After clarifying the concepts of joint, several and joint and several liability, the Federal Court held that the law with regard to a joint liability situation in Malaysia is governed by Section 44(1) of the Contracts Act 1950. This section provides that the creditor may proceed against one or any number of the joint promisors to perform the whole of the promise, unless the contract expresses otherwise. It therefore follows that so long as a judgment debt remains unrealised, a judgment creditor, i.e. the EPF Board, is entitled to proceed against one judgment debtor, or the other, or both to satisfy the entire judgment sum.
Critically, the Federal Court also held that the insertion of the term ‘joint liability’ in the judgment itself would not entitle the courts to conclude that liability is divided in equal proportions against each of the judgment debtors as it would be contrary to Section 44 of the Contracts Act 1950.
In cases where only one promisor has fully paid off the promised amount, that promisor is entitled to claim contribution from the other joint promisor for an equal contribution by virtue of Section 44(2) of the Contracts Act 1950. However, this is strictly a matter between the joint promisors inter-se
and does not affect the rights of the creditor under Section 44(1) of the Contracts Act 1950.
Following the above, the Federal Court held that the Court of Appeal in Sumathy
had erred in law by holding that the judgment creditor is only entitled to seek recovery in equal proportions against each of the defendants.
The EPF Act
The Federal Court also noted that Section 46 of the Employees Provident Fund Act 1991 (“EPF Act
”) imposes joint and several liability on the directors of a company for unpaid contributions. The Federal Court held that the express wordings of Section 46 of the EPF Act prevails over the terms of the judgment.
This decision of our Federal Court is noteworthy in two respects. First, it clarifies that Sumathy
was wrongly decided. Second, it confirms that liability of judgment debtors under a court judgment would in effect be joint and several unless the judgment expressly states that liability is to be borne in equal or other specified proportions.
Case commentary by Karen Tan (Associate) of the Dispute Resolution Division of Skrine.