Court of Appeal decision poses problems for claiming recurring debts - International Law Office

International Law Office

Litigation - Malaysia

Court of Appeal decision poses problems for claiming recurring debts

August 23 2011


Malaysian law continues to lag behind that of other jurisdictions on the issue of whether a cause of action that arises after the date of a writ may later be included in the same lawsuit by way of an amendment to the proceedings. The Court of Appeal recently overturned a High Court ruling and reaffirmed the previous ruling of the Federal Court in Sio Koon Lin v SB Mehra ([1981] 1 MLJ 225).

In that case, an agreement had been reached between the two parties for the debtor to pay RM100,000:

  • RM15,000 was due on execution of the agreement;
  • RM35,000 was due by October 12 1972; and
  • The remaining RM50,000 was due by equal monthly instalments of RM10,000 on the 12th day of each of the five succeeding months thereafter.

However, there was no provision for the full sum to become due and payable in default of any one payment. The creditor filed a writ on October 7 1972 claiming payment of RM85,000 and later amended the writ on October 14 1972 to claim payment of any sum found due following the taking of an account.

The original decision in Sio Koon Lin was premised on a 1932 English decision in Eshelby v Federated European Bank ([1932] 1 KB 254), but was since overturned in Vax Appliances Limited v Hoover Plc ([1990] RPC 656) and Hendry v Chartsearch Ltd ([1998] CLC 1382). However, following the Court of Appeal decision, Sio Koon Lin once more constitutes good law and continues to pose a problem for creditors running accounts and claiming debts that arise on a recurring basis.

In theory, a hirer under a hire purchase agreement could therefore default on payment for several months and be liable only for the amount outstanding on the date on which proceedings against it are commenced. The hirer could then wait until the trial is about to begin, up to one year later, and then tender payment for the amount outstanding on the date of the writ. This would force the creditor to file a fresh suit for the amounts due for the period since the date of the writ and allow the hirer to delay payment and effectively grant itself an extended credit period.

For further information on this topic please contact Nahendran Navaratnam or Wong Wye Wah at Kadir Andri & Partners by telephone (+603 2078 2888), fax (+603 2078 8431) or email (nn@kaaplaw.com or wyewah@kaaplaw.com).


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