Legal Profession: Compensation Fund - Claim for compensation - Appellants suffered loss due to dishonest act of advocate and solicitor - Whether appellants entitled to compensation - Whether "Guidelines On Making A Claim For Compensation" issued by respondent, in particular para 2(b), ultra vires provisions of Legal Profession Act 1976 - Whether s 111 of Act applied to protect respondent from any action or legal proceedings instituted by appellants - Whether appellant's claim meritorious

The appellants and their two other siblings had beneficial interest in their parents' house in Ipoh, which was sold to Kawan Properties Sdn Bhd at the sale price of RM2,524,410.00. Shan a/l Theivanthiran ("Shan"), at the material time an advocate and solicitor practicing as a partner in the firm of Messrs Thevin Chandran & Associates ("Firm"), acted for the appellants and their two siblings in that sale transaction. A cheque for the sum of RM2,145,748.50, being the balance purchase price, was forwarded by the purchaser's solicitors to the Firm. In due course, that cheque was cleared and payment was received by the Firm. Each of the four beneficiaries, including the appellants, were to receive RM521,427.00 as their share of the balance purchase price. Shan drew out two Public Bank Berhad cheques each for the sum of RM521,427.00 in the respective names of the appellants and gave them to the appellants, but subsequently notified the appellants not to cash the cheques until he notified them to do so. Shan then deposited a cheque in the sum of RM1,042,854.00 into the 1st appellant's Maybank account, which was the total payment due to the appellants. However, Shan then instructed his bank to stop payment on the said cheque. Shan, and by extension the Firm, failed to make payment of the sum of RM1,042,854.00 to the appellants despite repeated assurance that it would be paid. The appellants then lodged a complaint to the Advocates & Solicitors Disciplinary Board ("Disciplinary Board") against Shan for professional misconduct occasioned by his dishonesty, ie failure to make payment of the stakeholder sums of RM521,427.00 to each of the appellants. After due inquiry, the Disciplinary Board found Shan guilty of professional misconduct and by Order dated 18 July 2020 ("Order") ordered that Shan be struck off the Roll of Advocates and Solicitors of the High Court in Malaya ("Roll"). The Disciplinary Board further ordered that Shan make restitution in the sum of RM521,427.00 to each of the appellants within one month from the date of the Order, which Shan failed to comply with. The appellants through their solicitors then wrote to the respondent informing the respondent of the Order and further enquired if they were entitled to be compensated for their loss from the Advocates and Solicitors Compensation Fund ("Compensation Fund") established under the Legal Profession Act 1976 ("LPA"). The respondent, however, replied in the negative. Its decision was based on the "Guidelines On Making A Claim For Compensation" ("Guidelines") issued by the respondent, and the sole reason given for its refusal to entertain the appellants' claim was that Shan was at the material time practicing as a partner and not sole proprietor. Aggrieved, the appellants appealed against that decision to the High Court vide an Originating Summons. The High Court found that the appellants' appeal had no merit and that the respondent had acted within its powers under s 80 of the LPA in rejecting the appellants' claim. Accordingly, the High Court dismissed the appellants' appeal. Hence, the present appeal in which the crucial issues were: (i) whether the Guidelines, in particular para 2(b), was ultra vires the provisions of the LPA; and (ii) whether s 111 of the LPA applied to protect the respondent from any action or legal proceedings instituted by the appellants, including the filing of the Originating Summons. The answer to these questions would resolve the related issue of whether the refusal of the respondent to consider the appellants' claim for compensation from the Compensation Fund was correct in law.

Held (allowing the appeal):

(1) It was manifestly clear from the words of ss 80(8) and (9) of the LPA that the victim of any dishonest act of an advocate and solicitor, or his clerk or servant, whether the advocate and solicitor was practicing as sole proprietor or in partnership with others, or whether the advocate and solicitor had a valid practicing certificate at the material time, might make a claim from the Compensation Fund for any loss suffered by him from that act of dishonesty. The Guidelines of the respondent could not override the broad ambit of the provisions in s 80(8) and (9) and impose restrictions, or narrow the category of advocates and solicitors whose dishonesty came within the purview of these provisions of the statute. Thus, para 2(b) of the Guidelines was ultra vires the provisions of the LPA, and the reliance by the respondent on the Guidelines to reject the appellants' claim for compensation from the Compensation Fund on the sole ground that Shan at the material time was not practicing as a sole proprietor was manifestly unreasonable, irrational and unlawful. The respondent was clearly acting ultra vires its powers under the LPA in imposing a restrictive condition to limit payments out of the Compensation Fund to only losses arising from the dishonest act of a sole proprietor. (paras 39-40)

