Pacific & Orient Insurance Co. Berhad v Sulaiman Bin Mohd Said & 1 Lagi (12ANCC-17-03/2016)

This is an appeal by the Defendant company against my decision dismissing their appeal filed against the decision of the Sessions Court Judge allowing the Plaintiff’s claim in the Originating Summons No. B54- 37-09/2015 (the OS).

In the OS the Plaintiffs’ claim against the Defendant is for a sum of RM400,000.00 with interest at the rate of 5% per annum till date of full settlement and costs. The said sum is the sum which the Defendant is liable to indemnify the Plaintiffs pursuant to the terms and conditions in the Certificate of Insurance 2010.

The parties will be referred to as they are in the lower court.

The Plaintiffs were at all material times partners of Messrs Paul Cheah & Associates (PCA) which is a legal firm. The First Plaintiff, Sulaiman bin Mohd Said (1st Plaintiff) was a partner of PCA for the 4 period from 15 April 1997 to 31 December 2013. The 1st Plaintiff resigned as a partner of PCA vide letter dated 5 August 2015.

The Second Plaintiff, Venu a/l K.P. Nair (2nd Plaintiff), was a partner from 12 December 1999 until 31 December 2013. Through his application to intervene, the 2nd Plaintiff was added as co-plaintiff to the OS proceedings by order of the court dated 13 November 2015. The 2nd Plaintiff passed away on 12 August 2016. On the application of the Defendant, the wife of the late 2nd Plaintiff, Thangam a/p K. Ramnath being the personal representative of the deceased estate is made a party to this OS proceedings.

The Defendant, Pacific & Orient Insurance Co. Berhad, an insurance company, was the insurers of the Malaysian Bar Professional Indemnity Insurance Scheme (PII Scheme) for the year 2010 (2010 PII Scheme).

Under the 2010 PII Scheme the Defendant agreed, pursuant to the Certificate of Insurance, to insure and indemnify PCA and each principal thereof against civil liability for claims made against PCA during the relevant insurance period. The Certificate of Insurance (Certificate of 5 Insurance 2010) issued by the Defendant in favour of the Plaintiffs is found at pages 106 to 118 Rekod Rayuan (Jilid III).

On 25 January 2011 Public Bank Berhad (PBB) filed a suit against PCA vide Kuala Lumpur High Court Civil Suit No. D-22NCC-165-2011 (PBB Suit) in relation to an alleged fraud committed by one of the partners of PCA, Mr Frankie Tan, at its Subang Jaya branch.

Vide 2 notifications dated 30 November 2010 and 19 January 2011, PCA notified the Defendant of the PBB Suit and the claim for indemnity made by PCA pursuant to the Certificate of Insurance 2010 (PCA’s Claim for Indemnity).

By a letter dated 6 January 2012, the Defendant vide its claim administrator, Echelon Claims Consultants Sdn Bhd, repudiated PCA’s Claim for Indemnity pursuant to clauses 15, 17 and 30 of the Certificate of Insurance 2010 on the basis of alleged non-cooperation of PCA with the Defendant’s panel solicitors in defending the PBB’s Suit.

Dissatisfied with the Defendant’s repudiation, PCA brought third party proceedings against the Defendant on the basis of the indemnity provided under the Certificate of Insurance 2010. 6

After several negotiations through court assisted mediation, a consent order between the parties was recorded on 2 August 2012 (Consent Order). The material terms of the Consent Order provides that –

that Messrs Paul Cheah & Associates agrees to withdraw the 2nd Third Party proceedings against Pacific & Orient Insurance Co. Berhad with no order as to costs; and

that Pacific & Orient Insurance Co. Berhad agrees to provide cover to Messrs Paul Cheah & Associates under the Certificate of Insurance 2010 subject to the revised Mandatory Limit of Indemnity of RM400,000.00 and all other terms and conditions in the Certificate of Insurance 2010 to apply. [13] In the PBB Suit, after a full trial, judgment was entered on 30 November 2012 against PCA (Judgment) for the sum of RM562,483.62 as at 4 January 2011 together with interest and costs (Judgment Sum). It is the Defendant’s position that based on the judgment of the High Court (pages 152 to 197 Rekod Rayuan Jilid II) a finding of fraud was made against FT who was one of PCA’s partner at the material time. 7 [14] In light of the finding of fraud by the court in the PBB Suit, the Defendant through letter dated 9 April 2013 (pages 223 to 225 Rekod Rayuan (Jilid II) ) issued by Echelon Claims Consultant Sdn Bhd to PCA informed PCA as follows –

