Lin Wen-Chih & Anor v Pacific Forest Industries Sdn Bhd & Anor [2023] 5 MLJ 422

Federal Court (Putrajaya)

Application of the res judicata principle

1. The Appellants, who are Taiwanese brothers, were previously shareholders and directors of Pacific Forest Industries Sdn Bhd (“the First Respondent”). They later sold their shares to Liu Ho-Tien, who acted as a representative and nominee for Dutaland Bhd (formerly Mycom Bhd, “the Second Defendant”).
2. At all material times, the First Respondent was indebted to the Appellants for a sum of RM10,134,000 as of 28 August 1996. This debt was clearly acknowledged by the First Respondent in a letter of acknowledgment dated 12 November 1996, which outlined the terms of repayment. The Second Respondent, Dutaland Bhd, also issued a letter of undertaking on the same date, guaranteeing payment of the debt.
3. The letter of acknowledgment contained specific provisions governing repayment. Under this arrangement, the debt was to be settled through the Appellants’ purchase of timber products from the First Respondent, equal in value to the outstanding debt plus agreed interest. Payment would be effected through set-off, where the purchase price of the timber products would be deducted from the debt. The agreement also stipulated that if the First Respondent failed to supply the timber or the products were defective, it would have to pay cash in lieu after a written notice of 30 days.
4. Only one shipment of timber was completed successfully, thereby reducing the debt to between RM6.22 million (as claimed by the Appellants) and RM5.43 million (as asserted by the First Respondent).
5. In 1997, the Appellants filed a suit to recover the remaining balance of RM6.22 million. However, the High Court dismissed the claim on the ground that it was premature, holding that the Appellants had not fulfilled the conditions in the letter of acknowledgment, as only one of the four contemplated shipments had taken place and no event triggering a cash payment had arisen. The decision was reported in Lin Wen-Chih & Anor v Pacific Forest Industries Sdn Bhd (formerly known as Veramax Sdn Bhd) & Anor [2000] MLJU 533; [2001] 1 AMR 988.
6. The Court of Appeal later reversed this decision, finding that the agreement had been frustrated due to the Respondents’ conduct (Lin Wen-Chih & Anor v Pacific Forest Industries Sdn Bhd (formerly known as Veramax Sdn Bhd) & Anor [2008] 6 MLJ 89). However, the Federal Court allowed the Respondents’ appeal, reinstating the High Court’s ruling on the basis that the issue of frustration was never pleaded by the Appellants. This is reported in Pacific Forest Industries Sdn Bhd & Anor v Lin Wen-Chih & Anor [2009] 6 MLJ 293.
7. Despite the Federal Court’s decision, the Appellants initiated a fresh action three years later, continuing their pursuit of the outstanding debt from the First and Second Respondent.
8. In 2012, the Appellants issued a new purchase order for timber even though they knew the First Respondent’s sawmill had stopped operating since 1998. When no supply came, they cancelled the order, demanded cash payment of RM6.2 million, and in 2013 filed a new suit. The Respondents defended the claim on limitation and res judicata.
9. The High Court in the 2013 suit held that limitation and res judicata did not apply but still dismissed the claim because the Appellants had never made any genuine purchase orders. Therefore, First Respondent had committed no default that would trigger cash repayment under the 1996 letter.
10. The Court of Appeal upheld the dismissal, but on different grounds. It held that the 2013 suit was time-barred and also barred by res judicata, because the cause of action, subject matter, evidence, and issues were essentially the same as those in the 1997 suit.
11. The Appellants then brought the matter to the Federal Court as they disagreed with the Court of Appeal’s findings on limitation and res judicata and still sought to recover the RM6.2 million. 

1. The Federal Court unanimously held that the core issue determining the outcome of this appeal was whether the Appellants’ action was barred by the doctrine of res judicata. Upon reviewing the submissions and records, the Federal Court affirmed that the Court of Appeal had correctly applied the doctrine particularly res judicata in its wider sense in finding that the issues raised in the 2013 action were substantially the same as those litigated, or that could reasonably have been litigated, in the 1997 suit.
2. The Federal Court emphasized that the subsequent claim in 2013 was premised on the same cause of action and factual foundation as the earlier suit, both arising from the same letter of acknowledgment and letter of undertaking which evidenced the debt. The Federal Court noted that while the Plaintiffs attempted to introduce new issues such as unjust enrichment, frustration, and voidability of contract, these were matters that could and should have been raised during the earlier proceedings. Hence, they were precluded from reasserting them in a new action.
3. In reaffirming the principle established in Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189 and the classic rule in Henderson v Henderson (1843) 3 Hare 100, the Federal Court reiterated that res judicata extends not only to matters that were actually decided but also to those that properly fell within the subject of the prior litigation and could have been raised with due diligence. This broader approach serves the public interest in ensuring finality of litigation and preventing parties from being vexed twice for the same cause.
4. The Federal Court further referred to Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536 and Hoystead v Taxation Commissioner [1926] AC 155, underscoring that parties are not permitted to reopen concluded disputes based on new interpretations of facts or law. Once a matter has been adjudicated, it must remain settled, even if subsequent insight might suggest a different argument or legal construction.
5. In conclusion, the Federal Court held that all the necessary elements of res judicata were satisfied which are identical parties, identical subject matter, and a final decision on the merits. Consequently, the Federal Court upheld the Court of Appeal’s decision that the Appellants’ 2013 claim was barred by res judicata in the wider sense, dismissed the appeal, and affirmed the lower court’s ruling with costs awarded to the Respondents.

Litigation cases must come to an end and that parties cannot reopen old disputes merely by framing new arguments or presenting additional issues based on the same facts and cause of action.