubble tea franchise (Chatime Franchise). Prior to the opening of Tealive, Loob Holding Sdn Bhd (Loob) was appointed as the master franchisee for the Chatime Franchise and had entered into an agreement called Regional Exclusive Representation Agreement (RERA).

Due to the popularity of the Chatime Franchise, it had expanded to 165 outlets in Malaysia in a short period of time.

However, trouble started brewing when La Kaffa alleged that Loob had breached RERA by, among others:

– Loob’s failure to purchase all raw materials from La Kaffa as required by Article 7 RERA;
– Loob failed to allow La Kaffa to inspect and/or audit, among others, Loob’s accounts, books and records; and
– Loob’s failure to pay for raw materials purchased from La Kaffa.

The parties then had the dispute arbitrated by the Singapore International Arbitration Centre (Singapore Arbitral Proceedings). The RERA was also terminated by La Kaffa. Loob argued that the termination was unlawful but accepted the termination in any event.

The matter was arbitrated in Singapore because Article 18 of the RERA stated that the RERA is governed by Singapore laws and any disputes regarding the RERA shall be arbitrated at the Singapore International Arbitration Centre.

After the termination, Loob started its Tealive bubble tea business. Out of 165 Chatime franchisees, 161 Chatime franchisees in Malaysia “converted” into Tealive.

Pending the disposal of Singapore Arbitral Proceedings, La Kaffa and Loob filed applications for interim injunctions under s 11(1) of the Arbitration Act 2005 and/or inherent jurisdiction of the Court in the High Court of Kuala Lumpur.

La Kaffa sought orders for, among others, an interim injunction to restrain Loob, its directors (including their spouses and immediate family members) and employees from, among others, carrying on business which is identical or similar to the Chatime Franchise business.

What is an Interim Injunction?

The important point here to note is the interim injunction.

I will focus on La Kaffa’s interim injunction only as Loob’s interim injunction in its counterclaim was only to restrain La Kaffa from interfering with its business.

The purpose of the interim injunction is to restrain Loob and its related parties from carrying on business which is identical or similar to the Chatime Franchise. This would include running the Tealive bubble tea business.

If the Court grants the interim injunction, it would last until the disposal of the Singapore Arbitral Proceeding. La Kaffa did not ask for a perpetual injunction to restrain Loob from operating the Tealive bubble tea business.

The High Court held that it does not decide on the merits of the dispute which should only be decided by the arbitral tribunal as agreed by the parties. The High Court held that it would only need to decide if the interim injunction would support, assist, aid or facilitate the Singapore Arbitral Proceedings.

And to decide whether the interim injunction would support, assist, aid or facilitate the Singapore Arbitral Proceedings, the Court would need to determine if there is any bona fide and serious question to be tried in respect of the plaintiff’s cause of action against the defendant; and if so:

– whether damages constitute an adequate remedy for the plaintiff; and
– if damages do not constitute an adequate remedy for the plaintiff, whether the “balance of convenience” lies in favour of the granting or refusal of an interim restraining injunction.

In other words, the Court would need to balance the rights of the parties to determine if Tealive should close down pending the completion of the Singapore Arbitral Proceedings.

Should Tealive close down?

La Kaffa says that it should because of our franchise laws and Article 15 of the RERA.

Pursuant to s. 27 of the Franchise Act 1998 (FA 1998), a franchisee shall give a written guarantee to the franchisor that the franchisee including its directors, the spouses and immediate family of the directors, and his employees shall not carry on any other business similar to the franchised business during the franchise term and for two years after the expiration or earlier termination of the franchise agreement.

In brief, La Kaffa argued that s. 27 of the FA 1998 requires Loob and its directors (including their spouses and immediate family members) and employees from, among others, carrying on business which is identical or similar to Chatime Franchise business e.g Tealive.

S. 27 FA provides the following:

Prohibition against similar business

27(1) A franchisee shall give a written guarantee to a franchisor that the franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall not carry on any other business similar to the franchised business operated by the franchisee during the franchise term and for two years after the expiration or earlier termination of the franchise agreement.

(2) The franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall comply with the terms of the written guarantee given under subsection (1).

(3) A person who fails to comply with subsection (1) or (2) commits an offence.

Article 15 of the RERA provides the following:

Article 15. Forbidden to Engage in Competition

I. Forbidden during the term of Agreement. Unless otherwise consented by the Parties in advance and in writing during the term of this Agreement, either Party, including their managers, employees, shareholders, subsidiaries or parent companies shall not in the Territory, directly or indirectly by itself through agents, engage in any commercial activities that are identical or similar to those done in the Franchised Stores.

II. The Parties agree that the commercial or business activities being done in the affiliate stores of the MASTER FRANCHISEE, including their managers, employees, shareholders, subsidiaries, or parent companies at the time of the execution of this Agreement would not be deemed to be identical or similar to those done in the Franchised Stores if the said activities do not form part of the core business or are complimentary to the core business of the affiliated stores.

III. Application scope. The Parties hereby consent that the aforesaid sub-articles (I) and (II) shall be applied to prevent the FRANCHISOR and the MASTER FRANCHISEE from engaging in unfair competition in breach of this Agreement.

IV. Default compensation. In the event any Party (Defaulting Party) violates this Article, the Defaulting Party shall pay the other Party (Non-Defaulting Party) a sum of US$10,000.00 as punitive penalty for each violation. All gains derive from the violation by the Defaulting Party shall also be paid to the Non-Defaulting Party as compensation and the Defaulting Party shall stop the competing activities immediately.

V. Validity of the provisions of this Agreement. This Article 15 shall survive the invalidity, expiration or termination of this Agreement.

In brief, Article 15(1) of the RERA prohibits La Kaffa and Loob from engaging in competing business during the term of the RERA.

What happened in the High Court?

As some of you may know, the case was first fought in the High Court. La Kaffa could not stop Tealive from operating.

The High Court held that it could not close Tealive down because the provision of s. 27 of the FA 1998 was not incorporated into the RERA and Loob and its related parties did not give a written undertaking to cease business for two years. Therefore, the High Court was of the view that there is no bona fide and serious issue to be tried as to whether Loob had breached s. 27 of the FA 1998.

Some may ask why the Court did not order the closure since it is clear that s. 27 of the FA 1998 requires Loob and its related parties to operate an identical or similar business as Chatime for two years.

The High Court was of the view that Tealive do not need to close down because Loob did not promise to close down after the termination of the RERA. The High Court Judicial Commissioner Wong Kian Kheong (as then he was) was of the view that the issue before the Court was whether La Kaffa is entitled to an interim injunction so that it can be used to support, assist, aid or facilitate the Singapore Arbitral Proceedings.

Based on my understanding of the grounds of judgment, the learned Judicial Commissioner was of the view that the action before him was not the forum for him to decide whether there was a breach of s. 27 of the FA.

Further, a breach of s. 27 of the FA amounts to a criminal offence. If it is a criminal offence, criminal action would need to be taken by the Government and it would need to go through a criminal trial to find liability. In a criminal trial, the burden of proof is beyond reasonable doubt as opposed to a balance of balance of probabilities in a civil case.

In addition, the learned Judicial Commissioner held that La Kaffa had been guilty of inequitable conduct. One of the inequitable conducts committed by La Kaffa was that it had sent a notice to “shopping mall owners” which stated, among others, all the agreements between Loob and the shopping mall owners regarding Chatime franchise business “shall be null and void”.

