Badiaddin Mohd Mahidin & Anor v.

Arab Malaysian
[1998] 2 CLJ Finance Bhd 75

BADIADDIN MOHD MAHIDIN & ANOR a

v.
ARAB MALAYSIAN FINANCE BHD
FEDERAL COURT, KUALA LUMPUR b
EUSOFF CHIN CJ
MOHD AZMI FCJ
PEH SWEE CHIN FCJ
WAN ADNAN ISMAIL FCJ
GOPAL SRI RAM JCA
c
[CIVIL APPEAL NO: 02-4-1996(N)]
5 JANUARY 1998
CIVIL PROCEDURE: Jurisdiction - High Court - Whether one High Court
has jurisdiction to set aside a final order of another High Court
d
CIVIL PROCEDURE: Appeal - Whether Court of Appeal correct in ruling
that court was functus officio after making judgment - Whether one court can
set aside a perfected judgment of another court of concurrent jurisdiction -
Whether court could grant order of sale after charge and first order decreed
invalid
e
CONTRACT: Privity - Whether appellants not being parties to contract liable
to repay respondent - Whether appellants had received benefit - Whether loan
agreement valid - Whether third party charge void - Contracts Act 1950,
s. 66
f
LAND LAW: Malay reservations - Charge - Whether invalid - Whether order
of sale invalid - Section 13 of Malay Reservations Enactment
WORDS & PHRASES: “Any person”- Contracts Act 1950, s. 66
The appellants were the registered co-owners of a piece of Malay reservation g
land (‘the land’) in Tampin. Their business associate, one Ismail Omar
(‘Ismail’), was in need of a loan and to furnish security for the personal loan,
the appellants assisted Ismail by charging the land to the respondent. After
the loan was disbursed, Ismail committed a breach of the loan agreement and
the respondent foreclosed the third party security and obtained an order for
h
sale of the property. The appellants successfully applied to have the charge
and the order for sale declared null and void on the ground that they were in
violation of the prohibition imposed by s. 13 of the Malay Reservations
Enactment (‘the Enactment’). The respondent then filed an application before
the same judge for a declaration that the appellants, having received a benefit
i
 Current Law Journal
76 1998 [1998] 2 CLJ

a from the respondent pursuant to s. 66 of the Contracts Act 1950 (‘the Act’),
were liable to repay the outstanding amount owing to the respondent. An order
for sale was granted on 8 October 1990 (‘the second order’), notwithstanding
the invalidity of the charge and the first order for sale as decreed by the judge
himself earlier.
b
The appellants subsequently applied and obtained an order dated 22 September
1995 setting aside the second order on the basis that they were entitled to
the remedy ex debito justitiae. The respondent appealed to the Court of Appeal
which allowed the appeal on the ground that the High court was functus officio
and thus had no jurisdiction to set aside the second order irrespective of any
c illegality in it. The appellants appealed to the Federal Court.
The issues before the court were: (i) whether the first and second orders or
any part thereof were invalid because they were made in contravention of s.
13 of the Enactment; (ii) whether one High Court has the jurisdiction to set
d aside a final order regularly obtained from another High Court of concurrent
jurisdiction; and (iii) whether s. 66 of the Act could be invoked against the
appellants.
Held:
Per Mohd Azmi FCJ
e
[1] It is settled law that one High Court cannot set aside a final order
regularly obtained from another High Court of concurrent jurisdiction.
The one special exception to this rule is where the final judgment of
the High Court can be proved to be null and void on the ground of
f
illegality or lack of jurisdiction. Apart from the breach of natural justice,
in any attempt to widen the door of the inherent and discretionary
jurisdiction of the superior courts to set aside an order of court ex debito
justitiae to a category of cases involving orders which contravened any
written law, the contravention should be one which defies a substantive
statutory prohibition so as to render the defective order null and void
g
on the ground of illegality or lack of jurisdiction. The discretion to
invoke the inherent jurisdiction should also be exercised judicially in
exceptional cases, where the defect is of such a serious nature that there
is a real need to set aside the defective order to enable the court to do
justice.
h

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 77

[1a] The Court of Appeal, in allowing the respondent’s appeal, had failed a
to appreciate the central argument on the availability of the inherent
jurisdiction of the High Court to exercise its discretion to set aside the
illegal attempt by the respondent to subvert and effectively reverse the
original, final and perfectly legitimate order of the High Court, as a
special exception to the doctrine governing the finality of court orders, b
notwithstanding the absence of any appeal. The learned judges had failed
to direct their minds to the fundamental issue of whether the appellants’
application came within the category of cases that attracted ex debito
justitiae. The second order for sale of the land, which had the effect of
an attachment in execution of a judgment, was null and void being in c
violation of the prohibition imposed by s. 13 of the Enactment. Thus,
that order being in violation of a statutory prohibition, it followed that
the High court should have the inherent jurisdiction to set aside the
second illegal order on the basis of the ex debito justitiae principle.
[2] Section 66 of the Act does not create a cause of action. It confers a d
discretionary remedy in the nature of restitution to be exercised by the
court within the ambit of the section and within the principles of the
law of contract. Under s. 66 of the Act, the party who is bound to
restore any advantage received or to make compensation for such
advantage should be construed as “any person” who is a party to the e
agreement and who has received any advantage pursuant to the terms
or conditions of the invalid contract. To extend the meaning of “any
person” in s. 66 of the Act to strangers to the agreement will be in
violation of the elementary principles of contract.
[2a] From the loan agreement and the charge documents, the appellants were f
not beneficiaries of the loan. The appellants were also not parties to the
loan agreement, and s. 66 of the Act could not be invoked against them.
The court thus had no jurisdiction to order the appellants to pay under
s. 66 of the Act. The fact that the appellants were paid from the loan
given by the respondent could not make them parties or privies to the g
contract so as to enable the court to bring them within the ambit of s.
66 of the Act. The loan agreement was perfectly valid and enforceable
by law. Applying the principle of severability, the effect of the illegal
charge was merely to downgrade the borrowing of the loan from a
secured to an unsecured loan. What was discovered to be void was the h
charge transaction between the appellants and the respondent, and as
third party chargors, the appellants did not receive any benefit within
the meaning of s. 66 of the Act, either under the charge or the loan
agreement. In the circumstances, the second order by the High Court
i
 Current Law Journal
78 1998 [1998] 2 CLJ

a under s. 66 of the Act was invalid as it was made without, or in excess

of jurisdiction. Since the judgment under s. 66 of the Act was invalid,
it followed that the order for sale of the appellants’ land to satisfy the
said judgment should fall to the gound, apart from it being in violation
of the prohibition imposed by s. 13 of the Enactment.
b
Per Peh Swee Chin FCJ
[1] The doctrine of res judicata would apply to bar the making of the third
order of 22 September 1995 (‘the third order’) directly concerned,
because the second order of 8 October 1990 had become the truth
c between the landowners and the chargee, and the third order would
constitute a challenge to the truth or accuracy of the second order. The
High Court should have exercised its inherent jurisdiction and dismissed
the fresh subsequent proceeding in which the third order was made, by
relying on the doctrine of res judicata even though it was not pleaded
d by any of the parties.
[2] When a judgment in the High court has been perfected, a party to the
judgment generally, and subject to the same passage or any written law,
and apart from any appeal, cannot re-open the matter finalised in the
judgment by seeking to alter it or amend it for the court would be
e functus officio, by virtue of the ratio of Hock Hua Bank v. Sahari Murid.
Once perfected, a judgment of the High Court is also entitled to the
obedience and respect from the parties to it on the basis of a command
from a superior court of unlimited civil jurisdiction in the course of
contentious litigation. It is also long established that one can apply to
f set aside an order of a superior court only in direct proceedings filed
for the very purpose of having it set side on valid grounds, but without
doing so, one cannot attack its invalidity laterally by raising an objection
to its invalidity in any other proceedings, without filing proceedings for
applying to have it set aside first. When one wishes to file such
g proceedings to so set it aside, one must do so within the same
proceedings or action in which the same order was obtained and not in
a separate fresh proceeding or new action on any ground other than those
mentioned in Hock Hua Bank v. Sahari Murid.
[3] Illegality affects a contract in the way that it nullifies the consideration
h or object of the contract and is available as a defence to an action based
upon such a contract. If a party complains of an illegality in a contract,
he must plead it or the court itself takes judicial notice of it when the
contract is ex facie illegal or evidence about it emerges in court. All
these must have taken place either at the trial of the first instance, or
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 79

in any direct appeal to a higher court therefrom. The court, if it does a

not deal with the illegality in any way aforesaid, will be functus officio
and cannot take the point after a judgment is perfected. A point of
illegality cannot be reserved by a litigant for future use without
deploying it at the trial or in an appeal therefrom. A court cannot outside
the scope of such trial and such appeal therefrom, at anytime therafter b
take judicial notice of such point pleaded as an afterthought in a later
action filed also as an afterthought. The doctrine of res judicata, being
based on the policy of interest rei publicae ut finis litium, will prevent
these afterthoughts.
[4] The second order of sale was in substance and in truth the same as the c
order of sale of the land which was set aside by the same court in the
same originating summons. The second order of sale was a resuscitation
of the order of sale of the land under the thinnest disguise which the
same court had set aside earlier by its judgment of 21 March 1988. The
resuscitation thus had the effect of invalidating or subverting the d
judgment of 21 March 1988, which was given on account of the
Enanctment after hearing arguments and from which none of the parties
had appealed.
[4a] The second order should not be re-opened and heard again after it was
e
perfected and also on the ground of res judicata, but it should not be
set aside as the clear ratio in Hock Hua Bank would be departed from,
even though it would be done on grounds of illegality on the argument
based on the Enactment. However the second order could be stayed
permanently. The second order was an order of execution but stated in
the form of and as part of a court’s order. The court which makes an f
order since perfected is functus officio about re-opening the matter and
rehearing the parties on merits about the order, but it is not functus
officio to hear a subsequent application to set aside an order of execution
or order of seizure and sale. The appellants would have been perfectly
in order to set aside such an order of execution but for the fact that g
the said order of execution which was made, was part of a perfected
court’s order. If the court could not grant an order outright, in the form
of setting aside the said order of execution because it was part of a
perfected order and also because it was res judicata, then the court could
still grant a relief or order which could be consistent with the prayer h
sought by the second originating summons. The court has the inherent
jurisdiction to stay any proceeding (which includes an order of
execution) which is an abuse of process. The second order was for the
resuscitation of the earlier order of sale which was a misuse of the
i
 Current Law Journal
80 1998 [1998] 2 CLJ

a court’s machinery and was therefore an abuse of process. Therefore the

appeal was allowed and the order of the Court of Appeal set aside. A
further order was made that the third order be substituted with another
order to the effect that execution of the second order be stayed
permanently without any right of removal of such stay.
b
Obiter dictum
[1] The grounds for setting aside a consent judgment are grounds which
relate to consensus ad idem or the free consent of parties to a binding
agreement or contract. If it is proved that there are grounds which vitiate
c such free consent, the agreement is not binding. If the agreement upon
which a consent order or judgment by consent is based, is vitiated by
any ground recognised in equity as vitiating such free consent, such as
fraud, mistake, total failure of consideration, then such a perfected
consent order or judgment by consent may be set aside in a fresh action
d filed for the purpose. Grounds which may vitiate such free consent
should also include misrepresentation, coercion and undue influence, and
other grounds in equity.
Per Gopal Sri Ram JCA

e [1] As a general rule orders of a court of unlimited jurisdiction may not

be impugned on the ground that they are void in the sense that they
may be ignored or disobeyed. It is well settled that even courts of
unlimited jurisdiction have no authority to act in contravention of written
law. So long as an order of a court of unlimited jurisdiction stands,
f
irregular though it may be, it must be respected. But where an order of
such a court is made in breach of statute, it is made without jurisdiction
and may therefore be declared void and set aside in proceedings brought
for that purpose. It is entirely open to the court upon the illegality being
clearly shown, to grant a declaration to the effect that the order is invalid
and to have it set aside. It is wrong to assume that such an order may
g
only be corrected on appeal. It is clear that in the light of the principles
established, that a court of unlimited jurisdiction, even in the absence
of an express enabling provision, has inherent power to set aside its
orders made in breach of written law. The ends of justice will not be
met if such a power does not exist; and the procedural branch of the
h broad and flexible doctrine of estoppel known as res judicata finds no
place in such a circumstance. Neither has the functus officio theory,
which upon close examination is merely part and parcel of the doctrine
of res judicata, any role to play in the case.

