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Beyond Statutory Enforcement: The High Court Examines Enforcement of Foreign Judgments under Common Law

14 February 2022

Key Contacts:
 
Siva-Kumar-web.jpg Trishelea-web.jpg Janice-Ooi_Resize-1.jpg
Siva Kumar Kanagasabai Trishelea Ann Sandosam Janice Ooi
 
 “The defendant’s complaints were disguised grounds of appeal against the decision of the foreign court. This court or the Malaysian courts is not an appellate court to rehear the dispute or scrutinise the foreign judgment for errors…” – per Choo Kah Sing, J
 
Siva Kumar Kanagasabai (assisted by Trishelea Ann Sandosam and Janice Ooi) successfully represented the Plaintiff in PT Sandipala Arthaputra v Muehlbauer Technologies Sdn Bhd [2021] 9 CLJ 484, an action to enforce a judgment issued by the South Jakarta District Court (“Indonesian District Court”) for approximately RM138 million under Malaysian common law and private international law. The High Court decision examined the key considerations and defences available when enforcing a judgment given by a foreign court which is not within the scope of the Reciprocal Enforcement of Judgments Act 1958 (“REJA").1 It reiterates that where foreign judgments cannot be statutorily enforced under the REJA, they can be enforced under common law.
 
Key Points

  1. A foreign judgment for a definite sum, and which is final and conclusive, can be enforced under the common law in Malaysia as the unsatisfied foreign judgment constitutes the cause of action. There are only four defences that a defendant can raise, namely: (i) that the foreign court had no jurisdiction; (ii) that the foreign judgment was obtained by fraud; (iii) that the foreign judgment would be contrary to public policy; and (iv) that the proceedings in which the foreign judgment was obtained were opposed to natural justice.

  2. If the person against whom the foreign judgment was given, submits to the jurisdiction of that foreign country by voluntarily appearing in the proceedings and defending the claim on the merits, jurisdiction of the foreign court would be established under Malaysian common law and private international law.

  3. The common law rule of breach of natural justice mainly focuses on the irregularity of proceedings. It does not involve an encroachment into the merits of the case or a re-evaluation of the admissibility of evidence before the foreign court.

  4. Public policy considerations under the common law involve the nature of the foreign judgment.  It has to be one that would shock the conscience of the Malaysian Court, be clearly injurious to the public good or be wholly offensive to the ordinary reasonable and fully informed member of the public. 
Brief Facts
 
The Plaintiff, an Indonesian company, entered into a contract with the Defendant, a Malaysian company, to purchase various machines, spare parts and services (“Contract”). The Contract contained an arbitration clause to the effect that parties agreed to resolve any disputes arising from the Contract by arbitration in Geneva, Switzerland.
 
Subsequently, disputes arose between the parties which resulted in the Plaintiff bringing an action against the Defendant and its related company (collectively referred to as the “Indonesian Defendants”) in the Indonesian District Court (“Indonesian Action”). The Indonesian Action was premised on two causes of action, namely, an action for breach of contract and an action for unlawful act (similar to the tort of conspiracy under the common law). The Indonesian Defendants challenged the Indonesian District Court’s jurisdiction to hear the Indonesian Action on the basis of the arbitration clause.
 
The Indonesian District Court made an interlocutory ruling that it had jurisdiction to hear the unlawful act claim, but the breach of contract claim ought to be determined by way of arbitration. The Indonesian District Court further directed parties to proceed on the merits vis-à-vis the unlawful act claim. Ultimately, the Indonesian District Court found in favour of the Plaintiff on the unlawful act claim and awarded damages to the Plaintiff (“District Court Judgment”). The Indonesian Defendants appealed the District Court Judgment on the merits and the issue of jurisdiction at all levels of the Indonesian Court system (“Indonesian Courts”), but were unsuccessful. The Indonesian Defendants did not satisfy the District Court Judgment.
 
In March 2019, the Plaintiff commenced a common law action in the High Court in Malaysia to enforce the District Court Judgment against the Defendant (“Enforcement Application”). In opposing the Enforcement Application, the Defendant raised the following defences:

  1. the District Court had no jurisdiction to hear and decide the Indonesian Action in view of the arbitration clause;

  2. the District Court Judgment was obtained through a breach of natural justice; and

  3. the District Court Judgment contravened Malaysian public policy. 
Decision of the High Court
 
Defences against common law action on foreign judgment
 
According to the learned High Court Judge, foreign judgments obtained in countries other than those listed in the First Schedule of REJA have to be enforced through the common law rule. For the Malaysian court to recognise a foreign judgment under the common law rule, which the Plaintiff’s case is mounted on, the foreign judgment must be for a definite sum and be final and conclusive (Adhiyasa Saranamas v. Kumpulan Guthrie Bhd & Ors [2014] 1 MLJ 91, p. 95, (HC); and The University of British Columbia v. Lim Siew Eng [2020] 1 LNS 710, (HC)).
 
Upon the above pre-conditions being met, the Malaysian court would enter judgment recognising the foreign judgment, unless there is/are sustainable defences which have been raised opposing its recognition.
 
According to the High Court, the Malaysian Supreme Court in See Hua Daily News Bhd v. Tan Thien Chin & Ors [1986] 2 MLJ 107, p. 109, has held that only four defences may be raised in an action on a judgment in common law, namely that: (1) the foreign court had no jurisdiction; (2) the judgment was obtained by fraud; (3) the judgment would be contrary to public policy, and (4) the proceedings in which the judgment was obtained were opposed to natural justice.
 
