Bread & Kaya 26: 2019 Malaysian Cyberlaw Cases, Part 1

  • Launch of Lexscout.com for public to search unreported Court judgments & lawsuits
  • Emergence of new businesses in digital economy sees new rules, regulations, Court cases

Bread & Kaya 26: 2019 Malaysian Cyberlaw Cases, Part 1

There had been a steady increase of cyber-defamation cases filed in our Courts in 2019. The number of cyber-related tort cases filed in the Kuala Lumpur High Court in 2019 increased to 70 over from over 60 cases in 2018.

The emergence of new types of business in our digital economy saw the grow of new types of rules and regulations, and Court cases. 

We saw the first digital currency Court case in our Court which led to the Court recognising that digital currency is a form of an intangible asset.  

Peer-to-peer (P2P) lending brought a new way of funding to businesses but like many other credit businesses, they had to resort to Court proceedings to recover their debts. 

The Court also had to deal with an e-hailing company’s liability in a road accident involving its e-hailing vehicle. The Department of Industrial Relation had to deal with whether a Grab car driver is an employee and may file a claim with the Department of Industrial Relation contrary to Grab’s position that e-hailing drivers are independent contractors.

Burgielaw and I had also jointly developed Lexscout, a portal for the public to search unreported Court judgments and lawsuits. The judgement search allows users to search more than 14,000 legal case judgments of the Malaysia Subordinate Courts up to the Federal Court. Many of these judgements are not reported by local law journals. The lawsuit search function is first of its kind in Malaysia. Users can now search if a person or company has been involved in a lawsuit in Malaysia.

 

WhatsApp

Malaysia’s most popular instant messaging application has got some people in trouble with the law.

In Pegawai Pengurus Pilihanraya Dewan Undangan Negeri Bagi Pilihan Raya Dun N.27 Amino Agos Bin Suyub v Dr. Streram a/l Sinnasamy & 2 Lagi [2019] 1 LNS 589, the appellant, an election official of the State Legislative Assembly for By-Election of District of Rembau, Negeri Sembilan, was found guilty of contempt of Court in the High Court for coaching a witness through WhatsApp. The Court of Appeal however allowed the appeal on the ground that such act may not fall under contempt in the face of court per se if the court has not warned the particular person that he should not communicate with the witness. Further, the Court of Appeal found that there was a breach of natural justice when the witness was not called to testify in the contempt proceedings. The Court of Appeal ordered the contempt proceedings to be sent to the High Court for retrial.

An employee was terminated by her employer after she left the WhatsApp Group of the Company (Thilagavathy a/p Arunasalam v Maxis Mobile Sdn Bhd [2019] 2 LNS 1050). For purpose of communicating with employees it was common practice by the employer at Maxis Retail Centres to create WhatsApp Groups among its employees for ease of communication, fast updates and responses for business operations. Two WhatsApp Groups were created for employees at Maxis Centre E-Curve, namely "Maxis e @ Curve" and "MSSC e @ Curve Home & EOMC". The Head of Maxis Centre E-Curve (COW-2) stated that he had informed all employees (including the Claimant) stationed at Maxis Centre E-Curve that they had to inform him in advance if they wish to exit from the WhatsApp Group. It required his approval before they could exit the group.

The Claimant’s employment was terminated by her employer after she had exited from her employer’s WhatsApp groups twice without permission. She had also failed to submit her sales report, as required by her employer.

The Industrial Court held that Claimant was in breach of her terms of employment with the Company when she failed to follow the reasonable oral and written instructions of COW-2 i.e. to obtain approval prior to exiting the WhatsApp Group.

In the meantime, a man was jailed for sharing a video of his wife’s cousin taking a bath on his family WhatsApp group. In Pendakwa Raya v Nor Hanizam Bin Mohd Noor [2019] 1 LNS 944, the accused was charged under s. 509 of the Penal Code for outraging the modesty of wife's cousin. The accused pleaded guilty and the Magistrate Court Judge sentenced him to two (2) months imprisonment. The Prosecution was not satisfied with the sentence and appealed to the High Court.

On appeal, the High Court has this to say, in Bahasa Malaysia, about invasion of privacy -

Keseriusan isu ini menjadi lebih memuncak di dalam zaman siber yang serba canggih di mana sesuatu berita atau imej sudah boleh dihebahkan kepada dunia dengan sekelip mata. Muat naik berita, imej dan video sudah menjadi sesuatu perkara yang sangat mudah dan selera masyarakat terhadap sesuatu berita, imej atau video sudah mencapai kepada suatu peringkat di mana nilai privasi, maruah dan keaiban sesorang dikompromi dan diketepikan dengan sewenang-wenangnya. Bahan lucah, berita palsu, fitnah, tohmahan dan sebagainya sudah menjadi suatu pengisian media yang dinantikan oleh sebahagian masyarakat dan ia mendatangkan masalah moral yang sangat serius di kalangan masyarakat sehingga menular di kalangan remaja.