What happened in the Court of Appeal?

The Court of Appeal had a different view and overturned the High Court’s decision.

In granting overturning the High Court’s decision, the Court of Appeal held that:

– A simple construction of Article 15 of the RERA as well as s. 27 of FA 1998 will demonstrate that there is an obligation for Loob not to compete with La Kaffa’s business even after the termination of the RERA;
– In light of Article 15 of the RERA and s. 27 of FA 1998, the High Court ought not to have refused the prohibitory injunction. When parties have agreed not to do certain acts and a statute also provides for such protection, the court is obliged to give effect to ensure the salient terms of the agreement as well as the statute is not breached.

The Court of Appeal found it unjustifiable for the High Court to rely that the Tealive bubble tea business consisting of 161 outlets and the livelihood of 800 employees will be affected. The conduct of Loob on the face of record is not only in breach of legal obligation related to restraint of trade but also breach of franchise law which does not encourage criminal or tortious conduct of business, goodwill.

Therefore, the Court of Appeal held that the failure to grant the prohibitory injunction was flawed which requires appellate intervention.

What happened after that?

Loob thereafter filed an application to the Court of Appeal to stay (suspend) the Court of Appeal’s order for an injunction, among others, pending the disposal of the application for leave to appeal to the Federal Court. However, the Court of Appeal, on a majority decision of 2-1, dismissed the application for stay.

It is unknown why Tealive stores did not close its doors after the stay of execution application was dismissed by the Court of Appeal. My guess is that La Kaffa was not enforcing the interim injunction. If Tealive closes down but Loob succeeds in the Federal Court, La Kaffa would be liable to pay damages for the profit Loob could have made during the closure and other forms of damages. This is because La Kaffa had given an undertaking as to damages for all loss suffered by the Loob as a result of the interim injunction. Such damages could amount to millions of Ringgit.

What now?

Fortunately for Loob, the application for stay of execution was granted by the Federal Court on 16 July 2018. Loob has filed an application for leave to appeal (permission to appeal) to the Federal Court. The Federal Court will only hear limited type of cases and in civil cases, the Federal Court will hear cases involving a question of general principle decided for the first time or a question of importance upon which further argument and a decision of the Federal Court would be to public advantage, among others.

If the Federal Court refuses leave for Loob to appeal to the Federal Court or dismisses the appeal, Tealive will need to close down until the disposal of the Singapore Arbitral Proceedings.


First published on Digital News Asia on 17 July 2018

Postscript [30 August 2018]: Parties have come to an agreement in resolution of their disputes, in which the decision has also been made to stop all court or any other enforcement action against each other.

Download:-
1. High Court Judgement
2. Court of Appeal
2.1 Appeal Proper
2.2 Stay of Execution
2.2.1. Majority Judgement
2.2.2 Minority Judgment

Bread & Kaya: Dear Attorney General Tommy Thomas, we need to speak about our Malaysia cyberlaw and IT laws reforms

By Foong Cheng Leong | Jun 22, 2018

– Act is clearly against the very fundamental principal of “innocent until proven guilty”
– Need law to curb creation of fake news, especially if created to stoke racial or religious sentiments

Repeal of 114A of Evidence Act 1950

WHEN s. 114A was introduced in the Parliament in 2012, a protest was held by netizens to urge the Government to repeal s. 114A. The #stop114A campaign was held and Malaysia had it first Internet Blackout Day to protest this section.

S. 114A provides for three circumstances where an Internet user is deemed to be a publisher of a content unless proven otherwise by him or her. The relevant section, namely s. 114A(1), states that “A person whose name, photograph or pseudonym appears on any publication depicting himself as the owner, host , administrator, editor or sub-editor, or who in any manner facilitates to publish or re-publish the publication is presumed to have published or re-published the contents of the publication unless the contrary is proved”.

In simple words, if your name, photograph or pseudonym appears on any publication depicting yourself as the aforesaid persons, you are deemed to have published the content. So, for example, if someone creates a blog with your name, you are deemed to have published the articles there unless you prove otherwise. If you have a blog and someone posts a comment, you are deemed to have published it.

Subsection (2) provides a graver consequence. If a posting originates from your account with a network service provider, you are deemed to be the publisher unless the contrary is proved. In simple terms, if a posting originates from your TM Unifi account, you are deemed to be the publisher. In the following scenarios, you are deemed to be the publisher unless you prove the contrary:-

(1) You have a home network with a few house mates sharing one internet account. You are deemed to be the publisher even though one of your house mates posts something offensive online.
(2) You have wireless network at home but you did not secure your network. You are deemed to be the publisher even though someone “piggybacks” your network to post something offensive.
(3) You have a party at home and allows your friends to access your PC or wireless network. You are deemed to be the publisher even though it was a friend who posted something offensive.
(4) Someone use your phone or tablet to post something offensive. You are deemed to be the publisher.

As for subsection (3), you are presumed to have published a content if you have custody or control of any computer which the publication originates from. Here, you are deemed to be the publisher so long your computer was the device that had posted the content. If someone “tweetjacks” you or naughtily updates your Facebook with something offensive, you are deemed to be the publisher unless you prove otherwise.

Clearly, it is against our very fundamental principal of “innocent until proven guilty”.

Position of intermediaries (e.g. platform providers)

Currently, many platform providers are vulnerable to be sued or charged in Court for what their users do. For example, an online forum owner would be liable for publishing defamatory statements made by their users pursuant to s. 114A of the Evidence Act 1950. Online marketplace operators may also be sued because their users sold counterfeit products.

It would be ideal for the Government to induce new laws to protect such platform providers but also the punish errant platform providers. For example, a one-strike or three-strikes rule. Under such proposed one-strike rule, an aggrieved person may file a complaint against the platform provider to remove certain postings. If the platform providers remove such posting within a specific time, the platform provider should be absolved from liability. However, if it fails to do so, it will be liable for the acts of its users.

S. 43H of the Copyright Act 1987 is a good example on how to deal with intermediary’s liable in respect of copyright infringement.

In this regard, the Sedition (Amendment) Act 2015, which is not in operation yet, should be repealed. The said amendment creates, among others, liability on website operators such as online forums, online news portals, and even Facebook page/ group owners. [Read http://foongchengleong.com/2015/04/bread-kaya-how-the-new-sedition-act-affects-netizens/]

Specific laws to govern blocking of websites or other electronic platforms.

All blocking orders should be made public and their detailed reasons to block websites. Currently, there is no public list other than one independently maintained by Sinar Project and reasons given are usually one-liners (e.g. in breach of s. 233 of the Communications and Multimedia Act 1998).

However, there could be specific websites which need not be reviewed due to national security issue, among others. As we all know, blocked websites can still be accessed via other means.

Blocking orders should also be made by the Courts rather than the arbitrary decision of the Minister. The current s. 263 of the Communications and Multimedia Act 1998 is used by the Ministry of Communications and Multimedia to direct internet service providers to block platforms in order to prevent the commission or attempted commission of an offence under any written law of Malaysia. In the past however, we have seen websites being blocked due to political reasons e.g. medium.com and bersih.org.

The Anti-Fake News Act 2018 and Sedition (Amendment) Act 2015 have provisions for websites to be blocked by way of application to the Court. All these blocking order sections and s. 263 of the Communications and Multimedia Act 1998 should be replaced with one single law to govern blocking of electronic platforms.