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 81

[2] The charge that the appellants had created over the land became void, a
in consequence of a breach of the Enactment. With it fell the annexure
that contained the contract between the appellants and the respondent.
The loan contract continued to be perfectly valid since it did not offend
the provisions of the Enactment. The appellants were not parties to the
loan agreement. Neither did they receive any benefit under the annexure b
to the charge. The benefit of which s. 66 of the Act speaks is one that
is received under the very contract which is discovered to be void. The
benefit in question under the contract of loan neither became void nor
was discovered to be void. The contract that was void was the annexure
to the charge and the appellants did not receive any benefit under it. c
[2a] The words “or any other person” appearing in s. 2(d) of the Act are
not wide enough to exclude the doctrine of privity of contract. It follows
that the identical words “any person” used by s. 66 of the Act do not
include persons who are not parties to a contract under which a benefit
passes. There is no justification in principle or policy to extend the terms d
of the section by means of an interpretation that runs counter to settled
jurisprudence. It follows that only parties to a contract may claim or
become liable to make restitution under that section. Accordingly, the
words “any person” appearing in s. 66 of the Act must refer only to
parties to the original contract that either becomes or is discovered to e
be void.
[2b] The first order did not in any way infringe the provisions of the
Enactment. There is nothing in the Enactment that prohibits the making
of an order for restitution of moneys advanced upon the strength of a
void security. The second order directed the sale of the land in f
contravention of s. 13 of the Enactment. As there is no power in a court
to make an order in breach of the provisions of written law, the second
order was illegal and utterly void. The Court of Appeal was wrong in
deciding the appeal to it purely on the basis that the judge was functus
officio. Thus the appeal should be allowed with costs both here and in g
the court below. The order of the Court of Appeal was set aside and
the orders made by the judge at first instance were restored.
[Appeal allowed.]
h

i
 Current Law Journal
82 1998 [1998] 2 CLJ

a [Bahasa Malaysia Translation of Headnotes]

Perayu-perayu adalah tuanpunya bersama yang berdaftar bagi sebidang tanah
rizab Melayu di Tampin. Rakan sekutu perniagaan mereka, seorang yang
bernama Ismail bin Omar memerlukan satu pinjaman dan untuk memberikan
jaminan bagi pinjaman persendirian itu, perayu-perayu telah membantu Ismail
b
dengan menggadaikan tanah mereka kepada responden. Selepas pinjaman itu
dibelanjakan, Ismail telah melakukan kemungkiran terhadap perjanjian pinjaman
tersebut dan responden-responden telah menghalang-tebus jaminan pihak ketiga
dan mendapatkan perintah jualan bagi hartanah tersebut. Tuan-tuan punya tanah
itu telah dengan jayanya memohon supaya gadaian dan perintah jualan tersebut
c diisytiharkan batal dan tak sah atas alasan bahawa mereka melanggari larangan
yang dikenakan oleh s. 13 Enakmen Rizab Melayu (‘Enakmen tersebut’).
Responden-responden kemudiannya telah memfailkan satu permohonan di
hadapan hakim yang sama untuk mendapatkan satu pengisytiharan bahawa
perayu-perayu, setelah menerima kemanfaatan daripada responden adalah
d dengan s. 66 Akta Kontrak 1950 (‘Akta tersebut’), bertanggungan untuk
membayar balik jumlah yang masih belum jelas yang terhutang kepada
responden. Satu perintah jualan telah diberikan pada 8 Oktober 1990 (perintah
kedua), meskipun terdapatnya ketaksahan gadaian dan perintah pertama tersebut
sepertimana yang didekrikan oleh Yang Arif sendiri pada awalnya.
e
Perayu-perayu kemudiannya telah memohon dan mendapatkan perintah
bertarikh 22 September 1995 yang mengenepikan perintah kedua tersebut atas
dasar bahawa mereka berhak kepada remedi ex debito justitiae. Responden
telah memohon kepada Mahkamah Rayuan yang telah membenarkan rayuan
tersebut atas alasan bahawa Mahkamah Tinggi adalah functus officio dan
f dengan itu tidak mempunyai bidangkuasa untuk mengenepikan perintah kedua
tanpa menghiraukan mengenai sebarang tindakan yang menyalahi
undang-undang dalam perintah tersebut. Perayu-perayu telah merayu kepada
Mahkamah Persekutuan.

g Isu-isu yang terdapat di hadapan mahkamah adalah: (i) samada perintah

pertama dan kedua atau mana-mana bahagian daripadanya adalah tak sah
kerana telah dibuat dalam melanggari s. 13 Enakmen tersebut; (ii) samada
sesuatu Mahkamah Tinggi mempunyai bidangkuasa untuk mengenepikan
perintah muktamad yang telah diperolehi menurut aturan daripada sebuah
Mahkamah Tinggi lain yang mempunyai bidangkuasa bersama; dan (iii) samada
h
s. 66 Akta Kontrak 1950 boleh digunakan terhadap perayu-perayu.

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 83

Diputuskan: a
Oleh Mohd Azmi HMP
[1] Ianya merupakan undang-undang yang telah ditetapkan bahawa sesebuah
Mahkamah Tinggi tidak boleh mengenepikan perintah muktamad yang
telah diperolehi menurut aturan daripada sebuah Mahkamah Tinggi lain
b
yang mempunyai bidangkuasa bersama. Tetapi satu kekecualian kepada
kaedah ini adalah di mana penghakiman muktamad Mahkamah Tinggi
boleh dibuktikan sebagai batal dan tak sah atas alasan kepenyalahan
undang-undang atau ketiadaan bidangkuasa. Selain daripada kemungkiran
keadilan asasi, dalam sebarang percubaan untuk memperluaskan
lingkungan bidangkuasa budibicara dan bidangkuasa sedia ada c
mahkamah-mahkamah atasan untuk mengenepikan sesuatu perintah
mahkamah ex debito justitiae, kepada kategori kes-kes yang melibatkan
perintah-perintah yang melanggari mana-mana undang-undang bertulis,
perlanggaran tersebut seharusnya merupakan sesuatu yang menentang
larangan berkanun yang substantif supaya menjadikan perintah yang tidak d
sempurna itu tidak sah dan batal atas alasan ketiadaan bidangkuasa atau
tindakan salah di sisi undang-undang. Budibicara untuk menggunakan
bidangkuasa sedia ada seharusnya juga dilaksanakan secara kehakiman
dalam kes-kes yang terkecuali, di mana ketidak-sempurnaan teramat
serius hingga wujudnya keperluan untuk mengenepikan perintah yang e
tidak sempurna itu bagi memboleh mahkamah melakukan keadilan.
[1a] Mahkamah Rayuan dalam membenarkan rayuan responden, telah gagal
menghargai, bahawa penghujahan utama mengenai ketersediaan
bidangkuasa sedia ada Mahkamah Tinggi untuk melaksanakan
budibicaranya bagi mengenepikan percubaan yang tidak sah di sisi f
undang-undang oleh responden, untuk menggagalkan dan secara
berkesannya mengakaskan perintah Mahkamah Tinggi yang
sesungguhnya sah, asal dan muktamad, sebagai kekecualian khas kepada
doktrin yang menguasai kemuktamadan perintah-perintah mahkamah,
tanpa menghiraukan ketiadaan mana-mana rayuan. Hakim-hakim yang g
bijaksana telah gagal untuk mengarahkan pemikiran mereka kepada
isu-isu asas mengenai samada permohonan perayu-perayu terlingkung
dalam kategori kes-kes yang menarik ex debito justitiae. Perintah kedua
mengenai penjualan tanah rizab itu, yang mana mempunyai kesan
sebagai suatu penahanan dalam perlaksaan sesuatu penghakiman, adalah h
tak sah dan batal dalam melanggari larangan yang dikenakan oleh s. 13
Enakmen tersebut. Dengan itu perintah tersebut yang melanggari suatu
larangan berkanun, dimaksudkan bahawa Mahkamah Tinggi seharusnya
mempunyai bidangkuasa sedia ada untuk mengenepikan perintah tak sah
yang kedua atas dasar prinsip ex debito justitiae. i
 Current Law Journal
84 1998 [1998] 2 CLJ

a [2] Seksyen 66 Akta Kontrak tersebut, tidak mewujudkan suatu kausa

tindakan. Ianya memberikan remedi budibicara menurut sifat restitusi
untuk dilaksanakan oleh mahkamah dalam lingkungan seksyen tersebut
dan dalam prinsip undang-undang kontrak. Di bawah s. 66 Akta tersebut,
pihak yang terpaksa mengekalkan sebarang kemanfaatan yang diterima
b atau membuat bayaran pampasan untuk kemanfaatan yang sedemikian
seharusnya ditafsirkan sebagai “mana-mana orang” yang merupakan satu
pihak kepada perjanjian tersebut dan telah menerima sebarang
kemanfaatan selaras dengan terma-terma atau syarat-syarat kontrak yang
tak sah itu. Bagi melanjutkan maksud “mana-mana orang” dalam s. 66
c sehingga membabitkan orang-orang yang tidak dikenali, yang bukannya
merupakan satu pihak kepada perjanjian itu adalah melakukan
perlanggaran prinsip asas kontrak tersebut.
[2a] Berdasarkan perjanjian pinjaman dan dokumen-dokumen gadaian,
perayu-perayu bukannya merupakan benefisiari-benefisiari pinjaman
d tersebut. Perayu-perayu juga bukannya merupakan pihak kepada
perjanjian pinjaman tersebut dan s. 66 Akta tersebut tidak boleh
digunakan terhadap mereka. Mahkamah dengan itu tidak mempunyai
bidangkuasa untuk memerintahkan perayu-perayu supaya membayar di
bawah s. 66 Akta tersebut. Fakta bahawa perayu-perayu dibayar daripada
e pinjaman yang telah diberikan oleh responden tidak boleh menjadikan
mereka pihak-pihak atau privi kepada kontrak tersebut bagi membolehkan
mahkamah merangkuminya dalam lingkungan s. 66 Akta tersebut.
Perjanjian pinjaman tersebut adalah sesungguhnya sah dan boleh
dikuatkuasakan menurut undang-undang. Dalam memakai prinsip boleh
f asing, kesan gadaian tak sah itu adalah semata-mata untuk menurutkan
taraf peminjaman pinjaman tersebut daripada pinjaman bercagar kepada
pinjaman tidak bercagar. Apa yang didapati sebagai tak sah atau batal
adalah transaksi gadaian antara perayu-perayu dan responden, dan sebagai
penggadai pihak ketiga, perayu-perayu tidak menerima sebarang
kemanfaatan dalam lingkungan maksud s. 66 Akta tersebut, sama ada
g
di bawah gadaian atau perjanjian pinjaman tersebut. Dalam keadaan itu,
perintah oleh Mahkamah Tinggi di bawah s. 66 Akta tersebut adalah
tak sah kerana ianya dibuat tanpa atau melampaui bidangkuasa. Oleh
kerana penghakiman di bawah s. 66 Akta tersebut adalah tak sah, di
dapati bahawa perintah jualan tanah perayu untuk memenuhi
h penghakiman tersebut seharusnya dibatalkan, selain daripada ianya
melanggari larangan yang dikenakan oleh s. 13 Enakmen tersebut.

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 85

Oleh Peh Swee Chin HMP a

[1] Doktrin res judicata akan terpakai bagi menghalang pembuatan perintah
ketiga bertarikh 22 September 1995 (‘perintah ke-3’) yang berkaitan
secara langsungnya, kerana perintah ke-2 bertarikh 8 Oktober 1990
(‘perintah ke-2’) telah menjadi kebenaran antara tuan-tuan tanah dan
b
pemegang gadaian, dan perintah ke-3 akan membentuk satu cabaran
kepada kebenaran atau ketepatan perintah ke-2 itu. Mahkamah Tinggi
seharusnya telah melaksanakan bidangkuasa sedia adanya dan menolak
prosiding baru yang berikutnya dalam mana perintah ke-3 itu dibuat,
dengan bergantung pada doktrin res judicata walaupun ianya tidak
diplidkan oleh mana-mana pihak. c

[2] Apabila sesuatu penghakiman dalam Mahkamah Tinggi telah

disempurnakan, sesuatu pihak kepada penghakiman itu secara amnya dan
tertakluk kepada rangkap yang sama atau mana-mana undang-undang
bertulis, dan selain daripada mana-mana rayuan, tidak boleh membuka d
semula perkara yang dimuktamadkan dalam penghakiman itu dengan
berusaha untuk mengubahkannya atau memindanya bagi mahkamah atau
adalah functus officio, menurut nisbah Hock Hua Bank v. Sahari Murid.
Sebaik sahaja disempurnakan, sesuatu penghakiman Mahkamah Tinggi
adalah juga harus dipatuhi dan dihormati oleh pihak-pihak kepadanya
e
atas dasar bahawa ianya adalah suatu perintah daripada sebuah
Mahkamah atasan yang mempunyai bidangkuasa sivil yang tidak terhad
dalam perjalanan litigasi bertikaian. Adalah juga lama ditetapkan bahawa
seseorang boleh memohon untuk mengenepikan sesuatu perintah
mahkamah atasan hanya dalam prosiding langsung yang telah difailkan
semata-mata bagi tujuan mengenepikannya atas alasan-alasan yang sah, f
tetapi dengan tidak melakukan sedemikian, seseorang tidak boleh
mencabar kesahihannnya secara sepihak dengan membangkitkan suatu
bantahan terhadap kesahihannya dalam mana-mana prosiding lain, tanpa
memfailkan prosiding untuk memohon bagi mengenepikannya terdahulu.
Apabila seseorang ingin untuk memfailkan prosiding yang sedemikian g
untuk mengenepikannya sedemikian rupa, seseorang mesti melakukannya
dalam lingkungan prosiding atau tindakan yang sama dalam mana
perintah yang sama telah diperolehi dan bukannya dalam satu prosiding
berasingan yang baru atau tindakan baru atas mana-mana alasan yang
lain daripada yang disebutkan dalam Hock Hua Bank v. Sahari Murid. h

[3] Kepenyalahan undang-undang menjejaskan sesuatu kontrak dengan cara

membatalkan pertimbangan atau tujuan sesuatu kontrak dan tersedia
sebagai satu pembelaan kepada sesuatu tindakan berdasarkan kontrak
yang sedemikian. Jika sesuatu pihak mengadu mengenai kepenyalahan
i
 Current Law Journal
86 1998 [1998] 2 CLJ

a di sisi undang-undang dalam sesuatu kontrak, beliau mestilah

memplidkannya dan mahkamah dengan sendirinya mengambil perhatian
kehakiman mengenainya apabila kontrak itu adalah tidak sah di sisi
undang-undang ex facie atau keterangan mengenainya berbangkit dalam
mahkamah. Kesemua perkara-perkara ini semestinya telah berlaku
b samada di perbicaraan pada mulanya, atau dalam mana-mana rayuan
secara langsung kepada mahkamah yang lebih tinggi bermula daripada
situ. Mahkamah tersebut, jika ianya tidak menguruskan kepenyalahan
undang-undang itu menurut mana-mana cara seperti yang tersebut di atas,
akan menjadi functus officio dan tidak boleh membangkitkannya selepas
c sesuatu penghakiman telah disempurnakan. Sesuatu perkara kepenyalahan
undang-undang tidak boleh diakaskan oleh litigan untuk digunakan di
masa hadapan tanpa menggunakannya di perbicaraan atau dalam sesuatu
rayuan bermula daripada situ. Sesebuah mahkamah tidak boleh di luar
lingkungan perbicaraan yang sedemikian dan rayuan yang sedemkkian,
bermula daripada situ, pada bila-bila masa selepas itu mengambil
d
perhatian kehakiman mengenai perkara sedemikian yang telah diplidkan
sebagai sesuatu yang difikirkan sedemikian dalam sesuatu tindakan
kemudian yang difailkan juga sebagai sesuatu yang difikirkan kemudian.
Doktrin res judicata, yang berasaskan dasar kepentingan rei publicae ut
finis litium, akan menghalang perkara-perkara yang difikirikan kemudian
e ini.
[4] Perintah jualan ke-2 adalah menurut substans dan menurut kebenaran
sama seperti perintah jualan tanah yang mana telah diketepikan oleh
mahkamah yang sama dalam saman pemula yang sama. Perintah jualan
f ke-2 adalah merupakan tindakan menghidupkan semula perintah jualan
tanah di bawah samaran yang paling jelas yang mana telah diketepikan
oleh mahkamah yang sama pada awalnya melalui penghakimannya
bertarikh 21 Mac 1988. Perbuatan menghidupkan semula itu dengan yang
demikian mempunyai kesan mentaksahkan atau melemahkan
penghakiman bertarikh 21 Mac 1988, yang mana telah diberikan menurut
g
Enakmen selepas mendengar penghujahan-penghujahan dan daripada
yang mana tidak satu pun daripada pihak-pihak yang berkenaan telah
merayu.
[4a] Perintah ke-2 tersebut tidak seharusnya dipulihkan semula dan didengar
h sekali lagi selepas ianya disempurnakan dan juga atas alasan res judicata,
tetapi ianya tidak seharusnya diketepikan sepertimana nisbah nyata dalam
Hock Hua Bank akan diketepikan, walaupun ianya akan dilakukan atas
alasan kepenyalahan undang-undang ke atas penghujahan tersebut
berdasarkan Enakmen itu. Walaubagaimanapun perintah ke-2 itu boleh
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 87

