(BIDANG KUASA RAYUAN)
MAHKAMAH PERSEKUTUAN RAYUAN SIVIL NO.04-1-2004(W)
ANTARA
DAN
SUNGEI WANG PLAZA SDN BHD/
LANDMARKS HOLDING BERHAD … RESPONDEN
(Dalam Perkara Rayuan Sivil No: W-04-3-1998
dalam Mahkamah Rayuan Malaysia)
ANTARA
DAN
SUNGEI WANG PLAZA SDN BHD/
LANDMARKS HOLDING BERHAD … RESPONDEN
CORAM: ABDUL MALEK AHMAD, PCA
SITI NORMA YAAKOB, FCJ
ALAUDDIN MOHD SHERIFF, FCJ
Proceedings were first commenced by the Appellant in the Industrial Court, where he claimed that he had been wrongly dismissed by his employer, the Respondent, without just cause or excuse.
The Appellant had worked for the Respondent since early 1977, as a Management Trainee and on 27th October, 1987, whilst he held the position as its General Manager, he was suspended from his duties pending a domestic inquiry into allegations of gross negligence and misconduct.
At the domestic inquiry that was conducted on 5th January, 1988, the Appellant had to answer to two charges of gross negligence and the acts complained of relate to:
“(1) your endorsement in a deed of assignment dated 20th December, 1985, and executed by Sa-Mula Jadi Sdn. Bhd. in favour of Arab
Malaysian Finance Bhd. in respect of SG-001. In the endorsement
you stated that the whole of the purchase price of RM2,722,500.00
payable by Sa-Mula Jadi had been paid in full on that date when in
fact this was not the case.
2) your endorsement in a deed of assignment dated 25th April, 1986,
and executed by Sa-Mula Jadi Sdn. Bhd. in favour of Asia Commercial Finance (M) Bhd in relation to Basement 001 and Basement Disco. In the endorsement you stated that the whole of the purchase price of RM3,800,000.00 payable by Sa-Mula Jadi had been paid in full on that date when in fact this was not the case”.
The Appellant admitted to the acts of negligence but contended that he was merely carrying out the lawful orders of his superior, one Simon Chong (“Chong”), the Respondent’s Executive Director. However his defence did not get him anywhere as he was found guilty of both charges and on 12th February, 1988, the Respondent dismissed him from its employment.
The Appellant questioned his dismissal in the Industrial Court and in Award No. 179 of 1993, dated 16th June, 1993, that Court ruled in his favour and held his dismissal to be without just cause or excuse. The Appellant was awarded compensation in lieu of reinstatement, back wages and payments in respect of leave due and not taken, to be paid to him within one month of the date of the Award. A stay on the Award was granted pending further proceedings in the High Court.
Those further proceedings were by way of Originating Motion No. R1-25-87-93 filed by the Respondent to have the Award quashed and the High Court allowed its motion on 29th December, 1997, quashed the Award by way of certiorari and also awarded costs to the Respondent.
The Appellant took the matter further to the Court of Appeal, which confirmed the High Court’s findings on 20th November, 2003, and the Appellant then filed an application for leave to appeal to this Court. Leave was granted to him on 18th February, 2004, to refer the following two questions of law.
(1) Whether the law on obedience to superior orders in the context of
employment law in Malaysia is any way different from that at
common law.
(2) Whether the principle of an order being “manifestly wrong” has
any part in the doctrine of superior orders.
Before directing our minds to the two questions, it is pertinent that we set out the circumstances surrounding the execution of the documents leading to the allegations and findings of gross negligence on the part of the Appellant.
In May, 1985, the Respondent successfully negotiated the sale of three parcels of business premises in Sungei Wang Plaza, a commercial complex,
to a company called Sa-Mula Jadi Sdn. Bhd. (“Sa-Mula”). Two sale and purchase agreements were executed in respect of the three parcels, the first to cover the two basement units, namely Basement 001 and Basement Disco, and the second to cover the ground floor unit, Lot SG-001.
In the first sale and purchase agreement dated 31st May, 1985, Sa-Mula agreed to purchase the basement units for RM3.8 million, the 10% deposit of which had been acknowledged by the Respondent as having been paid by Sa-Mula with Sa-Mula undertaking to pay the balance of the purchase price in two instalments, RM1.52 million within three months of the date of the agreement and RM1.9 million within 6 months of the date of the agreement. The Appellant signed this first sale and purchase agreement on behalf of the Respondent.