The Defendant in this case had raised three of the four defences available. The High Court’s findings on each are set out below.
 
Jurisdiction of the Indonesian Courts
 
The High Court held that whether a foreign court has jurisdiction over a defendant is to be considered from the perspective of Malaysian common law and private international law.  The international jurisdiction of a foreign court can be established in the following four cases (citing the leading textbook of Dicey, Morris and Collins on The Conflict of Laws, 15th Ed, Vol. 1, Sweet & Maxwell, Thomson Reuters):

  1. First case – where the person against whom judgment was given was, at the time the proceedings were instituted, present in the foreign country.

  2. Second case – if the person against whom the judgment was given was claimant or counterclaimed, in the proceedings in the foreign court.

  3. Third case – if the person against whom the judgment was given, submitted to the jurisdiction of that country by voluntarily appearing in the proceedings. With regard to appearance, voluntary submission includes where a defendant contests the court’s jurisdiction, but nevertheless proceeds further to plead to the merits.

  4. Fourth case – if the person against whom the judgment was given, had before the commencement of the proceedings, agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of that country. 
The High Court found that as per the Third case, the Defendant had submitted to the jurisdiction of the Indonesian Courts when it defended the Indonesian Action on the merits all the way to the apex Court in Indonesia (in addition to its challenge on  jurisdiction). Hence, the Defendant is bound by the outcome of the adjudication by the Indonesian Courts. 
 
The High Court also found that under Malaysian common law, even the entering of conditional appearance to challenge jurisdiction in foreign proceedings amounts to submission to jurisdiction as per Henry v. Geoprosco International [1975] 3 WLR 620, and that Malaysia’s common law position is different from that in the United Kingdom which has been modified by the Civil Jurisdiction and Judgments Act 1982, section 33(1).   
 
In rejecting the contention that the dispute fell within the scope of the arbitration clause and therefore the Indonesian Courts did not have jurisdiction to adjudicate, the High Court held that:

  1. an arbitration clause could not oust the jurisdiction of the Indonesian Courts and that the exercise of discretion on whether or not to adjudicate a subject matter is “always within the inherent powers of the courts”; and

  2. it will not give the arbitration clause a wide interpretation as sought by the Defendant as doing so is akin to “re-opening the case and re-litigating the jurisdiction argument which had been ventilated by the defendant’s counsel(s) (in Indonesia)”. 
Natural Justice
 
The High Court noted that in considering the requirements of natural justice for the purposes of enforcement of a foreign judgment and the special defence thereto, the test is: “did the proceedings in this foreign court offend against our views of substantial justice?” (following Adams v. Cape Industries Plc [1991] 1 All ER 929, at p. 1049; Pemberton v. Hughes [1899] 1 Ch 781).
 
When considering the concept of “substantial justice”, the Malaysian common law would mainly focus on the irregularity of proceedings. The Court was satisfied that there was no breach of natural justice in the present case as the Defendant was notified of the proceedings in the Indonesian Courts, was properly and legally represented at every stage of proceedings  and was given its day in court at every opportunity available at every level of the judicial system in Indonesia.
 
The concept of “substantial justice” does not mean the right to encroach into the merits of the case or to re-evaluate the admissibility of evidence before the foreign court. Even if the evaluation of the evidence and arguments by the foreign court was questionable and led to the foreign court being “manifestly wrong” in its conclusion, the foreign judgment is still not impeachable based on the principle of substantial justice. 
 
Hence, the Defendant’s contentions that the Indonesian Courts wrongly dismissed the jurisdictional challenge and that its arguments/evidence were not duly considered fall outside the ambit of the natural justice defence. Similarly, its contention that damages were not proven and excessive, and that the grounds of judgment did not contain reasons, are irrelevant to the consideration of whether there had been a breach of natural justice.
 
Malaysian public policy
 
The High Court explained that a complaint under the head of public policy has to be one that would “shock the conscience” of the Malaysian Court, be “clearly injurious to the public good or be wholly offensive to the ordinary reasonable and fully informed member of the public”.
 
Having considered the complaints raised by the Defendant, which essentially challenged the merits of the Indonesian Courts’ decisions, the High Court was of the view that they could not have been said to harm public good or public interest. The High Court cautioned against treating public policy as an “all-encompassing” defence and reiterated that the Malaysian Courts are not appellate courts that will rehear disputes decided by a foreign court or scrutinise a foreign judgment for errors.
 
Comments
 
Given the dearth of authorities, this decision of the High Court provides a much welcomed analysis of the Malaysian common law position in recognising and enforcing a foreign judgment that falls outside the ambit of REJA. The decision makes clear that the Malaysian Court will not reconsider the merits of the claim which led to the foreign court entering judgment, and has clarified the limits of the three of the four defences available to a judgment debtor in resisting enforcement.
 
The case is pending appeal in the Court of Appeal.
 
Case summary by Janice Ooi (Senior Associate) of the Dispute Resolution Practice of Skrine. 
 
1 The foreign courts within the scope of REJA are certain superior courts in UK, Hong Kong, Singapore, New Zealand, Sri Lanka, India and Brunei.
 

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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