Bread & Kaya 27: Cyberlaw cases in the Covid-19 Era, Pt2

• Victory for management corporation against AirBnB operators 
• Service of Court documents for Facebook Inc to Facebook Malaysia good enough says High Court

Employee who was dismissed for leaving a WhatsApp group

Last year, I reported that 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). The Industrial Court held that that the Claimant was in breach of her terms of employment with the company when she failed to follow the reasonable oral and written instructions of the company, i.e. to obtain approval prior to exiting the WhatsApp group.

On appeal to the High Court (Thilagavathy a/p Arunasalam v. Maxis Mobile Sdn Bhd [2020] 1 LNS 1062), the High Court overturned the Industrial Court’s decision and ordered the matter to be decided by another Industrial Court Chairperson. The High Court held that the Industrial Court failed to make an objective assessment on the facts and evidence before them in determining whether the employee was guilty based on the charges stated in the show cause notice. Amongst the reasons for the decision is that the Industrial Court ought to take into account that there was no clear notice or warning to the Claimant that she cannot leave the company’s WhatsApp group without the permission of the company.

When the Claimant asked to be re-added to the group, the company refused to do so. The company’s witness also could not confirm that every employee has been informed that they need permission to exit the group. Therefore, it is reasonable to assume that the Claimant has no knowledge that permission is required to exit the group. The Industrial Court had earlier held that the Claimant ought to have cross examined the company’s witness regarding the issue of exiting the WhatsApp group. However, the High Court held that the Industrial Court failed to consider that the Claimant was not legally represented, hence she does not know how to cross examine a witness, and it is not fair to judge the Claimant with technical matters not within her capability as a layperson with no legal background.

On the topic of WhatsApp groups, we also saw defamation lawsuits being filed for publications on WhatsApp groups. In Mohamed Fahamy Mohamed Suyud v. Iscada Net Sdn Bhd [2020] 1 LNS 867, the Defendant filed a counterclaim against the Plaintiff for publishing certain alleged defamatory statements on a WhatsApp group. However, the High Court found that the Defendant has failed to prove that those statements referred to the Defendant. The High Court was of the view that pure speculation is not sufficient, and the ordinary reader must have rational grounds for his belief that the words refer to the Defendant.

First Decision on a Persons Unknown Injunction in Cyberspace

In most litigation cases, the defendant is usually named. However, the use of the Internet has made it harder for a plaintiff to trace the identity of a wrongdoer. This is coupled with internet users’ assertions of their right to remain anonymous for, among other things, their own safety, right to privacy and speech and expression.

Where a defendant’s name is unknown, it is still possible to file an action against such person in Malaysia. We have seen this in land possession matters and accident matters. It is now possible to file an action against “persons unknown” in Malaysia in respect of matters arising from the cyberspace sphere.

In Zschimmer & Schwarz GmbH & Co KG Chemische Fabriken v. Persons Unknown & Anor [2021] 7 MLJ 178, the High Court granted an ex parte proprietary injunction and Mareva injunction against “persons unknown” as the 1^st Defendant. In this case, the Plaintiff was a victim of cross-border cyber fraud known as a “push payment fraud” where the victim is tricked over emails to make a payment for a legitimate transaction into a different bank account under the control of the fraudster.

The Plaintiff, a German company, was in communication with its South Korean counterparty. The fraudster, being Persons Unknown, deceived the Plaintiff into paying into the 2nd Defendant's bank account the sum of EUR 123,014.65 (approximately RM600,000.00) by infiltrating the email communications between the Plaintiff and the South Korean counterparty. The Plaintiff thought it was making a genuine payment to its South Korean counterparty for a commission payment. Instead, the fraudster had siphoned the Plaintiff's monies away.

Justice Ong Chee Kwan delivered the first known decision on a Persons Unknown injunction. After going through a series of English cases against Persons Unknown, his Lordship held-

[40] It is not usually the case that a defendant is described as ‘Persons Unknown’. Nevertheless, the Court can grant interlocutory orders against the 1st Defendant — being Persons Unknown. In cases like the present which involve cyber fraud and fake email addresses, the fraudster or fraudsters are unknown. English case law have allowed for similar injunctive orders against ‘Persons Unknown’. There is nothing in our Rules of Court 2012 that would prevent the Writ of Summons and applications from being filed against Persons Unknown.