Clause 36(i) of the Certificate of Insurance 2010 defines misconduct as “dishonest or fraudulent conduct in the discharge of his duty”;

Following the High Court finding of fraud against Mr Frankie Tan in the PBB Suit, PCA Claim for Indemnity is excluded by virtue of clause 33(e) except as provided in clause 12; and

However coverage under clause 12 is subject to PCA’s strict compliance with the terms and conditions under clause 12 especially clause 12(e). [15] PCA’s appeal to the Court of Appeal against the Judgment was dismissed with costs on 5 August 2013. [16] Vide letters dated 25 October 2013 and 6 January 2015 PCA through its solicitors Messrs. Shook Lin & Bok issued letters of demand 8 to the Defendant demanding payment for the Judgment Sum (pages 201 – 202 and pages 204 to 2015 Rekod Rayuan (Jilid II) ). [17] As there were no supporting documents furnished by PCA to prove PCA’s compliance with clause 12(e) of the Certificate of Insurance 2010, the Defendant accordingly repudiated the policy liability under the Certificate of Insurance 2010 on the basis of PCA’s non-compliance. [18] The 1st Plaintiff filed the OS against the Defendant claiming for the reduced Mandatory Limit of Indemnity of RM400,000.00. On 26 February 2016 the Plaintiff’s claim was allowed with costs by the learned Sessions Court (SC) Judge. Thus this appeal by the Defendant/Appellant. [19] From the Defendant’s Amended Memorandum of Appeal dated 1 July 2016, the Defendant’s grounds of appeal may be summarized as follows –

The learned SC Judge erred in law in holding that the Consent Order estopped the Defendant from disputing liability; 9

The learned SC Judge erred in law and/or in fact in failing to consider and hold, that despite the Consent Order, the Defendant’s liability under the Certificate of Insurance 2012 was subject to all other terms and conditions therein; and

The learned SC Judge erred in law and/or in fact in failing to consider and hold that there were conflicting allegations and facts alluded by both parties in their affidavits. Accordingly the OS ought to have been converted to writ action. The Defendant’s contentions [20] It is the Defendant’s contention that their agreement to provide cover under the Certificate of Insurance 2010 is subject to the terms and conditions contained therein –

(a)

Clause 12, in particular clause 12(e) of the Certificate of Insurance 2010 provides as follows

Notwithstanding the Exclusion in Clause 33(e), we will indemnify the Firm and its employees against any claim arising out of misconduct excluding indemnity to any person(s) or employees who were party to or condoned such misconduct relating to the claim.

The maximum amount we will indemnify you for claims in respect of misconduct is RM350,000 or the Firm’s Mandatory Limit whichever is the lower. This is applicable towards any one claim and in the aggregate during the Period of Insurance. This Limit of Indemnity is over and above the Base Excess in Clause 9.

You shall at our request take or procure, to be taken at our expense, all reasonable steps to obtain reimbursement from any party to such misconduct or from his personal legal representatives.

You agree that any recovery so obtained together with any monies which but for such misconduct would have been due to any party to such misconduct, shall be paid to us up to but not exceeding the amounts paid by us in respect of such claim together with any expenditure reasonably incurred in obtaining such reimbursement.

You establish that at the time of the misconduct giving rise to the claim, the principal who committed such misconduct was practising as a genuine principal of and 11 carrying on practice in common with other principals of the Firm.

