Petroliam Nasional Bhd

- vs -

Cheah

Judgment

Hashim Yeop A Sani SCJ

(delivering the judgment of the Court)

1. This was an appeal against the award of costs by Harun J in Originating Summons No A254 of 1984. We dismissed the appeal with costs and we now give our reasons.

2. The events leading to this appeal may be summarised as follows. On 8 December 1984 the respondent took out an Originating Summons No A254 of 1984 against both the appellants as defendants. In the Originating Summons a number of declarations were sought for, the main ones being —

   1. a declaration that the acquisition of shares in Bank Bumiputra Malaysia Bhd by Petronas is ultra vires the Petroleum Development Act, 1974;

   2. a declaration that the purchase or acquisition of $2.488 billion “problem loans” of Bank Bumiputra Malaysia Bhd by Petronas is ultra vires the Petroleum Development Act, 1974.

3. The backdrop of the Originating Summons is an episode in the banking history of this country popularly described as the “BMF scandal”. In order to rescue the Bank concerned from getting into a crisis due to bad loans the Petroliam Nasional Bhd (PETRONAS in short) acquired a majority share holding in the Bank. The respondent, exercising what he considered as his right as an account holder in the Bank as well as a citizen of this country, took out the Originating Summons to challenge the legality of the acquisition of the shares of the Bank by PETRONAS. Soon after the Originating Summons was served on the appellants both the appellants took out summons-in-chambers on 29 December 1984 to strike out the Originating Summons. The grounds relied on by both appellants were substantially identical namely that the Originating Summons and supporting affidavit disclosed no reasonable cause of action against either of them and that the action was misconceived, frivolous and vexatious as well as an abuse of the process of the court.

4. For all intents and purposes PETRONAS is a government corporation established under the Petroleum Development Act, 1974 and the Companies Act 1965. Some time pending the hearing of the summons-in-chambers to strike out the Originating Summons the second appellant tabled a Bill in Parliament and the Bill was subsequently passed by Parliament as the Petroleum Development (Amendment) Act, 1985. The amending Act of 1985 gave new powers to the corporation and these new powers are described in the new section 3A of the Act as the “power to take over or acquire by agreement, assignment, purchase or by any other means the whole or any part of any commercial undertaking, business or enterprise of whatever form of any person or body of persons (corporate or unincorporate)”. Section 4(1) of the amending Act then declares that:

   Every act done or transaction carried out by PETRONAS before the enactment of this Act that would have been lawful if this Act had been enacted and in force when such act was done or transaction was carried out is hereby declared to be and always to have been lawfully done or carried out by PETRONAS, and such act or transaction may be continued and dealt with under the principal Act as amended by this Act.

5. The amending Act 1985 was made retrospective to have effect from 1 October 1974 i.e. from the date when the parent Act first came into force.

6. So when the summons-in-chambers to strike out the Originating Summons came to be heard on 22 July 1985 the respondent could no longer dispute that he had no cause of action and the whole proceeding before the learned Judge dwelt only on the question of costs.

7. In our law the discretion of the court in matter of costs is clearly spelt out. In the Courts of Judicature Act 1964 s 68(1)(c) puts in no uncertain terms that no appeal should be brought to the Supreme Court where the judgment or order relates to costs only, “which by law are left to the discretion of the Court”, except with the leave of the Supreme Court or the Judge concerned. Order 59 r 3(2) of the Rules of the High Court 1980 provides as follows:

   If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

   This provision is identical to the English Ord. 62 r 3 (see Supreme Court Practice 1979 vol 1 page 959).

8. The general principle envisaged in the rule is simply that costs follow the event and that the successful party is entitled to be paid his costs except when it appears to the Court that in the circumstances of the case some other order should be made same principle was enunciated in greater detail by Parker LJ in Ottway v Jones [1955] 2 All ER 585, 591:

   One starts with this, that, as a general principle, costs follow the event, and the successful party is entitled to be paid his costs unless there are special grounds to order otherwise, and those grounds, it is well settled, must be grounds connected with the cause of action. No doubt, also, where a plaintiff has wholly failed to establish his title or his right, it is impossible judicially to order the successful defendant to pay the plaintiff’s costs. Indeed, as is shown by the cases to which my Lord has referred, it is there said that the occasion for the exercise of the discretion does not arise until the plaintiff has established his right.