The law should also allow any person such as users of the platforms to challenge any blocking orders. When the previous Government decided to block medium.com, as far as I know, the site owners did not file any challenge in Court to unblock their website. Many netizens were denied access to informative and educational content from medium.com. There were no specific laws allowing them to challenge the block. They were also unsure if they could meet the threshold to file an action for judicial review.

Specific channels to allow litigants to obtain information about wrongdoers

In the present case, a person who wishes to obtain information about another person, for example another Facebook user who had defamed or harasses him, would need to go through a long and expensive process to obtain such information. Normally these wrongdoers will use platforms provided by foreign companies to attack another user.

It would be ideal if a straight forward process be made to such person to obtain such information. For example, filing a request to the Government for it to request the same from the platform providers.

SS. 211 and 233 of the Communications and Multimedia Act 1998

S. 233 of the Communications and Multimedia Act 1998 (which is similar to s. 211) has been used by the previous administration against dissent. The Bar Council has called for the repeal of Section 233(1)(a) of the Communications and Multimedia Act 1998 as it is a serious encroachment on the freedom of speech and expression guaranteed by Article 10(1)(a) of our Federal Constitution. I concur with the Bar Council on this.

However, I suggest that new laws be introduced to stop contents which can cause hatred and disturbance about certain individuals or organisations. We cannot have people sending fake messages which can cause a riot, for example.

Anti Fake News Act 2018

Many calls have been made to repeal the Anti Fake News Act 2018, which came into operation weeks before the 14th General Election. One person has been sentenced and many have been investigated for spreading fake news. Prime Minister Dr Mahathir Mohamad has confirmed that this Act will be repealed.

Notwithstanding such calls to repeal the law, I am of the view that there should be laws to curb the creation of fake news especially those created to stoke racial or religious sentiments. Note that s. 233 of the Communications and Multimedia Act 1998 requires a communication to target a certain person. Fake news may not necessary be targeting a certain person. It could target a race and a place, for example.

Revamp of the Admissibility of Electronic Evidence

Currently, almost every document printed by a computer is admissible under s. 90A of the Evidence Act 1950. This section should be examined to define clearly on what admissible and not admissible.

The Court’s electronic system should also be upgraded to allow the admissible of all forms of electronic media such as songs, videos and animated files. Currently, lawyers have to burn those evidence in a CD to be filed in Court. This defeats the open justice system where all Court proceedings are accessible to the public.

[Postscript] In addition, the Court’s file search system should also be updated. Currently it allows a user to conduct a file search for 30 minutes (per ticket) via its slow system. It loads page by page and one cannot download all the documents at one go. It should be revamped to allow a user to download the entire file with one single fee.

Laws to protect netizens

New laws should be introduced to criminalise cyberbullying, stalking and harassment. It is noted that this type of acts these days are not made directly against a person.

Government should also study the criminalisation of maintaining cybertroopers. Many organisations in the world including Governments use the services of cybertroopers to attack individuals. They would send threatening, harassing or annoying messages, posting private information of that individual and create fake content about that individual.

Lastly, what we need is meaningful and effectively consultation with the Government. The previous administration had basically shoved us with laws with little consultation. I remember when our #Stop114A team went to meet the then Deputy Minister of Law, V.K Liew, to hand in our petition to repeal s.114A, he said that the Bar Council needs professional advice. I trust that the new Government will make a wise choice in deciding the right people for the right job.


First published on Digital News Asia on 22 June 2018

Bread & Kaya: 2017 Cyberlaw cases Pt3 – sexual offences against children and computer crimes

By Foong Cheng Leong | Mar 30, 2018
– Sending death threats using someone else’s mobile phone is not OK
– 2018 will mark interesting year for cyber related cases including Uber driver suing Uber

THE first statute in Malaysia to use the term “social media” is part of the law designed to protect children against sexual offences and not any computer crimes related or media related law.

At the same time a bank officer got into hot soup for using their superior’s email account and password. Let’s go through these cases now.

Crime

Sexual Offences Against Children Act 2017

The Sexual Offences Against Children Act 2017 was introduced to address the seriousness of sexual offences committed against children in Malaysia. The ultimate object of the proposed Act is to provide for better protection for children against sexual offences and to safeguard the interest and well-being of children and to provide effective deterrence.

One of the laws introduced is the law against child grooming. S. 12 of the Act states that child grooming is an offence punishable with imprisonment of no more than 5 years and liable for whipping. The Act specifically stated that the following amounts to child grooming :-

(a) A communicates with Z, a child via social media by pretending to be a teenager and develops a love relationship with Z with the intention of using Z in the making of child pornography. A never meets Z. A is guilty of an offence under this section .

(b) A communicates with Z, a child via e-mail and befriends Z with the intention that A’s friends C and B could rape Z. A never meets Z. A is guilty of an offence under this section.

This law is also the first statute in Malaysia to use the words “social media”.

Last year, we were anticipating the amendments of the Communications and Multimedia Act 1998. However, the amendments never came. Nevertheless, numerous people were investigated under s. 233 of the Communications and Multimedia Act 1998. Notably, in the case of Mohd Fahmi Redza Bin Mohd Zarin Lawan Pendakwa Raya dan Satu Lagi Kes (Kuala Lumpur Criminal Application No. 44-103-08/2016), the accused was charged under s. 233 of the Communications and Multimedia Act 1998 for publishing an offensive Instagram posting using the username kuasasiswa. The accused filed an application to strike out the charge on the grounds that:-

– s. 233 of the Communications and Multimedia Act 1998 is unconstitutional and/or ultra vires in view of Article 5(1), 8 and 10(1)(a) of the Federal Constitution
– the charge against him acts as and/or has the characteristic of a censorship and therefore in contravention of the objectives of the CMA according to s. 3(3) of the CMA; and
– the charge against the accused is defective as it does not have the details of the parties that were offended by his acts.

The Public Prosecutor applied to have the matter heard before the Federal Court in respect of the issues on the constitutionality of s. 233 of the CMA (in accordance with ss. 30 and 84 of the Courts of Judicature Act 1964. Upon hearing the parties, the High Court referred the matter to the Federal Court for the latter to decide on the following question:-

Whether Section 233(1)(a) of the Multimedia and Communication Act (Act 588) is Inconsistent with Article 5(1), 8 and 10(1)(a) of the Federal Constitution?

However, the Federal Court dismissed the application for non-compliance of the Courts of Judicature Act 1964 (Federal Court Criminal Application No. 06-04-04/2017(W)).

In Nik Adib Bin Nik Mat v Public Prosecutor (Rayuan Jenayah No 42S(A)-39-7/16), the accused was charged under s.233(1)(a) of the Communications and Multimedia Act 1998 for sending indecent and false photos of cabinet leaders titled “Pesta Bogel” on Facebook. He was also charged under s. 5(1)(a) of the Film Censorship Act 2002 for possession of 883 pieces of pornographic videos in his laptop. The Session Court sentenced him to the maximum sentence of 1 year imprisonment for the first offence and another 1 year imprisonment for the second offence.

On appeal, the High Court Judge stated that “cyber offences are serious offences especially the offence at hand, as those offensive materials could be easily disseminated to the public at large within seconds at a touch of a button” and agreed with the Sessions Court Judge that public interest is of paramount importance and should supersede the interest of the accused.