The Firm complied with risk management procedures set out below or equivalent thereto at the time of such misconduct.

entries in the client cashbook and client ledger of each branch maintained pursuant to Rule 11(2) of the Solicitors’ Account Rules were copied and exchanged;

(ii) bank statements of client accounts and office account of each branch office are sent by its bank direct to the principal office as well as the branch office;

(iii) all transactions involving client bank accounts must have two (2) signatories except to stop operation of an account or the cancellation of any transaction, where one (1) signatory will suffice; and

(iv) in all other respects the Firm complies with the Solicitors’ Account Rules 1990 and the Accountant’s Report Rules 1990 (as amended from time-to-time). [21] The Defendant contends, based on the grounds of judgment of the learned Judge in the PBB Suit, the following finding was made –

PCA’s former partner, Mr Frankie Tan had fraudulently attested a forged signature of PBB’s officer in the Discharge of Charge; 12

That the loan sum of RM800,000.00 was transferred by PBB into the account of PCA’s Head Office; and

There was no evidence tendered and explanation proffered by PCA to contra the aforesaid findings. [22] Burden of proving PCA’s compliance with clauses 12(a) to (e) of the Certificate of Insurance 2010 lies with the Plaintiffs. However the Plaintiffs failed to furnish supporting documents to prove PCA’s compliance. Instead the Defendant alleged PCA has admitted its non-compliance of the Certificate of Insurance 2010 vide its letter dated 21 May 2013 (pages 240 – 243 Rekod Rayuan (Jilid II) ). [23] It is the Defendant’s position that the Consent Order entered between the parties is subject to PCA’s compliance with the terms and conditions of the Certificate of Insurance 2010, in particular clause 12(e). Due to PCA’s non-compliance with the said clause 12(e), the repudiation of the policy liability is lawful, valid and justifiable. [24] It is the Defendant’s submission that since the entire action hinges upon one jugular question of fact, to wit whether PCA has complied with clause 12(e) of the Certificate of Insurance 2010 and that the parties 13 have entirely different stance on this question of fact, the OS procedure adopted by the Plaintiffs is eminently unsuitable or inappropriate. The Plaintiff’s contentions [25] The 2nd Plaintiff’s primary case is based upon the proper interpretation of the Consent Order. By the Consent Order the Defendant has agreed to indemnify and pay the Plaintiffs as individual partners of PCA to the amount of RM400,000.00. The Defendant cannot now approbate and reprobate and seek to deny liability by relying on the terms of the Certificate of Insurance 2010 and the master policy. [26] The Plaintiffs submit a consent order or consent judgment is evidence of a contract between the parties thereto and binding upon them. Based on case law, in interpreting the terms of the Consent Order it is important take into account of the background knowledge which would reasonably have been available to the parties at the time the Consent Order was executed on 2 August 2012. 14 [27] The background knowledge and material facts were –

PCA had duly notified the Defendant of the PCA’s Claim for Indemnity under the Certificate of Insurance 2010;

The Defendant repudiated liability which caused the Plaintiff to filed for third party proceedings against the Defendant in the PBB Suit;

Defendant denied liability in respect of the third party proceedings; [28] With the above background the Defendant would have clearly understood paragraph 1 and 2 of the Consent Order to mean that PCA’s agreement to withdraw the third party proceedings against the Defendant on the basis that the Defendant agreed to provide cover and indemnify PCA under the Certificate of Insurance 2010 subject to the revised Mandatory Limit of Indemnity of RM400,000.00. As such the Defendant had by reason of the Consent Order agreed to pay and indemnify the Plaintiffs up to the sum of RM400,000.00. [29] The Plaintiffs submit, on the facts of the present case, such interpretation of the Consent Order is the only interpretation that would make business common sense. Based on the terms of the Consent 15 Order and the facts that transpired leading to the execution of the Consent Order, the Defendant is liable to indemnify and pay the Plaintiffs. Issues [30] Considering the facts presented by the parties, the main issues which need to be determined by this court are –

whether the Consent Order is subject to the terms and conditions of the Certificate of Insurance 2010. This issue essentially relate to the interpretation of the Consent Order which is a question of law;

whether the Defendant is estopped, by reason of the Consent Order, from disputing its liability under the

