- These two applications, namely application [Enclosure (20)] to set aside default judgment obtained on 24.11.1994 and to set aside the Order for Substituted Service [Enclosure (32)] were heard and disposed off by me, whereby I dismissed both applications with costs. The brief facts of this case are as follows.
- The Plaintiff company was wound up on 17.01.1994, pursuant to a winding up petition presented on 04.07.1990. The said petition was gazetted on 13.09.1990 and advertised twice on 28.09.1990. The Plaintiff company was at all material times controlled by the late Mr. Koh Liang Hee and his family. The First Defendant is one of the sons of the late Mr. Koh Liang Hee. The First Defendant was a shareholder of the Plaintiff company and also a director from 21.01.1991.
- The Plaintiff company at one time had held substantial assets. However, when the Liquidators were appointed, their investigations revealed, some at least, of the assets of the Plaintiff company, had been dissipated during the course of the winding-up. Amongst the other assets that belonged to the Plaintiff company at the date of presentation of the petition but which had been transferred to third parties by the date of appointment of Liquidators was the property known as Certificate of Title No. 21193 Lot No. 658, Section 83 held under Mukim of the town of Kuala Lumpur which property forms the subject-matter of this action (hereinafter called “the said property”).
- On 01.08.1990 the First Defendant entered into a Sale & Purchase Agreement whereby the First Defendant purportedly purchased the said property for RM600,000.00. The said property was only transferred to the First Defendant on 11.12.1990 and was simultaneously transferred to Standard Chartered Bank. Incidentally this date was after the date of gazetting and advertising of the said petition.
- The Plaintiff company filed the present Originating Summons to seek inter alia, an order to cancel the registration of the land in favour of the First Defendant and that the Plaintiff company be replaced as the registered proprietor. This summons was served by substituted service and in the absence of the First Defendant on the hearing date on 24.11.1994, default judgment was entered. On 05.06.1995, the First Defendant filed Enclosure (20) which is an application to set aside Enclosure (17) that is the Default Order dated 24.11.1994. Then on 01.11.1995 the First Defendant filed Enclosure (32). As this is an application to set aside the Order for substituted service, I shall first deal with it.
- At the outset, learned counsel for the Plaintiff company raises an objection as to delay. According to learned counsel the First Defendant only filed his application to set aside the Default Order on 5 June 1995 and the application to set aside the order for substituted service on 01.11.1995. He further submits that under Order 2 Rule 2(2) of the Rules of the High Court, an application to set aside for irregularity in any proceedings shall be made within a reasonable time. He says in this case, the First Defendant has not even given any reason for the delay and as such he cannot seek the aid of this Court to set aside the said order.
- In his reply, learned counsel for the First Defendant submits that there is no delay in this case, as the Default Order was obtained without the knowledge of the First Defendant and that the order itself is in fact defective because the Originating Summons was short served and thus tantamount to no service at all. Furthermore, there has not been a delay in challenging service as well, because the challenge has been taken in Enclosure 20.
- After giving due consideration to both parties’ arguments, I overruled the Plaintiff company’s objection as I was of the opinion that the objection was only technical in nature and that I should go to the merits of the applications to set aside service and the default order.
Manner of Service & Set Aside Substituted Service Order
- The law requires that the proceedings be brought to the notice of the First Defendant by serving the proceedings. It is the First Defendant’s submission that if the Plaintiff company knew all along where the First Defendant would be, during working hours, they owe an obligation to attempt service where the First Defendant can be found and not where they know he is going to be absent. They cannot now say that they were unsure of the First Defendant’s address because they have themselves visited him there and this fact was not denied in the affidavits. In addition, having been unsuccessful in serving the First Defendant personally, they attempted to fix an appointment. The letter by which the appointment was fixed was never delivered. The obligation is on the Plaintiff to ensure this as item 6 to Practice Note 1 of 1968 clearly envisages this:
“6. On keeping the appointment the process server should inquire whether the defendant has received the letter of appointment with the copy document, and if it is stated that the defendant, is away, inquiry should be made whether or not letters are being or have been forwarded to an address within the jurisdiction; the object is to show that the defendant has received communications sent to him.”
- Therefore according to the First Defendant, the Plaintiff company was not entitled to serve the originating summons by substituted service as the letter of appointment was undelivered.
- Plaintiff on the other hand contends that they have complied with the Practice Note as item 2 of the Practice Note only requires the Plaintiff to attempt service at the residential address if it is known. In support of his contention he cites the case of Re S. Nirmala A/P Muthiah Selvarjah T/A Shamin Properties; Ex Parte the New Straits Times Press (M) Sdn. Bhd. (1988) 2 MLJ 616:
“The calls should only be made at the defendant’s residence if such address (it does not matter whether it is the permanent address or only a temporary address) is known. If the address of the defendant’s residence is not known, the call obviously cannot be made there but may be made at his business address. It is equally obvious that such a call at the business address cannot be made if that address is not known. The Note goes on to provide that even if the residential address of the defendant is known the call may be made at his business address (if that is also known) but only if the claim relates to the defendant’s business.”
- Now, the Practice Note recommends certain steps to be taken before the application for substituted service is made. For convenience, Items 1 & 5 of the Note are reproduced below.
- Item 1 provides: “The calls should be made at the defendant’s residence, permanent or temporary, if known; otherwise, or if the claim relates to the defendant’s business, at his business address. If the defendant has left the address given on the writ, this should be stated in the affidavit. If a copy of the document to be served is left, it must be in a sealed envelope addressed to the defendant.”
- Item 5 provides: “The second call should be made by appointment by letter sent to the defendant by ordinary prepaid letter post, giving not less than two clear days’ notice, enclosing a copy of the document to be served, and offering an opportunity of making a different appointment.”
