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2021 MarsdenLR 3673
HIGH COURT MALAYA IPOH
RE: MOHD SAIFUL AZUAR MD ISA; EX-PARTE: BANK KERJASAMA RAKYAT MALAYSIA BERHAD
[Bankruptcy No: AA-29PB-165-08-2020]
The court affirmed that, in absence of explicit terms, multiple judgment debtors under a consent judgment bear joint and several liabilities, aligning with the provisions of the Contracts Act.
Headnote:(A) Contracts Act 1950 – Section 44(1) – Insolvency Act 1967 – Section 105 – Joint and several liability – The court confirmed that the liability of judgment debtors under a consent judgment that does not specify joint and several liability is indeed joint and several as per statutory provision – The Federal Court's recent ruling has clarified the legal stance on multiple debtors' liabilities under consent judgments. (Paras 74; 62-74)
Facts of the case: The JD had neglected to make payments as per a consent judgment leading to bankruptcy proceedings initiated by the Bank – The JD contested the bankruptcy on grounds related to alleged defects in the bankruptcy notice and excess claims contrary to the terms established in the judgment. (Paras 8-12; 26-28)
Findings of Court: The court concluded that the bankruptcy notice was valid, and the liabilities under the consent judgment are classified as joint and several, allowing the Bank to pursue full recovery against any one or more judgment debtors. (Paras 34-45)
Issues: The core issues included the legal initiation of bankruptcy proceedings against the JD and interpretation of liability clauses in the cited consent judgment. (Paras 35-40)
Ratio Decidendi: The court ruled that, given the absence of specification in the consent judgment regarding liability, all judgment debtors are jointly and severally liable for the entire amount, reinforcing this through relevant statutory provisions. (Paras 57-63)
Result: The appeal by the Bank was allowed, and the annulment of the adjudication order was set aside. (Paras 73-75)
JUDGMENT
Q: When two or more persons enter into a consent judgment to pay the judgment debt, may the judgment creditor in the absence of express agreement compel any one or more of the judgment debtors to satisfy the whole of the consent judgment?
Introduction
[1] On 16 July 2021, I had allowed an appeal filed by the Judgment Creditor ("the Bank") against the decision of the learned Senior Assistant Registrar, Puan Nurfarah Syahidah Binti Mohd Nor, who allowed an application by the Judgment Debtor ("JD") to have his bankruptcy annulled.
[2] The premise for my decision was that the liability of multiple judgment debtors in a consent judgment is joint and several. These are the grounds for my decision.
[3] In hearing the appeal, this Court was tasked to deal with the above query in the JD's application to annul an Adjudication Order and Receiving Order ("AO & RO") which is the technical name for an order making a person a bankrupt and vesting his estate unto the hands of the Director General of Insolvency.
[4] The AO & RO was premised upon the non-compliance by the JD with the terms of a consent judgment.
[5] It has been settled by our apex Court that a consent judgment is a contract and this was indeed conceded by the JD in his written submissions (Encl 18 para 16 citing the Federal Court authority of Tan Geok Lan v. La Kuan @ Lian Kuan , which held that:
"[15]... a consent judgment or order is not the less a contract and subject to the incidents of a contract because there is superadded the command of the Court, and its force and effect derives from the contract between the parties leading to, or evidenced by, or incorporated in, the consent judgment or order. A consent order must be given its full contractual effect, even if it relates to an interlocutory step in the action (see Halsbury's Laws of England (4th Ed Vol 37)"
[6] With the consent judgment being subject to the incidents of a contract, this Court turned to the Contracts Act 1950 (Revised 1974) Act 136 ("Contracts Act") for guidance and found that it is expressly provided in s 44 (1) thereof that:
"When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of the joint promisors to perform the whole of the promise."
[7] It would have followed that as the answer is statutorily provided for in subsection 44 (1) Contracts Act (supra), this would be a straightforward matter to deal with. Alas, it was not.
Factual Background
Consent Judgment
[8] It was undisputed (Encl 30 para 5) that on 10 May 2012 before His Lordship Mohd Zawawi Bin Salleh J. (now FCJ), the JD together with two other parties on a without admission of liability basis, recorded a consent judgment (Encl 30 p 49 to 51) where the three judgment debtors were to pay the Bank a sum of RM670, 816.40 owing as at 10 June 2011:
i) by way monthly instalments for a period of three months, a sum of RM1,500.00 a month commencing from the date of the consent judgment;
ii) the judgment debtors were to assign 5% of the total value of a project in Manjung, Perak to the Bank;
iii) the judgment debtors were to totally assign to the Bank all other projects within one year from the date of the consent judgment;
iv) penalty in the form of ta'widh will not be imposed upon the judgment debtors after 10 June 2011;
v) each party will bear their own legal costs;
vi) in the event the judgment debtors were to default in the terms aforesaid, the Bank is at liberty to recover the legal costs paid by it to its solicitors from the judgment debtors and the Bank is at liberty to forthwith impose penalty by way of ta'widh, all other charges and financing charges given by the Bank to the judgment debtors calculated as from 10 June 2011 until full settlement. The Bank is at liberty to enforce this consent judgment and commence execution proceedings against the judgment debtors.
vii) the Bank agree to stay execution on the consent judgment against the judgment debtor