(2) Section 111 of the LPA was not applicable to the facts of this case. Section 111 would be a bar against any action or proceeding against the Malaysian Bar or the Bar Council if by that action or proceeding it was sought to make the Malaysian Bar or the Bar Council liable for their act, ie where legal liability of some sort was sought to be imposed and where, for example, damages were sought, unless it could be shown that the decision was made in bad faith or with malice. Here, the purpose of the Originating Summons was not one of assign any liability to the respondent but rather to challenge the decision of the respondent in respect of their rejection of the appellants' claim for compensation from the Compensation Fund. This was a decision in respect of the administration and management of the Compensation Fund, by which the appellants were aggrieved. The reliefs sought in the Originating Summons were all in respect of the appellants' rights to seek compensation from the Compensation Fund, in order to remedy and mitigate their loss arising from the dishonesty of Shan, an advocate and solicitor. If the respondent were allowed to rely on s 111 of the LPA as a shield and bar any proceedings to challenge their decision rejecting the appellants' claim, then it would mean that the respondent's decision would be absolute and beyond legal scrutiny; that could not be the intent and purpose of s 111. The respondent was a statutory body and the exercise of statutory powers were justiciable and open to scrutiny of the courts. The respondent's exercise of discretion under s 80 of the LPA ought to be done in accordance with the law and would not be unfettered. An act of the respondent done ultra vires the powers conferred under the LPA could not be construed as an "act or thing done under this Act" for it to be accorded the protection contained in s 111. Thus, a person aggrieved by that decision of the respondent could challenge and question it in a court of law. In any event, the act of the respondent in arriving at a decision vide an ultra vires act, could not be shielded by applying s 111. If that were to be allowed, it would mean that the Court was condoning an ultra vires act of the respondent, and shielding it from the Court's scrutiny. Surely an act done outside the powers and ambit of the LPA could not be protected from scrutiny by reference to s 111. (paras 43-46)

(3) In this case, the appellants had shown that they had suffered loss from the dishonest act of Shan, who was at the material time an advocate and solicitor. The appellants had lodged a complaint with the Disciplinary Board against Shan and he was found guilty of professional misconduct and, in particular, the breach of undertaking to release the balance purchase price due to the appellants. This was a clear act of dishonest conduct as an advocate and solicitor, and the Disciplinary Board ordered Shan to be struck off the Roll. The Disciplinary Board had also ordered Shan to make restitution in the sum of RM521,427.00 to each of the appellants within one month of the Order, which Shan had failed to do. Thus, the appellants had a meritorious claim in the Originating Summons as they had proven that they had suffered loss in the sum of RM521,427.00 each and that they were entitled to payment from the Compensation Fund to mitigate their loss as provided in s 80(8) of the LPA. (para 47)

Case(s) referred to:

Dato Mohamed Hashim Shamsuddin v. The Attorney-General, Hong Kong [1986] 1 MLRA 175 (folld)

Hartaya Sdn Bhd & Ors v. Malayan Banking Bhd & Ors [2009] 4 MLRH 639 (refd)

Ketua Pengarah Jabatan Alam Sekitar & Anor v. Kajing Tubek & Ors and Other Appeals [1997] 1 MLRA 474 (refd)

Langkawi Holiday Villa Sdn Bhd lwn. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran, Semenanjung Malaysia & Satu Lagi [2020] MLRHU 877 (refd)

Michael Joseph Carvalho & Satu Lagi lwn. Majlis Peguam Malaysia [2021] MLRHU 2459 (refd)

Perbadanan Kemajuan Negeri Pahang v. Bar Malaysia (Unreported Judgment of the High Court Kuantan in 2003) (overd)