ditangguhkan secara tetap. Perintah Ke-2 merupakan suatu perintah a

perlaksanaan tetapi telah dinyatakan dalam bentuk dan sebagai
sebahagian daripada perintah mahkamah. Mahkamah yang membuat
sesuatu perintah yang sejak itu telah disempurnakan adalah functus
officio mengenai memulakan semula perkara itu dan mendengar semula
pihak-pihak berdasarkan merit-merit mengenai perintah itu, tetapi ianya b
tidak functus officio untuk mendengar suatu permohonan yang berikutnya
untuk mengenepikan satu perintah perlaksanaan atau perintah penyitaan
dan jualan. Tuan-tuan punya tanah mungkin berada adalah keadaan yang
amat sempurna untuk mengenepikan perintah perlaksanaan yang
sedemikian melainkan bagi fakta bahawa perintah perlaksanaan tersebut c
yang mana telah dibuat, adalah merupakan sebahagian daripada perintah
mahkamah yang telah disempurnakan. Jika mahkamah tidak boleh
memberikan satu perintah secara langsung, dalam bentuk mengenepikan
perintah perlaksanaan tersebut kerana ianya merupakan sebahagian
daripada perintah yang telah disempurnakan dan juga kerana ianya adalah
d
res judicata, maka mahkamah masih boleh memberikan satu relief atau
perintah yang berkemungkinan konsisten dengan pohonan yang dipohon
melalui saman pemula yang kedua. Mahkamah mempunyai bidangkuasa
sedia ada untyuk menangguhkan sebarang prosiding (yang mana
termasuk perintah perlaksanaan) yang mana adalah satu penyalahgunaan
proses. Perintah ke-2 adalah bertujuan untuk menyelamatkan perintah e
jualan yang lebih awal yang mana merupakan salah gunaan jentera
mahkamah dan dengan itu adalah suatu penyalahgunaan proses. Dengan
itu rayuan telah dibenarkan dan perintah Mahkamah Rayuan diketepikan.
Satu perintah yang selanjutnya dibuat bahawa perintah ke-3 digantikan
dengan satu perintah yang lain supaya perlaksanbaan perintah ke-2 f
digantung dengan tetap tanpa sebarang hak untuk membatalkan
penggantungan yang sedemikian.
Obiter dictum
[1] Alasan bagi mengenepikan sesuatu penghakiman persetujuan adalah g
alasan-alasan yang berkaitan dengan konsesus ad idem atau persetujuan
bebas pihak-pihak kepada sesuatu perjanjian atau kontrak yang mengikat.
Jika ianya terbukti bahawa terdapatnya alasan-alasan yang merosakkan
persetujuan atau kebenaran yang bebas sedemikian, maka perjanjian itu
tidak mengikat. Jika perjanjian ke atas yang mana sesuatu perintah h
persetujuan atau penghakiman melalui persetujuan diasaskan, telah
dirosakkan oleh mana-mana alasan yang diiktirafkan dalam ekuiti sebagai
merosakkan persetujuan bebas yang sedemikian, seperti fraud, kesilapan,
kegagalan pertimbangan yang sesungguhnya, maka perintah persetujuan
i
 Current Law Journal
88 1998 [1998] 2 CLJ

a yang disempurnakan itu atau penghakiman melalui persetujuan boleh

diketepikan melalui tindakan baru yang telah difailkan bagi tujuan itu.
Alasan-alasan yang akan merosakkan persetujuan bebas yang sedemikian
seharusnya juga termasuk salah-nyataan, paksanaan dan pengaruh tidak
wajar dan lain-lain alasan dalam ekuiti.
b
Oleh Gopal Sri Ram HMR
[1] Menurut kaedah umum, perintah-perintah mahkamah bidangkuasa yang
tidak terhad mungkin tidak dipersoalkan atas alasan bahawa ianya batal
dalam ertikata bahawa ianya mungkin tidak dipedulikan atau tidak
c dipatuhi. Ianya amat diketahui bahawa mahkamah-mahkamah
bidangkuasa tidak terhadp juga tidak mempunyai kuasa untuk bertindak
dalam melanggari undang-undang bertulis. Asalkan perintah mahkamah
bidangkuasa tidak terhad kekal, sungguhpun ianya mungkin tidak teratur,
ianya mesti dihormati. Tetapi di mana perintah mahkamah yang
d sedemikian dibuat dalam kemungkiran statut, ianya dibuat tanpa
bidangkuasa dan dengan itu mungkin akan diisytiharkan tak sah dan
diketepikan dalam prosiding-prosiding yang dimulakan bagi tujuan itu.
Ianya sesungguhnya terbuka kepada mahkamah setelah kepenyalahan
undang-undang itu dengan jelasnya ditunjukkan, untuk memberikan satu
pengisytiharan bahawa perintah itu tak sah dan haruslah diketepikan.
e
Ianya salah untuk mengandaikan bahawa perintah yang sedemikian akan
hanya dibetulkan ketika rayuan. Ianya jelas bahawa memandangkan
prinsip-prinsip yang tetap, bahawa sesuatu mahkamah bidangkuasa tidak
terhad, walaupun dalam ketiadaan peruntukan nyata yang membolehkan,
mempunyai kuasa sedia ada untuk mengenepikan perintah-perintahnya
f yang dibuat dalam kemungkiran undang-undang bertulis. Keputusan
keadilan tidak akan dicapai jika kuasa yang sedemikian tidak wujud; dan
cabang prosedur doktrin estopel yang luas dan mudah dilentur itu yang
dikenali sebagai res judicata tidak terdapat dalam keadaan yang
sedemikian. Teori functus officio tidak mempunyai, yang mana setelah
g diperiksa dengan telitinya adalah semata-mata merupakan sebahagian
daripada doktrin res judicata, sebarang peranan dalam kes tersebut.
[2] Gadaian yang telah diwujudkan oleh perayu-perayu ke atas tanah itu
menjadi batal, sekiranya berlaku kemungkiran Enakmen tersebut.
Bersama-samanya juga terbatal lampiran yang mengandungi kontrak
h
antara perayu-perayu dan responden. Kontrak pinjaman terus menjadi sah
kerana ianya tidak mengganggui peruntukan-peruntukan Enakmen
tersebut. Perayu-perayu bukannya merupakan pihak kepada perjanjian
pinjaman tersebut. Mereka juga tidak menerima sebarang kemanfaatan
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 89

di bawah lampiran kepada gadaian tersebut. Kemanfaatan yang disebut a

oleh s. 66 Akta tersebut adalah yang diterima di bawah kontrak yang
didapati terbatal. Kemanfaatan yang dipersoalan di bawah kontrak
pinjaman tidak menjadi batal ataupun didapati sebagai batal. Kontrak
yang batal dan tak sah adalah lampiran kepada gadaian tersebut dan
perayu-perayu tidak menerima sebarang kemanfaatan di bawahnya. b
[2a] Perkataan-perkataan “or any other person” yang terdapat dalam s. (2)
Akta tersebut tidak begitu luas untuk mengeluarkan doktrin privity
kontrak. Di dapati bahawa perkataan yang serupa “any person” yang
telah digunakan oleh s. 66 Akta tersebut tidak termasuk orang-orang
yang bukannya merupakan pihak-pihak kepada kontrak di bawah yang c
mana sesuatu kemanfaatan beredar. Tidak terdapat justifikasi pada
prinsipnya atau dasar untuk melanjutkan terma-terma seksyen itu melalui
suatu interpretasi yang seiringan dengan juriprudens yang tetap. Di dapati
bahawa hanya pihak-pihak kepada sesuatu kontrakboleh menuntut atau
menjadi bertanggungan untuk membuat, restitusi di bawah seksyen itu. d
Berikutan itu, perkataan “any person” yang terdapat dalam s. 66 Akta
tersebut mestilah hanya merujuk kepada pihak-pihak kepada kontrak asal
yang sama ada menjadi atau didapati tak sah.
[2b] Perintah pertama tidak dalam apa cara pun melanggari
e
peruntukan-peruntukan Enakmen tersebut. Tidak terdapat apa-apa dalam
Enakmen itu yang melarang pembuatan satu perintah untuk restitusi
wang yang telah didahulukan berdasarkan kekuatan jaminan yang tak
sah. Perintah yang kedua telah mengarahkan penjualan tanah yang
melanggari s. 13 Enakmen tersebut. Oleh kerana tidak terdapat kuasa
dalam sesebuah mahkamah untuk membuat satu perintah yang f
memungkiri peruntukan-peruntukan undang-undang bertulis, maka
perintah kedua itu tak sah dan sememangnya batal. Mahkamah rayuan
salah dalam memutuskan rayuan kepadanya semata-mata atas dasar
bahawa hakim adalah functus officio. Dengan itu rayuan tersebut
seharusnya dibenarkan dengan kos kedua-duanya di sini dan dalam g
mahkamah di bawah. Perintah Mahkamah Rayuan telah diketepikan dan
perintah-perintah dibuat oleh hakim pertamanya hendaklah dipulihkan
atau dikembalikan.
[Rayuan dibenarkan.]
h

i
 Current Law Journal
90 1998 [1998] 2 CLJ

a Cases referred to:

Ainsworth v. Wilding [1896] 1 CH 673 (cit)
Asia Commercial Finance (M) Bhd v. Kawal Teliti Sdn Bhd [1955] 3 MLJ 189 (cit)
Chief Kofi Forfie v. Barima Kwabena Seifah [1958] 1 All ER 289 (refd)
Daimler Co Ltd v. Continental Tyre & Rubber Co (Great Britain) Ltd [1916] 2 AC
307
b Devi Prasad v. Mehdi Hasan AIR [1940] Pat 81 (cit)
Eu Finance Bhd v. Lim Yoke Foo [1982] 2 MLJ 37 (cit)
Gendsingh v. Gowardhan AIR [1938] Nag 451 (cit)
Giraj Baksh v. Kazi Hamid Ali [1886] ILR 9 All 340 (cit)
Hj Hamid Ariffin & Anor v. Ahmad Mahmud [1976] 2 MLJ 79 (cit)
Hock Hua Bank v. Sahari Murid [1981] 1 MLJ 143 (foll)
c
Huddesfield Banking Co v. Henry Lister [1892] 2 Ch 273
Isaacs v. Robertson [1985] AC 97 (refd)
Kepong Prospecting Ltd & Ors v. Schmidt [1968] 1 MLJ 170 (refd)
Khaw Poh Chhuan v. Ng Gaik Peng & Ors [1966] MLJ 761
Kinch v. Walcott [1929] AC 482 (cit)
d Lawrence v. Lord Norreys [1890] 15 App Cas 210
Low Lee Lian v. Ban Hin Lee Bank Bhd [1997] 1 MLJ 77 (cit)
Meenakshi Naidoo v. Subramaniya Sastri LR 14 IA 160 (refd)
Metropolitan Bank v. Pooley [1885] 10 App Cas 210
Mui Bank Bhd v. Cheam Kim Yu (Beh Sai Ming, Intervenor) [1992] 2 MLJ 642 (cit)
NKM Properties Sdn Bhd v. Rakyat First Merchant Bankers Bhd [1986] 1 MLJ 44
e (cit)
Overseas Chinese Banking Corp Ltd v. Simcloma Realty Sdn Bhd [1989] 1 MLJ 377
(cit)
Pembenaan KSY Sdn Bhd v. Lian Seng Properties Sdn Bhd [1991] 1 MLJ 100 (cit)
Puah Bee Hong v. Pentadbir Tanah Daerah Wilayah Persekutuan [1994] 2 MLJ 601
(cit)
f Re Overseas Aviation Engineering (GB) Ltd [1962] 3 All ER 12 (refd)
Re Shephard 43 Ch D 131
RMKRM v. Firm of MRMVL [1926] AC 761 (cit)
Sajan Singh v. Sardara Ali [1960] MLJ 52
Scotch Leasing Sdn Bhd v. Chee Pok Choy [1977] 2 MLJ 105 FC (cit)
g Superintendent of Pudu Prison v. Sim Kie Chon [1986] 1 MLJ SC 494 (cit)
Sykt Marak Jaya Sdn Bhd v. Sykt Masinda Sdn Bhd [1991] 2 MLJ 417 (cit)
Wright v. Redgrave [1879] 11 Ch D 24

Legislation referred to:

Contracts Act 1950, ss. 2(d), 14, 66
h Malay Reservations Enactment 1933, ss. 8(i), (ii), 13, 16, 17
National Land Code 1965, ss. 17, 260, 263

[Appeal from Court of Appeal, Kuala Lumpur; Civil Appeal No: N-02-679-95]