As for Lot SG-001, the purchase price was agreed at RM2,722,500.00 and this is reflected in the second sale and purchase agreement dated 11th June, 1985, which was also executed by the Appellant on behalf of the Respondent. The other terms of the second sale and purchase agreement acknowledge receipt by the Respondent of the 10% deposit made by Sa-Mula and the latter’s
undertaking to settle the balance of the purchase price within 14 days of the date of the agreement, i.e. by 25th June, 1985.
However six months after the execution of the second sale and purchase agreement, Sa-Mula assigned all its rights and interests under that agreement to Arab-Malaysian Finance Bhd (“AMFB”) to secure loans made by AMFB to a third party. For this transaction, Sa-Mula also obtained the Respondent’s consent as evidenced by an endorsement made by the Appellant on behalf of the Respondent in a document titled “Consents And Undertakings By The Vendor”. In endorsing the Respondent’s consent to the assignment, the Appellant made a number of confirmations, one of which was that the purchase price for Lot SG-001 had been settled in full by Sa-Mula as at 20th December, 1985, the
date of assignment when in fact that was not the true picture.
Sa-Mula also executed a second deed of assignment assigning all its rights and interests in the first sale and purchase agreement to Asia Commercial Finance (M) Bhd (“ACF”) to secure a loan made by ACF to a third party. The second deed of assignment is dated 25th April, 1986 and an acknowledgement and consent to the assignment which formed part of the assignment is endorsed by the Appellant on behalf of the Respondent confirming that as at 25th April, 1986, the purchase price for the basement units had been fully settled. This confirmation as well as the 10% deposit acknowledged as having been paid by
Sa-Mula in the first sale and purchase agreement had never been received by the Respondent.
The gross negligence and misconduct that the Appellant had been found guilty of relate to the misrepresentations in the two deeds of assignment which state that the price for all the three parcels of property had been fully paid when in fact that was not so.
The Appellant’s defence throughout all the proceedings had been that he had endorsed and signed the two deeds of assignment on the instructions of Chong, who had assured him that everything was in order and that he, Chong, would take the responsibility of collecting the purchase price of the properties sold. In fact even before he signed the first sale and purchase agreement, the Appellant had inquired about the payment of the 10% deposit and he was assured by Chong that he, Chong, would issue him with a comfort note to allay his fears. That comfort note was only prepared by Chong at the time of the execution of the second sale and purchase agreement.
Before us, the decision of the Court of Appeal was attacked on the grounds that it had erred in its appreciation of both the facts and the law.
The first issue that was raised relate to the finding that the Appellant knew of the misrepresentations appearing in the two deeds of assignment. It was argued that reliance by the Court of Appeal on the same finding made by
the High Court was misplaced as the High Court had confused the facts surrounding the executions of the two sale and purchase agreements with that surrounding the executions of the deeds of assignment.
The only payments acknowledged by the two sale and purchase agreements as having been received by the Respondent from Sa-Mula were the 10% deposits of the purchase prices of the two basement units, the subject matter of the first sale and purchase agreement, and the ground floor unit the subject matter of the second sale and purchase agreement.
The Appellant’s testimony on the deposits was that before he executed the two sale and purchase agreements, he had inquired from Chong whether the deposits had been paid. Chong had assured him that he, Chong, would collect all the monies due under the agreements and that he was also prepared to issue a comfort note to the Appellant, which he did at the time the second sale and purchase agreement was signed. Chong was not called to testify and on the unchallenged evidence of the Appellant, the Industrial Court made the following finding of fact.
“ It is clear beyond all reasonable doubts upon a consideration
of the evidence that the two SPA Agreements were signed with
Simon Chong’s confident assurance that all monies will be
collected by him and further his instruction was not merely oral but supported in the form of a Note, to induce the Claimant to sign the SPA’s without any anxiety whatsoever. It is unequivocally clear that the Claimant signed the two SPA’s not only because he was authorized and instructed to do so but under the conviction that the transaction was above board.”
In summary, the Industrial Court made a finding that at the time when he executed the two sale and purchase agreements, the Appellant was aware that the Respondent had not received the 10% deposits from Sa-Mula, but all the same, he signed the agreements on the assurance given by Chong that the 10% deposits would be collected.
However a different situation arose when the Appellant was instructed by Chong to sign the two deeds of assignment. On each occasion the Appellant inquired whether all monies had been paid and he was assured by Chong that everything was in order and it was proper for him to sign the two deeds. From this evidence the Industrial Court arrived at the following conclusion.
“It is crystal clear and transparent that the Claimant endorsed the two DOA’s only because of the directives from Simon Chong to endorse the said documents, only because Simon Chong accepted full responsibility and accountability for the monies that were due to the company only and only because Simon Chong had given the Claimant a confirmation and full assurance that everything would be in order to sign the two SPA’s and the DOA’s.”
