The legal effect of withdrawing a claim without liberty to file afresh

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The disputed Will and Suit 156

The CA’s Grounds of Judgment are available here.

Mr Lee was married to Ms Tea. They had several children.

Mr Lee also owned 5 parcels of land.

Mr Lee died. He left a Will. His youngest daughter (Ms Lee Tiew Yee) took out Probate on his Estate.

The younger Ms Lee then, in her capacity as Executrix, executed a Sale and Purchase Agreement with Lim Peng Khoon (Mr Lim). She sold the Lands to Mr Lim.

Suit 156 was mounted by Ms Tea and her children against (1) Mr Lim and (Ms Lee, Executrix). In gist, they challenged the Will and the S&P executed.

On the day of trial, the Lee family members indicated that they wanted to withdraw Suit 156. There was purportedly a Settlement Agreement executed between the Lee family members, to which neither Mr Lim nor the Court was privy-to.

Mr Lim objected. As a result, Suit 156 was struck-out without liberty to file afresh and with costs of RM40,000 to the Defendants.

Events transpiring BEFORE Suit 156 was withdrawn

Unbeknownst to Mr Lim and prior to Suit 156 being withdrawn, the Lands had been transferred to the Lim family members.

This transfer was effected on the basis of a purported Power of Attorney that Mr Lim had “signed”. A Settlement Agreement was also purportedly executed, together with a payment voucher representing an “ang pow” of RM10,000 that was purportedly paid to Mr Lim (i.e., wherein it was made to appear that Mr Lim relinquished the Lands and was paid 10k for his troubles).

The Lands were transferred without the original Issue Documents of Title. The original Land Title was never surrendered but the Land Office caused new titles to be issued.

Mr Lim initiates Suit 105

Mr Lim then sued Ms Tea, the Lee children and the Land Office.

In gist, he sought declarations that the purported Settlement Agreement, Power of Attorney and a letter (wherein he had purportedly acknowledged their right to the Lands) was forged. Mr Lim also asked for vacant possession of the Lands.  

Against the Land Office, Mr Lim sought orders that they had breached their statutory duties and were negligent.

The HC proceedings

After trial, and just before Judgment was to be delivered, Lee Hui Khoon (the 3rd Appellant) was adjudged a bankrupt.

The trial Court found that:

1. The Bankruptcy was inconsequential. The Court could still deliver its Judgment;

2. The SA, PA and letter were all declared null and void;

3. The Land Office was found to have breached its statutory duties and was negligent;

4. The lands would be transferred to Mr Lim.

Findings on appeal

The Land Office did not appeal. Ms Tea and her children did.

The CA unanimously dismissed their appeal.

On bankruptcy (paras. 25-46)

The CA noted that there is a distinction between debts provable in bankruptcy and proprietary rights. What Mr Lim sought were proprietary rights, towards which no leave Order was necessary under Section 8 of the Insolvency Act 1967. However, where Mr Lim sought damages to be assessed, that would necessitate an order sanctioning the damages proceedings:

44. However, as alluded to above and to avoid any doubt, while section 8(1)(a) of the Insolvency Act 1967 does not prevent the Court from adjudicating upon and determining the parties’ claims after conclusion of the trial, it does operate to prohibit the enforcement of any judgment obtained against the bankrupt in respect of a provable debt, except with leave of the Bankruptcy Court. This reflects the fundamental principle that upon bankruptcy, the administration and distribution of the bankrupt’s estate falls within the supervisory control of the Bankruptcy Court, and individual creditors may not enforce judgments against the bankrupt’s person or property outside that regime.

45. Accordingly, whilst the High Court retained full jurisdiction to determine Suit 105 and to deliver judgment notwithstanding that the 3rd Appellant was adjudged a bankrupt, the Respondent would be required to obtain leave of the Bankruptcy Court before taking any steps to enforce any monetary judgment against the 3rd Appellant personally, or against property vested in the Director General of Insolvency.

On the power of attorney and its statutory presumption as to correctness (paras. 47-60)

The CA then considered the statutory presumption in favour of a Power of Attorney. This was contained in Section 85 of the Evidence Act 1950, read together with S. 3(2) of the Powers of Attorney Act 1949.

The statutory presumption works towards supporting the view that a PA is prima facie valid. However, this may be displaced.

Mr Lim called cogent expert evidence that suggested he had not signed the PA (paras. 56-60).

Once this was done, the burden then shifted back to the Appellants to prove that the PA was executed. They would be obligated to call the Commissioner of Oaths who witnessed the execution of the PA. Their failure to do so necessitated an adverse inference being drawn.

