Pembinaan KSY Sdn Bhd

- vs -

Lian Seng Properties Sdn Bhd

Judgment

Hashim Yeop A Sani (Malaya) CJ

(delivering the judgment of the court)

1. The appellant company, Pembinaan KSY Sdn Bhd (‘KSY’), were the contractors to Lian Seng Properties Sdn Bhd (‘the company’) engaged for the development project of a property (now called KL Plaza) owned by the company.

2. The company had borrowed heavily from various financial institutions for the development project and by June 1986 the company owed KSY $10,529,000 on account of unpaid architect’s certificates. In fact work on the development project came to a standstill on account of the company’s failure to pay and the banks refused to lend any more money to the company. After some negotiations which must have aborted, KSY finally sued the company for the amount of $10,529,000 in January 1987.

3. After various extensions of time granted by the court for the company to file the defence KSY finally entered judgment in default on 31 March 1987 for the same sum and the company was duly informed of this fact.

4. On 22 April 1987 KSY and the company signed a lump sum agreement after negotiations with the various financial institutions where the company agreed that upon completion of the development project they would pay KSY a lump sum of $26,050,000. KSY completed the balance of the work on the development project and a certificate of practical completion was issued on 1 November 1987 but no payment was made.

5. On 10 December 1987 a winding-up petition was filed by Morgan Guarantee Trust Co of New York against the company which was the subject of another appeal (Supreme Court Civil Appeal No 02-454-89). KSY gave notice of intention to support the Morgan Guarantee Trust petition on 15 April 1988. In the appeal by Morgan Guarantee Trust we held that Morgan Guarantee Trust Co of New York was competent to file the petition on the date of the petition (see [1991] 1 MLJ 31).

6. The winding-up petition was postponed a number of times and on 6 March 1989 the company filed a notice of motion to strike out KSY as a supporting creditor on the grounds that it had no locus standi to support the petition. The learned judge granted the order in terms of the motion (see [1989] 3 MLJ 172). Hence this appeal.

7. In his written judgment the learned judge found that KSY founded its rights to be a supporting creditor on two judgments, namely, the default judgment entered on 31 March 1987 for $10,529,000 and on O 14 judgment obtained on 17 November 1988 for $12,902,000. As the O 14 judgment was granted subsequent to the date the company gave notice of intention to support the petition, that is 15 April 1988, we need only concern ourselves in this appeal with the default judgment.

8. The question is whether the default judgment is a sufficient basis for KSY’s application to support the petition.

9. The learned judge devoted a substantial part of his written judgment on the reasons why he found the default judgment to be ‘null and void’ and should therefore be set aside. He concluded at p 17 of his judgment:

   Accordingly the said default judgment entered on 31 March 1987 was irregularly entered independent of the RHC and should be set aside ex debito justitiae.

10. The reasons why he came to this conclusion was that he held that the company had seven days from 23 March 1987 to file the defence, that is, it had up to 2 April to file the defence. Since O 3 r 2(5) of the Rules of the High Court 1980 excludes Saturday and Sunday and purporting to apply Anlaby v Praetorius (1888) 20 QBD 174 and Syarikat Joo Seng v Habib Bank Ltd [1986] 2 MLJ 129 the learned judge ruled that the default judgment relied on by KSY was a nullity. Since the default judgment was a nullity the company had the option to ignore it or go to court to set aside relying on Eu Finance Bhd v Lim Yoke Foo [1982] 2 MLJ 37.

11. With respect, the conclusion of the learned judge was in our view misconceived.

12. Syarikat Joo Seng [1986] 2 MLJ 129 was an appeal where judgment in default of defence was entered without obtaining leave from the court or judge. There the appellant had applied to set aside the default judgment and that was refused by the High Court judge and the appeal was against the refusal. In that case the respondent should have complied with O 19 r 7(1) of the Rules of the High Court 1980 by applying to the court or judge for leave to enter judgment against the appellants.

13. Eu Finance Bhd concerned an appeal on the administrative act of the Collector of Land Revenue and the issue before the court concerned jurisdiction. In Harkness v Bell’s Asbestos & Engineering Ltd [1967] 2 QB 729 Lord Diplock was referring to an order which is a nullity, not an order which has been irregularly obtained.

14. The default judgment in this case until set aside is a good and enforceable judgment. The correct law on this issue is as stated in Isaacs v Robertson [1984] 3 All ER 140 where the headnote reads:

    Orders made by a court of unlimited jurisdiction in the course of contentious litigation are either regular or irregular. It is misleading to seek to draw distinctions between orders that are ‘void’, in the sense that they can be ignored with impunity by those persons to whom they are addressed, and orders which are ‘voidable’, in the sense that they may be enforced until set aside, since any order must be obeyed unless and until it is set aside and there are no orders which are void ipso facto without the need for proceedings to set them aside.

15. In the speech of Lord Diplock reference was made to the passage in the judgment of Romer LJ in Hadkinson v Hadkinson [1952] 2 All ER 567:

    It is the plain and unqualified obligation of every person against, or in respect of, whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged.

16. In this case the application to set aside the default judgment although made on 4 April 1987 was only served on KSY on 19 May 1990. It was exhibited for the first time in the company’s application in the proceeding.

17. It was clear to us that KSY was perfectly entitled to rely on the default judgment as basis for its rights to be a supporting creditor and KSY should be recognized in the petition as a supporting creditor.

18. The appeal was accordingly allowed with costs here and below.

Cases

Anlaby v Praetorius (1888) 20 QBD 174; Syarikat Joo Seng v Habib Bank Ltd [1986] 2 MLJ 129; Eu Finance Bhd v Lim Yoke Foo [1982] 2 MLJ 37; Harkness v Bell’s Asbestos and Engineering Ltd [1967] 2 QB 729; Isaacs v Robertson [1984] 3 ALL ER 140; Hadkinson v Hadkinson [1952] 2 All ER 567

Legislations

Rules of the High Court 1980: Ord.3 r 2(5), Ord.19 r 7(1)

Representations

PS Gill for the appellant.

MS Murthi for the respondent.

Notes:-

This decision is also reported at [1991] 1 MLJ 100