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 91

For the appellants - V Ganesalingam; M/s Krishna & Assoc a

For the respondent - JW Appukuttan; M/s Kitson Foong & Assoc

Reported by Michele Saw

JUDGMENT
b
Mohd Azmi FCJ:
The historical and factual background leading to this appeal has been fully
supplied in the other judgments of my learned brothers which I have had the
opportunity to read in draft. Suffice it is to state that the appellants at all
relevant times were the registered co-owners of a piece of Malay reservation c
land in Tampin. When their business associate, one Ismail bin Omar was in
need of a loan of RM400,000, he was required by the respondent finance
company (hereinafter referred to as ‘the respondent’ or ‘the respondent/
chargee’) to furnish security for the personal loan. To assist Ismail, the
appellants charged their land to the respondent. After the loan was approved d
and disbursed, Ismail committed a breach of the loan agreement, and
whereupon the respondent in the normal course of financing business,
foreclosed the third party security and obtained an order of sale of the property
under the National Land Code. To cut the story short, it was then discovered
that the third party charge on the Malay reservation land was null and void e
as at all material times the respondent was never specified a “Malay” under
s. 17 read together with the Second Schedule to the Malay Reservations
Enactment, and as such the dealing in the said land was illegal. Consequently,
on the application of the appellants/chargors, Mustapha Hussain J granted an
order dated 21 March 1988 (the March 1988 order) the relevant part of which
f
declared the charge of the appellants’ reserve land and as well as the order
of foreclosure by the Land Administrator invalid. The illegality of the charge
and the order of sale seem obvious enough, and understandably the respondent/
chargee did not even care to appeal, but from subsequent events it is fair to
assume that the respondent must have received legal advice to seek redress
against the appellants/chargors under the provision of s. 66 of the Contracts g
Act 1950, as a way out of its predicament, consequent upon the secured loan
becoming unsecured as a result of the third party charge being declared null
and void. Hence on the respondent’s application before the same judge, an
order was obtained dated 8 October 1990 (the October 1990 order) declaring
that the appellants/chargors had received an advantage or benefit from the h
respondent (ostensibly under the Loan Agreement) and simultaneously the
learned judge also made an order of sale of the Malay reservation land either
by public auction or by private treaty, and that the proceeds of sale be utilized
to pay the balance outstanding on the loan made to Ismail (which came to
i
 Current Law Journal
92 1998 [1998] 2 CLJ

a RM300,000) notwithstanding the invalidity of the charge and order of sale

decreed by His Lordship himself more than two years earlier, by his March
1988 order.
It was in these extraordinary circumstances whereby s. 66 of the Contracts
Act was invoked by the respondent/chargee to impose liability on the
b
appellants/chargors independently of the illegal third party charge that the
appellants were forced to apply and had obtained from Mohd. Noor Abdullah
J an order dated 22 September 1995 (the subject matter before the Court of
Appeal) to set aside the October 1990 order, on the basis that they were
entitled to the said remedy ex debito justitiae, without the need to comply
c with appeal procedure. Unfortunately, in setting aside the order of Mohd. Noor
Abdullah, J the Court of Appeal, with respect, missed completely to appreciate
the central argument on the availability of the inherent jurisdiction of the High
Court to exercise its discretion to set aside what was obviously an illegal
attempt by the respondent/chargee to subvert and effectively reverse the
d original March 1988 final and perfectly legitimate order of Mustapha Hussain,
J as a special exception to the doctrine governing the finality of court orders
notwithstanding the absence of any appeal. Relying principally on the principle
laid down by Chang Min Tat, FJ (as he then was) in the Federal Court case
of Hock Hua Bank v. Sahari b. Murid [1981] 1 MLJ 143, the reasoning of
e the Court of Appeal was purely on the basis that the High Court was funcus
officio and so it concluded that Mohd. Noor Abdullah, J had no jurisdiction
whatsoever to set aside the October 1990 order irrespective of any illegality
in the said order. In the result, the learned judges of the Court of Appeal
allowed the appeal of the respondent/chargee almost entirely on the ground
f of lack of jurisdiction, without having to consider the merits of the chargors’
appeal, in particular on the validity of invoking s. 66 Contracts Act 1950 to
the facts and circumstances of the case, which was the basis of the RM300,000
liability virtually imposed on the appellant/chargors by both parts of the
October 1990 order.
g It is of course settled law as laid down by the Federal Court in Hock Hua
Bank case that one High Court cannot set aside a final order regularly obtained
from another High Court of concurrent jurisdiction. But one special exception
to this rule (which was not in issue and therefore not discussed in Hock Hua
Bank) is where the final judgment of the High Court could be proved to be
h null and void on ground of illegality or lack of jurisdiction so as to bring the
aggrieved party within the principle laid down by a number of authorities
culminating in the Privy Council case of Isaacs v. Robertson [1985] AC 97
where Lord Diplock while rejecting the legal aspect of voidness and voidability
in the orders made by a court of unlimited jurisdiction, upheld the existence
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 93

of a category of orders of the court “... which a person affected by the order a
is entitled to apply to have set aside ex debito justitiae in the exercise of the
inherent jurisdiction of the court, without his needing to have recourse to the
rules that deal expressly with proceedings to set aside orders for irregularity,
and give to the judge a discretion as to the order he will make.
b
The Privy Council through Lord Diplock also emphasised that the courts in
England have not closed the door as to the type of defects in the final
judgment of the court that can be brought into the category that attracts ex
debito justitiae the right to have it set aside without going into the appeal
procedure, “save that specifically it includes orders that have been obtained
in breach of rules of natural justice”. Similarly, in this country the statement c
of Abdoolcader J (as he then was) in Eu Finance Berhad v. Lim Yoke Foo
[1982] 2 MLJ 37 @ 39 provides the correct guideline on the subject:
The general rule is that where an order is a nullity, an appeal is somewhat
useless as despite any decision on appeal, such an order can be successfully
d
attacked in collateral proceedings; it can be disregarded and impeached in any
proceedings, before any court or tribunal and whenever it is relied upon – in
other words, it is subject to collateral attack. In collateral proceedings the court
may declare an act that purports to bind to be non-existent. In Harkness v.
Bells’ Asbestos and Engineering Ltd. [1967] 2 QB 729, 736 Lord Diplock LJ
(now a Law Lord) said (at p. 736) that ‘it has been long laid down that where e
an order is a nullity, the person whom the order purports to affect has the
option either of ignoring it or of going to the court and asking for it to be set
aside’.

For my part, I must hasten to add that apart from breach of rules of natural
justice, in any attempt to widen the door of the inherent and discretionary f
jurisdiction of the Superior Courts to set aside an order of court ex debito
justitiae to a category of cases involving orders which contravened “any written
law”, the contravention should be one which defies a substantive statutory
prohibition so as to render the defective order null and void on ground of
illegality or lack of jurisdiction. It should not for instance be applied to a g
defect in a final order which has contravened a procedural requirement of any
written law. The discretion to invoke the inherent jurisdiction should also be
exercised judicially in exceptional cases where the defect is of such a serious
nature that there is a real need to set aside the defective order to enable the
court to do justice. In all cases the normal appeal procedure should be adopted
h
to set aside a defective order, unless the aggreived party could bring himself
within the special exception.

i
 Current Law Journal
94 1998 [1998] 2 CLJ

a In allowing the respondent/chargee’s appeal, it is obvious from the judgment

of the Court of Appeal that the learned judges had failed to direct their minds
sufficiently or at all to the fundamental issue of whether the appellants’
application before Mohd. Noor Abdullah, J came within the category of cases
that attracts ex debito justitiae. It is apparent that this issue on inherent
b jurisdiction must be within the contemplation of this court, when allowing the
appellants leave to appeal by order dated 16 April 1996, and also from the
question of law framed, viz. “whether the order of Dato’ Mustapha, J dated
21 March 1988 and 8 October 1990 (or part or parts thereof) are bad in law
by reason of breach of the Malay Reservations Enactment 1933.” It is plain
c that if the said orders were in violation of any of the statutory prohibitions
in ss. 8(i), 13 or 17 of the Enactment which have their roots in the
constitutional protection given to the Malays over reserve land created both
before and after Merdeka, then it must necessarily follow that Mohd. Noor
Abdullah, J should have the necessary inherent jurisdiction to set aside the
entire October 1990 illegal orders on the basis of ex debito jusititiae principle.
d
Such constitutional protection enshrined in art. 89 of the Federal Constitution
and given effect by the Malay Reservations Enactment ought to be strictly
applied and construed by the courts both in spirit and substance so as to give
a meaningful and effective result both objectively and purposively to the
intention of the supreme law of the Federation, and consequently the
e discretionary relief under s. 66 ought not in any event be exercised to
compensate a wrongdoer. Having properly declared in the March 1988 order
that the charge and the order of sale were null and void, it is unthinkable
that in October 1990, the same judge could turn turtle by ordering the same
land to be sold by public auction to satisfy a judgment arising out of the same
f illegal transaction purportedly under s. 66 of the Contracts Act. Clearly the
1990 order of sale of the reserve land which had the effect of an attachment
in execution of a judgment was null and void being in violation of the
prohibition imposed by s. 13 of the Malay Reservations Enactment which
provides:
g
No Malay holding shall be attached in execution of a decree or order of any
court unless the suit or proceeding in which such decree or order was made
was instituted before the commencement of this Enactment.

As adverted to earlier, it is also unfortunate that the Court of Appeal had

h denied itself of the opportunity to consider the appellants’ complaint on the
merits particularly in relation to the applicability of s. 66 to the facts and
circumstances of this case, where the appellants/chargors were not privy to
the Loan Agreement between the respondent and the borrower Ismail. Could
Mustapha Hussain, J invoke the provision of s. 66 to order repayment at
RM300,000 under the Loan Agreement which was still outstanding under the
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 95

loan given by the respondent to Ismail, and also to order the sale of the a
appellants’ Malay reservation land by public auction to satisfy the RM300,000
judgment, notwithstanding his earlier final order declaring null and void the
charge and the order of sale of the same reserve land? Obviously not. Clearly
the real effect of the October 1990 order was to reverse the earlier March
1988 order between the same parties, under the guise of a claim for a remedy b
under s. 66, which provides:
When an agreement is discovered to be void, or when a contract becomes void,
any person who has received any advantage under the agreement or contract
is bound to restore it, or to make compensation for it, to me person from whom
he received it c

It is necessary to bear in mind that s. 66 of the Contracts Act does not create
a cause of action. It only confers a discretionary remedy in the nature of
restitution to be exercised by the court within the ambit of the section and
within the principles of the law of contract. First it must be borne in mind
that the respondent/chargee had entered into two separate and distinct d
agreements with two different persons – the first with Ismail (the borrower)
and the second with the appellants/chargors (the landowners) who in
compliance with the requirement of the respondent gave a third party security
for the loan by granting the respondent a registered charge over their Malay
reservation land. From the Loan Agreement and the charge documents, the e
appellant/chargors were not a beneficiary of the loan. Neither Ismail nor the
respondent was under any contractual obligation to give any part of the loan
to the appellants, but there was evidence that Ismail did give some money
from the disbursement of the loan to the appellants. In my view, since the
appellants/chargors were not party to the Loan Agreement, s. 66 cannot be f
invoked against them. Under that section the party who is bound to restore
any advantage received or to make compensation for such advantage should
be construed as “any person” who is a party to the agreement and has received
any advantage pursuant to the terms or conditions of the invalid contract, but
not otherwise. To extend the meaning of “any person” in s. 66 to strangers g
to the agreement would be in violation of the elementary principle of contract.
Since the Loan Agreement was strictly between the respondent and Ismail, the
court had no jurisdiction to order the appellants to pay under s. 66 merely
because he had received a fraction of the loan money from Ismail. The
appellants were not a party to the Loan Agreement and as such there was no
h
question of repayment by them either by way of restitution of benefit or
compensation. As indicated earlier on s. 66 does not create a cause of action.
It provides an equitable remedy which the court can order in favour of an
innocent party against another party to an agreement who had received benefits
i
 Current Law Journal
96 1998 [1998] 2 CLJ

a under it although the agreement is found unenforceable by law. In this case

the appellants/chargors were not a party to the Loan Agreement. Their only
role was to provide security for the loan, without any right to any money
payable under the loan or the right to tell the respondent to whom or in what
manner the loan should be disbursed. In accordance with the terms of the Loan
b Agreement the whole loan of RM400,000 was in fact disbursed on the sole
instruction of Ismail, the borrower. The fact that Ismail had used the loan
money received from the respondent to pay other people including the
appellants could not make them parties or privies to the contract so as to
enable the court to bring them within the ambit of s. 66. The principle of
c tracing in the law of trust should not be applied in ordinary relationship
between a financier and its customer. It would be absurd for instance to hold
that it part of the loan had been used to settle Ismail’s grocery bills then the
grocer could be ordered to restore the money to the respondent under s. 66.
The truth of the matter is that only Ismail was a party and had received
benefits under the Loan Agreement with the respondent. In any event, the Loan
d
Agreement as distinct from the third party charge is perfectly valid and
enforceable by law. Applying the principle of severability, the effect of the
illegal charge was merely to downgrade the borrowing by Ismail from a
secured to an unsecured loan. What was discovered to be void was the charge
transaction between the appellants and the respondent, and as third party
e chargors, the appellants did not receive any “benefit” within the meaning of
s. 66, either under the charge or the loan agreement. In the circumstances,
the remedy ordered by Mustapha Hussain, J under s. 66 was invalid as it was
made without or in excess of jurisdiction. Since the judgment under s. 66 was
invalid, it follows that the order of sale of appellants’ land to satisfy the said
f judgment must equally fall to the ground, apart from being in violation of
the prohibition imposed by s. 13 of the Malay Reservations Enactment.
There could not be any dispute and indeed there was none in the courts below
that the charge created by the respondent over appellants’ Malay reservation
land was void, being in contravention of the prohibition imposed by s. 8(i)
g
of the Malay Reservation Enactment, as applicable to the State of Negeri
Sembilan. Under that provision, it is expressly enacted that “... no Malay
holding shall be transferred, charged or otherwise disposed of to any person
not being a Malay, and no memorandum of transfer, charge or lease in
contravention of this section shall be capable of registration in any Land Office
h or Registry of Titles” (except as provided in s. 8(ii), and ss. 16 and 17, none
of which is applicable in the present case). The respondent could have come
under s. 17 exception if at the relevant time the respondent company’s name
by virtue of a legal fiction, had been included and specified “a Malay” in the
Second Schedule to the Enactment, but this was admittedly not the case due
i (according to the respondent) to an alleged administrative bungling.
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 97