In short, what the Court said was, “In this digital age, information and content can spread in the blink of an eye. The ease of uploading images and videos, too easily done, with society’s appetite for such reaching an unhealthy level where privacy and dignity are compromised and disregarded too easily. Fake news, slander and ponography have become media staples eagerly consumed by a segment of society resulting in serious moral problems in society and our youth.

The High Court Judge also held that the words "intrudes upon the privacy" under s. 509 of the Penal Code includes recording a person without permission and distributing the video.

The High Court enhanced the imprisonment period to six months from the date of conviction.

 

Peer-to-peer (P2P) Lending 

Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers.

In Malaysia, the Securities Commission governs the operation of P2P financing. The Securities Commission only allows P2P operator to facilitate businesses or companies to raise funds from both retail and sophisticated investors through an online platform.

P2P operators are not permitted to facilitate individuals seeking personal financing. This is because the primary objective of introducing market-based financing is to help build small businesses which in turn help to spur and promote growth of the economy. Through the Securities Commission registered P2P platform, an investor may invest in an investment note or an Islamic investment note issued by businesses or companies for a specified tenure with the expectation of a predetermined financial return.

Since 2017, there have been 2,505 successful peer-to-peer (P2P) financing campaigns across 643 issuers, with a total of US$49.3 million (RM212.65 million) raised. Issuers raising funds on P2P financing platforms have maintained a campaign success rate of 99%. In 2018, a total of RM180.05 million was raised reflecting 452% growth from 2017. Among the successful fundraising campaigns, 91% raised RM200,000 and below. 22% of the successful issuers raised more than once. (Data from Securities Commission Annual Report 2018.)

[RM1 = US$0.23]

Notwithstanding the above success, some issuers could not repay what they have raised. The operator of “Funding Societies”, Modalku Ventures Sdn Bhd, had to commence legal proceedings against a few companies to recover the facilities.  Modalku is registered as a recognized market operator under s. 34 of the Capital Market and Services Act 2017 to operate a P2P platform.  

In Modalku Ventures Sdn Bhd v Reliance Shipping & Travel Agencies (Sarawak) Sdn Bhd & Anor (Kuala Lumpur Sessions Court Suit No. WA-B52NCC-392-06/2019) raised a novel defence by claiming that P2P financing is illegal under the Moneylenders Act 1951. 

The Plaintiff granted the 1st Defendant facilities of RM650,000 to be utilised as working capital of the 1st Defendant. The 2nd Defendant is a director and guarantor of the 1st Defendant. An investment note certified was issued by the 1st Defendant to the investors of the 1st Defendant.

The 1st Defendant defaulted in the loan and the Plaintiff sued for the outstanding amount. The Plaintiff sought for an order for summary judgment of the outstanding amount.

The Defendants argued that the Facility Agreement is illegal pursuant to the Moneylenders Act 1951 and Moneylenders (Amendment) Act 2003 because the Plaintiff is not licensed to carry out money lending activities.

In view that the Plaintiff is a registered market operator, the Sessions Court held that Moneylenders Act 1951 does not apply to the Plaintiff. S. 2A(1) read together with Item 10 of the First Schedule of the Moneylenders Act 1951 provides that the Moneylenders Act 1951 does not apply to any person licensed, registered or regulated under the Capital Markets and Services Act 2007.

Accordingly, the Sessions Court granted the summary judgment.  Appeal to the High Court was dismissed in Civil Appeal No. WA-12ANCC-69-09/2019.

Similarly, in Modalku Ventures Sdn Bhd v Reliance Shipping & Travel Agencies (Sabah) Sdn Bhd & Anor (Kuala Lumpur Sessions Court Suit No. WA-B52NCC-393-06/2019), the Defendants, in resisting an application for summary judgment, argued that the Facility Agreement and security documents are illegal pursuant to the Moneylenders Act 1951 and Moneylenders (Amendment) Act 2003 because the Plaintiff is not licensed to carry out money lending activities and a contravention of s. 15A of the Moneylenders Act 1951 which provides that "no moneylending agreement in respect of money lent after the coming into force of this Act by an unlicensed moneylender shall be enforceable".

The Plaintiff argued that s. 2A of the Moneylenders Act 1951 read together with Item 12 of the First Schedule of the Moneylenders Act 1951 provides that the Moneylenders Act 1951 does not apply to any person licensed, registered or regulated under the Capital Markets and Services Act 2007.

