This article first appeared in The Edge Malaysia Weekly on December 14, 2020 - December 20, 2020

This monthly report is compiled and briefly summarised by a group of lawyers on a voluntary basis for the benefit of readers of The Edge.

Please consult your own lawyers if you need advice on the cases, issues and related matters highlighted here.

Federal Court (‘FC’) sets guidelines with respect to its power to review its own decisions

The FC, being the apex Court of the country, is not bound by its own decisions. In hearing an appeal proper, the FC may depart from its earlier decisions. In reviewing its own decisions, the FC must be satisfied that the case is fit for review in that it falls within the limited grounds and very exceptional circumstances. Examples include coram failure or the panel of the FC was improperly constituted, breach of natural justice, or when bias is established. These examples fall within the meaning of ‘manifest miscarriage of justice’. To expand the category of cases beyond ‘manifest miscarriage of justice’, or giving a broad or unrestricted discretion to review its own decisions, is a recipe for chaos and forsakes public policy — there will be no end to finality and certainty in judicial decisions and which has the effect of bringing the legal system into disrepute. In this context, rule 137 of the Rules of the Federal Court 1995 (‘Rule 137’) enables the FC in upholding justice to review its own decisions in exceptional cases.

Issues

What are the basic tenets of a Rule 137 review motion? Recently, seven motions (‘Seven Motions’) to review its own decisions were heard together by the FC in Yong Tshu Khin & Anor v Dahan Cipta Sdn Bhd & Anor and six other reviews and the FC had the opportunity to clarify and further illuminate upon the applicable principles and exclude reasons that do not constitute valid grounds to justify a review (Judgment dated 30.11.2020).

Review summary

The Seven Motions raised a common point (‘Common Point’) and further specific points (‘Specific Points’). The Common Point was that the decisions under review alleges coram failure in the panel of the FC which delivered the decisions. The Common Point argument was that the appointments of additional Judges of the FC — Tun Md Raus as Chief Justice and Tan Sri Zulkefli Makinuddin as President of the Court of Appeal (the ‘two Judges’) — were respectively unconstitutional because (a) the advice given to the Yang di-Pertuan Agong with respect to their appointments as Additional Judges of the FC was not given by a sitting Chief Justice to take effect during his tenure; and (b) the two Judges could not have occupied the positions as Chief Justice and President of the Court of Appeal on a proper construction of Article 122(1A) of the Federal Constitution. Accordingly, Tun Md Raus was not entitled to empanel the FC panels which heard the relevant appeals and neither could the two Judges sit, if they did, in those cases. The opposing arguments of the respondents, in gist, were (a) the validity of the appointment of the two Judges cannot be challenged collaterally; and (b) even if their appointments are deemed invalid, their decisions are saved by the ‘de facto doctrine’.

In a unanimous decision delivered by Tengku Maimun CJ (Zabariah Yusuf, Hasnah Mohammed Hashim, Harmindar Singh Dhaliwal and Rodzariah Bujang FCJJ concurring), the FC reaffirmed the basic tenets of a Rule 137 review motion and dismissed the Common Point and Specific Points.

Decision: Basic tenets of a Rule 137 review motion

The FC held that in a Rule 137 review motion, the merits or demerits of the earlier judgment under review are irrelevant considerations. This is because a review hearing of an earlier judgment is not a hearing of an appeal against the earlier judgment in the ordinary way and the correctness of an earlier decision of the FC is not by itself a valid reason justifying a review. Specifically, review hearings are intended to prevent a manifest miscarriage of justice.

Decision: Common Point

The respondents argued that even if the appointment of the two Judges were deemed invalid, their decisions (both judicial or administrative) were saved by the de facto doctrine, a doctrine that has been in existence since 1871 and this doctrine is part of Malaysian common law. Although the applicants conceded the doctrine exists, it was argued that the de facto doctrine does not apply to constitutional appointments. The FC rejected the argument. According to the FC, which reasoning is in line with decisions of other jurisdictions, is that public policy demands that the decisions of a judge or a judicial arbiter can be deemed valid even if his appointment is invalid and it applies to the appointment of judges. The underlying reason is that the de facto doctrine operates on the principle that collateral attacks against judgments on the basis of lack of authority to enable litigants to re-litigate their cases all over again harms the justice system and the doctrine exists to save the integrity of the judgment of the Court.

