KUALA LUMPUR (Feb 16): Serba Dinamik Holdings Bhd had on Wednesday (Feb 16) argued at the High Court that the appointment of its special auditor Ernst & Young Consulting Sdn Bhd (EY Consulting) to conduct a special independent review (SIR) should be declared null and void, as the firm does not fit the definition of an auditor.

The beleaguered oil and gas company said therefore, due to questions surrounding EY Consulting's status, the firm should be granted an injunction from releasing the fact-finding update (FFU) and other updates regarding Serba Dinamik to Bursa Malaysia Securities Bhd or other regulatory authorities.

Its counsel Mak Lin Kum argued before Justice Datuk Ahmad Fairuz Zainol Abidin in online proceedings that EY Consulting does not fall within Paragraph 2.24 of the Main Market Listing Requirement (MMLR)'s meaning of auditor when the consulting firm was engaged in July 2021.

Paragraph 2.24 states that "where the exchange is of the opinion that a breach of these requirements may have occurred and the appointment of a special auditor is necessary, the exchange may instruct the listed issuer, any of its subsidiaries or both, as the exchange may direct. Any cost incurred as a result of the appointment of the special auditor must be borne by the listed issuer".

A special auditor means any auditor other than the statutory auditor of the listed issuer appointed pursuant to the Companies Act or in relation to a foreign corporation, pursuant to the relevant laws of the place of incorporation, according to Paragraph 2.24.

Mak said EY Consulting as a firm has not been recognised by the Finance Minister as an auditor, and that the defendant (EY Consulting) misrepresented itself as an auditor within the meaning of Paragraph 2.24 of the MMLR.

He then showed the letter from EY Consulting dated July 2, 2021 which referred to Paragraphs 2.23 and 2.24 of the MMLR to conduct the SIR of the statutory audit by KPMG, Serba Dinamik's former external auditor.

“The firm Ernst & Young PLT is a recognised auditor while EY Consulting is not and it is not registered with the Audit Oversight Board. Hence, my client is taking issue on that and hence questioned whether EY Consulting should be allowed to reveal the FFU and other findings in the first place.

“Hence, Serba Dinamik contends that the appointment of EY Consulting should be declared null and void and ab initio,” he said.

Serba Dinamik had on Nov 5 filed a lawsuit against EY Consulting seeking to restrain the auditor from sharing any findings or opinions on the company with Bursa Malaysia or other parties following questions surrounding the firm not being a qualified auditor per se.

EY Consulting: FFU done by qualified auditor

Meanwhile, EY Consulting's counsel Gopal Sreenevasan argued that Serba Dinamik had known from the day its client was appointed that Muhammad Syahrizal Abd Rahim, who is a partner in E&Y PLT and a registered auditor, would be doing the special audit that was required.

He further explained that the term special auditor within Paragraph 2.24 does not necessarily mean an auditor per se as the scope is wider, because it has nothing to do with audit or financial numbers or accounts or financial statements.

“It has to do with ascertaining whether the findings made by the statutory auditor of Serba Dinamik, namely KPMG, [were] correct. We say that the words should mean something other than the statutory auditor should be given emphasis.

“Furthermore, as shown, Syahrizal who is appointed — and this was informed to Serba Dinamik — is a partner in E&Y PLT and recognised as a qualified auditor as shown. Prior to the release of the FFU there had not been any problems regarding EY Consulting's status,” he added.

Gopal further said EY Consulting had complied with the requirements to be an auditor when Syahrizal was engaged, where it ensured the existing auditor is not a special reviewer from KPMG.

He further claimed that this litigation was made by Serba Dinamik due to the company not liking the contents of EY Consulting's FFU.

“It is not an action to genuinely ventilate on a complaint with regards to my client. We say Syahrizal fulfils the criteria and this was presented to Serba Dinamik's board before my client was hired,” he added.

Furthermore, Gopal argued that at another High Court in Bursa Malaysia's action against Serba Dinamik last Feb 7, Judicial Commissioner (JC) Wan Muhammad Amin Wan Yahya in his decision had recognised EY Consulting as an auditor and ordered the FFU findings to be released.

“We say that this court should not allow this matter or issue to be relitigated, as a decision has been made in the other court,” he said.

Mak in his reply said this court should not be bound by the decision made by Wan Muhammad Amin as that matter was between Bursa Malaysia and his client and does not involve EY Consulting.

He further said in the absence of a written judgment by the JC, such a notion should be considered as obiter dictum (not legally binding as merely the judge's expression) in court.

The Serba Dinamik lawyer further alleged that his client was not aware of the purported internal communications between EY Consulting over Syahrizal's appointment and that he was a qualified auditor.

Decision on March 8

Justice Ahmad Fairuz fixed March 8 to deliver his decision on whether the contract between Serba Dinamik and EY Consulting should be declared null and void and hence, whether an injunction should be imposed on the firm from releasing the findings. He will deliver his decision via email.

Also present in this proceedings was counsel Christopher Leong, who held a watching brief for the Securities Commission Malaysia.

Prior to this, Justice Ahmad Fairuz had on Feb 10 decided against Serba Dinamik's application to impose an injunction on Bursa Malaysia to prevent the company from being compelled by the regulator to release the FFU.

It was also reported that Wan Muhammad Amin, in the legal action filed by Bursa Malaysia against the company, had on Feb 7 ordered Serba Dinamik to reveal the FFU and other findings periodically.

His court had on Monday (Feb 14) also dismissed the company's application for a stay.

https://www.theedgemarkets.com/article/serba-dinamik-argues-ey-consultings-appointment-should-be-nullified-latter-not-auditor