To summarise, Mohd. Noor Abdullah, J was correct in law in exercising the a

inherent jurisdiction of the High Court to set aside ex debito justitiae the
October 1990 order of Mustapha Hussain, J for the following reasons. The
third party charge having been lawfully declared invalid by the High Court
in 1988 by virtue of s. 8(i) of the Malay Reservations Enactment, the principal
order made in 1990 for restitution of benefits or compensation against the b
appellants which in effect was an order to enforce an invalid third party
security for repayment of loan purportedly decreed under s. 66 of the Contracts
Act 1950 was made without or in excess of jurisdiction, and in consequence
the order of sale of the appellant’s land could not be sustained. Secondly, the
sale order itself was in effect an order of execution to satisfy a judgment by c
the sale of the reservation land by public auction or private treaty (which
should be construed in the circumstances as an order of attachment in
execution of the said judgment) and therefore contravened the prohibition
imposed by s. 13 of the Malay Reservations Enactment, a legislation especially
permitted and protected by art. 89 of the Federal Constitution not only relating
d
to reservation land existing before Merdeka Day, but also in respect of new
reservation land.
If counsel in the court below had been more persuasive in the legal concept
of ex debito justitiae, I would venture to say that the Court of Appeal would
have concluded that Mohd. Noor Abdullah, J had the necessary jurisdiction e
to exercise his discretion to set aside the order of Mustapha Hussain, J dated
8 October 1990, and that the principle of functus officio, or res judicata could
not in any way defeat the inherent jurisdiction of the court to do justice in
this particular case.
For the above reasons, I was in agreement with the unanimous decision of f
this court in allowing the appeal, by setting aside the order of the Court of
Appeal, and restoring the orders granted by Mohd. Noor Abdullah, J dated
22 September 1995. My learned brothers, His Lordship the Chief Justice and
His Lordship Dato’ Wan Adnan have read this judgment in draft and have
indicated to me their agreement with the reasons contained herein for allowing g
the appeal.
Peh Swee Chin FCJ:
I have read all the written grounds of judgement since the conclusion of the
hearing of the appeal when we allowed the appeal thereat with costs and set h
aside the order of the court below. It is my misfortune and sorrow as well
that I have been unable to agree with such grounds or reasoning and perforce
with the greatest respect I have to give my point of view to which I have
also committed myself in certain earlier judgements which I have delivered.
i
 Current Law Journal
98 1998 [1998] 2 CLJ

a The appeal is the culmination of a chequered history of litigation between,

on the one hand, the appellants, who were the registered owners and chargors
of a piece of Malay reservation land and on the other hand, the respondent
which was the chargee of the same as well as a finance company. Quite a
number of orders of High Court in Seremban were made or involved, and it
b would only be necessary to set out in full three of the orders which were all
extracted already at all material times. The appellants and respondent are
hereafter called the landowners and the chargee respectively and the land is
hereafter called the said land.
The litigation started with an order of sale of the said land made on 17
c October 1986 by the Land Administrator of Tampin on the application by the
chargee for money borrowed but unpaid and secured by a charge of the said
land.
In subsequent originating summons No. 31-593 of 1986, on the application
d of the landowners, both the relevant charge and the said order of sale aforesaid
were declared null and void, inter alia, on 21 March 1988 for contravening
s. 8 of the Malay Reservation Enactment FMS Cap. 142 which prohibits charge
etc. of any Malay Reservation land to a non-Malay, and which is hereafter
called the said Enactment the order dated 21 March 1988 is set out below.
e JUDGEMENT
UPON THE APPLICATION of the 1st and 2nd Applications by way of
Originating Summons dated the 27th day of November 1986, coming on before
the Court for Judgement this day in the presence of ENCIK ZAINAL ABDUL
RAHMAN of Counsel for the 1st and 2nd Applicants and ENCIK YEOH SIK
f KEE of counsel for the 1st Respondent and in the presence of the 2nd
Respondent AND UPON HEARING Counsel for the 1st Respondent as
aforesaid AND the Honourable MR JUSTICE MUSTAPHA HUSSAIN having
ordered that Judgement be entered accordingly THIS COURT DOTH
HEREBY DECLARE that the Charge under Presentation No. 300-81 Vol. 6
Folio 85 registered at The Land Office, Tampin, over land EMR 315, Lot 342
g
Mukim Repah District of Tampin registered on the 12th October 1981 and
charged by the 1st and 2nd Applicants in favour of the 1st Respondent be and
hereby declared null and void AND HIS COURT DOTH HEREBY
FURTHER DECLARE that the Order for sale made by the 2nd Respondent
on the 17th day of October 1986 in relation to the said land be and is hereby
h declared null and void} AND IT IS ORDERED that the 2nd Respondent do
delete and cancel the said charge from the Register Document of Title} IT IS
ALSO ORDERED that the 1st and 2nd Applicants, shall jointly and or
severally render full and proper restitution to the 1st respondent of all money
and benefit received from the 1st Respondent of all money and benefit received
from the 1st Respondent AND IT IS ALSO ORDERED that pending the
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 99

restitution as aforesaid the 1st and 2nd Applicants be and are hereby restrained a
from disposing and/or dealing in any manner whatsoever with the said land
AND IT IS ALSO ORDERED that the parties be and are hereby at liberty
to apply for directions in regard to the implementation of this Judgement AND
IT IS LASTLY ORDERED THAT there shall be no order as to costs.

Dated the 21st day of March 1988 b

...

SENIOR ASSISTANT REGISTRAR

High Court, Malaya
Seremban c
There was no appeal from the order dated 21 March 1988. On 8 October 1990,
the chargee obtained a further order quantifying the sum owed by the
landowners apparently in pursuance of the restitution mentioned in the above
judgement, (and surprisingly), ordering the said land to be sold again by public
auction for the chargee to repay itself the money so owed on the void charge. d
The order dated 8 October 1990 is hereafter called the said previous order
and is set out below.
BEFORE THE HONOURABLE MR. JUSTICE MUSTAPHA HUSSAIN

HIGH COURT, SEREMBAN, NEGERI SEMBILAN e

THE 8TH DAY OF OCTOBER 1990 IN CHAMBERS

Judgement

UPON THE APPLICATION of the 1st Respondent AND UPON READING

f
the summons in Chambers dated 4th May 1989 AND UPON HEARING Mr.
S, Palakrishnan of counsel for the 1st Respondent and in the presence of
Counsel for the Applicants IT IS ORDERED that a declaration that the
Applicants have received advantage and/or benefits directly from the 1st
Respondent AND IT FURTHER ORDERED that the Applicants do jointly
and/or severally pay to the 1st Respondent the sum of $300,000.00 together g
with interest at 14% per annum on monthly rests from 31st March 1989 AND
ALTENATIVELY IT IS FURTHER ORDERED that the property identified
as Title No. EMR 315, Lot 342, Mukim Repah, Tampin, Negeri Sembilan be
sold by public Auction and/or Private Treaty AND IT IS FURTHER
ORDERED that the proceeds there from the utilised to pay the said sum of
$300,000.00 and interest AND IT IS LASTLY ORDERED that the Applicants h
do pay cost.

Dated the 8th day of October, 1990.

i
 Current Law Journal
100 1998 [1998] 2 CLJ

a ... Signed ...

SENIOR ASSISTANT
REGISTRAR
HIGH COURT
SEREMBAN

b The landowners appealed from the said previous order and the appeal was
struck out (for being incompetent) for proceeding with the appeal without
having obtained prior leave to appeal. Nothing further was heard of the appeal,
though a few years later a new proceeding was launched by the landowners
using the legal process as it were a game of chess, as it would become clear
c later.
The new proceeding was Originating Summons No. 24-110/1995, filed by the
landowners. It was beard and an order was made on 22 September 1995; the
order is set out below, and it is hereafter called the order directly concerned:

d PERINTAH

SAMAN PEMULA INI setelah dipanggil untuk perbicaraan pada 31 haribulan

Julai 1995 dengan kehadiran Encik V. Ganesalingam bagi pihak Plaintif-plaintif,
Encik J.W. Appukuttan bagi pihak Defendan Pertama dan Yang Berbahagia
Tuan Abdul Aziz bin Abdul Rahim, bagi pihak Defendan Kedua DAN
e KEMUDIAN DITANGGUHKAN kepada 22 haribulan September 1995 untuk
keputusan dengan kehadiran Encik V. Ganesalingam bagi pihak Plaintif-plaintif,
Encik J.W. Appukuttan bagi pihak Defendan Pertama dan Encik Abdul Karim
bin Al Rahman Peguam Kanan Persekutuan bagi pihak Defendan Kedua MAKA
ADALAH PADA HARI INI DIISTIHARKAN BAHAWA Perintah Mahkamah
bertarikh 8hb Oktober 1990 (di bawah Saman Pemula No: 31-593-1986) di
f mana diperintahkan bahawa tanah Plaintif-Plaintif yang dipegang di bawah
Hakmilik No: EMR 315 Lot 342, Mukim Repah, Daerah Tampin, dijual melalui
lelongan awam atau private treaty, adalah tidak sah dan batal DAN
SELANJUTNYA DIPERINTAHKAN BAHAWA Perintah bertarikh 8hb
Oktober tersebut dimana diperintahkan bahawa tanah Plaintif-plaintif tersebut
dijual melalui lelongan awam atau private treaty diketepikan DAN
g
SELANJUTNYA DIPERINTAHKAN BAHAWA Defendan Pertama dan/atau
agen-agen mereka dihalang daripada meneruskan perjualan dan pindahmilik dan
atau melupuskan tanah Plaintif-Plaintif tersebut DAN SELANJUTNYA
DIPERINTAHKAN BAHAWA Defendan Pertama menyerahkan kepada Plaintif-
Plaintif salinan asal dokumen Hakmilik tanah Plaintif-Plaintif tersebut DAN
h AKHIRNYA DIPERINTAHKAN BAHAWA kos kepada Plaintif-Plaintif

Bertarikh pada 22 haribulan September 1995.

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 101

t.t. Othman bin Yusof a

...

Timbalan Pendaftar
Mahkamah Tinggi
Seremban b
The order directly concerned set aside that part of the said previous order as
providing for the order of sale of the said land for the chargee to repay itself,
and this order of sale is therein called hereafter, the second order of sale. The
chargee appealed from this order directly concerned and the appeal was
allowed by the Court of Appeal, on the ground that the said previous order c
dated 8 October 1990 (which had been perfected before the new originating
summon was filed) could not be varied or altered except on appeal and further
the slip rule (O. 20 r. 11 RHC) did not apply either. The Court of Appeal
relied for support, substantially on the Federal Court case of Hock Hua Bank
v. Sahari bin Murid [1981] 1 MLJ 143, and held that the High Court was d
functus officio with regard to the order directly concerned and was wrong in
making it.
The effect of the Court of Appeal allowing the appeal was that the said
previous order as set out above was restored (containing as it did the order
of sale of the said land by public auction or private treaty), and the order e
directly concerned, however, was set aside.
The order directly concerned set aside the second order of sale which had
directly contravened s. 13 of the said Enactment. I was of the view that the
second order of sale should not in form be set aside as it would directly f
repudiate the relevant ratio in Hock Hua Bank v. Sahari bin Murid. Happily,
the second order of sale could be allowed to remain but execution of it should
be stayed permanently without a right of removal of such stay. It would
virtually give the same effect as if the said order directly concerned were still
extant. I will explain further my reasons for saying so by discussing a number g
of connected topics. Had a stay of execution not been possible, if I may say
in passing, the second order of sale would have to remain as part and parcel
of the said previous order of the court and being so would remain inviolate
from any attempt to set it aside.
For completeness, s. 13 of the said Enactment provides: “No Malay holding h
shall be attached in execution of a decree or order unless the suit as proceeding
in which such a decree order was made was established before the
commencement of this Enactment.”

i
 Current Law Journal
102 1998 [1998] 2 CLJ

a The question that arose immediately for me were (a) whether the High Court
could set aside its earlier order made and perfected about four years previously
in a fresh subsequent proceeding (ie, O.S. 24-110/95) from the point of view
of the perfection of the order and another point of view of res judicata; (b)
whether illegality could be a ground for doing so when it could not do so by
b virtue of what is stated in (a) above.
The appeal against the order directly concerned was heard and allowed by the
Court of Appeal on the ground of that point of view that the said previous
order having been perfected previously, it could not be amended or altered
relying on Hock Hua Bank v. Sahari bin Murid [1981] I MLJ 143, hence the
c appeal before the Federal Court.
Before dealing with the point on which the Court of Appeal relied, let me
deal briefly first with the other point of view referred to by me earlier, that
of res judicata. The doctrine of res judicata would apply and bar the making
d of the order directly concerned, because the said previous order had become
the truth between the landowners and the chargee, and the order directly
concerned would constitute a challenge to the truth or accuracy of the said
previous order. It is true that the doctrine was not expressly argued or
expressly relied on by the courts below.
e However, the High Court ought to have also dismissed the fresh subsequent
proceeding in which the order directly concerned was made by still exercising
its inherent jurisdiction by relying on the said doctrine even though it was
not pleaded by any of the parties, see Superintendent of Pudu Prison v. Sim
Kie Chon [1986] 1 MLJ SC 494, 498; Asian Commercial Finance (M) Bhd.
f v. Kawal Teliti Sdn. Bhd. [1955] 3 MLJ 189, 202, FC and Scotch Leasing
Sdn. Bhd. v. Chee Pok Choy [1977] 2 MLJ 105 FC.
Reverting to the point relied on by the Court of Appeal, that of the perfected
order not being capable of being amended or altered except for certain
exceptions as stated in Hock Hua Bank supra, a passage therefrom as quoted
g
by the Court of Appeal is set out as follows:
Clearly the court has no power under any application in the same action to
alter, vary or set aside a judgement regularly obtained after it is drawn up
receipt under the slip rule in O. 28 r. 11 of the Rules of Supreme Court 1957
(O. 20 r. 11 of the Rules of High Court 1980) so far as necessary to correct
h
errors in expressing the intention of the court: Re. St Nazarie Co., Kelsey v.
Doune; Hession v. Jones, unless it is a judgement by default or made in the
absence of a party at the trial or hearing. But if a judgement or order has been
obtained by fraud or where further evidence which could not possibly have
been adduced at the original hearing is forthcoming, a fresh action will lie to
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 103

inipeach the original judgement: Hip Foong Hong c. Neotia & Co., & Jonesco a
v. Beard. The hearing of the action will in a proper case be expedited: Smith
v. Peizer.

