Heo Joon Siong v 1. ) Yap Kong Yeaw (BA-22NCC-151-12/2022)

YAP KONG YEW

DATO’ SRI NGU TIENG UNG (NO. K/P: 670420-13-5765) … DEFENDAN-DEFENDAN JUDGMENT Introduction [1] Based on the version of events provided by the Plaintiff, he has provided a friendly loan of RM5,000,000.00 to the First Defendant. The Second Defendant stood as a guarantor for the said loan. When the First Defendant defaulted in the repayment of the loan, the Plaintiff initiated an action to recover the loan from both the First and Second Defendants. [2] The narrative by the Second Defendant is that the Plaintiff and the First Defendant had conspired to deceive him. [3] As for the First Defendant who is the principal debtor, he has remained passive in these entire proceedings. [4] Before the Second Defendant could mount a challenge to the above action by the Plaintiff against him, he is confronted with the task of having to set aside a judgment in default that the Plaintiff has obtained against both the First Defendant and him, on 15 March, 2023. [5] The concern of this Court at this juncture is in dealing with an application by the Second Defendant to set aside the default judgment that the Plaintiff has entered against him. The Issues for Determination [6] In dealing with the Second Defendant’s Notice of Application in Enclosure 13 to set aside the default judgment, the following issues will have to be resolved. [7] The first issue is whether the default judgment of 15 March, 2023 is an irregular or a regular judgment. [8] In the event that this Court finds that the said default judgment is irregular, the issue then is whether the ex debito justitiae rule applies. [9] If this Court were to conclude that the ex debito justitiae does not apply as a matter of cause to an irregular judgment, the issue that follows is whether the Second Defendant has defence on the merits. [10] Regardless of the finding of whether the default judgment was one that was irregular or regular, another issue for resolution is whether the Second Defendant should be barred from having the default judgment set aside on the ground of non-compliance with Order 42 rule 13 of the Rules of Court 2012. [11] In determining the above issues, the law and principles governing the service of documents, particularly the ones relating to the service of a Writ and a Default Judgment will take centre stage. Was the Default Judgment an Irregular or a Regular Default Judgment? [12] A default judgment will be deemed irregular if it can be demonstrated that a defendant had not been served with the originating process. Reference may be made to the case of Summit Company (M) Sdn Bhd v Nikko Products (M) Sdn Bhd [1985] 1 MLJ 68 to illustrate the serious consequence of such a failure on the part of a plaintiff to comply with the provisions of the rules of court pertaining to service of an originating process. [13] It was contended by the Second Defendant that the judgment in default in this case is irregular on the ground that service of the Writ and Statement of Claim was not in accordance with the provision in Order 10 rule 1 of the Rules of Court 2012. [14] The above submission requires this Court to carefully examine this rule. Order 10 rule 1 provides for three general modes of service (and not two modes as contended by the Second Defendant - the Second Defendant having quoted the unamended Order 10 rule 1 of the Rules of Court 2012), namely: • personal service; OR • prepaid AR registered post; OR • electronic communication. [15] In the present matter, the Plaintiff had utilized prepaid AR registered post as the mode for effecting service of the Writ and Statement of Claim on the Second Defendant. [16] The Second Defendant’s main contention is that he had never received the Writ and Statement of Claim. The Second Defendant had pointed out that the Plaintiff’s Affidavit of Service only exhibited the AR registered post receipt and not the acknowledged AR card. Hence, the Second Defendant adopted the position that the judgment in default in this case is an irregular judgment in default. [17] Based on the decision of the Federal Court in Goh Teng Whoo & Anor v Ample Objectives Sdn Bhd [2021] 3 AMR 881; [2021] 4 CLJ 348; [2021] 3 MLJ 159; [2021] 2 MLRA 682, this Court finds that the failure to exhibit the AR registered card containing an endorsement as to receipt by the Second Defendant himself or someone authorised to accept service of the same on his behalf rendered the judgment in default as irregular. Does the ex debito justitiae rule apply? [18] Having found that the default judgment in this case is one that is irregular, the consequential issue for determination is whether an irregular judgment ought to be set aside ex debito justitiae. [19] The Second Defendant argued that the answer should be in the affirmative and like many parties before this case, relied on Tuan Haji Ahmed Abdul Rahman v Arab Malaysian Finance Bhd [1996] 1 MLJ 30 (and this Court can confidently say that many other parties in the future will continue to do so). The rule as supposedly enunciated by the Federal Court in this case, what this Court considers as the “traditional approach”, can be traced to cases such as Anlaby v Praetorius (1888) 20 QBD 764, Nevill v Hanley Ltd (1988) 14 VLR 270, Pace v Neil (1893) 19 VLR 393, Daly v Silley [1960] VR 353 and White v Weston [1968] 2 QBD 647. [20] It must however be remembered that Edgar Joseph FCJ in Tuan Haji Ahmed Abdul Rahman did say in no uncertain terms that the ex debito justitiae rule is merely a “general rule”. His Lordship went on to provide two qualifications to the above rule, that is, an application to have an irregular judgment set aside may be denied if:

there is delay on the part of the party in making the application to have the judgment set aside; and

the party seeking to set aside the default judgment had taken fresh steps after becoming aware of the irregularity. The first qualification is an issue to be determined in this application. [21] On the ex debito justitiae rule, it can be deduced from cases such as Lai Yoke Ngan & Anor v Chin Teck Kwee [1997] 3 AMR 2458; [1997] 3 CLJ 305; [1997] 2 MLJ 565; [1997] 1 MLRA 284 and Lee Tain Tshung v Hong Leong Finance Bhd [2000] 3 AMR 2707; [2000] 4 CLJ 15; [2000] 3 MLJ 364; [2000] 1 MLRA 543 and those from many other jurisdictions that:

