Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd

[2004] 5 MLJ (Vincent Ng J) 13

A Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd

HIGH COURT (KUALA LUMPUR) — COMPANIES WINDING UP
PETITION NO D1–28–311 OF 1996
VINCENT NG J
18 AUGUST 2003
B
Civil Procedure — Judgments and orders — Consent order — Setting aside — Want of
authority — Whether part of consent order ought to be set aside for want of authority by
counsel — Whether lack of authority by counsel a ground for setting aside consent order

Companies and Corporations — Winding up — Petition to wind up — Whether court had

C jurisdiction to make any order other than to wind up respondent company — Whether court
could record consent order — See Teow Guan v Kian Joo Holdings Sdn Bhd & Ors [1995]
3 MLJ 598
The petitioner had presented a petition to wind up the respondent. The
petition was contested by the respondent and six opposing contributories,
D the latter including the applicants. The parties reached an amicable
settlement and a consent order was recorded allowing the Petitioner to
withdraw the petition with liberty to file afresh and providing for the sale of
certain assets by the petitioner to the respondent and the opposing
contributories. This was an application by way of motion by two opposing
contributories (‘the applicants’) seeking to set aside the part of the said
E consent order requiring the applicants to purchase the said assets. The
applicants averred that their instructions to their solicitors had been limited
to opposing the winding up petition. At no time were the solicitors
authorised to enter into the consent orders. The applicant further averred
that, following the decision in See Teow Guan v Kian Joo Holdings Sdn Bhd
& Ors [1995] 3 MLJ 598 (CA), the only final order the court could have
F made was to direct a winding up of the respondent company or to dismiss
the petition. The court had exceeded its jurisdiction when it allowed the
parties to record the consent order. Counsel for the petitioner raised an
objection as to the mode of procedure adopted by the applicants to move
the court to set aside the consent order, which had then yet to be perfected.
G
Held, dismissing the application:
(1) Prior to the perfection of a consent order or judgment there was a
limited jurisdiction to set aside such an order or judgment. The court
would interfere only if the evidence indicated that counsel had been
acting in excess of authority, either deliberately or inadvertently, or
H
had been labouring under a mistake, such which would vitiate the
agreement. A party seeking to set aside such an unperfected consent
order could do so by summons or notice of application prior to or
contemporaneously with the perfection of the order. The applicants
were thus not amiss in making their application by motion (see para
I 25).
(2) Counsel’s alleged lack of authority was invariably never a ground to
set aside a consent order or a contract. Any injustice suffered by the
14 Malayan Law Journal [2004] 1 MLJ

client could be resolved in the context of a claim against his counsel. A

There was no obligation to prove express authority. Solicitors or
counsel, by implication, had authority to compromise an action. The
petitioner and the court were entitled to assume the existence of such
authority when the lack of such authority was not specifically brought
to their attention at the material time (see para 11); Leow Seng Huat v
Low Mui Yein [1996] 5 MLJ 381 followed. B
(3) The applicants had then been represented by the same solicitors who
had appeared for the respondent and the other opposing
contributories in the winding up proceedings. A single set of affidavits
had been filed on behalf of the respondent and the opposing
contributories, including the applicants. The fact that negotiations C
took place over a period of three days clearly showed that all the
contributories had authorized their counsel and solicitors to negotiate
and conclude a settlement. There was no affidavit from the applicants’
former counsel, solicitors, the respondent or the other contributories
as to any lack of authority (see paras 7, 9–10, 13); Teh Eok Kee & Anor
v Tan Chiah Hock & Anor [1995] 3 MLJ 613 followed. D
(4) The fallacy of the applicants’ contentions became more apparent in
considering that the applicants were seeking to invalidate only the
portion of the consent order which related to their obligations whilst
requiring the petitioner and the respondent to fulfill theirs. The
applicants alleged that their solicitors had sufficient authority to E
consent to a part of the order and not to the rest of the order. Consent
and authority cannot, by any stretch of rational reasoning, be divisible.
Equity would not allow the applicants to retain the benefit of the
consent order without bearing the burden that accompanied that
benefit (see paras 12, 14); Yee Seng Plantation Sdn Bhd v Kerajaan
Negeri Trengganu [2000] 3 MLJ 699 referred. F
(5) The true ratio in See Teow Guan has been misconstrued by counsel
and misapplied by the courts. The ratio in See Teow Guan is based on
the majority decision in Re RJ Jowsey Mining Co Ltd [1969] 2 OR 549;
1969 Ont. Rep Lexis 152, Jessup JA dissenting. This court was
completely ad idem with and preferred the minority view on the G
matter In See Teow Guan the petitioner had presented a petition in the
High Court seeking that the company ‘be wound up by the court’.
This court was however bound to adopt the ratio in See Teow Guan
(see paras 17, 19).
(6) However in recording the consent order, the court had not exercised H
its adjudicatory function. Rather the court was merely giving due
recognition to an agreement arrived at between the parties. The
applicants’ implied concession that the court has jurisdiction to hear
a winding up petition, but has no power to record a consent order on
the same was untenable and wholly without basis in law. The High
Court is a superior court of record and was not debarred from I
recording such an order (see paras 20–21); See Teow Guan v Kian Joo
Holdings Sdn Bhd & Ors [1995] 3 MLJ 598 distinguished; Lee Kee
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 15