When a judgement in High Court has been perfected in the manner described
in the above passage, a party to the judgement generally and subject to the
same passage, or any other written law, and apart from any appeal, cannot b
re-open the matter finalised in the judgement by seeking to alter it or amend
it for the court would be functus officio by virtue of the ratio of Hock Hua
Bank v. Sahari bin Murid. Once perfected, a judgement of the High Court is
also entitled to the obedience and respect from the parties to it on the basis
of a command from a superior Court of unlimited civil jurisdiction in the c
course of contentious litigation, see Issac v. Robertson [1985] AC 97;
Pembenaan KSY Sdn. Bhd. v. Lian Seng Properties Sdn. Bhd. [1991] 1 MLJ
100. Puah Bee Hong v. Pentadbir Tanah Daerah Wilayah Persekutuan [1994]
2 MLJ 601. It is elementary that a superior court is not any inferior court or
statutory tribunal, (such as a Land Administrator under the National Land Code d
as in Eu Finance Bhd. v. Loke Yoke Fou [1982] 2 MLJ 37). It is also long
established that one can apply to set aside an order of a superior court only
in direct proceedings filed for the very purpose of having it set aside or valid
grounds, but without doing so, one cannot attack its invalidity laterally by
raising an objection to its invalidity in any other proceedings, without filing e
proceedings for applying to have it set aside first.
When one wishes to file such proceedings to so set it aside, one must do so
within the same proceedings or action in which the same order was obtained
and not in a separate fresh proceeding or new action on any ground other than
those mentioned in the quoted passage from Hock Hua Bank v. Sahari bin f
Murid, and as mentioned later in this judgement in connection with a consent
judgement.
What has been sought or felt in the appeal was that on account of s. 13 of
the said Enactment, that the said second order of sale of the said land should
g
be done without. This however should not be achieved in form of setting it
aside directly as it was part of the said previous order, for amputating the
second order of sale of the said land in this matter would be contrary to the
ratio of Hock Hua Bank v. Sahari bin Murid supra.
The Hock Hua Bank case, if I may say with respect, is a classic for its h
incontestable precedent-wise correctness, clarity and untedious precis. Its ratio
was followed by Supreme Court in Mui Bank Bhd. v. Cheam Kim Yu (Beh
Sai Ming, Intervenor) [1992] 2 MLJ 642 (SC); Scotch Leasing Sdn. Bhd. v.

i
 Current Law Journal
104 1998 [1998] 2 CLJ

a Chee Pok Choy and Anor [1997] 2 MLJ 105 (SC); Overseas Chinese Banking
Corporation Ltd. v. Simcloma Realty Sdn. Bhd. [1989] 1 MLJ 377; Syarikat
Marak Jaya Sdn. Bhd. v. Syarikat Masinda Sdn. Bhd [1991] 2 MLJ 417. The
English parentage of Hock Hua Bank v. Sahari bin Murid is Ainsworth v.
Wilding [1896] 1 Ch. 673 which was approved and adopted in two Privy
b Council cases, viz. Firm of R.M.K.R.M. v. Firm of M.R.M.V.L. [1926] AC 761,
and Kinch v. Walcott [1929] AC 482.
I now deal with illegality as a ground for setting aside a previously perfected
order (ie, the said previous order) made in another action by filing a fresh
action or proceeding out of time of an appeal against the said previous order.
c It will be remembered the second order of sale of the said land was set aside
by all other members of the Federal Court on ground of illegality because of
s. 13 of the said Enactment.
It is true that the Federal Court in Hock Hua Bank v. Sahari bin Murid did
d say that a judgement could be set aside or impeached in a subsequent fresh
action on the ground that such judgement was obtained eg, by fraud. Would
it follow that if fraud in obtaining a judgement is sufficient as a ground, a
fortiori, illegality touching a judgement would also suffice similarly for setting
it aside? My answer to this is negative. Now, the case of Hock Hua Bank v.
Sahari bin Murid does not mention such a ground of illegality. It will be noted
e
that the judgement in the cited case was not a consent judgement. Consent
judgement or consent order can next be considered to find out if among the
available and established grounds that obtain for the purpose of setting aside
such consent judgement or consent order, the ground of illegality is among
such grounds.
f
The grounds referred to for setting aside a consent order of a judgement by
consent are grounds which basically relate to consensus ad idem or the free
consent of parties to a binding agreement or contract. It is elementary that if
it is proved that there are grounds which vitiate such free consent, the
g agreement is not binding. Now a consent order or a judgement by consent is
undoubtedly based on an agreement of both parties where consent to the
agreement must or should have been free in the first place. If the agreement
upon which a consent order or judgement by consent is based, is vitiated by
any ground recognized in equity as vitiating such free consent, such as fraud,
mistake, total failure of consideration, (see Huddesfield Banking Co. v. Henry
h
Lister [1895] 2 Ch. 273 and the cases cited therein), then such a perfected
consent order or judgement by consent could be set aside in a fresh action
filed for the purpose. Grounds which would vitiate such free consent should
also include misrepresentation, coercion, and undue influence and other grounds
in equity.
i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 105

In a similar vein, s. 14 of our Contracts Act 1950 speaks of the same grounds a
which make the consent to an agreement unfree. Thus illegality of contract is
not a ground for making such consent unfree, thus grounds for setting aside
a consent order or judgement by consent also do not include illegality, also.
Illegality on the other hand, affects a contract mostly in the way in that it
b
nullifies the consideration or object of a contract and is available as a defence
to an action based upon such a contract, that is all.
If a party complains of an illegality in a contract eg, when the consideration
or object of the agreement is forbidden by statute and therefore unlawful, he
must plead it or the court itself takes judicial notice of it when the contract c
is ex facie illegal or evidence about it clearly emerges in court. All these
presupposedly must take place and must have taken place either at the trial
of the first instance, or in any direct appeal to a higher court therefrom as
the case may be. The court if it did not deal with the illegality in any way
aforesaid, would be functus officio and cannot take the point after a judgement d
is perfected, the point not being one of the exceptions covered by eg, the ratio
of Hock Hua Bank v. Sahari bin Murid. Further a point of illegality could
not be reserved by a litigant for future use without deploying it at the trial or
in an appeal therefrom. A court, cannot outside the scope of such trial and
such appeal therefrom, at any time thereafter take judicial notice of such point
e
pleaded as an afterthought in a later action filed also as an afterthought. The
doctrine of res judicata, it having been based inter alia also on the high policy
of interest rei publicae ut finis litium, would prevent these afterthoughts, see
Asia Commercial Finance (M) Bhd. v. Kawal Teliti Sdn. Bhd. [1995] 3 MLJ
189 and Scotch Leasing Sdn. Bhd. (In receiverships) v. Chee Pok Choy and
Anors, supra. f

Let me demonstrate my position by way of illustration by referring to the well-

known Privy Council case of Sajan Singh v. Sardara Ali [1960] MLJ 52, being
an appeal from Malaya. In that case, Sajan Singh, the registered owner of a
lorry used for hire or reward covered by a haulage permit issued to his name, g
sold the lorry to Sardara Ali who thereafter carried on the business of running
the lorry for hire or reward on his own account entirely using the haulage
permit of Sajan Singh and keeping up the pretence that it was the business
of Sajan Singh by paying income tax on profit from the lorry business in Sajan
Singh’s name. Both parties then fell out; Sajan Singh seized the lorry and
h
Sardara Ali sued for and succeeded ultimately in recovering possession of the
lorry. Sardara Ali had been the virtual assignee or transferee of the Sajan
Singh’s haulage permit and therefore, was involved in the illegality of contract
as any transfer or assignment of a haulage permit was prohibited by the then
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 Current Law Journal
106 1998 [1998] 2 CLJ

a relevant road transport legislation. The Privy Council, per Lord Denning’s
judgement held that since the illegal contract was fully carried out, it was
effective to pass the property in the lorry to Sardara Ali and the court had
no power to confiscate the lorry for illegality stating: “Let the estate lie where
it falls”.
b
I would like to ask, with respect, a rhetorical question: “Could Sajan Singh,
having lost his case, file a fresh action or proceeding in the High Court to
set aside wholly or in part the judgement of court on the ground that the
judgement was illegal by statute?”

c Save for some special factor in this case which compelled me to part company
with the Court of Appeal, the Court of Appeal was, with great respect, very
properly relying on the Hock Hua Bank v. Sahari bin Murid.
Whatever the labels used, the second order of sale was in substance and in
truth the same as the order of sale of the said land which was set aside by
d the same court in the same originating summons shortly before the said
previous order was made, notwithstanding the additional bit of alternative
method of sale by “private treaty” in addition to public auction. The same
land was involved; there was the same purpose of the sale order for recovering
the money due under the abortive charge. The second order of sale was a
e resuscitation of the order of sale of the said land under the thinnest disguise
which the same court had set aside earlier by its judgement given on 21 March
1988 in the same originating summons. The resuscitation in my view had the
effect of invalidating or subverting the said judgement dated 21 March 1988
given on account of the said section Enactment after hearing arguments and
f from which none of the parties had appealed.
In my view, with respect to all parties concerned, such resuscitation in these
circumstances was an abuse of process of the kind for which this court ought
not to fold its arms and do nothing about it.
g I had considered and decided that the clear ratio in the Hock Hua Bank case
ought, on no account, to be departed from for dealing with this most
unsatisfactory situation even though we were persuaded to do so on the ground
of illegality on the argument based on the said Enactment. In other words,
the said previous order should not be reopened and heard again on merits vide
h the ratio of Hock Hua Bank v. Sahari bin Murid after it was perfected and
also on the ground of res judicata in any event. The second order of sale
had to be got rid of, but only if there was some other legal basis for doing
so. There was happily such a basis as follows.

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 107

The said relevant part of the said previous order as comprising the second a
order of sale was treated by all parties in this appeal tacitly on the assumption
that it was an order of execution thereby infringing the said s. 13 of the said
Enactment. The assumption was entirely correct. It was an order of execution
(which includes a writ of seizure and sale) stated unfortunately in the form
of and as part of a court’s order ie, the said previous order. b
An order of execution is also a proceeding, and if necessary, the case of
Wright v. Redgrave [1879] 11 Ch. D 24 is authority for it. The reason for
saying so will become clear in a moment or two later. An order of execution
may be carried out at the instance of a judgement creditor normally within
six years after the date of order as judgement for payment of money and c
thereafter leave would be required for so carrying it out after the six years’
period. The second originating summons, in which the said order presently
concerned was made, was filed well within the six years from the date of the
said previous order. Any judgement debtor if dissatisfied could have been
entitled to file similarly an application within such time frame to set aside or d
stay any order of execution or writ of seizure and sale. The court which makes
an order since perfected is functus officio about re-opening the matter and
rehearing the parties on merits about the order, but it is not functus officio to
hear a subsequent application to set aside an order of execution or order of
seizure and sale. e

Normally, the landowners would have been perfectly in order to set aside such
an order of execution but for the fact that the said order of execution which
was made was part of a perfected court’s order, ie, of the said previous order.
But if the court could not grant an order outright in the form of setting aside
the said order of execution because it was part of a perfected order and also f
because it was res judicata, then the court could still otherwise grant a relief
or order which could be consistent with any prayer sought by the second
originating summons, see the case of Khaw Poh Chhuan v. Ng Gaik Peng
and Ors [1966] MLJ 761 at p. 785. The court could therefore grant a stay of
the said order of execution – a relief consistent with the prayer of the second g
originating summons if the court had the inherent jurisdiction to do so.
On the question of such inherent jurisdiction, first there is the inherent
jurisdiction to stay any proceeding, (which includes an order of execution),
which is an abuse of process; see for instance Metropolitan Bank v. Pooley
h
[1885] 10 App. Cas. 210; Lawrence v. Lord Norreys [1890] 15 App. Cas. 210
and in the letter, Lord Herschell said it ought to be sparingly exercised and
only in very exceptional cases. Lord Blackburn in Metropolitan Bank, supra,
said that on the other hand, a stay or even dismissal of proceeding may “often
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 Current Law Journal
108 1998 [1998] 2 CLJ

a be required by the very essence of justice to be done.” Thus the inherent

jurisdiction to stay any proceeding which is an abuse of process exists
undoubtedly. Was the second order of sale ie, the order of execution an abuse
of process? It was for the resuscitation of the earlier order of sale for reasons
stated earlier was a misuse of court’s machinery and was therefore an abuse
b of process. I therefore decided that the relevant part of the said previous order
ie, the second order of sale ought be stayed permanently.
My decision would appear however to be unusual and could even give rise
to some misgiving about the propriety about such consequential order not made
by other members of the court. This court however, or any member of this
c court could make any additional consequential order and if any precedent is
ever required, one can draw a parallel between such further consequential order
of mine and the case of Daimler Company Ltd. v. Continental Tyre and Rubber
Company (Great Britain) Ltd. [1916] 2 AC 307.

d In that case, in answer to an application for summary judgement under O. 14

the defendants, inter alia, alleged that the action was commenced without the
authority of the plaintiff. The Master disagreed and granted such summary
judgement. The Master’s order was confirmed on appeal by the judge in
chambers and further by Court of Appeal. On further appeal to the House of
Lords, the Law Lords were unanimous that the appeal should be allowed on
e
the ground of so commencing action without authority. Earl of Halsbury alone
held (merely) that appeal should be allowed. That would have meant by
necessary implication, that the summary judgement was set aside and
unconditional leave to defend was granted. Lord Parker, in allowing the appeal,
appears to make a different consequential order in exercising of an inherent
f jurisdiction to curb an abuse of process by ordering further that the whole
action be struck out and all orders therein discharged. Viscount Mersey, Lord
Kinnear, Lord Atkinson, Lord Shaw and Lord Parmoor all agreed to the order
proposed by Lord Parker. Lord Parker’s proposal of course, carried the day.

g I therefore also allowed the appeal with costs and set aside the order of the
Court of Appeal below, making a further order that the said order directly
concerned be substituted with another order to the effect that execution of the
second order of sale contained in the said previous order be stayed permanently
without any right of removal of such stay.
h

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 109

Gopal Sri Ram JCA: a

This appeal raises a short but important point of principle. It has to do with
the scope and extent of the protection given by the Malay Reservation
Enactment (‘the Enactment’). The matter arose in this way.
The appellants are the registered proprietors of all that land held under EMR b
315, for Lot No. 342 in the Mukim of Repah Tampin, Negeri Sembilan (‘the
said land’). They entered into a joint venture agreement with one Ismail bin
Omar for the purpose of developing the said land into a housing estate.
Ismail was in need of funds. The appellants were prepared to assist him. They
c
charged the said land to the respondent to secure a loan advanced to Ismail.
The charge was duly registered. There was an annexure to the charge, cl. 1(1)
of which reads as follows:
1. In consideration of the Chargee having agreed to lend to Ismail bin Omar
(hereinafter called the ‘Borrower’) an amount of Dollars Four Hundred d
Thousand (M$400,000) only the Chargors undertake that he will pay on
demand to the Chargee:-

(1) the said sum of Dollars Four Hundred Thousand (M$400,000) only
(hereinafter referred to ‘the Loan’ which expression shall include
wherever the context so permits any balance or part thereof) together e
with interest thereon at the rate of Fourteen per centum (14%) per
annum on yearly rest (hereinafter referred to as the ‘Prescribed Rate’
which expression shall include where and when applicable such other
rate as may from time to time be substituted therefor in the manner
hereinafter provided) AND until demand as aforesaid to ensure that
the Borrower repay the Loan and interest thereon at the Prescribed f
Rate within Thirty Six (36) calendar months (hereinafter referred to
as the ‘Repayment Period’) from the date following part or full
disbursement of the Loan or advanced or paid to on behalf or for
the benefit of the Chargors (or on such other date as the Chargee
may stipulate).
g
Such a charge as was created by the appellants in favour of the respondents
is called a third party charge because the chargee is not the borrower but a
third party. The chargor’s security is liable to foreclosure only when the
borrower makes default on the principal contract he has with the lender. It is
akin to a secured guarantee, but with important differences. See, Low Lee Lian h
v. Ban Hin Lee Bank Bhd. [1997] 1 MLJ 77; NKM Properties Sdn. Bhd. v.
Rakyat First Merchant Bankers Bhd. [1986] 1 MLJ 44.