9. Because costs is in the discretion of the court there has been a rule of practice of the House of Lords as stated by Viscount Cave LC in Donald Campbell & Co Ltd v Pallak [1927] AC 732 that no appeal would lie for costs only but the House will however entertain an appeal from an order of the Court of Appeal as to costs, where it is alleged that the order is founded upon an error of law.

10. To summarise, an appellate court does not interfere in the question of costs without reluctance. This is because the court below has an absolute discretion except that the discretion must be exercised judicially. An appellate court should not interfere unless it can be shown that there has been an error of law or the purported exercise of discretion was based on grounds wholly unconnected with the cause of action.

11. The main thrust of the argument of the appellants would seem to be that there was a total failure on the part of the respondent to establish his title and therefore it would be impossible for the court to order costs against the appellants. This argument does not however give a correct picture of the situation before the learned judge. The respondent was an account holder with the Bank and he thought he had sufficient interest to come to the court and apply for the declarations. What actually happened was not that there was a failure on his part to establish his title but that the government had successfully taken a Bill through Parliament which altered the very basis on which he relied for his application for the declarations.

12. It was said by counsel for the first appellant that the learned judge had made the remark “this is not cricket” during the argument before him. We feel that the remark if made would be hardly surprising. The circumstances were materials available to the learned judge. Thus as an appellate court we are unable to say that the learned judge had under the circumstances exercised his discretion wrongly. Lord Halsbury in Civil Service Co-operative Society v General Steam Navigation Co 2 KB 756, 765 said:

    No doubt, where a judge has exercised his discretion upon certain materials which are before him, it may not be, and I think is not, within the power of the Court of Appeal to overrule that exercise of discretion. But the necessary hypothesis of the existence of materials upon which the discretion can be exercised must be satisfied.

13. The White Book says at page 938:

    On an appeal as to costs where the costs are in the discretion of the Judge the CA will assume that he exercised his discretion unless satisfied that he did not do so (Re Rotch (1909), 54 SJ 30). A fortiori it will not interfere where he assigns reasons therefor which are perfectly germane and not based on any false principle (Lever Bros v Masboro’ Equitable, etc., Society (1912), 28 TLR 294); nor where there are also other possible grounds for his discretion (Societe des Hotels Reunis v Hawker (1914), 30 TLR 423, CA).

14. Wee Chong Jin CJ in KE Hilborne v Tan Tiang Quee [1972] 2 MLJ 94, 99 said:

    It has long been well settled that costs are in the discretion of the court. It has also long been well settled that an appellate tribunal is not entitled to interfere with a discretion exercised by a lower court unless it is clearly shown that the discretion has been exercised on wrong principles. It has also long been well settled that in the exercise of its discretion a court may, if in its opinion there are grounds for it to do so, refuse to award costs to a party who establishes that he has a good cause of action.

15. The appeal was accordingly dismissed but we directed that the reference.

Cases

Ottway v Jones [1955] 2 All ER 585; Donald Campbell & Co Ltd v Pollak [1927] AC 732; Civil Service Co-operative Society v General Steam Navigation Co [1903] 2 KB 756; KE Hilborne v Tan Tiang Quee [1972] 2 MLJ 94

Legislations

RHC 1980: Ord. 56 r 3(2)

Court of Judicature Act 1964: s.68(1)(c)

Representation

Dato Peter Mooney (Zainudin Haji Ismail and Mrs N Segara with him) for the first appellant.

Suriyadi Halim Omar (Senior Federal Counsel) Muniandy Kannyappan (Federal Counsel) with him for the second appellant.

Raja Abdul Aziz Addruse (William Leong with him) for the respondent.