Litigation can be time-consuming and costly, which is why it should only be used for legitimate purposes. However, some parties misuse the court’s litigation process for their own ends. This led to the establishment of the tort of collateral abuse.

In Malaysia, the courts recognize the tort of collateral abuse as a cause of action. This means that an aggrieved party can file a suit against the party who has abused the court’s process. There are three essential elements that need to be established to prove the tort of collateral abuse: 

  1. the process complained of must have been initiated
  2. the purpose of initiating the process must be for something other than genuine redress, and
  3.  the plaintiff must have suffered damage or injury as a result.

Neither malice nor the termination of the proceedings in the plaintiff’s favour are necessary elements of the tort. A plaintiff in an action for collateral abuse of process need not prove that the defendant had invoked the process of the court maliciously. Neither does he have to prove that the proceedings terminated in his favour.

In contrast, Singapore’s courts do not recognize the tort of collateral abuse as a separate cause of action. In Lee Tat Development Pte Ltd v Management Corporation of Grange Heights Strata Title Plan No. 301 [2018] SGCA 50 case, the Singapore Court of Appeal held that recognising this as a separate tort would undermine the principle of finality in the law and encourage satellite litigation. The Court of Appeal suggested that there are other remedies available to address abusive litigation, such as striking out a case or applying for summary judgment.

The courts in Malaysia do not adopt the approach by the Singapore Court of Appeal. Here are some examples of cases where the Malaysian courts discussed the tort of collateral abuse.

Malaysia Building Society Bhd v Tan Sri General Ungku Nazaruddin Bin Ungku Mohamed [1998] 5 MLJ 425

Malaysia Building Society Bhd instituted bankruptcy proceedings against Tan Sri General Ungku Nazaruddin, which culminated in him being adjudicated a bankrupt. In response, Tan Sri Nazaruddin applied to set aside the orders and sought damages from Malaysia Building Society. The judge made an order annulling the bankruptcy and directed that damages be paid by the Malaysia Building Society to Tan Sri Nazaruddin. 

The Court of Appeal held that the High Court does not have the power to award damages when making orders to annul a bankruptcy; it is only upon proof of the elements that go to make up the tort of collateral abuse of process, is a plaintiff entitled to damages.  The Court of Appeal then went on to hold that Tan Sri Nazaruddin had “short-circuited” the methodology for obtaining relief, by obtaining damages without proving a single element of the tort. 

Conweld Engineering Sdn Bhd & Ors v Goh Swee Boh & Anor [2023] 1 CLJ 323

Goh Swee Boh and his son (“Goh Family”) commenced a winding up petition against Conweld Engineering Sdn Bhd (“Conweld Engineering”). The Goh Family was successful in its winding up petition but the petition was later set aside by the majority shareholders of Conweld Engineering, the Low Brothers. The Low Brothers then filed a separate claim against the Goh Family on the basis that the winding-up petition was a collateral abuse of the court’s process. 

The High Court found that the winding-up petition was a collateral abuse of process as it was filed predominantly to resolve a deadlock and obtain a fair value for the shares. However, the Court still dismissed the Low Brothers’ claim because ultimately Conweld Engineering and the Low Brothers had not suffered any damages as result of the petition. 

The matter went up to the Court of Appeal, which agreed with the High Court’s decision. The Court of Appeal also emphasised that the tort of collateral abuse is a distinct and separate tort that is available where it is not open or feasible to a defendant to apply to strike out the suit.

Key Takeaway

It is more common for an aggrieved litigant to apply to strike out a suit which they say is an abuse of process, rather than to take up a separate action for the tort of collateral abuse.  The key difference is that in a claim for the tort of collateral abuse, the applicant may be awarded damages, whereas he would not be so entitled if he applied to strike out the claim on an interlocutory basis. 

However, most cases of the tort of collateral abuse involve bankruptcy or winding-up proceedings. This is because the courts generally frown upon the practice of applying to strike out such proceedings as they would cause delay.

***

This article was written by Sean Ferdinand Ng (Associate) from Donovan & Ho’s employment law practice. 

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

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