Loh Holdings Sdn Bhd

- vs -

Peglin Development Sdn Bhd

Judgment

Wan Suleiman FJ

(delivering the Judgment of the Court)

1. It will be necessary to set out in some detail the pre-history leading up to the present appeal so as to enable us to better understand the issues at stake.

2. We shall be referring to the parties in Malacca High Court Civil Suit No 111 of 1980 in the same order in which they were referred to therein.

3. Defendants 1, 2, 3 and 4 held shares in the fifth defendant company (first respondent in the present appeal). Fifth defendant had a piece of land known as Holding No 236, Mukim Berendam, Malacca, which formed the principal asset of the fifth defendant company. Sometime in July 1977, appellant negotiated to take over the fifth defendant company through sale of all shares in the fifth defendant company. Negotiations were carried out through Datuk Yeap Kee Aik the first defendant. The price of each share was worked out on the basis of the price of the land. This is not in dispute — see para 7 of Statement of Defence at page 31.

4. The parties entered into an agreement on 2 December 1977 — see Agreement at pages 155 to 168. The parties to the agreement were Datuk Yeap Kee Aik, Datin Yeap Kee Aik and Chuan Hiang Realty Sdn Bhd on behalf of themselves and all the other holders of ordinary shares of the fifth defendant company, as vendors and the appellant as purchaser.

   Recital 2 at page 156 states,

   The Vendors are the beneficial owners of the numbers of the ordinary shares in the capital of the company set out opposite their respective names in the third column of the schedule hereto aggregating the whole of the issued capital of the Company (hereinafter collectively called the said shares.)

   Recital 3 at page 156 states,

   (a)	The Company is the registered proprietor of the freehold land known as Holding No 236 situate in the Mukim of Batu Berendam more particularly described in the second Schedule hereto (hereinafter called the said land).

   The company here refers to the Peglin Co. The consideration then paid was $90,000.

5. Clause 3 at page 157 sets out the manner in which the balance of the purchase price of $810,000 should be paid. Clause 8(III)(a)(ii), the next relevant clause states that the Vendors hereby jointly and severally undertake with the purchaser that:

   (ii)

   they would obtain the approval (the terms and conditions of the approval to be acceptable to the Purchaser) from the appropriate authorities for the sub-division of the said land into a housing estate by 6 March 1978 and the fees for the issue of separate documents of titles, for the sub-division of the said land shall be borne by the Purchaser.

6. Clause 8III(b) at page 163 states as follows:—

   In the event of the Vendors’ failure to obtain the requisite approval for the sub-division of the said land from the appropriate authorities by 6 March 1978 the deposit and part payment paid under cl 3 supra shall at the sole discretion of the purchaser, either, be refunded to the Purchaser, free of interest within two (2) weeks or, be treated as part payment and the sale and purchase of the company to be completed nonetheless. Thereafter this agreement shall become null and void and no compensation shall be payable to either party for any reason whatsoever.

7. It is clear from the agreement, submits learned counsel for the appellant that the company was to be taken over with the land.

8. On 27 February 1978, appellant’s solicitors wrote to the first defendant a letter, for an extension of the date of completion in accordance with the terms of the agreement dated 2 December 1977. First defendant’s reply at page 59 confirmed the extension of the date of completion requested for.

9. To give effect to this new date of completion the appellant’s solicitors drafted a supplementary agreement. Paragraphs 14, 15 and 16 of the affidavit of Tan Chee Lan, solicitor for the appellant refer to a letter sent to the fifth defendant on 13 April 1978 for the attention of first, second and fourth defendants together with the draft supplementary agreement, a reminder when there was no response and subsequent lodging of the private caveat against the land on behalf of the appellant.

10. On 24 May 1979 a notice to remove the caveat was served on the appellant.

11. On 19 June 1979 appellant applied to extend the duration of the caveat and on 27 June 1979 the High Court, Malacca extended the duration of the caveat “until the final determination of the Civil Suit which the Applicant should commence against the registered proprietors of the said land within three (3) months.”

12. On 22 September 1979 appellant commenced Civil Suit No 92/79 against the fifth defendant the registered proprietors of the land. Paragraph 1 of the Statement of Claim reads:—

    By an agreement entered into between Plaintiffs and the Defendants, the latter agreed to sell and the Plaintiffs agreed to buy 1,050,000 ordinary shares in the Defendant Company known as Peglin Development Sdn Bhd for a total consideration of $900,000.

