Howse Finke equity- a possibility in Malaysia?
Howse Finke equity- a possibility in Malaysia?
The chess-set caper
Consider a simple scenario.
Ascrobius, a chess savant, was gifted an expensive, one-of-a –kind chess set for winning a Chess Tournament. Delighted with his prize, it takes centrestage in his home.
At Ascrobius’s celebratory jamboree, Boris, an acquaintance of his and fellow chess-enthusiast, gushes over the set. Being the owner of an art gallery, Boris believes that the set would perfectly complement his setup.
After a night of heady wine and jocosity, Boris casually slips in that he would like to display the set at his gallery. Bibulous Ascrobius gladly obliges, believing in his addled mind that the chess-set ought to be shown to the world. Boris packs the set away and has it displayed in his gallery that very night.
The next morning, Ascrobius is shocked at what he has agreed to. The sentimental value of the set is invaluable. Sheepishly, he telephones Boris. After a spot of small talk, he asks for the set back.
Boris is taken aback. He asserts that Ascrobius has agreed to give him the set and that the gallery would hold it indefinitely. It would also be put on display in a tour that Boris is planning for the New Year.
The conversation terminates in a flurry of expletives. Both men are at loggerheads and neither will budge.
When the softly, softly, catchee monkey approach of waiting it out fails, Ascrobius instructs his solicitors to initiate litigation. A Writ and Statement of Claim are taken out against Boris and Ascrobius seeks a declaration that he is the lawful owner of the set.
Boris puts in his Defence and pleads that the set is an unconditional gift. The matter is set down for trial.
Intervening events- the repossession
Whilst preparing for trial, Ascrobius is informed that the chess set is to be displayed at a public exposition. It will be stored in an unlocked display case, with minimal security.
Ascrobius has seen the light. He believes the legal process to be a 50-50 gamble and decides to take the law into his own hands. He shall repossess what is rightfully his.
The suit is withdrawn
Ascrobius immediately telephones his solicitor and instructs him to withdraw the suit. His solicitor is bewildered and asks for an explanation. Ascrobius refuses to give one and demands that the suit be withdrawn.
The necessary correspondence is exchanged with Boris’s solicitors. Boris is only too pleased and agrees to a withdrawal with no order as to costs. The matter is withdrawn within days and the suit is disposed of.
The self-help Sokolsky
Upon the withdrawal being finalised, Ascrobius steals into the exposition disguised. Availing himself of self-help, he makes off with the set.
It (set) steals the limelight in his home again and he puts up a Facebook picture of it with the caption “Checkmate.”
Boris takes to war
Upon discovering the usurpation, Boris is livid. Seeing Ascrobius’s post sends him over the edge. He immediately dials his solicitors and tells them to rain hellfire on Ascrobius.
The above scenario may appear to be a one-off, but it happens more often than one may think. It may also take on different forms; one may envision a client who first wants to attempt the legal route in seeking a mandatory injunction to deliver-up goods.
Subsequently, due to a change in the circumstances, he may instruct his solicitors to withdraw the application (for a mandatory injunction) and to then rely on self-help measures. Impatience, despite the speedier disposal of cases, plays a big factor.
How ought Boris’s solicitors take to war? In a game of legal chess, it may be necessary to employ stratagems that reverberate far and wide. Boris’s conduct, whilst less than stellar, has been outmatched by Ascrobius’s kleptomania.
It must be remembered that Ascrobius has deliberately misled not only his own solicitors and Boris’s solicitors, but also the Court.
The Malaysian position is arid
In Malaysia, there appears to be a dearth of cases dealing with this position. Should a reader discover otherwise, I would be grateful to hear from you.
Turning to the common law jurisdiction of Australia, Boris’s solicitors may find respite.
There is a doctrine that is gaining traction in Australia, namely that of “Howse Fink” equity. It sees the Court intervening in situations where a party initiates a devious stratagem to achieve a result that it sought to achieve in the Court proceedings (but failed).
To gain some insight into this form of equity, it is necessary to consider its incubation; what was the backdrop to its development?
Staying true to its name, Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 43 ALR 449 served as the first notable instance in which the Australian Courts adjudicated on the notion of sidestepping justice.
The facts of Pioneer Concrete are relatively simple. Section 155 of the Trade Practices Act 1974 granted the Trade Practices Commission (TPC) the right to issue a notice requiring a person to furnish information. Failing to comply with the notice was a criminal offence.
The appellant had allegedly breached Section 45 TPA 1974. The respondent (a separate 3rd party) sued on this.
In an unconnected proceeding, the TPC issued a notice under S. 155 TPA 1974. The appellant was concerned that the respondent would be able to obtain the information provided pursuant to the notice. As put by Gibbs CJ:
In the present case the contravention alleged is a contravention of s 45 of the Act, which exposes the persons who have contravened the section to penalties but not to criminal proceedings: see ss 76 and 78 of the Act. It is said that it is possible that the applicant in the pending proceedings (whose interest is adverse to the persons to whom the notices were given) may be able to obtain from the Commission the information and documents furnished to it in compliance with the requirement under s 155 and use them in evidence in the proceedings against the persons compelled to furnish them, notwithstanding that it might not have been possible for the applicant to obtain that information or those documents by way of interrogatories or discovery in the proceedings.
