KAUSAR CORPORATION SDN BHD V. TEH YEW CHOONG

DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR

(BAHAGIAN RAYUAN DAN KUASA-KUASA KHAS)

RAYUAN SIVIL NO. R2-12-28-2000

Antara

KAUSAR CORPORATION SDN. BHD.

PERAYU

Dan

TEH YEWCHOONG

RESPONDEN

(Dalam Mahkamah Sesyen di Kuala Lumpur

Dalam Wilayah Persekutuan, Malaysia

Saman No. 1-52-5030-98

Antara

TEH YEW CHOONG

PLAINTIF

Dan

KAUSAR CORPORATION SDN. BHD.

DEFENDAN

ALASANPENGHAKIMAN

1. This is an appeal by the Defendant against the whole decision of the Sessions Court Judge, who had dismissed the Defendant's application to set aside the Judgment in Default which was obtained by the Plaintiff on the 29.10.98. According to the Plaintiff's Statement of Claim dated 4.4.98 which is at page 10 of the Appeal Record, the Plaintiff claimed:

(i) The Plaintiff had entered into a Sale and Purchase Agreement dated 2.2.90 (hereinafter referred to as the Agreement) between the State Secretary of Selangor (as owner) and Defendant (as the Developer) and had purchased a medium cost single storey terrace house located on a piece of land known as H.S.(M) 04506, P.T. 10677 Mukim Cheras, Daerah Ulu Langat, (hereinafter referred to as the Property) for a value of RM6O,000.00 subject to the terms and condition of the Agreement;

(ii) According to the Sale and Purchase Agreement clause 20(1), the Defendant agreed to complete and deliver vacant possession together with electricity and water connection within 24 calendars months from date of Agreement i.e. on or before the 1.1.92 (hereinafter referred to as 'the Completion Date');

(iii) Plaintiff avers Defendant gave the keys only on 20.7.96 and the connection of water and electricity was on 10.8.97.

(iv) According to clause 20(2) of the Agreement, if the Defendant fails to deliver the vacant possession of the property together with the connection of water and electricity on or before the completion date, the Defendant has to pay the Plaintiff damages calculated at 19% per annum of the Purchase Price from the completion date to the actual date of delivery of the property;

(v) The Plaintiff avers there was a delay in the delivery of the property and thus made claim for liquidated damages for the sum of RM33,108.34.

2. In summary the chronological events after the summons and Statement of Claims were filed are as follows:

3. The grounds of appeal against the decision of the Learned Sessions Court Judge who had on 26th January, 2000 dismissed the Defendant's application to set aside the Judgment in Default of Appearance dated 29th October, 1998 appear to be as follows:

1. First Ground

That upon receipt of the Summons and Statement of Claim, the Defendant had written a letter to the Plaintiff's Solicitors (exhibited in page 20 of the Appeal Record) ("the Defendant's letter") informing them that the Plaintiff's claim was statute barred. Since there was no letter in reply from the Plaintiff's Solicitors, the Defendant assumed that the matter had been resolved.

The Defendant's legal manager had also thereatter resigned and the matter was inadvertently overlooked by the Defendant's new manager.

2. Second Ground

That there was no direct intent to disrespect the Honourable Court or the Plaintiff or the Plaintiff's Solicitors as the Defendant believed that the action was statute barred.

3. Third Ground

That the Defendant was unaware that the Default Judgment had been obtained against them until a copy of the same was served on the Defendant on 22nd April, 1998.

4. Fourth Ground

That the Defendant believed that since the Plaintiff's claim was statute barred, the Plaintiff would and should have withdrawn their claim. Learned Counsel for the Defendant submitted that the principal ground which the Defendant was relying on to set aside the Default Judgment was based on the merits of the case on the issue that the Plaintiff's claim was statute barred.

