Third-party proceedings are a vital procedural mechanism governed primarily by Order 16 of the Rules of Court 2012 (ROC 2012). These proceedings allow a defendant to bring a person who is not already a party into an existing action. The primary objects of this rule are to prevent a multiplicity of actions, enable the court to settle disputes between all parties in one action, and prevent the same question from being tried twice with potentially conflicting results.
1. The Scope and Grounds for Issuing a Notice
Under Order 16 rule 1(1), a defendant who has entered an appearance may issue a “third-party notice” in three specific scenarios:
- Contribution or Indemnity: Where the defendant claims that a non-party is liable for some or all of the sum the defendant may be ordered to pay the plaintiff.Related Relief: Where the defendant claims relief relating to the original subject matter that is substantially the same as that claimed by the plaintiff.Connected Issues: Where the defendant requires an issue connected to the subject matter to be determined not just between the plaintiff and defendant, but also between them and the third party. 2. The Independent Nature of the Action
A fundamental legal principle is that third-party proceedings are independent of and separate from the main proceedings initiated by the plaintiff against the defendant. In this sub-action, the original defendant is treated as a “plaintiff” and the third party as a “defendant”.Crucially, a third-party notice does not make the third party a direct defendant to the original plaintiff. As held in Fullji Realty Sdn Bhd v. Lim Yong Meng, if a plaintiff intends to obtain judgment against the third party, they must apply to add them as a defendant under Order 15 rule 6; otherwise, the third party is generally absolved if the plaintiff fails against the defendant.Furthermore, the presence of a third party does not automatically constitute “some other reason” to warrant a trial when a plaintiff applies for summary judgment. In United Merchant Finance Bhd v. Majlis Agama Islam Negeri Johor, the Federal Court held that a statement by a defendant that they are entitled to an indemnity is no answer to the plaintiff’s claim unless the third party has already discharged that claim.
3. Procedural Requirements and the Necessity of Leave
The timing for issuing a third-party notice is strictly regulated:
- Actions by Writ: A defendant may issue a notice without leave only before serving their Statement of Defence. Once the defence is served, leave of the court becomes mandatory.Fatal Irregularities: In SRC International Sdn Bhd v. UMNO, the court held that failing to obtain leave after serving a Statement of Defence is a fatal and incurable procedural defect.Claims Against the Government: Under Order 73 rule 8, leave is always required to issue a third-party notice for service on the Government. 4. Third-Party Directions and Default
Once a third party enters an appearance, the defendant must apply for directions. If the defendant fails to do so within seven days, the third party may apply to have the notice set aside. In Subramania Pillay v. Sundrammal, it was noted that failure to take out directions means there is no issue for trial between the defendant and the third party.If a third party defaults by failing to appear or serve a defence, they are deemed to admit the claim stated in the third-party notice and are bound by any judgment or decision reached in the main action.
5. Setting Aside and the “Plain and Obvious” Test
Under Order 16 rule 6, the court possesses the discretion to set aside third-party proceedings at any stage. The principles for setting aside are identical to those for striking out a claim under Order 18 rule 19. The court must be satisfied that the notice is “obviously unsustainable,” disclosed no reasonable cause of action, or is an abuse of process.
6. Limitation Periods: The Mat Abu Man Principle
In the landmark case Mat Abu Man v. Medical Superintendent, General Hospital Taiping, the Supreme Court ruled that the limitation period for a third-party claim for contribution accrues only when the defendant is found liable to the plaintiff. Consequently, time begins to run from the date the defendant is held liable, rather than the date of the original accident or tort.
7. Special Context: Fiduciary Duties and Directors
Courts have scrutinized third-party proceedings involving company directors:
- Non-Executive Directors: In Sime Darby Bhd v. Dato’ Seri Ahmad Zubair, the court struck out third-party notices against non-executive directors. It held that to be a “joint tortfeasor” for contribution, there must be active procurement of the tort rather than passive participation in the decision-making process.Duties to the Company: In Multi-Code Electronics Industries (M) Bhd v. Gordon Toh Chun Toh, the court affirmed that a director owes no fiduciary duty to a fellow director; their duties are owed strictly to the company. Thus, a defendant director cannot rope in fellow directors merely for a “collegiate” breach of duty that the company itself chose not to sue for. Conclusion
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