A Choong v Empat Nombor Ekor (NS) Sdn Bhd [1975] 1 MLJ 134 and
KI Muhideen v KEP Mohd Abdul Kassim [1959] MLJ 257 referred.
(7) The withdrawal of the petition, the part of the order intended by
applicants to be retained, would have entailed the company, a going
concern, to suffer liabilities and its creditors to acquire third party
B rights against the company. The applicants cannot be allowed to
create a new right or to resuscitate an extinguished right in their favour
against a third person, or to create, on the part of a third person, a new
liability. Indeed, a judgment or order may not be set aside by consent
of the parties if it would prejudice third party rights ice third party
rights (see paras 26–27); Hammond v Schofield (1891) IOB 453
C followed; The Bellcairn (1885) 10 PD 161 referred.

[Bahasa Malaysia summary

Pempetisyen telah mengemukakan satu petisyen untuk menggulungkan
responden. Petisyen tersebut telah dipertikaikan oleh responden dan enam
D penyumbang pembangkang, yang mana termasuklah pemohon-pemohon.
Pihak-pihak telah mencapai satu penyelesaian secara persahabatan dan satu
perintah persetujuan telah direkodkan membenarkan pempetisyen menarik
balik petisyen tersebut dan bebas untuk memfailkan yang baru dan
memperuntukkan untuk jualan aset-aset tertentu oleh pempetisyen kepada
E responden dan penyumbang-penyumbang pembangkang. Ini adalah
permohonan melalui usul oleh dua penyumbang pembangkang (‘pemohon-
pemohon’) yang memohon untuk mengenepikan sebahagian daripada
perintah persetujuan yang menghendaki pemohon-pemohon membeli aset-
aset tersebut. Pemohon-pemohon menegaskan bahawa arahan mereka
kepada peguamcara mereka adalah untuk membangkang petisyen
F penggulungan tersebut. Tidak pada bila-bila masa peguamcara-
peguamcara tersebut diberi kuasa untuk memasuki perintah-perintah
persetujuan tersebut. Pemohon selanjutnya menegaskan bahawa, mengikut
keputusan dalam See Teow Guan v Kian Joo Holdings Sdn Bhd & Ors [1995]
3 MLJ 598, satu-satunya perintah muktamad yang mahkamah boleh buat
adalah untuk mengarahkan penggulungan syarikat responden atau untuk
G menolak petisyen tersebut. Mahkamah telah melampaui bidang kuasanya
apabila ia membenarkan pihak-pihak merekodkan perintah persetujuan
tersebut. Peguam bagi pihak pempetisyen telah menimbulkan satu
bantahan berhubung cara prosedur yang digunakan oleh pemohon-
pemohon untuk memohon mahkamah mengenepikan perintah persetujuan
tersebut, yang mana masih belum disempurnakan.
H
Diputuskan, menolak permohonan tersebut:
(1) Sebelum penyempurnaan perintah persetujuan atau penghakiman
terdapat bidang kuasa terhad untuk mengenepikan perintah atau
penghakiaman sedemikian. Mahkamah akan campur tangan hanya
I jika keterangan menunjukkan bahawa peguam telah bertindak
melampaui kuasa, sama ada secara sengaja atau tidak, atau telah
bertindak di bawah satu kesilapan, yang akan membatalkan perjanjian
16 Malayan Law Journal [2004] 1 MLJ