Shangri-La Hotel (KL) Bhd & Ors v. National Consultative Council & Ors [2017] MLRHU 336 (refd)

Legislation referred to:

Legal Profession Act 1976, ss 3, 80(1), (2), (8), (9), (12), 111

Counsel:

For the appellants: Subashini Gunasegaran (Baljeet Kaur with her); M/s VT Singam, D Gunasegaran & Co

For the respondent: Savithiri Ganesan; M/s Savi Ganesan & Co

JUDGMENT

Vazeer Alam Mydin Meera JCA:

Introduction

[1] The appellants claimed for compensation from the Advocates and Solicitors Compensation Fund ("Compensation Fund") established under the Legal Profession Act 1976 ("LPA"). The respondent informed the appellants that they were ineligible to make their claim, and thus refused to consider the appellants' application. The appellants then appealed that decision to the High Court vide an Originating Summons.

[2] The High Court found that the appellants' appeal had no merit and that the respondent had acted within its powers under s 80 of the LPA in rejecting the appellants' claim. Accordingly, the High Court dismissed the appellants' appeal.

[3] The appellants appealed that decision to this Court. We allowed the appeal for the following reasons.

Background Facts

[4] The appellants and their two other siblings had beneficial interest in their parents' house in Ipoh ("Property"). The Property was sold to Kawan Properties Sdn Bhd at the sale price of RM2,524,410.00.

[5] Shan a/l Theivanthiran ("Shan") who at the material time was an advocate and solicitor practicing as a partner in the firm of Messrs Thevin Chandran & Associates acted for the appellants and their two siblings in that sale transaction.

[6] On 2 May 2014, a cheque for the sum of RM2,145,748.50, being the balance purchase price, was forwarded by the purchaser's solicitors to Messrs Thevin Chandran & Associates. In due course, that cheque was cleared and payment was received by Messrs Thevin Chandran & Associates.

[7] Each of the four beneficiaries, including the appellants were to receive RM521,427.00 as their share of the balance purchase price. Shan then drew out two Public Bank Berhad cheques dated 17 March 2016 each for the sum of RM521,427.00 in the respective names of the appellants and gave them to the appellants. However, Shan subsequently notified the appellants not to cash the cheques until he notified them to do so.

[8] On 31 March 2016, Shan deposited a cheque in the sum of RM1,042,854.00 into the 1st appellant's Maybank account, which was the total payment due to the appellants. However, Shan then instructed his bank to stop payment on the said cheque.

[9] Shan, and by extension the firm of Messrs Thevin Chandran & Associates, failed to make payment of the sum of RM1,042,854.00 to the appellants despite repeated assurance that it would be paid.

[10] The appellants then lodged a complaint to the Advocates & Solicitors Disciplinary Board ("Disciplinary Board") against Shan for professional misconduct occasioned by his dishonesty, ie failure to make payment of the stakeholder sums of RM521,427.00 to each of the appellants.

[11] After due inquiry, the Disciplinary Board found Shan guilty of professional misconduct and by Order dated 18 July 2020 ordered that Shan be struck off the Roll of Advocates and Solicitors of the High Court in Malaya ("Roll").

[12] The Disciplinary Board further ordered that Shan make restitution in the sum of RM521,427.00 to each of the appellants within one month from the date of the Order. Shan, however, failed to comply with that Order.

[13] The appellants through their solicitors then wrote to the respondent via email dated 21 September 2020 informing the respondent of the Order and further enquired if the appellants were entitled to be compensated for their loss from the Compensation Fund.

[14] The respondent via email dated 22 September 2020 replied in the negative and stated as follows:

"We regret to inform you that the Bar Council is unable to entertain any claim made against Shan A/L Theivanthiran as he was practicing as a partner in Messrs Theivin Chandran & Assoc. Please find attached herewith the Compensation Fund brochure that provides the guideline in relation to eligibility.

In the circumstances, kindly advise your client on the remedies available in respect of Shan A/L Theivanthiran."

