Mashudan Bin Kamar v Bank Islam Malaysia Berhad (J-02(NCvC)(W)-2088-11/2021)

MASHUDAN BIN KAMAR (NRIC No.: 510827-01-5471)

KHARIL BIN SULAIMAN (NRIC No.: 560702-05-5467) (menuntut sebagai pengamanah PERSEKUTUAN GURU-GURU MELAYU JOHOR, Cawangan Batu Pahat)

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HAJI EKHWAN BIN MOHD OTHMAN @ DAIRY … APPELLANTS AND BANK ISLAM MALAYSIA BERHAD … RESPONDENT (Company No: 98127-X) (In the Matter of High Court of Malaya at Muar In the State of Johor Darul Takzim, Malaysia Suit No.: JB-22NCvC-11-01/2018 Between 04/09/2023 11:54:37 J-02(NCvC)(W)-2088-11/2021 Kand. 64 2 of 19 1. Mashudan bin Kamar (NRIC No.: 510827-01-5471)

Kharil bin Sulaiman (NRIC No.: 560702-05-5467) (menuntut sebagai pengamanah PERSEKUTUAN GURU-GURU MELAYU JOHOR, Cawangan Batu Pahat)

Haji Sanusi Bin Haji Lambing 4. Hj Abdul Kadir Bin Hj Muhammad 5. Zamilah Binti Haji Ekhwan 6. Haji Ekhwan Bin Mohd Othman @ Dairy … Plaintiffs And Bank Islam Malaysia Berhad (Company No: 98127-X) … Defendant

Omar bin Kassim … 1st Respondent (NRIC No.: 581224-01-5753)