whether the learned SC Judge erred in allowing the Plaintiffs OS that necessitate appellate intervention by this court. The first and second issue will be dealt together below. 16 [31] It is not disputed that the Consent Order was executed by the parties. However dispute arose as to the implementation of the Consent Order due to the different interpretation adopted by both the Plaintiffs and Defendant in respect of the terms of the said order. [32] As stated above the Defendant contends notwithstanding the execution of the Consent Order, the Defendant’s liability to provide cover to PCA under the Certificate of Insurance 2012 is subject to the terms and conditions of the said certificate of insurance. Since the Plaintiffs failed to comply with the terms and conditions of the Certificate of Insurance 2012, the Defendant is entitled to repudiate their liability. [33] The Plaintiffs on the other hand submit, pursuant to the Consent Order, the Defendant had agreed to indemnify and pay the Plaintiffs as individual partners of PCA to the amount of RM400,000.00. As such the Defendants cannot now approbate and reprobate and deny liability by reference to the Certificate of Insurance 2012. [34] The Consent Order (pages 150 to 151 Rekod Rayuan (Jilid II) ) was recorded on 2 August 2014. It reads as follows – 17 CONSENT JUDGMENT UPON the Third Party action of the Defendant filed against the 2nd Third Party herein AND UPON the matter having been called for mediation today before the Honourable Judge Dato’ Mary Lim Thiam Suan in the presence of Mr. Chow Yee Wan the counsel for the Plaintiff, Mr. Lim Choon Wee, Mr. Venu a/l K.P. Nair and Mr. Sulaiman Bin Mohd Said, the counsel for the Defendant and Mr. Wong Hok Mun, the counsel for the 2nd Third Party AND AFTER HEARING the counsel aforementioned that the Defendant and the 2nd Third Party herein through their counsel have agreed to the terms set forth below and marked as Enclosure 64. IT IS HEREBY ORDERED BY CONSENT as follows :-

that Messrs Paul Cheah & Associates agrees to withdraw the 2nd Third Party proceedings against Pacific & Orient Insurance Co. Berhad with no order as to costs;

that Pacific & Orient Insurance Co. Berhad agrees to provide cover to Messrs Paul Cheah & Associates under the Certificate of Insurance 2010 subject to the revised Mandatory Limit of Indemnity of RM400,000.00 and all other terms and conditions in the Certificate of Insurance 2010 to apply; and

that all costs in relation to the present proceedings between Messrs Paul Cheah & Associates and Public Bank Berhad be borne by Messrs Paul Cheah & Associates. Dated 2 August, 2012 18 Whether the Consent Order is subject to the terms and conditions of the Certificate of Insurance 2010 and whether the Consent Order operate as an estoppel against the Defendant The law [35] It is settled law that a consent order is by nature similar to a contract. The Federal Court in Tan Geok Lan v. La Kuan [2004] 2 CLJ 301 through Mohd Noor Ahmad FCJ held: - a consent judgment or order is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of the court, and its force and effect derives from the contract between the parties leading to, or evidenced by, or incorporated in, the consent judgment or order. A consent order must be given its full contractual effect … [36] In MBF Holdings Berhad & Anor v. Loy Teik Ngan & Anor and other appeal [2014] 1 LNS 1746, the Court of Appeal cited with approval the decision of the High Court in Malaysia Discounts Bhd. and Ors. v. Pesaka Astana (M) Sdn. Bhd. & Ors [2008] 5 CLJ 130; [2008] 6 MLJ 839) and held that: - It is settled law that a consent order was by nature similar to a contract between the parties to the suit or binding in respect of matters adumbrated in such a consent order. The usual rules for construing a 19 commercial contract would accordingly be relevant in the construction of a consent order. [37] In a recent case The Government of Malaysia v Imej Warisan Sdn Bhd [2017] 1 LNS 1914, one of the issues before the Court of Appeal was an interpretation of a particular provision in a design and build contract. Vernon Ong JCA delivering the decision of the Court Appeal said – [24] It has often been said that where the court is called upon to interpret a contract, it will do so in a sensible fashion (see Loh Wai Lian v SEA Housing Corporation Sdn Bhd [1987] 1 LNS 37). In this connection, it is also instructive to consider Lord Steyn's statement in Mannai Investment Co Ltd v. Eagle Star Life Assurance Co Ltd [1997] AC 749, 771: "In determining the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial transaction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language. In contradistinction to this modern approach, Lord Greene M.R's judgment in Hankey v. Clavering [1942] 2 KB 326 is rigid and formalistic." [25] Thus, while individual contracts will fall to be interpreted in accordance with their own terms, it is a useful guide to construction that 20 a stipulation as to time must be read along with other provisions of the contract to determine if time is truly of the essence of the contract. Here it is important to bear in mind that a contract is to be interpreted in accordance with the following guidelines: Berjaya Times Square Sdn Bhd v. M-Concept Sdn Bhd [2010] 1 CLJ 269 FC at 296. First, a court interpreting a private contract is not confined to the four corners of the document. It is entitled to look at the factual matrix forming the background to the transaction. Second, the factual matrix which forms the background to the transaction includes all material that was reasonably available to the parties. Third, the interpreting court must disregard any part of the background that is declaratory of subjective intent only. Lastly, the court should adopt an objective approach when interpreting a private contract. (see Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98). As Lord Clyde said in Bank of Credit and Commerce International SA v. Munawar Ali [2001] 2 WLR 735: "The knowledge reasonably available to them (that is to say the parties to the contract) must include matters of law as well as matters of fact. The problem is not resolved by asking the parties what they thought they intended. It is the imputed intention of the parties that the court is concerned to ascertain. The parties may well have never applied their minds to the particular eventuality which has subsequently arisen, so that they may never in fact have had any conscious intention in relation to that eventuality. It is an objective approach which is required and a solution should be found which is both reasonable and realistic. The meaning of the agreement is to be discovered from the words which they have used read in the context of the circumstances in which they made the agreement. The exercise is not one where there are strict rules, but one where the solution is to be found by considering the 21 language used by the parties against the background of the surrounding circumstances." [38] Thus in interpreting the Consent Order, the words used must be read in the context of the circumstances which led to the execution of the Consent Order by both parties. In doing so this court is required to consider, among others, the following factors –