13. The main defence to this is a total denial by the defendant that he had entered into such an agreement adding as alternative that in any event it was illegal to enter into any such agreement.

14. On 8 November 1979 the fifth defendant in the aforementioned Civil Suit applied to strike out the appellant’s claim in that action. The affidavit in support of which signed by first defendant as director and shareholder of defendant company reads as follows:—

    5.

    I crave leave to refer to the preamble of the said Agreement and I hereby affirm that the said Agreement was for the Sale of the shares held by myself, Datin Yeap Kee Aik Nee Tan Siew Kim and Chuan Hiang Realty Sdn, and, as shareholders in the Defendant Company. We did not at any stage contract to sell the shares for and on behalf of the Defendant Company. I am advised that the Defendant Company cannot sell its shares.

    6.

    I further crave leave to refer to the first schedule and to the signatories on page ten (10) of the said Agreement. I hereby affirm that I did not contract to sell the shares for and on behalf of Edward Eu (Pte) Ltd nor did I sign the said Agreement in that capacity.

15. This was supported by the affidavit of the second defendant substantially to the same effect as the first defendant’s affidavit and the affidavit of Yeap Yu Lin, daughter of the first and second defendants and a director of the fifth defendant company, also to the same effect.

16. On 13 November 1979 fifth defendant applied to remove the caveat, an application supported by the affidavit of Yeap Yu Lin. On 7 March 1980 both the application to strike out and the application to remove the caveat came up for hearing before the High Court at Malacca and on 2 June 1980 judgment was given for the fifth defendant.

17. On 17 September 1980 the appellant instituted the present proceedings against four shareholders of the fifth defendant company, the fifth defendant and the sixth defendant. The prayer for relief is set out on pages 9 to 10. To preserve the property the appellant applied for an interim injunction which was granted on 16 December 1980.

18. On 27 October 1980 the fifth defendant and the sixth defendant took out separate summons to strike out appellant’s claim against them. The main ground of the fifth defendant’s application is set out in paras 3 to 6 of the affidavit of Yeap Yu Lin at pages 135 and 136. The grounds of the sixth defendant’s application are at paras 4 to 9 of the affidavit in support on page 131.

19. Both applications were heard on 27 March 1981 and judgment delivered on 20 March 1982 against the appellant on two grounds i.e.

    1. The Judge found res judicata and issue estoppel applied against appellant. The Judge held further that “no cause of action could be successfully maintained against fifth and sixth defendants”.

    2. In the course of his judgment the Judge also concluded that there was no evidence to indicate a breach of the agreement on the part of the fifth and sixth defendants.

20. The present claim of the appellant against defendants 1, 2, 3 and 4 is for specific performance of the agreement of 2 December 1977. There is a dispute as regards the position of defendant 3 as a party to the agreement — the claim is against defendants 1, 2, 3 and 4 whereas in the alternative claim it is against first, second and fourth defendants only.

21. The issue in regard to the claim against the fifth and sixth defendants in the present action is set out in paras 17 to 20 of the Statement of Claim which read as follows:—

    17.	On or about 5 October 1979, without the plaintiff’s knowledge, a sale agreement was entered into between the fifth Defendant of the one part and the sixth Defendant of the other part whereby the fifth Defendant agreed to sell and the sixth Defendant agreed to purchase the said land for a consideration of $1.2m free from all charges and encumbrances and with vacant possession (hereinafter called the Peglin-Ricwal Agreement).
    18.	Covenant 2 of the Peglin-Ricwal Agreement stated that the sale is subject to and conditional upon the Vendor being able to successfully remove the private caveat lodged by Loh Kee Peng on behalf of the Plaintiff.
    19.	On 10 October 1979 the sixth Defendant lodged a private caveat against the said land.

