An agreement to withdraw an assault charge is not necessarily illegal because the consent of the court must be obtained. The plaintiff sued the defendant for $57 on an agreement, the consideration for which was the withdrawal of a charge of assault brought by the plaintiff against the defendant. The charge was not proceeded with but there was no evidence that the case had been withdrawn with the consent of the court, as required by s 218 of the Criminal Procedure Code.

Held: it must be presumed that the consent of the court had been obtained and the compounding of the offence was lawful consideration.

Phun See v Yew Kee [1913] 1 FMSLR 103 High Court, Federated Malay States (Innes JC).

The court found that the trial judge had misdirected himself on certain facts and held that, in the circumstances of the case, there was no evidence to conclude that the defendant had proved the cheque had been given for an illegal consideration.

Ratna Ammal v Tan Chow Soo [1967] 1 MLJ 296 Federal Court, Penang (Azmi CJ (Malaya).

The appellant in consideration of a loan of $1,000 by the respondent entered into an agreement whereby he purported to assign all his rights and liabilities under a Forest Permit to the latter's wife. Under the permit the appellant obtained the right to fell timber in a forest reserve and there was evidence that the respondent's wife did actually operate in purported exercise of rights assigned to her by the appellant. The respondent obtained judgment against the appellant for the $1,000 claimed as money lent. On appeal, the appellant was given liberty to add a new ground of appeal: 'From the evidence before the court the learned magistrate should have found that the plaintiff was in pari delicto and his claim was based on an illegal contract and should have dismissed this claim on that ground. The court should always take notice of the illegality of the contract even though it has not been specifically pleaded.'

Held: (1) under ss 20 and 22 of the Forest Enactment a person cannot lawfully exercise rights in a reserved forest by virtue of permission granted to someone else. The respondent's wife's exercise of the purported rights assigned to her by the appellant was a breach of the provisions of the enactment and an illegality; (2) notwithstanding that illegality had not been pleaded in this case, it was the duty of the court to take the point although the litigant had not taken it.

Leong Poh Chin v Chin Thin Sin [1959] MLJ 246 High Court, Ipoh (Good J).

The plaintiff, a licensed gambling casino, obtained in the High Court of England a judgment against the defendant and subsequently applied to the High Court in Kuala Lumpur to have the judgment registered under s 4 of the Reciprocal Enforcement of Judgments Act 1958. The application was granted by the senior assistant registrar and the defendant's application to set aside the order was dismissed. The defendant appealed to the judge-in-chambers. On appeal, the defendant argued that the cheques given to the plaintiff (in exchange for cash and gambling chips) were given for illegal consideration, or, alternatively, that the judgment was for gambling debt, and should not be enforced, being against public policy.

Held, dismissing the defendant's appeal: (1) had the contract been entered in this country it had been so executed with lawful consideration, and s 24 of the Contracts Act 1950 cannot apply to make it void; (2) the cheques were issued in exchange for cash and gaming chips for purposes of gaming at a licensed gaming casino. It is not for an unlawful purpose by the law of England. Had such transaction occurred in this country, it is a lawful transaction provided that the gaming is done in a gaming premises licensed by the Finance Minister under s 27A of the Common Gaming House Act 1953. The enforcement of the UK judgment cannot be considered as against the public policy of Malaysia.

The Aspinall Curzon Ltd v Khoo Teng Hock [1991] 2 MLJ 484 High Court, Kuala Lumpur (Eusoff Chin J).

In this case, one Tengku Sepiah was the registered owner of a piece of land which she sold and transferred to Futo Trading Sdn Bhd who was to develop the land for building. Futo Trading Sdn Bhd made an arrangement with the defendants for the development of the land. The defendants were themselves the registered owners of another piece of land and this also was to be developed for building. The plaintiffs had made bookings in respect of lots on the land and had signed booking applications which contained the terms and conditions of booking. Application was made for sub-division of the lands but approval was given subject to a reservation of certain lots for bumiputra. The plaintiffs sued for specific performance of the sale of the lots of the land. The defendants claimed that the actions should be dismissed because (1) there was no concluded contract on which an action would lie; (2) even if there was a concluded contract, the special condition imposed made the performance of the contract impossible and/or unlawful and that therefore further performance of it was excused and (3) (in respect of some of the lands) as the defendants were not the registered owners of the land when the bookings were made, even if the bookings made by them amount to concluded contracts, such contracts were illegal by virtue of r 11(1) of the Housing Developers (Control and Licensing) Rules 1970.

Held: (1) the defendants' contention that there was no concluded contract fails as there was a booking document which contained the terms and conditions of the booking and the parties are deemed to have approved the printed sale and purchase agreement setting out the terms and conditions of sale; (2) the special conditions in this case were not endorsed on the title deeds and even if they could be said to have been imposed when the approval was given, they could be said to have been withdrawn before the qualified titles were issued. Even if the special conditions were imposed and not withdrawn, the defendants cannot invoke their existence to avoid their liabilities under the contracts; (3) the defendants should have known that in applying for conversion and sub-division the authorities could impose terms and conditions. They could have inserted an express condition that the discharge of their obligations would be dependant on the approval to be obtained from the land office but they did not do so. On the facts of the case, the defendants took the risk of contracting to supply each of the purchasers with a sub-lot with a building duly erected thereon without qualification save one that the building to be erected on the sub-lot was subject to 'approval by the local authority or authorities'; (4) in this case, it was not possible to read into the contract a further qualification of an implied term that the contract need only be performed by the defendants if they ended by having all the lots for disposal. The defendants are not excused from performance; (5) in this case, the defendants by inviting the purchasers to make bookings, by implication held themselves as being legally entitled to enter into the contracts for the sale of the lots with houses to be built thereon. The contract was ex facie lawful and the fact that it was unlawful was not known to the purchasers. The plaintiffs were never in delicto since they did not know the vital fact, that the vendor was in fact not the registered owner of the land, that would make the performance of the contract illegal. The defendants' attempt to avoid their liabilities on the basis of illegality therefore fails; (6) the plaintiffs in this case are entitled to damages for breach of contract.

Khau Daw Yau v Kin Nam Realty Development Sdn Bhd [1983] 1 MLJ 335 High Court, Kuantan (George J).

Kesang Corp Bhd ('Kesang') owned 17.5% of the share capital of KCB Finance Bhd ('KCB'). The plaintiff agreed by contract to purchase from the first defendant 7.8 million shares in Kesang ('the contract'). The plaintiff and the first defendant both applied to 'Bank Negara' for the Minister of Finance to approve the contract under s 45(1) of the Banking and Financial Institutions Act 1989. 'Bank Negara' dismissed both applications and consequently the first defendant repudiated the contract. The plaintiff claimed damages for breach of the contract firstly on the ground that ministerial approval under s 45(1) of the 1989 Act, was only mandatory in direct acquisition of not less than 5% of the shares in a licensed institution. The plaintiff therefore contended that since Kesang was not a licensed institution, ministerial approval was not necessary. The plaintiff also argued that even if the minister's approval was required, s 45(1) of the 1989 Act did not render the contract void because s 125 of the 1989 Act saved the contract. Section 125 of the 1989 Act states, inter alia, that 'except as otherwise provided' in the 1989 Act, no contract shall be void solely by reason of contravention of any provision of the 1989 Act.

Held, dismissing the claim: (1) under s 2(1) of the 1989 Act, 'interest in a share' has the same meaning as that provided by s 6A(2) to s 6A(10) of the Companies Act 1965; (2) by acquiring shares in Kesang, the plaintiff would also be indirectly acquiring voting rights in KCB, a licensed institution. Accordingly s 6A(6)(a) of the 1965 Act which relates to direct acquisition, did not apply in this case. An indirect acquisition of an interest in a share is recognized as is clear from the language of s 6A(10)(a) of the 1965 Act. The contract therefore fell within s 45(1)(a) and (b) of the 1989 Act and it was mandatory for the parties to obtain the minister's approval; (3) the importance of s 45(1) of the 1989 Act is that the obtaining of the minister's approval, gives the parties the capacity to enter into an agreement. In this case since neither the plaintiff nor the first defendant had the capacity to enter into the contract without the minister's approval, there was no agreement which could be saved by s 125 of the 1989 Act. Since the 1989 Act has not expressly provided for an agreement without the minister's approval to be validated, the contract was therefore void and unenforceable; (4) in any event, the granting of the minister's approval is an administrative act which the 1989 Act has rendered mandatory for the purposes of regulating the activities of financial institutions in this country. In that respect, the obtaining of such approval is a matter of public policy which comes within the ambit of s 24(e) of the Contracts Act 1950. Accordingly a contravention of s 45(1) of the 1989 Act is also a contravention of s 24(e) of the 1950 Act. For this reason, s 125 of the 1989 Act could not come to assist the plaintiff to save the contract; (5) solely on the fact that Bank Negara dismissed both applications from the plaintiff and the first defendant for the minister's approval, the contract was rendered void and unenforceable.

Coramas Sdn Bhd v Rakyat First Merchant Bankers Bhd & Anor [1992] 2 MLJ 603 High Court, Kuala Lumpur (Siti Norma Yaakob J).

In this case, it was

Held, dismissing the appeal: the contract was illegal and therefore void because of the failure of the appellant to be registered and licensed as a pepper dealer under the Pepper Dealers and Planters Ordinance (Cap 100).

Chop Khing Foh v Chong Boo Khoi [1957] SCR 109 Supreme Court, Sarawak, North Borneo and Brunei

D entered into a contract with A whereby D agreed to lay pipes for A within a stipulated time. D failed to complete the work on time and the dispute was referred to arbitration. In the course of arbitration A applied to the arbitrator, X, to refer questions of law in the form of a special case to the High Court. X declined to make the reference. A then applied to the High Court under s 22(1) of the Arbitration Act 1950 to direct X to make such reference. D firstly argued that A could not make such an application under the terms of reference to the arbitrator. D also argued that the questions sought to be referred should first await X's findings of fact.

Held, adjourning the application sine die: (1) there was nothing in the terms of reference to prevent A from applying to the court under s 22(1) of the 1950 Act; (2) even if the terms of reference did prevent, the terms of reference would be ineffective because statute would override the contract; (3) the court will not direct the arbitrator to state a case merely because he has refused. The question of law which is sought to be referred, must be material to the issues and is one which the court must decide having regard to all the circumstances. Moreover the application must be made before the arbitrator has made his award; (4) X should proceed with the arbitration and give both parties prior notice of his findings of fact so that A would be at liberty to continue this application. X however could not pronounce his final award without direction of the court as to whether he would be required to refer questions of law to the court.

Kerajaan Negeri Selangor v Maraputra Sdn Bhd Originating Summons No 21-40 of 1991 High Court, Shah Alam (Shankar J).

P was hired by D to recover two aircraft from Nigeria. The aircraft had been hired by D to certain prominent Nigerians, who had not paid the hire instalments. There had been a coup d'etat in Nigeria. P and his fiancee undertook to recover the aircraft for D in consideration of a fee of 25,000, to be paid in two instalments. P managed to fly off one of the aircraft and after dodging a pursuing fighter, landed the aircraft in the Ivory Coast. He had left Nigeria without permission from air traffic control, a serious offence. He gave evidence that this was done because he had been told by a Nigerian official that his life was in danger. The aircraft was eventually recovered by the Nigerians from the Ivory Coast authorities. P had been paid the first instalment of his fee. He sued for the second instalment. D raised the defence of illegality by Nigerian law. The trial judge allowed P's claim. D appealed.

Held, dismissing the appeal: (1) the ex turpi causa defence rests on a principle of public policy. It applies where a plaintiff has been guilty of illegal or immoral conduct, if in all the circumstances it would be an affront to the public conscience to grant the plaintiff relief, because the court would thereby appear to assist or encourage the plaintiff in his illegal conduct or to encourage others in similar acts; (2) the defence will apply where the plaintiff seeks to found his claim on an illegal contract or to plead illegality in order to support his claim or where the grant of relief to the plaintiff would enable him to benefit from his criminal conduct; (3) however, there may be cases where it would be wrong for a civil court to disqualify a plaintiff from recovery, even though his claim is derived from conduct which constitutes a statutory offence. In the present case, the offences committed by P were designed to free himself and his fiancee from pressing danger. The claim therefore should be allowed as the court's conscience was not affronted; (4) the court would have reached the same conclusion even if the offences had been committed in England under English law; (5) it would have been for the criminal courts to consider what penalties should be imposed. But, if the offences were committed to escape danger to life, the court would not hold that P was disqualified from claiming his fee in a civil action. The appeal was accordingly dismissed.

Howard v Shirlstar Container Transport Ltd [1990] 3 All ER 366 Court of Appeal, England (Lord Donaldson MR, Taylor and Staughton LJJ).

P entered into a contract to purchase residential property from D. A deposit of S$131,000 was paid. As foreigners, P required the approval of the minister to acquire an interest in residential property. The minister disapproved P's application. P demanded the return of the deposit, claiming that the contract had been frustrated. D declined to return the money. P sued.

Held, dismissing the claim: (1) the fact that D did not know that P were foreign nationals until after the minister had disapproved their application negatived the submission that the contract had been made conditional upon ministerial approval; (2) the failure to obtain ministerial approval was an offence under the Residential Property Act (Cap 274) and the contract was therefore illegal; (3) accordingly, P were not entitled to recover the deposit paid. The action was dismissed with costs.

Lim Xue Shan & Anor v Ong Kim Cheong [1990] 3 MLJ 449 High Court, Singapore (Rajah J).

Four Seas Communications Bank Ltd v Sim See Kee [1990] 3 MLJ 226 High Court, Singapore (Rajah J).

See CONFLICT OF LAWS, Vol 3, para 941.

See companies and corporations, para V [35].

Datuk Tan Leng Teck v Sarjana Sdn Bhd & Ors [1997] 4 MLJ 329 High Court, Melaka (Augustine Paul JC).

P, a registered co-operative society, gave overdraft facilities to one of its members, X. The loan was secured by registering a charge over D's land in favour of P. X defaulted on the loan and P applied for an order for sale of D's land. D applied to the High Court to stay P's foreclosure proceedings pending the disposal of Civil Suit No 2919-87. In Suit No 2919-87, P sued, inter alia, D and X for the recovery of the debt due to P. The senior assistant registrar gave summary judgment for P but this was reversed by the High Court. P has appealed to the Supreme Court and the appeal is still pending in Suit No 2919-87. The applications of both P and D were heard together. D firstly argued that the foreclosure proceedings should be stayed because the issues raised in P's application for summary judgment in Suit No 2919-87 were substantially the same as those in the present foreclosure proceedings. D then argued that P was carrying on banking business by granting overdraft facilities to X and by charging D's land. D alleged that P could not carry out banking business under the Banking Act 1973. D further alleged that P could not use the word 'bank' to denote its business and by doing so P had contravened s 9(1) of the 1973 Act. D contended that as a result of the contravention of the 1973 Act, the charge was void pursuant to s 24 of the Contracts Act 1950.

Held, allowing P's application for order for sale; dismissing D's application for stay: (1) a chargee has the right to sue for the recovery of the debt under common law and also a statutory right to apply for order of sale of the land subject to the charge under s 256(2) of the National Land Code 1965. These are separate actions for different remedies; (2) this court had jurisdiction to adjudicate P's application even though similar issues had been adjudicated by another court in a separate action; (3) P can give loans to its members under s 30(1) of the Co-operative Societies Act 1948 and this includes the granting of overdraft facility which is one method of making loans; (4) s 30(3) of the 1948 Act implies that if there is no prohibition by the minister, P can accept a charge as security for a loan. In any case, no corporation would give a loan without some form of security; (5) in enacting the 1973 Act, the legislature must have known that co-operative societies registered under the 1948 Act were allowed to give loans to their members and not to members of the general public. The fact that it was not necessary for co-operative societies to be exempted under s 59 of the 1973 Act clearly indicates that the limited banking business carried out by co-operative societies does not fall within the 1973 Act. It is to be noted that those who are exempted from the 1973 Act carried out banking business with members of the general public; (6) P had infringed s 9(1) of the 1973 Act by using the word 'bank' to describe its business. P may be liable to a penalty under s 9(2) of the 1973 Act but this could not affect the charge which P is allowed to enter under the 1948 Act; (7) the charge was not void because it was permissible under s 30 of the 1948 Act. The consideration or the object of the charge agreement was therefore not forbidden by law; (8) P had not infringed the Moneylenders Act 1951 because s 2A(1) of the 1951 Act states that the 1951 Act shall not apply to co-operative societies.

Co-operative Central Bank Bhd v Belaka Suria Sdn Bhd 1991 High Court, Kuala Lumpur (Lim Beng Choon J).

In a suit on a promissory note for $400, the defendant alleged that the consideration consisted of, inter alia, (a) a sum of $130 drawn by the plaintiff from a Kutu and lent by him to the defendant and (b) a sum of $130 lent by the plaintiff to the defendant, who managed the Kutu, to enable him to discharge his liabilities thereunder. The Kutu consisted of 26 persons and was not registered under the Societies Enactment.

Held: (1) a collection of 26 people who agree together each to deposit $5 bi-monthly and who agree to decide by lot that each of them shall have the total amount subscribed in turn was rendered illegal by s 10 of the Societies Enactment as being an unregistered society of more than 10 persons; (2) nevertheless the object of such a society and the contracts between its members may well give rise to civil rights and obligations. Money lent to meet such an obligation is lawful consideration for a promissory note given in respect of such loan.

Ramasamy v Muniappan [1940] MLJ 290 High Court, Federated Malay States (Horne J).

[Annotation: See also Ameer Batcha v Kunjumon [1959] MLJ 59.]

This was an appeal against the decision of the President of the Sessions Court, Alor Star. The respondent, a padi planter, was tenant of five relongs of padi land owned by the appellant. He had occupied the said land for 18 years until June 1966. Before 1958, the respondent was cultivating more than ten relongs of the appellant's land, but sometime in that year, the appellant took back half of the land. A tenancy agreement for the 1958/9 season to the extent of the remaining half portion (ie five relongs) was executed and duly registered under the Padi Cultivators (Control of Rent and Security of Tenure) Ordinance 1955. The respondent thereafter continued to cultivate the land and paid rent accordingly to the appellant. Sometime in 1963, on a request in writing by the appellant, the respondent paid rent to the appellant's nephew. Receipts of such payments were acknowledged by the nephew. The respondent was never in arrears of rent. In June 1966, the respondent alleged that the appellant, without any notice whatever, occupied the said land by sending a tractor to plough it, thereafter planted it with padi and harvested it, when in fact he (the respondent) had already cultivated and prepared the land for planting. The respondent, accordingly, sought relief from the Padi Committee, Kota Star, under the Padi Cultivators (Control of Rent and Security of Tenure) Ordinance 1955, and on 30 July 1966, the committee made an order allowing the respondent to execute a tenancy agreement with the appellant. The appellant refused to do so. No further action was taken by the respondent under the ordinance and he continued to cultivate the land and paid rents to the appellant. The respondent brought an action against the appellant for trespass and damages on the grounds that he (the respondent) was deprived of cultivating the land deriving benefit therefrom for the 1966/67 season and had thereby suffered special and general damages. The learned President, while holding that it was illegal for the appellant (landlord) to collect rent without a tenancy agreement, held that the documents evidencing payments of rent established the relationship of landlord and tenant notwithstanding that the respondent had not complied with the mandatory provisions of the Padi Cultivators Ordinance (Control of Rent and Security of Tenure).

Held, allowing the appeal: (1) as there was no written agreement registered under the Padi Cultivators (Control of Rent and Security of Tenure) Ordinance 1955 and both parties having contravened its provisions, the respondent-occupier was not a tenant but a mere licensee having permissive occupation; (2) as the respondent was a bare licensee, the appellant owner was entitled to re-enter forcibly without being liable in trespass as the appellant had a better right to possession. The respondent was entitled to be compensated for his expenses in preparing the land for cultivation.

Haji Taib v Ismail [1971] 2 MLJ 36 High Court, Alor Star (Syed Agil Barakbah J).

In 1934, the plaintiff (hereinafter referred to as 'the respondent') bought about 40 acres of rubber land. At the time, he already owned 99 acres of rubber land so that with the new purchase, his total holding of rubber land exceeded 100 acres. This was important in connection with the Rubber Regulations which made a distinction between holdings of 100 acres and more and of holdings below 100 acres. If a man held 100 acres or more, the permissible production was assessed by an assessment committee. If he held less than 100 acres, it was assessed by the local district officer. In order to avoid these regulations, the respondent in 1935 transferred 40 acres of his rubber land to his son, the defendant (hereinafter referred to as 'the appellant'). In the memorandum of transfer the respondent acknowledged receipt of $7,000 as consideration, but it was found as a fact by the trial judge that no money was paid by the appellant. The transfer was duly registered. The certificate of title showing the appellant as proprietor of the 40 acres remained in the possession of the respondent all the time. The respondent also received all the income from the property and paid all the wages and assessment. The appellant paid nothing and received nothing in respect of the property. In 1950, the appellant having refused to execute a power of attorney in respect of the property in favour of the respondent to enable the latter to sell it, the respondent brought an action for a declaration that the appellant held the property in trust for the respondent and for an order for the property to be retransferred to him. The trial judge took the view that the respondent had practised a deceit on the public administration of the country in order to get a personal benefit but held that in view of the Court of Appeal decision in Sardara Ali v Sarjan Singh [1957] MLJ 165, the respondent's possible turpitude was no bar to the success of his claim and he therefore gave judgment for the respondent. The Court of Appeal disagreed with the trial judge's interpretation of the decision in Sardara Ali v Sarjan Singh but held that there was no evidence that the respondent had practised deceit on the public administration of the country. The trial judge's decision was affirmed on the ground that the appellant held the property for the respondent as express trustee. On appeal to the Privy Council.

Held: (1) the trial judge's finding that the respondent had practised deceit on the public administration of the country to make a personal gain must be upheld. The board could not agree with the Court of Appeal that there was no evidence for such a finding; (2) the appellant was not precluded from relying on this defence even though he had not pleaded it and had not appeared at the trial to give evidence on it; (3) in view of the finding that the respondent had arranged the transfer for an illegal or fraudulent purpose, and as the fraudulent purpose had in fact been carried out, the respondent was precluded from obtaining the aid of the court.

Palaniappa Chettiar v Arunasalam Chettiar [1962] MLJ 143 Privy Council Appeal from Malaysia (Lord Denning, Lord Devlin and LMD De Silva).

In this case, the respondent, by her attorney, had lent money to the appellant on the security of a charge of certain lands belonging to the appellant. The respondent was a registered moneylender carrying on business under the name of ARPRM Firm but the loan in this case was made by the attorney on behalf of the respondent personally. The respondent applied for an order for sale of the lands to satisfy the principal sum and interest. The appellant objected to the application on the ground, inter alia, that as the loan was not made in the registered name of the moneylender, the moneylender had contravened s 8 sub-ss (b) and (c) of the Moneylenders Ordinance 1951 (Ord 42/1951). The learned trial judge held that the provisions of s 8 sub-ss (b) and (c) of the Moneylenders Ordinance had been contravened and therefore the loan was illegal and void ([1973] 1 MLJ 50). He held, however, that s 66 of the Contracts (Malay States) Ordinance 1950 applied and he made an order that the application for the order of sale be dismissed upon payment of the sum of $19,400, the balance of the principal sum. The appellant appealed on the ground that the learned trial judge was wrong in directing him to pay to the respondent the sum of $19,400 as a condition of obtaining the relief he sought. The respondent cross-appealed and contended that the learned trial judge was wrong in holding that s 8 sub-ss (b) and (c) of the Moneylenders Ordinance had been contravened and that the loan transaction was therefore illegal and void.

Held, (Azmi LP and Suffian FJ, Ong Hock Sim FJ dissenting): (1) the agreement in this case was forbidden by s 8 sub-ss (b) and (c) of the Moneylenders Ordinance and therefore the agreement was void; (2) the learned trial judge was correct in the circumstances of this case in finding that neither the respondent nor her attorney was aware of the illegality of the transaction at the time of the execution of the documents and therefore s 66 of the Contracts (Malay States) Ordinance was applicable and the learned trial judge was right in ordering the return of the sum of $19,400 to the respondent; (3) the respondent was entitled to interest at the rate of 6% on such sum from the date of the institution of the suit.

Ng Siew San v Menaka [1973] 2 MLJ 154 Federal Court, Kuala Lumpur (Azmi LP, Suffian and Ong Hock Sim FJJ).

The applicant and another person were licensed as moneylenders under the authorized name of 'AR PRM Firm'. The applicant lent to the respondent a sum of money and the respondent charged his land to the applicant as security for the loan. Both the memorandum of loan and the charge were executed by the attorney of the applicant. The respondent having failed to pay the principal sum and interest due, the applicant applied for an order to sell the land to satisfy the amount due. The respondent opposed the applicant contending that the claim was illegal and void and/or unenforceable on the ground that the applicant had contravened the provisions of the Moneylenders Ordinance 1951 (Ord 42/1951). In her affidavit in reply, the applicant contended that even if the respondent succeeded in his counterclaim, the respondent having received from the applicant the sum of money, was bound to restore it to the applicant.

Held: (1) as the applicant had contravened the provisions of s 8 sub-ss (b) and (c) of the Moneylenders Ordinance, the transaction of loan was illegal and void; (2) non-compliance with either s 8 sub-ss (b) or (c) of the Moneylenders Ordinance renders a moneylending transaction illegal and void, but it does not make the transaction statutorily unenforceable; (3) as both the parties in this case were not aware and were genuinely ignorant of the illegality at the time of making the loan transaction, the applicant was entitled to relief under s 66 of the Contracts (Malay States) Ordinance 1950.

Menaka v Ng Siew San [1973] 1 MLJ 50 High Court, Kuala Lumpur (Mohamed Azmi J).

This was an appeal from the decision of the Federal Court ([1973] 2 MLJ 154). The appellant was a registered moneylender carrying on business under the name of ARPRM Firm. Through her attorney she lent some money to the respondent on the security of a charge of certain lands belonging to the respondent. The loan was made by the attorney on behalf of the appellant personally. The appellant applied for an order for the sale of the lands to satisfy the principal sum and interest. The respondent objected to the application on the ground, inter alia, that, as the loan was not made in the registered name of the moneylender, the moneylender had contravened the provisions of s 8 sub-ss (b) and (c) of the Moneylenders Ordinance. The Federal Court by a majority held that the agreement in this case was forbidden by s 8(b) of the Moneylenders Ordinance and was therefore void. The majority held that the learned trial judge was right in the circumstances of the case in finding that neither the appellant nor her attorney was aware of the illegality of the transaction at the time of the execution of the documents and therefore s 66 of the Contracts (Malay States) Ordinance 1950 was applicable and the learned trial judge was right in ordering the return of the $19,400, the balance of the principal sum, to the appellant. The appellant appealed against the dismissal of her claim and before the Privy Council the respondent was given leave to cross-appeal against the decision of the Federal Court that he was liable for interest at 6% from the date of the raising of the action.

Held: (1) the appellant in this case had contravened para (c) of s 8 of the Moneylenders Ordinance and therefore the contract and the security were unenforceable; (2) in the circumstances of this case as neither party was aware of the illegality at the time of making the loan transaction and the documents were prepared and executed on both sides in complete good faith, the appellant was entitled to restitution of the balance of the principal sum of $19,400; (3) the award of interest was in the discretion of the court and in this case as it had not been shown that the Federal Court committed any error of law in the exercise of their discretion, their decision will be upheld.

Menaka v Lum Kum Chum [1977] 1 MLJ 91 Privy Council Appeal from Malaysia (Lord Simon of Glaisdale, Lord Fraser of Tullybelton and Lord Russell of Killowen).

The plaintiffs, tenants of rent-controlled premises, agreed in writing with the landlords/defendants that they (the tenants) would vacate the premises on 7 March 1966 and in consideration thereof the landlords would pay $60,000 on 7 March 1966 and in consideration thereof the landlords would pay $60,000 on 7 March 1966 before possession and $50,000 by five equal monthly instalments of $10,000. As the defendants failed to pay the $60,000 or comply with the remaining clauses of the agreement, the plaintiffs brought this action to enforce the agreement against their landlords. The defendants admitted making the agreement but raised two points of law which were set down for hearing to be disposed of before the trial of the action pursuant to the Rules of the Supreme Court, O XXVI r 2. The points were (i) whether the agreement was unlawful for non-compliance with s 2 of the Premiums on Leases Ordinance (Cap 253, 1955 Ed) by reason of non-presentation forthwith to the city council or the successors thereof; (ii) whether the agreement was unenforceable, the premises being subject to the provisions of the Control of Rent Ordinance (Cap 242, 1955 Ed).

Held: (1) under the Premiums on Leases Ordinance (Cap 253), to require the giving up possession of any building for valuable consideration was unlawful unless (a) the particulars of such consideration were furnished in a written document and (b) the document was forthwith presented for inspection by the person giving up possession to the city council. The plaintiffs had not been guilty of any unlawful act under s 2(1) of the Premiums on Leases Ordinance because in the present case condition (a) above had been complied with, and condition (b) above was to be complied with by the plaintiffs only on giving up possession and as possession had not yet been given up by the plaintiffs the duty to present the document for inspection to the city council had not arisen. Furthermore, after the Local Government Integration Ordinance 1963 came into operation on 1 September 1963 it was impossible for the plaintiffs to comply with condition (b) as there was no statutory provision for the function of receiving and inspecting the document referred to in s 2(1) of the Premiums on Leases Ordinance to be exercised by anyone. Condition (b) must therefore be regarded as suspended until statutory provision was made for the function in question to be exercised by someone; (2) the consideration required by the plaintiffs to be given by the defendants was not in addition to the rent. The consideration was required as a condition of the surrender of the tenancy to the landlords. The consideration was not required as a condition of the transfer of the tenancy and therefore the plaintiffs did not contravene the provisions of s 4 of the Control of Rent Ordinance.

Turquand, Young & Co v Yat Yuen Hong Co Ltd 1965 High Court, Singapore (Ambrose J).

Wong Hon Leong David v Noorazman bin Adnan [1995] 3 MLJ 283 Court of Appeal, Kuala Lumpur (Shaik Daud, Gopal Sri Ram and VC George JJCA).

See CONTRACT, Vol 3, para 1873.

The respondents had claimed the sum of M$373,586.52 being the price of timber sold and delivered to the appellants. The appellants alleged that the purchase price for the timber was inflated because of the conspiracy, fraud and corruption of agents acting on their behalf and allegedly on behalf of the respondents. The registrar gave leave to the respondents to sign final judgment for the sum claimed and costs and an appeal to the High Court was dismissed. The appellants appealed to the Court of Appeal.

Held, allowing the appeal: (1) if the allegations of the appellants could be established they have a good defence to the action and a good counterclaim and set-off which exceeded the respondents' claim; (2) it was plain on the affidavits that there were triable issues and therefore leave to defend should have been given.

PT International Nickel Indonesia v General Trading Corp (M) Sdn Bhd 1975 Court of Appeal, Singapore (Chua, Kulasekaram and D'Cotta JJ).

The appellants in this case claimed against the respondents for the purchase price of 4,000 sets of rubber tyres purchased by an Indonesian from a Taiwan seller. The said goods were shipped on a ship proceeding from Taiwan via Singapore to Jakarta, Indonesia. The facts revealed that the appellants opened a letter of credit in favour of the Taiwan seller for the agreed purchase price, US$228,305, through their bankers in Singapore. The bills of lading and other supporting invoices and documents covering shipment of the goods were sent to the appellants' Singapore bank by the Taiwan seller. The Indonesian buyer opened a letter of credit through a Singapore bank in favour of the appellants, for US$47,000, a much lesser sum than the agreed purchase price. This sum was declared on the 'proforma invoice' which was supplied by the Indonesian embassy in Singapore. The respondents obtained a blank 'proforma invoice' from the Indonesian embassy. The appellants signed this blank document and the respondents subsequently filled in all the requisite particulars, most of which were false to avoid payment of customs duties on the imported goods. The arrangement between the respondents and the appellants were contained in three letters from the respondents to the appellants. When the ship arrived at Jakarta, they were refused entry as they did not tally with the description in the 'proforma invoice' as endorsed by the Indonesian embassy in Singapore. The goods were sent back to Singapore and eventually were sent to another Indonesian port. The respondents failed to pay the appellants. The court below held that the 'whole operation was designed expressly by the parties herein and the Indonesian buyer to evade Indonesian customs duties' and dismissed the appellants' claim on the ground that the contract between the parties was illegal and void. On appeal to the Court of Appeal,

Held, dismissing the appeal: if a party to a contract actively engages in an illegal adventure to get goods into a country in breach of the revenue laws of that country, the court will not assist the parties to the adventure by entertaining or settling any dispute between the parties arising out of the contract.

Patriot Pte Ltd v Lam Hong Commercial Co 1978 Court of Appeal, Singapore (Wee Chong Jin CJ, Kulasekaram and D'Cotta JJ).

In this case, the respondent was registered as the proprietor of land classified as Native Area Land. He executed two documents (a) an agreement and (b) a declaration of trust. In the latter document, he declared that he held the land in trust for the appellant. No authorization of the Yang di-Pertua Negeri had been obtained. A caveat was lodged by the appellant in respect of the said land and this was duly registered. The respondent applied for an order to remove the caveat. The High Court allowed the application and awarded costs to the respondent ([1986] 1 MLJ 312). The appellant appealed.

Held: (1) having regard to the definition of 'native' in the Sarawak Interpretation Ordinance it would appear that the clear intention of Parliament is to confine the meaning of native to a natural person. The word 'native' is therefore limited to only a natural person; (2) the agreement made between the respondent and the appellant was an agreement made in contravention of s 8 (b) of the Sarawak Land Code. As such, it was entered into for an illegal consideration and was therefore a void agreement within the meaning of s 2(g) of the Contracts Act 1950 (Act 136); (3) since the appellant lodged the caveat to protect an agreement which is expressly prohibited by statute it follows that the appellant cannot lawfully assert any interest in the said land. The consideration being deemed to be illegal, an order must be made for the removal of the caveat.

Manang Lim Native Sdn Bhd v Manang Selaman [1986] 1 MLJ 379 Supreme Court, Kuching (Lee Hun Hoe CJ (Borneo).

Two pieces of native land were registered in the name of DD as trustee for PD Sdn Bhd. PD Sdn Bhd applied for conversion of the native titles to country lease titles and for their sub-division so as to build shophouses. Sale and purchase agreements in respect of the shophouses were entered between PD Sdn Bhd and 29 purchasers. Approval for the conversion of the native titles to country lease titles was obtained. Subsequently upon PD Sdn Bhd's application, P granted end-financing facility to the 29 purchasers. The 29 purchasers then entered into loan agreements cum assignment with P. Pending the issue of sub-divided country lease titles, PD Sdn Bhd executed memoranda of transfer in escrow in favour of the 29 purchasers. The 29 purchasers also simultaneously executed memoranda of charge in escrow in P's favour. Upon the issue of the sub-divided country lease titles in the name of DD, PD Sdn Bhd so as not to incur additional costs, arranged for direct transfer from DD to the 29 purchasers. DD then executed fresh memoranda of transfer in escrow in favour of the 29 purchasers. All the 29 sub-divided title deeds had been released to the common solicitors for both P and the purchasers in order to effect the registration of the transfers and the charges. The full purchase price had been settled. Out of 29 sub-divided title deeds, 22 had been transferred to the purchasers and had been charged in favour of P. The transfers in respect of the other seven title deeds were held back by prohibitory orders which were entered by D, the judgment creditor of DD. P applied to set aside the prohibitory orders.