However, the learned High Court Judge was of the view that personal interest of the accused should not be disregarded at all and thus, allowed the appeal against the sentence. The learned High Court Judge took into account the grounds submitted by the accused and held that the misdirection of Session Court on imposing maximum sentence for the first offence warrants the appellate intervention and a special consideration ought to be given so that he can mend his ways and “turn over a new leaf”.

The High Court substituted the original sentence with 1 week imprisonment and a fine of RM3,000 in default 3 months imprisonment for the first charge and for the second charge, a fine of RM10,000 in default 1 ½ years imprisonment.

In Pendakwa Raya v Dato’ Dr Ahmad Ramzi Bin Ahmad Zubir (Rayuan Jenayah No. T-09-15-01/2014), the Respondent was charged with criminal defamation after he had sent text messages containing death threats to various individuals using another person’s (SP5) mobile phone number via an online platform registered in the name of a colleague of the Respondent (SP16). The said online platform allows users to broadcast SMS to numerous mobile numbers via the Internet. The Respondent had changed the sender’s mobile phone to SP5’s mobile number. The Respondent’s convicted by the Sessions Court but his conviction was overturned by the High Court.

On appeal, the Court of Appeal restored the conviction. In the grounds of judgment, the Court of Appeal discussed on the method used to determine whether the SMS was sent by the Respondent. The investigation had showed that the internet protocol address that was used to send the SMS was registered to the Respondent’s internet account. The MAC Address found was the same MAC Address of the Respondent’s router. According to the evidence provided by Cyber Security Malaysia, a MAC Address is a unique number provided by the Internet Service Provider and in order to connect to the Internet, it must be done through a router.

In Pendakwaraya v Charles Sugumar a/l M. Karunnanithi (Mahkamah Majistret Kota Bharu Kes Tangkap No: MKB (A) 83-43-02/2016), the accused was charged under s. s. 424 of the Penal Code for dishonestly concealing money of a scam victim in his bank account knowing that the said money does not belong to him. The victim had befriended a person by the name of Alfred Hammon from UK through Facebook. Alfred Hammon then made the victim transfer money to the accused’s bank account on the pretence that he needed the money to cash his cheque of US$3 million. Alfred Hammon promised that he will return the money together with interest. However, after transferring RM36,300 the victim realised that she was scammed.

The accused claimed that he is not part of the scam. The accused claimed that when he was working as a tour driver, he was requested by his customer to receive money on the customer’s behalf. The accused claimed that he did it to give his customer the best service so that he can attract more customers. He said that he was informed by the customer that the customer’s friend had to transfer money to him so that the customer can continue his tour in Malaysia. The accused said that he did not gain any remuneration or commission from that assistance.

The Magistrate acquitted the accused as the Magistrate found that, among others, the accused’s evidence is consistent and is a credible witness. The Magistrate agree that the accused was made a scapegoat by the customer who took advantage of his goodness and sincerity in giving the best service as a tour driver.

Computer Crimes Act

In Rose Hanida Binti Long lwn Pendakwa Raya (Kuala Lumpur High Court Criminal Appeal No. 42K–(115–124)-09/2016), the appellant was charged under the Computer Crimes Act 1997 (unauthorised access to computer material with intent to facilitate the commission of an offence involving fraud or dishonesty or which causes injury) and s. 420 of the Penal Code (for cheating) for making false claims to his employer, a bank, by using his superior’s account and password to without his superior’s knowledge. She was initially sentenced by the Sessions Court with 4 years of imprisonment and fine of RM260,000 in default of 15 months jail. She appealed the sentence but withdrew it later. Notwithstanding that it had been withdrawn, the High Court Judge exercised his revisionary powers and enhanced the sentence to 6 years and fine of RM260,000 in default of 15 months jail due to the seriousness of the offence.

In Kangaie Agilan Jammany lwn PP [2017] 1 LNS 1640, the accused was charged under s. 5(1) of the Computer Crimes Act 1997 for making modification of the contents of Air Asia’s flight booking system without authorisation. The accused had allegedly used the function “move flight function” in those unauthorised transactions to change, among others, the flight details and customers’ emails for the purpose of notification. The said function is a critical function to allow authorised staff to make changes so that no charges are made to customers.

The accused was given an ID ‘6954’ and password to access Air Asia flight booking system but he had limited access to it. Thus, one of the witnesses, SP4, had given his ID and password to the accused after the accused had requested for it on the ground that the latter is unable to access to the system using his own ID. SP4 did not know that the accused had misused his account. The accused had then used the said account to help his family members and friends to get cheaper flight tickets, among others. Air Asia alleged that it had lost about RM229,100.42 due to the accused’s actions.

In the system log, it was found that the accused had changed the flight schedule and also that there were a few customer email notifications which involved the agent code 6954 which had made the flight changes. Further, there was an incident whereby SP4 was asked by the accused to provide his new password after it had been changed.

The Sessions Court found the accused guilty and had applied the statutory presumption under s. 114A of the Evidence Act 1950 after the accused could not rebut the evidence that the agent code 6954 belongs and used by him.

Under 114A of the Evidence Act 1950, a person is deemed to be a publisher of a content if it originates from his or her website, registered networks or data processing device of an internet user unless he or she proves the contrary. In 2014, this new law sparked a massive online protest dubbed the Malaysia Internet Blackout Day or also the Stop114A.

On appeal, the High Court concurred with the Sessions Court Judge. The High Court Judge also held that s. 114A of the Evidence Act 1950 applies retrospectively notwithstanding that the offence was committed prior to the enforcement of s. 114A as the presumption did not alter the original subject matter and even includes the same subject matter that did not prejudice the accused before and after. In other words, without using such presumption, the Prosecution would still have to prove that the Accused was the person who used his ID and password to access the employer’s system had committed an offence to change the flight schedule without authorisation. On the contrary also by applying the presumption of the law, the Prosecution will still have to prove that the accused alone has a specific ID and password to access the system.

Closing

2018 will mark another interesting year for cyber related cases. In late 2017 and early 2018, the following cases have been filed:-

– A Uber driver sued Uber Malaysia Sdn Bhd for non payment of his fees. The interesting question in this case would be whether Uber Malaysia Sdn Bhd is liable to pay such fees or one of Uber’s foreign entities.
– In the Intellectual Property Court of Kuala Lumpur, a brand owner had filed a law suit for trade mark infringement against a web hosting company for hosting a website that sold counterfeit products. The interesting question in this case is whether a webhoster is liable for what their subscribers do.
– In the same Court, a brand owner had also filed a law suit for trade mark infringement against online marketplace operator for using the brand owner’s registered trade mark and allowing their users to sell unauthorised products. The interesting question in this case is whether an online marketplace operator is liable for what their users do on their platform and in particular case, for selling unauthorised products.
– The same Court also granted an application to serve a Writ and Statement of Claim via email and WhatsApp messenger after it could not locate the Defendant at her last known address. Traditionally, when a Defendant cannot be located, Plaintiff would normally ask the Court to allow a notice relating to the lawsuit to be published in the newspaper, among others. We will see more and more substituted service applications to be served electronically.
PKR communications director Fahmi Fadzil filed a civil suit against the Malaysian Communications and Multimedia Commission and Nuemera (M) Sdn Bhd for allegedly failed to protect his personal data which resulted in the leakages of his personal data together with personal information of 46.2 million mobile subscribers. This was one of Malaysians’ biggest data leak.

