PUTRAJAYA (Aug 5): The Court of Appeal today granted the Securities Commission Malaysia (SC) a stay of proceedings in the claim for damages from the regulator by an audit firm.

The firm, Afrizan Tarmili Khairul Azhar, is seeking close to RM35 million in damages from SC after the High Court set aside SC's sanctions on the firm for alleged non-compliance with auditing standards.

A three-member Court of Appeal bench granted the stay pending the hearing of SC's appeal, which is now scheduled for Sept 15.

"The requirement of stay has been fulfilled and there is merit in this application. We allow the applications for stay sought by SC," Justice Datuk Has Zanah Mehat said during proceedings conducted online.

The other two judges were Datuk M Gunalan and Datuk Ghazali Cha.

The bench made no order as to costs.

SC's lawyer Lambert Rasaratnam had sought the stay on the grounds that the hearing of the appeal at the Court of Appeal is scheduled for next month.

Furthermore, he said SC as a commission should not be penalised for performing its regulatory function.

Sukhwinder Singh Mahinder Singh, the audit firm's lawyer, however argued that there were no special circumstances for the court to allow a stay.

Justices Has Zanah and Gunalan interjected in saying that the assessment of damages is a laborious and long process whereas the appeal is scheduled next month.

Afrizan Tarmili Khairul Azhar on Aug 10 last year managed to get the High Court to set aside the SC sanctions.

In her judgement, Justice Mariana, who is now a Court of Appeal judge, said the firm was denied its statutory, constitutional and natural justice rights to be heard in an inquiry by the Audit Oversight Board (AOB).

"There is no evidence to show that the public confidence had been threatened or the investing public suffered losses as a result of the two audited reports prepared by them (Afrizan Tarmili Khairul Azhar). Given the public confidence is intact, the punishment imposed is vastly disproportionate to the alleged misconduct. The SC had impaired the firm's rights to livelihood.

"Hence, the court finds the impugned decisions were tainted with illegality, irrationality, procedure impropriety and proportionality," Justice Mariana said, in ordering the deputy registrar to assess the damages.

The firm, along with its managing partner Datuk Mohd Afrizan Hussain and partners Tamili Dulah Kusni and Khairul Azhar Ariffin, then filed the claim for damages from SC.

SC had suspended the firm for 12 months, beginning Aug 28, 2019, for alleged non-compliance of auditing standards. The suspension resulted in the firm being prohibited to audit public interest entities during the period.

The firm, in its claim, said that as a result of the AOB decision, it had lost many clients which it had built since 2000 such as Supermax Corp, Seacera Group Bhd, Mentiga Corp Bhd, and Alam Maritim Resources Bhd.

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