The High Court (Australia’s equivalent of Malaysia’s Federal Court) held that to restrain the TPC from carrying out its legitimate functions on the off-chance that the respondent would access the information, without any actual risk, would not be sustainable:
No doubt it is right to say that the power conferred by the section might, in some cases, be used so as improperly to interfere with judicial proceedings. I incline to think that if the power were used to assist a party in proceedings already pending, in a way that would give such a party advantages which the rules of procedure would otherwise deny him, there would be a contempt of court. … In the present case it was not shown that the person who gave the notice had any intention to interfere with the course of justice, or that there was a real risk that the exercise of the powers under s 155 would in the circumstances have that effect.
Pioneer Concrete set-out the proposition that misusing the Court’s powers to grant one party an advantage (one denied by the rules of court) would be contempt. This is a very important legal rule as it supports the notions of justice that underpin every modern legal system.
Taking it one step further- preventing the circumvention of justice
Pioneer Concrete was considered and applied by Powell J in Howse Fink and Johnson Computing Services v Beard (BC8901536).
The facts of Howse Fink are interesting.
The axeman cometh
The plaintiff was the employer of the defendant. It was alleged by the defendant that as a term of her employment, a Mercedes Benz 450 SL Coupe (“the car”) would be taken out on a hire-purchase agreement and paid for by the plaintiff.
The defendant terminated her employment but kept the car (given how beautiful this car is, the defendant’s position is understandable).
The plaintiff sued for a return of the same and the defendant counterclaimed, asserting that it was rightfully hers.
The “devious stratagem” of the Plaintiff
The plaintiff devised a dastardly scheme; it stopped all hire-purchase payments.
The leasing agency repossessed the car after which, the plaintiff merely made the outstanding payments and took possession of it (the car).
The defendant sought an interlocutory mandatory injunction to have possession of the car returned to her. It is pertinent to note that the final relief sought by the plaintiff in the civil suit was for possession of said car.
Powell J noted that “…the making of an interlocutory mandatory Order for restitution, in a case in which the applicant's title to possession of the subject matter of the Order is in dispute in the proceedings, would be a highly unusual course to adopt…”
However, due to the “manner in which the Plaintiff recovered possession of the motor vehicle can only be described as a devious stratagem designed to achieve the result which it had sought to achieve in the proceedings, but which, at the time of its adopting that stratagem, it had not achieved by Order of the Court”, the interlocutory order was granted.
Contempt of Court- skirting dangerously close
Whilst not making a finding that there was contempt of Court on the part of the plaintiff, Powell J noted that “[t]he Plaintiff's conduct in so acting, if not constituting contempt of Court, has come perilously close to it, and is to be roundly condemned.
His Lordship accordingly granted the mandatory injunction and ordered the Plaintiff to deliver-up the car pending the disposal of the suit.
The doctrine of Howse Fink equity has been considered and applied by several Australian Courts (limited to the jurisdiction of New South Wales).
Eagle Star Trustees v Tai Ping Trading (No. 2) (BC9001811)
Cinc v Bucan Holdings (BC200406110)
Pioneer Mortgage Services v Columbus Capital (BC201509575)
Takeaways from Howse Fink
In the scenario outlined above, Boris’s solicitors would be able to utilise the doctrine of Howse Fink equity to assist them in framing a claim against Ascrobius.
The unscrupulous conduct of Ascrobius, in misleading the Court, all solicitors concerned and Boris, would be met dimly by any presiding judge.
In withdrawing the suit and “removing” the jurisdiction of the Court, Ascrobius deliberately evaded the Court proceedings whilst knowing full well that he intended to commandeer the chess set through his own means.
This would fall squarely within the realm of Howse Fink equity and the Court would be able to step in to proscribe his “devious stratagem”.
To initiate an action for contempt would also carry a strong psychological power-play; the opposition would be far willing to capitulate and to enter into negotiations should such an application be put in.
Any application for contempt MUST be treated with caution though and only utilised for suitable, deserving cases. It is not a bargaining chip to be toyed with and a reprobate application will certainly be condemned with a large order as to costs.
In concluding, it is interesting to see how the doctrine of Howse Fink equity is developing in Australia. It is hoped that the same will be imported into the jurisprudence of the Malaysian judiciary as it will see a great reduction in parties opting for “self-help” measures.
It will further serve to uphold the rule of law and to ensure that Malaysia remains attractive to foreign investors.
No savvy entrepreneur would want to put money into a country that employs cowboy diplomacy and Howse Fink equity is perfectly suited to discouraging cattle ranchers.
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