22. The affidavit in support filed by Tan Chee Lan on behalf of the appellant is as follows:—

    17.	On or about 5 October 1979, without the Plaintiff’s knowledge, a sale agreement was entered into between the fifth Defendant of the one part and the sixth Defendant of the other part whereby the fifth Defendant agreed to sell and the sixth Defendant agreed to purchase the said land for a consideration of $1.2m free from all charges and encumbrances and with vacant possession (hereinafter called the Peglin-Ricwal Agreement). The copy of the Peglin-Ricwal Agreement as supplied to the Plaintiff is annexed and marked “TCL B”.
    18.	Covenant 2 of the Peglin-Ricwal Agreement stated that the sale is subject to and conditional upon the Vendor being able to successfully remove the private caveat lodged by Loh Kee Peng on behalf of the Plaintiff.
    19.	(i) At or before they entered into the Peglin-Ricwal Agreement, both the fifth Defendant and the sixth Defendant knew of the existence of Loh-Peglin Agreement and in particular were aware of the terms of Covenant 4(i). (ii) By entering into the Peglin-Ricwal Agreement both the fifth Defendant and the sixth Defendant knew and intended that the Peglin-Ricwal Agreement would constitute a breach by the first, second, third and fourth Defendants of the said Covenant 4(i). (iii) The fifth and sixth Defendants thereby induced a breach of the said covenant.

23. The claim, it should be noted, is therefore based on inducement. In that regard we were urged to note the following:—

    1. The agreement of 2 December 1977 had never been terminated. The caveat was entered to protect the appellant and the caveat was only applied for on 9 November 1978.

    2. The 745,500 shares of defendants 2, 3 and 4 in the fifth defendant company would constitute a majority in the shareholding. The appellant has no claim against defendant 3 who had only 34,500 shares.

    3. The land which was the main asset of the fifth defendant company formed an integral part of the sale of shares. It was submitted that cl 3 at page 156, cl 4 of the Agreement at page 158 and cl III(A) at pp 162 and 163 would lend support to this argument.

24. The claim against defendants 5 and 6 is:—

    1. an injunction to restrain the fifth and sixth defendants, etc. from conveying or otherwise disposing of the land to any other person, and

    2. damages for inducing a breach by the first, second, third and fourth Defendants, alternatively by the first, second and fourth Defendants of Covenant 4(i) of the Loh-Peglin Agreement.

25. The causes of action in the two different Civil Suits are therefore:—

    1. In Civil Suit No 92/79 — specific performance of the alleged contract between appellant and the fifth defendant;

    2. In the present action i.e. Civil Suit No 111/80 — the fifth and sixth defendants by entering into the second agreement induced a breach between appellant and the first, second, third and fourth defendants, a cause of action based on tort.

    THE TORT OF INDUCEMENT TO BREACH CONTRACT

26. Learned counsel for the appellant referred us to Greig v Insole [1978] 1 WLR 302, 332, 340 a passage in which, he submits summarises the law regarding the tort of inducement to breach a contract.

    At common law it constitutes a tort for a third person deliberately to interfere in the execution of a valid contract which has been concluded between two or more other parties, if five conditions are fulfilled: First, there must be (a) “direct” interference or (b) “indirect” interference coupled with the use of unlawful means; see per Lord Denning MR in Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106, 138. As to the meaning of “interference” this is not confined to the actual procurement or inducement of a breach of contract: it can cover a case where the third person prevents or hinders one party from performing his duties even though this be not a breach. Secondly, the defendant must be shown to have knowledge of the relevant contract. Thirdly, he must be shown to have had the intent to interfere with it. Fourthly, in bringing an action, other than a quia timet action the plaintiff must show that he has suffered special damage, that is more than nominal damage; see Rookes v Barnard [1964] AC 1129, 1212, per Lord Devlin. In any quia timet action, the plaintiff must show the likelihood of damage to him resulting if the act of interference is successful; Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691, 703, per Diplock LJ. Fifthly, so far as it is necessary the plaintiff must successfully rebut any defence based on justification which the defendant may put forward.

27. Raja Abdul Aziz next referred to Thomson & Co Ltd v Deakin [1952] Ch 646, 678, 681 where it was held inter alia that

    apart from a conspiracy to injure, which was not in question here, acts of third party lawful in themselves do not constitute an actionable interference with contractual rights merely because they bring about breach of contract, even if they are done with the object and intent of bringing about such breach. The tort of procuring a breach of contract however is not confined to direct intervention. The intervener knowing of the existence of a contract between A and B and acting with the object of procuring its breach by A to the damage of B will be liable not only (1) if he intervenes by persuading A to break it, but also (2) if he intervenes by the commission of some act wrongful in itself so as to prevent A from in fact performing his contract and also (3) if he persuades a third party to do an act in itself wrongful or not legitimate (as committing a breach of a contract of service with A) so as to render, as was intended, impossible A’s performance of his contract with B.

