BEYOND STATUTORY ENFORCEMENT: MALAYSIA'S APEX COURT DISMISSES A COMMON LAW ACTION FOR ENFORCEMENT OF FOREIGN JUDGMENT DUE TO FAILURE TO ADDUCE THE FOREIGN JUDGMENT

There is a simple, but fundamental, difference between a statutory enforcement under Reciprocal Enforcement of Judgments Act 1958 (“REJA”) and a common law action.  REJA covers cases where a judgment creditor wants to enforce a decision from a jurisdiction which enforces Malaysian court judgments (the so called 'reciprocity').  When REJA applies, the foreign judgment can effectively be converted into a Malaysian judgment.  However, if a creditor holds a judgment from somewhere that does not enforce Malaysian decisions, then it may still be enforced through a common law action.  Here, the creditor brings a new Malaysian court case where it sues the debtor on the judgment.  The claim is not a full re-examination of the underlying dispute (e.g., 'you owe me money because you are in breach of contract'), but it relies on the foreign judgment (e.g., 'you owe me money because the courts of the UAE have said you do').

The Federal Court in Pembinaan SPK Sdn Bhd v Conaire Engineering Sdn Bhd-LLC & Anor [2023] 3 MLRA 287 has recently affirmed the legal position in Malaysia that a judgment creditor may institute a fresh action in the local courts to enforce a foreign judgment from a non-reciprocating country.

The Court was asked 6 questions on the procedural and evidential requirements to enforce foreign judgments by common law actions:

1. Whether a foreign judgment is enforceable by a common law action in Malaysia (the foreign country not being a First Schedule country under REJA) if the judgment is not proved as a foreign judgment or order in accordance with the Evidence Act 1950?

2. Whether a foreign judgment purporting to be a default judgment where liability on quantum and assessment of compensation was decreed in absentia satisfies the basic rules of fair procedure and natural justice to be enforceable by way of a common law action in the Malaysian courts?

3. In a common law action to enforce a foreign judgment not being a First Schedule country under the REJA, without the foreign judgment being proved in accordance with Chapter V of the EA 1950, whether there is a sustainable cause of action for other evidence to be admitted and weighed?

4. In a common law action to enforce a foreign judgment not being a First Schedule country under the REJA, whether the party responding to the common law action is limited only to the defences set out in See Hua Daily News Bhd v Tan Thien Chin & Ors [1986] 2 MLJ 107?

6. In a common law action to enforce a foreign judgment not being a First Schedule country under the REJA, whether the applicant suing upon that judgment as a cause of action is obliged to prove its claim on liability and quantum?
7. Whether a non-REJA foreign judgment benefits from the same limited defences against the registration of a First Schedule of REJA foreign judgment under section 5 of REJA?

In delivering its decision, the Court highlighted the requirements set out in the landmark Supreme Court decision in See Hua Daily News Bhd v Tan Thien Chin & Ors [1986] 2 MLJ 107 that a judgment creditor may sue in the local courts on a foreign judgment, as long as that judgment is (1) for a definite sum and (2) final and conclusive.

Background

By a letter of understanding, Al Tamouth Investments LLC ("Tamouth") appointed a joint-venture company, SPK-Bina Puri JV ("SPK-Bina Puri"), as the main contractor for a development project in Abu Dhabi. SPK-Bina Puri appointed Conaire Engineering Sdn Bhd-LLC ("Conaire") as the subcontractor to undertake certain construction works for the project.  That work was carried out and completed on time subject to certain claims of outstanding defective works.

Conaire subsequently initiated legal proceedings in Abu Dhabi against Tamouth and SPK-Bina Puri for payment of monies for work done in respect of the project and successfully obtained a judgment against SPK-Bina Puri ("Abu Dhabi Judgment"). After obtaining the Abu Dhabi Judgment, Conaire commenced proceedings against Tamouth and SPK-Bina Puri to enforce the Abu Dhabi Judgment in Malaysia. The action was resisted on several grounds, namely that there was a lack of knowledge of the existence of the Abu Dhabi Judgment and/or the related proceedings at the Abu Dhabi Court and that wrong parties were named in the enforcement action.

Decision

The Court had to consider the admissibility of copies of the Abu Dhabi Judgment which formed the underlying basis of the enforcement action. The Abu Dhabi Judgment was written in Arabic, and several versions of its English translation were tendered as evidence to support the enforcement action. The accuracy of the translations was however vigorously challenged due to discrepancies in the names and identities of the named defendants in the translations. None of the translations had the original copy of the Abu Dhabi Judgment attached, and the original copy of the Abu Dhabi Judgment was never produced in the enforcement action.

The Court found that the specific provisions of the Evidence Act 1950 and the evidentiary rules in Malaysia apply equally when dealing with a common law enforcement action. Since only copies and not the original of the Abu Dhabi Judgment was exhibited, and the copies exhibited were also not tendered in the manner prescribed under the law, there was no proof of the document central and critical to the underlying cause of action. Consequently, absent the Abu Dhabi Judgment, Conaire's claim remained unproved, and the enforcement action was dismissed on this ground alone.

In reaching its conclusion, the Court answered the first and third leave questions in the negative and declined to examine the remaining questions dealing with the matter of defences.

Whilst the Court had declined to answer the remaining leave questions, it went on to endorse the pre-requisites and available defences laid out by the Supreme Court in See Hua Daily News Bhd in resisting a common law enforcement action, namely that (i) the foreign court had no jurisdiction; (ii) the foreign judgment was obtained by fraud; (iii) the foreign judgment would be contrary to public policy; and (iv) the proceedings in which the foreign judgment was obtained were opposed to the principles of natural justice.

Commentary

It is little surprise that the first and third questions were answered negatively – it is always going to be necessary to prove the existence of a judgment if you want to enforce it.  The interesting and novel point is the second question posed.  Most of the world's court systems have a concept of default judgment – that is that a claimant can win if the defendant does not enter an appearance or submit a defence. It has become common for judgment debtors to resist the enforcement of foreign default judgments on the basis that the default judgments are not 'final and conclusive' in nature. Unfortunately, the legal world has no single agreed approach to dealing with this.  Some nations, such as India, have generally refused to enforce foreign default judgments. Others, such as England and Wales, have been happier to enforce, and to reject the argument that a default judgment is insufficiently final (as long as the defendant had proper notice of the proceedings). It remains to be seen what position the courts in Malaysia will take.  Will the courts allow the enforcement of default judgments outside the REJA regime?

Default judgments are common.  In considering whether to bring proceedings elsewhere and then enforce in Malaysia, there remains a real incentive to ensure that any proceedings are issued in a reciprocating state as, while Malaysia allows a creditor to sue on a non-REJA judgment, the value of non-REJA default judgments remains unclear.

For further information, please contact Peter Godwin, Craig Shepherd, Tse Wei Lim and Emily Lim or your usual Herbert Smith Freehills contact.

Disclaimer

Herbert Smith Freehills LLP is licensed to operate as a Qualified Foreign Law Firm in Malaysia. Where advice on Malaysian law is required, we will refer the matter to and work with licensed Malaysian law practices where necessary.