Consent Judgments and the avenue for abuse
Updated: Feb 11, 2022
A Consent Judgment ("CJ") is, by and large, an awkward affair. Briefly, a CJ involves disputing parties agreeing to amicably resolve their disagreement by recording a judgment. A CJ is contractual in nature.
In Kamil Azman v Amanah Raya Berhad  MLJU 580, the Federal Court re-emphasised this point:
In this regard we are mindful that this Court in Tan Geok Lan v La Kuan @ Lian Kuan  3 MLJ 465, had ruled that a consent order is akin to a contract with superadded command of the court. Thus it must be given its full contractual effect. It is to be interpreted in the same manner as the court would a contract. The canons of interpretation are as familiar as any canons of construction would be to a legal practitioner. The paramount consideration is to ascertain the intention of the parties to the consent judgment. Such intention is to be objectively assessed by the court, in particular by reviewing the language employed in the Consent Judgment.
We further agree with the respondents’ submissions that the Consent Judgment must be construed as a commercial instrument. The aim is to ascertain the contextual meaning of the relevant contractual language. It must be done objectively as to what a reasonable person, circumstanced as the actual parties in a commercial environment were, would have understood it to mean. This must be gathered from the language used and its relevant contextual sense (see SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor  1 CLJ 177).
The avenue for abuse of a Consent Judgment
A CJ, given that it carries the imprimatur of the Court, is open to abuse. One particularly pernicious aspect of this (which I personally have seen in practice) would be a situation where colluding parties purport to "sue" each other.
They then record a CJ in terms that are beneficial to them. This CJ is then utilised for the purposes of carrying out an unlawful scheme to defraud.
The Courts appreciate this fact. In Hill v Haines  Ch 412, the English Court of Appeal noted that “It can be assumed that ancillary relief orders resulting from a hard fought trial are less likely to be tarnished by collusion or fraud on the creditors than consent orders.”.
In Chow Chuan Fat v Yeo Chai Seng  MLJU 1346, Wong Kian Kheong J carried out a detailed assessment as to CJs and the circumstances in which they may be set-aside.
His Lordship firstly outlined 5 circumstances in which the Court can set-aside a perfected judgment:
D. Whether the Court has jurisdiction to set aside a sealed Consent Judgment
Based on my understanding of case law, there are at least 5 circumstances wherein the High Court may exercise its exceptional jurisdiction to set aside an earlier perfected judgment or order of the High Court (which has not been appealed to the Court of Appeal):
(1) when the sealed judgment or order has been made without jurisdiction (1st Vitiating Circumstance).
(2) when the perfected judgment or order has been obtained by way of fraud or collusion as stated in s 44 EA (2nd Vitiating Circumstance).
(3) when the sealed judgment or order has been obtained in contravention of a mandatory statutory prohibition (3rd Vitiating Circumstance).
(4) when there is a breach of the first rule of natural justice, namely when the perfected judgment or order may be impugned on the ground of biasness (4th Vitiating Circumstance).
(5) when there is a breach of the second rule of natural justice, namely when a party has been deprived of his or her right to be heard before the judgment or order is pronounced (5th Vitiating Circumstance).
As is characteristic of His Lordship’s judgments, the above 5 vitiating circumstances were exhaustively supported.
His Lordship held that premised upon the peculiar facts before him, an interlocutory application (Enclosure 40) was a suitable mechanism to set-aside the perfected Consent Judgment. Despite an objection from the Plaintiff’s Counsel, His Lordship held as follows:
The Plaintiff’s learned counsel, Ms. Kho Zhen Qi (Ms. Kho), had contended that Court Enc. No. 40 was defective. This is because the Consent Judgment had already been perfected and a perfected consent judgment can only be set aside by way of a fresh suit (Fresh Suit). ...
Firstly, I am of the view that if a party relies on the 2nd Vitiating Circumstance (fraud or collusion), the party has to file a Fresh Suit to set aside the perfected judgment or order. This is because the 2nd Vitiating Circumstance cannot be proven by way of affidavit and can only be proven in a trial.
If a party wishes to set aside a sealed judgment or order under the 1st, 3rd, 4th or 5th Circumstance, whether the party should file a Fresh Suit or apply to the same Court which has granted the perfected judgment or order, depends on the justice of the matter. I rely on Selvam Holdings, at p. 24 and 26-27, as follows:
“Under the aforesaid circumstances, a court is seised with the necessary jurisdiction to entertain an application to set aside the earlier order ex debito justitiae. Expressed in another way there is no need to adopt the appeal procedure nor to file a fresh suit to set aside the defective order. That can be done in the same proceedings where the impeached order was granted and before the same judge or another judge with concurrent jurisdiction.
Lam Hooi v Tanjung Pasir Puteh Realty  MLJU 333
RG Shinde v State of Maharashtra  1 MLJ 42 (Indian Supreme Court)
Selvam Holdings v Grant Kenyon  3 MLJ 201
Pacific Fantasy Holdings v Heritage Grand Mansion  10 MLJ 360
Badiaddin v Arab Malaysian Finance  1 MLJ 393, FC (locus classicus)
In conclusion, a party that has been wronged by a fraudulent/unlawful consent judgment must act quickly to protect his rights.
As outlined above, we came across a similar situation, where a party had wrongfully utilised a Consent Judgment for the purposes of unlawfully dissipating assets (shares and an entire building).
We secured not merely a prohibitory injunction (to restrain disposal of the assets), but also a quia timet injunction, to restrain the initiation of proceedings designed to stultify the Court’s processes. Both were granted, thereby stopping the wrongdoers in their tracks.
Fortune truly does favour the prepared.
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