28. Referring next to a passage at page 681 which reads:

    I come then to such formulation of the result as seems to me to be correct; but I should first add this. The argument that this tort should be confined to such direct intervention or interference as is illustrated, for example, in Lumley v Gye introduces this strange difficulty. A limited company, a persona ficta, can only act through agents or servants. If the intervention has to be of so direct a kind, it would obviously create strange problems in the case of a limited liability company. No doubt, if I approach some person in the company who has authority on the company’s behalf to make contracts, I may be said to be approaching the company direct. I think that the illustration of the company emphasizes the anomaly which would result if, in the case of a limited company, a tortious act were only committed if the person approached or induced had a particular office or responsibility (actual or perhaps ostensible) in that company.

29. From this, he says, two propositions follow. First, if the person approached has authority e.g. a Managing Director it should be regarded as interference with the party who is a party to the contract. It becomes particularly relevant in the context that Datuk Yeap Kee Aik was the Managing Director of Peglin Development, not a mere officer or servant.

30. We were referred to a number of cases, of which the most significant, in this respect, is HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159, 172.

31. A company, he says may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such. So you will find that in cases where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company.

32. Secondly, the evidence, we were urged indicates that fifth defendant knew or ought to know of the agreement of 2 December 1977 which required the defendants to hand over control and management of the fifth defendant company to appellant on completion of the sale. (Clause 8(c) of Agreement).

33. For instance, the agreement between fifth defendant/sixth defendant mentioned the caveat, at cl 3. This together with the statutory declaration of the Director of the appellant company and its annexures show that the agreement of 2 December 1977 still subsisted. Also that for the same reasons sixth defendant knew of the existence of the caveat. The other defendants (or defendants 1, 2 & 4) he added made use of the fifth defendant being a separate legal entity as vehicle for disposing the land to sixth defendant.

34. From this, two inferences, he added should be drawn — the fifth defendant knew of the first agreement through the first defendant because knowledge of the latter will be imputed to the fifth defendant that the sale of the land would deprive appellant of his benefits under the agreement, and on the basis of what was said in Thomson v Deakin (supra) when the intervener deals directly with the controlling mind he is to be taken as dealing in effect with the party to the contract. The sixth defendant, in dealing with the first defendant, Datuk Yeap was directly interfering with the contract entered into between the appellant and the four defendants.

35. It cannot be gainsaid that under Ord. 18 r 19 pleadings will only be struck out in plain and obvious cases. So long as the Statement of Claim discloses some ground of action, the mere fact that the plaintiff is unlikely to succeed at the trial is no ground for striking out. See Mooney v Peat Marwick & Mitchell  [1967] 1 MLJ 87 . We need only refer to a passage from another authority referred to by learned counsel, the Privy Council decision in Rediffusion (Hong Kong) Ltd v Attorney General of Hong Kong [1970] AC 1136:

    It is a well established principle that the summary power under RSC O 18 r 19 to strike out a writ or pleading as disclosing no reasonable cause of action or defence should be exercised only in plain and obvious cases... No evidence is admissible on a cause of action summons... the only documents that can be looked at are the writ, the documents referred to in the writ...

36. Counsel therefore submitted that it was premature for the judge to hold that the claim against defendants is bad because there is no cause of action.

    DIRECT INTEFERENCE

37. Though the law recognises that a company is a separate legal entity from its shareholders, courts have from time to time been quite prepared to prevent the shareholders from committing fraud, submits counsel.

38. We were referred to Gilford Motor Co v Horne [1933] Ch 935 and Jones v Lipman [1962] 1 WLR 832 as two such instances. In the former case, an agreement had been entered between the company and its Managing Director, Horne who covenanted not to solicit customers and persons “in the habit of dealing with other company”, whilst holding office or afterwards. Defendant opened a spare parts business for the sale of spare parts of Gilford vehicles, the vehicles assembled and sold by the plaintiff company.

39. The court held that the business carried on by Horne was formed as a device, a strategem, in order to mask the effective carrying on of business of Horne.