..

[49] As stated above, there is nothing in our Rules of Court 2012 prohibiting the making of an order against Persons Unknown. In fact, Order 89 of the Rules of Court 2012 for summary proceedings for possession of land allows for a defendant reference to Persons Unknown.[See Fauziah Ismail & Ors v Lazim Kanan & Orang-Orang Yang Tidak Diketahui [2013] 7 CLJ 37 (CA); the commentary in Foong’s Malaysia Cyber, Electronic Evidence and Information Technology Law, para [8.098] to [8.100]].

This case clears the doubt on whether action can be taken against Persons Unknown in respect of matters arising from the cyberspace sphere. With the increase of online scams and fraud, we can expect similar cases to be filed in Court so that victims of these cybercrimes are able to seek redress and preserve their assets.

Short Term Lodging - AirBnB Effect

The Federal Court finally resolved the issue of whether a management corporation has the power to ban short term lodging. In Innab Salil & 8 Ors v. Verve Suites Mont’ Kiara Management Corporation, the Defendants operated and/or caused to be operated a short-term rental in the Verve Suites. The Plaintiff, being the management corporation, passed a special resolution, which was then incorporated into its House Rule No. 3, to stop the operation of short-term rentals in the Verve Suites. The Plaintiff then filed an action against the Defendants to stop them from breaching House Rule No. 3. The Defendants argued that the management corporation does not have the power to pass House Rule No. 3 as it is beyond their powers provided under section 70 of the Strata Management Act 2013.

On appeal, the Court of Appeal ([2019] MLJU 1496) held, among other things, that the Strata Management Act 2013 was to advance the interest in communal living within a strata scheme. Therefore, it would defeat the spirit and purpose of the Act for the proprietors, such as the Defendants, to use their residential units in the form of a business enterprise such as short-term rentals. The majority of the residents had voted against the same. The wish of the majority had to be taken heed of, hence there could never be any violation of section 70(5) when House Rules No. 3 was adopted.

The Federal Court held that by-laws passed pursuant to section 70 of the Strata Management Act 2013 stipulated in subsection (2) are justifiable if they exist for the good of the strata community. In other words, even if the State Authority permits the use of the land for commercial purposes, such use is still subject to other laws in force, in particular to section 70 of the Strata Management Act 2013. Hence, the passing of House Rule No. 3 is not unlawful. The Federal Court also held that the arrangements by the Defendants are nothing more than mere licences, and therefore do not amount in law to “dealings” within the ambit of section 70(5) of the Strata Management Act 2013.

Accordingly, House Rule No. 3 is not ultra vires section 70(5). As concurrently found by the High Court and the Court of Appeal, the said House Rule was enacted for the many legitimate purposes under section 70(2) or for that matter, for the purposes under which the Plaintiff has established under section 59 of the Strata Management Act 2013. As such, the Federal Court held that the said short-term rentals in this case amount to licences and not tenancies.

Discovery of the Identity of Social Media User

Last year, I reported that it is possible to file an action to obtain information about certain Facebook users in 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). However, in usual cases against foreign defendants, one would need to make a formal application to Court to have the court documents served overseas through, among others, the assistance of our Government and the foreign government or judicial authorities of that country. This is a long and complicated process. 

The Court has also now allowed the service of court documents on Facebook Malaysia Sdn Bhd (“Facebook Malaysia”) as the Court found that Facebook Malaysia is the agent of Facebook, Inc under Order 10 Rule 2 of the Rules of Court 2012. In this case, the Applicants, who are husband and wife, filed a pre-action discovery order against Facebook, Inc to obtain information about certain Instagram users who had allegedly defamed them.