the Consent Order is to be construed in the manner a reasonable commercial person would construe them as to give commercial sense to the order;

the factual matrix which forms the background to the Consent Order and this includes all materials and matters of law and of fact that was reasonably available to the parties;

It is the imputed intention of the parties that this court is required to ascertain and not what the parties thought they intend it to be. [39] What then was the factual matrix which forms the background leading to the execution of the Consent Order by Plaintiffs and the 22 Defendant?. From the affidavit evidence the factual matrix is as follows –

(a)

PCA was sued by PBB for damages suffered by PBB for alleged fraud committed by Mr Frankie Tan, one of the partners of PCA at its Subang Jaya branch. Subsequently Mr Frankie Tan was named as the 1st Third Party and the Defendant as the 2nd Third Party in a third party proceedings filed by PCA.

via letter dated 6 January 2012 the Defendant repudiated PCA’s Claim for Indemnity on the ground of PCA’s non-cooperation with the Defendant’s panel solicitors. 23

PCA initiated Third Party Proceedings against the Defendant for indemnity and compensation for any damages that may be awarded to PBB that has to be paid by PCA. The Plaintiffs’ pleaded case was that the Defendant had illegally terminated the contract of insurance with PCA based on purported breaches of clauses 15, 16 and 17 of the Certificate of Insurance 2010 merely because PCA had not been cooperative with the Defendant’s solicitor appointed to defend the action against PCA. The Plaintiffs’ Statement of Claim (3rd Party Notice Against The 2nd Third Party) dated 10 April 2012 can be found at pages 1 – 12 Rekod Rayuan Tambahan (Jilid 3).

It is pertinent to note that the Plaintiffs' prayer in the Third Party Proceedings is for an order that the Defendant indemnify and compensate the Plaintiffs for any damages that may be awarded to PBB that has to be paid by the Plaintiffs. The Plaintiffs also sought for a declaratory relief, inter alia, that the Defendant’s repudiation of the insurance contract is illegal null and void. 24

In its defence, the Defendant claim that PCA has breached the terms and conditions of the Certificate of Insurance 2010, in particular, clause 15(a) and/or (b) for not being cooperative with the Defendant’s solicitor appointed to defend the action against PCA. Particulars of the non-cooperation was set out at paragraph 13 of the Defendant’s 2nd Third Party’s Statement of Defence dated 27 April 2012 (pages 13 to 49 Rekod Rayuan Tambahan (3).