Held, allowing the application: (1) a registered owner, by executing a memorandum of transfer or upon receipt of the purchase price in full, had divested himself of all beneficial interest in the land and vested it in the bona fide purchaser. The registered owner becomes a bare trustee for the purchaser; (2) the contention that the trust relationship between DD and PD Sdn Bhd was void and unenforceable for breaching s 17(1) of the Sabah Land Ordinance, is not substantiated. DD had executed memoranda of transfers in favour of the purchasers who had paid the full purchase price and were given possession of the title deeds; (3) upon reading cl 12 of the sale and purchase agreements, the agreements were made with a view of sale after the issue of the sub-divided titles. Hence the agreements are not contrary to the ordinance; (4) the courts are inclined to observe the principles of equity in the protection of the little individual, the purchaser, as against big institutions or financiers which are perceived as being able to withstand the loss, if any.

Borneo Housing Mortgage Finance Bhd v Bank Bumiputra Malaysia Bhd [1991] 2 MLJ 261 High Court, Kota Kinabalu (Syed Ahmad Idid JC).

The appellant occupied certain premises ('the premises') which was erected on State land together with his late father, and built a house on it. It was at the invitation of his late father that the appellant occupied the premises and remained in occupation with his wife and children since 1964. By a deed of gift dated 26 December 1974 ('the deed'), the appellant's father bequeathed the dwelling house to his daughter, the respondent. The deed was properly executed, attested and stamped. After the father's death in 1981 the appellant continued to occupy the dwelling house without paying a single cent by way of rental to the respondent. In 1986, the respondent through her solicitors issued a notice to quit to the appellant, and subsequently commenced an action to recover possession of the premises. The learned magistrate ordered that vacant possession of the premises be given to the respondent. The appellant appealed.

Held, allowing the appeal: (1) the trial court had failed to consider that the respondent's claim was founded on an illegality as the dwelling house stood on State land and the deed could not have divested the dwelling house to the respondent as the occupation of the State land was without lawful authority and punishable under s 425 of the National Land Code 1965 ('the Code'); (2) a party is bound by his pleadings but even where, as in this appeal, the illegality is not pleaded by the appellant, this court will not enforce a deed of gift founded on unlawful occupation of State land which is illegal, or arises out of an illegal transaction, where the illegality is disclosed on the respondent's own evidence and statement of claim, and it appears that the respondent was implicated therein; (3) where a statute makes a particular contract or class of contracts void, the court will refuse to allow an action to be maintained thereon, even though the objection is not pleaded and the parties do not desire to rely on it; (4) no action can be brought on a promise to do an illegal act, or to do an act with an illegal object, and no action can be brought on a promise, the consideration for which is wholly or in part illegal or against public policy; (5) even if the deceased held a temporary occupation licence on the State land, that licence was temporary and not transferable, and expired on the deceased's death; (6) the issuance of a temporary occupation licence to the deceased will not convert the State land into alienated land. Title to State land can only be acquired by the process of alienation effected in accordance with the provisions of the Code.

Narayanan v Kannamah [1993] 3 MLJ 730 High Court, Taiping (Abdul Malik JC).

Teo Ai Choo v Leong Sze Hian [1986] SLR 75 Court of Appeal, Singapore (Wee Chong Jin CJ, Sinnathuray and Lai Kew Chai JJ).

See CONTRACT, Vol 3, para 1592.

The defendant held a licence to work forest area in Pahang under the Forest Rules 1935. The licence was subject to certain conditions, in particular, it was not to be transferred by power of attorney to another person or by sub-letting or by other means and no sub-contracts or partnership might be made in connection with the said licence without prior approval in writing from the District Forest Officer. The plaintiff alleged that there was an agreement entered into between him and the defendant in 1965 to work the forest area and sought an injunction to restrain the defendant from otherwise dealing, disposing etc of the forest area in question and for a declaration that the defendant was liable to perform the covenants in the agreement. The question before the court was whether the agreement was illegal and if so whether the defendant could raise the defence of illegality.

Held: (1) the agreement in the question was null and void and illegal as tending to contravene the provisions of rr 2 and 18 of the Forest Rules 1935; (2) in this case the defendant was not the party who sought to enforce the illegal contract; he came to court as a defendant, and it was within his province as a defendant to set up the defence of illegality.

Tan Bing Hock v Abu Samah [1967] 2 MLJ 148 High Court, Raub (Raja Azlan Shah J).

[Annotation: Sarjan Singh v Sardara Ali [1960] MLJ 52 and Palaniappa Chettiar v Arunasalam Chettiar [1962] MLJ 143 were distinguished.]

Teh Poh Wah v Seremban Securities Sdn Bhd [1996] 1 MLJ 701 Court of Appeal, Malaysia (Gopal Sri Ram, Siti Norma Yaakob JJCA and Mokhtar Sidin J).

See CONTRACT, Vol 3, para 2109.

The plaintiffs ran a printing press. The first defendants publish educational books and trial answer papers which the plaintiffs printed at their request from time to time. In consideration of the goods and services provided, the second and fourth defendants executed a guarantee and letter of indemnity in favour of the plaintiffs. In 1989 the plaintiffs printed seven work books and four trial examination papers. The required number of copies were sent to the first defendants. No payment was received and the plaintiffs finally sued the defendants for the sum of RM110,953.44. They applied for summary judgment but the registrar granted the defendants unconditional leave to defend. The defendants pleaded illegality. They contended that the work done by the plaintiffs was in contravention of s 11 of the Printing Presses and Publication Act 1984 ('the Act'), in that the address of the printers did not appear on the finished work.

Held, allowing the appeal: (1) s 11 of the Act could be regarded as having been complied with if the name and address of the printer was printed on the document before it was actually published. A document only becomes a publication when it is published, ie made available for public consumption. The offence in s 11 arises only when the document is published, reproduced, sold, circulated or distributed or is offered for such purposes. Mere possession of a document on which the printer's name and address did not appear was not yet an offence. It was the offer to publish or actual publication of such a document which made the transaction illegal; (2) when the plaintiffs printed the documents in question, they had not yet committed any offence. The onus of ensuring compliance with s 11 was on the first defendants. They could easily have returned the proof copies or the entire stock to the plaintiffs and require the name and address of the printer to be added on. By failing to do this and using the publications in question, the first defendants alone contravened s 11 of the Act; (3) even if the plaintiffs were at fault this was not the kind of illegality which rendered a contract unenforceable. It was not enough that there was some incidental act or omission which was made punishable. The test was whether the real objective of the Act was to make the contract unenforceable.

Ling Wah Press Sdn Bhd v Pustaka Utama Pelajaran Sdn Bhd & Ors Suit No 22-82-91 High Court, Shah Alam (Mahadev Shankar J).

In cases where contracts are made with persons carrying on business which in law is regarded as immoral and illegal the circumstances of each case must be considered and only where those circumstances clearly prove that the purpose for which such a contract was made was an immoral or illegal one ought the court to treat it as illegal and incapable of enforcement.

Muthukaruppan Chitty v Ah Sim [1904] 8 SSLR 35 High Court, Straits Settlements (Thornton J).

The first defendants owned a building where they run the Amara Hotel and were desirous of converting the fourth level of the building into a discotheque. They approached the plaintiffs to undertake the project and to manage the discotheque. A written agreement was executed by which the first defendants were responsible for obtaining the licence to operate the discotheque. The plaintiffs' duties were to operate and manage the discotheque. When the discotheque was ready to be opened in December 1988, the first defendants applied for and obtained a licence in the name of the second defendant. In June 1991 the second defendant advised the authorities that he had no power to ensure the observance of the terms and conditions of the licence he held. He was charged in court and convicted of an offence under the Public Entertainments Act (Cap 257) ('the Act'). On 29 July 1991, the plaintiffs commenced the present action alleging that the first defendants had terminated or attempted to terminate the agreement and procured the non-renewal of the public entertainment licence by causing the second defendant to refuse to apply for its renewal. The plaintiffs sought, inter alia, a declaration that the first defendants do cause the second defendant to apply for the renewal of the licence. The defendants initially delivered a defence which was subsequently amended to include an assertion that the provision in the agreement which gave the right to the plaintiffs to apply for the licence was invalid, illegal and unenforceable unless the plaintiffs themselves became operators of the discotheque. This defence was argued as a preliminary point.

Held, ruling in favour of the defendants: (1) on the true construction of the agreement the plaintiffs were obliged to provide entertainment to the public. In this respect they were given absolute discretion and control of the running of the discotheque; (2) s 3 of the Act requires that the person to whom the licence is issued must be in a position to exercise control over the mode and manner of the management and operation of the discotheque; (3) unless the plaintiffs applied for and obtained a licence in the name of a person who was accountable to them, they transgressed the Act; (4) the agreement therefore set out a scheme for the plaintiffs to provide public entertainment under a licence issued to someone who was not their true representative; (5) where a statute or statutory instrument prohibits the doing of work otherwise than under a licence, a contract under which unlicensed work was carried out will generally be unenforceable. It was equally illegal for a party to aid and abet another by agreeing to lend his licence. The agreement was unenforceable by the plaintiffs in these proceedings; (6) the successful defendant in principle should not be deprived of his costs merely because he raised the defence of illegality of contract. The defence in the instant case was raised at a very late stage by way of amendment of the defence. The defendants would therefore only be entitled to their costs of the proceedings limited to the trial of the preliminary issue.

Nova Management Pte Ltd v Amara Hotel Properties Pte Ltd & Anor [1993] 2 SLR 289 High Court, Singapore (GP Selvam JC).

[Annotation: Reversed on appeal. See [1994] 1 SLR 263.]

Sim Tony v Lim Ah Ghee (t/a Phil Real Estate & Building Services) [1994] 3 SLR 224 High Court, Singapore (Lai Siu Chiu J).

See CONTRACT, , Vol 3.

Sim Tony v Lim Ah Ghee (t/a Phil Real Estate & Building Services) [1995] 2 SLR 466 Court of Appeal, Singapore (Karthigesu JA, Lai Kew Chai and Chao Hick Tin JJ).

See CONTRACT, Vol 3, para 1867.

The appellant was the registered owner of land. To avoid paying estate duty upon the appellant's death, the respondent company and a holding company were incorporated. The appellant then entered into an agreement with the respondent company whereby the former would purportedly sell his land to the latter ('the agreement'). The appellant also executed a trust deed whereby the appellant would purportedly hold the land in trust for the respondent company ('the trust deed'). The appellant purportedly sold his land for M$18,970,000 in consideration of allotment to the holding company of 18,970,000 ordinary shares in the respondent company at par value of M$1 each. The holding company then recorded an indebtedness to the appellant of M$18,970,000 in its books. The appellant subsequently purchased with a premium of M$13 each of 1,355,000 M$1 ordinary shares in the holding company. The total value of the shares in the holding company purchased by the appellant was M$18,970,000 and this was set off against the holding company's indebtedness of the same amount to the appellant. The holding company then convened an extraordinary general meeting which converted the 1,355,000 ordinary shares at par value of M$1 each to non-convertible cumulative preference shares of the same par value without voting rights ('the preference shares'). The appellant's wife and children were exclusively allotted ordinary shares in the holding company with voting rights. The respondent company applied to the High Court to order the appellant to transfer the land to the respondent company. The High Court allowed the application and the appellant appealed to the Supreme Court on the ground that the whole scheme was illegal. The issue of illegality was neither pleaded nor raised by the appellant during the trial at the High Court. During the trial, evidence was led by the respondent company to show that the whole scheme was devised by a tax consultant firm for the sole purpose of avoiding estate duty under s 11(i)(b) of the Estate Duty Enactment 1941. The respondent company contended that the scheme was drawn up to avoid and not to evade paying estate duty.

Held, allowing the appeal: (1) the courts take judicial notice of illegality of contracts and refuse to enforce them; (2) where the contract is ex facie illegal, judicial notice may be taken at any stage either at the court of first instance or at the appellate stage irrespective of whether illegality is pleaded or not. When the contract is not ex facie illegal, the court can still take judicial notice of the illegality although the illegality is not pleaded, if the facts showing clearly the illegality which have not been pleaded, emerge in evidence in the course of the trial; (3) in this case the documents, including the agreement and the trust deed, were ex facie lawful but the witnesses had given evidence showing that the documents had one purpose in common that was to avoid paying estate duty. Accordingly the facts that emerged in evidence in this case, including affidavit evidence, warranted the court to take judicial notice of the illegality of the scheme although this was not pleaded by the appellant; (4) extrinsic evidence of intention to avoid paying estate duty was admissible under s 92(a) of the Evidence Act 1950 to contradict or vary the agreement because such evidence was relevant for the purpose of considering the question of the illegality of the agreement; (5) while the words 'tax evasion' suggest illegality, the words 'tax avoidance' do not necessarily indicate legitimacy. The real test in any transaction, is whether the primary purpose of the transaction is to avoid tax. If it is, the transaction is for an illegal purpose and is of such a nature that, if permitted, it would defeat the tax law in question, coming under s 24(b) of the Contracts Act 1950; (6) the primary purpose of the scheme in this case, was to avoid paying estate duty especially so when the land practically remained with the appellant's wife and children in the sense that they would exclusively control the holding company without having paid one cent towards the purchase of the land. The scheme was therefore illegal and the agreement and the trust deed were thus unenforceable; (7) when the issue of illegality was raised, the court had lifted the corporate veil of the respondent company and the holding company because it was necessary to do so in this case. The courts have a discretion to lift the corporate veil for the purpose of discovering any illegal or improper purpose.

Lim Kar Bee v Duofortis Properties (M) Sdn Bhd Civil [1992] 2 MLJ 281 Supreme Court, Malaysia (Harun Hashim, Mohamed Azmi and Peh Swee Chin SCJJ).

As a general rule, a man's right to possession of his own chattels will be enforced against one who, without any claim of right, is detaining them, or has converted them to his own use, even though it may appear from the pleadings, or in the course of the trial, that the chattels in question came into the defendant's possession by reason of an illegal contract between himself and the plaintiff, provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract, or to plead its illegality in order to support his claim.

Berenger v Rozario [1953] MLJ 239 High Court, Singapore (Whitton J).

The defendants had appointed the plaintiffs as structural engineer for the development of a shopping complex. The letter of appointment contained the terms and conditions in regard to the plaintiffs' professional fees together with the schedule of payment. After structural designs were completed, the plaintiffs were informed that the defendants wished to terminate the plaintiffs' appointment because the plaintiffs had entered into a partnership/joint venture to undertake the said project. The plaintiffs claimed summary judgment, alleging that according to the schedule, they were therefore entitled to 55% of the total fees due, plus other charges. Alternatively, they claimed fees on a quantum meruit basis. The defendants claimed trial, alleging inter alia that the contract between the parties was illegal as the fees levied by the plaintiffs did not comply with the scale of fees drawn up by the Board of Engineers. The SAR allowed the plaintiffs' application for summary judgment. The defendants appealed.

Held, affirming the SAR's decision: (1) a quantum meruit claim did not bar an O 14 application where there was no defence to the claim provided there would be a consequential order for damages to be assessed by the registrar; (2) the purpose of the scale of fees drawn up by the Board of Engineers was to check engineers from charging exorbitantly high fees. The fees charged by the plaintiff was not only reasonable but was on the low scale. The contract was therefore not tainted by illegality and there was no triable issue before the court.

Mott Macdonald (Malaysia) Sdn Bhd v Hock Der Realty Sdn Bhd Civil Suit No 22-346-1994 High Court, Johore Bahru (Abdul Malik Ishak J).

In this case, the plaintiff had made an agreement with the defendant's husband, since deceased, whereby he acknowledged the receipt of $2,500 from the deceased and agreed to execute a power of attorney for the transfer of the land belonging to him to the deceased. It was also agreed that if the sum of $2,500 was repaid before a prescribed date then the application for transfer will be withdrawn or if the land has been transferred it will be retransferred to the plaintiff. Subsequently the deceased succeeded in registering the transfer of the land to him. It was alleged by the plaintiff that the agreement was a moneylender's transaction and that the registration of the transfer was obtained by fraud and by means of an insufficient or void instrument. The defendant on the other hand alleged that the agreement was an agreement for sale, subject to the condition for repayment which the plaintiff had failed to comply with, and therefore the deceased's title was indefeasible.

Held: (1) the agreement in this case was a loan transaction on the security of the land and the transaction was a moneylending transaction and as the agreement was insufficient to constitute a note or memorandum within the meaning of s 16 of the Moneylenders Ordinance 1951, it was therefore unenforceable by reason of illegality; (2) in this case, the plaintiff has proved fraud and misrepresentation on the part of the deceased and that the assignment to the deceased was obtained by means of an insufficient or void instrument, and therefore the deceased's title to the land was not indefeasible, although it was registered in the deceased's name; (3) the Collector of Land Revenue had not made a final decision against the plaintiff in this matter and as the Collector's order was conditional in nature the fact that the plaintiff had not appealed against the decision under s 237 of the Land Code (FMS Cap 138) is not fatal to his cause of action in this case.

Appoo s/o Krishnan v Ellamah d/o Ramasamy [1974] 2 MLJ 201 High Court, Kuala Lumpur (Mohamed Azmi J).

In this case, the appellant had been employed as a contractor by a company for the extraction of timber. The appellant agreed to furnish the necessary vehicles and to provide the buildings for the accommodation of the workers and for other necessary purposes and also to build a road leading to and from the timber area. It bought vehicles on hire-purchase and applied for and obtained a temporary occupation licence of land on which was constructed the road. Subsequently, the appellant agreed to withdraw and agreements were made whereby the respondent undertook the work of extracting the timber and the appellant's agreement with the company was cancelled. The respondent thereupon entered into an agreement with the appellant whereby the respondent agreed to buy over from the appellant the vehicles at an agreed price subject to the payment of the remaining instalments of the hire-purchase to the hiror and paying an agreed sum for the appellant's infrastructure and the road. The respondent paid the amount due to the appellant under the agreements by instalments which were paid by post-dated cheques, the last of which for $45,000 was dishonoured. The appellant brought the action to claim the sum of $45,000 and interest. The respondent admitted giving the post-dated cheques but it challenged the validity of the agreement on the ground, inter alia, of illegality, fraud and misrepresentation. It counterclaimed for the sum of $90,000 which had been paid by it under the agreement to the appellant. At the trial in the High Court the learned trial judge dismissed the claim and allowed the counterclaim for the refund of $90,000 with interest and damages. He held that the entire agreement was tainted with illegality and it was not severable, that the respondent was not in pari delicto because its partners were in ignorance of the law and had acted under strong pressure and because of the fraudulent misrepresentations of the appellant. The learned judge decided to admit parol evidence to prove the implied undertakings in construing the agreement and he then considered and found fraud and deceit on the part of the appellant. The appellant appealed.

Held, allowing the appeal: (1) the parol evidence was wrongly admitted by the trial judge as the evidence did not fall within either proviso (b) or proviso (c) of s 92 of the Evidence Act 1950 (Act 56) but was evidence adding a new term or terms to the agreement; (2) on the facts the charges of fraud and misrepresentation against the appellant could not be sustained; (3) the evidence sought to be adduced to show misrepresentation, deceit and fraud ranged far beyond the confines of the respondent's pleadings. The respondent's application to amend the pleadings must be disallowed, as it was made at the appellate stage and there was no good and strong justification for it; (4) although the temporary occupation licence is not transferable the statute does not prohibit the giving of permission to use the rights under it. In this case, all the appellant did was to permit the respondent to use his rights under the temporary occupation licence and there was nothing illegal about such an arrangement; (5) the appellant could not be held liable for damages arising from the cancellation of the temporary occupation licence as cl 9 of the agreement clearly provided that the respondent was not entitled to such damages.

Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229 Federal Court, Kota Kinabalu (Lee Hun Hoe CJ (Borneo).

This was a case as to the sale of ten chests of Benares opium. The defendant pleaded, inter alia, that the contract was void as being one by way of gaming and wagering but curiously enough he pleaded the Statute 8 and 9 Vic C 109 and not the Indian Act XXI of 1884, though his counsel appears to have added that plea at the trial. Cox CJ declined to decide whether the English Act applied or not.

Held: to render a contract void as being a bet or wager it was necessary to prove that both parties to the contract entered into it knowing it to be a bet or wager.

Wee Soon Chew v Nathan [1897] 4 SSLR 8 High Court, Straits Settlements (Cox CJ).

[Annotation: See also D'Almeida v D'Menzies (1886) 4 Ky 126, and Lim Lian Wah v Lee Ah Kiew (1929) 7 FMSLR 66.]

A dealer who seeks to protect himself from the consequence of his customer's failure to perform his contract on the due date by inserting a clause in the contract requiring the customer to put up a margin if the contract showed a loss against him at the due date, does not thereby show that he is merely wagering with his customer; and that where a dealer is prepared to deliver or take delivery, as the case may be, and has not entered into a secret understanding that he will in no case do so, the contract is no wager.

Syn Thong & Co v Tong Joo Hoo & Co [1929] SSLR 39 High Court, Straits Settlements (Stevens J).

[Annotation: This case no longer represents the law in view of s 6 sub-ss (3) and (4) as amended by the Civil Law (Amendment) Ordinance 1962. By virtue of the new amendments transactions dealing with rubber, whether for immediate or future delivery either with or without licence, are therefore not illegal or null and void by way of gaming or wagering.]

The respondents, who were plaintiffs in the court of the first instance, were rubber brokers and members of the Singapore Chamber of Commerce Rubber Association in the class of brokers. They claimed damages from the appellant for breach of several contracts in writing for the purchase and sale of rubber or in the alternative the balance of expense incurred by them and agreed, alternatively reasonable remuneration earned by them in respect of services rendered as the defendant's brokers. All the contracts in this case, subject to a few exceptions were FOB contracts involving delivery at the time they were made. The appellant raised the defence of illegality which was based on two grounds: (i) that the appellant was not licensed under the Rubber Dealers Ordinance to purchase rubber; and (ii) that the contracts were void as gaming and wagering contracts under s 6 of the Civil Law Ordinance. The court of first instance held that the words 'purchase rubber' as used in s 3 of the Rubber Dealers Ordinance refer to present purchases and not to forward or executory contracts, and that therefore the defendant not being a holder of a licence under the ordinance did not render the contracts illegal. It was also held that the contract was not a wagering contract. On appeal, the Court of Appeal reversing the decision reported in [1958] MLJ 45,

Held: the contracts were not real contracts for the sale of rubber, but were merely colourable transactions, to enable the appellant to gamble in differences, and were void. No opinion was expressed as to whether the contracts were void because the appellant was not licensed to purchase rubber under the Rubber Dealers Ordinance.

SE Mizrahie v Stanton Nelson & Co Ltd [1958] MLJ 97 Court of Appeal, Singapore (Whyatt CJ, Tan Ah Tah and Wee Chong Jin JJ).

The first defendant is a Malaysian who lives in Batu Pahat, Malaysia where he manages his business. He owned #13-03, Cairnhill Plaza ('the property'). Wanting to raise more funds for his business in Malaysia, he contacted his brother, the second defendant, to help him to raise a loan on the property. The second defendant approached the manager of the Grange Road branch of the plaintiff bank, Yen. In the course of the negotiations, he told Yen that the first defendant was a Malaysian. The second defendant asked Yen whether there would be any problems and Yen told him that a Singapore address may have to be used to transact the loan. The second defendant then left everything to Yen. Subsequently, an overdraft facility of S$700,000 was granted to the first defendant to be secured by a legal mortgage of the property. Interest was to be at 2[1/2]% above the bank's prime lending rate or at such other rate as the bank may from time to time decide. The first defendant accepted the terms of the loan and opened a current account giving his Malaysian address. The address was subsequently changed to a Singapore address. The plaintiffs thus had notice that the first defendant was a Malaysian. The second defendant signed a personal guarantee in Singapore for a sum of S$700,000 in consideration of the plaintiffs agreeing to make the advances to the first defendant. On Yen's advice, the loan was split to an overdraft facility of S$250,000 and a term loan of S$450,000 repayable by monthly instalments. In 1985, the first defendant defaulted and the plaintiffs' solicitors demanded payment of all outstanding sums. The first defendant was not given notice that the interest had been changed from 2[1/2]% above the bank's prime rate to 4%. The defendants were told that the plaintiffs did not consent to any leasing of the property as the plaintiffs intended to sell it. The defendants delivered the keys to the plaintiffs, and possession was given on 28 November 1987. In March 1989, the property was sold for S$600,000. The plaintiffs claimed for the repayment of the loan. The first defendant alleged that the loan was illegal and unenforceable under the provisions of the Exchange Control Act 1953 of Malaysia. The second defendant contended that the guarantee was a nullity and unenforceable, being a guarantee for an illegal loan. The defendants also counterclaimed for breach of duty by the plaintiffs as mortgagees.

Held, ordering judgment for the plaintiffs against the defendants for the amounts claimed, less the amounts due to the first defendant to be assessed by the registrar and set off against the plaintiffs' claim: (1) the property was mortgaged to the UOB. The first defendant opened his bank account in Singapore. The defendant's security is in Singapore. The defendant was paid in Singapore. The guarantor is a permanent resident in Singapore. The purpose for which the loan was taken by the first defendant may have helped him with his business in Batu Pahat, but Malaysian currency was not involved. A difference between enforcing a foreign law and recognizing it must be made. In recognizing the Exchange Control Act of Malaysia, the court need not necessarily enforce it. The plaintiffs' connection with the defendants on the facts of the case is not sufficient to taint the contract with illegality and render it unenforceable; (2) the courts will not countenance an agreement involving the commission of a criminal offence in a friendly country with impunity as it would be contrary to public policy. On the facts of this case, it cannot be said that public policy requires this court not to enforce the contract since the plaintiffs did not aim at assisting the defendants in breach of the Malaysian Act.

Overseas Union Bank Ltd v Chua Kok Kay & Anor 1993 High Court, Singapore (KS Rajah JC).

The plaintiffs obtained from the defendants an option to purchase a house in the defendants' development. The option was in Form D of the Schedule to the Housing Developers Rules 1976 ('the rules') and the consideration for it was the sum of $72,400 paid as the booking fee and which was equivalent to 10% of the purchase price. In compliance with the terms of the option, the defendants' solicitors wrote to the plaintiffs enclosing, inter alia, the agreement for sale and asking the plaintiffs to return the agreement duly signed by the plaintiffs with a cheque for $72,400 which, together with the booking fee, amounted to 20% of the purchase price. By virtue of cl 2 of the option, the plaintiffs had three weeks from the date of delivery of the agreement to them, ie until 10 February 1984, to exercise the option by signing the agreement. By virtue of cl 3 of the option, the sum of $72,400 was payable upon execution of the agreement by the defendants. Clause 4 of the option provided, inter alia, that if the plaintiffs did not wish to exercise the option or allowed it to expire without exercising it, the defendants shall refund 90% of the booking fee if the purchase price was $200,000 or below or 95% of the booking fee if the purchase price was more than $200,000. On 8 February 1984, ie two days before the option was due to expire, the plaintiffs' solicitors telexed the defendants' solicitors for an extension until 17 February 1984 to sign and return the agreement. The defendants' solicitors replied on 13 February 1984, ie three days after the option had expired, agreeing to extend the period to 17 February 1984. On 17 February 1984, the plaintiffs' solicitors wrote to the defendants' solicitors enclosing the agreement duly signed by the plaintiffs. They enclosed also a cheque post-dated to 29 March 1984 for the sum of $72,400 which was to be paid under cl 3 of the option upon the agreement being signed by the defendants. The plaintiffs' solicitors stated that it had been mutually agreed between the plaintiffs and the defendants that the sum of $72,400 payable under cl 3 of the option would be paid by a cheque post-dated to 29 March 1984. The defendants' solicitors acknowledged by letter the arrangement regarding the post-dated cheque. The agreement was signed by the defendants on 20 February 1985 and a copy of it was sent to the plaintiffs' solicitors. By virtue of cl 3(1)(b) of the agreement, an instalment of $72,400 amounting to 10% of the purchase price was to be paid within 14 days of the receipt by the plaintiffs of the defendants' notice in writing that the foundation works of the property had been completed. A notice to that effect which was dated 21 February 1984 was given to the plaintiffs. The plaintiffs' solicitors by a letter dated 5 March 1984 asked for an extension of time of four weeks for payment of the instalment. The defendants' solicitors telexed a reply agreeing to the extension. On 28 March 1984, a new firm of solicitors acting for the plaintiffs wrote to the defendants' solicitors stating the plaintiffs' intention not to proceed with the purchase, and asking for the return of the booking fee and the post-dated cheque for $72,400. They also returned the agreement to the defendants' solicitors asking for its cancellation. The defendants' solicitors wrote saying that the booking fee would be forfeited in view of the plaintiffs' decision not to proceed with the purchase and later wrote to the plaintiffs' solicitors saying that there had come into existence a binding agreement, by virtue of which the defendants were entitled not only to forfeit the booking fee but also the sum of $72,400 paid under cl 3 of the option and the instalment of $72,400 payable under cl 3(1)(b) of the agreement. The plaintiffs commenced an action claiming: (a) a declaration that no binding agreement existed, the plaintiffs not having validly exercised the option; and (b) an order that the plaintiffs be at liberty to enter final judgment against the defendants for $65,160 interest and costs, the sum of $65,160 representing 90% of the booking fee which the plaintiffs claimed to be entitled to recover by virtue of cl 4 of the option. The defendants presented for payment the post-dated cheque for the sum of $72,400 but it was dishonoured. In their counterclaim, the defendants contended that they were entitled, inter alia, to the sum of $144,800, representing 20% of the purchase price and being the total of the booking fee and the sum payable pursuant to cl 3 of the option. The claim for the instalment of $72,400 under cl 3(1)(b) of the agreement was not pursued. Taking into account the sums received and a claim for interest, the defendants counterclaimed the sum of $75,561.87. At the trial, the plaintiffs contended that no binding agreement had come into being, the plaintiffs having failed to pay the sum of $72,400 under cl 3 of the option when they purported to exercise the option and/or the option having already expired when the defendants' solicitors agreed that its life would be extended by a period of seven days. They also argued that in breach of r 10(B)(3) of the rules the defendants, without the approval of the Controller of Housing, amended the option, first by purporting to extend it for seven days, and secondly by agreeing to accept payment of the instalment due under cl 3 by a cheque post-dated to 29 March 1984 when in fact (if the option had been validly extended) the payment should have been made on 20 February 1984.

Held, dismissing the claim and allowing the counterclaim: (1) the defendants had, in law, granted a fresh option by notifying the plaintiffs on 13 February 1984 that the option had been extended until 17 February 1984, which option was exercised by the plaintiffs within time; (2) there came into existence, upon the plaintiffs signing and returning the agreement with the post-dated cheque, an enforceable contract; (3) although the new option fell foul of the prescribed form and a breach of the rules had therefore been committed, liability to a penalty or imprisonment was the only consequence intended by the Housing Developers (Control and Licensing) Act (Cap 250, 1970 Ed) and the rules to follow from a breach of the rules, and hence the new option was capable of acceptance and had been validly accepted.

Foo Kee Boo & Anor v Ho Lee Investments (Pte) Ltd [1988] SLR 620 High Court, Singapore (Grimberg JC).

The plaintiff in this case sought for specific performance by the defendants (housing developers) of an agreement between them for the sale by the defendants of a maisonette unit at Leonie Hill. In the alternative the plaintiff claimed damages for breach of the said agreement. The facts revealed that the plaintiff had already paid a booking fee of $2,000 payable to the defendants' solicitors through one Mr Zee. The price of the maisonette was confirmed at $130,000 in a letter of 13 January 1979 by the defendants addressed to the plaintiff. The plaintiff wrote a letter of 11 September 1979 regarding the purchase of the said maisonette. On 1 October 1979 she received a letter from the defendants stating that they had decided not to sell the maisonette and they accordingly returned her said cheque. On 26 October 1979, the plaintiff commenced proceedings.

Held, allowing the plaintiff's claim: (1) the Housing Developers (Control and Licensing) Act (Cap 250, 1970 Ed) merely prescribes a method of performance by the housing developer for the protection of a class of persons - the purchasers - as far as possible from the risk of exploitation. The said Act does not in any way prohibit the making of a contract for the sale and purchase of flats; (2) in this case, the contract between the plaintiff and the defendants was not illegal and was enforceable.

Mary-Ann Arrichiello v Tanglin Studio Pte Ltd 1980 High Court, Singapore (Chua J).

The plaintiffs claimed for $340,818.67 against the defendants for the price of diamonds and gems sold and delivered by the plaintiffs to the defendants. The defendants admitted the claim but contended that the contracts for the sale of diamonds and gems to them were tainted with illegality. The defendants claimed that the diamonds and gems sold to the defendants were meant for sale in Peninsular Malaysia and that they were to be taken there without any declaration and payment of customs duty due to the Malaysian authority. That was the only defence raised.

Held: mere knowledge on the part of the plaintiffs that the diamonds and gems sold to the defendants would be exported illegally by the defendants to Malaysia does not constitute a defence to the claim by the plaintiffs.

Dimpex Gems (Singapore) Pte Ltd v Yusoof Diamonds Pte Ltd [1987] SLR 350 High Court, Singapore (Thean J).

An agent who has received money to the use of his principal on an illegal contract between him as such agent and a third party cannot be allowed to set up the illegality of the contract as a defence in an action brought by the principal to recover from the agent the money so received.

Lim Lian Wah v Lee Ah Kiew [1929] 7 FMSLR 66 High Court, Federated Malay States (Elphinstone CJ).

3 [2548] CONTRACT Illegality – Loan transactions prohibited by statute – Action by lender to recover loans – Lender had knowledge of illegality – Whether loan agreements void and unenforceable – Contracts Act 1950, s 24(a) & (b) – Companies Act 1965, s 67 – Wai Hin Tin Mining Co Ltd v Lee Chow Beng [1968] 2 MLJ 251 (cited) Scott v Brown, Doering, McNab & Co [1892] 2 QB 724 (cited) Phoenix Insurance v Adas [1987] 2 All ER 152 (consd) Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 (folld) Menaka v Lum Kum Chum [1977] 1 MLJ 91 (consd) Vita Food Products Inc v Unus Shipping Co Ltd [1939] 1 All ER 513 (consd) Government of Malaysia v Lim Kit Siang [1988] 2 MLJ 12, 40 (cited) Wallersteiner v Moir [1974] 3 All ER 217, 238 (cited); bi]Re VGM Holdings Ltd [1942] 1 All ER 225 (cited) Carney v Herbert [1985] 1 All ER 438 (cited) Muniandy & Anor v Muhammad Abdul Kader & Anor [1989] 2 MLJ 416 (folld) Firm, Pratapchand v Firm, Kotrike AIR 1975 SC 1223 (consd) Patriot Pte Ltd v Lam Hong Commercial Co [1980] 1 MLJ 135 (consd)

P had granted a fixed loan to T Sdn Bhd in 1980 to facilitate the purchase by D3 and D6, who were directors of T Sdn Bhd, of the shares of D1. D1 executed the relevant securities on its assets and properties and P disbursed the loan. In 1982, P granted a further loan to D1, part of which was to be used to pay off T Sdn Bhd's earlier debt to P. The securities used were the same securities belonging to D1 and its subsidiary. P subsequently commenced proceedings to recover the loans from D. The learned judge found in favour of D on the ground that both the 1980 and 1982 loan agreements were illegal and, accordingly, void and unenforceable. P appealed to the Supreme Court against the decision of the learned judge.