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 Current Law Journal
110 1998 [1998] 2 CLJ

a In the present case the appellants, as chargors, agreed to pay to the respondent,
on demand, the loan made to Ismail and interest thereon. They also agreed
to ensure that Ismail would pay the loan and interest within thirty-six months.
If Ismail defaulted, they would, on demand being made on them, be liable to
make payment. In my judgment, the appellants were, according to the language
b of the annexure read as a whole, in the position of secured guarantors.
The respondent, on the strength of the appellants’ charge; lent RM400,000 to
Ismail. It is common ground between the parties that the respondent disbursed
no part of this sum to the appellants. It was, however, established that the
appellants received from Ismail part of the loan he obtained from the
c respondent. But this fact is neither here nor there. Once the respondent
disbursed the loan to Ismail, the money was his and it was up to him what
he chose to do with it. And the fact that he paid over to the appellants, part
of the loan he had obtained from the respondent did not make the appellants
parties to the original contract of loan that Ismail had with the respondent.
d For, there were two separate and distinct contracts. The first was the contract
of loan between Ismail and the respondent. The second was the contract
between the appellants and the respondent contained in the annexure to the
charge. The importance of this aspect of the case may be seen later in this
judgment.
e
At the date of the creation of the charge, the respondent had not been included
in the Schedule to the Enactment. It was not, therefore, a Malay for the
purposes of the Enactment. The charge was consequently a dealing prohibited
by the Enactment. In accordance with a long line of uncontroverted authority
it was illegal and utterly void. See, Haji Hamid bin Ariffin & Anor v. Ahmad
f bin Mahmud [1976] 2 MLJ 79.
Ismail did not repay the loan in full. There was RM300,000 still owing to
the respondent. The respondent wanted to recover this sum and outstanding
interest. It therefore enforced the charge. Because the said land was held under
g a Mukim Register, the respondent went before the Land Administrator and
obtained an order for sale. The appellants then applied to the High Court at
Seremban for a declaration that the charge as well as the order for sale made
by the Land Administrator were invalid. On 21 March 1988 the High Court
granted the declarations sought and, as a consequential measure, directed the
cancellation of the charge in question. Had matters rested there, no difficulty
h
would have arisen.

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 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 111

But the judge who heard the cause went further. He acted upon the a
respondent’s summons filed in the same proceedings and made an order, inter
alia, directing the appellants to repay all monies lent to Ismail. For
convenience I shall refer to this as “the first order”.
On 8 October 1990, the learned judge made another order (‘the second order”)
b
whereby he granted a declaration that the appellants had received an advantage
or benefit directly from the respondent. He also ordered that the said land be
sold by public auction or by private treaty and that the proceeds of the sale
be used to pay the balance outstanding on the loan made to Ismail. The instant
appellants were dissatisfied with this decision. They appealed against it to the
Supreme Court. But their appeal was dismissed because it was procedurally c
defective.
The appellants then commenced proceedings afresh to have the order of
8 October 1990 declared null and void and to have it set aside on the ground
that it contravened s. 13 of the Enactment. The matter came before Mohd. d
Noor Abdullah J. He was not the judge who had made the earlier orders. After
hearing argument, he granted the declaration sought and set aside the impugned
order. The respondent then appealed to the Court of Appeal (Shaik Daud, NH
Chan, Abu Mansor JJCA) which allowed the appeal. The appellants then
moved this court for leave to appeal. This court granted leave limited to only
e
one issue, namely whether the first and second orders or any part thereof are
invalid because they were made in contravention of ss. 13 and 17 of the
Enactment.
So much for the factual background.
f
In the proceedings before Mohd. Noor Abdullah J, the respondent argued that
res judicata and estoppel precluded the appellants from questioning the validity
of the second order. The learned judge, however, rejected this argument
principally on the ground that it would be unjust to estop the appellants from
challenging the second order by reference to res judicata or any other branch
g
of the doctrine of estoppel because the impugned order was plainly invalid:
it having been made in contravention of an express provision of written law.
The Court of Appeal, without considering the merits of the reasoning advanced
by the learned judge, reversed him on the sole ground that the High Court
was functus officio and had no power to re-open the matter. Shaik Daud JCA h
(with whom the other members of the court agreed), when delivering the
leading judgment of the court said:

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 Current Law Journal
112 1998 [1998] 2 CLJ

a It is settled law that one High Court cannot set aside a final order of another
High Court, let alone its own final order. It is our view that the Seremban
High Court having rightly or wrongly given 8 October 1990 order, is functus
officio, and it cannot set its own order aside. In Hock Hua Bank Bhd. v. Sahari
bin Munid [1981] 1 MLJ 143, the learned judge had made an order for sale
in a foreclosure proceeding. The order was made after hearing all the parties
b and was made despite a claim of non est factum and allegations of fraud and
forgery by the respondent. There was no appeal against that order. The
respondent applied to set aside the judgment which at first was refused but on
a second application it was allowed. On appeal the then Federal Court held
that the learned judge was functus officio. At p. 144 of the judgment Chang
Min Tat FJ (as he then was) who delivered the judgment held:
c
Clearly the Court has no power under any application in the same action
to alter vary or set aside a judgment regularly obtained after it is drawn
up, except under the slip rule in O. 28 r. 11 Rules of the Supreme Court
1957 (O. 20 r. 11 Rules of the High Court 1980) so far as necessary
to correct errors in expressing the intention of the Court.
d
Clearly the order of 8 October 1990 is a final order of the Seremban High
Court. Therefore that order cannot be altered varied or set aside by the same
court even though presided over by another judge. Nor does it come under
the provision of O. 20 r. 11 of the Rules of the High Court 1980. The only
recourse is to appeal to a higher court which has jurisdiction to pronounce the
e
validity or otherwise of 8 October 1990 order. Therefore we feel that with
respect Dato’ Mohd. Noor b. Haji Abdullah J ought not to have entertained
the respondent’s application.

The view expressed by the Court of Appeal makes it necessary and desirable,
f before going into the merits of the argument advanced in favour of striking
down the first and second orders, to address and determine the jurisdictional
question. If, as held by that court, there is no power in a court to set aside
its orders, though made in contravention of the express provisions of a statute,
then, I must fold my arms in abject submission, allow the orders to stand and
let the illegality persist. But I do not perceive the law to intend such a result.
g
It is true, as a general rule, that orders of a court of unlimited jurisdiction
may not be impugned on the ground that they are void in the sense that they
may be ignored or disobeyed. The decision of the Judicial Committee of the
Privy Council in Isaacs v. Robertson [1985] AC 97 affirms the existence of
h the rule. There, Lord Diplock when delivering the advice of the Board said:
Their Lordships would, however, take this opportunity to point out that in
relation to orders of a court of unlimited jurisdiction it is misleading to seek
to draw distinctions between orders that are ‘void’ in the sense that they can
be ignored with impunity by those persons to whom they are addressed, and
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 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 113

orders that are ‘voidable’ and may be enforced unless and until they are set a
aside. Dicta that refer to the possibility of there being such a distinction
between orders to which the descriptions ‘void’ and ‘voidable’ respectively have
been applied can be found in the opinions given by the Judicial Committee of
the Privy Council in the appeals Marsh v. Marsh [1945] AC 271 at p. 284
and MacFoy v. United Africa Co Ltd. [1962] AC 152 at p. 160; but in neither
of those appeals nor in any other case to which counsel has been able to refer b
their Lordships has any order of a court of unlimited jurisdiction been held to
fall into a category of court orders that can simply be ignored because they
are void ipso facto without there being any need for proceedings to have them
set aside. The cases that are referred to in these dicta do not support the
proposition that there is any category of orders of a court of unlimited
c
jurisdiction of this kind; what they do support is the quite different proposition
that there is a category of orders of such a court which a person affected by
the order is entitled to apply to have set aside ex debito justitiae in the exercise
of the inherent jurisdiction of the court without his needing to have recourse
to the rules that deal expressly with proceedings to set aside orders for
irregularity and give to the judge a discretion as to the order he will make. d
The judges in the cases that have drawn the distinction between the two types
of orders have cautiously refrained from seeking to lay down a comprehensive
definition of defects that bring an order into the category that attracts ex debito
justitiae the right to have it set aside, save that specifically it includes orders
that have been obtained in breach of rules of natural justice.
e
The contrasting legal concepts of voidnesss and voidability form part of the
English law of contract. They are inapplicable to orders made by a court of
unlimited jurisdiction in the course of contentious litigation. Such an order is
either irregular or regular. If it is irregular, it can be set aside by the court
that made it upon application to that court; if it is regular, it can only be set
aside by an appellate court upon appeal if there is one to which an appeal f
lies.

It is one thing to say that an order of a court of unlimited jurisdiction must

be obeyed until it is set aside. It is quite a different thing to say that a court
of unlimited jurisdiction may make orders in breach of written law. Isaacs v.
g
Robertson is certainly not authority for the latter proposition. I take it to be
well settled that even courts of unlimited jurisdiction have no authority to act
in contravention of written law. Of course, so long as an order of a court of
unlimited jurisdiction stands, irregular though it may be, it must be respected.
But where an order of such a court is made in breach of statute, it is made
without jurisdiction and may therefore be declared void and set aside in h
proceedings brought for that purpose. It is then entirely open to the court, upon
the illegality being clearly shown, to grant a declaration to the effect that
the order is invalid and to have it set aside. It is wrong to assume that such
an order may only be corrected on appeal.
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 Current Law Journal
114 1998 [1998] 2 CLJ

a As Abdoolcader J observed when delivering the judgment of the former Federal

Court in Eu Finance Berhad v. Lim Yoke Foo [1982] 2 MLJ 37, 39:
The general rule is that where an order is a nullity, an appeal is somewhat
useless as despite any decision on appeal, such an order can be successfully
attacked in collateral proceedings; it can be disregarded and impeached in any
b proceedings, before any court or tribunal and whenever it is relied upon – in
other words, it is subject to collateral attack. In collateral proceedings the court
may declare an act that purports to bind to be non-existent. In Harkness v.
Bell’s Asbestos and Engineering Ltd [1967] 2 QB 729, Lord Diplock LJ (now
a Law Lord) said (at p. 736) that ‘it has been long laid down that where an
order is a nullity, the person whom the order purports to affect has the option
c
either of ignoring it or of going to the court and asking for it to be set aside’.

There are several authorities that deal with the validity of orders made in
excess of jurisdiction by a court of unlimited jurisdiction and I find it sufficient
to refer to two of them. The first is the decision of the Privy Council in
d Meenakshi Naidoo v. Subramaniya Sastri LR 14 IA 160 which concerned a
case where the High Court at Madras purported to entertain an appeal against
the decision of a District Judge which was not appealable. At the hearing
before the High Court, neither the parties nor the court raised the question of
jurisdiction. The High Court then reversed the District Judge. On appeal to
e
the Privy Council it was held that consent or waiver could not cure the absence
of jurisdiction. Sir Richard Baggallay, when delivering the advice of the Board
said (at p. 166):
It has been suggested, and it is not right altogether to pass that suggestion over,
that, by reason of the course pursued by the present appellants in the High
f Court, they have waived the right which they might otherwise have had to raise
the question of want of jurisdiction. But this view appears to their Lordships
to be untenable. No amount of consent under such circumstances could confer
jurisdiction where no jurisdiction exists. Upon this point it may be convenient
to refer to the judgment of their Lordships delivered by Lord Watson in the
comparatively recent case of Ledgard v. Bull LR 13 IA 144, as it in very
g concise terms deals with the circumstances under which there can be a waiver
of a right to complain of a want of jurisdiction. Their Lordships say: ‘The
defendant pleads that there was no jurisdiction in respect that the suit was
instituted before a court incompetent to entertain it; and that the order of
transference was also incompetently made. The District Judge was perfectly
competent to entertain and try the suit if it were competently brought; and their
h Lordships do not doubt that in such a case a defendant may be barred by his
own conduct from objecting to irregularities in the institution of the suit. When
the judge has no inherent jurisdiction over the subject-matter of a suit, the
parties cannot by their mutual consent convert it into a proper judicial process,
although they may constitute the judge their arbitrator, and be bound by his
i decision on the merits when these are submitted to him. But there are numerous
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 115

authorities which establish that when, in a cause which the judge is competent a
to try, the parties without objection join issue, and go to trial upon the merits,
the defendant cannot subsequently dispute his jurisdiction upon the ground that
there were irregularities in the initial procedure which, if objected to at the
time, would have led to the dismissal of the suit. In the present case there
was an inherent incompetency in the High Court to deal with the question
brought before it, and no consent could have conferred upon the High Court b
that jurisdiction which it never possessed.

