15 September 2021

Liability – Joint and severally – Consent Judgement did not include phrase that defendants would be ‘jointly and severally’ liable for judgment sum – Employees Provident Fund Act 1991

Lembaga Kumpulan Wang Simpanan Pekerja v Edwin Cassian Nagappan
[2021] 7 CLJ 823 | Federal Court

- see the grounds of judgment here

Facts The Employees’ Provident Fund Board (‘EPF Board’) (the ‘Appellant’) commenced a suit against a company and its directors (‘Defendants’), in which one of them was Edwin Cassian Nagappan (the ‘Respondent’). A consent judgement was entered between the parties, whereby the Defendants agreed to pay the EPF Board the arrears in employer contributions (‘Consent Judgement’). The Consent Judgement however, did not include the phrase that the Defendants would be ‘jointly and severally’ liable for the judgment sum. The Defendants failed to comply with the consent judgment and the EPF Board proceeded to issue a bankruptcy notice against the Respondent alone. The Respondent applied to set aside the bankruptcy notice and the application was allowed by the Senior Assistant Registrar. Subsequently, the EPF Board filed an appeal at the High Court and then the Court of Appeal but it was both similarly dismissed on grounds that the court could not import into the enforcement or bankruptcy order, the phrase ‘jointly and severally’. Hence, the present appeal.

Issue Whether failure to include ‘jointly and severally’ in a court order meant each defendant would only be liable for a portion of the judgment sum, proportionate to his share/interest/obligation?

Held In allowing the appeal, the Federal Court looked at s. 44 of the Contracts Act 1950, which provides that when two or more persons make a joint promise, the promisee may proceed against one or both of the joint promisors to perform the whole of the promise. Since the appeal dealt with unpaid contributions, the Federal Court also turned to s. 46 of the Employees Provident Fund Act 1991 (‘EPF Act’), which imposes joint and several liability on the directors of a company for unpaid contributions. Thus, the Federal Court held that these provisions must be given full effect and it was not open to the courts to stultify, vary or whittle down the clear provisions promulgated by Parliament in relation to liability for EPF contributions. The Federal Court further pointed out that the previous Court of Appeal decision in Sumathy Subramaniam v. Subramaniam Gunasegaran & Another Appeal [2018] 2 CLJ 305, in which the court below decided that a plaintiff who becomes a judgement creditor where the liability is joint, is only entitled to seek recovery in equal proportions against each defendants, was flawed because it pre-supposed that liability is proportionate to the number of promisors, from the perspective of the creditor. The Federal Court referred to s. 44 of the EPF Act to hold that the courts below had erred in law in invoking the presumption that joint liability was for only half the debt and not the full amount, hence, the EPF Board was entitled to proceed against one promisor, or the other, or both, in order to procure full performance of the promise. In conclusion, liability of judgment debtors under a court judgment would in effect be joint and several unless the judgment expressly states otherwise.

ZUL RAFIQUE & partners
{15 September 2021}

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