tersebut. Pihak yang memohon untuk mengenepikan perintah A

persetujuan yang tidak sempurna boleh juga berbuat demikian melalui
saman atau permohonan notis sebelum atau sejajar dengan
penyempurnaan perintah tersebut. Pemohon-pemohon oleh itu tidak
salah dalam membuat permohonan mereka melalui usul (lihat
perenggan 25).
B
(2) Peguam yang dikatakan tidak mempunyai kuasa tidak langsung
merupakan alasan untuk mengenepikan perintah persetujuan atau
kontrak. Apa-pa ketidakadilan yang dialami oleh anakguam boleh
diselesaikan dalam konteks tuntutan terhadap peguamnya. Tiada
obligasi untuk membuktikan kuasa nyata. Peguamcara atau peguam,
secara implikasi, mempunyai kuasa untuk menentukan satu tindakan. C
Pempetisyen dan mahkamah berhak untuk membuat anggapan
terdapat kuasa sedemikian apabila kekurangan kuasa sedemikian tidak
dikemukakan secara khusus kepada perhatian mereka pada masa
matan (lihat perenggan 11); Leow Seng Huat v Low Mui Yein [1996]
5 MLJ 381 diikut. D
(3) pemohon-pemohon pada masa itu telah diwakili oleh peguamcara-
peguamcara yang sama yang hadir bagi pihak responden dan
penyumbang pembangkang yang lain dalam prosiding penggulungan
tersebut. Satu set afidavit telah difailkan bagi pihak responden dan
penyumbang-penyumbang pembangkang tersebut, termasuklah E
pemohon-pemohon. Hakikat bahawa perundingan telah diadakan
sepanjang tempoh tiga hari jeals menunjunkkan bahawa semua
penyumbang-penyumbang tersebut telah memberi kuasa kepada
peguam dan peguamcara-peguamcara mereka untuk berunding dan
mencapai satu penyelesaian. Tiada sebarang afidavit daripada bekas
peguam pemohon-pemohon, peguamcara-peguamcara, reponden F
atua penyumbang-penyumbang lain berhubung kekurangan kuasa
(lihat perenggan-perenggan 7, 9–10, 13); Teh Eok Kee & Anor v Tan
Chiah Hock & Anor [1995] 3 MLJ 613 diikut.
(4) Salah anggapan berhubung niat pemohon-pemohon semakin jelas
dalam mempertimbangkan bahawa pemohon-pemohon sedang G
memohon untuk mentaksahkan hanya bahagian perintah persetujuan
yang berkaitan obligasi-obligasi mereka sementara menghendaki
pempetisyen dan responden memenuhi obligasi-obligasi mereka.
Pemohon-pemohon mengatakan bahawa peguamcara-pegumcara
mereka mempunyai kuasa yang mencukupi untuk menyetujui kepada H
sebahagian perintah tersebut dan tidak kepada bahagian lain dalam
perintah tersebut. Persetujuan dan kuasa tidak boleh, berdasarkan
apa-apa alasan rational, boleh dibahagikan. Ekuiti tidak akan
membenarkan pemohon-pemohon memperoleh faedah perintah
persetujuan tersebut tanpa menanggung beban yang diperolehi
daripada faedah tersebut (lihat perenggan-perenggan 12, 14); Yee I
Seng Plantation Sdn Bhd v Kerajaan Negeri Trengganu [2000] 3 MLJ
699 dirujuk.
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 17

A (5) Ratio sebenar dalam See Teow Guan telah disalah tafsir oleh peguam
dan disalah pakai oleh mahkamah. Ratio dalam See Teow Guan adalah
berdasarkan keputusan majoriti dalam Re RJ Jowsey Mining Co Ltd
[1969] 2 OR 549; 1969 Ont Rep Lexis 152, Jessup JA menentang.
Mahkamah ini sepenuhnya ad idem dengan dan lebih kepada
pendapat minoriti berhubung perkara tersebut. Dalam See Teow Guan
B pempetisyen telah mengemukakan satu petisyen di Mahkamah Tinggi
memohon syarikat ‘be wound up by the court’. Mahkamah ini
bagaimanapun telah memakai ratio dalam See Teow Guan (lihat
perenggan-perenggan 17, 19); Jaya Harta Realty Sdn Bhd v Koperasi
Kemajuan Pekerja-Pekerja Ladang Bhd [2000] 3 CLJ 361 dirujuk.
C (6) Namun begitu dalam merekodkan perintah persetujuan tersebut,
mahkamah tidak menggunakan fungsi penghakimannya. Bahkan
mahkamah hanya memberikan pengikhtirafan kepada persetujuan
yang dicapai antara pihak-pihak tersebut. Konsesi pemohon-
pemohon yang dikatakan tersebut bahawa mahkamah mempunyai
bidang kuasa untuk mendengar petisyen penggulungan, tetapi tiada
D kuasa untuk merekodkan perintah persetujuan pada yang sama tidak
boleh dikekalkan dan keseluruhannya tidak berasas dalam undang-
undang. Mahkamah Tinggi adalah mahkamah tertinggi dan tidak
dihalang daripada merekodkan perintah sedemikian (lihat perenggan-
perenggan 20–21); See Teow Guan dibeza; Lee Kee Choong v Empat
Nombor Ekor (NS) Sdn Bhd [1975] 1 MLJ 134 dan KI Muhideen v
E KEP Mohd Abdul Kassim [1959] MLJ 257 dirujuk.
(7) Penarikan balik petisyen, bahagian perintah yang diniatkan oleh
pemohon-pemohon dikekalkan, akan menyebabkan syarikat tersebut,
yang diberi perhatian, mengalami liabiliti-liabiliti dan pemiutang-
pemiutangnya untuk memperoleh hak-hak pihka ketiga terhadap
F syarikat tersebut. Pemohon-pemohon tidak boleh dibenarkan
membentuk satu hak baru atau mewujudjan semula satu hak yang
telah lenyap menyebelahi mereka terhadap pihak ketiga, atau
membentuk, bagi pihak orang ketiga, liabiliti baru. Sememangnya,
satu penghakiman atau perintah tidak boleh diketepikan dengan
persetujuan pihak-pihak jika ia akan memprejudiskan hak pihak ketiga
G (lihat perenggan-perenggan 26–27); Hammond v Schofield (1891) IOB
453 diikut; The Bellcairn (1885) 10 PD 161 dirujuk.]

