Be cautious in litigation

It is common for lawyers to encounter clients who want everything done yesterday. Clients are naturally concerned about their disputes, and hence oftentimes urge lawyers to quickly respond either to the clients themselves, or to the other side. In the rush to get things done, lawyers who are already flustered can easily overlook the bigger picture.

Consider the recent Court of Appeal case of Boo Are Ngor v Chua Mee Liang. In this case, Chua Mee Liang took out a suit against Boo Are Ngor, but the suit was struck out due to Chua Mee Liang's failure to comply with directions of the Court. Chua Mee Liang did not appeal, but instead started a second suit against the same party.

In response, Boo Are Ngor's lawyers defended the second suit, and it was not until nearly 4 years later that they applied to strike out the second suit for being an abuse of process of Court. The reason, it was asserted, was that since Chua Mee Liang's first suit was struck out for failure to comply with Court directions, Chua Mee Liang should not be granted the indulgence to commence a second suit.

Unfortunately for Boo Are Ngor, the Court of Appeal held that since he has taken action to defend the second suit, he is no longer entitled to strike out the suit for abuse of process of Court. One can only imagine what a difference it would have made for Boo Are Ngor if the application to strike out was made in the first instance. That, however, could only happen, if lawyers are allowed to do their jobs, sometimes a little slower than clients would like.

Lawyering remains that one unique profession where client service is not always the most important consideration, and the client is definitely not always right.

Contracts without good faith

Can a contract be entered into without good faith? One would think logically not, but apparently the Court of Appeal does not agree. In the case of Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor, the Court of Appeal was asked to read into the contract an implied term that parties are to act in good faith, with honesty, and in a reasonable manner. One would assume these are very self-evident implied terms. Unfortunately, the Court of Appeal held otherwise. According to the learned judges, a Court would not read any implied terms into the contract if the contractual terms are clear as of themselves. This is even so despite the terms sought to be read into the contract being so basic and fundamental.

This new decision shows all the more why it is so necessary to ensure contracts are properly drawn up in the first place. Otherwise, even very basic issues may be overlooked, causing much more substantial losses at the end of the day.

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If you have any questions or comments, email me at khenghoe@mycounsel.com.my.

Limitation Act does not apply to beneficiaries of insurance policies

It is an established principle of law that any claim should be made within the period prescribed under the Limitation Act. For contract and tort claims, the limitation period is 6 years. This means if a claim is made after 6 years, the person sued can in fact go to Court and say, "Yes, I am wrong as alleged, but so what? You cannot sue me!"

In the recent Court of Appeal decision of Anthony Kulanthai Marie Joseph v Malaysian Assurance Alliance Bhd [2008] 4 CLJ 205, the Court of Appeal was faced with the dilemma of a beneficiary under an insurance policy who claimed for the insurance monies after the expiry of more than 6 years of her husband's demise. The High Court earlier had dismissed the wife's claim on the basis that limitation has set in.

The Court of Appeal did justice in this case by declaring the wife as a beneficiary under trust, and declared the insurance company as a bare trustee. In this way, limitation periods prescribed under the Limitation Act would not apply, and therefore the wife is free to claim for the money without regard to delay in time.

The Court of Appeal should be applauded for this decision, as clearly if an insurance company has accepted premiums for a life insurance policy, it should not be permitted to rely on technicalities to deny any legitimate claim.

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Despite its shortcomings, I continue to keep faith in the Malaysian judiciary. E-mail me at khenghoe@mycounsel.com.my.

What kind of lawyer do you want?

When a client calls me and asks, "How much?", I immediately know that is not the correct client for me. Don't get me wrong. Of course, I am not the cheapest lawyer in town, but neither am I the most expensive. That is not the reason I conclude the client is not for me. The reason is because the client probably has (or thinks that he/she has) a case which requires only standard work. There is no dispute. There is no hiccup. Only some documentation to undergo. Routine stuff- fill up the forms, attend Court, and voila.

However, when the case involves a substantial dispute, "how much" would rarely be the first question on the client's mind. Oh yes, the question would eventually be asked, but not at the start. From the start, the client first wants to determine whether the lawyer is the suitable candidate to undertake the case.

It is here that the client needs to ask, "what kind of lawyer" does he/she want? Mind you, just because you have a disputed case does not mean you necessarily want to engage a pitbull. A pitbull may charge all the time, but it could very well be creating much unnecessary collateral damage in the process.

There is so much more to lawyering than pit-bulling. A lawyer could be a principled defender- one who would vigorously defend your interest but only in a principled manner. Another lawyer could be a skilled negotiator- always able to broker a win-win situation out of any position. Yet another could be good with technicalities- tying up everybody in countless technical manouvres if that is what's required. Yet another can be a charismatic influencer- able to win his way by sheer charm.