Held, dismissing the appeal: (1) in the instant case, the loan in 1980 clearly contravened s 67 of the Companies Act 1965. Section 67 prohibits a company from giving directly or indirectly, whether by means of a loan, guarantee or security or otherwise, any financial assistance with the object of dealing in the shares of the company or its holding company; (2) section 24(a) and (b) of the Contracts Act 1950 rendered the loan agreement in 1980 void and unenforceable. The securities and guarantees executed in respect of it were equally invalid and unenforceable as being contrary to public policy. In this respect, the trend in common law countries to save commercial contracts and not to strike them down cannot be followed in Malaysia in the light of s 3 of the Civil Law Act 1956 and s 24 of the Contracts Act 1950; (3) in the instant case, the two loans granted by P in 1980 and 1982 should be regarded as one continuous transaction. The 1980 loan was clearly a loan to deal in the shares of D1. The 1982 loan dealt also with the liquidation of the 1980 loan. The securities used were the same securities belonging to D1 and its subsidiary. The two loans were thus indistinguishable in character. Furthermore, the evidence showed that P had knowledge of the illegality. Accordingly, as the 1980 loan was prohibited by statute, the 1982 loan was tainted with the illegality; (5) s 67(6) of the Companies Act 1965 could not be relied upon by P to recover the loan as it was designed to protect D1 and no one else. The words 'recovering the amount of any loan made in contravention of this section' in s 67(6) can only mean any loan made by D1 itself. P was, accordingly, not entitled to recover the loan granted in 1980 under s 67(6) of the Act;in the instant case, P could not rely on the doctrine of severance to argue that although the loan was unenforceable, being in contravention of s 67 of the Companies Act 1965, the securities and guarantees were, nevertheless, severable and enforceable. The issue of severance was never argued by P in the court below and neither was it mentioned anywhere in the pleadings. It was, accordingly, too late for P at this stage to raise the issue of severance.

Chung Khiaw Bank Ltd v Hotel Rasa Sayang Sdn Bhd & Ors [1990] 1 MLJ 356 Supreme Court, Malaysia (Hashim Yeop A Sani CJ (Malaya).

The state government of Terengganu offered Kilang Perkayuan Hj Mohd Noor ('the firm') a licence to enter upon and harvest timber from two parcels of a concession demarcated as compartments 408 and 412. The offer was accepted. Before any licence was issued, the firm entered into an agreement ('the agreement') with the plaintiff where it sold to the plaintiff all the timber located on the two parcels. The state authority later issued the licence in respect of compartment 412 of which no dispute arises. When the plaintiff came to harvest timber from compartment 408, he discovered that that parcel had been subjected to logging by neighbouring loggers and had been left in a state which did not accord with the terms or the description accorded it in the original grant in the licence. An arrangement was then arrived at whereby the firm was to apply for a replacement parcel. This was done and the state issued a new licence to the firm for a new parcel designated as compartment 549. The first defendant, the sole proprietor of the firm, then went bankrupt and the second and third defendants were brought in as partners, whereupon the first defendant then withdrew from the firm. Once the new licence for compartment 549 was issued, the firm proceeded to act as if the agreement did not exist. The plaintiff took out a writ against the defendants and obtained an ex parte injunction preventing them from entering compartment 549 or giving effect to any agreements, apart from the agreement with the plaintiff to sell him the timber logs harvested from the said parcel. On an application to set aside that injunction, the judge dissolved the injunction because: (1) the parties did not contemplate that compartment 549 would form part of their agreement and, therefore, the plaintiff could claim no rights in respect of it; (2) the plaintiff had no locus standi to sue the second and third defendants because they were not parties to the agreement; (3) the agreement was illegal and consequently, there was no serious question to be tried; (4) the balance of convenience lay in favour of the defendants; and (5) damages were an adequate remedy, the parties having provided for it in cl 14 of the agreement. The plaintiff appealed to the Court of Appeal.

Held, allowing the appeal: (1) (per Gopal Sri Ram JCA) the question of substituting compartment 549 for compartment 408 was and could not have been within the contemplation of the parties when they entered into the agreement. The problem with compartment 408 arose after the implementation of the agreement. That parties should stipulate for an unforeseen event in advance of it is non sequitur; (2) (per Gopal Sri Ram JCA) the plaintiff had produced sufficient evidence at the interlocutory stage to raise an inference that the second and third defendants were not exercising their independent judgment but were puppets controlled by the first defendant in all matters and affairs of the firm. The judge ought to have held that the plaintiff's contention that the second and third defendants were the alter ego of the first defendant merited further investigation at the trial and for that reason, amounted to a serious question to be tried; (3) (per Gopal Sri Ram JCA) the burden was on the second and third defendants to show that they took the interest without notice of the prior contract. This is a matter to be resolved at the trial and whether or not their assertion was the truth, is a matter to be determined after their evidence is tested by cross-examination. The summary disposal by the judge of an issue of such import was a serious miscarriage of justice; (4) (per Gopal Sri Ram JCA) the legality of the agreement was a serious question requiring mature consideration at the trial of the action and should not have been gone into in detail at the interlocutory stage. The question as to whether there was a serious issue to be tried depended on an objective perception of the facts presented to a judicial arbiter. No element of discretion is involved in the evaluation of those objective facts; (5) (per Gopal Sri Ram JCA) while the judge was correct in taking into account the practical realities of the situation, amongst which is the fact that workers would be laid off and the risk that the concession would be lost through effluxion of time, he did not sufficiently balance these with other relevant and competing considerations that weighed heavily in favour of the injunction being continued until the trial of the action; (6) (per Gopal Sri Ram JCA) although cl 14 of the agreement provides that in the event of a termination of the agreement, the firm would pay to the plaintiff an agreed compensation amounting to twice the value of the timber sold, s 19 of the Specific Relief Act 1950 provides that a contract may be enforced even though a sum is named in it as the amount to be paid in case of its breach, and the party in default is willing to pay the sum. Whether the section applies to this case is a matter that is manifestly unsuitable for full discussion when considering the grant or refusal of an injunction; (7) (per Siti Norma Yaakob JCA) the life span of an ex parte interim injunction is two weeks from the date of the grant and any application to have it revoked or set aside must be heard and determined by the court before the expiry of the two-week period. Here, the inter partes application to set aside the injunction was held and the judgment of the judge was made within the two-week period. As such, there was no basis for the appellant to reapply to the judge for the reinstatement of the interim injunction. The plaintiff had adopted the correct procedure when he proceeded to appeal against the judge's order; (8) (per Gopal Sri Ram JCA) (per curiam) a judge hearing an application for an interlocutory injunction should: (i) ask himself whether the totality of the facts presented before him disclosed a bona fide serious issue to be tried. He must refrain from making any determination on the merits of the claim or any defence to it and identify with precision the issues raised and decide whether they are serious enough to merit a trial. If he finds that no serious question is disclosed, the relief should be refused. If, however, he finds that there are serious questions to be tried, he should move on to the next step of his inquiry; (ii) having found that an issue has been disclosed that requires further investigation, he must consider where the justice of the case lies. He must take into account all relevant matters, including the practical realities of the case before him and weigh the harm the injunction would produce by its grant, against the harm that would result from its refusal; and; (iii) the judge must have in the forefront of his mind that the remedy that he is asked to administer is discretionary, intended to produce a just result for the period between the date of the application and the trial proper and to maintain the status quo. It is a judicial discretion capable of correction on appeal. A judge should briefly set out in his judgment the several factors that weighed in his mind when arriving at his conclusion.

Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193 Court of Appeal, Kuala Lumpur (Gopal Sri Ram, Siti Norma Yaakob and VC George JJCA).

In this case, the plaintiff in the first action claimed that he had found a lottery ticket crumpled up at an Esso station. Later, he found that the ticket had won the third prize in the Tenth Social and Welfare Services Lottery draw. The first defendant, however, claimed that he had a right to the property and possession of the social welfare lottery ticket which had won the third prize. The first defendant claimed that he had bought the lottery ticket and given it with other lottery tickets to his wife for safe keeping. While the first defendant was away in Sarawak, their driver asked the wife for the bundle of tickets in order that he could check them. Subsequently, the driver returned the bundles but without the winning ticket. The first defendant made a report and called as witnesses the person from whom he bought the tickets and his wife. The learned trial judge accepted the evidence of the first defendant and his witnesses and rejected that of the plaintiff.

Held, dismissing the plaintiff's claim: (1) the evidence showed that the first defendant bought the social welfare ticket and that his driver obtained it by fraud. The plaintiff's claim that he found the ticket was rejected and the court found that he had obtained the ticket from some person; (2) neither could it be said that he had a better right to immediate possession of the ticket. His right, if any, must come from the possessory right vested in the driver who committed the fraud, which in law is subservient to that of the first defendant, his master; (3) the plaintiff had dealt with the lottery ticket in question in a manner inconsistent with the right of the first defendant and therefore had committed conversion of the ticket. The lottery ticket in this case is a chattel and action lies for its conversion; (4) although the seller of the lottery ticket to the first defendant was unauthorized and had therefore committed an offence in selling it without authority, in this case the illegal contract had been fully executed and therefore the title to the lottery ticket passed to the first defendant; (5) in the circumstances, the plaintiff could not be said to have acquired any right of property in the lottery ticket;there is no doubt at all that the plaintiff had neither the title nor the right of possession to the winning ticket. In such a situation, judgment must be given for the first defendant since the court does not confiscate the property because of illegality.

Daniel s/o D William v Luhat Wan & Ors; Luhat Wan v Social and Welfare Services Lotteries Board & Ors [1990] 2 MLJ 48 High Court, Kuala Lumpur (Lim Beng Choon J).

A contract which, had it been made between Europeans would be void as being a marriage brokerage contract, is not void in this Colony, if made between Hindus. Hindu customs and usages in reference to such contract will be recognized.

Karpen Tandil v Karpen [1895] 3 SSLR 58 Court of Appeal, Straits Settlements (Cox CJ and Leach J).

[Annotation: See note in [1933] MLJ xlii on 'Marriage Brokerage Agreements'.]

The plaintiff was a deposit-taking company incorporated in Hong Kong. It has no office or place of business in Singapore. The first defendant was a property developer. The plaintiff made a loan to the first defendant for the first defendant to purchase certain property. The loan was also secured by a mortgage over the property. The first defendant defaulted in the payment of the loan. Meanwhile, the first defendant had let the property to the second defendant without the plaintiff's knowledge. The plaintiff brought the present action to claim the sum owed with interest and also claimed vacant possession of the premises from the second defendant. The defendants contended first that the plaintiff was an illegal moneylender and secondly that it was unlawfully carrying on the business of banking in Singapore.

Held: (1) although the agreement was negotiated in Singapore, the first defendant's account was opened and maintained in Hong Kong and in the absence of evidence to the contrary, it must be inferred that the loan was funded from Hong Kong. The mere fact that the loan was secured by a Singapore registered mortgage cannot result in the plaintiff being said to have carried on business in Singapore; (2) and such other business as may be prescribed by the Monetary Authority of Singapore for the purposes of the Act. The Legislature did not intend the definition of 'banking business' in the Banking Act to be construed disjunctively so that the making of advances to customers alone amounts to the conduct of banking business. Therefore, the plaintiff was not conducting banking business in Singapore; (3) 'banking business' in s 2 of the Banking Act (Cap 19, 1985 Ed) means that a company can only be said to be conducting banking business if it performs all of the functions of receiving money on current or deposit account; paying and collecting cheques; making advances;the sum owed by the first defendant should be paid to the plaintiff. In the event of default, the mortgage over the property should be enforced by foreclosure or sale and the first and second defendants should deliver up the possession of the property.

Vernes Asia Ltd v Trendale Investment Pte Ltd & Anor [1988] SLR 202 High Court, Singapore (Grimberg JC).

The respondent was a bank registered and carrying on business in Singapore. The appellant charged his land in Malaysia as security for advances on current account made by the respondent to a company in Singapore. Subsequently the appellant executed two further charges on the land in favour of the respondent as security for advances by the respondent to two other companies registered in Malaysia. The respondent required payment of the principal and interest on the charge. No payment was made and the respondent applied to the court for an order of sale of the land by public auction. An order was made in the High Court and the appellant's appeal to the Federal Court was dismissed - see [1981] 1 MLJ 196. The appellant appealed from the decision of the Federal Court. Two main issues were raised on the appeal. They are whether the respondent, in obtaining a charge on land situated in Malaysia as security for a loan and in attempting to enforce the charge was (1) transacting banking business within the meaning of s 2 of the Banking Act 1973 contrary to s 3(1) of that Act and/or (2) acting in contravention of s 9(1) of the Exchange Control Act 1953. If, in consequence of either of these questions being answered in favour of the appellant, the charge is illegal, the further question that arose was what relief, if any, the appellant was entitled to receive.

Held: (1) the expression 'making advances to customers' in s 2 of the Banking Act cannot include the taking of security from third parties. The customer in this case was the borrower company and the appellant was merely a guarantor. Even if it were held that the security was taken in Malaysia, that was not contrary to s 3(1) of the Act; (2) the security in this case was not taken in Malaysia. The registration of the charge in order to make it enforceable cannot be considered as part of the transaction of making an advance to a customer. Consequently no part of the transaction was carried on in Malaysia. The loan was made in Singapore and the proper law applicable was that of Singapore; (3) the business of making advances to customers cannot by any reasonable process of interpretation be held to include enforcing the security against a guarantor; (4) there was no evidence in this case that if the security was enforced the respondent would seek to obtain any payment outside Malaysia and therefore there was no evidence that the respondent would be acting in contravention of the Exchange Control Act 1953; (5) if the charge was illegal on either of the grounds adduced, the appellant was more to blame for that than the respondent. Even if it be assumed that the parties were equally to blame, the appellant was at least entitled (contrary to the view of the learned trial judge) to a declaration that the charge was illegal, void and unenforceable.

Koh Kim Chai v Asia Commercial Banking Corp Ltd [1984] 1 MLJ 322 Privy Council Appeal from Singapore (Lord Fraser of Tullybelton, Lord Edmund-Davies, Lord Scarman, Lord Bridge of Harwich and Sir Denys Buckley).

Mustafa bin Osman v Lee Chua & Anor [1996] 2 MLJ 141 Court of Appeal, Kuala Lumpur (Gopal Sri Ram, Siti Norma Yaakob JJCA and Mokhtar Sidin J).

See CONTRACT, Vol 3, para 2467.

In this case, the plaintiff had obtained a forest licence. By an agreement between him and the defendants, it was agreed that the rights under the licence be assigned to the defendants who should fell and remove the timber. The defendants did not carry out the terms of the contract with the result that the licence was cancelled. The plaintiff claimed $43,800 as damages. The defendants pleaded that the agreement was illegal, unenforceable and void.

Held: (1) the agreement in assigning the rights under the licence to the defendants was in effect a purported transfer of the licence which was prohibited by the Forest Rules 1356 and was therefore null and void; (2) as both parties were aware that the licence was not transferable, no claim for restitution could be made.

Hashim bin Adam v Daya Utama Sdn Bhd [1980] 1 MLJ 125 High Court, Kuala Trengganu (Mohamed Zahir J).

The defendant held a licence to extract timber from a specified forest area. He entered into a contract with the plaintiff by which for a consideration of $2,000, the right to extract timber was assigned to the plaintiff. The contract was in contravention of rr 2 and 18 of the Forest Rules 1935 which provide that no licence issued thereunder shall be transferable. The plaintiff brought an action for breach of the contract. He did not dispute the fact that the contract on which the action was founded was illegal, but contended that he was entitled to recover damages on the ground that he was not aware of the illegality.

Held : the evidence showed that both parties were in pari delicto. The loss must lie where it fell. The plaintiff could not found an action on the illegal contract to recover damages from the defendant.

Tan Bing Hock v Abu Samah [1968] 1 MLJ 221 High Court, Raub (Gill J).

In this case, the appellants had obtained warrants of distress against the respondents for arrears of rent. The respondents applied to discharge the warrants on the grounds (a) that the use of the land was illegal and therefore the contract of tenancy was void or voidable; and (b) that the machines are fixtures and therefore cannot be distrained. The land was agricultural land and the applicants had been unsuccessful in their application to change the category of land use from agriculture to industry. The learned Judicial Commissioner allowed the respondents' applications. He held that the appellants were guilty of giving an illegal consideration to the said agreement and as such the contract was void under s 24 of the Contracts Act 1950 (Act 136). He further held that the machines which were attached to the land by bolts and screws were fixtures. The appellants appealed.

Held: the tenancy agreement in this case was void and unenforceable. The appellants were aware of the illegality when they entered into the agreement and therefore s 66 of the Contracts Act 1950 could not assist them.

Singma Sawmill Co Sdn Bhd v Asian Holdings (Industrialised Buildings) Sdn Bhd [1980] 1 MLJ 21 Federal Court, Johore Bahru (Raja Azlan Shah Ag CJ (Malaya).

The respondent in 1965 entered into an agreement with the appellants for a lease of padi land for a period of six years at an annual rent of $250 and pursuant thereto the respondent paid the appellants $1,500 being six years' rent in advance. The agreement provided that if the respondent should be prevented from cultivating the land then the sum of $1,500 should be returned to the respondent. On the appellants subsequently refusing to allow the respondent to till the land, the respondent commenced proceedings to recover the said sum of $1,500. In the court below, the learned judge ([1969] 2 MLJ 116) dismissed the appellants' contention that as the agreement was void ab initio for illegality under s 3(1) of the Padi Cultivators Ordinance 1955 the respondent could not recover the sum paid. The learned judge held that as the illegal purpose had not been achieved the respondent was entitled in view of s 66 of the Contracts (Malay States) Ordinance 1950 to a refund of the money paid. On appeal,

Held, dismissing the appeal: since the facts and circumstances of the case as found by the learned trial judge proved that the parties were ignorant that they were executing an illegal agreement, s 66 of the Contracts (Malay States) Ordinance would apply and accordingly the respondent was entitled to the return of the deposit. Per Suffian FJ: 'In the instant case there is no evidence that the plaintiff was in pari delicto and that he knew when he entered into the agreement that it was forbidden by law, the illegality of the agreement was discovered subsequent to the making of it, the claim for restoration of his money is not based on the illegal contract but dissociated from it and his action is not founded on dealings which are contaminated by illegality.'

Ahmad bin Udoh & Anor v Ng Aik Chong [1970] 1 MLJ 82 Federal Court, Penang (Azmi LP, Suffian and Ali FJJ).

On 4 April 1988, the plaintiff claimed vide a civil suit against the first defendant, a company and the second to fifth defendants, directors of the first defendant and the proprietor of land, lot 48606 mukim Sungai Raja, Daerah Kinta, Perak Darul Ridzuan. The plaintiff avers that the second and third defendants agreed orally to permit the plaintiff to extract rock materials from the said land subject to certain conditions. Due to a dispute concerning a clause which the defendants wanted to include, no written agreement was signed. As the plaintiff is wary that the defendants will dispose of the said land or permit other people to enter upon the said land, the plaintiff applied for judgment as per para 14 of the statement of claim. The plaintiff vide ex parte summons-in-chambers, applied for an interim injunction and on 8 April 1988, the court granted an interim injunction, inter alia, restraining the defendants from permitting any person(s) other than the plaintiff or its agents from entering, working or extracting rock materials from the said land until final disposal of this suit or further order. On 13 April 1990, all the defendants applied for the order dated 8 April 1988 to be set aside and the decision here is in relation to that application.

Held, allowing the defendants' application: (1) after considering the conditions in the permit in this case, provisions of law, s 73 of the National Land Code 1965 (Act 56/1965) and s 24 of the Contracts Act 1950 (Act 136) and case authorities, in the court's judgment, the permit issued to the first defendant cannot be transferred and any attempt to transfer its rights thereunder is illegal and the agreement for that purpose is void. Without stating every condition of the agreement, the effect from the said agreement is that the first defendant gives all its right to extract rock materials which it holds under the relevant permit for its permitted duration granted to it by the authorities (30 years) to the plaintiff. The right which was being transferred is an exclusive right. In the court's judgment, this agreement is an attempt to transfer rights which is prohibited by the permit concerned and s 73 of the NLC, is illegal and void under s 24 of the Contracts Act 1950. Therefore, the application for an order for specific performance cannot be granted to the plaintiff; (2) it is clear that the agreement involved performance of a continuous duty for a period exceeding three years and therefore, cannot be specifically performed pursuant to s 20 of the Specific Relief Act 1950 (Act 137). Section 54 of the same Act provided that an injunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. Therefore, there is no reason why the interim injunction should stand; (3) the court was aware that at this stage, the plaintiff needs only to show that there is a serious question to be tried based on the principle in the case of American Cyanamid Co v Ethicon Ltd [1975] AC 396. But in this case, all the facts required by the court to come to a decision had already been agreed upon and there is no reason why a decision cannot be made even at this stage.

Marble Terrazzo Industries Sdn Bhd v Anggaran Enterprise Sdn Bhd & Ors [1991] 1 MLJ 253 High Court, Penang (Abdul Hamid JC).

[Annotation: The judgment was delivered in Bahasa Malaysia.]

The plaintiff company (the sub-sub-purchaser) was the successful bidder at an auction sale of a property put up for sale on 18 April 1984 by the defendant bank in exercise of its power of sale as mortgagee. The piece of property was one of the lots the original purchaser had sub-divided into separate factory units without obtaining any prior permission from the Planning Authorities. On 23 May 1984, the defendants' solicitors served a notice on the plaintiffs' solicitors calling upon them to complete the purchase of the property within 21 days. The plaintiffs' solicitors made an application to court to determine whether the auction sale agreement of 18 April 1984 was 'tainted with illegality' because it amounted to an agreement to complete the sale and purchase of property by an illegal act in breach of s 9(3)(a) of the Planning Act (Cap 279, 1970 Ed). It was contended that the contract was not one that the mortgagee could lawfully perform because in order to perform it the mortgagee had to execute an instrument assigning to the sub-sub-purchaser, inter alia, 'all the estate right and title to the property' and which instrument sub-divides land within the meaning of the Planning Act.

Held: (1) it must be implicit in the definition of 'sub-divide' in s 2 of the Planning Act that it is the instrument which becomes capable of being registered or being included in a separate folio of the land register before a person can be said to sub-divide land within the meaning of the Planning Act. The reason is because the Registration of Deeds Act (Cap 281, 1970 Ed) and the Land Titles Act (Cap 276, 1970 Ed) provide for the registration of instruments affecting land and not of land; (2) in the present case the agreement itself was clearly not capable of becoming registered under the Registration of Deeds Act or being included in a separate folio of the land register under the Land Titles Act and accordingly the agreement did not sub-divide land within the meaning of the Planning Act and did not infringe the provision of s 9(3) of the Planning Act; (3) the auction sale agreement was therefore lawful and it was lawful for the parties to the agreement to complete the sale and purchase of the property; (4) costs should be in favour of the mortgagee.

Chin Hwa Trading Pte Ltd v United Overseas Bank Ltd 1984 High Court, Singapore (Wee Chong Jin CJ).

Unless a defendant raises the defence of the illegality of a contract on the pleadings, he cannot rely upon it and, except where the contract is on the face of it illegal or its illegality is brought to the notice of the court, even the court has no right to intervene.

Natha Singh v Syed Abdul Rahman & Anor [1962] MLJ 265 High Court, Penang (Hepworth J).

The appellants in this case sought to claim a sum of $143,358.28 from the respondents for professional services rendered to the respondents pursuant to an agreement between the parties dated 19 August 1971. The parties had agreed that the proper law of the said agreement was the law of the state of Washington. The lower court dismissed the claim on the ground that the said agreement was void and unenforceable. The appellants were partners in a firm of consultant engineers practising in the United States. They were, however, not registered as required under ss 18 and 19 of the Professional Engineers Act (Cap 225, 1970 Ed).

Held, dismissing the appeal: (1) the said agreement was illegal as it infringed the provisions of ss 18 and 19 of the Professional Engineers Act; (2) a court will not enforce a contract which by its own lex fori it would not enforce because it was tainted with illegality. In this connection the foreign law factor is irrelevant.

John B Skilling & Ors v Consolidated Hotels Ltd 1978 Court of Appeal, Singapore (Chua, Kulasekaram and D'Cotta JJ).

The plaintiffs, partners of a firm of consulting mechanical and electrical engineers practising in Hong Kong, rendered professional services in respect of the Hotel Sheraton project owned by the defendants. This was pursuant to a contract made between the plaintiffs and the defendants. The plaintiffs claimed the sum of $106,250 being 85% of the value of the work completed by them. The defendants contended that the said contract was illegal and unenforceable in court because the plaintiffs were not registered as required by the Professional Engineers Act (Cap 225, 1970 Ed).

Held: (1) the plaintiffs were engaged in professional engineering work in Singapore even though the drawing of plans was carried out in Hong Kong; (2) an overseas professional engineer who undertakes employment as such in Singapore even in respect of one isolated project such as this one would be contravening the provisions of s 18 should he fail to register himself unless he engages in such employment under the direction or supervision of a registered professional engineer; (3) services performed by the plaintiffs under the aforesaid contract were therefore illegal in that the plaintiffs never took steps to get themselves registered beforehand nor to engage in such services under the direction or supervision of a registered professional engineer; (4) the plaintiffs' claim was therefore unenforceable notwithstanding the defendants' own participation in this illegal contract.

Raymond Banham & Anor v Consolidated Hotels Ltd 1975 High Court, Singapore (Winslow J).

The appellant was the registered proprietor of a piece of land in Malacca ('the land') which was governed by the National Land Code (Penang and Malacca Titles) Act 1963 ('the Act'). By a deed of assignment dated 9 March 1981, the appellant absolutely assigned a house on the land to the respondent for a sum of RM10,000. By another agreement of the same date ('the tenancy agreement'), the appellant let to the respondent that portion of the land on which the house stood, at a monthly rent of RM15. Both documents were prepared by a solicitor. On 28 May 1993, the appellant gave the respondent a notice terminating the tenancy, and requiring the latter to quit and deliver vacant possession of the premises. It appeared that the parties did not realize that the tenancy agreement was an illegal agreement caught by s 108 of the Act which prohibited the land from being transferred, leased, transmitted or charged to any person other than a Malay. Section 108 included, within the definition of the expression 'lease', any tenancy of whatever form or duration. The appellant brought an action against the respondent in the magistrates' court for vacant possession of the land. The appellant's statement of claim expressly pleaded, and relied upon, the illegal tenancy agreement. It was alleged that the respondent had failed to abide by the terms of the tenancy agreement and the notice to quit. The respondent, in his defence and counterclaim, challenged the validity of the notice to quit, alleged that it was the appellant who was in breach of the terms of the tenancy agreement and claimed damages for breach. Although the respondent did not plead illegality, she purported to take the point as a preliminary objection as to the locus standi of the appellant to bring the action at the hearing. The magistrate heard argument and decided in favour of the appellant on the ground that the respondent was a monthly tenant, so that the notice to quit had had the effect of terminating the relationship of landlord and tenant. The respondent then appealed to the judicial commissioner who proceeded on the basis that the tenancy agreement was illegal and void, and decided that the appellant's claim was unsustainable. The appellant appealed, arguing that the effect of the judicial commissioner's decision was to permit the occupation of land by one who was disabled by statute from having possession.

Held, dismissing the appeal: (1) illegality need not be specifically pleaded, and that once the illegality is brought to the attention of the court before whom the action is being tried, the court, upon being satisfied that the transaction is indeed illegal, is obliged to act upon it; (2) the appellant's statement of claim claimed vacant possession expressly on the basis that the respondent had acted in breach of the tenancy agreement. Accordingly, the appellant relied upon the illegality to claim possession of the land. This, therefore, was a case where the maxim ex turpi causa non oritur actio applied with full vigour; (3) the parties in the present case were in pari delicto when they entered into the illegal tenancy agreement. After all, the tenancy agreement was prepared by a solicitor. This was, therefore, not a case where the contract may be said to be discovered to be void under s 66 of the Contracts Act 1950; (4) in this case, it was the appellant who offended the terms of the statute and risked forfeiture of the land by the state authority; (5) it is settled law that property in chattels and land can pass under an illegal, and therefore unenforceable, contract. Consequently, the property in the house having passed to the respondent, and he having been put in occupation of the land, the loss should be borne by the appellant.

Mustafa bin Osman v Lee Chua & Anor [1996] 2 MLJ 141 Court of Appeal, Kuala Lumpur (Gopal Sri Ram, Siti Norma Yaakob JJCA and Mokhtar Sidin J).

The respondent was a member of a political party and was nominated to stand for a parliamentary constituency. His election expenses were borne by the party. The respondent signed a document undertaking to donate the allowance paid to him as a member of the Dewan Rakyat to the party. He also agreed that in the event of his doing any act which was seen to be against the interests of the party he would forfeit his seat in the Dewan Rakyat and the party could then submit the letter of resignation, signed by him, to the Speaker of the Dewan Rakyat. The respondent was elected as a member and at first he kept to his undertaking and requested his parliamentary remuneration to be paid to the party. The party in turn gave him a monthly sum of $300. Subsequently he asked the party to increase the allowance to $600 but receiving no reply, he resigned from the party. The party thereupon sent the letter of resignation to the Speaker. The result was that the respondent lost his seat in the Dewan Rakyat. He brought an action against the party claiming the refund of $8,024.70 being his parliamentary remuneration retained by the party and the payment of $41,325.80 being the amount of parliamentary remuneration which he would have received had it not been for the party's submission of the letter of resignation. The learned trial judge held that the undertakings were illegal, but held, notwithstanding the illegality, that the respondent was entitled to the refund of $8,024.70 and to the special damages of $41,325.80, subject to the deduction of $15,000 for the election expenses ([1982] 1 MLJ 36). The appellant appealed.

Held: (1) in whatever way the matter was looked at the respondent's claims must be dismissed. If the arrangements were not illegal and therefore valid, it goes without saying that what was done by the party and the appellant with regard to the remuneration and the resignation were fully authorized by the arrangement and no claim could arise therefrom, unless it could be shown that the appellant was in breach of the agreement, which was not the case here; (2) if on the other hand the arrangement was illegal, as correctly found by the trial judge, the respondent should not be entitled to the claim also, because the court will not lend its aid to an illegal transaction. No attempt was made by the respondent to show that he had nothing to do with the arrangement or that he was an innocent party. The appellant as the defendant was allowed by law to rely on the illegality in order to reject the respondent's claim; (3) the arrangement was not a fraud and neither were the facts constituting the alleged causes of action for malicious falsehood, fraudulent misrepresentation or conspiracy separable from those constituting the illegality. Nor were the acts of the appellant done otherwise than in pursuance of the arrangement so as to exclude the maxim volenti non fit injuria; (4) even if the arrangement was held to be a friendly or gratuitous one still the respondent was not entitled to recover any claim because of the maxim volenti non fit injuria.

Datuk Ong Kee Hui v Sinyium anak Mutit [1983] 1 MLJ 36 Federal Court, Kuching (Lee Hun Hoe CJ (Borneo).

The plaintiffs were a casino licensed under the laws of the State of Nevada, USA. The defendant was at all material times a businessman and a seasoned gambler of the `million-dollar class'. In 1987, the defendant met the plaintiffs' junket representative in Singapore. He was informed that if he gambled to a certain level, the plaintiffs could offer him free food and accommodation as well as first class passage. In January 1988, the defendant visited the plaintiffs' casino in Las Vegas and applied for a credit of US$1,000,000. The credit facility was granted after the plaintiffs' standard procedures were complied with. The defendant however did not have to utilise the credit as he won US$355,100. In December 1988 the defendant made a second trip to the plaintiffs' casino and upon his request, his previous c redit of US$1,000,000.00 was re-activated. On this trip, the defendant was however less fortunate and by the time he left the plaintiffs' casino, he had withdrawn a total credit of US$1.7m. Between June 1989 to August 1990, the defendant repaid to the plaintiffs three separate sums of S$483,750, S$290,250 and S$290,250. The balance outstanding was US$1,158,037. The plaintiffs commenced the action for the recovery of this amount owing by the defendant in respect of the loans granted to him at the plaintiffs' casino in Las Vegas. At the trial, the plaintiffs' evidence on the loans and outstanding amount were not challenged by the defendant. Three main issues arose for the court's consideration: (1) at which place was the contract to grant credit facilities made: Singapore or Las Vegas; (2)what was the proper law of the contract; and (3) whether the contract was enforceable under the laws of Singapore.

Held, allowing the plaintiffs` claim: (1) the contract to grant credit facilities to the defendant was made in Las Vegas, Nevada and not in Singapore. The defendant, being a seasoned gambler, knew that his first discussion with the plaintiffs' junket representative in Singapore on credit was purely preliminary and that the credit facility would only be granted to him in Las Vegas upon the completion of the required formalities; (2) in view of the finding that the contract to grant credit was only made in Las Vegas, the governing law of the contract had to obviously be Nevada law; (3) the term `proper law of a contract' meant the system of law by which the parties intended the contract to be governed, or where their intention was neither expressed nor to be inferred from the circumstances, the system of law with which the transaction had its closest and most real connection; (4) in applying the `closest and most real connection' test, the main factors to be taken into account were the place of contracting, the place of performance, the place of residences or business of the parties respectively and the nature and subject matter of the contract; (5) in this case, given the following important aspects, ie the loans were to be given in Las Vegas and in US dollars, the gambling was to be carried out at the plaintiffs' casino and none of the parties were Singaporean, the transaction undoubtedly had the closest and most real connection with Las Vegas, Nevada; (6) the proper law had to be determined by applying the test of `closest and most real connection' as at the time the transaction was concluded. Subsequent conduct of the parties was not a relevant consideration in the determination of that question. Therefore, the fact that the defendant made payments in Singapore dollars and the plaintiffs sued the defendant in Singapore were wholly fortuitous and could not alter the proper law which governed the contract; (7) at common law gaming was not per se illegal; neither was borrowing or lending money for gaming immoral or unlawful at common law. Section 6 of the Civil Law Act did not render gambling illegal but rendered a wagering contract void and could not be sued upon; (8) the fact that the contract, if governed by Singapore law, could be invalid or void under s 6 of the Civil Law Act did not mean that it, being governed by Nevada law and valid under that law, may not be enforced in Singapore; (9) it was not against public policy to allow the plaintiffs to recover the loans they gave to the defendant to enable him to gamble legally at their casino at Las Vegas.

Las Vegas Hilton Corporation t/a Las Vegas Hilton v Khoo Teng Hock Sunny [1997] 1 SLR 341 High Court, Singapore (Chao Hick Tin J).

The plaintiff entered into an agreement with the defendant whereby the latter was to acquire a lorry (the subject matter of the proceedings) and register it in his own name and obtain a haulage permit for the lorry, but it was intended that the lorry should be purchased by the plaintiff and used by him on his own account. This transaction was in contravention of certain regulations governing the transfer and use of motor vehicles. For some time the plaintiff used the lorry as his own, but operated it in the name of the defendant. Subsequently they fell out and the defendant removed the lorry from the plaintiff's possession without his permission. The plaintiff then brought an action for declaration that he was the owner of the lorry, coupled with a claim in detinue. The learned trial judge was satisfied as to the truth of the plaintiff's claim but took notice of the illegality and gave judgment for the defendant. He held that as both the plaintiff and defendant had practised deceit on the public administration of the country, it was the duty of the court to refuse the plaintiff aid. The Court of Appeal ([1957] MLJ 165) reversed this decision and held that the plaintiff could recover damages for trespass as he did not seek to found his claim on the illegal transaction. The defendant appealed.