Decision: Specific points

(a) No written grounds of decision

In Tan Boon Lee’s Motion, the HC and the CA concurrently held that the applicant was not a vexatious litigant. The FC gave leave to appeal. On hearing of the appeal proper, the FC reversed the concurrent findings and declared that the applicant was a vexatious litigant. However, no written grounds of decision was delivered. The FC rejected the argument that the failure to provide grounds of judgment per se constitutes a breach of natural justice. The FC held that while it was not establishing a precedent that judges, at any level of the judicial hierarchy, are not required to provide written judgments, the extent of the duty to give reasons depends on the subject matter as well as the facts and circumstances of each and every case. It was held that the applicant failed to satisfy that there had been a substantial miscarriage of justice within the meaning of Rule 137.

(b) Dismissal of an appeal without answering the sole leave question posed

In Tan Wei Hong’s Motion, the applicant argued that there was coram failure and grave prejudice had been occasioned to the applicants by reason of the failure of the FC to answer the sole leave question posed in the hearing of the appeal proper of the case. The FC dismissed both arguments. The FC held that it is a trite practice of the FC that even when leave had been granted, a subsequent panel of the FC need not answer the leave question if the circumstances do not require it. There may be valid reasons why the FC declined to answer the leave question posed. It may be because the FC, upon considering the merits of the appeal, finds that there was no necessity to answer the question of law posed because the facts of the case do not actually relate to the question of law posed or framed to be answered by the FC.

(c) Breach of natural justice

In Yong Tshu Khin’s Motions, the applicants’ argument were that the earlier panel of the FC did not have jurisdiction under s 96(a) of the CJA 1964 to make the decision because (a) a matter which was not in issue in the Courts below was decided by the FC; (b) following the aforesaid, there was a breach of natural justice; and (c) the decision was accordingly erroneous. The FC held that it is trite that natural justice means the right to be heard. However, review applications are not meant to operate as another tier of appeal and the correctness of the decision of the FC is not, per se, a valid reason to seek a review of it. Where parties have been accorded every opportunity to be heard on essential points based on the lengthy leave questions which were framed and considered by the FC, a review application is not justified.

Federal Court (‘FC’) explains why an applicant company may proceed ex parte when applying for a scheme of arrangement or compromise under the provisions of the Companies Act 2016 (‘CA 2016’)

When a company gets into financial difficulties, the Companies Act 2016 (‘CA 2016’) provides a statutory mechanism to allow the company in financial distress to propose a scheme of arrangement with its creditors. This statutory mechanism is adopted practically in all common law jurisdictions. The underlying statutory idea is to allow the company to carry on business and afford opportunity to creditors to recover sums owing to them on terms of the proposed scheme of arrangement or compromise, provided the terms are agreed upon by the majority creditors (75% of total value) at a convened meeting. A scheme of arrangement or compromise usually involves the creditors taking a “haircut” on sums owing to creditors. When a scheme has been proposed between the company and its creditors, the Court may in a summary way convene a creditors’ meeting to consider the proposal. Section 368 of the CA 2016 empowers the Court in a summary way to grant an injunction to restrain proceedings or further proceedings against the company without leave of the Court. This discretionary judicial power serves several purposes, one of which is to enable the creditors’ meeting to be held and for the creditors to vote on the proposal.

Issue

Generally, the Courts are willing to lend its jurisdiction to grant injunctions in appropriate cases after hearing both parties and are reluctant to grant injunctions on an ex parte basis, or in the absence of the party affected by the injunction. Section 368 of the CA 2016 is silent as to whether the Court should grant an injunction ex parte to restrain creditors from taking proceedings or further proceedings in cases where a scheme of arrangement has been proposed between the company and its creditors. In Mansion Properties Sdn Bhd v Sham Chin Yen and 15 Others, the Federal Court was called upon to resolve the issue (Judgment dated 24.11.2020).

Case summary and decision

Mansion Properties Sdn Bhd (‘Mansion’) was the developer of a housing project, which includes a hotel and condominium. Some purchasers filed action against Mansion for late delivery. Mansion filed ex parte originating summons under s 366 of the CA 2016 to convene a creditors’ meeting to approve its proposed scheme of arrangement and for an injunction under s 368 to restrain all further proceedings against it for a period of ninety days (‘1st OS’). The High Court (‘HC’) granted the orders ex parte (‘1st Order’), which were served on creditors. The proposed scheme was approved at the creditors’ meeting. The respondents intervened in the 1st OS to ask for leave to continue actions against Mansion and set aside the 1st Order, among other reliefs. Mansion then filed another originating summons to Court to sanction or approve the scheme (‘2nd OS’), which was granted (‘2nd Order’). The respondents then filed applications to intervene in the 2nd OS to set aside the 2nd Order or stay the same until the determination the 1st OS. The 1st OS and 2nd OS were consolidated and heard together by the HC. The HC allowed the intervention by the respondents but dismissed the other prayers sought by the respondents. On appeal to the Court of Appeal (‘CA’), the CA allowed the appeal, holding that since the 1st OS incorporated a restraining order, Mansion could not have proceeded ex parte and the 1st OS was an abuse of process. Accordingly, the 1st Order was set aside and subsequent 2nd Order was also set aside.

