PUTRAJAYA: The Federal Court on Tuesday set aside earlier decisions by the High Court and the Court of Appeal, both of which ordered, among others, a specific performance against Detik Ria Sdn Bhd to sell its 49% stake in Sri Han Suria Sdn Bhd which owns Prudential Assurance Malaysia Bhd (PAMB) to Prudential Corp Holdings Ltd and The Prudential Assurance Company Ltd.
Following the apex court’s ruling, Detik Ria is able to retain its 49% stake in Sri Han Suria Sdn Bhd. Besides retaining its equity interests Detik Ria is expected to receive all benefits from the 49% stake including dividends, if any, and the dispute may be resolved further in the High Court.
Sri Han Suria is 50.99% owned by Prudential Corp and 49% by Detik Ria, while the remaining 0.01% is held by PCA IP Services Ltd.
The High Court, in its decision in 2020, and upheld by the Court of Appeal in 2022, ruled that there was nothing wrong in the enforcement of two put and call options agreements entered into by Prudential Assurance and Detik Ria, which would have allowed the disputed 49% stake to be passed to Prudential Corp.
However, the Federal Court, in a unanimous decision, ruled that Section 67 of the now-repealed Insurance Act 1996 was breached, when two put and call agreements entered into by the companies in 2002 and 2009 were carried out without the finance minister’s approval.
“The court below erred in its decision that recognised the agreements despite such agreements being carried out without the minister’s approval under Section 67 of the Insurance Act 1996. It erred in relying on the approval from Bank Negara Malaysia (BNM),” said Tan Sri Nallini Pathmanathan, who led the three-member bench, which also included Datuk Seri Hasnah Mohamed Hashim and Datuk Harmindar Singh Dhaliwal.
While Prudential Corp Holdings Ltd and The Prudential Assurance Company Ltd had argued that the Insurance Act 1996 is inapplicable in this and that it is the Financial Services Act 2013 that applies instead, such argument was not accepted by the Apex Court.
“In this context, we are not persuaded that the Financial Services Act 2013, that is the relevant legislation by reason of Section 272(l) of the Act which expressly preserves obligations that occurred under the repealed Insurance Act 1996. Accordingly, consent of minister is mandatory before any subsequent dealings can be performed” said Nallini.
Following the apex court’s ruling, Detik Ria is expected to receive all benefits from the 49% stake including dividends, if any, and the dispute may be resolved further in the High Court. This is besides retaining its equity interests.
Detik Ria’s lead counsel Tan Sri Tommy Thomas, together with Tey Jun Ren, Mervyn Lai and Chuar Kia Lin, had submitted in court that the dividends paid in the period under review amounted to RM2.72 billion, and hence Detik Ria should be given 49% of that sum or RM1.3 billion. The exact sum is being disputed.
Nallini said Prudential Corp and Prudential Assurance are required to return any benefits received under the two agreements, which include the dividends paid out from Sri Han Suria.
Nallini also directed Detik Ria to return a sum in excess of RM109.205 million, being the part payments for its 49% stake in Sri Han Suria, with 5% interest running from September 2019.
Nallini in addition directed Prudential Corp and Prudential Assurance to pay costs of RM200,000 here and below and subject to allocatur to Detik Ria.
Detik Ria had initially been ordered to pay RM25,000 costs by the High Court and RM50,000 costs by the Court of Appeal.
Detik Ria is represented by Messrs Pierre Chuah & Associates and Prudential Corp and Prudential Assurance are represented by Messrs Firoz Julian.