Held: (1) although the transaction between the plaintiff and the defendant was illegal, nevertheless it was fully executed and carried out, and on that account it was effective to pass the property in the lorry to the plaintiff. Accordingly the plaintiff could succeed in detinue; (2) the plaintiff also had a clear claim in trespass as on the facts he was entitled to rely on his possession.

Sajan Singh v Sardara Ali [1960] MLJ 52 Privy Council Appeal from the Federation of Malaya (Lord Cohen, Lord Denning and Lord Jenkins).

In this case, the plaintiff, a Malaysian citizen entered into an unconditional agreement on 14 July 1978 to purchase a house in Singapore from the defendant and the completion date was to be on 7 August 1978. The vendor knew that the purchaser was a Malaysian citizen and the contract was entered into by the parties inspite of the fact that approval to purchase the said property had already been refused under s 16 of the Residential Property Act 1976 on 5 July 1978. On 11 July 1978, the plaintiff sent her cheque for $10,700 by way of deposit in favour of the defendant's solicitors to be held by them as stakeholders. Purporting to act under cl 15 of the said agreement the defendant having been advised that ss 3(1)(c) and 3(2)(c) of the Act did not apply in this matter forfeited the said deposit on the ground that the plaintiff had failed to complete the sale on 7 August 1978. In this proceeding the plaintiff applied to court for 'a declaration that the agreement for sale and purchase dated 14 July 1978 made between the defendant and the plaintiff is null and void and that the plaintiff is entitled to the return of the sum of $10,700 being the 10% deposit'.

Held: (1) as the whole of this transaction was already an illegal one and both parties to the transaction had contravened some of the provisions of s 3 of the Act and as such punishable under s 25 of the Act the court could not be called upon to assist either one or the other of the parties with regard to the agreement in question; (2) the maxim 'in pari delicto potior est conditio defendentis' applied in this case; (3) in the circumstances, there would be no order as to costs since both parties had offended against the law.

Cheng Mun Siah v Tan Nam Sui [1980] 2 MLJ 269 High Court, Singapore (Rajah J).

The appellant had deposited some money with a person carrying on the business of a pawnshop. She brought an action for the recovery of the money. Her action was dismissed as it was held that she was an unlicensed moneylender and the contract was void and unenforceable. Her appeal to the High Court was dismissed and she appealed to the Federal Court.

Held: (1) although the appellant had lent her money on interest she was not a moneylender as she did not carry on the business of moneylending; (2) the person accepting the deposits was carrying on a borrowing business and as he was not a public company or a licensed borrowing company, the transaction was illegal, void and unenforceable; (3) in this case, s 66 of the Contracts Act 1950 (Act 136) applies as the contract was discovered to be void, and the appellant was entitled to the restitution of her money.

Yeep Mooi v Chu Chin Chua & Ors 1980 Federal Court, Kota Bharu (Raja Azlan Shah CJ (Malaya).

The plaintiff brought the action for specific performance of three agreements in respect of the sale and purchase of three pieces of land. The plaintiff applied for and obtained a temporary injunction valid for 14 days with liberty to apply for an extension. The plaintiff then applied to extend the injunction until the final disposal of the suit. The plaintiff's cause of action was pegged to three letters all dated 7 September 1989 which were alleged to have offered three pieces of land for sale. The plaintiff alleged that the offers were accepted and initial moneys tendered according to the said letters of offer. The defendant, however, informed the plaintiff by letter that it could not accept the plaintiff's agreement and directed its agent to return the cheques. The plaintiff contended that the letters constituted binding contracts and the defendant had no right in law to repudiate them. The defendant alleged that the purported contracts were tainted with illegality but the court observed that the complaints were directed to the letter of offer for one of the pieces of land only. The defendant alleged that it was agreed not to reflect the true purchase price in the sale and purchase agreement yet to be formulated. This is so as to defeat the Stamp Ordinance 1949 and to defraud two third parties to whom the land was encumbered. The plaintiff, however, denied any evasion of the Stamp Ordinance 1949 and alleged that such an alleged breach would not render the agreement void. Further, any fraud in the two third parties were perpetrated by the defendant.

Held, discharging the injunction in part: (1) and there would be a supplementary agreement showing a work contract by which the defendant was entitled to $2.157m. The arrangements of the two parties amounted to nothing less than a dubious means of evading the Stamp Ordinance 1949 and an attempted fraud on public revenue as well as the third parties. The mention of such a fictitious price in the letter of offer relating to the 50 acres of land and purportedly accepted by the plaintiff amounted to overt steps in carrying out the fraud; (2) under s 24(a) of the Contracts Act 1950, the only contracts that are unlawful are those forbidden by law. The object of the Stamp Ordinance 1949, however, is not to vitiate the contract but to impose a penalty upon the party offending. However, s 24(e) of the Contracts Act 1950 directs a court to hold the consideration or object of an agreement as unlawful and void if the court regards such consideration or object as immoral or opposed to public policy. No court will lend its aid to a man who founds his cause of action upon an unlawful act. An agreement formed for the purpose of evading the Stamp Ordinance 1949 and attempting fraud against the revenue department and two third parties and deriving profits therefrom was certainly illegal; (3) where, on the facts, there is nothing which gives the plaintiff any right at all, the injunction sought should be refused; (4) in respect of the remaining two pieces of land, the letter of 28 August 1989 had set out the essential terms and thereafter, it said 'subject to signing of formal contract'. There was nothing in that letter to show that it was the intention of the parties not to make a concluded bargain at all. In using the formula 'subject to signing of formal contract', it merely proposed to have the terms restated in a form which would be fuller and more precise but not different in form. The two subsequent letters of offer of 7 September 1989 also clearly manifested the intention of the parties. It was a fallacy to suggest that the parties did not intend to make any concluded bargains. In any event, the plaintiff had strenuously disputed the defendant's contention and the plaintiff had shown that there was a serious question that can only be resolved at the trial; (5) s 92 of the Evidence Act 1950 prohibits the admission of oral evidence for the purpose of contradicting, varying, adding to or subtracting from the expressed terms of a contract. However, the language of proviso (a) allows parol evidence to show that a contract in writing was really made for objects forbidden either by statute or common law. The plaintiff had not denied the defendant's allegations regarding the matters discussed. The plaintiff's only contention was that even if the matters were discussed and even if they had reached an agreement at all, they were irrelevant and inadmissible in view of the finality of the letters of offer. As the plaintiff has failed to deny or contradict the defendant's allegations, it must be held that the allegations have been admitted. As such, both parties had agreed that the sale price was $14.157m; that the agreement should not reflect the actual price;there was no indication in the letter of 6 September 1989 that there was to be a block sale of the three pieces of land. The sale and purchase of the 50 acres of land was not made a condition of the sales and purchases of the other two smaller lands. Further, the three pieces of land were offered for sale under three separate letters of offer of the same date. Even if it had been a block sale, the agreements were not founded on or sprang from an illegal transaction and they cannot be said to be illegal or void.

Amalgamated Steel Mills Bhd v Ingeback (Malaysia) Sdn Bhd [1990] 2 MLJ 374 High Court, Kuala Lumpur (Lim Beng Choon J).

P claimed that D, the registered proprietor of a piece of land, gave an option to sell D's land to X. P also claimed that Y, who was the representative of X, agreed to sell the land on D's behalf to P. P further alleged that both D and he agreed to the purchase price of M$479,000 but D wanted the sale and purchase agreement to state M$330,000 only. This was because according to P's allegation, D wanted to distribute less to his family members. P therefore instructed his solicitor to draw up the agreement stating the price as M$330,000 although P would pay D M$479,000. D denied giving an option to X and denied selling the land to P. P claimed for specific performance of the sale and purchase agreement. At the trial P did not give oral evidence nor did P call X and Y as witnesses.

Held, dismissing P's claim: (1) P knowingly misrepresented the price in the sale and purchase agreement and the government would have been defrauded of revenue if the instrument had been sent for stamping. The performance of the agreement would contravene s 61(a) of the Stamp Act 1949. Such an agreement was therefore void and unenforceable under s 24 of the Contracts Act 1950; (2) since X and Y did not give evidence, an inference was drawn that had they testified the evidence would have been unfavourable to P.

Harun bin Taib v Khor Peng Song Civil Suit No 22-147-90 High Court, Alor Setar (KC Vohrah J).

The plaintiffs were co-owners of a property. On 12 December 1990 the plaintiffs, in consideration of the sum of $10,000, granted an option to one 'Lim Jit Wah and/or nominee' to purchase the property for the sum of $700,000. On 26 December 1990, the defendants ('Gimly') exercised the option by paying the sum of $60,000, being the balance of the 10% deposit of the purchase price to the plaintiffs' then solicitors to be held by them as stakeholders. On 11 January 1991, Gimly's solicitors lodged a caveat against the property in the land register. Subsequently, the plaintiffs' solicitors carried out a search at the Registry of Companies, which revealed that Gimly was deemed to be a 'foreign person' under the Residential Property Act (Cap 274) ('the Act') as one of its directors and shareholders was not a Singapore citizen. The plaintiffs' solicitors therefore required Gimly to produce a copy of the letter of clearance from the Land Dealings Unit. Gimly, however, had not obtained the said clearance or the approval of the Controller of Residential Property prior to the exercise of the option. The plaintiffs accordingly refused to complete the sale. On 27 April 1991, the plaintiffs commenced the subject originating summons for an order that the option contract declared null and void under s 3 of the Act; that the option money may be retained by them; that their former solicitors who held the deposit of 10% of the purchase price as stakeholders, release the sum to them; and that the caveat lodged by Gimly be withdrawn; and for costs of land incidental to their application. It was argued for Gimly that s 25(2) of the Act did not specifically provide that a foreign person must obtain an approval for the purchase of a residential property before the contract was signed, but that so long as they obtained the Minister's approval prior to the completion of the purchase, the contract for the purchase would be valid. It was also contended that the word 'purchase' in s 25(2) connoted all the terms in the sale and purchase agreement leading to the completion of the transaction and the vesting of the property in the purchaser. Hence, 'purchase' was not affected until the transfer was registered so that even if the words 'desires to purchase' in s 25(2) of the Act did connote a point of time, it would be wrong to hold that the approval must be obtained before the signing of the contract, because that agreement was not the purchase itself but only the start of the purchase.

Held, allowing the application in part: (1) Gimly's submissions could not be accepted as they centred on the concept of purchase whereas the Act was much wider in that it dealt with the acquisition of an interest in land. Section 3(1)(c) of the Act provides that except as provided in the Act, a foreign person should not acquire any interest in a residential property. It is clear from the language of s 3 of the Act that unless a foreign person has already obtained the Minister's approval under s 25(4) of the Act, he cannot enter into an agreement which would give him a caveatable interest in land; (2) in the context of s 25(2) of the Act, the words 'desires to purchase' must connote the forming of an intention by a foreign person to purchase or acquire an interest in land. If after forming such an intention, the foreign person enters into an unconditional written contract for purchase of the desired property, he would gain nothing as the contract would be null and void under s 3(2) of the Act. To enable him to enter into a contract for the purchase of the desired property, the foreign person should first obtain the Minister's approval for the purchase of residential property of such class or nature as he desires. An approval can be in generic terms and need not relate to a specific property. Alternatively, if the foreign person desires to purchase a specific property, he should enter into a conditional contract for the purchase of the property, the overriding condition being that the contract would not come into effect until the proposed purchaser has obtained approval from the Minister under s 25(4) of the Act; (3) the option money would be retainable by the plaintiffs in any event as it was not tainted by the illegality of the contract for the sale of the property. The option was a separate contract independent of the contract for sale. The plaintiffs were paid the option money in consideration of their granting an option for the purchase of the property, such option to be valid for a period of 14 days. Once the option money was paid, it was not recoverable unless the consideration therefor had wholly failed or the plaintiffs had breached the option by selling the property to someone else; (4) the plaintiffs as the registered proprietors of the property had an absolute right under s 111 of the Land Titles Act (Cap 157) to call upon Gimly to satisfy the court as to why their caveat should not be removed. This right was independent of the contract for sale and did not arise out of that contract, and was therefore unaffected by the illegality of the contract for sale. The onus was on Gimly to establish why their caveat should not be removed, and they could only do so if they could prove that they had a caveatable interest in the property under s 104(1) of the Land Titles Act. As the only interest that Gimly could possibly have in the property would have arisen under the illegal contract of sale, that interest acquired was null and void. Gimly's caveat therefore could not remain on the land titles register; (5) the plaintiffs were not entitled to the balance of the deposit held by their former solicitor as stakeholder. The stakeholder holds the deposit on trust to deal with it in different ways in different contingencies. A vendor is not entitled to forfeit the deposit unless the contract has gone off owing to the default of the purchaser. A default occurs when a party to a contract fails, without legal excuse, to fulfil his obligations thereunder. In this case, the contract being illegal, it could not be performed by either party, and no legal obligations arose thereunder. The failure to complete was not due to any default on the part of Gimly; (6) as the plaintiffs were innocent of any wrongdoing and had been embroiled in an illegality by an action on the part of Gimly whichose. This right had been fettered by Gimly's wrongful refusal to withdraw the caveat. The plaintiffs had, accordingly, no alterative but to invoke the aid of the court, and were therefore entitled to costs.

Tan Cheow Gek & Anor v Gimly Holdings Pte Ltd [1992] 2 SLR 817 High Court, Singapore (Judith Prakash JC).

In this case, the defendant applied for an order to set aside the interim injunction obtained against him by the plaintiff. The injunction restrained the defendant from entering into any agreement with any party other than the plaintiff in the sale of certain shares held by the defendant until final determination of the suit filed by the plaintiff. The defendant also applied for the plaintiff's writ of summons and statement of claim to be struck out pursuant to O 18 r 19(1) of the Rules of the High Court 1980. The defendant contended that: (a) there had been non-disclosure of material facts on the plaintiff's part in that when she applied for the interim injunction, she never disclosed to the court a letter written by her former solicitors, M/s Skrine & Co, to the Governor of Bank Negara, seeking the approval of the Minister of Finance for the sale of the shares pursuant to s 23A of the Banking Act 1973 (Act 102); (b) there was non-compliance with s 23A of the Banking Act 1973 which required any agreement or arrangement for the sale of shares in a bank to have the prior approval of the Minister of Finance; (c) the plaintiff could not obtain specific performance of the agreement between herself and the defendant because the object of the agreement was opposed to public policy under s 24(e) of the Contracts Act 1950 (Act 136) and thus unlawful.

Held, allowing the defendant's application: (1) there was non-disclosure of material facts, especially the vital letter written by the plaintiff's former solicitors, M/s Skrine & Co, to the Governor of Bank Negara. The plaintiff, in her application for the interim injunction through her present solicitors, had also failed to draw the court's attention to s 23A of the Banking Act 1973 and to the fact that up to the present date there had been no approval of the Minister of Finance for the agreement pursuant to s 23A of the Banking Act; (2) s 23A of the Banking Act is clear and comprehensive in prohibiting a person from entering into an arrangement or agreement to acquire a shareholding which, when aggregated with existing shareholding, would amount to not less than 5% of the issued shares of a licensed bank, without obtaining the prior approval of the Minister of Finance upon the recommendation of the Central Bank. It is also clear from that section that it covers arrangements or agreements, both formal and informal, express and implied; (3) in this case, the plaintiff would not be able to obtain specific performance of the said agreement in view of s 24(e) of the Contracts Act, as it is obviously a matter of public policy that the prior approval of the Minister of Finance under s 23A of the Banking Act must be obtained before any agreement or arrangement is entered into for the acquisition of an aggregate of 5% holding in any licensed bank.

Tunku Kamariah Aminah Maimunah Iskandariah bte Sultan Iskandar v Dato James Ling Beng King [1989] 2 MLJ 249 High Court, Kuala Lumpur (Gunn Chit Tuan J).

The respondents in this case had a lease of a granite quarry in Pulau Ubin for a term of ten years from 1 September 1969. By a written agreement dated 2 May 1975, the respondents granted the appellants a licence to extract granite from the quarry from 1 May 1975 until the expiry of the lease. It was also agreed that if the Commissioner of Lands offered a further lease to the respondents, then the appellants shall be given priority to continue with the existing arrangement subject to adjustment of the royalty payable. Negotiations took place at the end of 1978 and early in 1979 for the agreement to be renewed. There was a dispute as to whether an agreement was reached. The appellants contended that an oral agreement was concluded at a meeting on 10 July 1979 to the effect that the appellants' licence would be renewed subject only to the respondents' obtaining the renewal of the statutory quarry licence. The respondents denied that any agreement was concluded and maintained that at all times negotiations between the parties were subject to the respondents being granted a new lease of the quarry. The respondents commenced an action claiming possession of the quarry and payment of arrears of licence fees. The appellants counterclaimed for specific performance of the alleged oral agreement for the renewal of the agreement and while admitting the arrears, claimed to set off damages for breach of the alleged agreement. The primary questions for decision were issues of fact, namely, whether an oral agreement was concluded for the renewal of the 1975 agreement and, if so, whether the agreement was conditional upon the grant to the respondents by the Commissioner of Lands of a new lease of the quarry. Sinnathuray J in the High Court held that no contract was concluded at the meeting of 10 July 1979 and further that at that meeting it was a condition of any agreement for a new licence that the respondents were themselves granted a new lease. He accordingly gave the respondents judgment for possession. He also held that the 1975 agreement was illegal as the appellants had no licence for the use of the land for the quarry, the licence being granted solely to the respondents. Nevertheless, he gave judgment for the respondents for the arrears claimed (see [1982] 1 MLJ 22). The appellants appealed to the Court of Appeal which dismissed the appeal. The appellants appealed further to the Privy Council.

Held: (1) the conclusion of the learned trial judge that there was no concluded agreement for renewal was a finding of fact which was not only clearly open to him on the evidence, but which was strongly supported by the contemporary documents and probabilities; (2) having found that the 1975 agreement was illegal the learned trial judge was in error in giving judgment for the respondents for the arrears of licence fees. The provision in the judgment for the payment by the appellants of the arrears must be deleted.

Eng Joo Lee Pte Ltd v Kian Chiang Granite Quarry Co (Pte) Ltd [1986] SLR 16 Privy Council Appeal from Singapore (Lord Keith of Kinkel, Lord Templeman, Lord Griffiths, Lord Ackner and Lord Oliver of Alymerton).

The plaintiff in this case sued the defendant for the repayment of $10,000 being a loan on a promissory note. The issue before the court was whether the defendant, Datuk Foo, in depositing a Malay Reservation land title with the plaintiff as security for a loan, rendered the contract of loan null and void.

Held: (1) what the law aims at is that the land should not fall into the hands of a non-Malay as clearly can be argued from s 7(i) of the Kelantan Land Malay Reservations Enactment 1930. It does not confine itself to the interest of the existing Malay proprietor. 'Any Malay' intended here is the general Malay and not any Malay in particular. If it is otherwise, then even a Malay chargee cannot levy execution on the land by sale as interest of the Malay proprietor is affected; (2) if acts are done in accordance with the Malay Reservations Enactment, then such acts are lawful; (3) in the instant case, there was nothing illegal in the mere deposit of title by the defendant. The deposit of title was made during the life of the Land Enactment 1938 which was then in force. There is no provision in either the Malay Reservations Enactment or the Land Enactment which prohibits such deposit of title and such deposit of title was therefore not illegal; (4) the plaintiff was therefore entitled to enter judgment against the defendant for the sum of $10,000 and interest.

T Bariam Singh v Pegawai Pentadbir Pesaka Malaysia (Administrator of Estate of Datuk Foo Say Lee) [1983] 1 MLJ 232 High Court, Kota Bharu (Mohamed Zahir J).

A sawmill licence had been granted to the first defendant and another to operate a sawmill. The licence was not transferable. A company was formed to work the sawmill licence, with a $200,000 capital, of which 75% was held by the plaintiff and the remaining 25% by the first defendant and the other licensee. Subsequently the plaintiff sold his shares in the company to the first defendant. The plaintiff accepted delayed payment but obtained a guarantee from the other three defendants. The first defendant paid $12,000 towards the purchase price but refused to pay the outstanding balance of $43,000. The plaintiff sued the defendants for the amount due. The defendants claimed that the sale of the shares and the guarantee agreement were illegal.

Held: (1) the agreements pursuant to which the company was incorporated were illegal as the agreements amounted to an attempt to circumvent the condition of the licence as to its non-transferability to non-licensees; (2) however the incorporation of the company was perfectly lawful and while its operation of the sawmill was illegal as it had no sawmill licence to cover the operation, the sale of the shares and the guarantee agreement for the purpose of making the company's operations come within the ambit of legality were not illegal; (3) the plaintiff was therefore entitled to judgment for the balance of $43,000 due on the agreement.

Tan Lai v Mohamed bin Mahmud & Ors [1982] 1 MLJ 338 High Court, Kuala Trengganu (Salleh Abas FJ).

Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd [1996] 2 SLR 109; (1996) CSLR VI[128] High Court, Singapore (Judith Prakash J).

See COMPANIES AND CORPORATIONS, Vol 3, para 108.

The appellant was the registered proprietor of rubber land in Jelebu. She had agreed to sell it to the respondents, the transfer to be executed on the issue of title. The appellant refused to execute the transfer but applied for rescission of the contract, alleging fraudulent misrepresentation on the part of the respondents. The respondents counterclaimed for specific performance and damages. The learned trial judge dismissed the appellant's claim for rescission but also dismissed the counterclaim on the ground that the agreement for sale was illegal, as it was an attempt to evade the restriction that the land was not to be transferred without the permission of the Collector of Land Revenue. The appellant appealed.

Held, dismissing the appeal and allowing the counterclaim: (1) on the facts the claim of the appellant for rescission was rightly dismissed; (2) there was no evidence that the respondents had any fraudulent intention to commit an illegality. The contract of sale was valid although there could be no transfer by way of specific performance without the permission of the Collector for the transfer being obtained; (3) in this case, an order may be made for specific performance subject to the permission being granted; if permission is refused, however, the respondents would be entitled to damages.

Chin Tai v Siow Shiow & Ors [1971] 1 MLJ 67 Federal Court, Kuala Lumpur (Ong CJ (Malaya).

On 9 March 1981, the plaintiff as the registered owner of land, which was Malay customary land, assigned the premises to the defendant for RM10,000 by a deed of assignment. The plaintiff in another separate document which bore the same date agreed to let the premises at monthly rental of RM15 to the defendant. On 28 May 1993, the plaintiff terminated the tenancy and directed the defendant to vacate the premises. The defendant failed to do so. The plaintiff applied by way of summons for an order of vacant possession and mesne profits. On 29 November 1993, the defendant submitted his defence and counterclaim and alleged that the plaintiff had breached the agreement of 19 March 1981 and he was thus was entitled to damages. Before the trial proper, the defendant made certain preliminary objections, inter alia, that the contract was void ab initio. The plaintiff's counsel agreed on the preliminary objection. The preliminary objection was upheld but the magistrate granted an order for vacant possession. The defendant appealed and submitted that since the whole contract was void ab initio the magistrate should have dismissed the summons and not ordered vacant possession.

Held, allowing the appeal and setting aside the magistrate's order: (1) the premises was governed by s 108 of the National Land Code (Penang and Malacca Titles) Act 1963 (the Act); (2) deciphering through the provisions of the Act, it would appear that the premises could not be transferred, leased, transmitted or charged to any person other than a Malay. Such a lease included any tenancy; (3) under s 24 of the Contracts Act 1950, the assignment and the tenancy agreement was illegal and void ab initio; (4) so long as there were provisions in the tenancy agreement which provided methods of effecting transfers of reservation lands from Malays to non-Malays according to the statute and the parties did attempt to comply with the provisions albeit unsuccessfully it could not be said that those agreements were attempts to evade the relevant enactments; (5) s 104 of the Act allowed the State Authority to declare certain persons to be certificated persons. This meant that a non-Malay who had been declared to be a certificated person could deal with that property in accordance with the provisions of the Code; (6) the agreement did not contain provisions for the plaintiff or the defendant to obtain the prior approval of the State Authority to declare the defendant a certificated person. As it stood, not only was the agreement void ab initio it had profited the plaintiff; (7) no court would lend its aid to a man who found his cause of action upon an immoral or illegal act. If from the plaintiff's own statments or otherwise, the cause of action appeared to arise ex turpi causa, or the transgression of a positive law of the country, then he had no right to be assisted.

Lee Chua v Mustapa bin Osman [1995] 4 MLJ 221 High Court, Malacca (Suriyadi Halim Omar JC).

X had earlier entered into an equipment lease agreement with M Sdn Bhd in respect of an X-ray equipment. With the consent of M Sdn Bhd, X assigned all his interest in the agreement to S. M Sdn Bhd subsequently terminated the lease and obtained default judgment against S for the sum owing under the agreement. An application by S to set aside the default judgment was dismissed by the court. In due course, receiving and adjudication orders were made against S. S applied to set aside the receiving and adjudication orders pursuant to ss 92(1) and 105(1), (5) of the Bankruptcy Act 1967. S contended that the judgment on which the act of bankruptcy was founded was based on an invalid consideration as the lease agreement was illegal at the material time. The agreement was null and void ab initio as it was made in contravention of s 3(1) of the Radioactive Substances Act 1968 and s 12(1) of the Atomic Energy Licensing Act 1984, both of which prohibited the use of the equipment in question without a licence. In the instant case, neither M Sdn Bhd nor S had the licence to sell or operate the equipment.

Held, allowing S's application: (1) the instant application by S can be made without the sanction of the official assignee. Section 38(1) does not apply to an application made under s 92(1) or s 105(1); (2) while a bankrupt cannot bring an action to set aside a judgment even if it was obtained fraudulently because the cause of action is vested in his trustee, the bankruptcy court is entitled to enquire into the validity of a judgment on which the bankruptcy proceedings was founded even though it has not been set aside. It is also settled that s 105(1) may be invoked even after the time to appeal had lapsed; (3) it is trite that where there is an express statutory prohibition, the court will not enforce a contract running foul of such prohibition. Such a contract is void and the court will not give effect to it even at the instance of a person who was a party to the illegality; (4) in the instant case, the equipment lease agreement is illegal and void under s 24 of the Contracts Act 1950. As the consideration is bad, it follows that a bankruptcy founded on such a judgment should not be allowed to stand. In the circumstances, the court exercised its power of review pursuant to s 92 and set aside the receiving and adjudication orders made in respect of S.

Re Sebastian, Ex p Metroplex Leasing & Credit Corp Sdn Bhd [1990] 3 MLJ 248 High Court, Kuala Lumpur (VC George J).

P was the owner of 290,000 shares, the certificates of which were deposited with H to secure P's account with them (H were commodities traders). When P closed his account with H, P's brother T delivered the shares to D1 to hold as security for T's trading account with D2. The shares were seized by the CID in the course of investigating D1's activities. They were charged with carrying on futures trading without a licence and pleaded guilty. In the statement of facts, D1 admitted that they had acted as a futures broker representative of D2, a Hong Kong company. P reclaimed the shares. D2, however, claimed that they were entitled to retain the shares as security for T's account. The assistant registrar gave judgment for P and D2 appealed.

Held, dismissing the appeal: (1) the Futures Trading Act (Cap 116) is clearly intended to regulate the carrying-on of futures trading business in Singapore and to protect the public from dealing with unlicensed brokers; (2) the Act prohibits an unlicensed broker from entering into a brokerage contract for futures; (3) on the evidence, D2 were carrying on the business of a futures broker in Singapore without a licence, through D1. Accordingly, the contracts which they had put through for T in Singapore were all illegal and all moneys due thereunder were irrecoverable; (4) P was entitled to recover his shares as it was an implied term of the pledge that the transactions must be lawful. Furthermore, one of the objects of the Futures Trading Act is to protect that class of the public who trade in futures. As there was no allegation that P was in pari delicto, he was entitled to recover his shares on this ground also. The appeal was therefore dismissed.

Tan Chor Thing v Tokyo Investment Pte Ltd & Anor [1991] SLR 555 High Court, Singapore (Chan Sek Keong J).

[Annotation: Affirmed on appeal. See [1993] 3 SLR 170.]

P was a Panamanian company whose principal business was that of making and facilitating capital investments in companies located in Asia. It had power under its constitutional documents to lend money. P lent money to D as bridging finance, in return for which he executed a promissory note in favour of P. D failed to pay back the loan. P sued. D resisted the claim on the ground that the loan was illegal as P were unlicensed moneylenders.

Held, granting judgment to P: (1) P's principal business was not that of lending money. The lending of money was incidental to its business of making and facilitating capital investments in companies located in Asia. P were accordingly not moneylenders; (2) P was a Panamanian company with a branch office in Singapore. D was Malaysian. The loan was funded from New York, deposited in Hong Kong account for the purchase of shares in a company incorporated in the Cayman Islands. The loan was secured by property in Malaysia. It was clear that the loans were offshore loans and P did not carry on the business of moneylending in Singapore nor were they residing in Singapore within s 5(1) of the Moneylenders Act. P was granted judgment and costs against D.

Private Investment Company for Asia (PICA) SA v Lorrain Esme Osman; Elders Finance Asia Ltd v Lorrian Esme Osman [1989] SLR 456 High Court, Singapore (Chua J).

[Annotation: Affirmed on appeal. See [1992] 1 SLR 369.]

This was an action for money had and received by the defendant to the use of the plaintiff. The plaintiff, alleged that he gave the defendant $61,000 on 8 January 1960 shortly before he left for India on the defendant's promise to send the whole of the money to him in India. The plaintiff received only $21,466.56 from the defendant. He claimed the balance, namely, $39,533.44. The allegations in the defence were that on or about the beginning of January 1960, the plaintiff handed $25,000 to the defendant, and later $6,000, upon a verbal agreement that the defendant should remit the said sums to India illegally in a manner contrary to Indian exchange control laws. The sum of $28,500 was remitted by the defendant to the plaintiff in India. A further sum of $1,500 was paid by the defendant to one M at the request of or with the sanction of the plaintiff. Finally a further sum of $1,000 was retained by the defendant with the knowledge of the plaintiff, in repayment of a debt due from the plaintiff to the defendant. It was agreed between the parties that if the defendant should make a profit on the illegal transaction, the defendant should be entitled to retain it. The defendant made a profit of $4,135. The court had to consider the following questions: (1) whether the plaintiff handed the defendant $61,000 on 8 January 1960; (2) did the plaintiff ask the defendant to send the money, which he handed to the defendant, to him in India at the black market rate of exchange; (3) how much of the money received by the defendant from the plaintiff remained in the defendant's hand; (4) whether the contract entered into by the plaintiff and the defendant was illegal by the law of India; (5) whether the contract being illegal by the law of India was enforceable in Singapore; and (6) whether an action could be maintained by the plaintiff for money had and received by the defendant under an illegal contract.

Held: (1) the sum of money handed by the plaintiff to the defendant on 8 January 1960, was only $31,000; (2) the plaintiff asked the defendant to send the money, which he handed to the defendant, to the plaintiff in India at the black market rate of exchange; (3) the balance remaining in the hands of the defendant was $7,941.41; (4) the contract entered into by the plaintiff and the defendant was contrary to s 4(2) of the Indian Foreign Exchange Regulations Act 1947; (5) in the present case the lex loci solutionis was the law of India as the contract was to be performed in India. The contract was not enforceable in Singapore as it was illegal by the lex loci solutionis; (6) the parties entered into, and the money which the plaintiff sought to recover was paid in pursuance of an illegal contract. An action for money had and received lay for the recovery of money paid in pursuance of an illegal contract, provided it was brought while the contract was still executory or before the illegal purpose had been substantially performed. In the present case, the illegal purpose had been substantially performed before the action for money had and received was brought. It was brought too late for the plaintiff to have the assistance of the court. A further reason why the court could not assist the plaintiff was because the weight of judicial authority has been strongly in favour of the theory that an action for money had and received depends on an imputed promise to pay.

Abdul Shukor v Hood Mohamed 1965 High Court, Singapore (Ambrose J).

The appellants had entered into three contracts with the respondents for the sale of copra. Copra was delivered under the first contract, but there was an overpayment of the sum of $10,597.60. No copra was delivered in respect of the second and third contracts. The appellants brought an action against the respondents claiming the sum of $10,597.60 for money had and received and also damages for loss in respect of the second and third contracts. Arulanandom J entered judgment for the appellants for money had and received but dismissed the rest of the claim. The appellants appealed.

Held , dismissing the appeal: as the appellants did not have a licence to purchase copra, the contracts entered into were clearly in contravention of the law such that the consideration was unlawful and therefore void.

Govindji & Co v Soon Hin Huat [1982] 1 MLJ 255 Federal Court, Penang (Raja Azlan Shah CJ, Abdul Hamid FJ and Abdoolcader J).

The respondent entered into an agreement with the appellants for a lease of padi land for a period of six years. Pursuant to the agreement, a sum of $1,500 was paid to the appellants. The appellants subsequently refused to allow the respondent to till the land. In an action for the recovery of the sum paid under the agreement, the sessions court gave judgment in favour of the respondent. On appeal from that decision the appellants raised a ground which was not pleaded in the court below, ie that the agreement was illegal for contravening s 3(1) of the Padi Cultivators Ordinance, and the sum paid under the illegal agreement was not recoverable by the respondent.

Held, dismissing the appeal: (1) in English law, money paid in consideration of an illegal purpose which is not accomplished is not recoverable unless the scheme is frustrated by reason of the plaintiff's repentence. Under s 66 of the Contracts (Malay States) Ordinance 1950 all that need be proved is that the illegal purpose has not been achieved; (2) the agreement was one which came within the ambit of the words 'if discovered to be void' in s 66 of the ordinance. The respondent was therefore entitled to the refund of the money paid under the illegal agreement.

Ahmad bin Udoh & Anor v Ng Aik Chong [1969] 2 MLJ 116 High Court, Alor Star (Wan Suleiman J).

By a number of agreements in writing, the first defendant rented from the plaintiffs nine units of equipment. The second defendant had undertaken to guarantee the punctual payment by the first defendant of sums payable under the agreements. The first defendant paid only part of the rentals due and owing. The plaintiffs alleged that in breach of the terms of the agreement the first defendant had failed to keep the equipment in good order and repair and that as a consequence, the first defendant was liable for the cost of repairs. The plaintiffs claimed that they were entitled to retake possession of the equipment and claimed against the defendants the total rent and all moneys payable under the agreements. The plaintiffs brought an action against the defendants for their claim and applied for summary judgment under O 14 of the Rules of the High Court 1980. The defendants opposed the application on various grounds. The first ground was that the plaintiffs had delayed in making the application and that no reason had been advanced for the delay. Appearance was entered on 3 October 1985 and the defence was delivered on 18 October 1985. The application for summary judgment was filed on 12 December 1985. The defendants contended that the lease agreements were a subterfuge for sale and purchase agreements. They further contended that the lease agreements were illegal in that they were intended or meant to defeat the revenue laws of the country or, alternatively, that they were contrary to public policy. The defendants also said that even if the agreements were valid, the defendants would not be liable for the sum claimed but only for the actual damage or loss proved to have been caused by the breach of the agreements or in any other reasonable compensation which was not a penalty. The defendants said that the sums claimed constituted a penalty. They also said that the plaintiffs had failed to mitigate the loss and damage allegedly suffered by them.