After series of negotiations through court-assisted mediation and well before the pronouncement of judgment dated 30 November 2012 in Suit PBB, parties executed the Consent Order on 2 August 2012. [40] As stated above, subsequent to the execution of the Consent Order, the Defendant repudiated for the second time its liability under the Certificate of Insurance 2010. The reason this time round – the Plaintiff failed to comply with clause 12(e) of the said certificate of insurance. 25 [41] Having considered the background of the instant case I am of the view that the Consent Order is not subject to the terms of the Certificate of Insurance 2010. I say so for the following reasons –

The terms of the Consent Order expressly and specifically provides each parties’ obligations, namely, the Plaintiffs are to withdraw the Third Party Proceedings against the Defendant in the PBB Suit and at the same time the Defendant is to provide cover to PCA under the Certificate of Insurance 2010.

The parties’ obligations under the Consent Order is reciprocal in the sense that it binds both parties equally. The parties’ obligations are to be carried out simultaneously and it is not in isolation of one to the other. To interpret otherwise would not make any sense at all considering the fact that the subject matter of the Third Party Proceedings is the Plaintiffs’ claim against the Defendant for indemnity coverage pursuant to the terms and conditions of the Certificate of Insurance 2010. 26

The Defendant’s interpretation that the Consent Order is subject to the terms and conditions of the Certificate of Insurance 2010 inevitably mean parties will be back at square one. If the intention of the parties at the time executing the Consent Order was as what is contended by the Defendant, then why bother going through series of court assisted mediation followed by the Consent Order. To add irony to the situation, although parties has mutually agreed on the terms as per the Consent Order, the effectiveness of the Consent Order is still conditional upon the fulfilment of the terms and conditions of the Certificate of Insurance 2010 which is exactly the dispute between the parties in the Third Party Proceedings.

It defies logic for the Plaintiffs to agree to withdraw the Third Party Proceedings without any obligation on the part of the Defendant to provide the indemnity required by the Plaintiffs as provided in the Certificate of Insurance 2010. Worst of all, despite the Consent Order the Plaintiffs would still be subject to the Defendant’s ‘mercy’ in that the Defendant would have the final say to determine whether the conditions in the Certificate of Insurance 2010 is complied by the Plaintiffs. 27 No reasonable person faced with a situation like that of the Plaintiffs/PCA – where a judgment in respect of a monetary claim of RM561,483.62, general damages and exemplary damages against the PCA were imminent, would agree to withdraw their claims in the manner contended by the Defendant.

It is inconceivable that the PCA’s consent to withdraw its claim (seeking indemnity and compensation for any judgment that may be made against it in the PBB Suit) in the third party proceedings against the Defendant is subject to further verification by the Defendant that the Plaintiffs has complied with the terms and conditions of the Certificate of Insurance. This is especially so when the Defendant had once repudiated its liability under the Certificate of Insurance 2010 through a letter dated 6 January 2012 issued by the Bar Council’s Insurance Broker that is Jardine Llyod Thompson Sdn Bhd to PCA (Rekod Rayuan (Jilid II) pages 143 – 144) and again resisted the claims made by the PCA in the Third Party Proceedings. 28

At the time the Consent Order was executed, the PBB Suit has yet to be adjudicated and determined by the court. This means the claim of fraud by PBB against PCA had not been disposed of. Notwithstanding such prevailing situation, the Defendant had willingly and mutually agreed to enter into an arrangement which was recorded as the Consent Order, namely, agree to provide for the indemnity cover of RM400,000.00 to PCA.

