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2022 MarsdenLR 194
COURT OF APPEAL PUTRAJAYA
YOW MAN KONG & SENTHIL KUMAR – Appellant
Versus
GHANDIRAJAN ARJUNAN & ANOR – Respondent
[Civil Appeal No: B-02(NCVC)(W)-418-03/2022]
Res judicata applies to prevent relitigation of claims that were previously adjudicated, despite allegations of fraud where no actual fraud was proved.
Headnote:(A) Settlement Agreement – Validity of agreements – Sale and Purchase Agreement – Respondents sold a shophouse to the appellant, subsequently canceled the agreement – Respondents owe appellant RM1.3 million under Settlement Agreement, of which RM850,000 was paid, with RM450,000 remaining unpaid – Appellant’s claims based on Settlement Agreement were subject to legal considerations regarding the status of the underlying agreements. (Paras 1-34)
(B) Res Judicata – Applicability – Previous judgment entered in favor of appellant in Suit 510 was challenged by respondents in Suit 275 on grounds of alleged fraud and illegality, but court elucidated that res judicata barred relitigation of claims already adjudicated. (Paras 59-75)
(C) Fraud Allegations – Evaluation – Judicial Commissioner incorrectly concluded SPA was a façade for illegal money lending, leading to reversal of Previous Judgment – Actual fraud not established by respondents, and no duty of disclosure on appellant regarding allegations of moneylending that were not part of the original suit. (Paras 85-93)
Facts of the case: Appellant purchased a shophouse for RM1.2 million, paying a deposit of RM800,000. Respondents canceled the agreement while failing to refund the deposit and were subsequently obligated to pay additional liquidated damages.
Findings of Court: Previous Judgment related to Settlement Agreement was valid and binding; fraud was not proved and respondents barred by res judicata from challenging earlier rulings.
Issues: Court examined the validity of the Sale and Purchase Agreement and the implications of res judicata against claims of illegality and fraud raised in subsequent litigation.
Ratio Decidendi: The court determined that the respondents’ failure to address the legality of their agreements timely prevented them from successfully challenging the Previous Judgment based on alleged fraud and illegality.
Result: Appeal allowed, Previous Judgment restored, and costs awarded to the appellant.
JUDGMENT
Introduction
[1] The subject matter of this appeal originated from the Sale and Purchase Agreement (SPA) of the respondents' shophouse (the property). The respondents are husband and wife. The appellant is the purchaser and the respondents are the vendors. The agreed purchase price of the property is RM1.2 million. The appellant has paid a deposit of RM800,000.00 as part payment of the purchase price. The SPA was subsequently cancelled by the respondents.
[2] This cancellation of the SPA means, the respondents had to refund back to the appellant the deposit sum of RM800,000.00. Pursuant to the terms of the SPA, the respondents also had to pay to the appellant 10% of the purchase price amounting to RM120,000.00 as agreed liquidated damages.
[3] To resolve the outstanding payments issue between them, the appellant and the respondents entered into a Settlement Agreement (SA) and Friendly Loan Agreement. Under the SA, parties agreed that the respondents owed the appellant the sum of RM1.3 million (Settlement Sum). The detailed figures as to how RM1.3 is derived at is stated in the SA.
[4] It is not in dispute that the respondents had paid the appellant RM850,000.00, leaving a balance sum of RM450,000.00 unpaid.
[5] On 16 July 2015, the appellant (plaintiff) filed Kuala Lumpur Sessions Court Suit No B52 NCC-510-07-2015 (Suit 510) against the respondents (as the 1st and 2nd defendants) and one Shahidra Raj Ghandirajan (the respondents' son as the 3rd defendant) to recover the balance outstanding sum of RM450,000.00. The claim is based purely on the terms of the Settlement Agreement.
[6] In Suit 510, the appellant applied for summary judgment. The Sessions Court dismissed the application. The appellant appealed to the High Court. On 17 February 2016, the High Court set aside the decision of the Sessions Court. Therefore, on 17 February 2016, summary judgment was entered by the Sessions Court against the respondents for the sum of RM450,000.00 (the Previous Judgment).
[7] The respondents' appealed against the decision of the High Court to the Court of Appeal. Their appeal was dismissed on 13 February 2017. There was no further appeal by the respondents. Thus, the Previous Judgment becomes a final judgment.
[8] On 1 June 2018, the respondents (plaintiffs) filed Shah Alam High Court Suit No BA-22 NCVC-275-06/2018 (Suit 275) against the appellant (defendant) to set aside the Previous Judgment in Suit 510 on the ground the appellant had concealed he was an unlicensed moneylender and that the illegal moneylending was disguised as a Sale and Purchase Agreement and Settlement Agreement. Due to the appellant's deception, the respondents contended the Previous Judgment in Suit 510 was obtained by fraud and is null and void on the grounds of illegality.
[9] In his defence, the appellant denied he was an unlicensed moneylender and contended the respondents cannot re-open and relitigate the case as it is res judicata.
[10] After a full trial, on 10 February 2022, the learned Judicial Commissioner (JC) held: (i) the appellant was an unlicensed moneylender; (ii) the sale and purchase agreement was a guise for loan transaction; (iii) the appellant had not been truthful; (iv) the Previous Judgment was obtained by fraud; and (v) res judicata does not apply. Accordingly, the learned JC set aside the Previous Judgment.
[11] The appellant challenged the entire decision of the High Court and appealed to this Court. The appeal came up for hearing before us on 17 October 2022. After hearing oral submissions from both sides, we directed Counsels to file further submission on the nexus between illegality and res judicata. The submissions are to be filed simulatenously on or before 7 November 2022. We adjourned the case to 12 December 2022 for decision.
Background Facts
[12]Vide a Sale and Purchase Agreement dated 10 January 2013 (SPA), the respondents agreed to sell to the appellant a property known as HSM 10486 PT 3302, Mukim Klang, Daerah Klang,