Held, dismissing the application: (1) the plaintiffs were not precluded from taking out an O 14 summons after the defence was filed but the onus of explaining the delay thereafter was on the plaintiffs and in this case, the plaintiffs had not discharged the onus as they had not explained the delay; (2) the defendants had succeeded in raising a triable issue capable of being resolved only by the calling of evidence at a proper trial as to whether the relevant agreements were leasing or hire-purchase agreements. The only place for the proper airing of the issue was at a full trial by evidence including the arguments whether the defendants could in law be allowed to prove that the agreements were other than lease agreements. This would be another legal issue to be thrashed out at the trial; (3) if the defendants could prove that the agreements had the effect of misleading the Revenue, such agreements would be unenforceable on the ground of public policy. This point had never, in regard to leasing agreements, been taken up before anywhere. On this point alone, the court would have been prepared to let the case go on trial; (4) the cost of repairs totalling M$1,230,000 was nearly half of the plaintiffs' total claim but the plaintiffs failed to give invoices or receipts to show how, when, and where the vehicles concerned were repaired. The plaintiffs had to prove onus of damages. The plaintiffs had claimed to have undertaken repairs to the vehicles but at the material time the vehicles were still in the possession of the defendants. These facts gave rise to another triable issue; (5) the court was not unmindful of s 92 of the Evidence Act 1950 (Act 56), and it was for the defendants to argue at the trial as to whether it would be open to them to adduce evidence to contradict or vary the written terms of the agreements. This in itself was a question of law to be decided by the trial court and it was not for the instant court to shut the door in their face.

B-Trak Sdn Bhd v Bingkul Timber Agencies Sdn Bhd & Anor [1989] 1 MLJ 124 High Court, Kota Kinabalu (Abu Mansor J).

[Annotation: The plaintiffs' appeals to the Supreme Court vide Civil Appeal Nos 441/86, 442/86 and 443/86 were dismissed on 27 February 1987.]

This was an application under s 44 of the Specific Relief Ordinance 1950 for an order of mandamus. An infant met with an accident on 19 August 1970, and as a result of that accident his leg was amputated above the knee. He brought an action for damages against the defendant (Civil Suit No 168 of 1971). The present application was filed by the defendant in the said suit against the respondent, the surgeon who performed the operation on the infant. The applicant alleged that the amputation of the leg was not necessary, the inference being that it was the negligence of the respondent which aggravated the injuries. On being requested by the applicant's solicitor for details of the injuries found on the infant and the treatment given at the hospital, the infant's solicitors authorized the hospital authorities to supply the information. This request was not complied with. Thus, the applicant, not having received any satisfaction from the hospital authorities, made an application under s 44 of the Specific Relief Ordinance 1950. The issue before the court was whether the applicant had succeeded in bringing his case within the purview of s 44 of the Specific Relief Ordinance.

Held: the applicant must show not only that he had a legal right to have the act performed, but that the right was so clear and well defined as to be free from any reasonable controversy. In the circumstances of this case, the applicant had failed to show the existence of any legal right to compel the performance of a legal duty cast upon the respondent. Per Sharma J: '...any duty or obligation falling upon a public servant out of a contract entered into by him as such public servant, cannot be enforced by machinery of a writ of mandamus or an order under s 44 of the Specific Relief Ordinance. Mandamus does not lie to enforce a civil liability arising out of a breach of contract to enforce rights based on contract. A civil suit for damages or for the enforcement of the civil liability may be the only proper remedy in such a case. Similarly, mandamus does not issue to enforce a civil liability arising under torts.'

Koon Hoi Chow v Pretam Singh [1972] 1 MLJ 180 High Court, Ipoh (Sharma J).

3 [2588] CONTRACT Implied terms – Fitness for purpose – Sale of Goods Act 1979 [UK] – Civil Law Act (Cap 43) – Murray v Kickerman (1979) 1 NSWLR 414 (refd) Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 (folld)

By several contracts made orally, P agreed to purchase from D paints and thinners for the purpose of fulfilling P's contractual obligations with S to make signboards for S. One type of paint which was applied to the sign board caused the acrylic material to crack. Eventually, P made new signboards using a different kind of paint instead of D's paints. P now brings an action against D for breach of an alleged implied term in the contract of sale that the paints and thinners sold by D would be suitable for use on acrylic surfaces. The issues before the court were (i) an issue of fact; was the damage complained of by P caused by the paints and thinners supplied by D; (ii) issue of law; was there an implied term in the contract of sale that the paints and thinners supplied should be fit for the purpose of application on acrylic materials?

Held, allowing P's claim: (1) on the first issue of causation, P has proved on a balance of probabilities, that it was D's paints combined with D's thinners which caused the damage and cracking; (2) as to the second issue, the onus is on P to show that he did make known to D the purpose for which the paints and thinners were bought. Once he can prove that the presumption is that he relied on D's skill and judgment in the recommendation and/or selection of the products suitable for such use, unless such reliance is positively disproved or if D can show such reliance to have been unreasonable; (3) on the facts, P did make known the purpose and D has failed to rebut the presumption of reliance or to show that such reliance was unreasonable; (4) in view of the words of s 14(3) Sale of Goods Act 1979, the fact that the buyer of goods had an opportunity to examine the goods would not automatically refute the presumption of reliance.

Lee Ah Yong t/a Comsign Agency v Kansai Paint (S) Pte Ltd Suit No 1891 of 1987 High Court, Singapore (Yong Pung How CJ).

Ho Weng Leong v Ng Kee Chin [1996] 5 MLJ 139 High Court, Johor Bahru (Abdul Malik Ishak J).

See CONTRACT, Vol 3, para 2111.

The respondent had paid a booking fee of $2,000 for a flat on the understanding that she should sign a contract of purchase within two weeks of receipt of notice from the vendors. Subsequently upon informing herself of the terms of the proposed agreement and form of lease she told the solicitors for the vendors that she was not prepared to buy the flat on the terms of the proposed agreement, which offered a lease instead of a sale of the flat, and she asked for the return of the booking fee. As there was no response she commenced action in the sessions court but her claim was dismissed. The respondent appealed successfully to the High Court which ordered the return of the sum of $2,000. The appellants, the vendors, thereupon appealed to the Federal Court.

Held, dismissing the appeal: (1) the contract of purchase in this case was inchoate of the type where a purchaser of land agreed to purchase subject to a proper contract to be prepared by the vendor's solicitor; (2) the booking fee in this case was paid on the condition that the amount was to form part of the purchase price in the event that a contract of purchase came to be executed, and as in this case no such contract was entered into the respondent was entitled to refund of the booking fee.

Skyline Trading Co v Tiow Yoke Lan [1969] 2 MLJ 212 Federal Court, Kuala Lumpur (Ong Hock Thye CJ (Malaya).

Tay Tian Liang v Hong Say Tee & Ors [1995] 4 MLJ 529; (1995) CSLR I[140] High Court, Johor Bahru (Abdul Malik Ishak J).

See COMPANIES AND CORPORATIONS, Vol 3, para 453.

South East Asia Insurance Bhd v Nasir Ibrahim [1992] 2 MLJ 355 Supreme Court, Malaysia (Abdul Hamid Omar LP, Gunn Chit Tuan and Edgar Joseph Jr SCJJ).

See CONTRACT, Vol 3, para 1865.

By an agreement dated 31 July 1982, the defendant undertook for reward to carry goods of the plaintiff and to deliver them to designated consignees of the plaintiff. Clause 15.1 of the agreement stated that the hired haulier would be fully responsible for the safe receipt and delivery of the goods and that they would indemnify the plaintiff in full 'for all losses, shortages/damaged goods, arising from whatever cause including misdelivery and mishandling by persons within the hired haulier's control, theft, burglary, pilferage, fraud, dishonesty and criminal breach of trust'. The plaintiff failed to deliver certain goods to the value of RM359,558.34 to the northern region of Malaysia since the carrier was robbed of its goods by person or persons unknown. The plaintiff claimed against the defendant the said sum. The defendant contended that the clause was not applicable as the robbery was not a theft within the meaning of cl 15.1 and that even if it was theft within the meaning of cl 15.1, the defendant was not liable because the theft was not done by person or persons within the control of the defendant as stipulated by cl 15.1.

Held, allowing the plaintiff's claim: (1) since robbery is an aggravated form of theft, robbery is theft within the meaning of cl 15.1 which was an indemnity clause. The omission of the word 'robbery' from the clause would not constitute an exception; (2) the words 'by persons within the hired haulier's control' were only applicable to wrongdoings stated in the first part of the clause, ie 'for all losses, shortages/damaged goods arising from whatever cause including misdelivery and mishandling'. It did not apply to wrongdoings or misdeeds in the second part of the clause which were 'theft, burglary, pilferage, fraud, dishonesty and criminal breach of trust'. In the case of theft, it was theft in the normal circumstances committed by anybody and not confined to theft by persons within the hired haulier's control. Therefore, there was no merit in the defence of the defendant.

Malaysian Tobacco Co Bhd v The Roadrailer Service Bhd [1995] 1 MLJ 847 High Court, Kuala Lumpur (Mokhtar Sidin J).

This was an application by the second defendant ('Chua') for indemnity, both for the judgment obtained against Chua by the plaintiffs in an action and the costs of defending that action, against Kua and Siau, who were also defendants in the same suit. All three had been co-directors of Kaline Holdings Sdn Bhd ('Kaline'). Kaline had borrowed from the plaintiffs and the loan was guaranteed by them and another director, Lee. Subsequently, Kua and Siau had bought Chua's shares in Kaline. One of the terms of the sale agreement was that they would indemnify Chua against all liabilities under whatever guarantees that he had signed as a director of Kaline prior to the agreement. One of the objections of the third parties was that the third party notice was invalid because it had been served to the third parties some two years after it was issued, and after judgment was given for the plaintiffs in their claim against Chua.

Held, allowing the application: (1) the indemnity had the effect of making Kua and Siau the principal debtors and Chua the surety in respect of the amount due under the judgment obtained by the plaintiffs against Chua. Chua was therefore entitled to a declaration that Kua and Siau pay the plaintiffs the amount due under the said judgment; (2) the third party notice should have been served before judgment was entered against Chua so that the validity of the claim against Chua, if contested by the plaintiffs, could have been litigated in the same action by the giving of the necessary third party directions; (3) nevertheless, if Kua and Siau had felt the third party proceedings was inappropriate, they should have asked for the dismissal of Chua's application at the hearing for third party directions. Since they had not done this but had agreed to the continuation of the proceedings, and given the other circumstances of the case, they must be taken to have been aware of the action of the plaintiffs against Chua. The third party notice could therefore not be dismissed on that ground; (4) neither could the third party notice be dismissed on the ground that it was not served within 12 months of being issued as that rule relating to writs was not applicable to third party notices. A third party notice has no specific period to limit its validity, so long as the objectives of the third party procedure can still be served; (5) there would be an order that Kua and Siau indemnify and keep indemnified Chua by paying the plaintiffs the amount due to them under the judgment they obtained against Chua; (6) the order for an indemnity for costs in Chua's defence against the plaintiffs was, however, not allowed because, by failing to serve the notice on Siau and Kua before judgment was entered against him, Chua had deprived them of the chance to decide whether to defend the action of the plaintiffs against him.

Asia Commercial Finance (M) Bhd v Kaline Holdings Sdn Bhd & Ors (Kaline Holdings Sdn Bhd & Ors, third parties) Civil Suit No 7-17 of 1991 High Court, Tawau (Ian Chin J).

United Malayan Banking Corp Bhd v Roland Choong Shin Cheong Civil Appeal No 11-42 of 1988 High Court, Johore Bahru (James Foong JC).

See COMPANIES AND CORPORATIONS, Vol 3, para 368.

The appellants were stockbrokers with whom the respondent was a remisier. In a suit by the respondent for a sum of money which was not disputed, the appellants counterclaimed, with interest thereon, the sum of S$143,707.94 as losses suffered by purchasing replacement shares for transactions in which a client of the respondent's had delivered forged share certificates. The terms and conditions governing the respondent's relationship with the appellants were continued in a contract dated 14 September 1981 and included the following: (1) that the respondent shall be responsible for all liabilities arising from contracts written by him; (2) that the respondent shall indemnifies the appellants for any losses and damages that may arise on all contracts written by him; and (3) that the respondent agrees to the above terms and conditions and thereby indemnifies the appellants for any losses or damages arising from any contracts written or any transactions entered into by him. The appellants contended that these clauses amounted to an indemnity by the respondent and in the alternative, that the respondent had impliedly warranted the genuineness of the documents submitted. The respondent argued against this construction of the clauses and also that in any event, the appellants were debarred from relying on the clauses by reason of their own negligence in accepting the forged share certificates from the client without first ensuring its authenticity. The learned trial judge dismissed the counterclaim (see [1991] 3 MLJ 286).

Held, allowing the appeal: (1) the indemnity given by the respondent to the appellants was wide enough to encompass the genuineness of the share certificates submitted by his client. The plain wording of the clauses in the contract favoured the appellants; (2) further, in construing the contract, it was necessary to have regard to the commercial purpose thereof and the relevant factual background in which the parties made the contract. All the clients of a remisier are his, but the contracts which he puts through for them are contracts made between them and the member firm, which is in no position to inquire into his clients. The appellants in this case were vicariously responsible for the performance of all such contracts. Obviously for this purpose, the contract drawn up by the appellants was expressed in very stringent and comprehensive terms from the point of view of the respondent. Losses arising from any default of the respondent's clients in honouring a bona fide transaction as well as losses arising from fraud or forgery by the respondent's clients must have been in the contemplation of the parties when the contract was made; (3) notwithstanding that no evidence was led to counter the evidence from the appellants' witnesses that, at the time the contract was made, fraudulent transactions involving forged share certificates were rare or unheard of, this could not be accepted. The forging of share certificates was an activity that had a history as long as that of shares themselves and had a case history of some note; (4) the appellants were not debarred from relying on the indemnity clause by reason of any negligence on their part. No such negligence had been proved and in any event, any such negligence on the part of the appellants as alleged could not in the circumstances have caused the loss; (5) the appellants were awarded the sum of S$143,707.94 with interest thereon at the rate of 6% pa from 22 July 1985, the date the counterclaim was filed, with costs here and below.

Associated Asian Securities Pte Ltd (in liquidation) v Lee Kam Wah [1993] 1 SLR 585 Court of Appeal, Singapore (Yong Pung How CJ, LP Thean and Goh Joon Seng JJ).

In this case, the plaintiff sought reimbursement from the defendants of the sum they had paid to two banks, under three letters of indemnity executed by the defendants in favour of the plaintiff. The defendants disputed liability maintaining that the three letters of indemnity executed by them were incomplete and uncertain, as the blanks spaces in them had not been fulfilled. The plaintiff's O 14 application against the defendants was dismissed. The plaintiff appealed against that decision.

Held, allowing the appeal with costs: The defendants have not alleged that there had been fraud or misrepresentation in the execution of the three letters of indemnity, their only objection being that the blanks have not been filled before execution. In the absence of fraud and as the presence of the blanks had not been questioned before, nor had they prevented the defendants from voluntarily affixing their signatures to the three letters of indemnity, their objection that the letters of indemnity are incomplete or uncertain merits no consideration whatsoever.

East West UMI Insurance Bhd v Low Boon Thong & Ors Civil Suit No D2-22-2137-90 High Court, Kuala Lumpur (Siti Norma Yaakob J).

Holiday Inns Inc & Anor v Hotel Enterprises Ltd 1975 High Court, Singapore (Chua J).

See CONTRACT, Vol 3, para 1990.

Hong Kong Teakwood Ltd v Hyundai Engineering & Construction Co Ltd [1987] SLR 354 High Court, Singapore (LP Thean J).

See CONTRACT, Vol 3, para 1777.

Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193 Court of Appeal, Kuala Lumpur (Gopal Sri Ram, Siti Norma Yaakob and VC George JJCA).

See CONTRACT, Vol 3, para 2452.

In this case, the appellants alleged that the respondent, a well-known singer from Hong Kong, had signed a contract agreeing to appear and sing at the appellants' night club for a number of days. It was a term of the agreement that in the event of breach, the respondent would not be entitled to perform in Kuala Lumpur during the period fixed in the contract or three months thereafter. It appeared that the respondent declined to honour his contract and was singing at another night club. The appellants claimed an injunction and damages and applied for an interim injunction to restrain the respondent from appearing at any opera, theatre, concert hall or other public or private entertainment in Kuala Lumpur until the hearing of the summons. The learned trial judge refused the application and the appellant appealed to the Federal Court.

Held: in this case, the respondent was not a resident of this country and it was unrealistic to suppose that the appellants would be sufficiently compensated by money damages alone. In the circumstances, the interim injunction applied for should be granted.

Pertama Cabaret Nite Club Sdn Bhd v Roman Tam [1981] 1 MLJ 149 Federal Court, Kuala Lumpur (Suffian LP, Abdul Hamid FJ and Mohamed Azmi J).

On 17 November 1980, the plaintiffs purchased a parcel of business premises measuring 3,500 sq feet on the ground floor and 1,500 sq feet on the first floor of the defendants' building complex known as Chi Liung Plaza. The plaintiffs had, since the purchase, been using the premises for their business of banking. For the purpose of extending their facilities to their customers, they proposed to install an ATM at the premises. On 18 June 1985, they wrote to the defendants seeking the latter's consent to the proposed installation but the defendants withheld their consent on the ground that the matter of installing such a machine had already been adjudicated before. This is a direct reference to proceedings in OSF 836/82 brought by the plaintiffs against the defendants, also for the purpose of installing an ATM at the same premises. As the plaintiffs consider that the previous proceedings have no bearing on their letter of request and that the defendants have been unreasonable in withholding their consent, they filed these present proceedings seeking a declaration that the refusal of the defendants to consent to the plaintiffs' request to install an ATM at their business premises is unreasonable and that the plaintiffs be allowed to install the machine in the manner described in their letter dated 18 June 1985. The defendants objected to the plaintiffs' application on the following two grounds: (a) that the installation of the ATM in the manner described by the plaintiffs would involve a deviation from the approved plans of the Plaza which can only be done at the time of construction and not after the whole building had been completed; (b) res judicata applies so as to prevent the plaintiffs making the same application as they had done previously in OSF 836/82.

Held: (1) the proposed plan is nothing more than an alteration or an improvement as it involves substituting or replacing the original material with another. Moreover, the premises where the proposed installation is to be built no longer belong to the defendants and as owners of the premises, the plaintiffs have every right to install such a machine in the course of providing better and up-to-date facilities to their customers provided of course they obtain the necessary consent from both the local authorities and the defendants under s 14 of the sale and purchase agreement; (2) res judicata does not arise as the facts now relied upon by the plaintiffs and the relief sought are very different from those raised in the previous proceedings.

Lee Wah Bank Ltd v Chi Liung Holdings Sdn Bhd [1988] 2 MLJ 652 High Court, Kuala Lumpur (Siti Norma Yaakob J).

In this case, the facts were that the defendants had advanced $7,000 to the plaintiff and the plaintiff thereupon paid off her loan to the Malaya Borneo Building Society Ltd and discharged her land from the charge to the society. The plaintiff and the defendants executed a memorandum of agreement purportedly pursuant to the Moneylenders Ordinance 1951 and the plaintiff also executed a charge of the land to the defendants. The title deeds of the land were handed over to the defendants. The defendants had originally applied for an order for the sale of the lands to recover the loan. Subsequently, the plaintiff brought the action against the defendants for a declaration that the memorandum of agreement and the charge were unenforceable and also prayed for the delivery of the title deeds to her. The defendants in their defence denied that the agreement and charge were unenforceable and further claimed that they were entitled to retain the title deeds until repayment of the sum of $7,000. In an earlier hearing ([1972] 1 MLJ 117), it was held that the memorandum of agreement and the charge were unenforceable.

Held: (1) as the plaintiff had benefited by the advance of the $7,000 and the defendants had not intended to make the advance gratuitously, the defendants were entitled to recover the sum by virtue of s 71 of the Contracts Act 1950 (Act 136); (2) the defendants were entitled to possession of the title deeds for the purpose of the creation of a lien under s 281 of the National Land Code 1965 (Act 56/1965); (3) since the money had been advanced by the defendants to pay off the money lent by the society as mortgagees, the defendants have become equitable assignees of the mortgage and were entitled to have the mortgage kept alive for their benefit and to enforce the mortgagee's rights thereunder.

Poomani v Associated Finance Corp Sdn Bhd [1975] 1 MLJ 277 High Court, Ipoh (Wan Hamzah J).

The plaintiff (respondent) and his first wife, then poor, went to live in a house and farm in Singapore in about 1916. In the course of time, two daughters were born and five sons adopted, and most of the family (including all the adopted sons and numerous grandchildren) lived together on the premises. All those old enough to do so worked on the farm, which was enlarged, and in various other business enterprises which the expanding prosperity of the family made possible. In 1955, as a result of family quarrels which ensued after the respondent's remarriage following the death in 1953 of his first wife, the respondent left the family home. He then brought actions against three of his adopted sons and two of his grandsons, claiming possession of the farm and family house and damages for trespass, a declaration that he was the beneficial owner of a petrol filling station erected by him on land adjacent to the farm, and the return of two lorries used on the farm. The defendants (appellants) alleged, inter alia, that there were contracts between the respondent and the adopted sons whereby the latter agreed to be adopted and to work with the respondent for the acquisition of wealth to be administered by him, and that, having been adopted and having helped to acquire wealth, they were entitled equally with the respondent to possession of the farm and the other property and to equal shares in it when the respondent died.

Held, affirming the decision of Tan Ah Tah J: the agreements alleged by the appellants, even if proved, were not intended to create legal relations, and were therefore not binding in law as contracts.

Choo Tiong Hin & Ors v Choo Hock Swee [1959] MLJ 67 Court of Appeal, Singapore (Whyatt CJ, Wee Chong Jin and Chua JJ).

P were merchant bankers which provided funds to MMC, a wholly-owned subsidiary of D set up to operate as ring-dealing member of the London Metal Exchange. During the negotiations for the provision of funds to MMC, P had sought from D assurances as to the responsibility of D for the repayment by MMC of any sums lent by P. A comfort letter was provided by D as part of an acceptance credit/multi-currency cash loan facility granted to MMC by P. The comfort letter contained a statement by D that 'it is our policy to ensure that the business of [MMC] is at all times in a position to meet its liabilities to you under the above arrangements (sic).' In 1985 the tin market collapsed and MMC ceased trading. P demanded repayment of all sums outstanding. Nothing was paid by MMC, which went into liquidation. P sued D. The trial judge held in favour of P. D appealed.

Held, allowing the appeal: (1) the central question in the present case was whether the statement in the comfort letter amounted to a contractual promise; (2) the fact that the parties had referred to the document as a letter of comfort did not mean that a court would refuse to give effect to the meaning of the words used. But in this case it was clear that the comfort letter was a document under which D would give comfort to P by assuming, not a legal liability to ensure repayment of MMC's liabilities, but a moral responsibility only; (3) thus, D had shown that they had no legal liability and the consequences of their decision to repudiate their moral responsibility were not matters for the court.

Kleinwort Benson v Malaysia Mining Corp Bhd [1989] 1 All ER 785 Court of Appeal, England (Fox, Gibson and Nicholls LJJ).

The issue before the court was whether on the proper construction of certain letters exchanged between the solicitors for the parties, there was a contract of sale concluded between the plaintiff as the intending purchaser and the defendants as owners of No 17, Lakme Street for the purchase of the premises at $177,000.

Held, dismissing the plaintiff's claim: (1) the sale and purchase was subject to contract and there was nothing in the exchange of letters between the parties from which it can be said or inferred that there was a change in the intention of either of the parties to create binding legal relations between themselves in any other way; (2) the exchange of letters between the solicitors was with regard to the negotiations relating to the making of an agreement for sale and purchase which was to be the contract between the parties.

Ong Chong Soo v Tan Eng Tai & Anor 1982 High Court, Singapore (Sinnathuray J).

The defendant borrowed RM200,000 from the plaintiffs. To secure the loan, a memorandum of charge dated 10 February 1983 ('the charge') was executed between the parties and was subsequently registered at the Land Registry office on 7 June 1983. The defendant defaulted in his monthly instalment payments. The plaintiffs accordingly applied by originating summons dated 31 March 1986 for an order for sale pursuant to s 148(2)(c) of the Land Code (Cap 81). The order for sale was granted on 22 August 1987 but the auction of the charged property was only successful on 23 October 1989. The amount outstanding as of 14 February 1986 was agreed to be the sum of RM147,771.68. The three main issues raised for the decision of the court were: (1) what the amount (ie the principal sum) to be used in calculating interest was, viz whether it was RM147,771.68 as claimed by the plaintiffs or RM121,995.30 as alleged by the defendant. It was contended by the defendant's counsel that to allow the sum of RM147,771.68 to prevail would mean allowing interest upon interest, which was not provided for in the charge. It was further contended that cll 1(1), 4(1) and 35 of the charge were not applicable as they amounted to a penalty and were therefore illegal, based on s 11(a) of the Civil Law Act 1956 ('the Act') and s 75 of the Contracts Act 1950; (2) whether the period of interest should be from 15 February 1986 to 23 October 1989 as claimed by the plaintiffs or from 15 February 1986 to 22 August 1987 as asserted by the defendant; (3) whether the rate of interest was 15% pa with monthly rests from 15 February 1986 to 23 October 1989 as claimed by the plaintiffs, or 15% pa simple interest from 15 February 1986 to 22 August 1987 as asserted by the defendant and at 8% pa from 23 August 1987 to 23 October 1989.

Held, allowing the application: (1) s 11(a) of the Act is not relevant in this case. The court agreed with the submission of the plaintiffs' counsel that s 11 applies to a case where there is judgment on a debt or damages. The Supreme Court in Malaysia International Merchant Bankers v Dhanoa [1988] 1 MLJ 257 has held that an order for sale is not a judgment; (2) with regard to s 75 of the Contracts Act 1950, there is no merit in the contention. The issue is on the payment of interest on monthly rests and the capitalization thereof. There is no question of a named sum payable or an imposition of a penalty upon breach of contract. Perhaps there may be a basis if the defendant is complaining on the imposition of additional interest or overdue charge upon default of instalment. But this is not the case here; (3) cll 1, 4(1) and 35 of the charge therefore continue to govern, inter alia, the relationship between the parties. As cl 35 entitles the plaintiffs to capitalize accrued interest, the principal sum as of 14 February 1986 should be RM147,771.68. As the accrued interest has been capitalized by the plaintiffs, it cannot be continued to be considered as interest; (4) the court agreed with the plaintiffs' contention that an order for sale is not a judgment and that as the charged land was only successfully auctioned on 23 October 1989, the actual realization of repayment of the loan through the order for sale was only on that date and not earlier. The cut-off point on the liability to pay the stipulated interest should not be on the grant of the order for sale in this case. It is also clear in the charge that the defendant 'promise[d] to repay the same in the manner hereinafter appearing and until payment to pay interest thereon at the rate and in the manner aftermentioned'. Further, the court's view on s 11 of the Act also applies in this issue. Accordingly, the period of interest is from 15 February 1986 to 23 October 1989; (5) based on the court's findings on the first two issues, the applicable rate of interest is 15% pa on monthly rests from 15 February 1986 to 23 October 1989. The order for sale is not a judgment which attracts the application of s 11(a) of the Act; (6) further, the defendant agreed to the rate of interest when the transaction was concluded and had already used the loan without making any complaint on the rate of interest.

Interfinance Bhd v Liew Ek Chiu Originating Summons No KG 89 of 1986 High Court, Kuching (Richard Malanjum JC).

The plaintiffs leased a piece of land in Trengganu to the defendants for a period of 46 years and the defendants in return undertook to clear and develop it into an oil palm estate. The defendants were also required to pay land premium and quit rent and also royalty 'at the rate of one per cent of the nett sale of all oil palm produce for the land'. The defendants fell into arrears with the payments and the plaintiffs brought an action to recover the debt and interest. The issues between the parties were: (i) whether under cl 8(e) of the agreement the 1% royalty is to be calculated on the basis of the finished product or on the basis of unprocessed oil palm fruits; and (ii) whether the interest chargeable on the outstanding sum owed by the defendants is to be computed at compound interest or at simple interest.

Held: (1) in this case, what the defendants are required to sell and did sell was the oil, that is, the end product and therefore the royalty of 1% of the nett sale price must be determined on the basis of the end product and not on the basis of the unprocessed oil palm fruits; (2) in this case, there were circumstances showing that the defendants had made use of the sums owing to the plaintiffs and therefore the plaintiffs were entitled to charge compound interest on the sums due to them under the agreement regarding land premium, annual quit rent, development bonus and royalty.

Trengganu State Economic Development Corp v Nadefinco Ltd [1982] 1 MLJ 365 High Court, Kuala Trengganu (Salleh Abas FJ).

The respondent in this case was a co-operative society registered under the Co-operative Societies Act 1948 ('the co-operative society'). In consideration of a loan of RM3m to one Encik Khalid bin Ramlee who was a member of the co-operative society ('the borrower'), the appellant ('the chargor') charged a piece of land in favour of the co-operative society as security. It was common ground that the loan was to be utilized by a company called Kemajuan Perkasa Sdn Bhd ('the company'). The provisions for default interest were annexed to the instrument of charge (Form 16B). Pursuant to cl 3.1 of the annexure, interest on the loan was prescribed at the rate of 14.5% per annum on monthly rests ('the prescribed rate'). However, cl 3.2 further provided that in the event that any amount due, whether of principal or interest, was not received by the co-operative society on the due date, 'the chargor shall pay interest at the rate of one and one-third (11/3) times the normal ruling rate of interest on the sum in arrears calculated retrospectively from the due date of such default until the date of the payment of the amount thereof' ('the additional interest'). The chargor later defaulted, and the co-operative society obtained a statutory order for sale on 10 April 1992 as chargee of the land. The land was subsequently sold by public auction, and the proceeds of sale was paid to the co-operative society. The chargor appealed against the order of sale, on the grounds that: (i) the loan was void for being ultra vires of s 30 of the Co-operative Societies Act 1948 ('the Co-operative Societies Act'), as the actual borrower, ie the company, was not a member of the co-operative society; (ii) the party liable should have been the company as the co-operative society had full knowledge thatt the borrower was only an agent of the company; and (iii) the co-operative society had charged additional interest on the sum in arrears (which comprised principal and capitalized interest) pursuant to cl 3.2 in addition to the interest calculated by means of the prescribed rate of interest pursuant to cl 3.1 payable before such default and continuing to be payable after such default, and this amounted to a penalty which was irrecoverable under s 75 of the Contracts Act 1950 ('the Contracts Act').

Held, ordering that the appeal be dismissed, save that the amount of default interest computed by virtue of cl 3.2 of the annexure to the charge be refunded to the chargor: (1) the argument of knowledge of agency tending to contradict or vary the charge instrument was inadmissible and was without avail to the chargor, which had executed what was commonly known as a 'third party charge'; (2) s 30(1)(a) of the Co-operative Societies Act empowers a registered society to make loans to its members and it does not specify to what purpose such a loan should be utilized. The loan was thus valid and was enforceable against the chargor who provided the security for the loan; (3) pursuant to s 75 of the Contracts Act, if a sum is named in a contract as the amount to be paid in case of breach of such contract, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or the penalty stipulated for; (4) default interest may or may not be a penalty, depending on circumstances. Illustration (d) of s 75 of the Contracts Act gives rise to a clear implication that default interest rate must be exorbitant in order that it be caught by s 75; (5) the provision of default interest in a contract would still be interpreted according to common law as to whether it is liquidated damages or a penalty, subject to provisions of written law in s 75 of the Contracts Act. The 'Explanation' and 'illustration (d)' in s 75 are by no means capable of supplanting in toto the common law on the questions of penalty and liquidated damages; (6) the essence of a penalty is a stipulated payment in terrorem of the party breaching the contract, whereas in liquidated damages, it is a genuine pre-estimate by both parties of the damages for such breach of contract; (7) ordinarily, in provisions for loans of money, if default is made by the borrower, the borrower is made to pay increased interest by means of a higher rate of interest in place of the lower rate of interest prevailing or payable before default. Therefore, arrears arising from default are subject to one single payment of interest still, though at a higher rate after default. Such default interest, if made payable from the date of contract (as distinct from the date of default), always amounts to a penalty; (8) clause 3.2 of the annexure to the charge in question was void and unenforceable by virtue of s 75 of the Contracts Act, and the interest calculated by virtue of cl 3.2 was irrecoverable. The element of 'additional money payment' was involved, in that a default interest of 20% per annum which was chargeable separately and additionally on arrears comprising principal and interest, became payable on default. Further, it was clear from the evidence that the default interest of 20% per annum was paid, side by side with the interest calculated by prescribed rate of interest of 14.5% per annum on the same money lent or owed for the same span of time; (9) the established measure of damages payable by a borrower in such default is damages for loss of use of fund or money, which was the sum of money (comprising principal including capitalized principal and interest not yet capitalized) which was in arrears as to evoke cl 3.2 for charging default interest. However, damages for the loss of use of such money has not been proved in this case. It followed that the court could not make any 'reasonable compensation not exceeding É the penalty stipulated for', according to s 75 of the Contracts Act in this case; (10) in view of the court finding cl 3.2 void and the said failure to prove damages for loss of use of the money in question, the default interest charged by virtue of cl 3.2 would have to be deducted from the amount of repayment to the co-coperative society by the chargor.

Realvest Properties Sdn Bhd v Co-operative Central Bank Ltd (In receivership) [1996] 2 MLJ 461 Federal Court, Kuala Lumpur (Chong Siew Fai CJ (Sabah & Sarawak).

The defendant had charged a piece of land to the plaintiff bank as security for a loan. The plaintiff applied for an order for sale of the lands under the provisions of the National Land Code 1965 ('the Code') following the defendant's failure to comply with a notice of demand in Form 16D of the Code. The defendant opposed the application. The defendant said that the plaintiff knew of the defendant's intention to erect a multi-storey building on the land and to sub-divide the building into parcels and to sell such parcels to end-buyers. The defendant also said that the plaintiff had agreed to provide end-financing to the end-buyers and that, relying upon such agreement, the defendant had engaged a contractor to construct the building. The defendant also said that the plaintiff had undertaken to pay the contractor the sum of $33.88m from the proceeds of the sale of all the parcels. The contractor could not complete the construction of the building as a result of which an arbitration was pending between the defendant and the contractor. It was said that the plaintiff was aware of the situation and was a party to the negotiations between the defendant and the contractor. It was therefore contended that the plaintiff's application was premature and that the plaintiff was estopped from proceeding with the application. The stamp duty paid on the charge was for up to the loan sum of $2m only and since the terms of the charge provided for capitalization of interest on the loan amount, it was contended for the defendant that the stamp duty paid was insufficient. Although it was agreed that the plaintiff may vary the rate of interest, the defendant said that there was a collateral term that the plaintiff should act reasonably and that, despite a protest by the defendant, the plaintiff had arbitrarily and unilaterally imposed unreasonable rates of interest which, in view of the provision regarding capitalization of interest, amounted to compound interest and/or contravened s 75 of the Contracts Act 1950 ('the Act').