40. In Jones v Lipman, the first defendant agreed to sell freehold land with registered title to the plaintiff for £5,250. Pending completion he sold and transferred the land to the defendant company (having a capital of £100), which he acquired and of which he and a clerk of his solicitors were sole shareholders and directors, for £3,000, of which £1,564 was borrowed by the defendant company from a bank and the rest remained owing to the first defendant.

41. The court held that the defendant company was a cloak for the first defendant, who could compel a transfer of land to the plaintiffs, and specific performance was accordingly decreed against both defendants.

42. We were also referred to Connors Ltd v Connors [1940] 4 All ER 179 where in disposing of the shares in the company, there was no mention of goodwill. Counsel drew a parallel between Connors’ case and the present appeal.

    INDIRECT INTERFERENCE

43. It was submitted that the fifth defendant is in fact the creature of the first defendant. The agreement requires the land to be in the name of the fifth defendant when the shares were taken over eventually. It is therefore implied that the fifth defendant will not part with the land for so long as the agreement between the appellant and the four defendants was still subsisting. This implied restraint was known to the fifth defendant because it was aware of the existence of the caveat. In fact, it was the fifth defendant who applied for the removal of the caveat even before the commencement of the Civil Suit No 92/79.

44. The sixth defendant by entering into the agreement with the fifth defendant must have intended to cause the fifth defendant to commit breach of the implied covenant. Breach of the implied covenant is an unlawful act. This forms an unlawful element according to the alternative test of indirect interference.

45. Counsel also referred us to a passage from the judgment of Lord Denning in Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106, 138:

    Indirect interference will not do. Thus a man who “covers the market” in a commodity may well know if it may prevent others from performing their contracts, but he is not liable to an action for so doing ... Indirect interference is only unlawful if unlawful means are used.

46. Even if the fifth defendant is a separate entity, and Datuk Yeap first defendant has nothing to do with it, still because of the implied condition that the property will not be transferred, the first agreement will still subsist. That is known to fifth defendant and it should also be known to sixth defendant by entering into this agreement to take away the property in the agreement and therefore inducing a breach of agreement to sell the shares with the land. Thus there had been indirect interference by unlawful means.

47. Knowledge of the subsisting agreement would counsel urges, arise from the existence of the caveat itself. A passage from the decision in Greig v Insole was cited:

    If the officers of the trade union, knowing of the contract, deliberately sought to procure a breach of it, they would do wrong: see Lumley v Gye (1853) 2 E & B 216. Even if they did not know of the actual terms of the contract, but had the means of knowledge — which they deliberately disregarded — that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not.

48. The trial judge himself found that there was knowledge.

49. Regarding the question of intention, it was clear from the statutory declaration that the agreement had not been terminated, it was submitted. The caveat was after all lodged by the appellant and if the sixth defendant knowing of it went on with the agreement of 5 October, then there was intent to cause wrong doing.

50. As to the fourth ingredient of damage, there is a difference of $300,000 in the price between the first agreement and the second. But more than that the appellant, who had made payments under the earlier agreement would have ended up with a “shell” company, had the second agreement been allowed to be performed.

51. Justification in law, he went on was for the fifth and sixth defendant to put forward (see Greig v Insole) and in the proceedings, they have not provided any justification.

52. There was therefore, he says a cause of action either on the basis of direct interference or alternatively an indirect interference disclosed against both respondents for inducement to breach of contract.

53. Referring now to the Grounds of Judgment, it was indicated to us that in both the cases cited therein, Doshi and Belmont the principle was that for knowledge not to be imputed to the person, there must be fraud present in the act of the agent i.e. the agent must be acting in fraud of the principal or that the agent, together with others are conspiring to defraud the principal. In this appeal the position is different. Here the first defendant is trying to use fifth defendant as a cloak in order to transfer the land to sixth defendant, and not to act in fraud of the fifth defendant, or conspiring with second, third and fourth defendants so to do.

54. It seems to us that counsel is correct in saying that the learned trial judge erred in applying the principles in Doshi’s case [1975] 1 MLJ 85, and Belmont’s case to the present one. In the former case, Chooi and his wife were the sole directors and shareholders of the Nominee Company, and Chooi acted as respondents’ solicitors in relation to the transfer of the premises to him by the Company. It was alleged that the transfer of the premises from Chooi to the Nominee Company was in fraud of the appellant because the purported consideration was far below the market value. It was held that the solicitors’ knowledge of fraud, if any, cannot be imputed to the respondent.

