Mohd. Azmi SCJ:

Toh Seak Keng, the 1st respondent/petitioner was a director and shareholder of the 5th respondent company (Yew Lee Feedmill Sdn. Bhd.). Apart from 140,000 shares registered in his name, the present appellants, namely, his brother, wife and three sons separately owned a total of 250,000 shares in the company. A management dispute arose between Toh and the other three directors (2nd, 3rd and 4th respondents) resulting in his removal as managing director of the company. As a minority shareholder, he filed an Originating Petition No. C2 of 1982 in the Kuala Lumpur High Court under s. 181 of the Companies Act 1965, challenging his removal from office, and in the alternative praying for the purchase of his entire 140,000 shares of the company by the other directors at a price to be fixed.

On 3 October 1983, Toh was absent when his petition came up for hearing. But a consent order was apparently recorded at the behest of the Counsels of both sides by which it was ordered that two of the co-directors should purchase not only Toh's entire 140,000 shares but also the 250,000 shares registered in the names of the present five appellants at a price of RM1.90 per share.

There is no dispute that the consent order is defective, and as far as the purchase of the appellants shares are concerned, it is conceded that the said order was made without any consent or instruction. At the material time, the appellants were not even parties to the petition which was specifically filed by Toh for the purpose of buying him out of the company, in lieu of a declaration by the Court that he was still the managing director of the company. Indeed, the appellants had nothing to do with the dispute in the petition and had never instructed anybody to include them or their interests in the consent order. In our judgment, there can be no doubt that the consent order was made without jurisdiction in so far as it binds and affects the appellants. Before the learned Judge, the appellants' civil suit to set aside was by order of Court consolidated with the respondents' application for execution of the consent order. The parties agreed that the matters in dispute be resolved on the preliminary issue is whether the appellants were estopped from challenging the validity of the consent order.

At the hearing, the respondents had conceded that when the consent order was made the Court had no jurisdiction to make an order binding on the appellants. If the Court had no jurisdiction to make the consent order affecting the rights of the appellants, we would have thought that the next point would be to consider whether they were entitled to have it set aside ex debito justitiae. Be that as it may, the learned Judge proceeded to hear the preliminary issue and dismissed the appellants' suit to set aside the consent order even to the limited extent that it affected them. He relied on the following speech of Lord Denning in the Privy Council case of Abuakwa v. Adanse [1957] 3 All ER 559; [1958] AC 95 at 101:

The general rule of law undoubtedly is that no person is to be adversely affected by a judgment in an action to which he was not a party, because of the injustice of deciding an issue against him in his absence. But this general rule admits of two exceptions: one is that a person who is in privity with the parties, a "privy" as he is called, is bound equally with the parties, in which case he is estopped by res judicata: the other is that a person may have so acted as to preclude himself from challenging the judgment, in which case he is estopped by his conduct.

The appellants were not in privity with the parties to the petition, but the learned Judge held that on the evidence the present case came within the second exception to the general rule. He cited and relied on the judgment of Wigram V.C. in Henderson v. Henderson [1843] 3 Hare 100, at 115 referred to by the Privy Council in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. & Anor. [1975] AC 58