Representative Action Against Professional Trustee Company Struck Out

• Published date: 05 March 2024
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Juen, Jeat, Nic & Nair
• Author: Mr Harish Nair and Casper Tey

On 22nd December 2022, the High Court struck out a class action suit seeking more than RM300 million against our client, a professional trustee company. Our Christopher Foo and Harish Nair acted for the client.

Factual Background

In 2010, a group of investors (including the plaintiffs in the suit under discussion) invested and took part in an oil palm plantation scheme set up and operated by a management company. Our client was appointed as the trustee of the scheme under a trust deed entered into between our client, the management company, and each investor of the scheme.

The scheme had been established, and subsequently opened for public subscription, under Division 5 of the Companies Act 1965. Upon the Act being repealed, the scheme then fell to be governed under the Interest Scheme Act 2016. Under the scheme, a certain number of "plots" were created and offered to the public for purchase. The scheme was planned to last for up to 23 years, with 2 phases envisaged. Under the trust deed, the management company was required to "repurchase" the plots during the second phase of the scheme if requests were made by the investors. Investors were also entitled to a return on their investment in the form of receipt of "net yield" from the oil palm plantation.

Around 2016, the scheme met various challenges, including an unexpectedly high volume of requests for repurchase of plots by investors. A meeting of the investors was then held pursuant to the provisions of the trust deed. A resolution was put forward to close the scheme with immediate effect, which was passed by a vast majority of the investors present and voting at the meeting.

Following this, a group of investors brought a representative action by way of an originating summons against the management company. This group of investors were asking the Court to order the management company to pay all monies due on the "net yield" and to repurchase all the plots in the second phase of the scheme. In this representative action, the investors heavily contended that the scheme was a "ponzi scheme" because the scheme was set up in such a way that investors could not request that the management company "repurchase" the plots in the first phase of the scheme (the first 6 years). Therefore, the investors contended that the scheme allowed the management company to swindle the investors during the first 6 years (i.e., the first phase) and subsequently close the scheme as soon as the scheme entered the second phase. The...