an irregular default judgment is not a nullity; and

an irregular default judgment may or may not be set aside. [22] Based on the above propositions of law, which this Courts considers as accurate and represent the correct statement of the law on this aspect of practice and procedure, the (continued) application of the ex debito justitiae rule is called into question. [23] In addition, there is nothing in Order 13 rule 8 and/or Order 19 rule 9 of the Rules of Court 2012 that provide for an application of the ex debito justitiae rule. These provisions do not in any way draw any distinction between an irregular and a regular default judgment. Defence on the Merits [24] Since this Court has concluded that an irregular default judgment need not be set aside as of right, it is justified for this Court ask whether the Second Defendant has defence on the merits or is his defence bound to fail. If the answer is the latter, then setting aside the default judgment, albeit one that is irregular, will serve no useful purpose: see ANZ Banking Group v Kostovski (Unreported, Supreme Court of Victoria, Chernov J, 2 July 1997) and Faircharm Investment Ltd v Citibank International plc

EWCA Civ 171. [25] Based on the above rationale, this Court is of the view that the contentions by the Second Defendant that – • the Plaintiff never filed bankruptcy proceedings against the First Defendant; • the judgment in default is to oppress the Second Defendant; • it is impossible for the Second Defendant to have any personal knowledge of whether the loan of RM5,000,000.00 was disbursed to the First Defendant; • the Second Defendant is merely a guarantor and not the principal debtor under the Friendly Loan Agreement; and • the guarantee agreement was executed by the Second Defendant as a result of oral misrepresentations made by the First Defendant and/or fraud by the Plaintiff and/or the First Defendant who was a person the Second Defendant had trusted do not amount to defence on the merits. As admitted by the Second Defendant, he signed the Friendly Loan Agreement. [26] The Second Defendant did admit that the First Defendant is a close friend of his brother and that he had on occasions met the First Defendant. The Second Defendant also averred that he was informed by the First Defendant that the latter was in need of cash to sustain his business and that the Plaintiff was willing to provide him with a loan for RM5,000,000.00 provided a person of good financial standing and reputation was willing to act as a personal guarantor for the said loan. Believing that the First Defendant will be disposing his assets to repay the loan and as an interim measure to tie him over this difficult period, the Second Defendant further claimed that he met the First Defendant and that he signed the personal guarantee agreement without reading the terms of the of the agreement. [27] Once again, the above assertions by the Second Defendant do not in any way support his application to have the default judgment, albeit one that this Court has concluded as irregular, set aside. To set aside this default judgment will serve no useful purpose. Was there non-compliance with Order 42 rule 13? [28] The matter before this Court also raised the question of whether there has been a delay by the Second Defendant to have the default judgment set aside and if the answer is in the affirmative, is the delay fatal to the Second Defendant’s application to have the default judgment set aside. [29] The judgment in default in this matter was entered by the Plaintiff against the Second Defendant on 23 December, 2022. This application in Enclosure 13 was filed on 15 March, 2023. [30] This Court is henceforth required to consider the provision in Order 42 rule 13 of the Rules of Court 2012, which applies regardless of whether a default judgment is one that is irregular or regular. [31] Order 42 rule 13 of the Rules of Court 2012 expressly provides that a party intending to set aside any order or judgment “must make his application to the Court and serve it on the party who has obtained the order or judgment within thirty days after the receipt of the order or judgment by him”. [32] This provision was introduced into the Rules of Court 1980 with effect from August 1, 1993 and retained in the current Rules of Court 2012. [33] Prior to the introduction of Order 42 rule 13, no express time-frame for the setting aside of a default judgment can be found in the rules of court. However, the apex court in Fira Development Sdn Bhd v Goldwin Sdn Bhd [1989] 1 CLJ (Rep) 32; [1989] 1 MLJ 40; [1988] 1 MLRA 288 had made it clear that an application to set aside a default judgment should be made with reasonable promptitude. Although there was no explanatory note that accompanied the amendment that introduced Order 42 rule 13, it was quite obvious that the then new provision was intended to “override” the Supreme Court in Fira Development Sdn Bhd v Goldwin Sdn Bhd. [34] Returning to the mandatory directive in Order 42 rule 13 of the Rules of Court 2012, it bears reiteration that the 30-day period runs from the date “after the receipt of the order or judgment by him”. The key term is “receipt of the judgment” by the Second Defendant. [35] Once again, the Second Defendant has denied receipt or knowledge of the default judgment. [36] The Plaintiff produced an AR post receipt and certificate of posting receipt as proof of service of the sealed copy of the default judgment on the Second Defendant to show that the date of the receipt of the judgment was on 12 January, 2023. [37] A similar issue as to whether there was proper service of the default judgment had been raised. [38] As Order 42 rule 13 does not provide for personal or other mode or service, ordinary service would suffice. Hence, service of the default judgment on the Second Defendant was in accordance Order 62 rule 6(1)(a) of the Rules of Court 2012 and the Second Defendant has not provided any cogent reason(s) for the delay in the setting of the default judgment. [39] In view of the above findings, the application in Enclosure 13 is dismissed with costs of RM5,000. As a consequence of this Order, the application in Enclosure 17 is also dismissed with no order as to costs. Dated: 11, November, 2023 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: Edmond Teh for the Plaintiff (Messrs. Shu Yin, Teh & Taing) SC Tay with Kevin Wong and Hashimah Abdul Halim for the Second Defendant (Messrs. Jason Teoh & Partners)