Is any one type of lawyer the "right" type? Not at all. It depends on how well the lawyer's personality suits yours, and your particular case. So, what kind of lawyer do you want? Perhaps you should first ask, what kind of person you in fact are.

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Have thoughts on the above topic? Email me at khenghoe@mycounsel.com.my.

Right of bank to proceed against chargor/guarantor stayed

It has been taken for granted by Banks that when a debtor defaults his/her loan, the Bank may proceed in foreclosure proceedings against any land charged to the Bank, and simultaneously proceed against the chargor/guarantor for the full sum. The Bank therefore would be entitled to take all actions simultaneously until recovery of full sum owed. Arguments raised to the effect that Banks must proceed in foreclosure first, usually are not regarded well by the Courts.

Hence, the Supreme Court in Low Lee Lian v Ban Hin Lee Bank Bhd had established the principle that the Bank, barring any special circumstances, may proceed against the chargor/guarantor personally despite having obtained an order for sale of the land.

This same issue was ventilated recently in the High Court in the case of AmMerchant Bank Bhd v Totalhill Sdn Bhd [2008] 3 CLJ 845. In this case, it was argued by the chargor/guarantor that the fact that foreclosure proceedings have commenced (and likely to cover the full indebtedness) constitutes special circumstances for the claim against the chargor/guarantor to be stayed.

Incredibly, the High Court agreed. By doing so, the High Court is setting a precedent which may well turn out to be prejudicial to the financial interests of Banks generally. It potentially opens the floodgates for other debtors/guarantors to argue that recourse must be had against the principal debtor/security first before recourse is had against them for the balance. That of course goes against the tenets of the contract signed which places the chargor/guarantor as principal debtors and therefore liable for the principal sum.

This case also goes to show that as much as Banks seek to contract out every risk, Courts of law would remain vested with the discretion to administer justice as they deem fit. Banks would do well to focus more on credit risk rather than legal risks in its business operations.

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Disagree with my views? Drop me an email at khenghoe@mycounsel.com.my

Court of Appeal binds itself

It is a long-held tradition in the Courts of law that lower courts should be bound by superior courts. This is the doctrine of stare decisis, or binding precedent, and ensures a relatively uniform approach to the law despite cases coming before different judges.

That a superior Court would bind a lower court goes almost without saying. But would a court bind itself? I.e. would a High Court bind another High Court, or would a Court of Appeal bind another Court of Appeal?

The traditional position is that a court is not bound by its previous decisions, although it would rarely stray from it. This gives litigants the certainty that the law would be largely uniformly applied, yet gives the court the flexibility to stray from its previous findings if necessary.

The Court of Appeal in its latest reported decision of Dato Seri Dr Kok Mew Soon v Mustapha Mohamed however, had taken the position that it binds itself. This means that a later Court of Appeal would be bound by an earlier Court of Appeal decision.

At the Court of Appeal level, this issue is still very much manageable, because there are only a few Court of Appeal judges and mostly located at Putrajaya. But would this decision also translate into the High Court binding itself? Logically, there is no reason why that should not be the case. The problem is this: there are many more High Court judges and High Court locations as compared to the Court of Appeal. There are points of law in which High Court judges would honestly and with all sincerity differ.

The difference in opinion is not an issue. It allows room for the development of legal principles in more well-thought out scenarios. But would a High Court judge now consider himself/herself bound by an earlier High Court judge, merely because the other chap decided the issue first? Is the only way open to a High Court judge to differ from another decision by way of declaring that other decision per incuriam (i.e. erroneous from the start)? Surely that is too drastic and would not be easily resorted to by any judge of sound standing.

The Court of Appeal has made its decision. It is arguably obiter (side comment) rather than ratio (binding principle), but as a trial judge once remarked to me when I tried to make that distinction: It is still an obiter of the Court of Appeal.

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Kheng Hoe tries to keep a lively countenance in the face of disputes. Try it sometimes- you may just live longer (khenghoe@mycounsel.com.my).

Be careful when negotiating with squatters

Malaysia adopts the Torrens system in land administration, which is a much more efficient and simple system as compared to the British deeds system. Under the Torrens system, a registered landowner's right in the land is indefeasible, and no extended occupation of land by squatters would ever create any legitimate expectation giving rise to equitable relief.

However, in the Court of Appeal decision of Rabiah Lip v Bukit Lenang Development Sdn Bhd, the Court of Appeal left open the possibility that a landowner who has made representations to squatters (who relied on those representations to expend money on the land) may be subject to a claim in proprietary estoppel against the landowner. In other words, the registered landowner's interest is indefeasible provided he has not made any representation in word or deed to the squatters which would allow them a claim in equity.

So, in dealing with squatters, and especially in any negotiations for them to leave the land, be careful, lest by word or deed you as the landowner are held liable in equity to permit a continued occupation of the land, even if the possibility of adverse possession is highly unlikely.

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If you have any questions or comments, drop me an email at khenghoe@mycounsel.com.my.