1. Applications by third parties to set aside third-party notices in banking suit where defendant claimed indemnity for contractual debt. (Para 1 , 2 , 4 , 5 , 6 )
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2026 MarsdenLR 1507
HIGH COURT SABAH & SARAWAK TAWAU
STEVE RITIKOS, JC
MAYBANK ISLAMIC BERHAD – Appellant
Versus
CHANG FUI VUN & ANOR; CHONG AH YIN @ SUI YIN & ORS – Respondent
[Suit No: TWU-22NCvC-35-10/2025]
To invoke third-party procedure for indemnity or contribution, a defendant must plead a specific legal basis or joint liability for the same wrong as the plaintiff's claim; mere factual causation of a debtor's inability to pay a contractual debt does not establish such a right.
Headnote:(A) Rules of Court 2012 - Order 16 Rule 1, Rule 6 and Order 92 Rule 4 - Third-party procedure - Setting aside and striking out of third-party notices - Threshold requirement that claims must fall within one of the limbs of Order 16 Rule 1(1) to avoid multiplicity of actions and inconsistent findings (Paras 13, 14).
(B) Indemnity and Contribution - Party seeking indemnity must plead clearly the legal basis, whether arising from express or implied contract, statute, or a relationship upon which law or equity imposes an obligation (Paras 16, 17) - A third party does not become responsible for a defendant's personal loans simply because their actions reduced the income needed to pay those loans (Para 24) - Right of contribution requires a pleaded common liability or joint participation in the wrong which underlies the plaintiff's claim; mere causal blame for a defendant's inability to meet a separate contractual obligation does not create such a right (Para 18).
(C) Striking Out - Power is drastic and exercised only in plain and obvious cases where the claim is ex facie unsustainable (Para 19) - A factual dispute cannot cure a defect of law; if a pleading, even taken at its highest, does not bring the claim within the scope of Order 16, the defect may be determined without deciding which factual version is true (Para 21).
Facts of the case:
A financial institution sued two defendants for outstanding sums under banking facilities. One defendant issued third-party notices against three non-parties, alleging that they had diverted partnership revenue, assets, and goodwill, through fraud and conspiracy, and consequently sought full indemnity and contribution against the banking claim. The non-parties applied to set aside and strike out the notices on the grounds that the claims were unsustainable under the third-party procedure.
Findings of Court:
The court found that no contractual, statutory, or equitable basis for indemnity was pleaded as the non-parties were not borrowers or guarantors. There was no common liability for the same damage or joint participation in the contractual default to support a claim for contribution. The relief sought against the non-parties was not substantially the same as the plaintiff's claim for debt, and the alleged fraud or diversion of funds were not questions necessary to determine the plaintiff's contractual claim.
Issues: Whether the claims for indemnity or contribution fell within Order 16 Rule 1(1)(a); whether the relief sought fell within Order 16 Rule 1(1)(b); and whether there were relevant common questions or issues under Order 16 Rule 1(1)(c).
Ratio Decidendi: Third-party procedure cannot be used to join independent tortious or equitable claims simply because they share a commercial setting or result in economic loss. To invoke the procedure for indemnity or contribution, there must be a distinct legal relationship or joint liability for the specific wrong upon which the plaintiff sues; factual causation of a debtor's default is insufficient to create a legal obligation to indemnify a creditor (Paras 24, 29, 31).
Result: Applications allowed; Third-Party Notices and Statements of Claim set aside and struck out.
Legal Category Hierarchy
- practice and procedure
- contract law
- partnership law
- tort law
Table of Contents
2. Defendant alleged third parties diverted partnership revenue and owed indemnity; third parties denied and asserted independent dealings. (Para 7 , 8 , 9 , 10 , 11 , 12 )
3. Third-party claims did not fall under any limb of O 16 r 1 as they were independent tortious and partnership claims not connected to bank's contract action. (Para 3 , 14 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 )
4. For third-party proceedings, indemnity requires a legal relationship imposing duty; contribution requires common liability for the plaintiff's claim. (Para 13 , 15 , 16 , 17 , 18 , 19 , 20 , 21 )
5. Third-party notices set aside and struck out; defendant ordered to pay costs to each third party. (Para 38 , 39 , 40 , 41 , 42 )
6. What is required for a claim of indemnity under O 16 r 1(1)(a)?
Indemnity requires a pleaded legal basis such as contract, statute, or relationship imposing an obligation to indemnify; mere factual causation is insufficient. (Para 16 , 17 , 23 , 24 , 25 , 26 )
