Seruan Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul Makmur & Anor [2016] MLJU 12

Case: Seruan Gemilang Makmur Sdn Bhd v Kerajaan Negeri Pahang Darul Makmur & Anor [2016] MLJU 12

Court: Federal Court (Putrajaya)

Topic: Striking Out Action

Facts  

  1. The Appellant filed a lawsuit against the Respondents on 9 January 2002, at the Kuantan High Court.   The lawsuit revolved around 10,000 acres forest concession in Kampung Nenasi, Mukim Bebar, Daerah Pekan, Negeri Pahang, granted to United Malay National Organisation (UMNO) Pahang.
  2. The Appellant received permission from the Second Respondent to extract timber from such concession.
  3. However, the Appellant claimed that they could only extract timber from 7,000 acres because the Second Respondent denied them access to the remaining 3,000 acres, which the Appellant believed contain valuable virgin forest and more profitable timber.
  4. The Appellant accused the Second Respondent for not preventing unauthorized timber extraction by third parties in the concession area.
  5. The Appellant claimed that they suffered losses of RM36,339,030.00 due to the Second Respondent’s actions.
  6. During the trial of the 2002 case, the Appellant presented a plan (referred to as the Blue Plan) of the area as evidence, supposedly approved by the Pahang State Exco on 5 April 2000.
  7. However, the Respondents argued that the State Forestry Department’s records showed no approval for the area in the Blue Plan.    Instead, they claimed that the approved area is outlined in the Yellow Plan, authorized by the Pahang State Exco on 7 January 1998.
  8. Later, this concession area was resurveyed and remapped into what they called as the Red Plan.
  9. Unfortunately, the Appellant decided not to call the maker or the licensed surveyor who approved and signed on the Blue Plan to the Court.
  10. Such decision made it difficult for the Respondents to challenge the validity of the Blue Plan.
  11. After a 10-day trial, on 25 May 2007, the trial judge ruled in favor of the Appellant, ordering the Respondents to pay to the Appellant RM37,127,471.60 along with 8% annual interest from 31 December 2000, until the amount is fully paid.
  12. However, the Court of Appeal, on 13 February 2008, rejected the Respondents’ appeal due to their failure to file the appeal records within the set time frame.
  13. Consequently, the High Court’s decision was upheld by the Court of Appeal.  The Respondents’ attempt to appeal to the Federal Court was also denied on 17 September 2008.
  14. The Respondents initiated a fresh suit against the Appellant to impeach and set aside the judgment obtained by the Appellant on the grounds of fraud and perjury committed by the Appellant’s witness during the earlier trial.
Issue 1.    Whether the Appellant’s application to strike out an action brought to impeach a judgment based on intrinsic fraud is feasible?
Ratios 1.    In determining the issue, the Federal Court took into consideration the principle for striking out pleadings pursuant to Order 18 Rule 19 of the Rules of Court 2012 (“P.U. (A) 205/2012”) which reads—

19. (1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement, on the ground that

(a)     It discloses no reasonable cause of action or defence, as the case may be;

(b)     it is scandalous, frivolous or vexatious;

(c)      it may prejudice, embarrass or delay the fair trial of the action; or

(d)     it is otherwise an abuse of the process of the Court.

and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.”

[Emphasis Added]

2.    The Federal Court took the principle into account with regard to the Respondent’s statement of claim which was allegedly assorted with scandalous, frivolous or vexatious, or is an abuse of the process of the Court.

3.    Such approach was taken when it is very clear that the claim cannot succeed.

4.    The Federal Court made a reference to the celebrated case of Bandar Builder Sdn Bhd v United Malayan Bankin Corp Bhd [1993] 3 MLJ 36 where the principle is well-settled.  The test in the aforementioned case are as follows:

(a)  it is only in plain and obvious cases that recourse should be had to the summary process under the rule;

(b)  this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it obviously unsustainable;

(c)  it cannot be exercised by a minute examination of the documents and facts of the case in order to see whether the party has a cause of action or a defence;

(d)  if there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under Order 33 Rule 3 of P.U. (A) 205/2012; and

(e)  The court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.  [Emphasis Added]

5.    The Federal Court also made a reference to the case of Sivarasa Rasiah & Ors v Che Hamzah Che Ismail & Ors [2012] 1 MLJ 473 where it had adopted the well-settled principle of striking out in the following passage:

A striking out order should not be made summarily by the court if there is issue of law that requires lengthy argument and mature consideration.   It should also not be made if there is issue of fact that is capable of resolution only after taking viva voce evidence during trial”

6.    It was clear for the Federal Court to decide that the basic test for striking out is that the claim on the face of it must be obviously unsustainable.

7.    The stress was not only on the word unsustainable but also on the word obviously which meant the degree of unsustainability must appear on the face of the claim without having to go into lengthy and mature consideration in detail.

8.    If a detailed analysis of legal and factual issues is required, then the claim should not be summarily struck out; it should be decided in a trial.

9.    As far as the present case is concerned, the Federal Court had found that there was a serious conflict on material fact particularly relating to issues on the existence of fraud.

10. It was held by the Federal Court that the Respondent’s action to impeach the earlier judgment as well as the issue of fraud pleaded therein, cannot be said to be frivolous, vexatious and an abuse process of the Court.

Decision 1.     The Appellant’s application to strike out an action brought to impeach a judgment based on intrinsic fraud is not feasible.

2.    The Federal Court dismissed the appeal with costs.

Key Take Away 1.    For a claim to be struck out, it must be obviously unsustainable at first glance. If the claim requires detailed legal analysis, it should go to trial instead.

2.    In the present case, the Federal Court ruled that claims involving significant factual conflicts, like fraud allegations, should not be struck out if the claims are not frivolous, vexatious or abusing the legal process.

 

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