Finally, the recent introduction this month of the Anti-Fake News Bill 2018 is too important for me to leave till next year to comment!

The word “fake news” is defined as any news, information, data and reports, which is or are wholly or partly false, whether in the form of features, visuals or audio recordings or in any other form capable of suggesting words or ideas.

The law applies to fake news concerning Malaysia or the person affected by the commission of the offence is a Malaysian citizen. Any person who, by any means, knowingly creates, offers, publishes, prints, distributes, circulates or disseminates any fake news or publication containing fake news commits an offence and shall, on conviction, be liable to a fine not exceeding RM500,000 or to imprisonment for a term not exceeding 10 years or to both.

The Court may also order the accused to make an apology. Interestingly, the new law allows civil action to be initiated by a person affected by the fake news publication for an order for the removal of such publication. I will write further on this new law on a separate article. [Postscript: The Anti Fake News Act 2018 is now in force effective from 11 April 2018]


First published on Digital News Asia on 30 March 2018

Bread & Kaya: 2017 Cyberlaw Cases Pt2 – viral content, Uber and appearance of an emoji

By Foong Cheng Leong
Mar 29, 2018

A video clip that was viewed 3 million times deemed to be the truth of an incident
Groupon has its day in court, twice with users not happy with merchants

CARRYING off from where I left off in part one of my review of the interesting Cyberlaw related cases that came to the courts in 2017, I start off with viral content and a case where a video was shared almost 50,000 times. And while Uber Technologies is merging its operations with Grab, it still had its day in court last year with a case in Sabah.

Viral Content

The case of Public Prosecutor v Poovarasan Subramaniam & 2 Others [2017] 1 LNS 1619 determined whether a viral video can be admitted as evidence in a criminal trial.

The 3 accused were charged for murder for a man who had allegedly stolen a mobile phone. In the course of trial during the Prosecution’s case, the Prosecution sought to adduce in evidence a VCD containing a video clip that captured a portion of the incident wherein the victim was assaulted by several men. The video clip went viral on the internet and a prosecution witness had downloaded the same from the blog KITABANTAI into the VCD.

The second accused strenuously objected to the admissibility of the VCD principally because the authenticity of the contents of the VCD is questionable. A trial within a trial (TWT) was held to consider the admissibility of the VCD.

During the TWT, the Prosecution called two bloggers, namely the owners of the blogs KITABANTAI and SIAKAPKELI who had published the video clip, to testify as to the origin of the video clip. KITABANTAI stated that the video came from SIAKAPKELI. SIAKAPKELI later revealed that the video clip came from an online news website called MYNEWSHUB. However, the journalist at MYNEWSHUB does not the exact source of the video clip.

Notwithstanding that the person who originally recorded the video clip live and thereafter uploaded the same in the social media could not be traced and produced in Court as witness, the learned High Court Judge was satisfied that the police investigation team and the Prosecution have used their best endeavours to produce the evidence of the chain of movement of the video clip in cyberspace till it was extracted by the police. The said video clip was admitted as evidence following ss. 90A(1) and (2) and 90C of the Evidence Act 1950. The learned Judge stated that he has no reason to believe that the video clip wasn’t authentic in the circumstances.

This case is in stark contrast with the case of Tan Chow Cheang v Pendakwa Raya (Criminal Appeal No. J-05(LB)-54-01/2016). In this case, the accused was charged with drug trafficking under s. 39B of the Dangerous Drugs Act 1952. During the examination of one of the raiding officer, the defence suddenly produced a CCTV recording in a pen drive showing that the drug was planted. On completion of the raiding officer’s evidence, the High Court granted the accused a discharge not amounting to acquittal upon the prosecution’s application notwithstanding that the defence had submitted that the accused was entitled to be acquitted and discharged as upon the production of the CCTV recording, the sole or main prop in the prosecution case collapsed prematurely.

The Court of Appeal agreed with the High Court. The Court of Appeal was of the view that the production of a certificate under s. 90A(2) of the Evidence Act 1950 is not the conclusive way to prove the pen drive’s admissibility. The Court of Appeal held that “to allow it to be admitted in such circumstances in, our view, would be open to abuse. It is not impossible during this era of modern technology for images to be superimposed or tempered with. Therefore, it is only safe for witnesses to be called either to confirm or to rebut it“.

In another case involving viral video (Datuk Wira SM Faisal Sm Nasimuddin Kamal v. Emilia Hanafi & Ors [2017] 1 LNS 1373), the Plaintiff and his ex-wife (1st Defendant) were in Syariah Court of Kuala Lumpur to resolve their matrimonial dispute/issues. Together with them were the family members of the Plaintiff and the 1st Defendant, among others.

On 20.9.2016, the Syariah Court ordered the children of the Plaintiff and 1st Defendant to spend a night with the Plaintiff at his home. The Judge of the Syariah High Court further ordered that the children must not be forced if they do not want to follow the Plaintiff. After that, the proceedings between Plaintiff and 1st Defendant was adjourned for the day.

A video recording was taken after the proceeding in the Syariah Court had ended. The video allegedly showed the aggressive behaviour and use of force by Plaintiff outside the courtroom towards both his 2nd child and wife. The 1st to 4th Defendants then shared the said video clip. The 3rd Defendant had uploaded the video clip on her Snapchat virtual page with the words “SMF shoved them to the ground when he gave up” whereas the 1st Defendant had also uploaded the video clip on her Instagram account with the caption “A mother’s heartache .” On a side note, this is probably the first written judgment in Malaysia featuring an emoji.

The Plaintiff alleged that the video clip went viral. The video clip spread so widely that:

(a) Up to 3 million people viewed the video clip;

(b) Nearly 50 thousand people shared and/or distributed the video clip;

(c) Nearly 15 thousand people made comments, conclusions and/or inferences against the Plaintiff as result of the video clip.”

The Plaintiff sued the Defendants for publishing the video clip. Notwithstanding that the video clip went viral, the High Court struck out the Plaintiff’s case. The learned High Court Judge held that:-

“The video recording that was published was undisputably a recording of an actual and real incident and therefore, cannot be denied as being the truth.”

“The objectionable words and statements complained of are not prima facie defamatory. In fact, the same do not substantially even make reference to Plaintiff nor do they directly or by implication refer to or implicate Plaintiff.”

In Synergistic Duo Sdn Bhd v. Lai Mei Juan [2017] 9 CLJ 244, the Plaintiff sued the Defendant for publishing two (2) Facebook postings in relation to the bad service by BGT Lakeview Restaurant operated by the Plaintiff. The second posting went viral and were shared more than 9,500 times and was reposted and published in newspapers, websites, blogs and other Facebook pages. The Plaintiff submitted that: (i) because of the postings, many of its customers cancelled their bookings and reservations; and (ii) if the Defendant was not restrained by way of an interim injunction, the Plaintiff would continue to suffer grave irreparable loss and damage to its reputation and goodwill.

In granting the Plaintiff’s application for interim injunction, the learned Judicial Commissioner held that the continued publication of postings on the Defendant’s Facebook would cause the Plaintiff’s to suffer further damage to their reputation and goodwill as the potential re-publication of the postings to potentially unlimited number of internet users would irreparably harm the plaintiff’s reputation: which harm cannot be adequately compensated with damages.

