Impeaching an Order/Judgment via a Badiaddin-type claim

Image credit: https://www.barnflakes.com/blog/2020/06/impeach.html

No discussion of a Badiaddin-type suit would be complete without considering the source case: Badiaddin bin Mahidin v Arab Malaysian Finance [1998] 1 MLJ 393 (Supreme Court).

The long and short of it is as follows:

1. Badiaddin (and one other) were the registered co-owners of a parcel of Malay reserve land;

2. Their associate, Ismail, needed funds;

3. Badiaddin charged the lands to Arab Malaysian Finance (Bank);

4. Ismail defaulted on the loan;

5. The Bank obtained an order for sale of the land;

6. Badiaddin applied to the HC for a declaration that the order for sale and the charge were both invalid for being in breach of the Malay Reservations Enactment;

7. The HC granted the declaration. However, the HC ordered Badiaddin to repay the sums owing to the Bank (1^st Order);

8. Subsequently, the HC also ordered the land to be sold to satisfy the balance outstanding on the loan (2^nd Order);

9. Badiaddin then applied to the HC to quash the 2^nd Order, citing contravention with S. 13 of the Malay Reservations Enactment;

10. The Bank argued that the HC was functus officio;

11. The HC held that the 2^nd Order was invalid;

12. The CA allowed the Bank’s appeal and held that the HC was functus officio;

13. The Supreme Court allowed Badiaddin’s appeal and set-aside the 2^nd Order.

    
    

    The Supreme Court observed as follows:

It is of course settled law as laid down by the Federal Court in Hock Hua Bank's case that one High Court cannot set aside a final order regularly obtained from another High Court of concurrent jurisdiction. But one special exception to this rule (which was not in issue and therefore not discussed in Hock Hua Bank) is where the final judgment of the High Court could be proved to be null and void on ground of illegality or lack of jurisdiction so as to bring the aggrieved party within the principle laid down by a number of authorities culminating in the Privy Council case of Isaacs v Robertson [1985] AC 97 where Lord Diplock while rejecting the legal aspect of voidness and voidability in the orders made by a court of unlimited jurisdiction, upheld the existence of a category of orders of the court ‘… which a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court, without his needing to have recourse to the rules that deal expressly with proceedings to set aside orders for irregularity, and give to the judge a discretion as to the order he will make’. 

The Privy Council through Lord Diplock also emphasized that the courts in England have not closed the door as to the type of defects in the final judgment of the court that can be brought into the category that attracts ex debito justitiae the right to have it set aside without going into the appeal procedure, ‘save that specifically it includes orders that have been obtained in breach of rules of natural justice’. Similarly in this country, the statement of Abdoolcader J (as he then was) in Eu Finance Bhd v Lim Yoke Foo [1982] 2 MLJ 37 at p 39 provides the correct guideline on the subject: 

The general rule is that where an order is a nullity, an appeal is somewhat useless as despite any decision on appeal, such an order can be successfully attacked in collateral proceedings; it can be disregarded and impeached in any proceedings, before any court or tribunal and whenever it is relied upon — in other words, it is subject to collateral attack. In collateral proceedings, the court may declare an act that purports to bind to be non-existent. In Harkness v Bells’ Asbestos and Engineering Ltd [1967] 2 QB 729 , Lord Diplock LJ (now a Law Lord) said (at p 736) that ‘it has been long laid down that where an order is a nullity, the person whom the order purports to affect has the option either of ignoring it or of going to the court and asking for it to be set aside’. 

For my part, I must hasten to add that apart from breach of rules of natural justice, in any attempt to widen the door of the inherent and discretionary jurisdiction of the superior courts to set aside an order of court ex debito justitiae to a category of cases involving orders which contravened ‘any written law’, the contravention should be one which defies a substantive statutory prohibition so as to render the defective order null and void on ground of illegality or lack of jurisdiction. It should not for instance be applied to a defect in a final order which has contravened a procedural requirement of any written law. The discretion to invoke the inherent jurisdiction should also be exercised judicially in exceptional cases where the defect is of such a serious nature that there is a real need to set aside the defective order to enable the court to do justice. In all cases, the normal appeal procedure should be adopted to set aside a defective order, unless the aggrieved party could bring himself within the special exception. 

It is true that the Federal Court in Hock Hua Bank v Sahari bin Murid did say that a judgment could be set aside or impeached in a subsequent fresh action on the ground that such judgment was obtained, eg by fraud. Would it follow that if fraud in obtaining a judgment is sufficient as a ground, a fortiori, illegality touching a judgment would also suffice similarly for setting it aside? My answer to this is negative. Now, the case of Hock Hua Bank v Sahari bin Murid does not mention such a ground of illegality. It will be noted that the judgment in the cited case was not a consent judgment. Consent judgment or consent order can next be considered to find out if among the available and established grounds that obtain for the purpose of setting aside such consent judgment or consent order, the ground of illegality is among such grounds.

