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2024 MarsdenLR 765
HIGH COURT MALAYA KUALA LUMPUR
SPK-SENTOSA CORPORATION BERHAD – Appellant
Versus
SEP CAPITAL (M) SDN BHD & ORS – Respondent
[Suit No: WA-22NCC-407-09/2021]
Consent judgments are declaratory and do not impose enforceable obligations unless explicitly stated; unilateral attempts to alter them without mutual consent are impermissible.
Headnote:(A) Arbitration Act 2005 - Section 37 - Consent Judgment - Nature of consent judgments - Declaratory judgments versus executable orders - The court examined the enforceability of a consent judgment declaring rights over an arbitration award and ruled that it did not impose enforceable obligations on the defendants (Paras 18, 20, 36, 50).
(B) Doctrine of estoppel - The court found that the plaintiff could not unilaterally impose obligations on the defendants post-judgment, as it contradicts the agreed terms of the consent judgment (Paras 23, 49).
(C) Non-assignment clause - The court upheld that the assignment of arbitration award proceeds was invalid without the consent of the third defendant, as stipulated in the contract (Paras 57, 59).
Facts of the case:
The plaintiff sought to compel the defendants to execute a deed of assignment for arbitration proceeds following a consent judgment. The defendants contended that the judgment was merely declaratory and did not impose any enforceable obligations (Paras 6, 12, 50).
Findings of Court:
The court ruled that the consent judgment was declaratory, lacking enforceable obligations, and dismissed the plaintiff's application for a consequential order (Paras 50, 66).
Issues: The court addressed whether the consent judgment imposed enforceable obligations and the validity of the assignment of arbitration proceeds without third-party consent (Paras 11, 52).
Ratio Decidendi: The court emphasized that a consent judgment cannot be varied unilaterally and that the absence of an enforceable order rendered the plaintiff's application invalid (Paras 41, 49).
Result: The plaintiff's application was dismissed with costs awarded to the defendants.
JUDGMENT
[1] When parties enter into a consent judgment declaring rights and entitlements, there is an expectation that it would be complied with, in letter and spirit. Yet, the First and Second Defendants here resist putting ink to paper to uphold a pronouncement that grants the Plaintiff rights over an arbitration award involving a third party.
[2] In examining whether to compel the First and Second Defendants' execution of an assignment, the pivotal issue lies in the tension between consent judgments as declaratory compromises versus executable orders. This turns on the nature of declaratory relief, the principles underlying consent judgments, the defences raised regarding unilateral variations, and ultimately, whether executing an additional document is necessitated to give effect to this declaratory bargain.
Background Facts
[3] On 12 May 2017, the Plaintiff, SPK-Sentosa Corporation Berhad and the First Defendant, SEP Capital (M) Sdn Bhd entered into a Share Sale Agreement for the Plaintiff to sell 54,300,000 shares in the Second Defendant, Pembinaan SPK Sdn Bhd and 3,500,000 shares in Semarak Korporat Sdn Bhd to the First Defendant for RM6 million and RM3.5 million respectively. The Share Sale Agreement contained certain conditions precedent and stipulated the payment schedule for the purchase price. Clause 6A of the Share Sale Agreement stated that the Plaintiff shall indemnify the Second Defendant for any costs or claims arising from an ongoing arbitration proceeding between the Second Defendant and the Third Defendant, TRW Boulevard Square Sdn Bhd, and that any proceeds from the arbitration shall accrue to the Plaintiff.
[4] At the time, there was an arbitration proceeding between the Second Defendant and Third Defendant concerning a construction contract dispute where the Second Defendant was seeking over RM2.7 million from the Third Defendant. On 16 July 2019, the arbitration tribunal issued a final award requiring the Third Defendant to pay over RM17 million to the Second Defendant ("Arbitration Award").
[5] There was a shortfall of RM1 million for the purchase consideration of the Second Defendant's shares under the Share Sale Agreement which the First Defendant failed to pay. On 30 July 2021, the Plaintiff filed a suit registered under WA-22NCC-339-07/2021 ("Suit 339") against the First Defendant to recover this RM1 million. On 22 October 2021, the parties recorded a consent judgment in Suit 339 for the First Defendant to pay RM700,000.00 as full settlement ("Consent Judgment").
[6] Separately, on 10 September 2021, the Plaintiff filed this suit in these proceedings against the First, Second and Third Defendants primarily seeking a declaration that the Plaintiff is entitled to the Arbitration Award proceeds and an order requiring assignment of rights under the Arbitration Award. During case management on 21 October 2021, the Plaintiff withdrew this suit against the Third Defendant.
[7] On 22 October 2021, the Plaintiff, the First Defendant and the Second Defendant recorded a consent judgment ("the Consent Judgment") in this suit declaring that the Plaintiff has rights over the RM16.9 million Arbitration Award sum, with interest and costs.
[8] Around 18 months later, the Plaintiff sent a draft deed of assignment dated 18 April 2023 seeking to assign rights over the Arbitration Award proceeds per the Consent Judgment. The First Defendant and Second Defendant refused to execute this draft deed of assignment, communicated by a letter dated 26 April 2023.
[9] On 17 January 2022 the Plaintiff issued a statutory notice of demand under s 466 of the Companies Act 2016 to the Third Defendant. On 24 March 2022, the Plaintiff had filed a winding up petition registered as Petition No WA-28NCC-237-03/2022 ("the Petition") against the Third Defendant to wind up the Third Defendant and demanded payment of over RM20 million. The Petition was dismissed by the High Court on 27 March 2023 on the basis that the C