After the execution of the Consent Order and the judgment pronounced in the PBB Suit, the Defendant again repudiated its liability on the ground PCA had failed to comply with clause 12(e) of the Certificate of Insurance 2010. The said clause 12(e) requires PCA to prove at the time of the misconduct (which the Defendant said was committed by Mr. Frankie Tan a partner of PCA) PCA has in place, risk management procedures as specifically laid down in the said clause. If the Defendant had intended for the Consent Order in particular the Defendant’s agreement to provide indemnity cover under the Certificate of Insurance 2010 is conditional upon the findings of the court in respect of PCA’s liability in the PBB Suit, then the Defendant ought to have insisted 29 words to that effect be expressly stated in the Consent Order. But there were no express words to that effect. In fact non-compliance with clause 12(e) was never specifically pleaded in the Defendant’s 2nd Third Party Statement of Defence as the ground for repudiation. In fact in the repudiation letter dated 6 January 2012 from Jardine Llyod Thompson the ground of repudiation was specifically stated – … In summary the Insurers [Defendant] have declined the claim on the grounds of non-cooperation as the witness statements and the specimen signatures of Mr. Frankie Tan … were not provided to the PS [Panel Solicitor] to enable them to effectively defend you at the trial which has been fixed for 20.01.2012… … The above are clear breaches of Clauses 15 and 17 of the 2010 COI which deals with non-cooperation. Failure to observe Clauses 15 and 17 of the 2010 COI has also breached Clause 30 which deals with observance and fulfilment of the terms, conditions, and endorsements of the Insurance … [42] It is simply beyond comprehension for the Defendant to incorporate, provisions of the Certificate of Insurance 2010 which were not even specifically pleaded in their pleadings, into the Consent Order and adversely construed it against the Plaintiffs. 30 [43] Simply put, if the Defendant had intended for its obligations under the Consent Order to be conditional upon the Plaintiffs fulfilment of some other provisions which were not even pleaded in its defence, it is therefore incumbent upon the Defendant to make such intention specifically and abundantly clear and put it before the Plaintiffs for their consent. In this respect what was said in the English case Schuler (L) AG v. Wickman Machine Tool Sales Ltd [1947] AC 235 is of significant relevance – The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear. [44] To my mind the phrase “… and all other terms and conditions in the Certificate of Insurance apply …” at the second paragraph of the Consent Order must necessarily relate to the payment of the revised Mandatory Limit of Indemnity of RM400,000.00 which precede such phrase. In this respect it is noted that in its 2nd Third Party Statement of Defence the Defendant pleaded that PCA’s limit of coverage is RM450,000.00 taking into account the base excess of RM50,000.00 and that the Plaintiffs being the remaining partners of PCA is covered up to the limit of RM350,000.00. However when the Consent Order 31 specifically state RM400,000.00 as the mandatory limit of indemnity, this ought to be construed as the conscious intention of the parties that the Defendant’s liability to provide indemnity coverage for such amount and this supersede whatever limit of indemnity stated in the Certificate of Insurance 2010. [45] Taking into consideration the factual matrix which forms the basis upon which the parties eventually struck a deal on the terms of the Consent Order, I am compelled to agree with the Plaintiffs that the interpretation adopted by the Defendant would lead to an unreasonable result. Such result could not have possibly be the intention of the parties. The events that transpired and that which were prevailing around the time mediation were carried out followed by the Consent Order could not have possibly led the parties to agree that the implementation of the Consent Order is conditional upon the Plaintiff’s compliance with the terms and conditions of the Certificate of Insurance 2010. [46] It is my considered opinion that the Consent Order entered by the PCA and the Defendant is meant to settle the disputing claims between the parties in regards to the Certificate of Insurance 2010. By the Consent Order the Defendant agreed to provide to the Plaintiffs, who 32 were the partners of PCA at the material time, the indemnity cover under the Certificate of Insurance 2010 to the amount of RM400,000.00. [47] As such the Defendant cannot approbate his obligation under the Consent Order but subsequently reprobate it for reasons which could not have been sensibly construed to be part of the terms of the Consent Order. [48] Therefore the Defendant is bound with the obligations/terms of the Consent Order it has drawn and agreed. Under the circumstances the Defendant cannot rely on the terms of the contract of insurance to deny its obligations under the Consent Order. It is also not open to the Defendant to rely on events subsequent to the execution of the Consent Order to support its interpretation of the Consent Order (Kedah Cement Sdn Bhd v Masjaya Trading Sdn Bhd [2007] 3 MLJ 597). [49] As the Consent Order is binding