[Emphasis Added]

[15] The respondent's decision was based on the "Guidelines On Making A Claim For Compensation" ("Guidelines") issued by the respondent, and the sole reason given for the respondent's refusal to entertain the appellants' claim was that Shan was at the material time practicing as a partner and not sole proprietor. As to who were eligible to make a claim from the Compensation Fund, para 2 of the Guidelines stipulated as follows:

(2) Eligibility and Procedure

Any person who has sustained losses owing to the dishonesty of lawyers may apply for a grant out of the Compensation Fund under these circumstances:

(a) the lawyer concerned was struck off the Roll of advocates and solicitors by an Order of the Disciplinary Board in the preceding year and there is no appeal pending;

(b) the lawyer concerned was practicing as a sole proprietor at the material time of the breach; and

(c) No out-of-court settlement or agreement has been entered into between the claimant and the lawyer concerned.

[Emphasis Added]

[16] Aggrieved by that decision, the appellants filed the Originating Summons challenging the respondent's decision of 22 September 2020. The primary contention of the appellants is that the Guidelines issued by the respondent, and in particular the respondent's imposition of the condition that only losses arising from dishonesty of advocates and solicitors who carried on practice as sole proprietors would be covered under the Compensation Fund, were ultra vires the provisions of the LPA, and were discriminatory, unjustified, unreasonable and void.

[17] The appellants inter alia sought declaratory orders from the High Court to the effect that:

(a) the respondent's restrictive conditions on eligibility to claim from the Compensation Fund as contained in para 2(b) the Guidelines was in conflict with the provisions of ss 80(2), 80(8) and 80(9) of the LPA; and

(b) the respondent's refusal to consider payment of compensation to the appellants from the Compensation Fund on grounds that Shan was not practicing as sole proprietor at the material time was ultra vires and/or in excess of the statutory powers of the respondent under the LPA and is therefore a nullity, void and/or of no effect.

[18] The respondent opposed the appellant's contention and argued that the conditions imposed in the Guidelines are not ultra vires and are well within the statutory powers conferred under the LPA.

The High Court's Decision

[19] The learned High Court Judge held that the appellant's Originating Summons had no merits and found that the respondent had acted within the statutory powers provided in s 80 of the LPA, and that pursuant to s 80(12) of the LPA the respondent had powers to make rules regarding the Compensation Fund, including the Guidelines. The High Court's judgment is reported as Michael Joseph Carvalho & Satu Lagi lwn. Majlis Peguam Malaysia [2021] MLRHU 2459.

[20] Hence, the learned High Court Judge held that the appellants did not fulfil the criteria laid down in the Guidelines and that the appellants knew from the Guidelines that they were not qualified to apply for compensation under the Compensation Fund. In arriving at that decision the learned High Court Judge had referred to the case of Perbadanan Kemajuan Negeri Pahang v. Bar Malaysia (Unreported Judgment of the High Court Kuantan in 2003) on the interpretation of s 80 of the LPA.

Issues In This Appeal

[21] The crucial issues in this appeal are:

(i) whether the Guidelines, in particular para 2(b), is ultra vires the provisions of the LPA; and

(ii) whether s 111 of the LPA applies to protect the respondent from any action or legal proceedings instituted by the appellants, including the filing of the Originating Summons.

The answer to these questions will resolve the related issue of whether the refusal of the respondent to consider the appellants' claim for compensation from the Compensation Fund is correct in law.

Evaluation Of Submissions Of Counsel

[22] The respondent submitted that it had acted pursuant to the provisions of the LPA in respect of the appellants' claim for compensation and that they had exercised their powers and discretion under s 80 of the LPA including the procedure to be adopted for all claims for compensation made from the Compensation Fund.

[23] Learned counsel for the respondent further submitted that the Bar Council is empowered under s 80(12) of the LPA to make rules in respect of the procedure to be followed for any claims and payment out of the Compensation. In this regard, the Bar Council has in exercise of that power laid down the procedure and set out the rules as found in the Advocates and Solicitors Compensation Fund Rules 1978 ("CF Rules") in respect of any claims and payment out from the Compensation Fund.

[24] Learned counsel for the respondent added that pursuant to s 80(12) of the LPA and the CF Rules, the Bar Council had issued the Guidelines to be complied with by claimants making any claim for payment from the Compensation Fund. Thus the respondent contends that the criteria set out in the Guidelines, particularly para 2(b) on a claimant's eligibility to make a claim, is not ultra vires its statutory powers.