Zul Azam bin Md Dahlan (beramal sebagai pekongsi di bawah firma Tetuan SABARUDDIN ALI & Co) ... 2nd Respondent 3. Sabaruddin bin Ali (beramal sebagai pekongsi di bawah firma Tetuan SABARUDDIN ALI & Co. ... 3rd Respondent 3 of 19 CORAM LEE SWEE SENG, JCA HADHARIAH SYED ISMAIL, JCA GUNALAN A/L MUNIANDY, JCA MINORITY JUDGMENT ON PRELIMINARY OBJECTION [1] Learned counsel for the Appellants on the day of hearing of the appeal on 1.3.2023, raised a Preliminary Objection (“PO”) that the Respondent’s Notice of Cross-Appeal is incompetent and as such should be struck out. [2] The PO was raised by the Appellants on a point of law and procedure as to the validity of the Notice of Cross-Appeal. It was submitted that the Notice of Cross-Appeal should be dismissed in limine on the ground that it was incompetent and wrong in law. The majority upheld the PO and strike out the notice of cross-appeal with costs of RM5,000.00 to be paid by the Respondent to the Appellants/Plaintiffs. [3] As I was in the minority that dismissed the PO with costs of RM5,000.00 to be paid by the Appellants/Plaintiffs to the Defendant, it behooves me to write this brief Grounds of Judgment. 4 of 19 Brief Facts [4] The 1st and 2nd Plaintiffs are the registered Trustees of a society called Persekutuan Guru-Guru Melayu Johor Cawangan Batu Pahat (“the Society”) and the 3rd to the 6th Plaintiffs are the office bearers of the Society. [5] The Respondent, Bank Islam Malaysia Berhad (“the Bank”), the Defendant in the High Court below, found itself in an unenviable situation. The High Court had dismissed the Plaintiffs’ claim against the Bank for breach of trust and negligence in releasing the surplus of the proceeds realised from an auction sale of its land of RM2.34 million to the 1st Third Party (“1st TP”) Omar bin Kassim (“Omar”). A previous High Court had held that the Power of Attorney (“PA”) given by the Society to Omar was fraudulently procured and null and void. The decision was affirmed in the Court of Appeal and leave to appeal further to the Federal Court had been dismissed. [6] Consequently, the High Court had also dismissed the Bank’s claim against all the Third Parties (“TPs”) including the 2nd Third Party (“2nd TP”) and 3rd Third Party (“3rd TP”) who are partners of a legal firm that had represented the Bank in the public auction pursuant to an order for sale obtained upon default of the Society’s loan from the Bank. However, the High Court went on to hold that the Defendant Bank had not relied on any advice of its solicitors when it came to the release of the said RM2.34 million to Omar. A balance sum of RM1,312,025.98 was released by the Bank to the Society. 5 of 19 [7] Upon being sued by the Plaintiffs, the Defendant had commenced Third Party (“TP”) proceedings against the said Omar and the 2 partners of the Legal Firm – Zul Azam bin Md. Dahlan and Sabaruddin bin Ali (“the Solicitors”) for a contribution and indemnity. Zul Azam testified as TPW.1. The Defendant’s claim against the 2nd and 3rd TPs is premised on negligence in discharge of their professional duty of care in advising the release of the sum of RM2.34 million to Omar. [8] Omar did not enter appearance nor appear in the High Court to defend himself. However, as the High Court had dismissed the Plaintiff’s claim against the Defendant Bank, invariably the Defendant’s claim against all the TPs had to be dismissed. [9] The Plaintiffs, being aggrieved by the said decision of the High Court, filed their appeal (Enclosure 1). The Defendant filed a Notice of Cross-Appeal (“Enclosure 3”) against the decision of the High Court of 14.10.2021 and prayed that the decision of the High Court be affirmed but that certain findings of fact against it with respect to the TPs be reversed. [10] The parties shall be referred to as they were as Plaintiffs or Appellants, the Defendant or Respondent and Omar as 1st TP and the Solicitors as 2nd and 3rd TPs. [11] The Plaintiffs as Appellants contended that the Notice of Cross-Appeal was incompetent as the subject matter of the Cross-Appeal has no connection whatsoever with the Plaintiffs’ claim for breach of trust and negligence against the Defendant Bank. The Defendant should have filed a Notice of Appeal against the TPs with respect to findings of facts that it did not agree so as to preserve its right to enter judgment against the TPs 6 of 19 or at least to be able to argue why the High Court was wrong to have made those findings of fact not in the Defendant’s favour. Whether the Notice of Cross-Appeal filed by the Defendant/Respondent against the finding of facts not in its favour in the TPs’ proceedings ought to be set aside as against the Appellant/Plaintiff [12] In Pengerusi Suruhanjaya Pilihanraya Malaysia v See Chee How & Anor [2015] MLJU 1831 the Court of Appeal explained that: [77] …… a cross-appeal is only meant for variation of “the decision” appealed against and not for variation, reversal or setting aside of any other decision of the High Court unrelated to the appeal filed by the