Interpleader actions and defeating an adverse claim for possession premised upon illegality

Between a rock and hard place [Image credit: https://dragon-and-other-myth-creatures.fandom.com/wiki/Scylla_and_charybdis]

The Court of Appeal recently (22.03.2025) released its Grounds of Judgment for Agasta Co Ltd & 1 or. v Autopulence Sdn Bhd [CIVIL APPEAL NO: B-03(IM)-3-01/2024]. The CA has released this Judgment hot on the heels of Dato Ting (which I wrote about here).

Whilst the CA does not specifically reference Dato Ting, the Judgment in Agasta underscores a jurisprudential shift towards the Courts calling-out illegality.

The facts

Agasta distributes reconditioned cars in Japan. It sold motorcars to Rintis. Agasta subrogated its right to claim payment to Nippon Export and Investment Assurance (“Agasta & Nippon”).

Rintis failed to pay for the cars.

Agasta & Nippon then sued Rintis in 2019. They obtained a Judgment for RM9m. A garnishee application was filed, yielding only RM218k.

Agasta & Nippon then filed a Writ of Seizure and Sale. The Court Bailiff attached 29 MPVs from Rintis’s premises, valued at ~RM6m.

Out of the woodwork

Autopulence and JH Capital (A&JH) then emerged. They claimed that the 29 MPVs actually belonged to them (7 to Autopulence, 22 to JH).

The mechanism in which A&JH utilised to assert ownership of the cars is described in great detail by Azizul JCA at paras. 10-20 and 32-41. The long and short of it is this:

1. Rintis was issued Approved Permits (AP), issued by the Ministry of Trade, Investment and Industry (MITI);

2. These APs were issued by MITI on the basis of policy considerations (Dasar Baharu AP Terbuka);

3. These APs were non-transferable;

4. A&JH would conclude purchases of reconditioned cars in Japan;

5. They would then use the AP belonging to Rintis to bring in these cars;

6. All official correspondence and documentation with the Government (including Customs) would allege that the cars belonged to Rintis;

7. Behind the scenes, Rintis and A&JH would have a separate arrangement, wherein Rintis would agree that the cars belong to A&JH;

8. A&JH would pay a “fee” of RM6,000 for each AP utilised to a company called “Reksinar Sdn Bhd”, which is associated with Rintis.   

In short, the mechanism utillised by Rintis and A&JH was designed to circumvent the AP policy considerations.

With there being a dispute, the Bailiff issued an Interpleader Notice.

The outcome in the High Court

The Deputy Registrar dismissed A&JH’s claim over the MPVs. However, the High Court Judge reversed the Registrar’s findings.

The CA unanimously overturned the HC and reinstated the findings of the Deputy Registrar.

The findings of the CA

The procedural mechanism for Interpleader Notices

The CA began with firstly setting-out the procedure for Interpleader Notices (paras. 21-24). Crucially, the CA recognised that the burden of proof lay with the Respondents (A&JH) to prove that the MPVs were theirs:

The Burden of Proof

[24] The law places on a claimant in interpleader proceedings the burden to prove that he is the lawful owner of the goods in dispute: Sigma Air Conditioning v World Wide Agencies. The burden of proof thus lay with the respondents in the present case to show that all rights, title and interest in the subject vehicles had passed to them at the point that the vehicles were purchased from the suppliers in Japan.

Illegality and its effect on the transaction between Rintis and A&JH

The CA then went on to consider the effect of the illegality of the transaction between Rintis and A&JH (paras. 29-57). Crucially, the CA noted that neither A&JH had deposed (in their affidavits) that they were the end-purchasers of the cars.

The CA also found as a fact that the critical and determinative point in this entire saga would be whether the contravention of the MITI policy would result in an illegality, thereby rendering the transaction between Rintis and A&JH void.

The CA unequivocally held that the transaction was illegal:

[51] In our view, the object of the contractual arrangement that had been 15 entered into by each respondent with Rintis was clearly intended to circumvent the requirements imposed under the Dasar Baharu AP Terbuka. The avowed objectives of the MITI policy was set out in paragraph 1.1, and included the aim of fortifying the economic agenda of Bumiputeras. The scheme put in place by Rintis and the respondents exemplifies what is colloquially referred to as an Ali Baba arrangement, with the Bumputera company acting merely as a front, and reduced to a rent-seeking role. It is difficult to see how this arrangement does not abuse and undermine the affirmative action policies of the government. [52] We are thus of the view that the contracts entered into by each of the respondents with Rintis are void ab initio as being contrary to public policy under section 24(e) of the Contracts Act 1950. For this reason, title to the subject MPVs never passed to the respondents, notwithstanding that they may have paid for them.

[56] It has to be further emphasised that it is the bounden duty of the court to give effect to the law. To excuse acts that are contrary to law or public policy simply on the basis of their pervasiveness would be a dereliction of that duty. The court is a court of law, not a court of widespread practices.

The Respondents are not without remedy

The CA was quick to point out that notwithstanding the illegality of the scheme, the Respondents could still pursue Rintis for any damages that they may have suffered, provided they can bring themselves within the S. 66 CA 1950 / Patel v Mirza considerations (para. 58).

Analysis

When one juxtaposes the Federal Court decision of Dato Ting against the decision in Agasta, it is clear that there is a definite jurisprudential shift towards calling a spade a spade. The Courts will no longer shy away from exposing the parties’ illegal transactions and no matter how the parties doll-up their arrangements, the Courts are unhesitant to cut a swathe through the legal morass.

Practitioners would be well-advised to take heed of these 2 recent pronouncements from the Appellate Courts. Illegality will not be condoned and will serve as a fatal blow to one's claim.

GAVIN JAYAPAL

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