4. On the First, Second and Third Grounds of appeal, I am of the opinion that upon receipt of the Summons and Statement of Claim, the Defendant, being a corporate citizen disputing the Plaintiff's claim and having obtained prior legal advice from their own Solicitors and the benefit of the services of an in-house legal manager, was obliged to enter appearance in the action and defend their position or at the very least, make an application forthwith to strike out the Plaintiff's action, and not recklessly and deliberately disregard court proceedings, particularly when full opportunity for the Defendant to appear and defend its position had been afforded by the Court on at least three occasions. The Summons (exhibited in pages 29-39 of the Appeal Record) had directed the Defendant to enter appearance in the Plaintiff's action in no uncertain terms. The Summons addressed to the Defendant stated as follows: "You are hereby summoned to appear either in person or by your advocate before the sessions Court in Jalan Raja, Kuala Lumpur on August, 1998 at 9.00 am. to answer a claim against you by the abovenamed Plaintiff. Take notice that within 7 days of the service of this summons on you, inclusive of the day of such service, you may enter an appearance appended to this summons for which the notice of appearance appended hereto may be used. And take notice that in default of attending the Court on the day and time appointed, judgment may be given against you." However, the facts in the instant case, as is stated by the Defendant's own affidavit in support of their application to set aside the Default Judgment (exhibited in pages 3-5 of the Appeal Record), shows that the Defendant, after perusing the Summons and obtaining advice from their Solicitors and having had the benefit of the services of their in-house legal manager at all material times, elected voluntarily to disregard the directions stated in the Summons. The records show that four days after receiving the Summons, on the 24th July, 1998, the Defendant merely issued a letter to the Plaintiff's Solicitors to inform them that the Plaintiff's claim was time-barred ("the Defendant's Letter"). There is no evidence adduced to show that the letter was even copied to the Court. The Defendant claimed that two months after writing the Defendant's Letter, i.e. on 30th September, 1998, their legal manager resigned and a new manager was appointed to replace the outgoing manager. However, no - documentary evidence was adduced on the change of legal managers. Thereafter, on 7th October, 1998, the Plaintiff's Solicitors wrote a letter to the Defendant to inform them that their attendance in Court was required on the new mention dated on 29th October, 1998 failing which judgment might be entered against the Defendant ("the Plaintiff's Subsequent Letter"). The Defendant did not dispute the receipt of the Plaintiff's subsequent letter. The Defendant's director who affirmed the Defendant's affidavit on behalf of the Defendant claimed that this matter was overlooked by the new manager. Again there was no evidence or affidavit from the new manager to this effect. The indisputable fact is that the Defendant did not attend the Court or write to the Plaintiff's Solicitors concerning the new mention date or take any other action until the Default Judgment was obtained and served on them. It was submitted that the Defendant averred that it was sufficient to issue the Defendant's Letter upon being served with the Summons. However, a perusal of the Defendant's affidavit did not show any such averment made by the Defendant. It was further submitted that the Defendant averred that the matter must have been resolved when the Plaintiff's solicitors did not respond to the Defendant's letter. However, the Defendant's affidavit did not reveal any such averment. In fact, paragraph 6 Of the Defendant's affidavit stated as follows:

"Setelah meneliti Saman tersebut saya telah dinasihatkan oleh peguamcara saya dan sesungguhnya percaya bahawa Defendan mempunyai pembelaan yang baik terhadap tuntutan Plaintif sepertimana dimaklumkan kepada Plaintiff melalui surat Defendan yang bertarikh 2.7.98."

It appears that the Defendant, having been advised that they had a strong defence based on limitation bar, assumed that they could quite safely ignore the Summons and the Rules of Court. The presumptuous manner in which the Defendant had brushed aside the Plaintiff's claim and the Summons was also evident from the fact that the Defendant was not deterred at all by the provisions in Section of the Limitation Act 1953, which requires the Defendant to plead the said Act expressly as a defence before the said Act can -operate as a bar to the Plaintiffs action.

5. It is my strict view that pleadings and especially Court Summonses are not to be taken casually. In particular, if the Defendant had identified the particulars of their defence at that time, there was nothing to prevent them from attending and explaining to the Court their alleged defence or applying to strike out the Plaintiff's claim before or on the return date. It is also clearly provided under Order 14 rule 5 (1) of the Subordinate Courts Rules 1980 that "a defendant who disputes his liability for the whole or part of any claim in the action may (a) at any time before the return day, serve on the plaintiff a notice of appearance or a defence, as the case may be, for which the notice of appearance appended to the summons may be used; or (b) appear on the return day and dispute the Plaintiff's claim". The Default Judgment was regularly obtained under the provisions of Order 28 rule 6 of the Subordinate Courts Rules 1980 which, if applied to the instant case, specifies that when the action is called on for hearing and the Plaintiff appears but the Defendant does not appear, the Court may, on proof of service, give judgment for the Plaintiff on his claim and make any other order as it thinks just. Although the Defendant had, by their own admission, the benefit of legal advice at all material times, they had deliberately failed to comply with procedural rules. In Sovereign General Insurance Sdn. Bhd. v. Syarikat Keratong Logging Sdn. Bhd. (1976) 2 MLJ 144:

"The plaintiffs filed a writ for a liquidated claim against the defendants but the latter failed to enter appearance. Subsequently, the plaintiffs entered a judgment in default of appearance against the defendants. The latter then applied to set aside the default judgment on the grounds, inter alia, that the defendants had a good defence to the plaintiffs' claim, and that there was an oversight by an officer of the defendants' company in not taking steps to have the appearance filed.

