INTRODUCTION

On 9.8.2024, the Court of Appeal in the case of CTOS Data Systems Sdn Bhd v Suriati bt Mohd Yusof [2024] MLJU 1935; [2024] CLJU 1719 set aside the decision of the High Court in Suriati binti Mohd Yusof v CTOS Data Systems Sdn Bhd [2024] MLJU 437; [2024] CLJU 440 which previously held that credit reporting agencies are not empowered to formulate a credit score or create their own criteria/ percentage to formulate a credit score.

The Court of Appeal ruled that credit reporting agencies, such as CTOS Data Systems Sdn Bhd, are allowed to provide credit information that has bearing on the eligibility of a customer to any credit, including by way of a credit score.

HIGH COURT PROCEEDINGS

On 29.1.2020, Suriati Binti Mohd Yusof (“Plaintiff/ Respondent”) commenced a claim for negligence and defamation against CTOS Data Systems Sdn Bhd (“Defendant/ Appellant”) in the Kuala Lumpur High Court.

The Plaintiff claimed that:

(i) The Defendant provided inaccurate credit information about the Plaintiff concerning a debt due to a company known as Webe Digital Sdn Bhd (“Webe”), leading to a loss of reputation, personal losses as well as business losses.

(ii) The Plaintiff attempted to apply for a loan for the purchase of a vehicle with a number of banks but all the applications were rejected as the Plaintiff’s CTOS report (by the Defendant) showed that the Plaintiff had a low credit score.

(iii) The Defendant had breached its duty of care to the Plaintiff in the course of collating, reporting and publishing credit information concerning the Plaintiff to the Defendant’s subscribers, including financial institutions.

(iv) The Plaintiff’s creditworthiness had been affected by reason of the Defendant giving the Plaintiff a low credit score resulting in her inability to obtain financing from financial institutions.

(v) The Defendant defamed the Plaintiff in the course of publishing inaccurate incomplete, misleading and/or outdated credit information concerning the Plaintiff to third parties.

On 7.3.2024, the High Court Judge allowed the Plaintiff’s claim against the Defendant and awarded the Plaintiff general damages in the sum of RM200,000.00, interest at the rate of 5% and costs of RM50,000.00.

The High Court Judge held that:

(i) Pursuant to the Credit Reporting Agencies Act 2010 (Act 710) (“CRAA 2010”), the Defendant’s main role is to collect, record, hold, and store the information received. The Defendant plays a dual role of collecting information and processing that information. The Defendant is also empowered to disseminate the information to its subscribers, including financial institutions.

(ii) Section 29 of the CRAA 2010 imposes a duty upon the credit rating agency to verify and to ensure the accuracy of the credit report. The Defendant owed a duty of care towards the Plaintiff in providing accurate credit information.

(iii) Plaintiff alerted the Defendant that the information against her was inaccurate. However, the Defendant chose to ignore the communication from the Plaintiff and continued to maintain the said information. By choosing to be indifferent even after being alerted by the Plaintiff, the Defendant has clearly breached the duty of care owed towards the Plaintiff.

(iv) There is no provision in the CRAA 2010 empowering the Defendant to formulate a credit score or empowering the Defendant to create its own criteria or percentage to formulate a credit score. The Defendant was just supposed to be a repository of the credit information to which the subscribers have access to.

(v) The Defendant defamed the Plaintiff in the course of publishing inaccurate, incomplete, misleading and/or outdated credit information concerning the Plaintiff to third parties.

Dissatisfied with the decision of the High Court, the Defendant/ Appellant appealed to the Court of Appeal against the decision.

COURT OF APPEAL

On 9.8.2024, the Court of Appeal unanimously allowed the Defendant/ Appellant’s appeal and set aside the order of the High Court. The Court of Appeal found merits in the appeal and was satisfied that there was misdirection on the part of the High Court which warrants appellate intervention.

The Court of Appeal ruled that:

(i) Defamation Claim

The Plaintiff/ Respondent admitted that she had commenced a separate action against Webe in the Kuala Lumpur Sessions Court in which she raised the contention that she was not indebted to Webe. The Sessions Court Judge held that the Plaintiff/ Respondent was indebted in the amount of RM2,186.60 to Webe.

Truth or justification is an absolute defence to an action in libel. Therefore, there is no merit on the defamation claim raised by the Plaintiff/ Respondent. Given that the Plaintiff/ Respondent’s debt to Webe was true in substance and in fact, the Plaintiff/ Respondent’s action for defamation cannot stand at all.

(ii) Negligence Claim

The Plaintiff/ Respondent also pleaded negligence as a cause of action allegedly resulting in damage to her reputation and creditworthiness. As the information of the Plaintiff/ Respondent’s indebtedness to Webe was correct, negligence had not been proven.

The Defendant/ Appellant, a Credit Reporting Agency, does not owe a duty of care to the Plaintiff/ Respondent as a customer as defined in the CRAA 2010.

Webe is a subscriber to the services of Defendant and the Plaintiff was its customer. The Defendant provides a service where a subscriber may upload information of debts owed to the subscribers by third parties. Webe uploaded information of the Plaintiff’s indebtedness’s in the sum of RM2,186.60.

Even if there was a duty of care, there was still no breach of this duty as the information cannot be said to be inaccurate, incomplete, misleading or irrelevant, as the Plaintiff had indeed defaulted on its payment obligations to Webe.

(iii) Breach of Statutory Duty

The Plaintiff/ Respondent did not specifically plead breach of statutory duty. Therefore, the High Court was not entitled to make any finding on such a claim.

Even assuming that there was an implied reference to it, there was no breach of any statutory duty as there was no connection proven between the rejection of the Plaintiff/ Respondent’s car loan application and the contents of the credit report.

“Credit Reporting” as defined under the CRAA 2010 includes credit information that has any bearing on the eligibility of a customer to any credit. This would entail a reporting which some credit reporting agencies would do by way of a credit score.

In this case, the credit score was calculated by a software using algorithms and bereft of human intervention and there is no evidence to show that the rejection of the car loan was premised on a low credit score.

Based on the above, the Defendant/ Appellant had not breached its duty of care to the Plaintiff/ Respondent in all circumstances.

This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author

Chew Jin Heng
Associate
Dispute Resolution
Halim Hong & Quek
jhchew@hhq.com.my