Notes
H For cases on consent orders, see 2(1) Mallal’s Digest (4th Ed, 2001 Reissue)
paras 3464–3474.
For cases on petition to wind up, see 3(1) Mallal’s Digest (4th Ed, 2003
Reissue) paras 1152–1219.

I Cases referred to
Aspden (Inspector of Taxes) v Hildesley [1982] 1 WLR 264 (refd)
Bellcairn, The (1885) 10 PD 161 (refd)
18 Malayan Law Journal [2004] 1 MLJ

Binder v Alachouzos [1972] 2 All ER 189 (refd) A

Brister v Brister [1970] 1 WLR 664 (refd)
Croft v Croft [1922] 38 TLR 648 (refd)
ER Ives Investment Ltd v High [1967] 2 WLR 790 (refd)
European Grain & Shipping Ltd v Johnson Ltd [1982] 2 Lloyds Law Repts
550 (refd)
Green v Rozen [1955] 2 All ER 797 (refd) B
Hammond v Schofield (1891) IOB 453 (folld)
Horizon Technologies International Ltd v Lucky Wealth Consultants Ltd [1992]
1 WLR 24 (refd)
Jaya Harta Realty Sdn Bhd v Koperasi Kemajuan Pekerja-Pekerja Ladang Bhd
[2000] 6 MLJ 493 (refd)
Jessel v Jessel [1979] 1 WLR 1148 (refd) C
KI Muhiudeen Rawther v KEP Abdul Kassim & Ors [1959] MLJ 257 (refd)
Lee Kee Choong v Empat Nombor Ekor (NS) Sdn Bhd [1975] 1 MLJ 134
(refd)
Leow Seng Huat v Low Mui Yein [1996] 5 MLJ 381 (folld)
Lewis v Lewis (890) 45 ChD 281 (refd) D
Lievesley v Gilmore [1866] LR1 CP 570 (refd)
Marsden v Marsden [1972] Fam Law 280 (refd)
RJ Jowsey Mining Co Ltd, Re [1969] 2 OR 549; 1969 Ont Rep Lexis 152
(refd)
See Teow Guan v Kian Joo Holdings Sdn Bhd & Ors [1995] 3 MLJ 598
(distd) E
Shaw, Re [1918] P 47 (refd)
Smith v Shirley & Bayliss [1875] 32 LT 234 (refd)
Sourendra Nath Mitra & Ors v Tarubala Dasi [1930] 57 Indian Appeals 133
(refd)
Teh Eok Kee & Anor v Tan Chiah Hock & Anor [1995] 3 MLJ 613 (folld)
Thrope v Fasey [1949] 1 Ch 649 (refd) F
Tong Lee Hwa & Anor v Chin Ah Kwi [1971] 2 MLJ 75 (refd)
Waugh v HB Clifford & Sons Ltd [1982] Ch 374 (refd)
Wondoflex Textiles Pty Ltd, Re [1951] VLR 458 (refd)
Worthington & Co v Abbot [1910] 1 Ch 588 (refd)
Yee Seng Plantations Sdn Bhd v Kerajaan Negeri Terengganu & Ors [2000] 3
MLJ 699 (refd) G

Legislation referred to
Companies Act 1965 ss 218(1), 221(1)
Corporations Act, RSO 1960 [Canada] s 256(d) H
National Land Code

Hamid Sultan Hamid Sultan (Loga Chitra & Assoc) for applicants/opposing
contributories.
Dato’ RR Sethu (NH Wong with him) (NH Wong & Assoc) for respondent/
petitioner. I
Alan Chua (Alan Chua & Co) for respondents/remaining opposing
contributories.
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 19

A Vincent Ng J:

Preamble
[1] This notice of motion (encl 20) is an application before me by two
opposing contributories, namely Lee Lay Leng and Lee Lay Wee (‘the
B applicants’) seeking to set aside the consent order dated 18 April 2000 be
set aside with costs to be borne by the petitioner.
[2] Briefly, the background facts of this case show that the petitioner
presented a petition to wind up the respondent pursuant to s 218(1) of the
Companies Act 1965 (‘the Act’). The petition was contested by the
C respondent and six opposing contributories including the applicants.
However, parties reached an amicable settlement and a consent order was
recorded on 18 April 2000 before Mohd Ghazali J (as he then was), inter
alia, allowing the petitioner to withdraw the petition with liberty to file
afresh and providing for the sale of certain assets held by the petitioner to
the respondent and the opposing contributories.
D
[3] The consent order has yet to be perfected.