Held, granting the plaintiff's application: (1) the application was not premature. On the evidence, the defendant had not relied on the plaintiff's end-financing agreement in carrying out the project. The defendant had moved the plaintiff to enter into the end-financing agreement in order that it could get the plaintiff to give security in respect of the costs of completing the project in the sum of $33.88m to the contractor. The plaintiff had not by words or conduct led or induced the defendant to believe that it, the plaintiff, would not enforce its right under the charge. The existence of an arbitration of the disputes arising from the contract between the defendant and the contractor was of no concern to the plaintiff as it was not privy to the contract; (2) where interest is to be capitalized, the unpaid interest retains the character of interest and there need not be separate and further payment of stamp duty on the instrument concerned in respect of the interest; (3) the capitalization of interest was intended to be part of the contract creating the charge between the parties. Considering that the rate of the capitalization of interest was the same as the prescribed rate of interest, it could not be said to be unconscionable or unreasonable. Section 75 of the Act was not applicable.

Perwira Habib Bank Malaysia Bhd v Pengkalan Enterprise Sdn Bhd [1992] 2 MLJ 35 High Court, Kuala Lumpur (Lim Beng Choon J).

This was a claim for interest on overdue payments. At an earlier hearing ([1971] 2 MLJ 213 and [1972] 1 MLJ 75, FC), the plaintiffs were given leave to sign final judgment for $860,165.17 for work done and the defendants were given unconditional leave to defend the claim in respect of interest for overdue payments. The plaintiffs claimed that interest was 10.8% per annum on monthly rests but the defendants contended that there was no agreement as to the rate of interest payable.

Held: (1) on the evidence there was no contractual rate of interest payable; (2) in the absence of a contractual rate, the plaintiffs were only entitled to a reasonable rate of interest. A reasonable rate is one which the plaintiffs would have enjoyed as income if the money was paid in time. In all the circumstances of this case, a rate of 5% per annum at simple interest was reasonable.

Woon Hoe Kan & Sons Sdn Bhd v Bandar Raya Development Bhd [1973] 1 MLJ 60 High Court, Kuala Lumpur (Harun J).

[Annotation: See the decision of the Federal Court, [1974] 1 MLJ 24.]

This was an appeal against the decision of the High Court ([1973] 1 MLJ 60). The appellants had contracted to carry out certain civil engineering works for the respondents and a sum of $1,190,165.17 was certified as due to them, out of which part payment of $330,000 had been made. There was evidence of the appellants' forbearance to sue for a considerable time in consideration of an agreement to pay interest on overdue payments. The appellants brought an action to recover the amount due and were given leave to sign final judgment for $860,165.17. Leave to defend was granted as to the claim for interest at the rate of 10.8% and the learned trial judge eventually allowed the claim at 5%. The appellants appealed.

Held, allowing the appeal: on the evidence the parties had agreed on the rate of interest and therefore the order should be for payment at the agreed rate, ie 10.8% per annum.

Woon Hoe Kan & Sons Sdn Bhd v Bandar Raya Development Bhd [1974] 1 MLJ 24 Federal Court, Kuala Lumpur (Ong CJ, Ali and Ong Hock Sim FJJ).

Lansi sued the defendant/respondent in his personal capacity and as administrator of the estate of his deceased father, Kaman, for a sum of $460, which the defendant/respondent had acknowledged in writing to be due both to Lansi and Kaman. Before Kaman died he released the defendant/respondent from that part of the debt due to him. Lansi claimed the whole debt of the $460 on the ground that s 45 of the Contract Enactment (Cap 52) rendered any release by one of two joint promisees void and inoperative.

Held: the release by Kaman was valid and Lansi was only entitled to judgment against the defendant/respondent in the sum of $230.

Lansi v Siah [1936] MLJ 235 High Court, Federated Malay States (Aitken J).

P sought an order compelling D, her son, to retransfer to her a house which she had previously transferred to him and also to repay her S$40,000 which she had previously handed over to him. The main issue regarding the house was whether it was transferred to D as a gift or whether it was transferred subject to the condition that it was to be retransferred to her upon the happening of a specified contingency. P's story was that she had bought the house in 1965 partially out of the proceeds of a loan. As the lender required a younger person to be added as owner, P included D and another daughter as co-owners. P got into trouble with the police for carrying out illegal abortions. She was jailed for six months. After her release from prison, P continued to carry on doing illegal abortions. The police commenced investigations and took her identity card. P formed the impression that her house would be confiscated by the police if she was arrested again. Accordingly, she and her daughter transferred the house to D but only on condition that it was to be retransferred to her when she got her identity card back from the police. At about the same time P handed S$40,000 to D for him to keep on her behalf as she could not open an account in her own name since she did not have her identity card. D opened a joint account and kept the passbook. P eventually got back her identity card in 1978 and asked D to retransfer the house to her. He declined to do so. D's story was that the house had been transferred to him as a gift.

Held, allowing P's claim: (1) the court accepted the evidence of P as being the correct version; (2) the defence of laches was rejected. The court was satisfied with P's explanation that for a long time D did not actually refuse to retransfer the property but was successfully stringing P along. Later she became frightened to approach him because he would become difficult whenever she raised the subject and she preferred to enlist the help of others to try and resolve the matter; (3) the court also accepted P's evidence on the transfer of the S$40,000 to D; (4) D was therefore in the position of a trustee for P in respect of the money and the house. These were not constructive or resulting trusts imposed by the law, but were simple express trusts which the plaintiff as settlor created orally for her own benefit, with a provision for revocation. D was accordingly ordered to retransfer the property to P, in default of which the registrar of the Supreme Court would execute the necessary documents. D was also to refund to P the balance of the sum of S$40,000 (less certain payments he had made on her behalf) with interest at 6%.

Lee Nellie v Wong Lai Kay [1990] SLR 314 High Court, Singapore (Yong Pung How J).

On 22 December 1951, the appellant, the proprietor of two adjoining vacant shop lots in Alor Star town, borrowed from the respondents $30,000 intending to build two shophouses thereon and agreed to grant them a lease for a period of 25 years on completion of the buildings (except the first floor of the premises erected on one lot) upon certain terms and conditions. The appellant also agreed 'not to sell or otherwise dispose of the demised premises or any part thereof, without first informing and granting the lenders (respondents) the option to purchase the same at such price and upon such terms and conditions as shall be mutually agreed on'. The agreement which purported to be an actual demise to take effect in future was executed in English, not in Jawi, as required by the Kedah Land Enactment. On 11 March 1952, the appellant charged the land to the Oversea-Chinese Banking Corp for $40,000. The buildings were subsequently completed and on 1 March 1953, the respondents went into occupation. On 10 June1959, the appellant offered to sell the premises to the respondents for $90,000, which offer was refused as being extremely high but they agreed to purchase the premises at a price to be mutually agreed upon and not at the price quoted by her. To prevent the lands being sold by the appellant the respondents lodged a caveat, which was discharged by the court on the ground that the chargee's consent in writing to the lease not having been obtained they had no registrable and, therefore, caveatable interest in the land by reason of s 92 of the Kedah Land Enactment. The appellant then sold the land to a third party and had the charge discharged. The purchaser gave the respondents notice to quit. Further proceedings taken by the respondents for an injunction restraining the appellant from selling the land were of no avail since the land had been sold. In the event, this action was brought by the respondents against the appellant claiming damages. On appeal against the judgment of Barakbah J declaring the appellant liable in damages for breach of contract,

Held, dismissing the appeal: (1) although the agreement was void as a lease for lack of registration, it was valid as an agreement for a lease enforceable in equity; (2) the agreement for lease was a binding contract, failure to comply with which was clearly a breach of contract.

Margaret Chua v Ho Swee Kiew [1961] MLJ 173 Court of Appeal, Penang (Thomson CJ, Hill and Good JJA).

The respondent, as administrator of one DA, deceased, in consideration of a sum of $375, entered into a written agreement to grant to the appellant a lease of land for 50 years when he had obtained the leave of the court under s 83(iii)(a) of the Probate and Administration Enactment. At the time of the agreement, letters of administration had been granted to the respondent but were not extracted by him until six months later. The agreement also provided that the appellant was to have vacant possession and to erect houses etc, or to make use of the land for any other purpose. After the agreement had been made, the appellant had plans drawn up by an architect at the cost of $1,800 for building on the land and also claimed to have expended $3,000 in making preparations on the land for building on it. On the respondent refusing to carry out the terms of the agreement, the appellant claimed $5,191.95 damages. The trial judge assessed his damages at $375. On appeal,

Held: (1) the question of damages is governed by s 74(1) of the Contracts (Malay States) Ordinance 1950; (2) the rule in Bain v Fothergill (1874) LR 7 HL 158 has no application in the Malay states;the parties contemplated that the land was to be used for building and therefore the damages suffered by the appellant were damages which the parties had known when they made the contract to have been likely to arise from any breach of it.

Lee Hin & Co v Mohamed bin Abubakar [1958] MLJ 25 Court of Appeal, Johore Bahru (Thomson CJ (FM).

Teng Aik Sdn Bhd v Gama Holdings (M) Sdn Bhd Civil Suit No 821 of 1985 High Court, Seremban (Faiza Tamby Chik J).

See CONTRACT, Vol 3, para 2232.

By an agreement in writing dated 14 June 1985 ('the agreement'), the defendants leased to the plaintiff premises ('the premises') for a term of three years. The plaintiff's claims are for, inter alia, a declaration that the agreement was duly rescinded by the plaintiff and/or that the agreement was frustrated. The defendants have counterclaimed for loss and damages suffered by them as a result of the plaintiff's breaches of the agreement. Before the agreement was executed, the premises had a public entertainment licence. On taking possession of the premises, the plaintiff's application for a public entertainment licence to the Public Entertainments Licensing Unit was not approved. The plaintiff contends that he is entitled to a rescission of the agreement as the defendants had not been able to fulfil their contractual obligations to transfer their public entertainment licence because they never had a valid licence at the material time. The defendants deny, as contended by the plaintiffs, that it was a condition precedent of the plaintiff's lease of the premises from the defendants that the defendants undertook to effect a transfer of the public entertainment licence granted to the premises permitting the performance of live music, singing and dancing on the premises.

Held, dismissing the plaintiff's claim and allowing the defendants' counterclaim: (1) whether the premises' public entertainment licence was valid or invalid at the time the plaintiff made his application for a public entertainment licence was irrelevant to the failure of the plaintiff to obtain a public entertainment licence. In any case, the plaintiff had operated a night club before and must know that a public entertainment licence was on a monthly basis and that at the time he executed the agreement the defendants had already ceased business and that the premises' licence had become invalid; (2) on the evidence, no undertaking was given by the defendants to apply to the relevant authority for the grant of a public entertainment licence to perform live music on the premises in order that the same might be transferred to the plaintiff; (3) it is conceded that the operation of a fully-licensed restaurant and lounge or bar did not require a public entertainment licence. The premises could, therefore, still be commercially operated by the plaintiff, albeit by operating the premises as a fully-licensed restaurant and lounge or bar. There was no condition precedent that the lease was only to take effect when the plaintiff obtained a public entertainment licence.

Goh Chin Kiat t/a Ginza Deluxe Nightclub v Dorothy Ong & Anor Suit No 12362 of 1985 High Court, Singapore (FA Chua J).

By a letter dated 7 July 1983, the appellant purported to enter into a lease agreement with the respondent. The letter stated that a lease would be drawn up 'with the usual terms that apply in Singapore'. It also set out that the 'lease will be for three years commencing 1 December 1983 with an option for renewal at the end of the period, details of which will be incorporated in the lease'. In regard to subletting, the letter stated that 'subletting will be permitted, details of which will be in the lease'. After delivery of this letter, the draft lease was sent by the respondent's solicitors to the appellant's solicitors, but the respondent did not sign it. On 7 November 1983, there was a discussion between the parties when the appellant raised the issue of the premises and of a 'diplomatic clause'. There followed an inconclusive exchange of correspondence between the parties. A dispute followed and the respondent sued the appellant in the High Court. The High Court ruled in favour of the respondent and the appellant appealed against this decision.

Held, (per Warren LH Khoo J dissentient): (1) it is clear law that even if the parties have reached agreement on the essential terms of a contract, if some other material terms have not been agreed, there is no contract; (2) if the documents or letter relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract was a condition or a term of the bargain or whether it was a mere expression of the desire of the parties as to the manner in which the transaction already agreed to would in fact go through; (3) the letter of 7 July 1983 was not intended to deal in any conclusive way with the renewal of the lease or the question of subletting, but was intended that the formal lease would do so. In so far as the two matters were material at the date of the letter, there was no concluded contract at all between the parties, even though they had reached agreement on the other terms of the intended lease; (4) the parties also conducted themselves in relation to each other in a manner consistent with the position that they had not concluded a contract by the letter of 7 July. In none of the letters written and discussions during the period following 7 July did either party refer to the letter, let alone any binding effect of that letter. The respondent's letter of 28 November was an affirmation of his position that unless a formal lease was signed, there was no legally binding contract. This position was further affirmed by his letter of 14 December.

Klerk-Elias Liza v KT Chan Clinic Pte Ltd [1993] 2 SLR 417 Court of Appeal, Singapore (LP Thean, Warren LH Khoo and Karthigesu JJ).

3 [2620] CONTRACT Lease – Misrepresentation alleged – Exclusion clause – Whether appellant entitled to rescind – Whether appellants affirmed the lease – Chan Chor Tng & Ors v Housing and Urban Development Co (Pte) Ltd [1981] 2 MLJ 298 (refd) Brown v Raphael [1958] Ch 636 (refd) Smith v Land and House Property Corp (1884) 24 Ch D 7 (refd) Clough v London and North Western Railway Co (1878) LR 7 Exch 26 (refd)

The present actions and appeal arise out of a lease which the respondent granted to the appellants in respect of premises at the development known as the Amara. The respondents commenced the present action against the appellants claiming, inter alia, S$45,400 for arrears of rent and damages for premature termination of the lease. In their defence, the appellants alleged that as a result of certain oral representations made by the respondents, they were induced into signing the agreement for a lease. The appellants also counterclaimed S$25,000 being the cost of fitting out works carried out by them on the premises as special damages which they suffered by the reason of the fraudulent representation made by the respondents which induced the appellants to execute the lease. The respondents denied that they made the representation alleged and also relied on cl 5(m) of the lease to say that the appellants were estopped from alleging that the respondents made any promise, representation, warranty or undertaking as an inducement to the appellants to become the respondents' tenants. The issues before the court were: (i) whether the statements and pictures contained in the brochure issued by the respondents' marketing agent or the oral representations by the respondents are representations; (ii) whether the ambit of the exclusion clause in cl 5(m) of the lease is sufficiently wide to cover the representations in the brochure or the oral representations.; (iii) if there were misrepresentations by the respondents, whether the appellants can unilaterally terminate the lease and then set up the misrepresentations as a defence to the respondents' action for the recovery of arrears of rent and sue by way of a counterclaim for damages. It was contended by the respondents that the appellants had affirmed the lease and they were not entitled to set up the misrepresentation as a defence.

Held, dismissing the appeal: (1) it is clear that statements of opinions and of intention in certain circumstances can be regarded as statements of fact. The statement of intention in the brochure, namely, that the respondents or their marketing agent will choose reputable anchor tenants and restauranteurs to take up space at the shopping complex should be regarded as a statement of fact in view of the circumstances of this case; (2) the effect of cl 5(m) is not to exclude or limit liability but to exclude any evidence, either oral or written, being given in these proceedings of any promise, representation, warranty or undertaking given by or on behalf of the respondents, inter alia, of other businesses to be carried on in the complex. In any event, no objection was taken here and in the court below as to the admissibility of the brochure or to the evidence of the witness, DW1, as to the oral representation; (3) having considered the evidence, the court is of the view that the appellants had affirmed the lease. As they had affirmed the lease, they are clearly not entitled to their counterclaim for special damages.

Song Ching Pte Ltd v Amara Hotel Properties Pte Ltd Civil Appeal No 80 of 1991 High Court, Singapore (Goh Phai Cheng JC).

The first defendant is the registered proprietor of land within the Butterworth Port and by two leases, the first defendant leased to Kumpulan Fima Berhad the property known as Butterworth Deepwater Wharves for the purpose, inter alia, of erecting and thereafter repairing and maintaining a project. By two subleases, Kumpulan Fima Berhad subleased the said property to the plaintiffs for the purpose of implementing the said project. Thereafter, a dispute arose between the plaintiffs and the first defendant. The first defendant appointed the second defendant as an arbitrator, as the leases and subleases provided that disputes should be settled through arbitration. The first defendant asked the plaintiffs to appoint their arbitrator in accordance with the agreement. The plaintiffs, however, did not appoint any arbitrator. They contended that there was no privity of contract between the first defendant and the plaintiffs and therefore there was no arbitration agreement between them. The plaintiffs applied to set aside the purported appointment of the second defendant to act as an arbitrator.

Held: on the face of the documents as well as the form there was no privity of contract between the first defendant and the plaintiffs; the first defendant cannot therefore enforce the covenant of the sublease relating to the appointment of arbitrators.

Fima Palmbulk Services Sdn Bhd v Suruhanjaya Pelabuhan Pulau Pinang & Anor [1988] 1 MLJ 269 High Court, Penang (Mohamed Dzaiddin J).

In the absence of any agreement to the contrary, all rates and taxes payable in respect of property leased fall upon the lessee. The lessor is entitled to recover from the lessee any sums paid by the former for rates and taxes. Under the Limitation Enactment a suit by the lessor for the recovery of such rates and taxes is founded upon a breach of contract in writing and is covered by art 95 of the Second Schedule to the enactment.

Khoo Ee Liang v Henry Waugh & Co Ltd [1934] MLJ 40 High Court, Federated Malay States (McFall J).

In this case, the respondent was a housing developer and he had agreed to sell a terrace house to the appellant on payment of instalments and interest. The parties signed a sale agreement and a memorandum of lease of the land. A dispute arose between the parties as the respondent asked the appellant to execute a fresh memorandum of lease. The respondent not only refused to comply with the respondent's request but also refused to pay the land rent under the existing memorandum of lease. However, the respondent continued to pay the instalments for the house. The respondent commenced a civil action in the magistrate's court against the respondent to enforce the forfeiture provision of the sale agreement, ie to recover possession of the house, the instalments and the various payments under the memorandum of lease. The respondent on the other hand took out a writ against the appellant in the High Court claiming a declaration that the sale agreement and the memorandum of lease were null and void because the execution was obtained by fraud or coercion and also because the terms were harsh and unconscionable. The case in the magistrate court was transferred to the High Court and both suits were consolidated and tried together. Mohamed Azmi J gave judgment for the respondent and gave him possession of the house and various sums due under the agreement. The appellant appealed. At the hearing of the appeal, counsel for the appellant applied for an amendment of the statement of claim to the effect that no forfeiture of the land could in law be enforced by the defendant/respondent without satisfying the equities in the plaintiff/appellant's favour.

Held: (1) the primary purpose of the forfeiture clause in this case was to secure the payment of the instalments and interest due in the purchase of the house. On the basis of the amount paid by him the appellant should be entitled to relief, because otherwise the forfeiture would become a penalty as the appellant by almost fully paying for the house had acquired an equity of restitution; (2) in this case the appellant had not refused to pay the instalments for the house altogether and on this ground, that is, the acceptance of payments by the respondent after the suit started, the relief asked for could be granted; (3) in view of the conduct of the appellant in this case, the court cannot fully acquit him of blame and as such it was proper that he should pay the costs of the proceedings both in the High Court and the Federal Court.

Chen Chow Lek v Tan Yew Lai [1983] 1 MLJ 170 Federal Court, Kuala Lumpur (Wan Suleiman Ag CJ, Salleh Abas and Abdul Hamid FJJ).

In this case, the first plaintiff company owned a sawmill and the second plaintiff was the chairman of the company. The first plaintiff company required additional machinery to expand its operations and placed four orders with the first defendant for the supply of the machinery. Payment was stated in the orders to be by leasing to be arranged with a credit corporation. The leasing arrangements with the credit corporation fell through and the first plaintiff company through the second plaintiff then arranged for leasing facilities with the second defendant. It was agreed in effect that the first defendant would sell the machinery to the second defendant which would in turn enter into a five year lease of the machinery with the first plaintiff company subject to the first defendant guaranteeing all payments due to the second defendant under the leasing arrangement to be entered into by the first plaintiff company and indemnifying the second defendant against all loss, damage, costs and expenses incurred or suffered and purchasing the machinery on the termination of the lease. The first plaintiff company defaulted in its dues for the lease rentals after making two payments and eventually the second defendant terminated the lease agreement and the first defendant acting as agents for the second defendant repossessed the machinery. The first defendant pursuant to the agreements purchased the machinery and indemnified the second defendant against all loss, damages and expenses incurred in the sum of $527,039.37. The plaintiffs sought a declaration that (a) the documents relating to the lease are bills of sale and therefore void under the Bills of Sale Ordinance 1950 and (b) the lease documents were a sham and invalid and of no effect. At the trial the plaintiffs indicated that they would not proceed with the claim based on the Bills of Sale Ordinance 1950. The first defendant counterclaimed for the sum of $415,572.10, that is $527,039.37 which it paid to the second defendant plus $165,660.73 for loss and expenses incurred, less the sum of $277,128 realised from the sale of the machinery.

Held: (1) there is no substance whatever in the contention of the plaintiffs that the first plaintiff was at any time the owner of the machinery in question or that the arrangement entered into to provide finance to the first plaintiff was other than what the documents show it to be, namely, the provision of lease financing to the first plaintiff by the second defendant by way of a lease of the machinery by the latter which had purchased it from the first defendant. The claim of the plaintiffs to the effect that the documents were a sham because they were a device to cover a transaction whereby goods were given as security for a loan must accordingly fail; (2) in regard to the counterclaim, the second defendant and in turn the first defendant were entitled to recoupment and to recover all loss naturally arising as a result of the breach of contract on the part of the first plaintiff. The first defendant was also entitled to recover for any damages or loss sustained by it beyond what it had to pay to the second defendant under the guarantee.

Tan Chin Kim Sawmill and Factory Sdn Bhd & Anor v Lindeteves-Jacoberg (M) Sdn Bhd & Anor [1980] 2 MLJ 204 High Court, Ipoh (Abdoolcader J).

In this case, the first plaintiff company (the appellant in the appeal) owned a sawmill and the second plaintiff was the chairman of the company. The first plaintiff company required additional machinery to expand its operations and placed four orders with the first defendant (the respondent in the appeal) for the supply of the machinery. Payment was stated in the orders to be by leasing to be arranged with a credit corporation. The leasing arrangements with the credit corporation fell through and the first plaintiff company through the second plaintiff then arranged for leasing facilities with the second defendant (MIMB). It was agreed in effect that the first defendant would sell the machinery to the second defendant which would in turn enter into a five year lease of the machinery with the first plaintiff company subject to the first defendant guaranteeing all payments due to the second defendant under the leasing arrangement to be entered into by the first plaintiff company and indemnifying the second defendant against all loss, damage, costs and expenses incurred or suffered and purchasing the machinery on the termination of the lease. The first plaintiff company defaulted in its dues for the lease rentals after making two payments and eventually the second defendant terminated the lease agreement and the first defendant acting as agents for the second defendant repossessed the machinery. The first defendant pursuant to the agreements purchased the machinery and indemnified the second defendant against all loss, damages and expenses incurred in the sum of $527,039.37. The plaintiffs sought a declaration that (a) the documents relating to the lease are bills of sale and therefore void under the Bills of Sale Ordinance 1950 and (b) the lease documents were a sham and invalid and of no effect. At the trial the plaintiffs indicated that they would not proceed with the claim based on the Bills of Sale Ordinance 1950. The first defendant counterclaimed for the sum of $415,572.10 that is $527,039.37 which it paid to the second defendant plus $165,660.73 for loss and expenses incurred, less the sum of $277,128 realised from the sale of the machinery. The learned trial judge dismissed the plaintiffs/appellant's suit but upheld the counterclaim of the first defendant/respondent in the sum of $403,048.75. The appellant appealed against the decision of the learned judge in respect of the counterclaim only. It was argued on behalf of the appellant that the respondent should not have paid the amount of $527,039.27 to the Malaysian International Merchant Bankers Bhd (MIMB) (the second defendant) as it was under no obligation to do so on the ground that firstly upon termination of the lease agreement for non-payment of the rentals due, only the rental amounts due up to the date of the termination were payable and no more and that secondly the guarantee undertaking given by the respondent to MIMB did not entitle the latter to recover damages and losses beyond the rentals which had fallen in arrears and that thirdly MIMB should have acted under its sale agreement by asking the respondent to purchase back the equipment at the agreed price of $45,442.80. It was also argued that the appellant were under no obligation to pay the sum of $165,660.73 which was claimed as the respondent's own losses, costs and expenses.

Held: (1) it was clear in this case that the intention of the parties was that MIMB was to be compensated not only for the sums of money which would become due and payable by the appellant but also for all losses, damages, costs and expenses suffered by MIMB; (2) it was also clear that the three parties intended that MIMB should have recourse against the respondent not only as regards non-payment of rentals by the appellant but also as regards all losses, damages, costs and other expenses which MIMB had incurred or suffered as a result of the termination of the leasing. The undertaking given by the respondent consisted of (a) a guarantee for the payment of rentals and (b) an indemnity against all losses, damages, costs and expenses; (3) disposal of the equipment was a matter only between MIMB and the respondent, the appellant as a hirer having no option to acquire the equipment. The appellant could not therefore complain if MIMB upon the termination of the lease agreement elected not to act upon the sale agreement; (4) if the sale agreement, the lease agreement and the guarantee and indemnity are read together as one instrument there is nothing that would justify the conclusion that MIMB could recover only the agreed price of $45,422.80; (5) the learned judge was therefore correct in holding that the respondent was entitled to the recoupment of the amount of $527,039.37 representing the losses, damages, costs and expenses suffered or incurred by MIMB, which the respondent in turn had paid MIMB; (6) the losses claimed by the respondent flowed from the default of the appellant in paying the rentals, which eventually led to the termination of the lease agreement. The respondent was entitled to recover these losses from the appellant under s 74 of the Contracts Act 1950 (Act 136).

Tan Chin Kim Sawmill and Factory Sdn Bhd v Lindeteves-Jacoberg (M) Sdn Bhd [1982] 1 MLJ 18 Federal Court, Ipoh (Raja Azlan Shah CJ, Wan Suleiman and Salleh Abas FJJ).

In this case, at the request of the respondents, the appellant purchased a photostat copier machine and leased it to them for a term of 36 months for the total rental of $13,623.84 payable in the sum of $378.44 per month. At the expiration or sooner determination of the lease the appellant as the owner was entitled to take back the machine and dispose of it. Two days after installation in the respondents' premises the machine broke down. It became defective thereafter in spite of constant servicing, repairs and replacement of parts by the supplier at the request of the respondents and with the knowledge of the appellant. As a result, the respondents' business was adversely affected, resulting in losses. The respondents stopped paying the monthly instalments. The appellant exercised its right under the agreement and took custody of the machine. The appellant brought an action and claimed the total rental as specified in the agreement less that already paid. The President of the Sessions Court gave judgment for two months' arrears of rental and the appeal of the appellant was dismissed in the High Court. The appellant appealed to the Federal Court.

Held, dismissing the appeal: (1) in the circumstances, there was more than sufficient ground for the appellant to have taken action against the suppliers for damages and the respondents were not obliged to continue paying the total specified rental; (2) the appellant had also committed a breach of the agreement in failing to dispose of the machine by means of a bona fide sale according to the stipulation therein.

Credit Corp (Malaysia) Bhd v KM Basheer Ahamed & Anor [1985] 1 MLJ 208 Federal Court, Kuala Lumpur (Abdul Hamid CJ (Malaya).

In this case, the respondents had leased certain printing equipment to the appellants. The appellants having defaulted in payment of the monthly rentals, the respondents brought an action to recover possession of the equipment and to recover the arrears of rent. The respondents also made an ex parte application for and obtained a mandatory injunction to enable the respondents to recover possession of the equipment. The appellants then applied to dissolve and set aside the mandatory injunction. This was refused (see [1986] 1 MLJ 256) and the appellants appealed.

Held: (1) the court has a discretion to grant an interlocutory mandatory injunction before trial but the discretion must be exercised and an injunction granted only in exceptional and extremely rare cases. The case must be unusually strong and clear in that the court must feel assured that a similar injunction would probably be granted at the trial on the ground that it would be just and equitable that the plaintiffs' interest be protected by the immediate issue of an injunction, otherwise irreparable injury and inconvenience would result. Where the case is one of urgency an application can be made ex parte; (2) the learned judge on the facts and circumstances of the case rightly concluded that this was an exceptional case where the court was justified in granting a mandatory injunction on an ex parte application before the trial; (3) the learned judge rightly concluded from the documents and the affidavit evidence that the agreement in this case was a lease agreement and not a loan agreement; (4) there was a clear breach of the lease agreement in this case by the appellants and the respondents therefore became entitled to immediate possession of the equipment. The learned judge was confident that the court would grant a mandatory injunction at the trial of the suit and rightly held that if the injunction had not been granted earlier the respondents would suffer irreparable damage and greater hardship. The balance of convenience was very much in favour of the respondents and the application was one of urgency. There was no unreasonable delay on the part of the respondents in filing the writ and the ex parte application for injunction; (5) this was a case where the learned judge was more than justified in granting a mandatory injunction on an ex parte application.

Tinta Press Sdn Bhd v Bank Islam Malaysia Bhd [1987] 2 MLJ 192 Supreme Court, Kuala Lumpur (Salleh Abas LP, Syed Agil Barakbah and Wan Hamzah SCJJ).

In this case the plaintiffs had leased certain printing equipment to the first defendant. The first defendant having defaulted in payment of the lease rent, the plaintiffs brought an action to recover possession of the equipment and to recover the arrears of rent. The plaintiffs also made an ex parte application for a mandatory injunction to enable the plaintiffs to recover possession of the equipment. The first defendant applied to dissolve and set aside the mandatory injunction.

Held: (1) the court has jurisdiction to grant a mandatory injunction on an ex parte application in urgent and exceptional cases; (2) it is clear that the relationship between the plaintiff bank and the first defendant in this case was that of lessor and lessee. There had been a clear breach of the agreement by the first defendant and the plaintiff bank as the owner of the equipment was entitled to recover possession of the equipment; (3) the plaintiff bank had an unusually strong and clear case against the first defendant and if the injunction had not been granted earlier, the plaintiff bank would suffer grave damage and greater hardship. The balance of convenience was very much in favour of the plaintiffs; (4) this was clearly an exceptional case where the court was justified in granting a mandatory injunction on an ex parte application; (5) considering all the circumstances of the case, including the rights of the parties, the balance of convenience and the urgency of the matter, this was a proper and appropriate case to grant the mandatory injunction.

Bank Islam Malaysia Bhd v Tinta Press Sdn Bhd & Ors [1986] 1 MLJ 256 High Court, Kuala Lumpur (Zakaria Yatim J).

Tan Chin Kim Sawmill and Factory Sdn Bhd v Lindeteves-Jacoberg (M) Sdn Bhd [1982] 1 MLJ 18 Federal Court, Ipoh (Raja Azlan Shah CJ, Wan Suleiman and Salleh Abas FJJ).

See CONTRACT, Vol 3, para 2528.

The plaintiff claimed upon a promise to pay contained in two agreements given by the defendant in exchange for a promissory note which was signed by the defendant when he was not of full age. The defendant submitted that the agreements were void on his version of the case, by reason of s 7(1) of the Civil Law Ordinance 1909 and in the alternative, that the claim was based on an unconscionable bargain. His further ground of defence was that the Infants' Relief Act 1874 was to be regarded as part of the mercantile law of England and was, therefore, imported by s 6 of the Civil Law Ordinance, the effect of the Act being to render the defendant's contract absolutely void.

Held: the Infants' Relief Act 1874 applies and the plaintiff cannot enforce the promissory note.

Ngo Bee Chan v Chia Teck Kim [1912] 2 MC 25 High Court, Straits Settlements (Ebden J).

There being no Carriers Enactment in the Federated Malay States, a contract for the carriage of goods is governed by the Contract Enactment 1899 and common carriers are only liable for negligence.

Ramjida v Abdul Kadir [1915] 2 FMSLR 158 High Court, Federated Malay States (Edmonds JC).

In October 1987, the defendant issued a letter of intent in Tokyo to Lee Kek Hong ('Lee'). The parties agreed in the letter of intent that Lee would establish a new company in Malaysia which would, after its incorporation, be appointed as the sole agent for the defendant's goods in Malaysia. The plaintiff company was then incorporated in Malaysia pursuant to the letter of intent and it distributed the defendant's goods. By a letter dated 18 May 1988 ('the letter'), the defendant confirmed the final arrangement of the agreement between the parties and requested the plaintiff to execute the agreement and return it immediately ('the agreement'). The plaintiff executed the agreement and sent it back to the defendant in Japan on 15 June 1988. On 8 August 1988 the defendant sent a telex to Lee confirming all the terms of the agreement ('the telex'). The defendant did not however execute the agreement but decided to terminate its relationship with the plaintiff. The plaintiff subsequently claimed in Malaysia from the defendant for damages for breach of the agreement and obtained leave from the court to serve its writ on the defendant in Japan. The defendant applied to the High Court to set aside leave for the plaintiff to serve its writ on the defendant outside the jurisdiction of the court. The defendant contended that the letter of intent was merely an agreement to make an agreement and was therefore not a concluded contract between the parties.

Held, dismissing the application: (1) once the parties have reached substantial agreement, it is not fatal that some points remain to be settled by further negotiations. Reasonable terms will be imported into the agreement by the court to make the agreement effective; (2) even if the letter of intent was not of itself a contract, a completed contract did come into existence in Malaysia on 15 June 1988 when the plaintiff accepted the defendant's offer by executing and returning the agreement. The plaintiff could also argue that the telex confirmed that the defendant's signature to the agreement was a mere formality; (3) the defendant's repudiation of the contract emanated in Japan but that repudiation had rendered it impossible for the performance of the contract in Malaysia by the plaintiff. The plaintiff could thus bring its claim within O 11 r 1(8)(g) and (i) of the Rules of the High Court 1980; (4) on the facts in this case, it was just to allow the plaintiff to sue the defendant in Malaysia; (5) in keeping pace with commercial realities, O 11 of the 1980 Rules should be liberally construed when the need arises.

SMIM (Malaysia) Sdn Bhd v Sanyo Murako International Co Ltd Originating Summons No 24-426-90 High Court, Shah Alam (Shankar J).

The defendant had appointed the plaintiff to construct a chicken farm project in Labuan for a fee of 15% of the total cost of the project which was budgeted at RM37m. The parties executed a contract dated 16 November 1983 but negotiations continued and resulted in the execution of another contract in May 1984 ('the 1984 contract'). Disputes later arose and the progress of the construction works was not satisfactory. An independent quantity surveyor was appointed to resolve the disputes, followed by three meetings. At the end of the second meeting, a document called the 'Final summary' was initialled by the plaintiff's representative and the quantity surveyor, containing an increased contract sum which the plaintiff contended was a concluded amount, but this was disputed by the defendant. Subsequently, a letter of intent ('the letter of intent') was sent by the defendant to the plaintiff confirming the decisions reached at the meetings. On 12 June 1985, notices to speed up the work and to remove and rectify various defective works were given by the defendant to the plaintiff. The defendant subsequently terminated the contract through a letter dated 4 July 1985 ('the notice of termination'). The plaintiff alleged wrongful termination and claimed damages of: (a) RM13,818,693 under the letter of intent which it alleged was a concluded new contract but which the defendant denied; or (b) alternatively, for RM7,533,658.74 under the 1984 contract which the defendant maintained was still in force at the time the notice of termination was given. The defendant counterclaimed for costs of rectification and completion of defective works. The main issues were: (1) whether the letter of intent was a concluded contract; and (2) if the contract between the parties at the time of termination was not contained in the letter of intent but was contained in the May 1984 contract, whether the plaintiff was in breach of its obligations.

