Destroying the substratum of an appeal by paying/receiving the Judgment Sum

Destroying the substratum of an appeal by paying the Judgment debt

A rather interesting decision was recently (15.02.2023) released by the Federal Court in See Teow Koon v Kian Joo Can Factory Berhad [Civil Review No.: 08(RS)-12-09/2019(W)].

It is a decision that will have reverberations for practitioners.

In preparing this article, I have taken the liberty of carrying out a file-search on the substantive FC Motion and Appeal, both of which were struck-out. The Civil Review was premised upon the FC’s decision to strike.

Background facts

On 04.11.2015, the HC allowed P’s (See Teow Koon) claim for ~RM6.7m against D (Kian Joo Can). An appeal was lodged.

On appeal, P threatened execution. D applied to the CA for a stay. The CA ordered D to deposit the Judgment Sum with their solicitors. D did so.

On 14.02.2017, the CA then partially allowed D’s appeal by reducing the sum owed to ~RM2.5m.

On 23.02.2017, D paid the sum of ~RM2.5m to P. P received the money (all transfers made and received through solicitors).

On 13.03.2017, P then lodged a Notice of Motion for leave to appeal to the FC. On 03.05.2018, leave was granted by the Federal Court.

P proceeded to file all Records of Appeal.

D then took-out a Notice of Motion to strike the appeal and to further rescind the grant of leave.

D’s argument: The receipt of the payment rendered the substratum of the appeal academic

D’s core argument was that the receipt of the payment by P on 23.02.2017 had rendered the appeal (lodged on 03.05.2018) academic. The substratum of the appeal was gone.

D substantiated this argument by reliance on Kosma Palm Oil v Koperasi Serbausaha Makmur [2004] 1 MLJ 257, where the FC made a comment that the payment of a judgment debt may destroy the substratum of the appeal (paragraphs 17 and 18).

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The Federal Court’s decision

The Federal Court, despite having granted leave and the matter being ready for full hearing, allowed D’s Notice of Motion. The entire matter was struck and the leave to appeal was rescinded on 12.03.2019 (see Sri Kelangkota v Arab Malaysian Prima Realty [2003] 3 MLJ 257, where the FC held that it could revisit a grant of leave).

It is of note that 5 Judges of the Federal Court determined the Notice of Motion (Sealed Order of the FC available here).

The Federal Court did not release its Grounds of Judgment (which would have been immensely useful). A perusal of the FC Civil Review Grounds indicates that brief grounds were delivered by the substantive panel.

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The Civil Review application

P, being dissatisfied with the decision of the Federal Court, filed a review application. The Federal Court dismissed P’s review application. The Review Panel correctly noted that their purpose was not to investigate the correctness of the previous panel’s decision:

[25] With respect, we disagree. Bearing in mind that in the exercise of our discretion under rule 137 of the Rules of the Federal Court 1995, this Court does not sit as if on appeal over the earlier decision, the correctness of the earlier decision, whether on the facts or on the law, is not under scrutiny as both are matters of evaluation and opinion. On the issue of law, this Court is not here to determine whether or not the earlier panel had interpreted or applied the law correctly. An illustration was given in Asean Security Paper Mills Sdn Bhd as to what or when the Federal Court will review its own judgment in the same case on a question of law, and that is where the Court had applied a statutory provision that has been repealed. As can be seen, review if at all allowed, is only in an extremely limited circumstance.

The Review Panel also noted that Rule 137 of the Federal Court Rules 1994 is wide in purport and import:

[32] Although rule 137 of the Rules of the Federal Court 1995 has frequently been associated with the inherent powers of the Court to review its own decisions in a subsequent but same case, a careful reading of its terms show that this power is not necessarily confined or limited to applications for review as generally understood.

[36] Consequently, the Federal Court is entitled to use its inherent powers “to hear any application or make any order” so long as the invocation of such powers is necessary to prevent injustice or an abuse of process of the Court. In our view, “any” application includes an application to strike out the order granting leave.

Commentary for practitioners

Albeit one having to look at it in a rather roundabout fashion (with the initial decision of the FC to strike the motion lacking written Grounds), this decision is of utmost importance for practitioners.

The payment of a Judgment Debt must be handled with the greatest of care to ensure that one’s client’s rights are kept safeguarded on appeal. A similar situation may be seen in the CA decision of Telekom Cellular v Kabalect [2000] 3 MLJ 254, where a majority panel concluded that the substratum of the appeal was not destroyed by payment of the full judgment sum.

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This ratio was distinguished by Suriyadi J (retired FCJ) in MBT v Syarikat Perniagaan Mesra [2004] 1 MLJ 676. His Lordship opted to hold that the substratum was destroyed once payment had been rendered.

With the FC decision in Kian Joo Can, a strong case is made-out that the position profferred in MBT is the correct position of law.

Conclusion

Practitioners would do well to carefully consider issuing and receiving payment on Judgment Sums. Your covering letter could very well be the distinction between one’s appeal being rendered academic or live.

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As a safeguard, it would be prudent to state on one’s covering letter that “the payment of the Judgment Sum herein is without prejudice to our Clients’ rights to prosecute their appeal to the fullest, said rights being absolutely reserved”. If one is receiving payment, it would be reasonable for a similar letter to be issued upon receipt of the monies. ?

GAVIN JAYAPAL

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