Held, dismissing the defendants application: (1) the explanation advanced by the defendants was not satisfactory because the officers concerned being experienced in this field dealing with claims and litigations could not be expected to make such a mistake;"

In Latchman Singh & Sons v. Tan Kian (1991) 1 CLJ 128 Wan Yahya bin Pawan Teh J (as he then was) said:

"Even if we accept that Mr. Charanjit did contact Encik Ramli before the 14 May, it is nevertheless incredible that he should be merely asking the Legal Aid Bureau to mention on his behalf as he must have known that by Order 28 rule 6 the Court was bound to give judgment in default of his appearance and his Defence. If he had intended to dispute the claim, surely he would have requested the Legal Aid Bureau to state so to the Courts in accordance with Order 14 rule 5(2) of the Rules and obtain a date within which he has to serve on the Legal Aid Bureau a defence. Counsel must have known that failure to comply with this procedure would result in the judgment being given under Order 14 rule 5(2). In spite of these, counsel's affidavit merely states he asked Legal Aid Bureau to get another mention date without disclosing whether he was disputing the claim or enquiring the date within which the court had ordered him to file his defence."

In the instant case I come to the conclusion that the Defendant did not have any satisfactory explanation for their absence on the return dates of the Writ of Summons. The Defendant was complacent and indifferent and was quite simply, disrespectful of the Summons. Further, it was untruthful of the Defendant to claim that they were unaware that the Default Judgment had been obtained against them until the same was served on the Defendant. The Defendant had been forewarned by the Plaintiffs subsequent letter. As such, the First, Second and Third Grounds of the Defendant's Appeal herein must fail.

6. While it cannot be disputed that the existence of a ,bona fide defence is an important consideration in any application to set aside a default judgment, I think it is only one of the factors to be taken into account. Since such applications require a Judge to exercise his judicial discretion, all the relevant surrounding circumstances and reasons for the application must be looked at as a whole. There is really no absolute formula. Each case must be considered on its own facts and merits. Counsel for the Defendant cited Insun Development Sdn. Bhd. v. Azali bin Bakar (1996) 2 MLJ 188 and Nasri v. Mesah (1971) 1 MLJ 32 as authorities for his submission that the Default Judgment here ought to be set aside as the Defendant has a bona fide defence based on time bar. However, both cases cited by counsel for the Defendant do not deal with setting aside of default judgments. In the Insun's case, the proceedings were commenced by way of originating summons for a declaration as to entitlement of agreed liquidated damages and for consequential reliefs and the vendor/defendant therein had expressly pleaded that the purchaser/plaintiff in that case was barred by Section 6(1) of the Limitation Act, 1953 (paragraphs E and F at page 192 of the said case). Whereas in Nasri's case, the proceedings were commenced as a writ action and the defendant therein pleaded limitation in her defence. In the instant case the Defendant was, quite simply, not even bothered to be present in the Court to plead the limitation defence (or any other defences) notwithstanding that by operation of law, under Section 4 of the Limitation Act 1953, it is proved that nothing in the Limitation Act shall operate as a bar to an action unless the Act has been expressly pleaded as a defence thereto in any case where under any written law relating to civil procedure for the time being in force, such a defence is required to be so pleaded. It is observed that the Defendant were quite content to sit back and not do anything believing that regardless of any inaction on their part, the law was on their side. Such conduct was surely reckless. Indeed, the Defendant's attitude was that their position was invincible in view of their alleged defence which they were confident they could raise at any time during the proceedings to strike down the Plaintiff's claim. However, on this point, it is instructive to note the English case of Ketteman and others v. Hansel Properties Ltd. (1988) 1 All ER 38, H.L., that an application by the defendant to amend to plead the limitation defence at trial was likely to be refused where the prior failure to plead it was deliberate or negligent. On pages 61 - 62 Lord Griffiths said:

"If a defendant decides not to plead a limitation defence and to fight the case on the merits he should not be permitted to fall back on a plea of limitation as a second line of defence at the end of the trial when it is apparent that he is likely to lose on the merits. Equally, in my view, if a defence of limitation is not pleaded because the defendant's lawyers have overlooked the defence the defendant should ordinarily expect to bear the consequences of that carelessness and look to his lawyers for compensation if he is so minded.

Counsel for the architects submitted that the authorities obliged a judge to allow an amendment no matter how late it was made nor for what reason provided the other party could be properly compensated by an award of costs. He relied on the authorities set out in Supreme Court Practice and in particular the decision of Brett MR in Clarapede & Co. v. Commercial Union Association (1883) 32 WR 262 at 263:

'The rule of conduct of the court in such a case is that, however negligent or careless may have been the first omission, and, however late the proposed amendment, the amendment should be allowed if it can be made without injustice to the other side. There is no injustice if the other side can be compensated by costs ....'