Held, dismissing the plaintiff's claim and alloing the defendant's counterclaim: (1) at the time the letter of intent was issued, negotiations seemed to be still going on and there were still some matters which required further agreement. There could only be a new contract after the parties had agreed on all the matters which had to be agreed upon and a finalized contract sum had been reached; (2) the letter of intent was not a concluded contract and at all material times, the parties had considered themselves to be still bound by the 1984 contract; (3) in deciding whether the termination of the 1984 contract was wrongful, the most important consideration was whether there was delay and other breaches as claimed by the defendant and whether in all the relevant surrounding circumstances including the extent of such breaches, if any, the defendant was justified in determining the contract; (4) it was clear that some of the works were defective in that the plaintiff had not taken the necessary care to ensure that they were of the required standard or quality and in accordance with specifications. It was also clear that there had been stoppages of work and delays in the performance of the contract. The plaintiff had also not complied with the notices of 12 June 1985 issued by the defendant. In the result, the determination of the contract by the defendant was justified; (5) the court found that the defendant had incurred costs to rectify the defective works and to complete the projects. The counterclaim of the defendant for RM3,209,917.20 with interest at 8%pa from the date of filing and costs was thus allowed; (6) (obiter) with respect to the plaintiff's claim for damages, on the evidence, the profit margin of 15% of the project cost was very much in the minds of both parties. In all the circumstances, if the claim was to be allowed, a profit margin of 10% would be reasonable.

Kokomewah Sdn Bhd v Desa Hatchery Sdn Bhd [1995] 1 MLJ 214 High Court, Kota Kinabalu (Charles Ho J).

In this case, a consent judgment had been entered against the respondent and two others. A bankruptcy notice was caused to issue by the respondent. Subsequently, the appellant managed to prevail on the bank to withdraw the bankruptcy proceeding against him upon the appellant delivering to the bank a letter of undertaking. The respondent bank later caused another bankruptcy notice to issue in another proceeding purporting to rely on the failure to comply with the undertaking. The learned trial judge ruled that the respondent bank was not precluded from recommencing bankruptcy proceedings against the appellant. The appellant appealed.

Held: on the facts disclosed and on the language of the undertaking there had been no breach of the undertaking as a whole. Although there had been a breach in the repayment scheme, the remedy provided by the undertaking was to effect the transfer of the shares deposited by the appellant with the respondent to the respondent and this undertaking was complied with by the appellant. There was no provision in the undertaking which stated that the respondent bank was at liberty to revert to bankruptcy proceedings despite the undertaking.

Michael C Solle v United Malayan Banking Corp [1986] 1 MLJ 45 Federal Court, Kuala Lumpur (Salleh Abas CJ (Malaya).

The respondents had been engaged to make a valuation of land for the appellant in respect of Po Hing Estate and had been paid by the appellant with a cheque issued by Po Hing Enterprise. The respondents were also asked by the appellant to do a valuation of a proposed industrial site at Sandakan. A copy of the report was at the request of the appellant sent to the Executive Vice-President of a company in New York. The respondents claimed payment but the appellant said that he was merely acting as the authorized overseas agent for the company in New York. At the trial, the only evidence was given on behalf of the respondents and the appellant alleged that the respondents had not proved their case on the balance of probabilities. The appellant relied on the claim that he was the authorized overseas agent for the company in New York. The learned trial judge gave judgment for the respondents. The appellant appealed.

Held, dismissing the appeal: as in this case the learned judge was satisfied that the respondents had proved their case, he was bound to enter judgment against the appellant. The learned judge was right to hold the appellant personally liable in the light of the evidence.

Ching Yuen Tung v Bep Aketik [1978] 1 MLJ 211 Federal Court, Kota Kinabalu (Lee Hun Hoe CJ (Borneo).

In this case, the appellants sued the respondents for the balance of the price of goods sold and delivered to the respondents. In their defence, the respondents denied liability and sought to show that the goods were ordered for a third party. The appellants applied for leave to sign final judgment but their application was dismissed by the senior assistant registrar and on appeal against the registrar's decision, the learned judge dismissed the appellants' appeal. The appellants then appealed to the Federal Court.

Held, allowing the appeal: (1) it was quite clear from the sales invoice and the delivery note that the goods were ordered by the respondents; (2) the respondents should not be allowed to bring oral evidence to contradict the terms of the contract and to show that the goods were ordered for a third party; (3) in this case, the sales invoice and the delivery note showed that even if the respondents were agents for a third party, Syahazam, in respect of the sale and delivery of the goods they were contracting in such form as to make themselves personally responsible.

Pernas Trading Sdn Bhd v Persatuan Peladang Bakti Melaka [1979] 2 MLJ 124 Federal Court, Johore Bahru (Raja Azlan Shah Ag CJ (Malaya).

The appellant sought an injunction to restrain the first respondent from removing various types of railway sleepers to enable the appellant to ship them to Pakistan. It was alleged that the appellant had entered into agreements with a company in Pakistan as agents for the second and third respondents for the purchase of the sleepers and that the second and third respondents had contracted to purchase the sleepers from the first respondent for shipment to Pakistan.

Held: (1) in this case, on the facts there was nothing in the acts of the first respondent which would make it owe a duty to the appellant or give the appellant a legal right against the first respondent. The acts of the first respondent were all towards the second and third respondents; (2) the learned trial judge was correct in refusing the injunction as the appellant had not shown that it had a legal right against the first respondent.

Government of Pakistan v Seng Peng Sawmills Sdn Bhd & Ors [1979] 1 MLJ 219 Federal Court, Kuala Lumpur (Raja Azlan Shah, Wan Suleiman and Syed Othman FJJ).

P applied to set aside a bankruptcy notice obtained by D against him. The bankruptcy notice was based on a judgment obtained by D against P in default of appearance. P contended, inter alia, that D was not entitled to enforce its claim against him but should proceed against H Sdn Bhd, the third party, who had agreed to pay the judgment debt to D at the rate of M$2,000 per month pursuant to a letter written by P to D. The learned judge dismissed P's application and made receiving and adjudication orders against P pursuant to the bankruptcy petition. P appealed to the Supreme Court against the decision of the learned judge.

Held, allowing the appeal: (1) in the instant case, D conceded that it had in fact received a total of M$12,000 from H Sdn Bhd pursuant to the agreement contained in P's letter to D. Their Lordships were of the view that by accepting these payments, D had impliedly accepted the arrangement for the payments to be made by H Sdn Bhd to it in terms of the letter written by P to D. Accordingly, by virtue of s 42 of the Contracts Act 1950, D was not entitled to enforce its claim against P which would mean that it would not be in a position to execute its judgment debt against P, including the bringing of bankruptcy proceedings; (2) as the consequential execution by way of bankruptcy notice and bankruptcy petition was bad and irregular, their Lordships, accordingly, allowed P's appeal and set aside the bankruptcy notice and the bankruptcy petition.

Chinn Swee Onn v Puchong Realty Sdn Bhd [1990] 1 MLJ 108 Supreme Court, Malaysia (Mohamed Azmi, Harun Hashim and Ajaib Singh SCJJ).

P had earlier brought a suit against D which was founded on a sale and purchase agreement relating to the sale of D1's property to P. P claimed, inter alia, for specific performance of the agreement which was executed by P with D2 acting as the attorney of D1 pursuant to a power of attorney. Subsequently, judgment in default of appearance was entered against D2. Consequent upon this judgment and relying on the doctrine of election, D1 applied to have the statement of claim against him set aside. The learned judge allowed D1's application on the ground that P's cause of action against D1 had merged in the default judgment obtained by P against D2. P appealed to the Supreme Court against the decision of the learned judge.

Held, allowing the appeal: (1) the material issue to be determined in the instant case was whether the liability of D was several or joint and not whether the remedies pleaded by P were in the alternative; (2) several liability arises when two or more persons make separate promises to another giving rise to more than one obligation, whether by the same instrument or by different instruments. Their promises are cumulative and discharge of liability by one does not discharge the other. Joint liability arises when two or more persons jointly promise to do same thing. There is only one obligation and performance by one discharges the others. The principle of election only applies where several defendants are sued in the alternative in a situation in which they jointly promised to do the same thing; (3) in the instant case, D1 in his defence denied that D2 was his lawful attorney or that he had authorized D2 to sell the property. D1 contended that D2 was in fact a purchaser and P a sub-purchaser of the property. Because of the apparent dispute between D1 and D2, both the sale agreement and the power of attorney would necessarily create cumulative promises to P which each of them would be legally bound to perform under the two instruments depending on whether the transaction was a sub-sale or otherwise. The fact that the remedies prayed for by P were in the alternative was immaterial. In the circumstances of the instant case, the doctrine of election did not apply; (4) order 13 r 4(1) of the Rules of the High Court 1980 did not bar P from further proceeding against D1 despite the judgment in default of appearance entered against D2. The words 'if any' in the order referred to 'defendants' and not 'action'. In any event, P's claim against D1 included a prayer for an order to execute a memorandum of transfer of the property whereas the default judgment against D2 did not include such an order but orders for possession of the property and damages only. Their Lordships, accordingly, held that the principle of election did not apply in the instant case.

Choo Ah Kow v Yeow Yew Thiam [1989] 1 MLJ 187 Supreme Court, Malaysia (Wan Suleiman, Mohd Azmi and Wan Hamzah SCJJ).

In this case, the appellants had obtained judgment in default against the respondent in their claim for $1,500,000 due on an overdraft granted to the respondent. The judgment was set aside in the High Court on the ground that the regularity of the judgment was questionable (a) as the proceedings had not been sufficiently brought to the attention of the respondent and (b) the respondent had a good defence on the merits. The writ had been served by posting at the business address of the respondent. The respondent alleged that he was the nominee of another person in the loan agreements and, if given leave to defend, he would make the other person a third party.

Held, allowing the appeal: (1) in the circumstances of the case the writ was properly served by posting at his business address; (2) if as the respondent claimed he was a nominee of the other person but in borrowing from the appellants he was contracting in his own name as principal, he was nevertheless liable personally.

United Malayan Banking Corp Bhd v Datuk Sri Chan Swee Ho & Ors [1978] 1 MLJ 222 Federal Court, Kuala Lumpur (Lee Hun Hoe CJ (Borneo).

The subject matter of this case is a hospital, the Lady Templer Hospital, owned by the plaintiffs, who also owned some 51 acres of land on which the hospital and other buildings were erected. On 11 December 1984, the plaintiffs and the defendants executed an agreement providing, on terms and conditions stated therein, for the transfer of the management of the hospital and for the lease of the land from the plaintiffs to the defendants for the period commencing 1 January 1985 and ending 18 June 2057. The plaintiffs contend that as a result of the defendants committing a breach of the agreement by not paying the rental and rental deposit and by not furnishing the bank guarantee/performance bond, and consequent upon sending the letter dated 14 February 1985 demanding performance of obligations by the defendants, the agreement had been terminated, thus putting an end to the licence granted to the defendants to occupy the hospital. The defendants had been occupying it and the land as trespassers since 1 April 1985, and must quit and deliver up vacant possession. The plaintiffs therefore make the present application for an interlocutory injunction to stop the defendants from carrying on the business of a specialist centre at the hospital and to compel them to deliver up vacant possession of the hospital. The defendants filed a defence and counterclaim and opposed the application, denying breaches on their part.

Held: (1) the undisputed facts relied on by the plaintiffs to show exceptional circumstances tilt the balance of convenience in their favour; (2) order in terms of all the prayers granted; (3) costs of the application would be paid by the defendants.

Governors and Trustees of Lady Templer Tuberculosis Hospital Fund Registered v Rampai Muda Development Sdn Bhd [1987] 2 MLJ 495 High Court, Kuala Lumpur (LC Vohrah J).

By a fire insurance policy dated 3 June 1980 A agreed to indemnify D against loss and damage occasioned by fire to the property situated in the premises where D carried on the business of selling motor spare parts and accessories. When the fire policy came into effect there was no municipal byelaw requiring D's business to be licensed. A's agent who clinched the insurance contract, gave evidence that he was the one who filled up the proposal form in English on D's behalf and D merely signed in Chinese characters. On 1 January 1981 a municipal byelaw requiring D's business to be licensed came into effect. A warranty was subsequently attached to the policy whereby D undertook to hold a licence during the currency of the policy ('warranty 9A'). The policy was then renewed for the period from 21 May 1981 to 21 May 1982. In November 1981 a fire occurred on D's premises. At the time of the fire, D's business was unlicensed. D submitted a claim to A who rejected it. D then filed a suit against P 17 months after the fire. One of the conditions of the policy stipulated that no claim could be brought against A after the expiry of 12 months from the date of the fire ('condition 19'). The High Court gave judgment in D's favour but made no order for interest to be paid. A appealed to the Supreme Court firstly on the ground that 'condition 19' did not contravene s 29 of the Contracts Act 1950 and D's claim was thus barred by it. A further argued that D had breached 'warranty 9A' which entitled A to repudiate the policy. D also lodged a cross-appeal in the Supreme Court. D contended that interest at the rate of 4% pa should have been awarded on the judgment sum from the date of the fire to the date of judgment.

Held, dismissing the appeal and the cross-appeal: (1) the preponderant view of the Indian courts is that conditions similar to 'condition 19' do not infringe s 28 of the Contracts Act 1872 [Ind] which is identical to s 29 of the 1950 Act. The validity of such conditions has been upheld principally on the distinction between rights and remedies; (2) the distinction between a right and its remedy does not however exist in Malaysian law. A right cannot be disassociated from its remedy. Accordingly 'condition 19' contravened s 29 of the 1950 Act and was void because it limited the time within which D could enforce his right under s 6(1)(a) of the Limitation Act 1953; (3) 'warranty 9A' could not be fulfilled ab initio because no byelaws were in force when the policy came into effect. On the facts in this case the procurement of a licence for D's business was never within the contemplation of the parties. D could not therefore be bound by 'warranty 9A' of which he was not aware and which in any event at the material time was impossible of performance. The High Court was thus correct in finding that 'warranty 9A' was severable from the rest of the policy at its inception; (4) by virtue of O 42 r 12 of the Rules of the High Court 1980 interest at the rate of 8% pa would have to be paid by A on the judgment sum from the date of judgment until the date of satisfaction; (5) the court has the power to award interest for any period before judgment under s 11 of the Civil Law Act 1956. In this case the High Court gave careful consideration to the written submissions made by counsel on behalf of both parties. The question of interest was specially addressed by D's counsel and it must be assumed that the High Court had exercised its discretion when no order for the payment of interest was made; (6) where discretion is given to a judge the appellate court ought not to review his decision unless he has declined to exercise his discretion or has manifestly proceeded on a wrong ground. Accordingly the Supreme Court would not interfere to order pre-judgment interest to be paid on the judgment sum.

New Zealand Co Ltd v Ong Choon Lin t/a Sykt Federal Motor Trading [1992] 1 MLJ 185 Supreme Court, Malaysia (Abdul Hamid Omar LP, Jemuri Serjan CJ (Borneo).

The second defendants had purchased from the first defendants a parcel of land together with a four-storey shophouse for M$480,000. By cl 2 of the sale and purchase agreement a sum of M$100,000 was paid by the second defendants upon the execution of the agreement and deposited with the plaintiffs, a firm of advocate and solicitors, as stakeholder. A further sum of M$100,000 was payable one month after execution of the agreement and the remaining M$280,000 by way of loan from a bank within two months from the date of the agreement. Failing this, the sum of M$100,000 would be forfeited by the first defendants and the agreement deemed to be rescinded. If the loan was not approved then the sum of M$100,000 would be returned to the second defendants and the agreement rescinded. The second defendants' application for a loan was approved subject to certain conditions which were not acceptable to the second defendants. The bank was therefore unable to accept the application for a loan. The question was whether the loan had been approved. As the parties were unable to arrive at a settlement, the plaintiffs took out an application for interpleader relief.

Held, ordering the refund of the M$100,000 to the second defendants: (1) in order to convert a proposal into a promise the acceptance must be absolute and unqualified. Therefore in order to constitute 'approval' in the acceptance of the second defendants' application for a loan, it had to be without qualifications. The acceptance must be absolute and unqualified, which was not the situation in the instant case; (2) there had been no approval of the loan and the deposit must be refunded. The sale and purchase agreement was deemed to be mutually rescinded.

Ee & Lim Advocates v Gin Nam Development Corp Sdn Bhd & Anor Originating Summons No KG 138 of 1991 High Court, Kuching (Haidar J).

By a letter dated 28 October 1982 the plaintiff bank had offered a term loan of RM15.7m to the defendants. The purpose of the loan was stated to be, as to RM5.7m, to redeem certain property that had been charged to Central Malaysian Finance Bhd, and as to the balance of RM10m, to make the initial payment in respect of the purchase by the defendants of three lots of land. The security to be provided for the loan was stated to be a first legal charge of the land to be redeemed by the said payment of the RM5.7m, an assignment of the sale and purchase agreement in respect of the purchase by the plaintiff of the three lots of land, and the personal guarantees of two individuals. On 29 October 1982, the plaintiffs and the defendants entered into a written loan agreement ('the agreement') in respect of the offer that had been accepted by the defendants. It provided, inter alia, that the loan was for RM15.7m, of which RM5.7m was to be used to redeem the said land 'which land is to be charged to the bank [the plaintiffs] ... as additional security for the term loan'. It was provided that 'the bank shall disburse the whole of the term loan after the execution of this agreement and other securities ... ' ('cl 2.03'). However, the bank did not wait for the execution of the agreement and the security documents but on 28 October 1982 effected redemption of the said land. The land was thereafter charged to the plaintiffs as a first legal charge to secure the loan. Although the duration of the loan was stated to be three months, there was no demand for repayment until 31 January 1984. The demand of that date was not met, and it was only on 23 January 1988 that the writ was caused to be issued, by which RM33,995,372.36 being the RM15.7m and accrued interest thereon was claimed. The statement of defence dated 29 April 1988 was filed and served on or about 30 April 1988. But it was only on 22 December 1988 that the plaintiffs took out an O 18 r 19 application to have paras 3 and 4 of the defence struck out and for summary judgment to be entered. The application was fixed to be heard on 17 March 1989 but was adjourned to 14 April 1989 on the defendants' counsel's request. On 11 April 1989 the defendants' solicitors sought a further adjournment but the senior assistant registrar proceeded to hear and dispose of the matter on 14 April 1989. The defendants were absent and were unrepresented. On the same day the plaintiffs' solicitors informed the defendants' solicitors as to what had transpired. Neither the defendants nor their solicitors did anything in respect of the judgment that had been entered against them until 3 June 1992 when they applied to set aside the judgment. It was contended for the defendants that if counsel had attended the hearing on 14 April 1989 or if the defendants had been given an opportunity of opposing the O 18 r 19 application, they would have relied on two lines of argument: (a) that the amount said to have been disbursed pursuant to the agreement had not been disbursed; (b) that the assignment of the sale and purchase of the three lots of land had the effect of superseding the agreement. The assignment was an absolute assignment and therefore, was not by way of charge only, and because of that, it replaced or superseded the agreement. Further, the effect of the fact of the assignment was that the bank had agreed that the first recourse for repayment of the loan would be on the securities provided. It was also contended that because of the assignment, the plaintiffs were obliged to pay the balance of thease pric so, the defendants had a claim against the plaintiffs in damages.

Held, dismissing the application: (1) cl 2.03 of the agreement has the effect that the borrower cannot insist on disbursement of the loan until after the execution of the security documents. It does not have the effect of precluding the bank from disbursing the amount prior to the execution of those documents if it chooses to do so; (2) the provision under the Rules that this application is sought to be made has not been disclosed to the court. There is no general rule that allows the setting-aside of judgments that have been entered against a defendant in his or its absence. In fact, the general rule is that on perfection of the order given, the judge or registrar that made the order becomes functious officio vis-a-vis the summons, petition, motion or trial in which the order was made unless the order has a liberty to apply provision, in which case within the confines of the liberty reserved, the judge or registrar could further deal with the matter; (3) however, there are specific rules that deal with certain specific situations that allow the court that made an order in the absence of a party, to set it aside, eg O 14 r 11 in respect of O 14, O 35 r 2(1), O 13 r 8, O 19 r 19. However, there does not appear to be any such specific rule in respect of a summary judgment entered on the hearing of an O 18 r 19 application where the defendant had failed to appear. The only other rule dealing with setting aside orders is O 2 r 1(2), but that rule is not relevant here as there is no suggestion that the order was irregular; (4) the plaintiffs have, by affidavit, explained to the satisfaction of the court the eight months' delay in taking out the O 18 r 19 application. In any event, that delay and the delay in taking out the action cannot be used, as the defendants' counsel sought to do, to neutralize the defendants' delay in applying to set aside the judgment; (5) the defendants have failed to provide the court with any acceptable explanation for the inordinate delay of three years in doing something in respect of the judgment; (6) the cases cited by the defence counsel do not hold expressly or by implication that because there was an absolute assignment, the loan agreement pursuant to which the assignment was effected is superseded or cancelled, or that the loan agreement becomes void, or that the lender has therefore to seek its recourse from the property, the subject of the assignment. Further, there is nothing in the agreement or in the deed of assignment that supports this argument. In this case, the agreement expressly provides for the borrower to provide, not in settlement or discharge of the loan but by way of security, the third party charge, the assignment and the guarantees. The deed of assignment itself reiterates that the assignment was 'to secure a term loan of RM15.7m'. It does not provide that it is in settlement of the loan or any part thereof; (7) for the purposes of deciding whether an assignment is absolute and not by way of charge only, it is not permissible to look outside the four corners of the deed. However, having construed the meaning and effect of the deed, there is no prohibition against looking at the circumstances in which the deed came to be drafted and executed. Where, as here, it was pursuant to the terms of a loan agreement that the deed was provided, the loan agreement can be looked into; (8) both lines of argument by the defence counsel are without merit; (9) by the terms of the deed of assignment it was the parties' intention that it was for the assignor to pay off the balance of the purchase price.

Development & Commercial Bank Bhd v Kredin Sdn Bhd [1993] 1 CLJ 307 High Court, Kuala Lumpur (VC George J).

This was an appeal against the decision of the High Court ([1972] 1 MLJ 13). The present appellant was the third defendant in the court below. The respondent/plaintiff borrowed some money from a firm of chettiars in Muar, on the security of two pieces of land, one piece belonging to his wife and the other to himself, in order to assist the defendants in satisfying a judgment obtained against them in a Malacca suit. The loan was for $7,000, the monthly interest on which the defendants had agreed to pay to the Muar chettiars. The respondent did not charge the defendants any interest. The defendants failed to pay the monthly interest, and under threat by the Muar chettiars to sell the two pieces of land, the respondent sold his land and paid off the Muar chettiars. He thereupon sued the defendants for his money. The learned trial judge held that the respondent was a person interested in the payment of the money within the meaning of s 70 of the Contracts (Malay States) Ordinance 1950 and therefore it was in his interest to pay off the loan in order to save his land from being foreclosed.

Held, allowing the appeal (Ong Hock Sim FJ dissenting): the respondent was bound under the contract by law to pay the debt to the Muar chettiars. Therefore, he could not be regarded as a person interested in the payment of money within the meaning of s 70 of the Contracts (Malay States) Ordinance.

PR SP Periakaruppan Chettiar v Yong Book Fong [1972] 1 MLJ 160 Federal Court, Kuala Lumpur (Azmi LP, Suffian and Ong Hock Sim FJJ).

In this case, the appellant had borrowed various sums from the respondent and his wife. He alleged that the respondent had charged him excessive interest, more than the rate agreed upon. The claim of the appellant was dismissed in the High Court and the appellant appealed.

Held: (1) in this case, the burden was on the appellant to prove his claim. The learned judge had gone into the evidence carefully and reached the conclusion that the appellant had failed to discharge the onus of proof. There was no reason to interfere with his finding of the facts; (2) as the appellant in this case was in effect alleging fraud, the learned trial judge was correct in saying that he required a higher burden of proof than is normal in a civil case.

Lee You Sin v Chong Ngo Khoon [1982] 2 MLJ 15 Federal Court, Kuala Lumpur (Lee Hun Hoe CJ (Borneo).

The first appellant and his brother, Ramesh Sabnani (since deceased), lent to the respondents a sum of S$300,000. The second appellants are the administrators of the estate of the deceased. The respondents were, at all material times, partners of a concern known as Lal's & Co ('Lal's'). The appellants claimed primarily against the first respondent personally. In the alternative, however, they claimed that the loan was made to both respondents as partners of Lal's. The first respondent alleged that he had paid to the appellants a total sum of S$117,000 as principal and a further sum of S$27,000 by way of interest or alternatively as further part payment of the principal and admitted that only S$6,000 was owing. The second respondent alleged that he had paid off his share of liability in the sum of S$150,000 by way of repayment to one Arjan Sabnani ('Arjan') at the request and on the instruction of Ramesh Sabnani. The action was heard in the High Court. The trial judge found that the loan was made to Lal's and was not a personal loan to the first respondent only. The trial judge also held that the loan came from moneys held by the first appellant and Ramesh Sabnani as tenants in common. Moreover, it was held that the payment by the second respondent to Arjan discharged both the respondents' liability to the second appellants. In respect of the first appellant's share of the loan, the trial judge allowed the claim only in the sum of S$33,000 as S$117,000 had been paid to the first appellant. Further, the trial judge ordered the first and second respondents to pay costs to the first appellant and the second appellants to pay the first and second respondents the costs of their defence. In addition, the trial judge also made an order of set-off in respect of costs and that only the difference should be paid either by the respondents to the first appellant or by the second appellant to the respondents. The appellants appealed.

Held, dismissing the appeal: (1) the moneys came from the joint account of the first appellant and Ramesh Sabnani. The moneys in their joint account were held by them as joint tenants. When the cheque was drawn against the joint account and the money so drawn was paid to the respondents, the loan was made by them as joint tenants and not as tenants in common. There did not appear to be any circumstances which would suggest that the lenders were tenants in common in equity; (2) upon the death of Ramesh Sabnani, the right of action in the debt became vested in the first appellant by virtue of the principle of survivorship. The second appellants as administrators of the estate of Ramesh Sabnani have no claim at all. They ought not to have been joined in the action; (3) as a matter of law, payment to one of the creditors discharges a debt owed to them jointly. In the premises, all repayments made to either the first appellant or Ramesh Sabnani (or to both of them) would go towards discharging the loan pro tanto, irrespective of whether both had consented to the repayment. It follows that the payment of S$150,000 to Arjan was part payment of the loan. The first respondent had also paid the first appellant a total sum of S$117,000. Accordingly, only a sum of S$33,000 remained outstanding and owing to the first appellant; (4) the first appellant succeeded in part against the two respondents and was awarded costs. The second appellants failed and costs were awarded against them. A set-off in this situation is inappropriate: one set of costs is payable to the first appellant and the other set of costs is payable by the second appellants, and the parties are not identical. Further, whether or not the second appellants were joined, the task confronting the respondents would still be the same and the respondents had not incurred any additional costs by the misjoinder of the second appellants. The order of costs against the second appellants was therefore not warranted. That order would be set aside and it follows that the order as to the set-off of the costs would also be set aside.

Kan Sabnani & Anor v Ramesh Lachmandas & Anor [1994] 3 SLR 712 Court of Appeal, Singapore (Yong Pung How CJ, Karthigesu and LP Thean JJA).

The plaintiffs and defendants were lenders and borrowers respectively under a multi-currency loan agreement. The plaintiffs obtained summary judgment under ord 14 of the Rules of the Supreme Court 1970 ('the RSC') for Swiss francs 1,744,878,22, being the total principal and interest sums due under the loan agreement, but failed in their application for interest at the agreed rate under the loan agreement. The defendants appealed against the judgment and the plaintiffs cross-appealed, seeking a variation to the judgment that they be awarded interest on the judgment sum at the rate stipulated in the loan agreement and not at the rate of 8% pa under O 42 r 12 of the RSC.

Held, dismissing the defendants' appeal: (1) the purpose of the loan was to provide financing of the purchase of property by the defendants in Australia. It was to provide 'amount of Eurocurrency which will be required to purchase A$1.16m' and not A$1.16m itself. One of the purposes of the loan agreement was to enable the defendants to take advantage of the shifts in value of currency on the world's money markets and the wording of the loan agreement was designed so that the risk of currency loss or gain is always on the defendants; (2) the loan was made by the plaintiffs to the defendants in Swiss francs, and it was clear from the construction of cll 3 and 5 of the loan agreement that the loan was to be repaid in Swiss francs and not in Australian dollars. Held further, allowing the plaintiffs' cross-appeal: (1) the learned Chief Justice's judgment in Sim Lim Finance Ltd v Pelandok Enterprises Pte Ltd [1981] MLJ 280 was a judgment in default of appearance. The distinction between interest on a judgment debt and an award of the covenanted rate of interest within a judgment was not argued and hence, the learned Chief Justice proceeded on the assumption that upon judgment, the covenant was not effective to create a right for contractual rates of interest to continue after judgment. The case, therefore, can be distinguished from the instant case; (2) on the construction of cl 11.4 of the loan agreement, interest at the covenanted rate is payable as a matter of agreement between the plaintiffs and the defendants until actual payment by the defendants; (3) O 42 r 12 of the RSC, which refers to a judgment debt, cannot curtail contractual rights as s 80(2)(j) of the Supreme Court of Judicature Act (Cap 322, 1985 Ed) prescribes for O 42 r 12 to apply unless otherwise agreed between the parties. The court is thus not precluded from awarding the plaintiffs their claim for post-judgment interest at the contractual rate; (4) s 9 of the Civil Law Act (Cap 43, 1988 Ed), whichprohibits interest charged upon interest, is inapplicable since the capitalizing of interest or charging of compound interest is contractually provided for in cl 11.4 of the loan agreement.

Wardley Ltd v Tengku Aishah & Ors [1991] SLR 605 High Court, Singapore (Karthigesu J).

[Annotation: Affirmed on appeal. See [1993] 1 SLR 337.]

The plaintiff gave an interest-free loan of $7,000 to the defendants and another person. He had raised the sum by borrowing the money from a Chettiar firm on the security of land belonging to him. The defendants had agreed to pay the interest on this loan. The defendants failed to pay the monthly interest and as a result the plaintiff had to pay the loan together with interest. He claimed reimbursement of the sum paid by him.

Held: (1) the plaintiff was a person interested in the payment of the money within the meaning of s 70 of the Contracts (Malay States) Ordinance 1950 and, as a result of the defendants' failure to carry out their legal obligations, it was in the plaintiff's interest to pay off the loan in order to save his land from being foreclosed; (2) the cause of action in this case under s 70 only arose when the plaintiff paid off the loan to the Chettiar firm and not when the loan was made by the plaintiff to the defendants and therefore the action in this case was not statute-barred.

Yong Book Fong v Nallakaruppan Chettiar & Ors [1972] 1 MLJ 13 High Court, Kuala Lumpur (Mohamed Azmi J).

A Chinese loan association consisting of 30 persons was held not to be an association for the purpose of carrying on a business that has for its purpose the acquisition of gain.

Soh Hood Beng v Khoo Chye Neo [1896] 4 SSLR 115 Court of Appeal, Straits Settlements (Cox CJ and Law J).

[Annotation: See article under heading ' "Hway" Chinese Loan Association' by CJ Koh, in [1938] MLJ xi, and article by Mrs KL Koh on 'The Legal Aspects of "Hwei" and "Koottu" in Singapore and Malaysia', in [1967] 2 MLJ xxxviii.]

In a 'hwei', the agreement is between each member and the manager or 'head' and not between the members themselves: per Williams CJ.

Lee Pee Eng v Ho Sin Leow [1958] SCR 18 Supreme Court, Sarawak, North Borneo and Brunei

This was an appeal against the decision of the magistrate dismissing the appellant's claim against the respondent, who was alleged to be the head of a 'hwei'. The appeal was based mainly on questions of fact. The respondent denied liability as she stated she had settled the amount claimed. It was not alleged that any member of the 'hwei' had defaulted.

Held: there was no reason in this case to upset the decision of the magistrate who had held that the appellant had not established his claim on a balance of probabilities and who had the advantage of seeing and hearing the witnesses.

Luk Dai Chung v Ngu Ee Nguok [1966] 1 MLJ 119 High Court, Sibu (Lee Hun Hoe J).

The appellant and the respondent were both members of a 'hwei'. The head of the 'hwei' was originally one of the defendants but she had been made a bankrupt and disappeared. The magistrate found that there was no privity of contract between the appellant and the respondent and he dismissed the appellant's claim against the respondent. The appellant appealed.

Held: in a 'hwei' the agreement is between each member and the manager or head and not between the members themselves and therefore the learned magistrate was correct in holding that there was no privity of contract between the appellant and the respondent.

Lau Chuo Kiew v Hii Chee Soon [1966] 1 MLJ 126 High Court, Sibu (Lee Hun Hoe J).

Where a person alleges that a head of a hwei is liable on the default of a member, the onus of proof lies on him, and in this case as the respondent had not discharged the onus of proof, her claim should have been dismissed.

Ngu Ee Nguok v Lee Ai Choon [1965] 1 MLJ 32 High Court, Sibu (Lee Hun Hoe JC).

The plaintiffs claimed the sum of $3,356 on a promissory note signed by the defendant which alleged a loan to the defendant by the plaintiffs. Oral evidence was given that the sum represented amounts due from him as the head of a hwei which he ran in 1962 and that the defendant had in fact never received the loans from the plaintiffs.

Held: (1) the oral evidence was admissible under the proviso to s 94 of the Evidence Ordinance (Sarawak Cap 54) to show that there was a want or failure of consideration; (2) as such evidence showed that the consideration shown in the promissory note and alleged by the plaintiffs was non-existent, the plaintiffs' claim must fail. Nature and method of operation of hwei explained.

Tang Siew Hee & Ors v Hii Sii Ung [1964] MLJ 385 High Court, Sibu (McGilligan J).

In a suit on a promissory note for $400, the defendant alleged that the consideration consisted of, inter alia, (a) a sum of $130 drawn by the plaintiff from a kutu and lent by him to the defendant, (b) a sum of $130 lent by the plaintiff to the defendant, who managed the kutu, to enable him to discharge his liabilities thereunder. The kutu consisted of 26 persons and was not registered under the Societies Enactment (Cap 96).

Held: (1) a collection of 26 people who agree together each to deposit $5 bi-monthly and who agree to decide by lot that each of them shall have the total amount subscribed in turn was rendered illegal by s 10 of the Societies Enactment as being an unregistered society of more than ten persons; (2) nevertheless the object of such a society and the contracts between its members may well give rise to civil rights and obligations. Money lent to meet such an obligation is lawful consideration for a promissory note given in respect of such loan.

Ramasamy v Muniappan [1940] MLJ 290 High Court, Raub (Horne J).