Digital Currencies

Due to the rising popularity of digital currencies in Malaysia, Bank Negara issued an exposure draft by the name of Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6). The document outlines the proposed requirements and standards that a digital currency exchanger as defined under the First Schedule of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) must carry out as reporting institutions. This is to ensure effective and robust Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) control measures are in place to safeguard the safety and integrity of the financial system as well as to promote greater transparency in the conduct of digital currencies transactions.

The draft exposure sets out the minimum requirements and standards that digital currency exchangers must observe as reporting institutions to increase the transparency of activities relating to digital currencies and ensure effective and robust AML/CFT control measures are in place to mitigate risks that digital currency exchangers may be used as conduits for illegal activities. Such requirement include conducting risk assessment, risk control and mitigation, risk profiling and customer due diligence, among others.

Digital currency exchangers must also comply with requirements in the document relating to: the identification and verification of customers and beneficial owners, on-going monitoring of customers’ transactions, sanction screening, suspicious transaction reporting and record keeping; transparency obligations; and requirements for the submission of data and statistics to the Bank for the purpose of managing ML/TF risks.

The document is applicable to reporting institutions, regardless that the person is not domiciled in Malaysia, carrying on the following activities listed in Paragraph 25 of the First Schedule to the AMLA:-

activities carried out by any person who provides any or any combination of the following services:

(i) exchanging digital currency for money;

(ii) exchanging money for digital currency; or

(iii) exchanging one digital currency for another digital currency, whether in the course of carrying on a digital currency exchange business or otherwise.

Singapore saw its first cryptocurrency dispute in its Court. The case of B2C2 Ltd v Quoine Pte Ltd [2017] SGHC(I) 11 concerns a cryptocurrency transaction dispute between the Plaintiff (a foreign electronic maker for virtual currency) and Defendant (an online virtual currency exchange platform provider in Singapore) which involves Bitcoin and Ethereum.

The Plaintiff alleged that the Defendant had acted in breach of the contract between them and breach of trust when the platform reversed transactions for the sale and purchase of the cryptocurrencies Bitcoin and Ethereum.

The transactions were unilaterally reversed after the Defendant identified that a technical glitch had occurred to the software used by the platform. Consequently, the Plaintiff had lost the benefit which it could have made if the transaction was not reversed.

The Defendant argued that there was unilateral mistake involved and they are entitled to reverse the transaction. The Plaintiff sought an order for summary judgment.

The Singapore International Court dismissed the summary judgment application by the Plaintiff as there were triable issues raised by Defendant and held that “a thorough investigation of the facts behind the setting of the abnormally high offer price is justified in order to place the court in a proper position fully to assess the state of the Plaintiff’s knowledge”as well as “the law on unilateral mistake where computers are involved in greater detail”.

E-Hailing Services

During the hype of prosecution of drivers of e-hailing vehicle, one Joe Vincent Singgoh sought an order from Court to protect drivers from such prosecution in Sabah. In the case of Joe Vincent Singgoh v Commercial Vehicles Licensing Board Sabah 1 & Ors (Sabah High Court Judicial Review No. BKI-13NCvC-10/10-2016), the Applicant, a person registered with e-hailing service provider Uber Technologies Inc. as a driver, had sought several orders amongst which an order of prohibition against the 1st and 2nd Respondents from relying on the provisions of Section 33 of the Commercial Licensing Vehicles Act 1987 to prosecute or prohibit the Applicant from using the services of Uber Technologies Inc. The Applicant also sought a mandatory injunction was also sought to restrain the prosecution, prohibition of the Applicant to drive or make drives for Uber.

The High Court held that the aggrieved person in this case is not the applicant. The proper person is Uber Technologies Inc. Uber Technologies Inc. has not made any application to the relevant authorities in Sabah for the relevant permits or licences. And in so far as Section 33 is concerned, Uber Technologies Inc. is the ‘person’ responsible to obtain such approvals and not the Applicant. It is not explained or disclosed why this is so.

The Court also held that whatever Uber is promoting is unlawful and illegal. Whether the Government will grant Uber Technologies Inc. the necessary approval or not is a matter for the former to decide as a matter of policy and the Applicants are not entitled to come to court to seek a prohibitive order to pre-empt any legal action that may be taken by the Police of JPJ to enforce the law.

However, the Government will soon be legalising operators of e-hailing service providers and their drivers. The Commercial Vehicle Licensing Board (Amendment) Act 2017 and Land Public Transport (Amendment) Act 2017 were introduced to amend the Commercial Vehicle Licensing Board Act 1987 (“CVLBA”) (applicable to Sabah, Sarawak and the Federal Territory of Labuan) and the Land Public Transport Act 2010 (“LPTA”) (applicable to Peninsular Malaysia) respectively to introduce the licensing of intermediation business. Intermediation business is defined as “business of facilitating arrangements, booking or transactions of e-hailing vehicle (pursuant to the new amendment to CVLBA) and for the provision of land public transport services (pursuant to the new amendment to LPTA). These amendments is clearly intended to regulate e-hailing services such as Uber and Grab.

The Commercial Vehicle Licensing Board (Amendment) Act 2017 and Land Public Transport (Amendment) Act 2017 also introduced a new class of commercial vehicle namely e-hailing vehicle. This would include the cars driving by Grab and Uber drivers.

Once these amendments are enforced, e-hailing providers like Grab and Uber and also their drivers would need to be registered.

E-Commerce

Groupon Malaysia had another challenging year. The Court had to decide in two (2) cases whether Groupon should be liable for the payment made to them for the purchase of products and services on the Groupon website.

In Groupon Sdn Bhd v Tribunal Tuntutan Pengguna & Anor [2016] 1 LNS 555, the Groupon user in this case bought a tour travel package vide its platform from one of Groupon’s merchants and paid RM999 (tour travel package) and RM652 (compulsory airport tax, surcharges and tipping) to Groupon and the merchant respectively. However, the said merchant allegedly cancelled the tour and Groupon made a refund of only RM999 to the user. Dissatisfied, the user demanded the refund of RM652. Upon the rejection by Groupon, the user filed a complaint to the Consumer Tribunal and it held in favour of the user i.e. Groupon is liable for the said amount of RM652.

Groupon contended that there is an exclusion provision in the travel voucher which states that the RM652 charges is to be paid to the merchant, hence, Groupon should not be compelled to pay for monies it had not received in the first place. The Court conceded and held in favour of Groupon, that “it is unmistakable that the airport tax, surcharges and tipping were not included in the tour travel deal. In other words, they were not borne or absorbed by the Applicant”.

In Groupon Sdn Bhd v Tribunal Tuntutan Pengguna & Anor [2016] 1 LNS 1009, similarly, the Groupon user in this case bought a tour travel package vide its platform from one of Groupon’s merchants and paid a RM999 (tour travel package) and RM450 (compulsory airport tax, surcharges and accommodation) respectively to Groupon and the merchant. Therein, the said merchant allegedly cancelled the tour and Groupon made a refund of only RM999 to the user. Dissatisfied, the user demanded the refund of RM450. Upon the rejection by Groupon, the user made a complaint to the Consumer Tribunal and it held in favour of the user i.e Groupon is liable for the third party payment to its merchant.