On appeal to the FC, the only issue was whether applications for the scheme of arrangement or compromise and a restraining order may be made ex parte. In a unanimous decision delivered by Mohd Zawawi Salleh FCJ (Rohana Yusuf PCA and Azahar Mohamed CJM concurring), the FC reversed the decision of the CA. The critical issue was whether in absence of an express provision in a relevant procedure, the application may be made ex parte. The FC held that the statutory purpose of enabling a company to propose a scheme is to preserve status quo pending the disposal of an application for a scheme meeting to be called. The preservation of status quo serves two purposes — (a) allow the company to develop and refine the scheme and pending the application for the calling of the scheme meeting and to prevent creditors from scuttling or rendering nugatory a proposed scheme; and (b) to allow the creditors to decide whether to approve the proposed compromise or arrangement with or without further modifications and refinements. The practice in proceeding ex parte is universal and the ex parte orders when served on creditors, the creditors have a right to intervene to set aside the ex parte orders and which was done in the case under consideration. In the circumstances, there could be no breach of natural justice or abuse of process. Additionally, there are specific statutory requirements in s 366(2)-(7) of the CA that provides for a number of specific statutory safeguards in respect of restraining orders granted under s 368(1).

Court of Appeal (‘CA’) : Landlords are liable for nuisance caused by tenants

There will inevitably be noise living in an urban society. Noise is very much a matter that many of us have to put up with as part of civil society. This is premised on the concepts of being good neighbours and neighbourliness, including the attitude of give and take. This is particularly true in cases of condominium living. The noise may be generated by personal activities of the neighbours or from construction or renovation works. Although one is expected in community living to put up with a certain volume of noise from neighbours in the enjoyment of their property, the law draws a line when the noise generated breaches the levels of tolerance of decent society and community living. In the latter case, the neighbour may be held to have committed the tort of nuisance.

Issues

Are landlords of tenanted parcels liable for the tort of nuisance as a result of the activities of their tenants in a condominium? What are the duties and responsibilities of the management corporation in the context of regulations, by laws and house rules governing condominium living? Aside from the question of trespass, these issues were considered by the CA in Chin Moy Yen & Ors v Chai Weng Sing & Ors [2019] MLJU 681.

Case summary and decision

The plaintiffs, a family of seven living in a condominium (‘Flora Green’), sued the defendants for nuisance and trespass. The 1st to 4th defendants were owners of three penthouse units at different points in time, which were located directly above the plaintiffs’ unit. The 5th defendant was the management corporation, established under the Strata Management Act 2013. During the period of June 2013 to September 2013, the 1st defendant renovated all the three penthouses, partitioned them and turned them into rental accommodation for students (‘Tenants’). The renovation works, which were frequently carried on late at night or the early hours of the morning, caused excessive noise and vibrations, which also damaged the plaintiffs’ unit. The other source of noise, it was complained, was frequently caused by the activities of the Tenants. The matters complained of persisted over a period of 18 months.

The plaintiffs sued the landlords for nuisance created by the renovation works as well as the activities of the Tenants. The High Court (‘HC’) dismissed the plaintiffs’ claim on the basis that there was insufficient evidence to prove that the defendants, by their acts or omissions had committed the nuisance against the plaintiffs as alleged in the particulars of nuisance set out in the statement of claim.

On appeal by the plaintiffs, in a unanimous decision, Mary Lim JCA (now, FCJ) (Hamid Sultan and Badariah Sahamid (as she then was) JJCA concurring), the decision of the HC was reversed. The CA found that there was sufficient evidence adduced by the plaintiffs that the noise and disturbances generated by the renovations and activities of the Tenants, created ‘noise that breached levels of tolerance of decent society and community and which amounted to nuisance’. As to the noise created by the renovation works, the 1st to 4th defendants was liable in nuisance as they had instructed and authorised the renovation works. As to the noise created by the Tenants, the CA found that the 1st to 4th defendants were fully aware of the complaints of the plaintiffs but had taken no efforts to abate it and thus was liable for the nuisance created by their Tenants. As to the 5th defendant, the CA held that it has a duty and responsibility to uphold the Regulations, Bylaws and House Rules of Flora Green, which provided that no owners may use the parcel in a manner that may cause nuisance to any other proprietor. In the circumstances, the 5th defendant was also held liable as the 1st to 4th defendants were liable.

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