The application
[4] The applicants’ subsequent objection to the consent order dated
E 18 April 2000 is limited to prayer 4 therein. The relevant portions of the said
consent order are reproduced below for ease of reference:
… IT IS HEREBY ORDERED BY CONSENT as follows:
...
(4)The Opposing Contributors shall jointly and severally purchase the
F Assets from the Petitioner at the total purchase consideration of Ringgit
Malaysia Ten Million (RM10,000,000) only (hereinafter referred to as
the ‘Purchase Price’) and shall pay the Purchase Price in the following
manner:
(a) Ringgit One Million Five Hundred Thousand (RM1,500,000)
(hereinafter referred to as the ‘Deposit’) shall be paid by the Opposing
G
Contributors to the Petitioner on or before 18th June 2000; and
(b) the balance of Ringgit Eight Million Five Hundred Thousand
(RM8,500,000) (hereinafter referred to as the ‘Balance Sum’ shall be
paid within thirty (30) months from 18th June 2000 in five (5) equal
installments of Ringgit One Million Seven Hundred Thousand
H (RM1,700,000), the first installment to be paid on or before the 18th
day of each sixth month,
until full payment of the Purchase Price.
[5] The application is premised on two grounds:
I (i) that applicants had not authorized their solicitor to enter
into any consent order with the petitioner; and
(ii) that the court had no jurisdiction to grant the consent order.
20 Malayan Law Journal [2004] 1 MLJ

[6] It is noteworthy that neither the respondent nor any of the other A
opposing contributories have any objections to this application.

FIRST GROUND

[7] The applicants were represented by the same solicitor who appeared B
for the respondent and the other opposing contributories in the winding up
proceedings.

[8] The applicants averred that their instruction to the solicitor was
limited; merely to opposing the winding up petition. At no time was the
solicitor authorized to enter into any consent orders. C
[9] I find that this issue is without substance and doomed to failure in the
face of evidence to the contrary and the fact that negotiations among all the
parties took place over a period of three days. Indeed, there is no affidavit
from the applicants’ former counsel, solicitor, respondent or other
contributories as to the lack of authority. D
[10] The applicants’ complaint of alleged lack of authority of their counsel
and solicitor is without substance, as there is no affidavit from their counsel,
solicitor, respondent or other contributories as to the lack of or for
misapprehension of his authority (see Lewis v Lewis (890) 45 ChD 281).
And, the fact that negotiation took place over a period of three days clearly E
showed that all the contributories had authorized their counsel and solicitor
to negotiate and conclude a settlement. Counsel and solicitor in the
ordinary course of their retainer have the power to enter into compromise
or settle disputes (see Sourendra Nath Mitra & Ors v Tarubala Dasi [1930]
57 Indian Appeals 133 at pp 138, 139–140, 141, 142 per Lord Atkin; Teh
Eok Kee & Anor v Tan Chiah Hock & Anor [1995] 3 MLJ 613). In the F
course of his judgment in Waugh v HB Clifford & Sons Ltd [1982] Ch 374,
Brightman LJ reviewed a number of the authorities referred to in the
foregoing discussion on implied authority and said this (at p 387):
The law has become well established that the solicitor or counsel retained in an
action has an implied authority as between himself and his client to compromise G
the suit without reference to the client, provided that the compromise does not
involve matters ‘collateral to the action’; and ostensible authority, as between
himself and the opposing litigant to compromise the suit without actual proof of
authority, subject to the same limitation …

[11] Thus, counsel’s alleged lack of authority is invariably never a ground H

to set aside a consent order or a contract. Any injustice suffered by the client
could be resolved in the context of a claim against his counsel (see Waugh
v HB Clifford & Sons Ltd; Leow Seng Huat v Low Mui Yein [1996] 5 MLJ
381, at p 385E–H). There is no obligation to prove express authority. A
solicitor or counsel by implication had authority to compromise. The
petitioner and the court, are entitled to assume the existence of authority I
when the lack of authority is not specifically brought to the attention of the
petitioner or the court at that material time.
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 21