Under these circumstances the Industrial Court concluded that the Appellant was innocent of any wrongdoing but had acted on the representations made by his superior. To that extent it cannot be said that the Appellant knew that the deeds contain misrepresentations.
In this case it must be established that the guilty knowledge must be present not at the time when the sale and purchase agreements were executed but at the time when the deeds were endorsed as the charges against the Appellant relate to the two deeds.
When reviewing the evidence of the Appellant’s state of mind at the relevant times, the High Court appeared to have misread the facts and confuse the events by concluding that when he executed the two deeds of assignment, the Appellant “knew that he was doing wrong.” This is seen from the judgment which is expressed in the following manner.
“ In this case, there was no shred of evidence that in giving the orders, force or coercion had been applied against the will of the first Respondent to commit the wrongful act of making false endorsements on the two deeds of assignment.”
The judgment goes further to express the following.
“ In fact from the evidence the first Respondent knew that what he was doing was wrong, but the risk he took was from his mistaken belief upon the assurance given by Simon that he would be responsible to ensure that all moneys would be collected. Before the endorsements, it was he who pointed it to Simon of the irregularity in the documents but upon the assurance given followed by a written note to that fact by Simon he committed the act.”
The first Respondent referred to in the judgment is the Appellant.
From the above passages, it would appear that the High Court linked the assurance given by Chong to be responsible for collecting all monies due, to have been made by him at the time of the endorsements of the two deeds. This is not correct. That assurance was given at the time the two sale and purchase agreements were signed. This mistaken belief is again reflected when mention is made to the “irregularities in the documents” and coupled with the reference to “a written note”, all of which indicate to events that were present at the time when the sale of purchase agreements were signed. It must be remembered no written or comfort note was issued at the time of the assignments. Since the facts alluded to by the High Court were not present at the time of the endorsements but nevertheless associated with the two deeds, the High Court reached a conclusion which resulted in the findings of the Industrial Court being set aside.
The Court of Appeal accepted the conclusion of the High Court and in so doing made the same error as the High Court. This is borne out by the statement of the Court of Appeal that although the Appellant “knew of the true position of the transactions at the material time, he went on to endorse the deeds on the assurance given by his superior Mr. Simon Chong.” This statement cannot be right as the Court was alluding to findings based on facts that happened prior to the endorsements of the deeds of assignment to arrive at the conclusion that the Appellant had the guilty knowledge at the time the two deeds were endorsed. This conclusion we say is erroneous as the guilty mind that requires to be established must be the guilty mind present at the time of the endorsements of the deeds and not at the time of executions of the two sale and
purchase agreements. As I have indicated above, at the time of the endorsements, the Industrial Court had concluded that the Appellant was not aware that the purchase price of the properties had been paid in full, a finding of fact, which we are not about to disagree as the evidence support such a finding and we see nothing perverse about it to warrant reversing it. Moreover the Appellant’s conduct in confronting Chong after he discovered that the deeds contain misrepresentations is consistent with the conduct of a man who did not know that he had committed a wrong.
The other issue taken before us was whether the Court of Appeal was correct when it held that the general rule on superior orders does not apply to an employee who is conscious that an order given to him is manifestly wrong.
In Malaysia, the general rule governing the doctrine of superior orders is
nothing more than the duty of obedience that is expected of an employee. The
most fundamental implied duty of an employee is to obey his employer’s orders. The classic modern statement of that duty is found in the judgment of Lord Eversherd M.R. in Laws v London Chronicle (Indicator Newspapers) Ltd (1959) 2 All ER 285 to be as follows.
“It is, no doubt, therefore, generally true that wilful disobedience of an order will justify summary dismissal, since wilful disobedience of a lawful and reasonable order shows a disregard - a complete disregard - of a condition essential to the contract of service namely the condition that the servant must obey the proper orders of the master and that, unless he does so, the relationship is, so to speak, struck at fundamentally.”
Working as instructed is the employee’s basic consideration under a contract of employment just as providing remuneration is the basic consideration of his employer. However the employee’s duty to comply is confined to all the lawful and reasonable orders of his employer in respect of the performance of such functions that falls within the scope of his contract of employment. Whether the employer’s orders are lawful and reasonable would
depend very much on the terms and conditions of the contract and the character of employment. The term “lawful and reasonable order” is often used to describe the order given and in this context it means primarily an order which is reasonably within the ambit of the employment in question so that, in any given dispute much or all will depend on the terms of the individual contract of employment. The employer thus cannot give an order outside the proper scope of the employment.