The 4 general grounds for impeaching a perfected judgment

As a general rule, the 4 grounds for impeaching a sealed, perfected judgment are:

a.       Breach of a statute;

b.       Fraud exercised in obtaining judgment; and

c.       Lack of jurisdiction;

d.       Illegality.

Where a fraudulent exercise has been performed to obtain a judgment, the Courts are alive to the same and will set it aside.

In DS Maglin v TS Kayveas [2023] 7 MLJ 512, a sealed, perfected Consent Judgment was set-aside as P (Datuk Chandrakumanan) and D (Datuk Ly) had colluded and conspired with each other to procure a fraudulent consent judgment.

This fraudulent CJ was utilised to transfer shares of a company (said company owning a building), thereby placing ultimate control of said building under the command of a co-conspirator (TS Kayveas).

This decision was upheld on appeal (TS Kayveas v DS Maglin [2023] 6 MLJ 194) and leave to appeal was refused.

Good practice

As a general rule, claims involving Badiaddin-type suits must be clearly thought-out.

It is not sufficient for a Badiaddin Plaintiff to allege that a matter could have been raised but was not raised (that was potentially illegal).

This is a fine distinction and one would be hard pressed to discover a finer demonstration of this distinction than the case of Yow Man Kong v  Ghandirajan [2023] 5 MLJ 64 (where I was instructed to argue the appeal for the unsuccessful Respondent).

Here, a summary judgment was obtained by a lender and affirmed by the CA.

The borrower then mounted a new claim and sought to impeach the summary judgment. At first instance, the HC allowed the claim and set-aside the summary judgment.

On appeal, the CA reinstated the summary judgment.

The second claim was caught by res judicata. The borrower could have (but did not) raise the issue of moneylending/illegality in the first suit. As a result of this, the 2^nd claim was caught by res judicata:

[79]  It cannot be denied that the issue of loan transaction and illegal moneylending now raised by the respondents are so clearly part of the subject matter of litigation and so clearly could have been raised in Suit 510. The sale and purchase agreement, the settlement agreement as well as other documents were in the possession of the respondents. The respondents had legal representation. It was well within the respondents’ knowledge as to what are the payments for when they paid the appellant. They knew whether or not the payments are payments for interest charged by the appellant. Knowing fully well that a litigant had only one opportunity to put forward their case, the respondents had an opportunity to plead illegality. They should have brought forward their case in whole in the earlier suit for the court to determine whether or not the impugned transaction is a genuine sale and purchase. But, they chose not to plead illegality. The appellant also had the opportunity to amend their statement of defence before the summary judgment application is heard and disposed of. But, they did not amend their statement of defence. Only after the previous judgment has been entered more than a year, the respondents filed this present suit accusing the appellant of misleading the earlier court for not telling it is illegal moneylending. Parties have gone through the legal process in the earlier suit right up to the Court of Appeal. The law says there must be a finality in a judgment. The law also say a party should not be vexed twice. The previous judgment is a final judgment. The appellant has been vexed twice. In the circumstances of the case, we hold estoppel by res judicata in a broader sense applies. We cannot permit the respondents to re-open the same subject matter again. Therefore, the question ‘does res judicata apply as a defence in a subsequent suit filed to set aside a judgment obtained earlier in another court on the ground the impugned transaction is illegal’ is answered in the affirmative. 

[80]  Given the above narrative, we find the learned JC has erred in holding res judicata was not applicable merely because illegality was not pleaded and decided by the court in previous proceeding. That is res judicata in a narrow sense or res judicata on cause of action. What he failed to consider is res judicata in a broader sense applies because there was an attempt by the respondents to plead illegality via affidavit evidence in the summary judgment application and the notice of motion before Court of Appeal which attempts were unsuccessful. The present suit is a third attempt by the respondents to raise illegality. This is an abuse of the court process.

Conclusion

Badiaddin-type suits are a nuanced, specialised tool (i.e., a scalpel and not a cosh).

They cannot be used as a means of setting-aside a perfected judgment obtained post-trial and woe-betide any solicitor who attempts to do so.

GAVIN JAYAPAL

__________________________________________

The information contained herein is for general information purposes only. The writer does not endeavour to keep the information up to date and correct, makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the article or the information, products, services, law, cases or related graphics contained herein for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

For all you know, this article could have been produced by a chimp with a typewriter, blessed with an infinite loop of time.

Consult your solicitor before you undertake any legal action whatsoever. In no event will the writer be held liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this article.

Through this article you are able to link to other websites which are not under the writer’s control. The writer has no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.