A [12] At any rate, the plea of lack of authority on the part of the applicant’s
former solicitors in support of the motion is inconsistent with the
contention that whilst a part of the consent order is valid, the other is
invalid. In the face of the averments in their affidavit, are the applicants now
saying that their solicitors had authority to consent to a part of the order and
not to the rest of the order? At any rate, in my view, consent and authority
B cannot, by any stretch of rational reasoning, be divisible. A further
consideration is that equity would not allow the applicants to retain the
benefit (of the withdrawal and dismissal of the petition) without the burden
that accompanies that benefit, namely, the purchase of the petitioner’s share
(see ER Ives Investment Ltd v High [1967] 2 WLR 790 and European Grain
& Shipping Ltd v Johnson Ltd [1982] 2 Lloyds Law Repts 550) — a fortiori
C
where the parties cannot be restored to the status quo ante (see Thrope v
Fasey [1949] 1 Ch 649).
[13] A perusal of the cause papers revealed that a single set of affidavits
were filed on behalf of the respondent and the opposing contributories,
including the applicants. This was consistent with the fact the respondent
D
and the opposing contributories shared a common or joint interest in the
company. The consent order itself set out lucidly the inter-dependant
obligations of each party to the proceedings on a quid pro quo basis. The sale
of the company assets to the opposing contributories, including the
applicants, was a fundamental and integral part of the whole settlement
E between the parties, such that the respective obligations are intimately
interdependent.

[14] The fallacy of the applicants’ contentions became more apparent,

considering that the applicants were seeking to invalidate only the portion
of the consent order that relates to their obligations whilst requiring the
F petitioner and the respondent to fulfill theirs (see Thorpe v Fasy). Indeed,
even when a State Government sought to set aside the whole of a consent
order on the ground of lack of authority of counsel — and alleged
contravention of the National Land Code that impinged on the power of the
State authority to alienate — it was refused by the Court of Appeal (see Yee
Seng Plantation Sdn Bhd v Kerajaan Negeri Trengganu [2000] 3 MLJ 699).
G This application to sever parts of the consent order some 14 months after
the same was recorded, only serves to bring to light the fact that the
applicants had indeed consented to the whole order which they now seek
this court’s sanction to renege on its terms.

H SECOND GROUND
[15] The application is primarily grounded upon the ratio in the decision
of the Court of Appeal in See Teow Guan v Kian Joo Holdings Sdn Bhd &
Ors [1995] 3 MLJ 598, wherein, Gopal Sri Ram JCA who delivered the
judgment of the Court of Appeal had expressed the following views:
I I must confess that, despite the rather wide words appearing in s 221(1) of the
Act, the only final order a companies court may make is either to direct a winding
up or to dismiss the petition. It may certainly make interim orders, eg by
22 Malayan Law Journal [2004] 1 MLJ

appointing a provisional liquidator or a receiver and manager pending the final A

disposal of the petition. But, as I have said, it is not my comprehension of the law
governing the winding up of companies that a court hearing a petition may make
an order as to the distribution or disposal of the assets of a company. And, as I
have since discovered, the point is covered by authority.
[16] The applicants argued that s 221(1) of the Act merely empowered
the court hearing a winding up petition to either direct the winding up of B
the said company and to make the necessary ancillary orders in support
thereof or to dismiss the petition. Therefore, they submitted, that the court
clearly exceeded its jurisdiction when it allowed the parties to record the
consent order on 18 April 2000.
[17] This submission finds no favour with me. Regrettably, I have to C
observe here that the true ratio in See Teow Guan has, ever so often, been
misconstrued by counsel and sometimes misapplied by judges in the
companies courts. The ratio in See Teow Guan was based on the Canadian
Court of Appeal decision in Re RJ Jowsey Mining Co Ltd [1969] 2 OR 549;
1969 Ont Rep Lexis 152. But, the decision in Re RJ Jowsey did not bear the
D
mark of unanimity. Jessup JA, a member of the appellate panel, dissented
upon lucid and, in my view, compelling grounds. This is what he had to say
— on the construction to be placed on the words ‘may make any interim or
other order as is deemed just’ in (the Canadian) s 258 of the Corporations
Act, RSO 1960, which is in pari materia with s 221(1) of our Companies
Act 1965: E
The broad effect of that section was stated by Neville J in Re Bleviot Mfg Aircraft
Co Ltd (1916), 32 TLR 253 at p 255:
‘The words ‘just and equitable’ are words of the widest significance, and do not
limit the jurisdiction of the Court to any case. It is a question of fact, and each
case must depend on its own circumstances.’ F
[18] And, he finally concluded:
In my opinion, the section (s 256(d) of the (Canadian) Corporations Act, RSO
1960) is in very broad terms with the intent that, at least as the term of a stay of
proceedings, a Court may order the equitable remedy that is most just having
regard to all the circumstances of the case and once it appears that justice and G
equity require the intervention of the Court in a company’s affairs. (Emphasis
added.)
[19] With respect, I am completely ad idem with and prefer to adopt
Jessup’s (JA) views on s 256(d) as it is a more cogent and eminently
persuasive approach which is consistent with the equitable jurisprudence
postulated in the manner s 256(d) was couched. It reads: H