[25] Hence, the respondent took the position that the imposition of the condition in para 2(b) of the Guidelines that only claims for losses arising from dishonesty of advocates and solicitors practicing as sole proprietors will be covered under the Compensation Fund is well within its powers, and therefore submitted that the High Court was correct in dismissing the appellants' Originating Summons.

[26] The learned counsel for the appellants, of course, takes a contrary position, and argues otherwise.

Are The Guidelines Ultra Vires The LPA?

[27] Section 3 of the LPA defines "Compensation Fund" to mean the fund maintained and administered by the respondent in accordance with s 80 of the LPA. Hence, the Compensation Fund is a statutory fund established under s 80(1) of the LPA which provides that:

(1) The Malaysian Bar shall maintain and administer in accordance with this section a fund to be known as the "Compensation Fund".

[28] The law mandates that every advocate and solicitor shall make an annual contribution to the Compensation as provided in s 80(2) LPA that reads:

(2) Every advocate and solicitor shall on each occasion he applies for a Sijil Annual pay to the Malaysian Bar a contribution of such sum as the Bar Council may from time to time determine and the Malaysian Bar shall pay that contribution into the Fund:

Provided that an advocate and solicitor who applies for a Sijil Annual shall be required to pay only half the contribution so determined if the practising certificate for which he proposes to apply is valid for less than six months.

Thus, every advocate and solicitor when applying for a Sijil Annual shall pay an annual contribution to the Compensation Fund, the amount of which shall be determined by the Bar Council. This annual contribution together with any investment earnings from the monies in the fund constitutes the entire Compensation Fund.

[29] The purpose of the Compensation Fund is stipulated in s 80(8) & (9) of the LPA, which provides:

(8) Where it is proved to the satisfaction of the Bar Council that any person has sustained loss in consequence of dishonesty on the part of any advocate and solicitor or any clerk or servant of an advocate and solicitor in connection with that advocate and solicitor's practice in Malaysia as an advocate and solicitor, or in connection with any trust of which that advocate and solicitor is a trustee, then subject to this section, the Malaysian Bar may, if the Bar Council thinks fair and reasonable, makes a grant to that person out of the Fund for the purpose of relieving or mitigating that loss.

(9) A grant may be made under this section whether or not the advocate and solicitor had a valid practising certificate when the act of dishonesty was committed, and notwithstanding that subsequent to the commission of the act the advocate and solicitor has died or had his name removed from or struck off the Roll or has ceased to practise or been suspended from practice.

[30] Hence, the legislative purpose of the Compensation Fund is to relieve and mitigate any loss suffered by victims of acts of dishonesty committed "on the part of any advocate and solicitor or any clerk or servant of an advocate and solicitor in connection with that advocate and solicitor's practice in Malaysia as an advocate and solicitor, or in connection with any trust of which that advocate and solicitor is a trustee." Thus, the ambit of s 80(8) & (9) of the LPA is rather wide and it covers all advocates and solicitors.

[31] The Parliamentary Debates as reflected in the Hansard dated 18.12.75 in respect of the relevant Bill tabled for reading that eventually led to the Legal Profession Act showed that the legislative intent and purpose in enacting s 80 of the LPA was one of public interest, particularly to protect the interests of the public who suffer loss arising out of the dishonest conduct of advocates and solicitors.

[32] It must be further noted that pursuant to s 80(9) of the LPA, a "grant may be made under this section whether or not the advocate and solicitor had a valid practising certificate when the act of dishonesty was committed" and notwithstanding the fact that the advocate and solicitor may have been struck off the Roll subsequent to the act of dishonesty.

[33] Hence, from the wordings of s 80(8) & (9) of the LPA it is very clear that the ambit of the sections cover losses arising from the acts of dishonesty of not only advocates and solicitors who had a valid practicing certificate but also those who did not. And further it covers the acts of dishonesty of even clerks and servants of an advocate and solicitor. The net is cast wide. It is pertinent to note that there is no restriction in s 80(8) and (9) of the LPA limiting payment only to losses arising from dishonesty of advocates and solicitors who were sole proprietors. Section 80(8) and (9) do not make any distinction in that regard to disallow a claim for loss arising from the dishonest act of an advocate and solicitor in a partnership practice, such as Shan.

