PPES RESORTS SDN BHD V KERUNTUM SDN BHD [1990] 1 MLJ 436 

CASE NAME & CITATION : 

CASE NAME : PPES RESORTS SDN BHD V KERUNTUM SDN BHD CASE CITATION: [1990] 1 MLJ 436 

COURT : HIGH COURT (KUCHING) 

JUDGE NAME: HAIDAR MOHD NOOR J 

FACTS OF THE CASE : 

The dispute over forest areas between Keruntum and PPES stems from the revocation of Keruntum’s timber extraction licence (No. T/0279) and subsequent overlapping licensing. Keruntum was initially granted the licence under Section 55 of the Forests Ordinance (Cap 126) to operate in the Long Akah area from 10 October 1983 to 9 October 2008. However, on 5 April 1988, the Ministry issued a show-cause letter under the newly amended Section 51A(1), questioning why the licence should not be canceled. Despite Keruntum’s response on 3 May 1988, the licence was revoked on 18 August 1988, prompting Keruntum to challenge the decision as ultra vires and illegal. 

On 28 September 1988, Keruntum filed for leave to quash the revocation, and the court granted leave on 1 November 1988, issuing an order (L-5) that also acted as a stay against further licensing over the disputed area. Meanwhile, PPES, a wholly owned subsidiary of the Sarawak Economic Development Corporation, was issued timber licences (Nos. T/0339 and T/0340) on 30 September 1988, covering overlapping areas. Logging operations by PPES began in October 1988. Keruntum, unaware until January 1989, lodged a police report on 26 January and sought clarification from authorities, later warning PPES to cease operations in April 1989 based on the court’s stay order. 

However, on 20 April 1989, PPES preemptively obtained a quia timet injunction, prohibiting Keruntum from initiating legal proceedings against it. Keruntum countered by seeking to strike out parts of PPES’s statement of claim and to set aside the quia timet injunction 

LEGAL ISSUES : 

• Does this court have any jurisdiction to issue a quia timet injunction as it did? 2. If so, should the quia timet injunction be maintained or set aside? 

LEGAL REASONING 

Issue 1: Does the court have jurisdiction to issue a quia timet injunction as it did? The court answered affirmatively, relying on statutory provisions and precedent. Section 50 of the Specific Relief Act 1950 (SRA) empowers courts to grant temporary and perpetual injunctions, and quia timet injunctions, though anticipatory, fall within this scope. Keruntum argued that Section 54(b) SRA barred such relief, relying on Cotton Corp of India v United Industrial Bank1. However, the court distinguished the Indian position: while India’s Section 41(b) expressly bars injunctions restraining legal proceedings, Malaysia’s Section 54(b) only restricts injunctions against proceedings in a non-subordinate court. The court refused to import India’s stricter approach, stating this would amount to judicial legislation. 

It reaffirmed the purpose of quia timet injunctions—to prevent irreparable harm before it occurs—and applied Fletcher v Bealey2, which requires (i) imminent harm and (ii) substantial or irreparable injury. Both elements were met: Keruntum had issued a threat of legal action, and PPES had shown evidence of financial harm (up to RM300,000 daily) and Keruntum’s limited financial capacity (RM10,000 paid-up capital). Thus, the court affirmed its jurisdiction and found Section 54(b) inapplicable in this context. 

Issue 2: Should the quia timet interlocutory injunction be maintained or set aside? Having affirmed its jurisdiction and the prima facie case, the court next considered whether the injunction should stand. Keruntum sought to discharge it on two grounds: (i) its intended legal action was not frivolous, and (ii) PPES allegedly failed to make full disclosure. The court also assessed equitable considerations, namely the balance of convenience and adequacy of damages. 

Allegation of frivolity or inevitability of failure 

Keruntum argued that its pending suit (OM No KG 16 of 1988) was not bound to fail. The court declined to assess that suit’s merits but highlighted that Keruntum’s licence had already been revoked, and PPES had obtained valid licences under the Forest Ordinance before any judicial review or stay application. The court held Keruntum had delayed asserting its rights and was responsible for any resulting prejudice. It further noted the presence of two parallel suits as potentially abusive, particularly since Keruntum no longer had any valid rights over the area. Citing Si Rusa Beach Resort3, the court stressed that the status quo should favour the party in lawful possession—here, PPES. 

Alleged non-disclosure of material facts 

Keruntum alleged non-disclosure by PPES. The court rejected this, finding that Leslie Majoribanks’s affidavit referred adequately to Keruntum’s challenge (notably via Exhibit E). Even if not all details were perfectly stated, the substance of the dispute was presented. Referring to Professor Dr A Kahar Bador4, the court emphasized that full legal title need not be proven at this stage—only a fair question supported by evidence like PPES’s timber licences. 

(c) Balance of convenience and adequacy of damages 

The balance of convenience clearly favoured PPES. It had invested over RM109 million in infrastructure, whereas Keruntum’s paid-up capital of RM10,000 made it financially unfit to compensate PPES. If Keruntum succeeded, PPES (via State backing) could compensate. The court dismissed Keruntum’s proposal to hold timber proceeds in escrow, calling such concerns speculative and unfounded. 

(e) RATIO DECIDENDI: 

The ratio decidendi is rooted in the court’s view that interlocutory injunctions, particularly of a quia timet nature, should not be granted where:

(i) the respondent has been granted lawful rights through statutory mechanisms,

(ii) there is no proven mala fides,

(iii) damages are an adequate remedy, 

(iv) the balance of convenience favours the respondent continuing its activities. 