55. The facts in Belmont’s case are equally different from those of the present appeal, so that the principle arising from that decision is equally inapplicable. Again it should be emphasised that first defendant was not using the fifth defendant company to defraud itself, but merely as a cloak for his own activities.

56. Mr. Chelliah says that the only person who can break the contract is the first defendant or the fourth defendant because the fifth defendant company cannot break the contract, not being a party to it. So the most that could be said was that the first defendant in order to enable himself to break the contract got the fifth defendant to agree to sell the land to sixth defendant. There was therefore merely a party finding an excuse to break the contract, not a case of inducement to break the contract.

57. Summarising his stand on this issue, he maintains that

    1. on the facts itself the contract was broken before the alleged act of the first, fifth and sixth defendants on 5 October 1979;

    2. even if the contract was not so broken before 5 October 1979 the alleged act of entering into the contract with the sixth defendant on 5 October does not show any interference or intention either directly or indirectly in order to bring about a breach of the contract;

    3. even if the act of entering into the agreement of 5 October 1979 indirectly brought about the result of breaking the contract, the act itself was the lawful act which fifth and sixth defendants are entitled to do and therefore that cannot be based on tort of inducing breach of contract.

58. As regards A we are inclined to agree with Raja Abdul Aziz that it is not for us to decide at this appeal whether the first agreement had been breached. Appellant’s position is that he did not pay on 6 March because they were told (by Datuk Yeap) that it was all right not to pay. See Syarikat Eastern Plastics Industry v Syarikat Lam Seng Trading [1972] 1 MLJ 21 .

59. In reply to points B and C Raja Abdul Aziz says and we are inclined to agree with him that there is evidence to support the view that fifth and sixth defendants must be taken to be aware that the implication of the agreements which are subsisting so far as the appellant is concerned, was that the land cannot be disposed of to any third party. Indeed the term used by the appellant in the application for the caveat was that it is to prevent the land from being disposed of to any third party, and sixth defendant is a third party, the inducer. The inducement is the extra $300,000 being offered for the land.

60. He goes on to say that thus acting through the first to fourth defendants, sixth defendant induces the fifth defendant to break the agreement, such breach being a “wrongful act”, and therefore making it tortiously liable. The following portion of the judgment in Thomson v Deakin [1952] Ch 646, 678, 681 cited is relevant:

    The matter then proceeds to the next stage. So far I have considered only the case in which the intervener directly acts himself, either by persuasion or by some wrongful act of his own. What is the situation if he attains the same result, indirectly, by bringing his persuasion or procuration to bear upon some third party, commonly a servant of the contracting party, but possibly an independent third person? In my judgment, it is reasonably plain (and the result, as it seems to me, would otherwise be highly illogical and irrational) that, if the act which the third party is persuaded to do is itself an unlawful act or a wrongful act (including in that phrase a breach of contract) and the other elements are present (namely, knowledge and intention to do the damage which is in fact suffered), then the result is the same and the intervener or procurer will be liable for the loss or damage which the injured party sustains.

    RES JUDICATA

61. Raja Abdul Aziz referred us to the House of Lords’ decision in Carl-Zeiss-Stiftung v Rayner & Keeler Ltd [1966] 2 All ER 536 at page 572:

    The broader principle of res judicata is founded on the twin principles so frequently expressed in Latin that they should be at an end to litigation and justice demands that the same party shall not be harassed twice for the same cause. It goes beyond the mere record; it is part of the law of evidence for, to see whether it applies, the facts and reasons given by the judge, his judgment, the pleadings, the evidence and even the history of the matter may be taken into account (see Marginson v Blackburn Borough Council ([1939] 2 KB 426; [1939] 1 All ER 273). Res judicata itself has two branches: (a) Cause of action estoppel — ... (b) Issue estoppel — ...

62. Counsel says that in this case, it cannot be a cause of action estoppel because the cause of action in the earlier case is quite different from the present one. There the fifth defendant was sued for breach of contract, whereas in the present case the cause of action is the tortious act of inducing a breach of contract. This same argument was not viewed with favour in the court below.

63. The learned trial judge considered the principles enunciated in the Privy Council decision in Yat Tung Investment v Dao Heng Bank [1975] AC 581.