The second authority is Chief Kofi Forfie v. Barima Kwabena Seifah of which
there is a note in [1958] 1 All ER 289. It is also a decision of the Judicial
Committee, on an appeal from Ghana. Mr. L.M.D. De Silva when delivering
c
the advice of the board is reported to have said (at p. 290) as follows:
A court had inherent power to set aside a judgment which it had delivered
without jurisdiction. Lord Greene, MR, in Craig v. Kanssen [1943] 1 All ER
108 at p. 113), after referring to several decisions, had said:
d
Those cases appear to me to establish that an order which can properly
be described as a nullity is something which the person affected by it
is entitled ex debito justitiae to have set aside. So far as the procedure
for having it set aside is concerned, it seems to me that the court in its
inherent jurisdiction can set aside its own order; and that an appeal from
the order is not necessary. e
Their Lordships were of the same opinion. Assuming that the judge had no
power on 29 June 1949, to review his judgment of 10 May 1949, he
nevertheless had power to declare it a nullity and proceed to give a fresh
judgment. This, in fact, he had done, and the only criticism of the proceedings
of 29 June that could be made was that, on a question of procedure, he f
attributed the authority to do the thing he did to a source from which it did
not flow. But, although the source named was, on the assumption made,
incorrect, he undoubtedly had power to do the thing he had done. No other
error could be said to have been committed. Such an error did not, in their
Lordships’ opinion, vitiate the act done. It followed that the judgment of 29
June 1949, was not a nullity. g

I must pause now to mention the decision of the Supreme Court in Scotch
Leasing Sdn. Bhd. v. Chee Pok Choy & Ors [1997] 2 MLJ 105. In that case,
the respondent, the registered proprietor of land held under Land Office title,
created a charge over it in the appellant’s favour. The appellant commenced
h
proceedings by originating summons in the High Court for an order for sale
of the land in question. The High Court heard the summons inter partes and
granted the appellant an order for sale. That order was perfected. Now, ss.
260 to 263 of the National Land Code 1965 confer exclusive jurisdiction upon

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 Current Law Journal
116 1998 [1998] 2 CLJ

a a Land Administrator to make an order for sale of any land held under Land
Office title. So, in truth, the High Court had no jurisdiction to make the order
in question. The respondent did not, however, take the point during the hearing
of the appellant’s summons. Some nine months later, the respondent applied
to set aside the order for sale on the ground that the High Court plainly lacked
b jurisdiction. The judge agreed with jurisdictional argument and set aside his
earlier order. On appeal, the Supreme Court reversed his decision, observing,
inter alia, as follows (at p. 110):
To allow the learned judge in the court below to reopen the matter nine months
after it was decided by himself (and for that matter, any other judge), a court
c would have to allow, equally, another judge exercising a co-ordinate jurisdiction
to set it aside on the same jurisdiction point after, say, 20 years, in the same
case, for food for a goose is also food for a gander. This would bring absolute
chaos to our judicial system which does not carry on in such fanciful way as
contended by learned counsel for the chargors.

d Such chaotic condition is prevented by several things.

First, a jurisdiction point is no less an issue than other issues in civil litigation.
If not raised at the hearing in the court of first instance or on appeal, it cannot
be raised thereafter, for the doctrine of res judicata sets in.

e Res judicata has been explained before, eg see Asia Commercial Finance (M)
Bhd v. Kawal Teliti Sdn Bhd [1995] 3 MLJ 189 (SC).

When the jurisdiction point in question was not raised before the learned judge
before he made the first order, when he heard the matter inter parties, or at
any rate, if it was not raised for review before the said order was perfected,
f the requirements of a proceeding in an adversarial system were complied with
and satisfied, unless the learned judge exceptionally took the jurisdiction point
on his own initiative, if he so minded, before the said order of sale was made.
We mentioned the adversarial system because in it, a court generally would
leave it to the parties in litigation to conduct their respective cases as best as
they could without interference.
g
It is to be remembered in this connection that a superior court like the High
Court is ‘a court of unlimited jurisdiction in the course of contentious litigation’
as stated by Lord Diplock in Isaacs v. Robertson [1984] 3 All LR 140 at p.
143, when referring to a High Court as such a court in connection with the
requirement that a High Courts order must be obeyed and could only be
h challenged in a direct application to set it aside. This was followed by the
Supreme Court in Puah Bee Hong Anor v. Pentadbir Tanah Daerah Wilayah
Persekutuan Kuala Lumpur Anor (Teo Keng Tuan Robert, Intervener) and
Another Appeal [1994] 2 MLJ 601 (SC).

i
 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 117

We may add that under s. 114(e) of the Evidence Act 1950, one can presume a
that the High Court has such attributed jurisdiction unless rebutted. We say
this in connection with our description of such a jurisdiction point as being
ordinarily an issue in litigation.

If the learned judge had no jurisdiction on 17 September 1992 to hear the

application dated 8 June 1992 to set aside the first order, the application to b
set aside could not have been entertained by the court in the first place. Thus,
any legal argument in support of such application to set aside – should it
proceed – ex necessitate could not have been entertainable, lying, as it did,
outside the threshold of the court.

As a necessary consequence, this appeal is not properly before us – it being c

an appeal from an order made at a hearing which was an exercise in futility.

I am, with respect, unable to agree with this observation since it conflicts with
well-settled principles enunciated in the two Privy Council cases earlier cited.
It is therefore my very respectful view that the decision in Scotch Leasing is
wrong. d

It is therefore clear, in light of the principles established by high authority,

that a court of unlimited jurisdiction, even in the absence of an express
enabling provision, has inherent power to set aside its orders made in breach
of written law. The ends of justice will not be met if such a power did not e
exist. And the procedural branch of the broad and flexible doctrine of estoppel
known as res judicata finds no place in such a circumstance. Neither has the
functus officio theory, which, upon close examination is merely part and parcel
of the doctrine of res judicata, any role to play in the case.
It follows from what I have said thus far upon the topic under discussion that f
Mohd. Noor Abdullah J had ample power and jurisdiction to grant the
declaration in question and to set aside the order made by his predecessor.
The Court of Appeal therefore fell into error by declining to enter upon the
merits of the case and in deciding the appeal before it entirely on the ground
that the High Court was functus officio. g

Having decided that the High Court had the requisite jurisdiction to set aside
the second order, the issue in respect of which this court granted leave may
be dealt with. The question is whether the first and second orders were validly
made, in particular having regard to the relevant provisions of the Enactment.
h
Taking the first order, it may be recalled that it, inter alia, directed the
appellants to repay the outstanding loan and interest due from Ismail to the
respondent. This part of the first order is connected with so much of the
second order that declared the appellants to have received benefits under the
contract of loan that Ismail had with the respondent. i
 Current Law Journal
118 1998 [1998] 2 CLJ

a In making these orders of restitution, the judge relied on s. 66 of the Contracts

Act 1950, which reads as follows:
66. When an agreement is discovered to be void, or when a contract becomes
void, any person who has received any advantage under the agreement
or contract is bound to restore it, or to make compensation for it, to the
b person from whom he received it.

The respondent, in support of its summons before the High Court, had argued
that the appellants, though not parties to the contract of loan between itself
and Ismail, and though not having received any part of the loan amount, had
nevertheless received an advantage under that contract and were therefore
c
obliged to disgorge it. It was contended that the phrase “any person” appearing
in s. 66 was wide enough to bring within its ambit persons who were not
parties to the void agreement to which the section refers.
In support of this argument, the respondent relied on two authorities decided
d under the equipollent Indian provision, namely, s. 65 of the Indian Contract
Act 1872. They are Giraj Baksh v. Kazi Hamid Ali [1886] ILR 9 All 340
and Devi Prasad v. Mehdi Hasan AIR [1940] Pat. 81. These decisions certainly
appear to support the respondent’s submission. However, there is at least one
decision that goes the other way. See, Gendsingh v. Gowardhan AIR [1938]
e Nag. 451.
Before entering upon a discussion of the Indian cases, I pause to mention a
point of much importance that must be appreciated. It is this. What became
void in consequence of a breach of the Enactment was the charge that the
appellants had created over the said land. With it fell the annexure that
f contained the contract between the appellants and the respondent. The contract
of loan between Ismail and the respondent continued to be perfectly valid since
it did not offend the provisions of the Enactment. But, no benefit whatsoever
passed from the respondent to the appellants under either contract. The
appellants were not parties to the loan agreement. Neither did they receive
g any benefit under the annexure to the charge. Indeed, what they suffered was
a detriment because they put their property at risk. The benefit of which s.
66 speaks is one that is received under the very contract which, to quote the
words of the section, “is discovered to be void” or “becomes void”. The
benefit in question, namely the sum of RM400,000 passed from the respondent
h to Ismail under the contract of loan which neither became void nor was
discovered to be void. Section 66 did not come into play insofar as that
contract is concerned. With regard to the contract that was discovered to be
void, namely, the annexure to the charge, the appellants did not, as I earlier
observed, receive any benefit under it. Nevertheless, the respondent sought to
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 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 119

extend the reach of section by contending that since the appellants had received a
a part of the loan sum from Ismail, they came within the phrase “any person”
and were therefore under an obligation to make restitution.
With that, I now turn to a consideration of the Indian cases relied upon by
the respondent.
b
A careful reading of the Indian cases makes it apparent that the difference of
opinion between the High Courts of India on the interpretation of their s. 65
gravitates around the doctrine of privity of contract. It may be traced to the
view taken by some of the Indian High Courts that s. 2(d) of the Indian
Contract Act 1872 did away with that doctrine. That subsection, which is in c
terms identical to the similarly numbered section in our Contracts Act 1950,
reads as follows:
(d) when, at the desire of the promisor, the promisee or any other person
has done or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or abstinence d
or promise is called a consideration for the promise;

The notion that s. 2(d) had the effect of abolishing doctrine of privity of
contract was exploded by the decision of the Privy Council in Kepong
Prospecting Ltd. & Ors v. Schmidt [1968] 1 MLJ 170. The Board there held
e
that our law does not recognise a jus quaesitum tertio arising by way of
contract. The concatenation of Indian cases giving rise to a conflict of opinion
on the subject was referred to in the advice of the Board, which on that
occasion was delivered by Lord Wilberforce. He said (at p. 174):
Their Lordships were not referred to any statutory provision by virtue of which f
it could be said that the Malaysian law as to contracts differs in so important
a respect from English law. It is true that s. 2(d) of the Contracts (Malay States)
Ordinance gives a wider definition of ‘consideration’ than that which applies
in England particularly in that it enables consideration to move from another
person than the promisee, but the appellant was unable to show how this
affected the law as to enforcement of contracts by third parties, and it was g
not possible to point to any other provision having this effect. On the contrary
paras (a), (b), (c) and (e) support the English conception of a contract as an
agreement on which only the parties to it can sue.

Kepong Prospecting is therefore authority for the proposition that the words
“or any other person” appearing in s. 2(d) of the Contracts Act 1950 are not h
to be wide enough to exclude the doctrine of privity of contract. It follows,
by parallel reasoning, that the identical words used by s. 66 do not include
persons who are not parties to a contract under which a benefit passed. In
my judgment, there is no justification, in principle or policy, to extend the
i
 Current Law Journal
120 1998 [1998] 2 CLJ

a terms of the section by means of an interpretation that runs counter to settled

jurisprudence. It follows that the only parties to a contract may claim or
become liable to make, restitution under that section. Any other construction
would produce an anomaly because, while only parties to a contract may sue
upon it, yet, when the very same contract is discovered to be void, anyone,
b including persons who cannot enforce it may recover any benefit received by
one of the parties thereto.
Accordingly, in my judgment, the words “any person” appearing in s. 66 must
refer only to parties to the original contract that either becomes or is discovered
to be void. The Indian cases of Giraj Baksh and Devi Prasad relied upon by
c the respondent in the High Court were not correctly decided and do not
represent our law.
Consequently, it is difficult to justify so much of the first and second orders
that make the appellants liable to repay the loan taken by Ismail from the
d respondent. As I earlier observed, it was Ismail who received all the money
from the respondent. The appellants had none of it, save from Ismail himself.
There was therefore no legal basis to pray in aid s. 66 of the Contracts Act
in order to impose liability upon which the appellants to make restitution.
Although these arguments were not raised in the appeal, the point at hand is
e so fundamental to the case that it would be unjust to let the matter pass
without comment. Further, the order of this court granting leave does throw
open, albeit to a limited extent, the validity of the first order and the
opportunity thus presented should be seized to clarify the position lest it be
thought that the law permits a wider reach in cases under s. 66 than is really
f the case.
Apart from the point made on the applicability of s. 66 to the facts of the
case, the first order does not in any way infringe the provisions of the
Enactment. In other words, there is nothing in the Enactment that prohibits
the making of an order for restitution of monies advanced upon the strength
g
of a void security. All that remains for consideration is the validity of so much
of the second order as directed a sale of the said land.
That no land to which the Enactment applies may be sold in execution of a
judgment is made plain by s. 13, which reads as follow:
h
No Malay holding shall be attached in execution of a decree or order of any
court unless the suit or proceeding in which such decree or order was made
was instituted before the commencement of this Enactment.

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 Badiaddin Mohd Mahidin & Anor v. Arab Malaysian
[1998] 2 CLJ Finance Bhd 121

Counsel for the respondent meets the prohibition housed in the section by a
arguing that there was no attachment in execution of a decree in the present
case. The respondent was merely seeking relief in equity, a proceeding that
falls outside the section.
As to what is meant by “execution”, counsel referred to the judgment of Lord
b
Denning MR in Re Overseas Aviation Engineering (G.B.) Ltd [1962] 3 All
ER 12. The Master of Rolls there said that “execution”.
means, quite simply, the process for enforcing or giving effect to the judgment
of the court: and it is ‘completed’ when the judgment creditor gets the money
or other thing awarded to him by the judgment. c
Counsel also relied on the following passage from the judgment of Bowen
LJ in Re Shephard 43 Ch. D. 131, 137:
Equitable execution is not like legal execution; it is equitable relief, which the
court gives because execution at law cannot be had. It is not execution, but a
d
substitute for execution.

With respect, the argument of counsel is without merit. And the authorities
he has cited do not assist him. The proper approach is to look at substance
and not mere labels. In substance the respondent was seeking to effect a sale
of the said land for the purpose of satisfying a judgment in its favour. What e
Parliament has sought to achieve by means of s. 13 is to put Malay reservation
land out of the process of execution. If counsel were correct in his argument,
a creditor could obtain by indirect means that which he cannot directly obtain
and thus thwart legislative intent. It is accordingly clear that the phrase
“attached in execution” in s. 13 refers to every mode of execution, including f
equitable execution.
The second order, in so far as it directs the sale of the said land, was made
in contravention of s. 13. As there is no power in a court to make an order
in breach of the provisions of written law, the second order was illegal and
utterly void. Mohd. Noor Abdullah J was entirely right in acceding to the g
appellants’ application to have the second order set aside. The Court of Appeal
was wrong in deciding the appeal to it purely on the basis that the judge was
functus officio. It ought to have entered upon the merits of the case. Had it
done so, it would have concluded that the second order was illegal and utterly
void. h

To summarise, the respondent is not entitled to pray in aid the court’s process
of execution to recover from the appellants, any part of the money it lent to
Ismail for two reasons.
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 Current Law Journal
122 1998 [1998] 2 CLJ

a (1) The appellants received no benefit under the contract that was discovered
to be void and they were not parties to the contract under which the
benefit did pass;
(2) The enforcement of the restitution order by means of a sale of the said
land would contravene the express prohibition in the Enactment against
b
such an exercise.
It is for these reasons that I came to the conclusion that the appeal should be
allowed with costs both here and in the court below. The order of the Court
of Appeal was set aside and the orders made by the judge at first instance
c were restored. The deposit paid in respect of the appeal to the Court of Appeal
was ordered to be paid out to the appellants in satisfaction of their costs in
that court. The deposit paid into court in respect of this appeal was ordered
to be refunded to the appellants.