On failing to appreciate evidence

The CA also observed that the HCJ not addressing each and every bit of a witness’s evidence was not a red-line fail. A trial Judge need not set-out every bit of evidence in his/her grounds. Only where crucial evidence was misappreciated, would this necessitate appellate scrutiny:

64. Critically, the mere failure of the learned Judicial Commissioner (as he then was) to refer expressly to the evidence of SP-5 does not necessarily mean that the evidence was disregarded. A trial judge is not required to set out every piece of evidence in the judgment. Appellate intervention is warranted only where the omission demonstrates that material evidence capable of affecting the outcome of the case had not been considered.

Part B documents not automatically admissible

A further argument was raised that as the Settlement Agreement, Power of Attorney, Payment Voucher and impugned letter were placed in Part B, they should have been marked as Exhibits (and not ID documents).

The CA drew a careful distinction. As Mr Lim disputed signing these documents, the burden of formal proof would still lie on the Appellants to have these documents converted into Exhibits:

69. With respect, the crux of the Respondent’s case against the Appellants is that he did not sign the SA, PA, Payment Voucher, and the Letter dated 16.6.2016. Whilst the Respondent did not dispute the existence of the SA, PA, Payment Voucher and Letter dated 16.5.2016, he is disputing the authenticity of his signatures in those documents. The mere inclusion of these documents as Part B documents in the Agreed Bundle of Documents in these circumstances does not automatically render them admissible or proved in evidence. Where a party expressly disputes the authenticity of his signature in a document, section 67 of the Evidence Act 1950 requires the party relying on the document to prove that the signature is genuine. The agreed bundle is primarily a procedural convenience, and documents in Part B do not dispense with the need for formal proof where the authenticity of the signature is challenged.

The effect of the withdrawal of Suit 156

As a final consideration, the CA observed that the HCJ did fall into error by conflating the withdrawal of Suit 156 with a res judicata scenario. The CA held that res would only apply where there was a determination on the merits:

78. It is trite that for estoppel to apply, particularly cause of action estoppel and issue estoppel, there must first be a final judicial determination on the merits. Where the action is struck out without liberty to file afresh, there is no adjudication of the issues in the action at all. The striking out order merely terminated the action procedurally. Accordingly, and with respect to the learned Judicial Commissioner (as he then was), there was in this case no room for the application of cause of action or issue estoppel as the merits of the issues raised in Suit 156 were never adjudicated upon.

 However, the CA observed that regurgitating issues that were a part of Suit 156 as a Defence in Suit 105 would amount to an abuse of the Court process:

79. However, we are of the view that the learned Judicial Commissioner (as he then was) was not wrong in disallowing the Appellants from raising the same issues in Suit 156 in defence of the claims in Suit 105, as it would be an abuse of process. The Appellants had already invoked the jurisdiction of the Court to challenge the Grant of Probate, the Will, and the validity of the sale of the Lands in Suit 156. When this action was struck out without liberty to file afresh, this means that the Court had expressly prohibited re-litigation of these challenges to be raised again.

80. The Appellants’ action to raise these same issues as a defence to the Respondent’s claim in Suit 105 constitutes an attempt to circumvent the earlier court order and to seek indirectly to do what they were prohibited from doing directly. As such, the learned Judicial Commissioner (as he then was) was fully entitled to prevent the Appellants from raising defences that would effectively undermine the previous court order and which amount to re-litigation of matters previously abandoned or struck out without liberty. The fact that the Judicial Commissioner (as he then was) had found that the Appellants had secretly and fraudulently transferred the Lands further justifies his decision to bar the reintroduction of the issues raised in Suit 156, as it shows a lack of good faith and the manipulation of the Court process.   

The outcome

The appeal was dismissed with costs. An ancillary appeal pertaining to the disqualification of solicitors acting for Mr Lim was also dismissed.

The CA found that the central issue at-hand was unconnected to the disqualification and affirmed the HC’s findings (which may be read at Lim Peng Khoon v Tea Chun Hia [2022] MLJU 2373). 

Key takeaways 

From the above, it is apparent that solicitors must be circumspect in their adducing of evidence and documentation. One cannot presume that a statutory presumption will automatically obviate the practical difficulties of evidence (including the need to call the first-hand witnesses). 

One must also be cognisant that bankruptcy will not, in and of itself, restrain a Judge from delivering Judgment. 

Crucially though, in advising one’s client, one must be cognisant of the fact that withdrawing a claim without liberty to file afresh is the be all and end all. One cannot relitigate those issues and bring them up again (even in defence). 

A very interesting Judgment and much like twice-steeped builders’ tea, is one that must be read again to fully gain its benefits. 

GAVIN JAYAPAL

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