One of the earliest cases dealing with the question of lawful and reasonable orders can be found in Menon v The Brooklands (Selangor) Rubber Co Ltd (1968) 1 MLJ 15 where Raja Azlan J (as he then was) had to deal with the issue of the plaintiff’s refusal to acknowledge receipt of a warning letter on a copy. The refusal was reported to the manager, who then directed the assistant manager to write to the plaintiff a letter instructing him to see the manager personally. This was done but the plaintiff refused to comply with such direction. The plaintiff was found guilty of misconduct in his employment in that he disobeyed the lawful and reasonable order of the defendants. The footnote on the case had the following holding.
“Held: the refusal to acknowledge receipt of warning letter justified instant dismissal since it goes to the essential conditions of his contract of service which requires that he be a diligent and responsible estate conductor. The conduct was inconsistent with his duty towards the master. It was inconsistent with the continued confidence between them essential to the relationship of master and servant.”
Further on appeal to the Federal Court (1968) 2 MLJ 186. Pike CJ, in dismissing the appeal had this to say :-
“This, in addition to the contumacious manner in which he refused to obey instruction to see the manager of the estate, went far beyond a mere isolated act of disobedience of a lawful order. It challenged and rejected the whole fabrics of the relationship of employer and effectively destroyed the trust which must subsist in any such relationship where the employee holds a responsible position.”
That same principle of law was followed in (1) Oasis Milk Bar v Lim Teng & Ors (1962) 1 LNS 111, (2) Vasudevan Pillai & Anor v City Council of Singapore (1965) 2 MLJ 51, (3) Yong Yoke Sung & Ors v Sungai Way
Estate (1966) 1 MLJ 175 and (4) C Paranthaman v Sime Darby Berhad (Sime Darby Plantation) (1994) 4 CLJ 532.
From the case law, it is clear that the duty of obedience is confined to compliance with the lawful and reasonable orders of an employer and as such the concept of an order being manifestly wrong has no part in the doctrine of superior orders. To that extent the Court of Appeal erred when it made an exception to the general rule on superior orders when stating that an employee is entitled to disobey the orders of his superior if he, the employee is aware that that such orders are manifestly wrong. However that exception holds good in military or criminal law as seen from the case of P.P. v Tengku Mahmood Iskandar (1973) 1 MLJ 128 where it was held that “a soldier is not protected where the order is grossly illegal.”
The duty of an employee at common law is also similar in that he is to comply with all lawful and reasonable orders given by his employer with respect to the performance of such functions within the scope of his employment. That duty is one of the fundamental obligations which are deemed to be impliedly undertaken in every contract of hiring. The duty of obedience at common law is subject to two qualifications, firstly that the employer may not order his employee to do something illegal or secondly order his employee to do anything dangerous.
However it may well be that an employee is caught in the situation that he
is required to obey an order and he is doubtful whether the order is legal or not. Under those circumstances the proper course is for the employee to obey the order first and to challenge its legality in separate proceedings. This distinction is made on the basis that if the law allows the employee to disobey any order he thinks is not legal, it would be impossible for the management to maintain discipline and industrial peace. On the other hand, if the employee takes upon himself to disobey the order which he thinks to be unlawful and unreasonable two courses are open to him. He can point out his difficulties, if any, to the superior and if the latter insists on the order being carried out, he can do the work and take the matter further in proceedings against his employer or to complain to his union. If he disobeys, he must take the risk if the Court finds the order to be lawful and reasonable. See the case of Pan Global Textiles Berhad, Pulau Pinang v Ang Beng Teik (2002) 2 MLJ 27.
For the reasons that we give in this judgment we answer both questions posed to us in the negative.
As we accept the findings of fact made by the Industrial Court and we see nothing perverse in their application to the relevant employment laws, we allow this appeal with costs here as well as costs in the High Court and Court of Appeal, set aside the orders of the Court of Appeal dated 20 November 2003 and restore Award No. 179 of 1993 dated 16 June 1993. The deposit made in this appeal is to be refunded to the Appellant.
My learned brothers, Abdul Malek Ahmad, PCA, and Alauddin Mohd Sheriff, FCJ, who have had sight of this judgment in draft concur with the reasons given and the conclusions reached.
Sgd.
Dated: 4 July 2006 (SITI NORMA YAAKOB )
FEDERAL COURT MALAYSIA
PUTRAJAYA
Counsel:
Dato’ Dr. Cyrus Das (Mr. Wang Kuo Shing with him) for the Appellant.
(Solicitors: Messrs. Wang Kuo Shing & Co.)
Mr. Vijayan Verogopal for the Respondent
(Solicitors: Messrs. Shearn Delamore & Co.)