Groupon contended that there is no contractual relationship between Groupon and the user in the RM450 transaction and hence it shall not be liable to pay. The Court rejected the argument and held in favour of the user that Groupon had acted as an agent for the merchant and made a representation in the travel package voucher, instructing the user to make the RM450 payment to the merchant. Groupon shall be liable for the damages as the contractual relationship was established between Groupon and the user but not between merchant and user.

Defamation

The case of Dato’ Aishaf Falina Bt Ibrahim v Ismail Bin Othman & 2 Ors (Kuala Lumpur Civil Suit No. 22NCVC-352-07/2015) highlighted two interesting points.

The Plaintiff claimed that she was defamed by the retention of the erroneous information in the human resources information system of the 3rd Defendant (her former husband) and its “publication” via the said system. The alleged erroneous information was the information regarding the Plaintiff’s post-divorce marital status with the 1st Defendant, was kept in the 3rd Defendant’s human resources information system for a period of time after she and the 1st Defendant had been divorced. The first question is whether the publication of the erroneous information via the human resources information system amounts to defamation.

The second interesting point is whether the publication on the intranet amounts to publication.

The High Court held that the 2nd and 3rd Defendants are liable in defamation for the retention of erroneous information concerning the Plaintiff’s marital status in the 2nd Defendant’s human resources information system notwithstanding that the error was due to a glitch caused by its source code. The High Court also found that the publication of the erroneous information on the human resources information system via its intranet amounts to publication.

The High Court however dismissed the Plaintiff’s action for tort of misuse of private information as the erroneous information is not private information and there was no misuse of information.

Meanwhile, in Lye Eng Eng & Anor v Ho Kee Jin (Kuala Lumpur High Court Civil Appeal No: WA-12BNCVC-174-11/2016), the High Court, on an appeal from the Sessions Court by the Plaintiff, increased the damages awarded to RM35,000 for defaming the 1st Plaintiff by sending an email containing defamatory statements to 23 persons including those who mattered most to him, namely, his children, his friends and business associates. The Court also held that the Sessions Court Judge had failed to take into consideration of the “gravity of the libel”.

Part 3: In the final part we look at a few cases where individuals ran foul of the Communications and Multimedia Act 1998 and some cases under the Computer Crimes Act.


First published on Digital News Asia on 29 March 2018

Bread & Kaya: 2017 Cyberlaw Cases – WhatsApp Messages and Customs TAP

By Foong Cheng Leong
Mar 26, 2018

Over 50 cyber related cases files in 2017 in Kuala Lumpur High Court

2017 had an interesting array of cyber related issues and laws. Facebook and other electronic platform defamation cases have become a norm. In the Kuala Lumpur High Court itself, there were 50 over cyber related tort cases filed in 2017. Many of them were filed by politicians against other parties including politicians and activists. Some were also filed by companies against individuals who had made disparaging remarks against them.

Interestingly, a defamation case was brought up because of certain defamatory statement via an office intranet.

We also saw how viral contents are treated in Court. Can a Judge rely on a viral video downloaded off the internet as evidence?

Cryptocurrency was one of the biggest news in 2017. Bitcoin shot up to almost US$19,800 (RM77,500) in December 2017. We saw one of the early Bitcoin disputes in one Singapore case. Bank Negara Malaysia issued an exposure draft by the name of Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6). The document outlines the proposed requirements and standards that a digital currency exchanger must carry out as reporting institutions. Notably, Bank Negara said cryptocurrency is not a legal tender in Malaysia.

A driver was reportedly successful in crowdfunding her legal fee of US$15,333 (RM60,000) through Facebook, among others. Sam Ke Ting was charged with dangerous and reckless driving after she had allegedly ploughed into a group of cyclists, killing eight and injuring eight others. The cyclists, aged 13 to 17, were believed to have been blocking the road at around 3am [Update: On 28 October 2019, the Johor Bahru Magistrate Court acquitted and discharged Sam Ke Ting without calling for her defence after the Court held that the prosecution failed to prove a prima facie case].

These and quite a few others, are notable Malaysian cyberlaw and electronic evidence cases (and some from other countries too) from 2017 that I will summarise over the next three days as part of my yearly tradition of what happened in the preceding year.

WhatApp messages, as much as it brings good to people, it also brought calamity. In Pendakwa Raya v Subbarau @ Kamalanathan (Court of Appeal Criminal Appeal No. N-06B-55-09/2016), the Respondent was charged in the Sessions Court under s. 8(1)(c)(iii) of the Official Secrets Act 1972 (OSA 1972) with having possession in his Samsung mobile phone soft copies of 2014 UPSR examination papers.

It is noted that no 2014 UPSR examination papers were found in the said Samsung mobile phone. However, the mobile phone of one arrested person by the name of Prem Kumar contains the said 2014 UPSR examination papers. The said 2014 UPSR examination papers were sent by the accused’s telephone to Prem Kumar’s WhatsApp account.

Evidence by the Communications and Multimedia Commission showed that the 2014 UPSR examination papers found in Prem Kumar’s mobile phone came from the respondent’s mobile phone. The witness from the Communications and Multimedia Commission explained that the fact that none of the images were found in the respondent’s handphone could be due to the images being deleted and thereafter overridden so that there is nothing left to extract in the handphone. Nonetheless, the Prosecutor argued that evidence clearly shows that the UPSR examination papers came from one source i.e. the respondent’s handphone.

Instead of dealing with the issue of electronic evidence, the Court of Appeal held that only real issue before the Court relates to the question of whether the UPSR examination papers are official secret.

In Pendakwa Raya v Mohd Syafrein Rasid [2015] 1 LNS 943, the accused was charged under Section 130J of the Penal Code for attempting to support the Islamic State and attempted to be a member of the same.

It was revealed in this case that the accused was influenced by what he saw about the war in Syria on Facebook. He even joined a few WhatsApp groups which had members sharing information about the Islamic State and their movement in Syria.

He then decided to travel out from Malaysia to join the Islamic State but was caught at the Immigration counter at the Kuala Lumpur International Airport. He pleaded guilty and was sentenced to two years’ imprisonment.

Admissibility of WhatsApp Chats

What would be the suitable way to admit chat logs from instant messaging applications? Should a party need to get someone from WhatsApp or an IT expert to extract the chat logs from the application? Or do they need to use WhatsApp’s available function to produce the chat logs? Or would print screens of the chatlogs be sufficient?

In Pendakwaraya Lwn Greencity International College Sdn Bhd (Kuala Lumpur Magistrate Department Case Summon No.: 87-309-1/2015), the Court admitted and gave weight to screenshots of WhatsApp messages to prove a mala fide intent by a witness.

However, Mohamad Azhar Abdul Halim v. Naza Motor Trading Sdn Bhd [2017] 1 ILR 292, the Industrial Court disregarded a screenshot of a WhatsApp chat. In this case, the Claimant was dismissed by the Company for misconduct. He had allegedly sent threatening and harassing messages via WhatsApp to a colleague (COW-1) who then left due to the messages. The Claimant brought an action against the Company for wrongful dismissal.

The Company tendered a snapshot image (print screen) of the WhatsApp message. The snapshot did not mention the Claimant’s name, date of WhatsApp message, Claimant’s hand phone number or Claimant’s profile picture nor any other evidence to prove that it was indeed the Claimant who was purportedly having such conversation with COW-1. Meanwhile, COW-1 also admitted that the WhatsApp message that she has is merely screen snapshot/image and not the original WhatsApp messages as she had changed her handphone. Further, she did not screen shot the full conversation between COW-1 and herself.