- In the present case, the Plaintiff company’s solicitors had informed the First Defendant’s solicitors vide letter dated 07.09.1994, that the Plaintiff company had instituted legal proceedings against the First Defendant and asked if they had instructions to accept service.
- Later the Plaintiff company proceeded to attempt personal service of the cause papers at the First Defendant’s residence at No. 8 Lorong Cendrai, Lucky Gardens, Bangsar Park, 59000 Kuala Lumpur. The First Defendant was however not present at the premises and accordingly a Notice of Appointment for service of the said Originating Summons was posted under cover of letter dated 15.09.1994, wherein an appointment at 9.30 a.m. on 23.09.1994 was fixed. The letter was unclaimed by the First Defendant. At the appointed time and date when the Process Server went to the said premises, the First Defendant was again not present.
- It is thus clear that the Plaintiff company has complied with the Practice Note as item 2 only requires the Plaintiff company to attempt service at the residential address, if it is known. In this case the residential address is known and the First Defendant has not disputed this fact. It is only when the claim relates to the First Defendant’s business that the call may be made at the business address.
- The Practice Note also requires service to be attempted within reasonable hours. In this case the Process Server went to the First Defendant’s premises at 12.30 p.m. In my opinion it is within reasonable hours as it is normal daylight hour. As regards the Letter of Appointment that was sent to the First Defendant’s address and which was not claimed by the First Defendant from the post office, to my mind, he cannot now complain because had he claimed it he would know of the time fixed for the appointment.
- Lastly as the First Defendant has entered unconditional appearance in this case, he has waived the right to challenge service. The Singapore Court of Appeal in THE “AVRO INTERNATIONAL” (1988) 1 MLJ 147: “The effect of entering an unconditional appearance is twofold: (1) it waives any irregularity of the writ or its service; and (2) the defendant is considered to have submitted to the jurisdiction…. A defendant who wishes to set aside the writ or its service for non-compliance of the rules of procedure……… must therefore file a conditional appearance.” Per Lai Kew Chai J.
- Thus for the abovesaid reasons I had dismissed the First Defendant’s application to set aside the order for substituted service.
Set Aside Default Order
- In respect of the application to set aside the Default Order [Enclosure (20)], I was satisfied that the Plaintiff had taken sufficient steps to bring the Originating Summons to the attention of the First Defendant. (See Order 62 Rule 5(3) Rules of the High Court 1980).
- In the case of United Malayan Banking Corporation v William Koh Trading Company & Anor. (1969) MLJ 62: “I should like to quote the first paragraph under the heading ‘substituted service’ from Mallal’s Supreme Court Practice, page 76 Vol. 1 which states that:
- The intention which underlies all procedure with regard to substituted service is that the defendant will probably get to hear of the proceedings” per Romer L.J. in Duverall v Grant Advertising following the principle laid down in Porter v Freudenberg. So even when an order for substituted service has been made the judgment can be set aside when merits are disclosed and when the court is satisfied that the Defendant was not aware of the proceedings and was not avoiding service which is tantamount to knowledge of the proceedings. Sockalingam Chettiar & Ors v Somasundram Chettiar.”
- “In this particular case the applicant’s affidavit has not shown to my satisfaction that (a) the first defendants were not aware of the proceedings and (b) that they were not evading service. I am of the opinion that the substituted service on the first defendants were in the circumstances of this case a proper service and that judgment obtained in default of appearance of the first defendants was regular and cannot be said to be irregular merely because the applicant alleges, which is disputed, that the first defendants had at all material time lived and are still living in Singapore.”
- It is also the First Defendant’s argument that the default judgment ought to be set aside as there are merits in his defence. He contends that despite the presentation of the winding up petition, he is still entitled to validate the sale and transfer of the land in accordance with section 223 of the Companies Act 1965. He further argues that the default judgment is wrong in law in that it fails to take into account section 66 of the Contracts Act 1950 and that the Plaintiff is obliged to return any advantage obtained by reason of the sale being void. He claims that he procured the discharge of a charge in favour of a Hong Kong Bank and this is a benefit to the company. Now, Section 223 can only operate upon a validation order being obtained which is subject to the Court’s discretion. For ease of reference Section 223 is reproduced below:
“Any disposition of the property of the company including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders be void.”
- Further in the case of Kimoyama Elektrik (M) Sdn. Bhd. v Metrobuilt Construction Sdn. Bhd. (1990) 3 MLJ 309: “The question of validating a transaction is at the discretion of the court but a person who seeks an order to validate a transaction must make an application for such an order.In the present case there is no such application. In any event even if there is an application this is not a proper case for the court to make such an order. If a validating order is made, Fullmark would be paid a substantial sum of money at the expense of the other creditors.”
- Therefore, in our case it is my considered opinion that since as at the date of the Default Judgment [Enclosure (17)], the First Defendant had not made any application to validate the transfer, despite the fact that he knew the Plaintiff company was wound up when he became a Director one month after the transfer and also the fact that he was informed by the Plaintiff company’s solicitors that the transfer was null and void pursuant to Section 223 of the Companies Act 1965.
- I dismissed his application to set aside the Default Order, with costs. As regards his contention that the Default Order is wrong in law as it fails to take account of Section 66 of the Contracts Act 1950, I am satisfied, after giving due consideration to the affidavits, namely Enclosures (19), (22) & (26) that the contention is both factually inaccurate as well as misconceived in law.
Source: Kwang Hap Siang SB v. Koh Thong Chuan & Anor  MLJU 233. High Court Kuala Lumpur. Rahmah Hussain JC.
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