Can one person be liable to the whole debt if it’s a case of joint liability?

LEMBAGA KUMPULAN WANG SIMPANAN PEKERJA v. EDWIN CASSIAN NAGAPPAN @ MARIE [2021] 1 LNS 928

• The Employees’ Provident Fund Board (“the Board”) filed a Sessions Court suit against a company, Fix Interior Collections Sdn. Bhd. (“the Company”) and its directors, two siblings named Edwin Cassion (“Edwin”) and Bernard John, premised on the company’s failure to make employer contributions on behalf of its employees.

• The parties recorded a consent judgement on 24 April 2013, where each of the three defendants agreed to pay the Board the arrears amounting to RM133,697.00 for the period from October 2010 until January 2012 in 24 instalments, together with dividends and interest as well as legal fees.

• The consent judgement did not include the phrase that the defendants would be “jointly and severally” liable for the judgement sum.

• The Company and two siblings failed to comply with the terms of the consent judgement as they only made part-payment, leaving an outstanding balance of RM90,857.00 with dividends and interest.

• The Board then issued a bankruptcy notice and a creditor’s petition against Edwin alone.

• Edwin applied to set aside the bankruptcy notice and the creditor’s petition at the High Court.

• The application to set aside both the bankruptcy and the creditor’s petition was allowed. Dissatisfied, the Board appealed to the judge in chambers. The Board’s appeal was dismissed by the Judge of the High court.

• The High Court, therefore, ordered them to pay the sum in equal proportions. The Court further held that if the words “jointly and severally” liable were not inserted into the consent judgement, the court cannot look behind judgement.

• The Board’s appeal to the Court of Appeal was similarly unsuccessful and was dismissed. The Court of Appeal was of the considered view that the liability of each of two directors was only half of the debt owed to the Board.

• The Board appealed to the Federal Court.

• Under the old common law position, there was no indication that in a joint liability situation, the liability of two or more debtors is shared. That is a misconception of the meaning of joint liability.

• In Malaysia, the common law is inapplicable as we are governed by the Contracts Act 1950. Unless a contrary intention is expressed in the contracts, all joint contracts effectively impose a full liability for the debt on each of the promisors. Thus, where the debts are jointly incurred, each promise is liable for the whole amount.

• Where there is a judgement premised on joint liability, the creditor is at liberty to go against one, or the other, or both.