This was not a case in which an application had been made to amend during the final speeches and the court was not considering the special nature of a limitation defence. Furthermore, whatever may have been the rule of conduct a hundred years ago, today it is not the practice invariably to allow a defence which is wholly different from that pleaded to be raised by amendment at the end of the trial even on terms that an adjournment is granted and that the defendant pays all the costs thrown away. There is a clear difference between allowing amendments to clarify the issues in dispute and those that permit a distinct defence to be raised for the first time.

Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies. Many and diverse factors will bear on the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so. But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore, to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.

Another factor that a judge must weigh in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall on their own heads rather than by allowing an amendment at a very late stage of the proceedings."

Therefore the Defendant in the instant case had deliberately and recklessly disregarded the Summons and the Plaintiffs subsequent letter at their own peril.

7. On the submission by the Defendants counsel on Section 56(1) of the Contract Act, 1950, I feel that the said section had been misapplied to the facts of this case. When the Defendant failed to perform the contract at or before the specified time, the contract or option of the Plaintiff, had not been avoided by the Plaintiff since the Plaintiff had extended time to the Defendant for them to complete the contract, deliver up his house and pay late delivery damages. As to the case of Kewangan Bersatu Bhd. v. Yap Ah Yit & Ors. (1999) 1 CLJ 429 where default judgment obtained against the Defendant/borrower was set aside and one of the grounds for the setting aside was that the plaintiff/bank's action was time-barred. Kewangan Bersatu case can be distinguished from the instant case. The Kewangan Bersatu case, is one involving setting aside a judgment obtained in default of defence. In the instant case it is case involving judgment in default of appearance. In the Kewangan Bersatu case the default judgment was entered due to the defendant/borrower's earlier solicitors failing to file defence in time and I found that the facts of the case showed that there was a change of solicitors and the defendant/borrower did intend to defend the plaintiff/bank's action. In addition, I found in the Kewangan Bersatu case that the plaintiff/bank had begun a number of actions against the defendant/borrower on the same cause of action and in the circumstances, I held that it was unjust not to set aside the judgment which was obtained in default of defence. The instant case before me today is different. This is a case where judgment was obtained against the Defendant in default of appearance in circumstances which have been set out above. In the instant case the Defendant, being a housing developer, was obliged by the Sale and Purchase Agreement dated 2nd February, 1990 to build a medium cost house and deliver up the same to the Plaintiff by or on 1st of February, 1992 complete with water and electricity supply connected. The Defendant delivered up the house more than five years after the stipulated date. When vacant possession of the house was finally delivered to the Plaintiff, the Defendant failed to pay late delivery damages although they were contractually bound to do so. When proceedings were instituted against them, they wilfully ignored the Summons and after Default Judgment was obtained, they applied to set aside the same on grounds of an alleged defence on merits, a defence which they could not care to attend the Court to inform the Court in the first place. In making the application to set aside Default Judgment, the Defendants were clearly abusing the process of law and attempting to get a second bite of the cherry to escape from their contractual liability. It was a conduct which was totally and unprincipled and should not be condoned. In the case of S.A. Andavan v. Registrar of Titles, Negeri Sembilan & Ors. (1977) 2 MLJ 220 Ajaib Singh J (as he then was) proposed:

"Semble: Litigation is governed by rules of procedure and no side may take undue advantage over another by side-stepping any rule and it is the duty of the court to ensure that the parties engage themselves in a far contest.

Parties in civil suits should observe the rules of procedure with meticulous care because a failure to do so may well result in irreparable set-backs for them and it is not often that a court will take it upon itself to free the parties from difficulties of their own making and put them on their feet again."

My view is the learned Sessions Court Judge correctly exercised his discretion in refusing to set aside the Default Judgment. The Defendant should and ought to have known that their defence must be specifically pleaded. No reasonable explanation had been advanced on why this was not done and judgment was allowed to go by default of appearance. There is no justifiable material in the instant case on which this Court can exercise its discretion in favour of the Defendant. Justice is not served if the Defendant could also benefit from their own wilful inactions. I would therefore dismiss the Defendant's appeal with costs.

(DATO' FAIZA BIN HAJI TAMBY CHIK)

Hakim

Bahagian Rayuan dan Kuasa-Kuasa Khas

Mahkamah Tinggi

Kuala Lumpur

Dated: 3^rd August 2000.

Counsel:

bagi pihak Perayu

K. Selvi

(Tetuan Adha SeIv i & Associates)

bagi pihak Responden

Sharizaal Samsuri

(Tetuan S. K. Yap & Sharizal)