[34] Now, to facilitate the administration of the Compensation Fund, s 80(12) of the LPA provides that:

(12) The Council may make rules in respect of the procedure to be followed in giving effect to this section and in respect of any matters incidental, ancillary or supplemental thereto or concerning the administration or protection of the Fund.

Pursuant to that statutory power, the Bar Council had made the CF Rules, which we have set out below in full for ease of reference:

In exercise of the powers conferred by subsection (12) of s 80 of the Legal Profession Act 1976 [Act 166], the Bar Council makes the following rules:

1. Citation

These Rules may be cited as the Advocates and Solicitors' Compensation Fund Rules 1978.

2. Contribution to be paid annually in advance

Contribution to the Compensation Fund for the succeeding year shall be paid annually in advance by each advocate and solicitor on application by him for a Sijil Annual.

3. Notice on Form A

Before or at the time of making an application to the Bar Council for a grant out of the Compensation Fund, an applicant shall complete, sign and deliver to the Secretary of the Bar Council a notice in Form A set out in the Schedule or in a form to the like effect approved by the Bar Council.

4. Notice to be delivered to Secretary

Every such notice shall be delivered to the Secretary of the Bar Council within six months (or such other period not exceeding two years as the Bar Council may allow) after the loss in respect of which the notice is delivered, first come to the knowledge of the applicant.

5. Notice to accompany an application

Every such notice shall be accompanied by an application for a grant out of the Compensation Fund, except where it is impracticable to deliver the application with the notice, in which case the application shall be delivered to the Secretary of the Bar Council as soon as practicable after the delivery of the notice.

6. Application in Form B

Every application shall be made in Form B set out in the Schedule or in a form to the like effect approved by the Bar Council. The Bar Council may require an applicant to make a statutory declaration in support of his application.

7. Bar Council may require oral evidence of documents

The Bar Council may require an application to be supported by oral evidence to be tendered and documents to be produced to the Bar Council or any Committee appointed and authorised by the Bar Council to exercise or to assist the Bar Council in the exercise of its functions under s 80 of the Act.

8. Bar Council may require pursuit of civil remedy or criminal proceeding

The Bar Council may before deciding whether or not to make a grant out of the Compensation Fund require, in respect of any application, the pursuit of any civil remedy which may be available in respect of the loss, or the institution of criminal proceedings in respect of the dishonesty leading to the loss, or the making of an application to a Disciplinary Committee.

9. Waiver

The Bar Council may waive any of the provisions of these Rules or permit the amendment of any notice or application.

10. Requirement of Bar Council to be communicated by notice

Any requirement of the Bar Council under these Rules may be communicated by a notice in writing which may be delivered personally or sent by post to the addressee at his last known address. Any such notice sent by post shall be deemed to have been received by the addressee within forty-eight hours (excluding Sundays and Public Holidays) of the time of posting.

SCHEDULE

FORM A - NOTICE OF LOSS

FORM B - FORM OF APPLICATION FOR A GRANT OUT OF THE COMPENSATION FUND

(SCHEDULE OF PARTICULARS TO BE ANNEXED TO FORM A OR B)

This Schedule should contain the following information which should be given in concisely numbered paragraphs:

1. The circumstances in which and the date or dates on which the money or other property, in respect of which the loss incurred came into the possession of the solicitor or his clerk or servants.

2. Full particulars of the money or property.

3. The facts relied upon in support of the allegation of dishonesty or failure to account.

4. The circumstances in and the date on which the loss first came to the knowledge of the applicant.

5. Particulars of any relevant documents which can be produced in support of this application.

6. Whether it is known that any other application is likely to be made in respect of the facts set out in this schedule.

7. Whether any civil, criminal or disciplinary proceedings have or will be taken in respect of the facts set out in this application. If proceedings have already been taken give the result.