on the parties, the Defendant is estopped from going back on his words (Tio Chee Hing v Tractors Malaysia Bhd [1973] 1 MLJ 66). In the case of Phua Beng Chooi @ Koh Kim Kee (P) v Koh Heng Kim @ Koh Heng Leong [2007] 2 MLJ 458) the learned Judge had this to say in respect of a consent order that the court was asked to vary or set aside – 33 I am dealing with a consent order drawn up by the parties and agreed to by the parties. It is binding and it serves as an estoppel. The court will not permit the person making a representation to go back on his word or allege a particular situation different from that which he represented… [50] It is the Defendant’s contention that the learned SC Judge erred when she holds that the parties have considered and waived clause 33(e) (which deals with misconduct) of the Certificate of Insurance 2010 prior to the recording of the Consent Order. The Defendant pointed out on the date the Consent Order was executed the High Court in PBB Suit has yet to decide that PCA is liable for misconduct. It is also the Defendant’s contention that the learned SC Judge erred when she accepted the unaffirmed statement and/or statement from the Bar by the Plaintiff’s counsel that the parties have waived the said clause. [51] I have perused the Grounds of Judgment of the learned SC Judge which is found at pages 1 to 12 Rekod Rayuan Tambahan. I believe that part of the said judgment which the learned counsel relies on in coming to such conclusion is paragraph 21 which read as follows – [21] Berdasarkan fakta-fakta ini jelas menunjukkan bahawa sebelum Penghakiman Persetuju ini dicapai, Defendan mengetahui bahawa terdapat tuntutan slah laku frod terhadap PCA. Walaupun mengetahui tuntutan atas asas frod ini, Defendan masih menruskan dengan memasukkan penghakiman persetujuan dengan PCA. Ini jelas 34 menunjukkan bahawa semasa penghakiman persetujuan tersebut dimasukinya isu salah laku frod telahpun dipertimbangkan dan tidak lagi menjadi isu. [52] To my mind, contrary to the contention of the learned counsel, such statement does not at all indicate that the learned SC Judge had ruled that the Defendant has waived clause 33(e) of the Certificate of Insurance 2010. The statement is the finding of the learned SC Judge that the Defendant had entered into the Consent Order despite being aware of the claim of fraud against PCA in the PBB Suit and as such it was concluded that clause 33(e) had already been given due consideration by the Defendant and therefore misconduct (which the Defendant now raised to repudiate liability) was no longer an issue. In the judgment of the learned SC Judge there was no finding made that the Defendant had waived clause 33(3). Neither was there in the judgment to show that the learned SC Judge had accepted statement from the Bar made by the Plaintiff’s counsel that parties have waived clause 33(e) of the Certificate of Insurance 2010. [53] The Defendant contends the originating summons procedure initiated by the Plaintiffs is eminently unsuitable and inappropriate because of the conflicting allegations and facts and a substantial dispute in respect of the terms of the Consent Order. The issue before this court 35 and the lower court is essentially one of law which is the interpretation of the Consent Order and it does not substantially relate to an issue of facts. No doubt the factual circumstances culminating to the Consent Order is vital for purpose of construing the terms of the Consent Order. Contrary to the Defendant’s contention, the relevant and material facts as narrated above is not disputed. As such there is no merits in the Defendants contention. In any event if the Defendant felt strongly about this issue, it should have moved the lower court under the relevant provisions of the Rules of Court 2012 for the OS be converted to writ. Whether the SC Judge erred in allowing the OS that necessitate appellate intervention by this court [54] As to the function of this court in so far as its appellate power is concerned, suffice for me to refer to the case of Sivalingam a/l Periasamy v Periasamy & Anor [1995] 3 MLJ 395 where it was held: It is trite law that an appellate court will not readily interfere with the findings of fact arrived at by the trial court to which the law entrusts the primary task of evaluation of the evidence. However the appellate court has a duty to intervene where a trial court has so fundamentally misdirected itself, that one may say that no reasonable court which had properly directed itself and asked the correct questions would have arrived at the same conclusion. 36 [55] As stated above I have perused the judgment of the learned SC Judge. Based on the aforesaid reasons I am of the view it is not manifestly and plainly wrong on the part of the learned SC Judge to allow the prayers sought by the Plaintiffs in the OS. Accordingly there is no justifiable ground for this court to interfere with the decision of the lower court. Conclusion [56] For the above mentioned reasons I dismissed the Defendant’s appeal with costs and affirmed the lower court decision. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 5 MARCH 2018 Counsel: Defendant/Appellant : PS Koh of Messrs Azim, Tunku Farik & Wong Plaintiff/Respondent : Lau Kee Sern with Heng Chia Leng of Messrs Shook Lin & Bok (for the 1st Respondent)