(d) where in the opinion of the court it is just and equitable for some reason,
other than the bankruptcy or insolvency of the corporation, that it should be
wound up.
Notably, s 218(1)(i) of our Act is a prototype of s 256(d) of the Canadian Act
and s 121(1) of the (English) Insolvency Court of Appeal Act 1986. With the I
greatest respect, I think the Court of Appeal in See Teow Guan should not have
adopted the views of the majority in Re RJ Jowsey considering the wide import of
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 23

A the words ‘make any interim or other order as it thinks fit’ expressed in s 221(1)
read in conjunction with the ‘just and equitable’ spirit encompassed in s 218(1)(i)
of our Act. To hold otherwise would be to read into s 221(1) an unwarranted
restriction not intended by the Legislature. Entirely pertinent to the focus of this
discussion is the fact that in See Teow Guan (High Court) the Petitioner had
presented a petition for the company to ‘be wound up by the court under the
B provisions of s 218(1)(f) and/or (i) of the Companies Act 1965’.
[20] Be that as it may, I stand bound to adopt the ratio in See Teow Guan.
This is however not the end of the matter as the next question which this
court would have to determine is: whether in recording the consent order
on 18 April 2000 (sought to be set aside) the court had exercised its
adjudicatory function, which happened in See Teow Guan and in Re RJ
C
Jowsey Mining Co Ltd. An adjudicatory function is essentially predicated
upon a real dispute. For the above reasons, I would hold that See Teow Guan
(which I had, in Jaya Harta Realty Sdn Bhd v Koperasi Kemajuan Pekerja-
Pekerja Ladang Bhd [2000] 6 MLJ 493, occasion to express contrary views
on another aspect of its ratio) is not applicable to the present case and can
D be distinguished on its facts. Most importantly, the observation therein has
nothing to do with the issue of validity of consent orders. In See Teow Guan,
the High Court in the exercise of its adjudicatory function in a contested
matter made an order for the distribution of assets subsequent to the
making a winding up order. The Court of Appeal quite rightly said that
distribution of assets in the course of a winding up was the liquidator’s
E function, not the court’s. Hence, the High Court ought not to have made
that order. In the present case, the court was not exercising its adjudicatory
function, simply because Mohd Ghazali J (as he then was) did not make any
decision on a contested matter. Thus, in my judgment, the ratio decidendi
in See Teow Guan has no bearing on the case at hand.
F [21] The presentation of the petition was the culmination of the dispute
between the parties which was resolved. By recording the consent order, the
court was merely giving due recognition (that was then mutually sought)
and effect to a new agreement between the parties (see Green v Rozen [1955]
2 All ER 797). I would thus hold, as untenable and wholly without basis in
law, the applicants’ implied concession that the court has jurisdiction to
G hear a winding up petition, but has no power to record a consent order on
the same. This cannot be right as the High Court is a superior court of
record and s 221(1) does not, in my view, debar the court from recording
such order (see Re Wondoflex Textiles Pty Ltd [1951] VLR 458, Lee Kee
Choong v Empat Nombor Ekor (NS) Sdn Bhd [1975] 1 MLJ 134 and KI
Muhiudeen Rawther v KEP Abdul Kassim & Ors [1959] MLJ 257).
H
[22] Further, when the parties agreed to record the consent order, they
were creating a contract or compromise which was valid and binding, as a
unanimous agreement between the parties. By having the terms of the
compromise recorded as a consent order by the court, the agreement
becomes a rule of court, that is, a super-added command.
I
[23] It is noteworthy that there is a difference between a consent order or
judgment and one to which the party against whom it is entered merely
24 Malayan Law Journal [2004] 1 MLJ