appellant.” (emphasis added) [13] The misconception as to the true nature of a Notice of Cross-Appeal had been exhaustively expounded in the Federal Court case of Kabushiki Kaisha Ngu v Leisure Farm Corp Sdn Bhd & Ors [2016] 5 MLJ 557. The plaintiff there had appealed against the High Court’s order to grant damages instead of a prayer for specific performance eventhough it had held that the sale and purchase agreement of a golf course land was a valid agreement between the first and second defendant and that the third defendant was not a bona fide purchaser. The plaintiff was aggrieved by the decision of an award of damages and they appealed on ground that they should be entitled to specific performance. The first defendant filed a cross-appeal by which it intended to reverse the entire decision of the High Court. 7 of 19 [14] Before the Court of Appeal, the plaintiff/appellant raised a preliminary objection against the first defendant’s appeal. The plaintiff argued that the effect sought by way of the first defendant’s cross-appeal was to set aside the finding of the High Court that there was a concluded contract. It was thus the plaintiff’s contention that the first defendant sought to raise matters which were unconnected with its appeal, which was only against a part of the judgment ie that no specific performance had been ordered. The plaintiff argued that the first defendant’s appeal should have been filed by way of a Notice of Appeal and not be way of a Notice of Cross-Appeal. The Court of Appeal agreed with the plaintiff and ruled that the cross-appeal should have been restricted to vary that part of the order that was being appealed by the plaintiff and should not be permitted to seek to reverse any other aspects of the decision of the High Court. The first defendant obtained leave to appeal to the Federal Court and the Federal Court held as follows: “[23] We are of the view that under r 8 of the RCA 1994 the first defendant cannot set aside the substantive finding of facts made by the High Court by way of notice of cross-appeal. The first defendant may only set aside the substantive findings of the High Court by way of filing a notice of appeal under r 5 of the RCA 1994. Only an appeal by way of a notice of appeal constitutes a re-hearing. Rule 8 of the RCA 1994 does not state that a notice of cross-appeal ‘... shall be by way of re-hearing’. Rule 8 of the RCA 1994 only provides that a respondent could only contend that the decision of the High Court should be varied if the respondent files the notice of cross-appeal within ten days after the service of the record of appeal. …… 8 of 19 [31] The Court of Appeal in the present case had rightly applied the principle enunciated in the English case of Re Cavander’s Trusts (1881) 16 Ch D 270 which states that an appeal on a point which does not affect the original appellant cannot be by a cross-appeal. In other words, where the respondent wishes to raise matters which are unconnected with the substance of the appeal by the appellant the respondent must proceed by way of a separate notice of appeal. ……… [36] It would appear that none of the parties in this case appealed against the entire decision of the High Court. The first defendant had failed to appeal against the finding of the High Court that the HK MOU was a binding contract. The High Court’s decision that there was a valid and binding agreement concluded between the plaintiff and the first defendant is adverse against the first defendant. It was thus incumbent on the first defendant to file a separate notice of appeal if it wanted the aforesaid decision to be reversed or set aside, rather than by filing a notice of cross-appeal. The operative words of ‘to contend’ and ‘decision of the High Court should be varied’ under r 8(1) of the RCA 1994 clearly limits the contentions under a notice of cross-appeal to effectively vary a decision, not set aside a judgment or order. It is incumbent on the first defendant to independently file a notice of appeal under r 5 of the RCA 1994 to rehear the issues that were not decided in the first defendant’s favour. A notice of cross-appeal does not provide for a complaint to be re-heard. The first defendant is at liberty to file an independent appeal under s 67(1) of the CJA 1964.” (emphasis added) [15] The Federal Court in Douglas Ding Jangan & Ors v Kerajaan Negeri Sarawak & Ors [2021] 4 MLJ 946 had reaffirmed the principle set out in at Kabushiki Kaisha Ngu (supra) as follows: 9 of 19 “[33] Juxtaposed with the facts of the present case, the High Court's finding that the appellants have acquired and/or created communal NCR over the cleared areas, which formed the basis for its decision to allow para 25 (i) of the statement of claim, was a finding that was wholly averse to the first to fifth respondents. It was therefore incumbent on the first to fifth respondents to file separate notices of appeal if they wanted the decision to be reversed or set aside. The decision cannot be reversed or set aside by way of cross-appeal under r 