ZENN HRB SDN BHD v LIANG KEE DEVELOPMENT SDN BHD

Case Significance

A robust application of the clean-hands and approbation-and-reprobation principles: a party that affirmed a default judgment by conduct, paid under it and took the benefit of striking out a winding-up petition based on it cannot later invoke section 471(1) of the Companies Act 2016 to undo a settled compromise; the originating summons was dismissed as an abuse of process.

This High Court (Ipoh) decision concerns an originating summons that the court treated not as a matter of mere procedural technicality but as a question going to the finality of litigation and the abuse of court process. The plaintiff sought declaratory relief, framed under section 41 of the Specific Relief Act 1950, section 2 of the Civil Law Act, section 471 of the Companies Act 2016 and Order 92 rule 4 of the Rules of Court 2012, contending in substance that a Judgment in Default had been obtained without leave under section 471(1) of the Companies Act 2016.

The court characterised the application as an opportunistic attempt to overturn a concluded settlement reached by consent, which had long been settled by mutual compromise. It framed the real question as whether the court should lend its equitable jurisdiction to a party who had remained silent when it mattered, had made payment when it suited, and now pleaded illegality when it no longer wished to honour its compromise. In addressing that question the court invoked the maxims of equity, including that a party who seeks equity must do equity and that a party who comes into equity must come with clean hands, and it examined whether the plaintiff had approbated and reprobated by taking the benefit of the arrangement.

On the findings, the plaintiff had affirmed the judgment by its conduct, had made substantial payments, and had obtained a benefit by striking out a winding-up petition that was based on the same Judgment in Default. The court held the plaintiff had raised no objection at the material time and that the belated challenge was inconsistent with the record and made in bad faith, as an attempt to undo a settled compromise for financial advantage. The court found the application to be an abuse of process and dismissed the originating summons with costs of RM2,000 payable to the defendant.