submits. Unlike the latter, the former — where the compromise has been A
embodied in a consent order or judgment — affords evidence of the
contract upon which it is based and which has been made a rule of court
(see Re Shaw [1918] P 47 (CA), Croft v Croft [1922] 38 TLR 648 and
Aspden (Inspector of Taxes) v Hildesley [1982] 1 WLR 264). Indeed, such
order has been said to be buttressed by superadded command of a judge
(see Lievesley v Gilmore [1866] LR1 CP 570, Worthington & Co v Abbot B
[1910] 1 Ch 588; Brister v Brister [1970] 1 WLR 664 and Jessel v Jessel
[1979] 1 WLR 1148 (CA)). See also Horizon Technologies International Ltd
v Lucky Wealth Consultants Ltd [1992] 1 WLR 24 (PC) and The Law and
Practice of Compromise by David Foskett (4th Ed — Sweet & Maxwell 1996)
at p 238. C
[24] The leading authority on the matter (see Marsden v Marsden [1972]
Fam Law 280) indicates that the power to interfere will not be exercised (or
does not exist) after any consent order or judgment has been perfected
(Marsden v Marsden; Watkins J regarded this as ‘well settled law’) save in
exceptional circumstances such as illegality, fraud or a sufficient mistake of D
fact — none of which grounds the applicants in the instant case have shown
(see Smith v Shirley & Bayliss [1875] 32 LT 234, Tong Lee Hwa & Anor v
Chin Ah Kwi [1971] 2 MLJ 75, Binder v Alachouzos [1972] 2 All ER 189
and Yee Seng Plantations Sdn Bhd v Kerajaan Negeri Terengganu & Ors).
After the perfection of the order or judgment, the question of excess of
authority cannot be raised to invalidate the compromise, though a sufficient E
mistake of fact, raised in fresh proceedings, may, in certain exceptional
cases, operate to do so. The procedure for seeking a judicial rescission of a
compromise that has been made a rule of court is identical to that required
in relation to any other contract. If the order has been perfected a fresh
action is needed seeking a declaration of invalidity or an order setting aside
the compromise or agreement with consequential directions. A fresh action F
is needed for reasons, inter alia, to allow the other side, where appropriate,
to counterclaim.

[25] It is common ground that the consent order was not perfected at the
time of this notice of motion (under the existing petition) was filed. Yet
G
nevertheless, since learned counsel for the petitioner, Dato’ RR Sethu, had
also raised an objection on the mode of procedure that the applicants’
solicitors had adopted to move this court to set aside the consent order, a
brief discussion on this aspect of the matter would be in order, more so as
Encik Hamid Sultan bin Abu Backer for the applicants had made no riposte
to this aspect of the objection. Prior to the perfection of a consent order or H
judgment, there is a limited jurisdiction to set aside such an order or
judgment. The rule appears to be that the court will interfere prior to
perfection of a judgment or order only if the evidence indicates that counsel
was acting in excess of authority, either deliberately or inadvertently, or was
labouring under a mistake which would vitiate the agreement. A party
seeking to set aside such unperfected consent order may do so by summons I
or notice of application prior to or contemporaneously with perfection. I
would thus hold that the applicants were not amiss on the procedural
 Lee Teng Siong v Lee Geok Thye Holdings Sdn Bhd
[2004] 5 MLJ (Vincent Ng J) 25

A requirements in making their application by this notice of motion; encl 20

is properly before me for determination.
Other considerations
[26] The withdrawal of the petition (the part of the order intended by
applicants to be retained) would have entailed the company, which is a
B going concern, to suffer liabilities and the creditors to acquire third party
rights against the company. In such situation, this court is reminded of the
following forceful and unequivocal caveat delivered by Willis J in Hammond
v Schofield (1891) IOB 453:
I cannot see upon what principle the consent of the plaintiff and defndant can be
C allowed to create a new right, or (which is the same thing), to resuscitate an
extinguished right in favour of the plaintiff against a third person, or to create on
the part of a third person a new liability. Courts exist, as it seems to me, not to
take away people’s rights or increase their liabilities, but not enforce them, and I
base my judgment upon this broad principle.

D [27] Indeed, a judgment or order may not be set aside by consent of the
parties if it would prejudice third party rights (see The Bellcairn (1885) 10
PD 161).
[28] Prior to the filing of this motion, there was part performance of the
consent order, in that the petitioner deposited his share certificates and the
duly executed memorandum of transfer with his solicitors, and the
E
applicants and the other opposing contributories had made two payments.
The applicants and the other contributories then defaulted in the payment
of the third and subsequent instalments. Hence, in my view, the applicants,
by the present motion are attempting to renege from the consent order and
to get out of their obligations to perform the agreed terms of the consent
F order. And, the grossly inordinate delay of 14 months in filing the present
motion, bereft of any explanation, is in my judgment fatal to their belated
challenge of authority, a fortiori after the order had entailed part
performance of the recorded compromise (see Teh Eok Kee & Anor v Tan
Chiah Hock & Anor).

G Conclusion
[29] After careful consideration of the affidavits and lengthy submissions
put in by both sides, I dismissed the applicants’ application vide encl 20 and
ordered the applicants to bear the costs of the application personally.

H [30] I conclude with the words of Phillimore LJ in Binder v Alachouzos:

This is indeed a remarkable appeal. No one could suggest that it is in any way
cluttered with merits.
Application dismissed.

I Reported by Sivapragasam Kumaran

_____________________