8 of the RCA. It can only be done by way of a substantive appeal under r 5. …….. [35] It will immediately be seen that although the notices of cross-appeal sought for a variation of the High Court decision allowing para 25(i) of the statement of claim, the grounds in support of the cross-appeals in fact sought for a completely different order. Far from asking for a variation of the decision, the respondents were actually seeking for an order that the entire decision of the High Court to allow para 25 (i) of the statement of claim be reversed or set aside. [36] For all intents and purposes, the notices were notices of substantive appeal under r 5 of the RCA disguised as notices of cross-appeal under r 8. This is clear from the contents of the notices and made clearer by the basis on which the cross-appeals were filed - that there is no evidence to support the learned trial judge's finding that the appellants and/or those whom they represent have acquired and/or created NCR over the cleared areas or some patches of the cleared areas shown in exh D80 or D81 or both D80 and D81, contrary to the finding of the High Court. [37] We do not find it to be correct in law for the respondents to mount such collateral attack on the decision of the High Court without filing notices of appeal of their own under r 5 of the RCA. A cross-appeal under r 8 of the RCA is only for the purpose of varying the decision of the High Court that is appealed against by the appellant and not for the purpose 10 of 19 of reversing or setting aside any decision of the High Court which no party to the action appeals against. The cross-appeal must relate to the appeal brought by the appellant and not otherwise and no variation order under r 8 of the RCA can be made in respect of a non-existent appeal. [38] It is important to keep in mind that there was no appeal filed by the appellants nor by the first to fifth respondents against the decision of the High Court allowing para 25 (i) of the statement of claim. The appellants' appeal was against the decision to dismiss their claim for the balance of the land areas other than the cleared areas. There was therefore nothing to vary in terms of r 8 of the RCA in respect of the decision of the High Court to allow para 25(i) of the statement of claim.” (emphasis added) [16] The cases cited above are not cases dealing with how best a defendant who had obtained a decision in his favour, in that the Court had dismissed the plaintiff’s claim against the defendant, may preserve his right to enter judgment against a third party where the plaintiff is appealing. In the event that the plaintiff’s/appellant’s appeal is dismissed, the defendant/respondent would have nothing to lose. However, should the appellant succeed, and the Court had dismissed the defendant’s claim against the third party purely on ground that the plaintiff’s claim against the defendant is dismissed, the Appellate Court would remit the matter back to the Court of first instance for the third party proceedings to be heard on the merits. [17] The position here is a bit trickier because the High Court below had heard the Plaintiffs, the Defendant and the 2nd and 3rd TPs; the 1st TP Omar did not enter appearance and defend the TP action. The High Court proceeded to find that in any event, the Defendant had not proved its claim against the TPs for a contribution and indemnity. Be that as it may the 11 of 19 Defendant’s claim against all the TPs was dismissed as the Plaintiffs failed in their claim against the Defendant. How then should the Defendant preserve its right to argue on appeal that it should be allowed to enter judgment against the TPs should the Plaintiffs succeed in their appeal? [18] There was an earlier application filed by the 2nd and 3rd TPs on 20.4.2022 in Enclosure 11 wherein 2nd and 3rd TPs applied to strike out the Notice of Cross-Appeal filed by the Defendant on 22.12.2021. The Application in Enclosure 11 was served on the Appellants’ solicitors and the Defendant/Respondent’s solicitors. [19] The 2nd and 3rd TPs argued that the Notice of Cross-Appeal is not in compliance with Rules 5 and 8 of the Rules of Court of Appeal 1994 (“RCA 1994”) and s. 67 of the Courts of Judicature Act 1964 (“CJA”). It was argued that the Respondent ought to have a Notice of Appeal pursuant to Rule 5 of the RCA 1994 as the Respondent wishes to appeal against substantive findings of the High Court. [20] However, the Court of Appeal that heard the application had dismissed the application and directed that all parties be heard. It must be noted that the Appellants did not at any time thereafter filed in their application to strike out the Defendant’s Notice of Cross-Appeal. [21] Section 69 of the CJA gives broad powers and discretion to the Court of Appeal to hear all parties that are already before the Court so as to enable it to do substantive justice with respect to the appeals of the parties before it as set out in s. 69(5). For context the whole s. 69 is set out below: 12 of 19 “Hearing of appeals