The Claimant demonstrated to the Court how easy it was to fabricate a WhatsApp conversation that can be done within minutes. The demonstration was witnessed by all parties, including the Company’s learned counsel, who did not cross-examine the Claimant on this matter.The Industrial Court held that the WhatsApp snapshot image does not conclusively prove that it was indeed the Claimant who was purportedly having a conversation with COW-1 because it is undisputed/unchallenged that nowhere in the WhatsApp snapshot image was it mentioned the Claimant’s name, date of WhatsApp message, Claimant’s hand phone number or Claimant’s profile picture nor any other evidence to prove that there in fact was such a conversation. Furthermore, the WhatsApp snapshot image was not proven to be authentic because as demonstrated in Court the WhatsApp message can be fabricated resulting in a fabricated WhatsApp snapshot image of that message. Therefore, there is doubt as to whether the Claimant had a conversation with COW-1 at the material time and had stated the threatening and harassing messages via WhatsApp.

Yahoo Messenger

In 2015, I reported in Rina Simanjuntak v PP (Criminal Appeal No: P-05-256-09/2014), a Yahoo Messenger Chat log saved the life of Rina Simanjuntak who had been sentenced to death by the High Court for drug trafficking. In 2016, Facebook chat messages saved the life of a German by the name of Rudolf Tschernezow who was charged with drug trafficking. The High Court in PP v. Rudolf Tschernezow [2016] 1 LNS 654 held the accused has proven that he is an innocent carrier using those messages. However, the Court of Appeal in PP v Rudolf Tschernezow (Criminal Appeal No J-05(LB)-345-12/2015) overturned the High Court’s decision and sentenced him to death.

In 2017, another lady tried to use her Yahoo Messenger chat logs to save her from the gallows. In Public Prosecutor v Ni Komang Yuningsih (Court of Appeal Criminal Appeal No. B-05(LB)-285-10/2015 (IND)), the Respondent, an Indonesian woman, was charged with drug trafficking under S. 39B(2) of the Dangerous Drugs Act 1952. She was acquitted by the High Court after she proved that she was merely an innocent carrier.

The High Court Judge relied on a print-out of conversation in “Yahoo messenger” and exchange of emails between the Respondent and a Nigerian man by the name of John Amadi who was claimed to be the Respondent’s lover. John Amandi persuaded her to come to Malaysia and had promised to marry her. John Amandi then sent the Respondent to India to meet his brother, Price, to discuss about their wedding. When the Respondent was about to fly to Malaysia, John Amandi’s brother gave her a luggage bag to be given to John Amandi. When she arrived in Kuala Lumpur International Airport, the custom officers found drugs in the luggage bag.

Notwithstanding the discovery, the High Court Judge acquitted the Respondent. The trial judge held that John Amadi and Prince are not fictitious characters but they do exist based on a print-out of Yahoo Messenger chat. The 195 pages printout was held to be impossible to be created by the defence at a very short period of time to strengthen its case and it also has a convincing story line.

Despite the acquittal, the Court of Appeal overturned the acquittal. The Court of Appeal was of the view that the Respondent’s deliberate omission to exercise a reasonable level of diligence in making sure that the bags given by Prince carries no incriminating items is an act of wilful blindness. There were too many inconsistencies with the Respondent’s evidence. She was accordingly sentence to death.

WhatsApp and Agreements

Can a legally binding agreement be forged through a WhatsApp conversation? In Shamsudin Bin Mohd Yusof v Suhaila Binti Sulaiman (Shah Alam Magistrate Court Suit No. BA-A72NCvC-384-03/2017), the Magistrate Court answered in the affirmative and held that an agreement was concluded based on oral and WhatsApp messages between the parties.

Would a WhatsApp message constitute written notice under an agreement? In Tengku Ezuan Ismara Tengku Nun Ahmad & Anor v. Lim Seng Choon David [2017] 1 LNS 1840, the Plaintiff sued the 1st Defendant for the return of his money paid for the purchase of the shares in the 2nd Defendant company pursuant to a Shareholders’ Agreement, among others. The 1st Defendant had sold the shares in the 2nd Defendants to the Plaintiff but failed to transfer the shares after being reminded repeatedly.

The Sessions Court allowed the application for summary judgment against the Defendants. The High Court upheld the Sessions Court’s decision. The Court had to decide whether a WhatsApp communication is considered as a “notice” in the context of clause 7 of the Shareholders’ Agreement. Clause 7 of the Shareholders’ Agreement provides –

Any notice required to be served by the parties hereto or by the Directors or EI [the 2nd Defendant] shall be served either by hand, by registered post or couriered post to the address of each party as stated above or by way of telex or facsimile transmission the numbers of which shall be provided by each of the parties to the other.

A skillful reader would know that Clause 7 above provides for only specific methods of transmitting the notice. Nevertheless, the learned Judicial Commissioner held that the WhatsApp message was sufficient to be a notice under Clause 7. She also held that Clause 7 of the Shareholders’ Agreement does not require the notice to be signed. Even if the requirement of a signature is implied into the said clause, that requirement was fulfilled by the Plaintiff. The 1st Defendant has never denied that he received the Plaintiff’s WhatsApp messages requesting for the transfer of the Shares to be effected. The Plaintiff’s WhatsApp messages is identified by the name “David” and the 1st Defendant is identified through his telephone number. As can be seen from the WhatsApp messages Plaintiff identified the 1st Defendant as “Tengku” to which the 1st Defendant has responded (via WhatsApp message too). Thus if the Plaintiff is required to sign as evidence of the Plaintiff’s identity, such requirement is fulfilled via the identity of the Plaintiff which is embedded in the mobile phone.

Electronic Notice

With the Government moving to digitising their services, many deliveries of correspondence are done through the Internet. Such delivery is not only limited to email, but also through their electronic portals. But what if the recipient did not know that a notice had been delivered through the electronic portal? Assuming that there is a deadline for the recipient to do something, when would the time starts to run? Would it be when the notice is published on the electronic portal or when the user logs into the portal to check it?

In Coach Malaysia Sdn Bhd v Ketua Pengarah Kastam Dan Eksais (Kuala Lumpur Originating Summons No: WA-25-193-07/2017) and Transmarco Concepts Sdn Bhd v Director General Of Customs And Excise (Kuala Lumpur Originating Summons No: WA-24-25-05/2017), the taxpayers applied for an extension of time to apply for leave to commence judicial review proceedings against the Director General of the Customs Department’s decisions which were uploaded to the Defendant’s electronic service by the name of Taxpayer Access Point (TAP System). The taxpayers alleged that they were not aware of the decision until they accessed the Tap System.

The High Court held that under subsection 167(3) of the Goods and Service Tax Act 2014 (GST Act), where a taxpayer has given his consent for a notice to be served on him through the electronic service, then the notice shall be deemed to have been served at the time when the electronic notice is transmitted to his account through the electronic service. As such, the clear effect of reading section 167 of the GST Act with Order 53 r 3(6) of the Rules of Court 2012 means that in respect of service of a decision where the taxpayer has opted for electronic service, the taxpayer is deemed to have knowledge of the notice once the notice had been transmitted to his account through the electronic service.

Part 2: The first statute in Malaysia to use the words “social media” and more.


First published on Digital News Asia on 26 March 2018

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