8. The name and address of any solicitor instructed on behalf of the applicant.

9. Any other relevant particulars.

[35] Having scrutinised the provisions of s 80(8) & (9) of the LPA and the CF Rules, we do not find any provision therein that gives the respondent the power to issue any guidelines restricting the application of the provisions in s 80(8) & (9) of the LPA, and make it applicable only to the dishonesty of a certain class of advocates and solicitors, ie sole proprietors. It is our considered view that the respondent does not have such powers to issue the Guidelines and whittle down the ambit of s 80(8) &(9) of the LPA and restrict the claims only to acts of dishonesty of advocates and solicitors who are sole proprietors.

[36] In fact, we found that the respondent does not have powers to issue any guidelines in the nature of the Guidelines at all. In order to issue such guidelines there must be express provision in the LPA authorising the respondent to issue them. However, there is no such express power found in the LPA. See: Shangri- La Hotel (KL) Bhd & Ors v. National Consultative Council & Ors [2017] MLRHU 336 Langkawi Holiday Villa Sdn Bhd lwn. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran, Semenanjung Malaysia & Satu Lagi [2020] MLRHU 877; Hartaya Sdn Bhd & Ors v. Malayan Banking Bhd & Ors [2009] 4 MLRH 639; Ketua Pengarah Jabatan Alam Sekitar & Anor v. Kajing Tubek & Ors and Other Appeals [1997] 1 MLRA 474 CA.

[37] At best, the respondent can only make rules pursuant to s 80(12) of the LPA, and that too for the limited purposes stated therein, which is in respect of procedure for making a claim from the Compensation Fund. Such rules must be confined to procedural matters and cannot affect substantive rights of parties. And in any event such rules cannot override the express provisions of the LPA being the parent statute which is the statutory source that contains the enabling provision for the issuance of the rules.

[38] This principle was made clear by Abdoolcader SCJ in Dato Mohamed Hashim Shamsuddin v. The Attorney-General, Hong Kong [1986] 1 MLRA 175 in the following terms:

This legislative provision clearly relates to a matter of practice and procedure with no question arising of creating or altering substantive rights or of any rules made pursuant thereto purporting per se to confer jurisdiction where none existed otherwise , and it is this specific enactment in the 1964 Act that enables the necessary rules to be spelt out to regulate the procedure for the purposes specified therein.

[Emphasis Added]

[39] Thus, it is manifestly clear from the words of s 80(8) & (9) that the victim of any dishonest act of an advocate and solicitor, or his clerk or servant, whether the advocate and solicitor was practicing as sole proprietor or in partnership with others, or whether the advocate and solicitor had a valid practicing certificate at the material time, may make a claim from the Compensation Fund for any loss suffered by him from that act of dishonesty.

[40] The Guidelines of the respondent cannot override the broad ambit of the provisions in s 80(8) & (9) of the LPA and impose restrictions, or narrow the category of advocates and solicitors whose dishonesty comes within the purview of these provisions of the statute. Thus, we found that para 2(b) of the Guidelines was ultra vires the provisions LPA, and the reliance by the respondent on the Guidelines to reject the appellants' claim for compensation from the Compensation Fund on the sole ground that Shan at the material time was not practicing as a sole proprietor is manifestly unreasonable, irrational and unlawful. The respondent was clearly acting ultra vires its powers under the LPA in imposing a restrictive condition to limit payments out of the Compensation Fund to only losses arising from the dishonest act of a sole proprietor.

Application Of Section 111 Of The LPA

[41] Learned counsel for the respondent further relied on s 111 of the LPA which provided that no action shall lie against the Malaysian Bar or the Bar Council in respect of anything done unless it can be proved that it was done in bad faith. In this regard, once again counsel has referred to the High Court case of Perbadanan Kemajuan Negeri Pahang v. Bar Malaysia (supra). The learned High Court Judge had accepted this argument and in doing so had also referred to the same High Court decision.

[42] Now, s 111 of the LPA provides:

111. No action against Disciplinary Committee, etc. for act done

No action or proceeding shall lie against the Disciplinary Committee, the Disciplinary Board, the Malaysian Bar, the Bar Council or any State Bar Committee or any member thereof for any act or thing done under this Act including any pronouncement or publication of any decision of the Disciplinary Board unless it is proved to the Court that the act or thing was done in bad faith or with malice.