(1) Appeals to the Court of Appeal shall be by way of re-hearing, and in relation to such appeals the Court of Appeal shall have all the powers and duties, as to amendment or otherwise, of the High Court, together with full discretionary power to receive further evidence by oral examination in court, by affidavit, or by deposition taken before an examiner or commissioner.

The further evidence may be given without leave on interlocutory applications, or in any case as to matter which have occurred after the date of the decision from which the appeal is brought.

Upon appeals from a judgment, after trial or hearing of any cause or matter upon the merits, the further evidence, save as to matters subsequent as aforesaid, shall be admitted on special grounds only, and not without leave of the Court of Appeal.

The Court of Appeal may draw inferences of fact, and give any judgment, and make any order which ought to have been given or made, and make such further or other orders as the case requires.

The powers aforesaid may be exercised notwithstanding that the notice of appeal relates only to part of the decision, and the powers may also be exercised in favour of all or any of the respondents or parties although the respondents or parties have not appealed from or complained of the decision.” (emphasis added) [22] The focus of the Rules of Courts are generally to facilitate and not to frustrate proceedings; its thrust and tenor is not to trip or trap the unwary. It is mercifully forgiving where the infraction of the Rules are not such as to cause serious prejudice to the other party raising objection which cannot be compensated by costs. The important thing is that no 13 of 19 one should have been misled by the actions taken. Rules of Courts are after all hand-maidens and not a jealous mistress. [23] No one reading the following Rules in the RCA 1994 can escape its gracious and generous disposition designed as it is for the Courts to do substantive justice to the parties before it and to prevent injustice or abuse of its process by being fixated to or fastidious about it. Rules 102- 105 are reproduced below: “Rule 102. Non-compliance with Rules not to render proceedings void. Non-compliance with any of these rules, or with any rule of practice for the time being in force, shall not render any proceedings void unless the court or a Judge shall so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the court or Judge shall think fit. Rule 103. Application to set aside for irregularity when allowed. No application to set aside any proceedings for irregularity shall be allowed unless made within reasonable time, nor if the party applying has taken any fresh step after knowledge of the irregularity. Rule 104. Objections of irregularity. When an application is made to set aside proceedings for irregularity, the several objections intended to be insisted upon shall be stated in the summons or notice of motion. Rule 105. Inherent powers of the Court. For the avoidance of doubt, it is declared that nothing in these rules shall be deemed to limit or affect the inherent powers of the court to make any order as may be necessary to prevent injustice or to prevent an abuse of the process of the court.” (emphasis added) 14 of 19 [24] While the Court of Appeal did not record the grounds for dismissing the application, one can surmise that it must mean that the Court of Appeal did not agree with the reasons given to strike out the Notice of Cross-Appeal as alluded to. [25] One must appreciate the delicate and unenviable position that the Defendant found itself to be in. Generally, a defendant would not have this problem if the High Court had, after dismissing a plaintiff’s claim, gone on to dismiss the defendant’s claim against the third parties on ground that as the plaintiff’s claim had been dismissed, the defendant’s claim against the third parties would stand dismissed as well. [26] Then when that plaintiff should appeal and succeed in the appeal, the Court of Appeal would then order the matter to be remitted to the High Court for it to hear the defendant’s claim against the third party. After all the cause of action of the defendant against the third party does not arise until the judgment is entered by the plaintiff against the defendant. [27] However, as all the parties including the 2nd and 3rd TPs were before the High Court, the High Court had heard the witnesses, one each from the Plaintiff, Defendant and the 2nd and 3rd TPs as the issues are in a sense quite interconnected with one another. Thus, if it is found that solicitors had given advice to release the auction proceeds of RM2.34m based on a wrong advice that the PA was valid when it was subsequently held to be null and void then the Plaintiffs may well succeed in their claim against the Bank and correspondingly the Bank against the TPs. 15 of 19 [28] Whether and to what extent the Respondent’s Notice of Cross-Appeal is confined to the scope of the Plaintiffs’/Appellants’ appeal is a matter that can be decided at the end of the appeal and not at this PO stage when no application was filed by the Appellant to strike out the Respondent’s Notice of Cross-Appeal. [29] I agree that the proper way for the Defendant to preserve their right in case the Court of Appeal should decide for the Plaintiff is to file a Notice of Appeal and not a Notice of Cross-Appeal against the findings of fact made against it vis-a-vis its claim against the TPs. That is the best the Defendant could do because generally one cannot appeal against a decision in its favour. [30] As in all Rules of Court one must allow substance over form or labels. The substance of the Notice of Cross-Appeal is directed against not the Appellant, but the TPs. The 2nd and 3rd TPs had failed to strike it out and the Court of Appeal had directed all parties to be heard on the appeal. It is not the business of the Appellant to raise the PO because it simply does not concern the Appellant at all. The Appellant had more than ample time to file in their application to strike out the Defendant’s Notice of Cross-Appeal but chose not to and only raised it at the hearing of the appeal proper. [31] Both on account of unexplained and unreasonable delay under Rule 103 RCA 1994, the late PO should be dismissed. The Appellants knew of the grounds of the 2nd and 3rd TPs in applying to strike out the Defendant’s Notice of Cross-Appeal when the application was served on their solicitors on 23.4.2022. It must have taken them many months to mull 16 of 19 over it and to raise it on 1.3.2023 after nearly a year at the date of hearing of the Appeal proper. [32] The Court must look at the substantive justice of the case. The Notice of Cross-Appeal, translated into English reads as follows: “Take notice, that on the hearing of the above appeal, Bank Islam Malaysia Berhad, the Respondent above-named, will contend that the decisions of the Her Ladyship Justice Halijah Binti Abbas given at the Muar High Court given on 14.10.2021 ought to be varied to the extent and on the grounds hereinafter set out:

that the decision of the Muar High Court that dismissed the Appellant’s claim against the Respondent together with the Respondent’s claim against all the Third Parties be upheld and affirmed;

that the Learned Muar High Court Judge failed to give due consideration to the merits of the Respondent’s claim against all the Third Parties when making its decision to dismiss the Appellant’s claim against the Respondent. The Respondent’s claim against all the Third Parties is that they be made jointly and/or severally liable to bear the losses suffered by the Respondent as follows:

the 1st Third Party, 2nd Third Party and 3rd Third Party do pay damages for all losses suffered by the Respondent arising out of and relating to the release of the sum of RM2,340,000.00 by the Respondent to the 1st Third Party;

(ii) Alternatively, the 1st Third Party make repayment of the whole of the sum of RM2,340,000.00 to the Respondent for the said sum released to the 1st Third Party; 17 of 19

(iii) Alternatively, the 1st Third Party, 2nd Third Party and 3rd Third Party jointly and/or severally pay the sum of RM2,340,000.00 to the Respondent as damages for the sum released to the 1st Third Party;

(iv) General and Exemplary Damages to be assessed as a result of the negligence and/or false representation by the 1st Third Party, 2nd Third Party and 3rd Third Party that had caused the Respondent to release the sum of RM2,340,000.00 to the 1st Third Party;

Interest at the rate of 5% per annum on the sum of RM2,340,000.00 calculated from date of judgment to full realisation;

(vi) Interest at the rate of 5% per annum on the general damages and exemplary damages calculated from date of judgment until full realisation;

(vii) Cost of this action.

that the Respondent filed this cross-appeal against the appeal filed by the Appellant so as to enable the Court of Appeal to give due consideration to make a decision on the claims of the Respondents against the Third Parties;

that the Appellant’s appeal against the decision of the Muar High Court which dismissed the Appellant’s claim against the Defendant be heard together with this cross-appeal from the decision of the learned High Court Judge that dismissed the Respondent’s claim against the Third Parties in that in the event the Court of Appeal allows the Appellant’s claim against the Respondent then the issue of damages in the Respondent’s claim against the Third Parties should also be given due consideration and decided on its merits; 18 of 19

Alternatively, in the event that the appeal of the Appellant is allowed, then the cross-appeal of the Respondent also should be allowed to the extent that the Third Parties are liable in full with respect to the reliefs of damages claimed.” (emphasis added) [33] It is abundantly clear that the pith and substance of the appeal is against the findings of fact of the High Court in dismissing the Defendant’s claim against the TPs and to preserve the Defendant’s right on appeal by the Appellant in the event that the Court of Appeal should allow the Appellants’ appeal and allow judgment to be entered for RM2.34 million against the Defendant/Respondent. [34] I see nothing wrong with that exercising of the Respondent’s defensive appeal which is only applicable should the Appellants succeed in its appeal. Whilst the Respondent can always argue against the Appellants’ appeal with respect to the High Court dismissing their claim against the Respondent, without the need to file any Notice of Appeal or Notice of Cross-Appeal vis-a-vis the Appellant, the Defendant would have to file a Notice of Appeal against the TPs in order to argue that judgment should correspondingly be entered by the Respondent against the TPs.

[35] No one is prejudiced, least of all the Appellants for the Appellants suffer no impediment in arguing their appeal to the hilt. As for the 2nd and 3rd TPs their striking out of the Notice of Cross-Appeal had been dismissed. 19 of 19 [36] It remains then for the Court of Appeal to hear all the parties and so the PO was dismissed with costs of RM5,000.00 to be paid by the Appellants/Plaintiffs to the Respondent/Defendant. Dated: 28 August 2023. Sgd. LEE SWEE SENG Judge Court of Appeal Malaysia COUNSEL FOR THE APPELLANTS: Shahareen Begum binti Abdul Subhan (Messrs Shahareen Begum) COUNSEL FOR THE RESPONDENT: Suhaidi bin Zakaria (Together with Mawar Nur Izzati binti Md Zamri) (Messrs Mastura & Associates) COUNSEL FOR 2ND & 3RD THIRD PARTIES: Ng Kong Peng (Together with Yok Jiang Lin) (Messrs K.P. Ng & Amardas)