Lembaga Hasil Dalam Negeri (LHDN) v KONG SUN ENTERPRISE SDN. BHD. (DAHULU DIKENALI SEBAGAI SPECIAL LAND SDN. BHD.)

Case Significance

Confirms that a default judgment obtained without valid service under Order 10 — where the plaintiff served at a known-inactive address, failed to seek substituted service and produced no AR card or proof of receipt — is irregular and will be set aside as of right, and that delay caused by the plaintiff's own conduct does not bar relief.

This High Court decision at Johor Bahru concerns an application by a company to set aside a default judgment entered against it in a tax recovery action brought by the Government of Malaysia. The default judgment, entered in February 2022 for some RM8,323,513.22 in allegedly outstanding income tax and related increases, had been obtained on the footing that the company had failed to enter an appearance within time after the writ and statement of claim were said to have been served on it; the Government had subsequently obtained a winding-up order against the company in its absence, and a private liquidator had been appointed. The central question was whether the writ and statement of claim had been validly served under Order 10 of the Rules of Court 2012, service having been attempted by AR registered post. Examining the evidence, the Court found that service had not been validly effected: the Government had served the documents at an address that was no longer active and had failed to apply for an order for substituted service even though it knew the old address was inactive, and it had failed to produce the minimum evidence of service, such as an AR card or other proof of receipt. In those circumstances service was not proven, rendering the default judgment irregular. The Court also rejected the Government's argument that the company had delayed in applying to set the judgment aside, holding that the company could not be blamed for a delay caused by the Government's own choice to serve at a closed address, and that it had acted promptly once it became aware of the judgment. Concluding that service had not been proved and that the judgment was irregular, the Court set the default judgment aside as of right. Because the judgment had been obtained irregularly, the company did not even need to demonstrate a meritorious defence, an irregular judgment being one that a defendant is entitled to have set aside ex debito justitiae.