CIVIL PROCEDURE

Tenaga Nasional Bhd v. Transformer Repairs & Services Sdn Bhd & Ors [2024] 1 CLJ 110 [Court of Appeal]

Brief facts

Zanwa Sdn Bhd (‘Zanwa’) owned a piece of land which was used as a factory for its manufacturing and business operations. In 2011, the appellant/plaintiff, Tenaga Nasional Berhad (‘TNB’) entered into a contract with Zanwa where Zanwa was to supply, erect and commission two units of power transformers (‘two power transformers’) for TNB. The two power transformers were supposed to be built by Zanwa on Zanwa’s own land and TNB had paid a total sum of RM8,106,491.34 to Zanwa. Notwithstanding this payment, Zanwa breached the contract by failing to deliver the two power transformers to TNB, therefore, the two power transformers had been kept on the said land.

In 2017, the land was sold to the second defendant (“the current land owner”) by way of public auction. Subsequently, the current land owner entered into a tenancy agreement with the first respondent/defendant (‘Magnitude’) of which Magnitude was an integral part of Zanwa. Magnitude allowed Zanwa to continue its manufacturing and business operations on the land, including the completion of the two power transformers for TNB. Zanwa was later wound up.

Zanwa vide letters, informed TNB that it had sold its factory to a third party and was unable to continue the contract and thus requested TNB to collect back the two power transformers. Another problem arose simultaneously when the current land owner filed a suit against Magnitude for breach of tenancy agreement. A summary judgment was granted in favour of the current land owner. Premised on this summary judgment, the current land owner obtained a writ of seizure and sale (‘WSS’) of all movable properties on this said land. The seized movable properties including the power transformers were then sold by the bailiff by way of public auction (‘judicial auction’) to the third defendant for a sum of RM216,000 (‘the sale proceeds’).

Dissatisfied with the judicial auction, Magnitude appealed to the High Court (‘HC’) against the current land owner’s summary judgment. Until this point of time, TNB had still yet to collect the two power transformers from the land. The court bailiff then seized all movable properties on the land including the two power transformers, pursuant to the WSS. Magnitude then filed an application to stay the execution of the current land owner’s summary judgment and the WSS, pending the disposal of Magnitude’s HC appeal against the current land owner’s summary judgment. The seized movable properties, including the two power transformers, were sold by the bailiff at the judicial auction to the third respondent/defendant (‘third defendant’).

Magnitude filed two applications in Klang Sessions Court for the following orders:-

  i. Setting aside of the WSS and the judicial auction;

  ii. The return of the sale proceeds for the auction to the third defendant; and

  iii. The return of the seized movable properties, except the two power transformers, to the Magnitude.

The two applications were allowed. The third defendant has filed an appeal to Klang High Court against Klang Sessions Court’s decision.

Magnitude’s High Court appeal on the current land owner’s summary judgment was allowed.

The current land owner’s appealed against the HC’s decision to the Court of Appeal. The current land owner appeal was allowed and the current land owner’s summary judgment was restored. Thus, the current land owner’s summary judgment is final and binding.

The third defendant filed an appeal to Klang High Court against Klang Sessions Court’s decision in regarding the setting aside of WSS and judicial auction (‘third defendant’s appeal’) and the appeal was allowed. Magnitude has obtained leave to appeal to Court of Appeal (‘CA’) against the Klang High Court’s decision.

An amended Originating Summons (amended OS) was filed by TNB to seek reliefs for the two power transformers against Magnitude, current land owner and also against third defendants.

The Klang HC dismissed the amended OS. TNB appealed against Klang HC’s decision.

Klang HC’s Decision

[1] The High Court judge (‘HCJ’) relied on the Federal Court’s judgment in Lim Ker v. Chew Seok Tee [1967] 1 LNS 88; 2 MLJ 253 that the bailiff could lawfully seize the two power transformers in the possession of Magnitude.

[2] Prior to the judicial auction, TNB had knowledge of the current land owner’s suit in Klang SC regarding the Magnitude’s breach of tenancy agreement and bailiff’s seizure but TNB failed to send any letter to the current land owner to oppose the bailiff’s seizure.

[3] The burden was on TNB and not the land owner to prove that the two power transformers belong to TNB.

[4] TNB had no ownership of the two power transformers because the construction of the two power transformers had not been completed and TNB had not paid in full price to Zanwa.

[5] With regard to the two power transformers, Zanwa was the interested party and “it begs the question” as to why TNB did not make Zanwa a party in this amended OS.

[6] As TNB had no possession of the two power transformers and has no immediate right to possess the same, TNB had “no locus standi and/or cause of action” against Magnitude and current land owner for the tort of conversion.

[7] The current land owner dealing of the two power transformers in this case did not amount to a commission of tort of conversion. This was because Klang HC (‘third defendant’s appeal’) had decided that the execution of the WSS and judicial auction was done pursuant to legal process.

[8] Due to TNB’s inaction and delay in claiming for the two power transformers (‘TNB’s inaction’), TNB was barred by laches, acquiescence, waiver, estoppel and/or abandonment from succeeding in the amended OS.

[9] In view of TNB’s inaction, the HCJ refused to exercise his discretion under s.41 of the Specific Relief Act 1950 (‘SRA’) to grant declarations in favour of TNB in the amended OS.

[10] The HCJ determined that as the third defendant was a bona fide purchaser of the two power transformers who had paid the sale proceeds for auction without any notice of TNB’s claim on the two power transformers, the third defendant should be entitled to the two power transformers.

[11] The HCJ decided that the amended OS had been filed for a collateral purpose, namely to overcome TNB’s inaction.

Court of Appeal’s Decision (Judgment delivered by Wong Kian Kheong JCA) :-

Premised on the appealable errors committed by the HCJ, the CA allowed the appeal and held that:

[1] the Klang HC’s decision was set aside;

[2] the amended OS was allowed where the following declarations and orders were granted:

(a) TNB was the lawful and beneficial owner of the two power transformers;

(b) the bailiff’s seizure and judicial auction of the two power transformers were invalid and void;

(c) any interest in the two power transformers obtained by the third defendant in the judicial auction was unlawful and was hereby set aside;

(d) an order for the third defendants to return the two power transformers to TNB within seven days from the date of this court’s order and the cost of this return shall be borne solely by TNB;

(e) the money in the client’s account of the current land owner’s solicitors, as trustees for the third defendant’s payment of the sale proceeds for the judicial auction of the two power transformers, shall be returned forthwith to the third defendant; and

(f) all court fees and commission paid by the third defendant with regard to the judicial auction of the two power transformers shall be refunded to the third defendant.

Conclusion

[3] Any execution creditor who has been informed that movable property in the possession of an execution debtor may belong in equity to a third party, should inquire from the third party before seizing and selling the movable property pursuant to WSS.

Case Digest 

GEO WIN SDN BHD v. CC LAND RESOURCES SDN BHD & ANOR [2025] 1 CLJ 39 (Court of Appeal)

[1] A party may be estopped from asserting a claim if it has previously acted in a way that is inconsistent with that claim. Specifically, a party is estopped from arguing that an agreement/contract is illegal or unenforceable if they had previously acknowledged and agreed to its terms.

[2] While contracts should be interpreted according to their terms, a rigid interpretation that defeats business common sense ought to be avoided.

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