The key factual premise underlying the court’s decision was that PPES Timber had been issued valid timber licences by the appropriate governmental authority before any judicial intervention by Keruntum. The court noted: 

“It is common ground that the timber licences to PPES were issued before Keruntum obtained leave of the court to apply for the order of certiorari and before the order for stay was issued against the Minister for Resource Planning” (p. 442). 

This was crucial in determining that PPES acted on its rights legitimately. The licences were issued on 5 December 1989, while Keruntum only obtained leave to apply for certiorari on 19 December 1989, and the stay order came even later. Consequently, PPES’s legal entitlement had crystallised before any potential challenge, and any injunction would interrupt a lawful exercise of administrative authority.

Moreover, PPES had made substantial financial investments in reliance on these licences, which the court took into serious consideration. As the judgment observed: 

“PPES had spent a total capital outlay of RM109,659,000 to date. The expenditure involved the purchase of equipment, lorries, tractors and bulldozers… and… RM4 million in building 45 miles of road and bridges.” 

In stark contrast, the court noted that Keruntum had only RM10,000 in paid-up capital, and hence would not be able to compensate PPES if the injunction was wrongly granted: 

“Keruntum has only a paid-up capital of RM10,000. On the opposite side, if Keruntum fails in the substantive motion, it would be well-nigh impossible for it to adequately compensate PPES” (p. 443). 

This led the court to find that the balance of convenience favoured PPES, since the risk of irreparable financial harm to PPES far outweighed any speculative harm to Keruntum. Furthermore, damages would suffice as a remedy for Keruntum if it succeeded in its judicial review. The judge reasoned: 

“On the other hand, PPES could adequately compensate Keruntum in the event Keruntum succeeds. On the opposite side, if Keruntum fails… it would be well-nigh impossible for it to adequately compensate PPES” (p. 443). 

Another factor influencing the court’s decision was the principle of preserving the status quo, especially in interlocutory proceedings. The court cited Si Rusa Beach Resort Sdn Bhd v Asia Pacific Hotels Management Pte Ltd5, affirming that the status quo should be maintained unless there is an urgent need to alter it. Since PPES was already in possession and operating in the forest areas, the court found: 

“PPES is in possession of the forest areas… and as such I am of the view that PPES should be allowed to continue with the operations… until the determination of Keruntum’s action” (p. 443). 

Finally, on the issue of mala fides, Keruntum alleged that the timber licences were issued in bad faith, particularly given the political context and timing. However, the court found the government’s explanation plausible: 

“The reason put forth that the timber licences were issued after the time set by the Forest Ordinance for appeal by Keruntum… would seem to be plausible and would not perhaps amount to mala fide” (p. 443). 

This assessment of good faith was important in showing that there was no abuse of power or ulterior motive strong enough to warrant equitable intervention. 

OBITER DICTUM: 

An instance of obiter dictum in the judgment can be observed in the learned judge’s commentary regarding the possible knowledge of the licensing authorities about Keruntum’s intention to challenge the revocation of its timber licence. While ultimately irrelevant to the core determination of whether the interlocutory injunction should be maintained or set aside, the judge remarked: 

“I do not agree that the Minister of Resource Planning and the Director of Forests had no knowledge of the intended action of Keruntum because to accept the submission of Mr Fong would signify that the ‘setiausaha tetap’ kept the letter of Keruntum’s in which it indicated its intention to challenge the validity of the Minister’s decision on the revocation of its timber licence (exh L-2A) close to his chest when it is a very important matter that should be his (setiausaha tetap) paramount duty as an officer to disclose… otherwise it may amount to dereliction of duty…” ([1990] 1 MLJ 436 at 441–442). 

This observation, while critical in tone, was not essential to the final ruling on the injunction application, as the judge ultimately relied on procedural timing, the balance of convenience, and adequacy of damages. Thus, the remarks concerning the potential misconduct or knowledge of the licensing authorities constitute obiter and do not form part of the ratio decidendi.

OUTCOME OF THE CASE : 

The High Court dismissed Keruntum Sdn Bhd’s application to set aside the quia timet interlocutory injunction granted in favour of PPES Timber Sdn Bhd. The Court held that PPES had been granted valid timber licences by the proper authorities under the Forest Ordinance before Keruntum obtained leave to apply for judicial review and before the stay order was issued. The learned judge remarked that “Keruntum could no longer operate the forest areas granted under the revoked licence until such time as the challenge of the revocation… is determined by the court in OM No KG 16 of 1988,” and emphasised that PPES, having legal rights under the validly issued licences, should not be precluded from carrying out its operations in the meantime. 

Further, the Court rejected Keruntum’s allegation of non-disclosure of material facts, finding that the affidavit of Leslie Majoribanks and its accompanying exhibits sufficiently disclosed the relevant facts. The judge also stressed that the balance of convenience favoured PPES, noting the significant financial outlay by PPES, in contrast to Keruntum’s limited capital, which made it unlikely to adequately compensate PPES if the injunction were wrongly granted. Accordingly, the interlocutory injunction was upheld to preserve the status quo, and Keruntum’s application to strike out portions of PPES’s statement of claim was only allowed in respect of paragraph 9(d), which the Court deemed scandalous and irrelevant.

Reference(S)

1 Cotton Corp of India Ltd v United Industrial Bank Ltd AIR 1983 SC 1272

2 Fletcher v Bealey (1885) 28 Ch D 688

3 Si Rusa Beach Resort Sdn Bhd v Asia Pacific Hotels Management Pte Ltd [1985] 1 MLJ 132

4 Professor Dr A Kahar Bador & Ors v N Krishnan & Ors [1983] 1 MLJ 407 

5 Si Rusa Beach Resort Sdn Bhd v Asia Pacific Hotels Management Pte Ltd [1985] 1 MLJ 132