Instead of applying to have the court documents served on Facebook, Inc in the United States, the Applicants obtained an ex parte order to have the court documents served on Facebook Malaysia. Facebook, Inc then applied to set aside the ex parte order on the ground that Facebook Malaysia is not an agent of Facebook, Inc and has never authorised them to accept documents on behalf of Facebook Inc. Furthermore, Facebook, Inc and Facebook Malaysia are separate legal entities. 

The High Court dismissed Facebook Inc’s application to set aside the service of the ex-parte order with cost of RM5,000. The High Court was of the view that:-

(1)        any reasonable man would conclude that Facebook Malaysia is indeed an agent of the Defendant by virtue of implied contract in existence between them as there were numerous online publications such as publication on the Prime Minister's Office on the attendance of the then Prime Minister and Communication Minister at the official opening of Facebook Malaysia, and New Straits Times report with the caption "It's official: Facebook opens office in Malaysia"; 

(2)        Facebook Malaysia is involved in the marketing and sales support services based on a search from the Companies Commission of Malaysia;

(3)        nothing was adduced to show that Facebook Malaysia had officially declared that it is not part of or an agent of the Defendant and vice versa; and 

(4)        the Applicants’ solicitors had earlier sent a letter to Facebook Malaysia regarding this matter and Facebook, Inc had replied to the Applicants’ solicitors directly stating that "We are responding in our capacity as Facebook, Inc which operates Facebook for Malaysia users". Accordingly, if Facebook Malaysia is not Facebook, Inc’s agent or has locus standi to act for Facebook, Inc, it should have returned those letters/documents straight back to the Applicants’ solicitors. Facebook Malaysia had failed to mention specifically that it is not an agent of the Defendant. 

The High Court also held that when Facebook Malaysia was officially opened or launched in Malaysia, Facebook, Inc. was indeed conducting business in Malaysia. It follows that it can receive any mode of originating process on behalf of its principal here in Malaysia. 

There were numerous malicious and defamatory remarks made by eight Instagram accounts which have reduced the Applicants into as though they are criminals and an irresponsible couple who does not deserve any respect from society. The defamatory words used, among others, are that the couple are kidnappers, paedophiles rapists, Satan practising black magic etc. The couple is experiencing great difficulties to identify the right party to sue, and the many court procedures to be adhered to, creating a great stumbling block for them to seek justice.

The Court was of the opinion that it will be highly prejudicial and cause grave injustice to the Applicants as though their rights to bring the actual culprits to court will be completely shut. There is no prejudice caused to the Defendants but on the other hand, the Applicants and family are still receiving continuous accusations and slanders. Even if there are some shortcomings or non-compliance on the part of the Applicants regarding the service of the court documents, such irregularity can be cured by Order 2 Rule 1 of the Rules of Court 2012. 

Electronic service of court documents

Prior to the enforcement of Rules of Court (Amendment) 2020, Order 10 rule 1 of the Rules of Court 2012 provides that a writ and originating summons shall be served personally on each defendant or sent to each defendant by prepaid AR registered post, addressed to his last known address. The Rules of Court 2012 was silent as to whether such court documents can be served via electronic means other than by way of facsimile.

The Rules of Court (Amendment) 2020, which came to force on 15 December 2020, introduced service of Court documents by means of electronic communication in accordance with any practice direction issued for that purpose. As of the date of writing, no such practice direction has been issued yet. Perhaps the Court may soon expressly allow the service of court documents by email and other instant messages applications such as WhatsApp, Facebook or WeChat. Our Courts have in the past allowed service of court documents in certain selected cases (for example, see 30 Maple Sdn Bhd v. Noor Farah Kamilah binti Che Ibrahim (Unreported; Kuala Lumpur High Court Suit No. WA-22IP-50-12/2017); Zschimmer & Schwarz GmbH & Co KG Chemische Fabriken v. Persons Unknown & Anor [2021] 7 MLJ).

This is Part 2 of a 3-part review. On Monday in Pt 3: All about cybercrime and contempt proceedings against Malaysiakini.

Foong Cheng Leong is an Advocate and Solicitor of the High Court of Malaya. He blogs at foongchengleong.com, and tweets at @FCLCo. www.linkedin.com/in/foongchengleong/