7. What is required for a claim of contribution under O 16 r 1(1)(a)?
Contribution requires common liability for the same damage or joint participation in the wrong underlying the plaintiff's claim; mere causal blame is insufficient. (Para 18 , 27 , 28 , 29 )
8. When is relief considered substantially the same under O 16 r 1(1)(b)?
The relief claimed against the third party must be substantially the same as the plaintiff's relief; sharing a commercial setting is insufficient. (Para 30 , 31 , 32 )
9. What constitutes a common issue under O 16 r 1(1)(c)?
The common issue must be necessary to determine the plaintiff's claim; issues arising only between defendant and third party are not relevant. (Para 33 , 34 )
10. Can factual disputes cure a pleading defect for third-party notices?
No, factual disputes do not cure a legal defect where the claim does not fall within any limb of O 16 r 1; the existence of triable facts is irrelevant. (Para 35 , 36 , 37 )
JUDGMENT
[Enclosures 77, 78 And 79]
Introduction
[1] There are 3 applications by Chong Ah Yin @ Sui Yin ("CAY"), Chang Sung Yuan ("CSY") and FV Success Sdn Bhd ("FV Success") (collectively, "the Third Parties") under O 16 r 6 and O 92 r 4 of the Rules of Court 2012 ("ROC 2012"). They seek to set aside and strike out the Third-Party Notices and the respective Statements of Claim issued against them by the 2nd Defendant, Yapp Seek Vui. CAY's application is in encl 77, CSY's similar application is in encl 78 whilst FV Success' application is in encl 79.
[2] The Plaintiff, Maybank Islamic Berhad ("Maybank"), sues the 1st and 2nd Defendants, who traded as Sing Sing Tyre, for monies allegedly outstanding under Islamic banking facilities. The 2nd Defendant says that, after she was excluded from the business, the 1st Defendant and the Third Parties diverted the partnership's revenue, assets, goodwill and business opportunities. She claims a full indemnity against Maybank's claim, an account and inquiry, damages and other relief.
[3] It is not enough that the 2nd Defendant may have an arguable complaint against one or more of the Third Parties. The question is whether the claims, as pleaded, are claims which may lawfully be pursued through the third-party procedure in this banking action.
Background Facts
[4] Maybank's principal action is a claim against the 1st and 2nd Defendants for sums allegedly due under Cash Line-i, Commodity Murabahah Term Financing-i and Letter of Credit/Trust Receipt/Invoice Financing-i facilities maintained for Sing Sing Tyre. The amount said to be outstanding is not less than RM3.2 million, together with contractual profit, compensation charges, costs and consequential relief.
[5] The 2nd Defendant's pleaded case is that she and the 1st Defendant entered into a written Partnership Agreement dated 3 November 2022. Their agreed profit-and-loss shares were respectively 70% and 30%. She alleges that the partnership revenue was to be used, among others, to service the banking facilities.
[6] According to the 2nd Defendant, the relationship broke down in early September 2024 when the 1st Defendant excluded her from management, changed the banking credentials, denied her access to the accounts and diverted partnership funds. By notice dated 12 November 2024, she terminated the partnership. These allegations are disputed, but their truth need not be determined on the present applications.
The Claim Against CAY
[7] CAY is the mother of the 1st Defendant. The 2nd Defendant alleged that on 19 December 2024 CAY registered a sole proprietorship named Sing Sing Tyre, Rim & Batteries Co at the premises formerly used by Sing Sing Tyre. It is alleged that the new business used the same premises, workforce, customers and goodwill; displayed a new Public Bank account for customer payments; replaced the signboard; and altered the business's Facebook identity.
[8] The 2nd Defendant characterises the new concern as a sham or facade through which the 1st Defendant and CAY continued the partnership business, diverted revenue, received partnership income and concealed the true continuation of Sing Sing Tyre. She alleged unlawful-means conspiracy, fraud, dishonest assistance, knowing receipt and misappropriation. She seeks a full indemnity against Maybank's claim, an account of partnership assets and profits, and damages.
[9] CAY denies knowledge of the partnership and the facilities. She alleged that Sing Sing Tyre ceased business and returned the premises before her new business began; that the goodwill belonged to a family business established in 1984; that her concern was independently funded; and that any remaining Sing Sing Tyre stock was segregated and not used. These matters illustrate the factual dispute but do not decide the O 16 issue.
The Claims Against CSY And FV Success
[10] CSY is the 1st Defendant's son and a director and shareholder of FV Success. FV Success was incorporated on 22 July 2024. The 2nd Defendant alleg