[43] We are of the considered view that s 111 of the LPA is not applicable to the facts of this case. Section 111 would be a bar against any action or proceeding against the Malaysian Bar or the Bar Council if by that action or proceeding it is sought to make the Malaysian Bar or the Bar Council liable for their act, ie where legal liability of some sort is sought to be imposed and where for example damages are sought, unless it can be shown that the decision was made in bad faith or with malice.

[44] Here, the purpose of the Originating Summons is not one of assigning any liability to the respondent but rather one of challenging the decision of the respondent in respect of their rejection of the appellants' claim for compensation from the Compensation Fund. This was a decision in respect of the administration and management of the Compensation Fund, by which the appellants were aggrieved. The reliefs sought in the Originating Summons are all in respect of the appellants' rights to seek compensation from the Compensation Fund, in order to remedy and mitigate their loss arising from the dishonesty of Shan, an advocate and solicitor.

[45] If the respondent is allowed to rely on s 111 of the LPA as a shield and bar any proceedings to challenge their decision rejecting the appellants' claim, then it would mean that the respondent's decision would be absolute and beyond legal scrutiny. And that cannot be the intent and purpose of s 111 of the LPA. The respondent is a statutory body and the exercise of statutory powers are justiciable and open to scrutiny of the courts. The respondent's exercise of discretion under s 80 of the LPA must be done in accordance to the law and is not unfettered. An act of the respondent done ultra vires the powers conferred under the LPA cannot be construed as an "act or thing done under this Act" for it to be accorded the protection contained in s 111 of the LPA. Thus, a person aggrieved by that decision of the respondent can challenge and question it in a court of law.

[46] In any event, the act of the respondent in arriving at a decision vide an ultra vires act, cannot be shielded by applying s 111 of the LPA. If we were to allow that, it would mean that the Court is condoning an ultra vires act of the respondent, and shield it from the court's scrutiny. Surely an act done outside the powers and ambit of the LPA cannot be protected from scrutiny by reference to s 111 of the Act. To that extent we found that the High Court's interpretation and application of s 111 of the LPA in Perbadanan Kemajuan Negeri Pahang lwn. Bar Malaysia (supra) was wrong.

Conclusion

[47] In this case, the appellants have shown that they have suffered loss from the dishonest act of Shan, who was at the material time an advocate and solicitor. The appellants had lodged a complaint with the Disciplinary Board against Shan and he was found guilty of professional misconduct and in particular the breach of undertaking to release the balance purchase price due to the appellants. This was a clear act of dishonest conduct as an advocate and solicitor, and the Disciplinary Board ordered Shan struck off the Roll. The Disciplinary Board had also ordered Shan to make restitution in the sum of RM521,427.00 to each of the appellants within one month of the Order, which Shan failed to do. Hence, the appellants have proved that they have suffered loss in the sum of RM521,427.00 each. The appellants have clearly shown that they were entitled to payment from the Compensation Fund to mitigate their loss as provided in s 80(8) of the LPA. Thus, the appellants had a meritorious claim in the Originating Summons.

[48] In the circumstance, we found that the High Court had erred in law and in fact in dismissing the appellants' claim for the various relief contained in the Originating Summons. The High Court's decision is plainly wrong and appellate intervention is warranted. Thus, we allowed the appeal and set- aside the Order of the High Court.

[49] In consequence thereof, we made the following Orders:

(a) a declaration that para 2(b) of the Guidelines is ultra vires the provisions in s 80(2), 80(8) & 80(9) of the LPA;

(b) a declaration that the respondent's refusal to consider payment out of the Compensation Fund to the appellants to mitigate their loss suffered as a result of the dishonest act of Shan, an advocate and solicitor, is unreasonable and irrational and was ultra vires and/or in excess of the statutory powers of the respondent under the LPA and is therefore a nullity, void and/or of no effect;

(c) that the appellants shall in accordance to the procedure in the CF Rules resubmit an application to the respondent within 60 days of date hereof and the respondent shall consider the appellants' aforesaid application for compensation for their loss suffered and shall make an appropriate award of compensation from the Compensation Fund using the same formula for payment for the year in question, which is the year 2020;

(d) costs of RM10,000 here and below to the appellants subject to allocatur; and

(e) parties are at liberty to apply to the High Court.