64. A scrutiny of the facts there shows that, there indeed unlike the present appeal the issue raised in the second litigation was the fundamental part of the first.

65. The defence of res judicata and the authorities considered by the learned trial judge were reviewed in Brisbane City Council v Attorney General [1979] AC 411 the facts wherein were as follows:

    In 1938 the trustees of a society whose main function was to organise a district annual show conveyed about 20 acres of land to Brisbane City Council in consideration of the council’s discharging a debt of £450 owed by the society and on the following conditions (recorded in the minutes of the council and in a letter of 25 October 1937, from the council to the trustees):

    (a) the area to be set apart permanently for showground, park and recreation purposes; (b) the show ring to be levelled off; (c) the show society to be granted the exclusive use of the ground without charge for a period of two weeks in each and every year, for the purposes of and in connection with the district annual show.

66. In 1970 developers applied under the City of Brisbane Town Planning Act 1964 for consent to use the land as a shopping centre and the council contracted to sell the land to them. The relator S gave notice of objection to the granting of planning consent: his appeal to Local Government Court eventually reached the High Court of Australia. Another appeal against the Local Government Court was dismissed in December 1975. In March 1971, during the pendency of the planning appeals, the Attorney General at the relation of S brought an action against the council and the developers for a declaration that the purported sale to the developers was ultra vires and void. That action was dismissed. In the present proceedings, the Attorney General on the relation of S and B sought, as against the council and the developers, a declaration that the land was subject to a valid and enforceable charitable trust. The trial judge found as a fact that a “show” in Queens land operated to encourage agriculture and horticulture and made an order granting the declaration. The council and the developers appealed on the grounds that the council did not hold the land as trustees; that there was no valid and enforceable public charitable trust and that even if there were the Attorney General was debarred from asserting it in that, inter alia , the existence of the trust could and should have been asserted in the previous litigation against the council. The Full Court of the Supreme Court dismissed the appeal.

67. The defence of res judicata was considered and disposed of at page 425, and we cite:—

    The second defence is one of “res judicata”. There has, of course, been no actual decision in litigation between these parties as to the issue involved in the present case, but the appellants invoke this defence in its wider sense, according to which a party may be shut out from raising in a subsequent action an issue which we could, and should, have raised in earlier proceedings. The classic statement of this doctrine is contained in the judgment of Wigram VC in Henderson v Henderson (1843) 3 Hare 100 and its existence has been reaffirmed by this Board in Hoystead v Commissioner of Taxation [1926] AC 155. A recent application of it is to be found in the decision of the Board in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581. It was, in the judgment of the Board, there described in these words: ... there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. (p 590). This reference to “abuse of process” had previously been made in Greenhalgh v Mallard [1947] 2 All ER 255 per Somervell LJ and their Lordships endorse it. This is the true basis of the doctrine and it ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut from bringing forward a genuine subject of litigation. In their Lordships’ opinion there is no room for application of this doctrine here.

68. We are satisfied that in this appeal, likewise res judicata should not be applied because the cause of action and the issues are different.

69. We would allow the appeal with costs.

Cases

Greig v Insole [1978] 1 WLR 302; Thomson & Co Ltd v Deakin [1952] Ch 646; HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159; Mooney v Peat Marwick Mitchell & Co [1967] 1 MLJ 87; Rediffusion (Hong Kong) Ltd v Attorney General of Hong Kong [1970] AC 1136; Gilford Motor Co v Horne [1933] Ch 935; Jones v Lipman [1962] 1 WLR 832; Connors Ltd v Connors [1940] 4 All ER 179; Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106; Doshi v Yeoh Tiong Lay [1975] 1 MLJ 85; Syarikat Eastern Plastics Industry v Syarikat Lam Seng Trading [1972] 1 MLJ 21; Carl-Zeiss-Stiftung v Rayner & Keeler Ltd [1966] 2 All ER 536; Yat Tung Investment v Dao Heng Bank [1975] AC 581; Brisbane City Council v Attorney General [1979] AC 411

Legislations

RHC 1980: Ord. 18 r 19.

Representation

Raja Abdul Aziz Addruse (Tan Chee Lan with him) for the appellant.

RR Chelliah (J Gurusamy and Dennis Xavier with him) for the respondent.