The Sessions Court agreed with the Plaintiff that the Moneylenders Act 1951 does not apply and therefore the Facilities Agreement and security documents are valid and enforceable.

 

E-hailing company’s liability in accidents

In Tea Chew Chin v Grabcar Sdn Bhd & Ors (Sessions Court Suit No. JA-A53KJ-610-10/2018), the Plaintiff was injured when the Grabcar driven by the 2nd Defendant and owned by the 3rd Defendant was involved in an accident. The Plaintiff claims that Grabcar was also responsible for his injuries as they have failed to provide a safe transportation platform. Grabcar on the other hand argued that they are not vicariously liable for the negligence of the driver or owner of any car that used the Grab application to participate in the Grab ride hailing service. Grab applied to strike out the case but the suit was later withdrawn.

A few months later, the insurer of the car owned by the 3rd Defendant sued the Plaintiff and all the other Defendants in the earlier suit (MPI Generali Insurans Berhad v Tea Chew Chin & 3 Ors (Johor Bahru High Court Suit No. JA-24NCvC-320-05/2019) and sought an order to declare that the insurance policy is invalid as the car was not used for private use. Grab again argued that it should not have been joined as a party to this action as they were merely providing the mobile application on the "Grab" platform for various car owners and drivers to operate ride hailing services, they had no connection whatsoever with the car and the insurance policy. The High Court dismissed the insurer's action. However, no grounds of judgment is available.

 

Digital Currencies

In my article Bread & Kaya: Malaysia’s first digital currency court case, I wrote about Malaysia’s first digital currency court case. In Luno Pte Ltd & Anor v Robert Ong Thien Cheng (Sessions Court Civil Suit No. BA-B52NCVC-389-12/2017), the 1st Plaintiff mistakenly transferred 11.3 Bitcoins onto the Defendant's e-Wallet which the Defendant refused to return. The Plaintiffs sued the Defendant for the return of the 11.3 Bitcoins under s. 73 Contracts Act 1950. The Defendant argued that, among others, Bitcoins are not a “thing” capable of being returned as envisaged under s. 73 Contracts Act 1950, cryptocurrency is illegal in Malaysia and therefore, the Plaintiffs are not entitled to recover the same. The Sessions Court allowed the Plaintiffs' claim and the Defendant appealed to the High Court. 

The High Court  (Shah Alam High Court Civil Appeal No. 12BNCVC-91-10/2018) dismissed the appeal and held that, among others, cryptocurrency trading is not illegal in Malaysia, digital currency is a form of an intangible asset and digital currency is a “thing” that has to be returned if it is mistakenly delivered. The matter is now pending at the Court of Appeal

 

Discovery of the Identity of Facebook User

In the past, Court actions were filed overseas against online service providers such as Google to obtain information of certain online users. Such action can be done either through a pre-action discovery application or a Court subpoena. It can cost the aggrieved party substantial amount of legal fees as foreign counsels have to be engaged to conduct the matter in Court. Further, it is not guaranteed that the service provider will provide the information.

However, through Lexscout.com, I found a case which shows that pre-action discovery application against Facebook can be made in Malaysia instead of filing such application outside Malaysia. In Universiti Utara Malaysia v Facebook Inc (Alor Setar High Court Originating Summons No. KA-24-1-01/2019), Facebook agreed to disclose basic subscriber information of certain Facebook users who allegedly have published defamatory statements against the Plaintiff (also known as a pre-action discovery order).

Filing a pre-action discovery application is one of the most efficient ways. The use of private investigators may also help and it is much more affordable and may be faster. However, it comes with a risk. The investigation by the private investigator may not be conclusive enough for the Court. This happened in the case of P.T. Tarakusuma Indah & Anor v The Qbee Motor Group Sdn Bhd [2019] 1 LNS 1619 where the Plaintiffs alleged that the Defendant was the person behind a certain Facebook page that had defamed them. The Plaintiff relied on the investigation report by a private investigator (PW2). The investigation report concluded that the administrator of the Facebook page "is someone employed or related‟ to the Defendant company or any other related companies such as QBEE Superbike Centre Sdn Bhd, Quian Long Auto Parts Sdn Bhd".

The High Court dismissed the Plaintiffs' action and held that they have failed to prove that the Defendant had published or distributed the impugned statements or had caused the impugned statements to be made or published or distributed in the Facebook page. The finding in the investigation report was vague and inconclusive and uncertain as to who the administrator for the Facebook page was. The Plaintiffs’ evidence on this point was purely based on assumption that it was the Defendant who made those impugned statements.

 
 
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