In this case, the plaintiff Ameer Batcha claimed that in November 1955 he started a kutu with ten tickets and a capital of $1,000, each ticket holder subscribing $100 every month. The subscriptions were pooled every month and the prize money paid to the lowest bidder, the difference between the pool amount and the bid amount being distributed as premium to the subscribers. The defendant was the successful bidder in February 1956 and the prize money was paid to him by the plaintiff. Since April 1956 the defendant failed to pay the subscriptions due by him, such subscriptions less the premium amount payable to him amounting to $489.40 and the plaintiff prayed judgment for this sum of $489.40. The defendant pleaded that, not having in any way been concerned in the kutu as alleged, the defendant was not liable. Alternatively, the defendant averred that the plaintiff was not entitled to recover as the kutu, not being registered, was an illegal society. At the hearing it was contended on behalf of the defendant that the kutu based on ten subscribers not being registered was an illegal society under the Societies Ordinance 1949. It was not registered under any ordinance. It was submitted on behalf of the appellant that even if the society was illegal, the object of the society and the contract between its members may well give rise to civil rights and obligations. The learned magistrate, agreeing with the submission of the defence counsel, dismissed the suit. The plaintiff appealed.

Held, dismissing the appeal: (1) the kutu in this case, was not carried on for the purpose of the kutu's profit, and therefore was not carrying on business so as to bring it within exception (e) of the definition of society in s 2 of the Societies Ordinance 1949; (2) the kutu in this case was illegal and does not fall under exception (e) of the definition of society in s 2 of the Societies Ordinance.

SM Ameer Batcha v VK Kunjumon [1959] MLJ 59 High Court, Kuala Lumpur (Sutherland J).

3 [2658] CONTRACT Lock-out agreement – Enforceability – Agreement to purchase business – Collateral lock-out agreement – Implied terms – Agreement to negotiate – Certainty of terms – Courtney & Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 All ER 716 (folld) Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 (refd) Mallozzi v Carapelli SpA [1976] 1 Lloyd's Rep 407 (folld) Albion Sugar Co Ltd v Williams Tankers Ltd, The John S Darbyshire [1977] 2 Lloyd's Rep 457 (refd) Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd's Rep 425 (refd) Trees Ltd v Cripps (1983) 267 EG 596 (refd) Nile Co for Export of Agriculture Crops v H & JN Bennet (Commodities) Ltd [1986] 1 Lloyd's Rep 555 (refd) Voest Alpine Intertrading GmbH v Chevron International Oil Co Ltd [1987] 2 Lloyd's Rep 547 (refd) Star Steamship Society v Beogradska Plovidba, The Junior K [1988] 2 Lloyd's Rep 583 (refd) Channel Homes Centre Division of Grace Retail Corp v Grossman (1986) 795 F 2d 291 (not folld)

R were the owners of a photographic business. In 1986 R decided to sell the business and its premises. Towards the end of 1986 negotiations between R and P were progressing when A entered into negotiations with R for the sale of the business. R warranted to A that the cash resources in the business was not less than £1m and that the trading profits for the first 12 months following completion would be not less than £300,000. Following a telephone conversation between A1 and R1 on 17 March 1987, A and R agreed that if A could provide a comfort letter from their bankers that loan facilities of £2m would be made available to R, then R 'would terminate negotiations with any third party or consideration of any alternative with a view' to concluding agreements with A. On 30 March 1987, R informed A that they had decided to sell the business to P. A alleged that there had been a contract between them and that R's decision amounted to a repudiation. A alleged that not only were R 'locked-out' for some unspecified time from dealing with any third party, but were 'locked-in' to dealing with A, also for some unspecified period. A succeeded at first instance. R appealed to the Court of Appeal where the appeal was allowed. A appealed.

Held, dismissing the appeal: (1) an agreement to negotiate was not recognized as an enforceable contract because it lacked certainty; (2) what had been 'agreed' on the telephone on 17 March 1987 was 'subject to contract'. Therefore the parties were still in negotiation; (3) there was clearly no reason in English contract law why a lock-out agreement where one party, for good consideration agreed, for a specified period, not to negotiate with anyone except the other party in relation to a sale of property, should not be enforceable. However, in such an arrangement the first mentioned party had in no legal sense locked himself into negotiations with the other party. What the other party had achieved was an exclusive opportunity, for a fixed period, to try and come to terms with the first mentioned party, an opportunity for which he had, unless he made the agreement under seal, to give good consideration; (4) the agreement alleged by A contained the essential elements of a basic lock-out agreement, save one. It did not specify for how long it was to last. The agreement therefore lacked certainty and was unenforceable.

Walford & Ors v Miles & Anor [1992] 1 All ER 453 House of Lords, England (Lord Keith of Kinkel, Lord Ackner, Lord Goff of Chieveley, Lord Jauncey of Tullichettle and Lord Browne-Wilkinson).

In this case, the respondents, the owners of the former Jayapuri Hotel at Petaling Jaya, had appointed the appellants as their agent to carry out and execute all services or acts required in relation to the management of the hotel. The management agreement was subject to approval by the Malaysian government. In the event, the government amended the incentive fee payable and this was treated as a refusal. The agreement, therefore, never came into effect and the claim of the appellants was for outstanding management fees, payable for the interim period prior to the date of the government's conditional approval. In their statement of claim, the appellants claimed the sum of RM300,000 and interest at the rate of 8% per annum on the decretal sum from the date of demand, ie 23 March 1982 till the date of realization. The appellants applied for summary judgment and the senior assistant registrar allowed the application. On appeal, the learned judge found no arguable case on the issue of liability but he ordered that the issue on quantum of management fees be tried before the senior assistant registrar. The senior assistant registrar assessed the management fees payable at RM495,193.85 on the basis of the interim period of six months and 22 days, but judgment was entered only in the sum of RM300,000. The respondents appealed contending that the length of the interim period should only be four months and not six months and 22 days as found by the senior assistant registrar. The appellants also cross-appealed. The following issues were raised before the learned judge in the appeal: (i) whether the senior assistant registrar was correct in concluding that the interim period was six months and 22 days pursuant to art 6(1)(a) of the management agreement; (ii) whether the senior assistant registrar was correct in fixing the rate of incentive fee at 9% instead of 12% of the gross operating profit pursuant to art 6(1)(b) of the said agreement; (iii) whether the rate of 8% interest on the judgment sum should run from the date of demand (23 March 1982) as prayed and allowed by the senior assistant registrar's first order dated 12 January 1984. The learned judge allowed the respondents' appeal on quantum. He held that the length of the interim period claimable was only four months and the rate of percentage on incentive fee was 9% and accordingly the assessment of the senior assistant registrar was reduced to RM167,266.26. The date from which the interest of 8% on the judgment sum was payable, was also varied by the learned judge from 23 March 1982 (date of demand) to 12 January 1984, the date of the senior assistant registrar's first order. The appellants appealed.

Held: (1) on their pleadings as well as affidavit evidence in the O 14 application, the appellants have claimed RM300,000 from the respondents for outstanding management fees calculated on the basis of services rendered during four months of the interim period. To allow a judgment for more than four months period without amending the pleading would be contrary to principle. Similarly in their pleading and affidavit evidence the claim on incentive fee has been calculated at the rate of 9% in accordance with government approval and as such it is equally against the principle of pleading to allow them at the rate of 12% without amendment. There is no reason therefore to interfere with the learned judge's finding on the first two issues, and the assessment of management fees of RM167,266.26 must be affirmed; (2) an appellate court should be slow to interfere with the exercise of discretion in granting interest by a lower court unless the order made is wrong in law or principle such as where the amount of interest awarded is unreasonably high or unreasonably low. Since no valid reason has been advanced to merit interference with the senior assistant registrar's discretion, the learned judge's judgment on interest must be set aside and the order of the senior assistant registrar restored.

Novotel Societe D'Investissements et D'Exploitation Hoteliers & Anor v Pernas Hotel Chain (Selangor) Bhd [1987] 1 MLJ 210 Supreme Court, Kuala Lumpur (Salleh Abas LP, Wan Suleiman and Mohamed Azmi SCJJ).

The parties to this action were Ceylonese Hindus. The second defendant, father of the first defendant, through a 'go-between' approached the second plaintiff, father of the first plaintiff in order to arrange a marriage between his son and the second plaintiff's daughter. The parties then met at the go-between's house and provisionally agreed that the proposal should be pursued. Then, according to the custom of the community, female relatives of the intended bridegroom visited the girl and gave a favourable report as to her suitability. A few days later, members of the two families met and drew up a written agreement (with provisions for a dowry of $3,000 and $5,000 for breach of the agreement, known as the penalty clause) to effect the marriage. Next morning the ceremony of Nichayartham, the customary manner of ratifying a betrothal, was performed and at which the second plaintiff presented the first defendant with a gold sovereign. About two weeks later, the second plaintiff also presented the first defendant with a shirt, a dhoti and a shawl, and the first defendant in return presented the first plaintiff with a sari and a piece of material for making a blouse to go with it. The next event which happened was a series of four letters written by the first defendant to the second plaintiff which amounted to a repudiation of his promise to marry the first plaintiff. In the present proceedings, the first plaintiff claimed (1) damages against the first defendant for breach of promise of marriage, (2) damages for deceit against all three defendants; and the second plaintiff claimed the return of the presents from the first defendant. The first defendant pleaded, inter alia, the incapacity of the first plaintiff to enter into the contract to marry, she being a minor then.

Held: (1) the Nichayartham ceremony was merely a confirmation or ratification of promises mutually given, the legal effect of which was already in existence; (2) the gift of the gold sovereign was not conditional on the marriage taking place as it was not proved that the giving of it was a customary feature of a betrothal ceremony and an essential part thereof; (3) other gifts were also made ex gratia; (4) the allegation of deceit was not proved; (5) accordingly, the first plaintiff could maintain an action on the agreement entered into between her father acting as her guardian and on her behalf and the first defendant whereby the latter promised to marry the first plaintiff; (6) the invalidity of the penalty clause in the written agreement does not vitiate the contract by reason of s 58 of the Contracts (Malay States) Ordinance 1950; (7) marriage contracts entered into by minors are distinguishable from other classes of contracts and do not come within the principle laid down in Mohori Bibee v Dhumodas Ghose 30 IA 114;the contract was not one for an immoral or an illegal purpose.

Rajeswary & Anor v Balakrishnan & Ors [1958] 3 MC 178 High Court, Ipoh (Good J).

[Annotation: See case note in (1961) 3 UMLR 127.]

The arrangements regarding part payment of the engagement money and the betrothal feast were purely between the parents on each side who 'arranged' the marriage, and the wife who broke the engagement could not be held liable. The wife being a minor not only when she broke the engagement but also at the time of action was protected by the provisions of the Infants Relief Act 1874.

Kong Sam Choi v Lieu Ying Kiew [1958] SCR 23 Supreme Court, Sarawak, North Borneo and Brunei

The plaintiff's claim against the defendant was for breach of promise to marry. Evidence revealed that she had lived with the defendant as husband and wife for several years. Subsequently the defendant forsook her to marry another woman. The plaintiff claimed for damages.

Held, allowing the plaintiff's claim: (1) the English Law Reform (Miscellaneous Provisions) Act 1970 which abolished actions for damages for breach of promise of marriage is not applicable in Malaysia by virtue of the Civil Law Act 1956 (Act 67) and the Contracts Act 1950 (Act 136); (2) there is no requirement under the Evidence Act 1950 (Act 56) that the plaintiff in such an action should have her evidence corroborated; (3) the plaintiff had proved to be a witness of truth and her claim for damages for promise of marriage would be allowed.

Doris Rodrigues v Bala Krishnan [1982] 2 MLJ 77 High Court, Seremban (Ajaib Singh J).

The plaintiff, the daughter of a marine department clerk, became engaged to be married to the defendant, a revenue officer in the customs department at Johore Bahru, on 12 December 1959. On 28 May 1960, it was agreed between the plaintiff and the defendant that the marriage should take place on 20 August 1960. On 10 August 1960, the defendant broke off the engagement and refused to marry the plaintiff. The plaintiff now sued the defendant for damages for breach of promise to marry and special damages for expenses incurred thereby.

Held: damages in an action for breach of promise of marriage are almost entirely in the discretion of the court. They may be of a vindictive and uncertain kind, not merely to repay the plaintiff for temporal loss but to punish the defendant in an exemplary manner. While in aggravating circumstances the damages may be large, they should not be fixed as though they were a fine. In assessing damages the injury to the affections of the plaintiff, the prejudice to his or her future life and prospects of marriage, the rank and condition of the parties and the defendant's means are all matters to be taken into consideration. Applying the above principles, the sum of $1,500 was awarded as general damages and $620.10 as special damages.

Dennis v Sennyah [1963] MLJ 95 High Court, Penang (Hepworth J).

The plaintiff brought an action for damages for breach of promise to marry, contending that damages should be aggravated by reason of the fact that she had been seduced by the defendant. It was argued upon the court that because the plaintiff knew that the defendant was already married, even if the defendant had made any promise to marry the plaintiff such promise was void ab initio.

Held: (1) the plaintiff's knowledge that the defendant was already married did not invalidate the promise as the defendant was, under his own personal law, entitled to more than one wife; (2) there was sufficient evidence that the defendant had promised to marry the plaintiff. Damages was assessed at $1,200.

Nafsiah v Abdul Majid (No 2) [1969] 2 MLJ 175 High Court, Malacca (Sharma J).

A Muslim woman has the right to claim in a proper case against a Muslim man for damages for breach of promise of marriage. The several Charters of Justice only import so much of the native religious manners and customs as is required by the necessity of preventing the injustice or oppression which would ensue if the law of England were applied to alien races unmodified. In the present case, the converse of that proposition would be more correct namely that if the principles of English law were not applied, injustice and oppression might result; and therefore the principles of English law are to be applied in such a case.

Mong v Daing Mokkah [1935] MLJ 147 High Court, Straits Settlements (Terrell J).

P claimed damages from D for breach of his promise to marry her. P alleged that she relied on D's promise and gave up her job. P also averred that as a result of their relationship, a son was delivered by her. D denied giving P such a promise. D applied to strike out P's claim on the ground that P was aware that D was a married man and to allow her to pursue her claim would be immoral and against public policy. The senior assistant registrar allowed D's application and P appealed to the High Court.

Held, allowing the appeal: (1) the validity of a promise of marriage, made by D who was at the time of making the promise already married and P to whom when he made the promise was aware of his status, has not been fully settled in law. The issue raised in this case warranted a mature and careful consideration on a serious point of law. D should have set the point down for argument under O 33 r 2 of the Rules of the High Court 1980 after both parties had agreed to the facts; (2) in this case, it was uncertain whether P was aware of D's marital status at the time D was alleged to have made the promise. If P was only aware of D's marital status after the alleged promise, D's contention could not be sustained on the grounds of immorality and public policy. D was therefore not entitled to strike out P's claim.

Thevesa Oh v Sia Hok Chai [1992] 1 MLJ 215 High Court, Kuala Lumpur (Lim Beng Choon J).

A marriage brokerage agreement is void as having an object opposed to public policy within the meaning of s 23 of the Contract Enactment. The remedy given by s 8 of the Muhammadan Laws Enactment 1904 is limited to the parties to the marriage contract, ie the bride and bridegroom.

Alang Kangkong v Pandak Brahim [1934] MLJ 65 High Court, Federated Malay States (Mudie J).

A marriage brokerage agreement is void as having an object opposed to public policy within the meaning of s 23 of the Contract Enactment; but such an agreement falls within s 65 of the Contract Enactment and money paid under it can be recovered by the person who paid it. The principle that a marriage brokerage agreement is illegal applies equally well to Sikhs as to Hindus. The words 'When an agreement is discovered to be void' in s 65 of the Contract Enactment mean no more than 'is found to be void', and the operation of the section is not limited to cases where a contract is found to be void by reason of some fact not known to the parties at the date of the contract, but subsequently discovered.

Khem Singh v Anokh Singh [1930] 7 FMSLR 199 Supreme Court, Federated Malay States (Elphinstone CJ).

The appellant lent $5,000 to the respondents under a memorandum of agreement, which was signed by the borrowers/respondents and the surety, and also the appellant. The memorandum was signed and executed on 6 June 1975 but it was stamped one day after execution. The respondents defaulted in payment of the loan and the appellant filed a claim for the balance of $1,666.72 against the respondents and the surety. At the trial, learned counsel for the respondents successfully objected to the admissibility of the memorandum of agreement for a loan on the ground that it was a promissory note within the meaning of s 2 of the Stamp Ordinance 1949 (Ord 59/1949) and that it was not stamped in accordance with s 41 of the said ordinance. The sole issue before the appeal court was whether the memorandum of agreement was a promissory note.

Held, dismissing the appeal: (1) to be a promissory note there must be an unconditional promise to pay a certain sum and it must be in one entire instrument. It must be a promise to pay absolute and must not depend on a contingency or a stipulation; (2) the memorandum in this case contained a promise to pay and is not coupled with any stipulation or any contingency. The fact that there was a clause where the surety would be liable if the borrower defaulted and that the lender could recall the balance of the loan at any time, were purely arrangements of the 'promise to pay' and did not in any way affect the character of the promissory note.

United National Finance Bhd v Tan Yam Sing & Ors [1982] 2 MLJ 351 High Court, Penang (Mustapha Hussain JC).

The district court ordered the sale of a vessel, which was subject to two registered charges, and the conditions of sale were held by the High Court to be obscure as to whether or not the vessel was sold subject to the charges. This order was addressed to the court bailiff and vested the vessel in that official for the purposes of the sale. An advertisement before sale did not include any reference to the charges, but the full order of the court, which included such references, was read out at the sale. One of the plaintiffs bid at the sale and purchased the vessel on behalf of himself and the other plaintiffs. The defendant was the auctioneer who advertised and carried out the sale. The plaintiffs brought the present proceedings against him claiming rescission and return of the purchase price or alternatively damages, on the ground, inter alia, that the defendant had misrepresented that the vessel would be sold, and vested in the purchasers, free of any encumbrances, when in fact it remained subject to the two registered charges.

Held: (1) the auctioneer was not a party to the contract of sale and there could not, therefore, be any order for rescission of the contract or refund of the purchase price made against him; (2) the court order having been read out at the sale, it was doubtful whether there was any misrepresentation and, in any case, there having been no breach of any warranty of authority the auctioneer, being merely an agent, could not be liable in damages for misrepresentation.

Wong Leh Tiong & Ors v Wong Ngie Chang 1960 Supreme Court, Sarawak, North Borneo and Brunei

When a vendor by a false and fraudulent statement causes the purchaser to complete, the fact that the purchaser had the means of discovering the truth will not disentitle him to damages. The exception of s 19 of the Contract Enactment 1899 does not apply where the misrepresentation is made by a false and fraudulent statement.

Webber v Brown [1908] 1 FMSLR 12 Court of Appeal, Federated Malay States (Belfield Ag CJC and Woodward JC).

The plaintiffs were an American company which manufactured motor cycle engine lubricants. They are the registered proprietors in Singapore of the 'Bel-Ray' trade mark. The sole distributor in Singapore for the plaintiffs' products were BQS Pte Ltd ('BQS'). The defendant was the sole proprietor of one Goh Sin Normee; it retails motor cycle spare parts and also repairs bicycles and motor cycles. The third party were general importers and exporters and dealt in industrial chemicals and poisons. In March 1987, the plaintiffs' solicitors, accompanied by representatives from BQS, executed an Anton Piller order on the defendant's shop and seized several cartons of Bel-Ray oil which were found to be fake. On 14 August the defendant consented to interlocutory judgment on the plaintiffs' claim for infringement of the Bel-Ray trade mark. The defendant paid the sum of S$25,000 as damages. The defendant then commenced the present third party action. The defendant alleged that the third party's director, one David Ng, had misrepresented to the defendant that the oil was genuine and authentic and thereby induced the defendant to purchase the same. The third party claimed that it was the defendant who wished to purchase the oil from one Nisson Enterprise, and as Nisson demanded cash payment, the defendant had approached the third party to purchase the oil and sell it to the defendant on credit terms. The third party denied making any representations to the defendant that the oil was genuine or authentic. The third party called the evidence of the proprietor of Nisson Enterprise who corroborated David Ng.

Held, dismissing the claim: (1) the court was satisfied that the defendant knew that the oil was not genuine but counterfeit. The defendant had admitted in evidence that he was familiar with the original Bel-Ray oil and had bought substantial quantities from BQS. He ought to have known that the oil seized was not genuine; (2) the standard of proof for fraudulent misrepresentation is that it was made knowingly or without belief in its truth or recklessly, careless whether it be true or false; (3) the defendant had failed to discharge this high standard of proof required to hold the third party liable for fraudulent misrepresentation.

Bel-Ray Co Inc v Tong Hin Motor Parts Co; Victoria International (Pte) Ltd (Third Party) Suit No 701 of 1987 High Court, Singapore (Lai Siu Chiu JC).

In this case, the respondent had bought a half share in a piece of land from the appellant and had paid the purchase price. Subsequently the respondent was induced to sign another agreement under which he was allocated a small portion of the land. The respondent alleged that he was induced by the false representation of the respondent to sign the second agreement. He applied to the court for a declaration and obtained a declaration that he was the owner of one half of the land and an order that the land be sub-divided. Portions of the land had, however, been transferred to the sons of the appellant. The sons were not parties to the action.

Held: (1) the transaction under the first agreement was a jual putus and the consideration had been settled. There was no appeal against the finding of the trial judge on this point; (2) the learned trial judge was correct in holding that the respondent had been induced by misrepresentation into signing the second agreement and the misrepresentation was fraudulent. The agreement was voidable at the option of the respondent and had been lawfully repudiated by him; (3) the court had no jurisdiction over any person other than those brought before it, as parties or as persons treated as if they were parties. The order for sub-division must be set aside and instead compensation should be ordered to be paid in respect of the deficiency of shares in the land to be transferred to the respondent.

Kheng Chwee Lian v Wong Tak Thong [1983] 2 MLJ 320 Federal Court, Kota Bharu (Wan Suleiman, Seah and Hashim Yeop A Sani FJJ).

The plaintiff claimed against the defendant, his elder sister, a share of the property known as 28 Olive Road, Singapore. The property was devised to the defendant absolutely by the will dated 6 September 1986 of their late father, Lim Say Chong, who passed away on 29 May 1990. The plaintiff's claim was founded on an agreement dated 19 August 1987 made between him and the defendant which provided, among other things, that in the event of the will of their father 'specifying' that either of them was to inherit the entire property, the property would belong to them in equal shares. The defendant did not deny that she had entered into such an agreement, but said that she was induced to enter into it by (i) undue influence exercised by the plaintiff, or (ii) fraudulent misrepresentation on the part of the plaintiff. Alternatively, she said that the entire agreement was in the circumstances an unconscionable bargain. Accordingly, she counterclaimed that the agreement should be set aside.

Held, dismissing the plaintiff's claim and allowing the counterclaim: (1) the burden of proving that the agreement was vitiated by undue influence, unconscionable conduct or fraudulent misrepresentation, is on the defendant; (2) undue influence is the unconscientious use of one's power or authority over another to acquire a benefit or to achieve a purpose. Allcard v Skinner (1887) 36 Ch D 145 established that cases of undue influence fall into two categories: first, cases where actual influence has been proved to have been exercised, and, secondly, cases where by virtue of a particular relationship between the parties the court presumes that undue influence has been exercised unless the contrary is proved; (3) the relationship of brother and sister is not one where the presumption of undue influence arises; (4) and (iv) its exercise brought about the transaction; (5) the plaintiff, though a highly educated person and well-qualified engineer, could not or did not exercise any dominance or influence over the defendant in the sense of pressurizing or prevailing upon her to sign the agreement if she did not really want to. She said that before she signed the agreement she read it and understood its contents. She signed it because she believed that agreement would be advantageous or beneficial to her. She is a person capable of exercising her own judgment and she did exercise her own judgment in signing the agreement. She would not have signed the agreement if at that time she had seen the will or knew that she would inherit the entire property. Hence, there was no undue influence exercised by the plaintiff over her in relation to her signing the agreement; (6) looking at the agreement alone, one could not say that it was wholly for the benefit of the plaintiff or that it left the defendants without any protection. Nor could it be said to be in any way an 'improvident deed'. It was ex facie a perfectly valid and binding agreement and no adverse inference can be drawn therefrom against the plaintiff. In so far as the defen-dant based her claim on the existence of a mere inequality of bargaining power, it must be rejected. Though Lord Denning MR in Lloyds Bank Ltd v Bundy [1975] QB 326 considered that the common thread underlying the cases of unconscionable bargains was the concept of 'inequality of bargaining power', it is insufficient, in itself and in the absence of any unconscionable conduct, to justify the setting aside of a contract; (7) the effect of recent decisions is that a complainant who is relying on a plea of undue influence against another party must show that (i) that other party had the capacity to influence the complainant; (ii) the influence was exercised; (iii) its exercise was undue;the defendant had made good her defence that the plaintiff had made false representations to her and knew that they were false. The plaintiff had represented to the defendant that he was most likely to inherit the property, that he would give her half of it, and that the agreement was for her benefit. These representations were not true. The plaintiff at that time knew the contents of the will and he therefore knew that the representations he made were not true. In reliance on these representations, the defendant signed the agreement. She signed it because she believed that the agreement was beneficial to her. She came to this belief clearly on the representations made by the plaintiff. Hence, by these representations, the plaintiff induced her to sign the agreement. Clearly, on this ground, the agreement cannot stand and must be set aside.

Lim Geok Hian v Lim Guan Chi [1994] 1 SLR 203 High Court, Singapore (LP Thean J).

Interschiff Schiffahrtsagentur GmbH v Southern Star Shipping & Trading Pte Ltd 1982 High Court, Singapore (Lai Kew Chai J).

See CONTRACT, Vol 3, para 1529.

Serangoon Garden Estate Ltd v Marian Chye [1959] MLJ 113 High Court, Singapore (Chua J).

See CONTRACT, Vol 3, para 1768.

The court granted an injunction restraining the issuing bank from paying out under a letter of credit as the plaintiffs found that the oil tendered was not low speed oil as contracted for but oil which could be classified as fuel oil or a blend of fuel oil and crude oil. The court accepted that this was an instance of 'gross misrepresentation bordering on fraud' and it was within the exception of fraud under which an issuing bank may be restrained from paying under a letter of credit.

Andoll Ltd v Korea Industry Co Ltd & Ors [1987] SLR 274 High Court, Singapore (Lai Kew Chai J).

In this case, the respondent was a squadron leader in the Royal Australian Air Force. He wanted to buy a car and get the benefit of exemption from duty in Malaysia and Australia. He would have obtained the exemption if the motor car was taken out of Malaysia and if it complied with the Australian Design Regulations. He agreed to buy a car from the appellants and signed a buyer's order which contained a condition that no guarantee or warranty of any kind whatsoever was given by the company. However, the respondent only bought the car on the representations of the appellants' salesman that the car conformed to the Australian Design Regulations. The car supplied did not comply with the regulations and the respondent had to sell the car for $6,500 thereby incurring a loss of $11,219.54 ($17,719.54-$6,500). The respondent also lost the fiscal advantage of importing the car to Australia duty free. The respondent claimed damages for breach of warranty. The learned trial judge found that there had been a warranty and this was breached by the appellants. He awarded general damages of $10,500 with interest at 8% from the date of the writ to the date of payment and costs of the suit at the subordinate court scale. No special damages were awarded as these were not pleaded, and an application for amendment of the pleadings was refused. The appellants appealed to the Federal Court contending that they were not liable or that the damages were too high while the respondent cross-appealed on the ground that the damages were too low and that he was entitled to interest from the date of accrual of the cost of action and to costs of the suit at the High Court scale and to special damages. At the hearing of the appeal, counsel for the appellants accepted the findings of fact by the learned trial judge. The appeal was therefore confined to legal issues on liability and quantum only.

Held: (1) there can be no doubt that it was the representations of the salesman expressed by words and conduct that led the respondent to enter into the agreement to purchase the car. There was abundance of evidence showing that the representations were not innocent and on the contrary could even be considered to be deceitful or plain lies; (2) there was clear evidence that had it not been for the promise of the salesman to deliver him a car complying with the Australian Design Regulations, the respondent would not have signed the buyer's order; (3) the representations made by the salesman was binding on the appellants. It would lead to great mischief in the law and certainly would not be in the interest of business efficacy if representations made by a salesman in the course of his employment could not be relied upon by an intending purchaser whom he was dealing with; (4) the prohibition against admissibility of evidence under s 92 of the Evidence Act 1956 (Act 56) only applies where all - as opposed to some only - of the terms of the contract are written into the agreement. Thus where some terms are given orally and some in writing, oral evidence can be given to prove the terms agreed to orally; (5) where the oral representations as in this case are in conflict with the printed condition in the written contract, the representations must be given an overriding effect and the printed condition must therefore be rejected; (6) it made no difference in this case whether the English Sale of Goods Act 1893 or the English Sale of Goods Act 1979 applies in Penang. It was not necessary or relevant to decide the question as to which of the two English Sale of Goods Act is applicable; (7) the amount of damages which should be awarded in this case should be the financial loss directly suffered by the respondent as a result of dealing with the appellants, ie $11,219.54; (8) it was just and proper in this case that the learned trial judge should allow the amendment of the pleading to enable special damages to be awarded. On the basis of the evidence, special damages of $2,341.35 should be awarded; (9) the costs in this case should be fixed at High Court scales as the case involved difficult questions of law, especially on the question of warranty and measure of damages; (10) interest is a matter of discretion and on the facts of the case the learned trial judge was not in error to order interest to run from the date of the writ.

Tan Chong & Sons Motor Co (Sdn) Bhd v Alan McKnight [1983] 1 MLJ 220 Federal Court, Ipoh (Wan Suleiman, Salleh Abas and Abdul Hamid FJJ).

The plaintiff, a businessman, was a subscribing member of a gymnasium known as 'Gold's Gym Singapore'. The defendants were the shareholders and directors of the company, Gold's Gym Singapore Pte Ltd, which owned and operated the gymnasium. The internationally renowned mark 'Gold's Gym' was owned by Gold's Gym Enterprise Inc of USA (the principal). The first defendant had a licence from the principal to use the name. This action arose out of an agreement made between the plaintiff and the defendants on 20 September 1989 for the purchase of the major part of the defendants' shares in the company and for the plaintiff's investment in the company. On 22 March 1990, the plaintiff returned the shares to the defendants and transferred control of the company and the gymnasium back to them. By returning the shares which the defendants accepted, the plaintiff effectively rescinded the agreement. The plaintiff's case was that he did so because: (a) the defendants had misrepresented to him in the discussions leading to the agreement that (i) only about S$120,000 was owed to Concept Design Contracts when in fact the amount owed was more; (ii) the list given to him of the company's sundry creditors was accurate and complete and that the amount owed to these creditors was approximately S$50,000 when it was not; (iii) the first defendant continued to hold a licence from the principal which entitled the company to the use of the principal's mark 'Gold's Gym' when he did not; (b) the defendants as the directors and shareholders of the company made these representations (i) fraudulently in that they knew them to be false or recklessly not caring whether they were true or false; (ii) further or in the alternative, negligently pursuant to s 2(1) of the Misrepresentation Act 1967 [UK], without any reasonable basis for believing that such representations were true; (c) he was induced by these representations to enter into the agreement and injected money into the company. The defendants deny the allegations of fraudulent and negligent misrepresentations. Their case essentially was that the plaintiff had agreed to purchase the shares and to invest money in the company based on its healthy membership base and the revenue the company was generating and not because of any licence the first defendant might have had enabling the company to use the mark 'Gold's Gym'. They further claimed that although the licence was mentioned during the discussions, this was not a representation and also these statements were true because all royalties had been paid and there was a subsisting licence. The defendants further denied any misrepresentation either as to the amounts owed to Concept or the accuracy of the list of the company's sundry creditors.

Held, allowing the claim: (1) (d) as a result, he has suffered loss and damage. Where the claim is for fraudulent misrepresentation, the plaintiff has to go further to prove that at the time of the making of the said representations, the defendants did not believe in the truth of the said representations or that they had recklessly not cared if the same were true or false. The standard of proof required in civil cases is generally expressed as proof on a balance of probabilities. The degree of probabilities will vary from case to case; (2) having considered the evidence adduced by the parties the court concluded that the defendants did make the representation that the list of the company's sundry creditors was accurate and complete and that the statement that the first defendant held a valid licence from the principal was made. The defendants' evidence was an amalgam of non-disclosure, evasiveness, half-truths and illustrated the manner in which they conducted the discussions and made the representations; (3) these representations were untrue. As to the list of creditors, the defendants did not deny that a number of creditors had not been included in the list. The first defendant admitted that in the absence of proper audited accounts, which they had not had since 1986, he could not have been certain of the true financial position of the company, who its creditors were and what amounts were owed by the company. The defendants admitted that the list of creditors had been hastily prepared by the gymnasium manager. If the defendants, as directors and shareholders of the company, did not themselves know the true financial position of the company, how could they possibly have expected the gymnasium manager to know? Therefore, they had no basis for representing that the list was accurate and complete and that the amount owed was about S$50,000; (4) the licence had been terminated on 1 May 1989 as stated in a letter from the principal's USA solicitors. It had not been renewed since. The royalty had to be paid in advance to renew the licence and the fact that the defendants did not do this was evidence not only that they could not have honestly believed the first defendant held a valid licence but also that they were negligent in assuming, if they did, that there was a valid licence. The statements as to the subsistence of the licence were more than just a mention as claimed by the defendants. They were representations of fact intended by the defendants to induce the plaintiff to buy the shares and to inject capital into the company. This was a franchise business and it must be axiomatic for any such undertaking that there is a valid licence in place. It was clear on the evidence that the plaintiff would not have continued with the discussions and signed the agreement if there was any doubt that the licence was valid; (5) thus, on the evidence both defendants knew that the list of creditors was not exhaustive and that they were recklessly not caring whether the completeness of the list was true or false and whether the first defendant's licence remained valid; (6) in a claim for misrepresentation, the plaintiff has to prove that: (a) representations of fact were made to him by the defendants; (b) these representations were meant to induce and did induce him, in the context of the case, to enter into the agreement to purchase the shares and to invest in the company; (c) these representations were false and untrue;s 2(1) of the Misrepresentation Act effectively imposes liability in damages for negligent misrepresentation and reverses the normal burden of proof by requiring the presenter to disprove his negligence. In this case, the defendants had made the representations negligently and had failed to discharge the burden of proving that they did have reasonable grounds to believe that these representations were true. Parties wishing to sell a business undertaking based on a franchise must ensure the validity of the licence conferring the franchise.

Chan Cheow Kiat v Teng Hoon Keng & Anor Suit No 234 of 1991 High Court, Singapore (Christopher Lau JC).

The respondents were engaged by the appellants on the strength of a letter, part of which read: 'We work under the name of Sylvia Martin and Bill Currie and are a top flight cabaret in Europe etc, this being our first trip East. Our engagements in London include every top spot such as the ... etc, ... in Paris, ... New York, ... Hollywood, ... etc. We are radio and TV stars of many years standing, both writing and acting.' On the respondents' act turning out to be unsuccessful, the appellants repudiated the contract on the ground that it had been induced by fraudulent misrepresentation on the part of the respondents. The respondents brought an action for arrears of salary. The Court of Appeal (2 MC 255) held, affirming the decision of the trial judge, that although the respondents' representations of fact were substantially false, the distortion was not intended to deceive, nor did it induce the contract or enhance the loss. On appeal to the Privy Council,

Held: the appellants had not discharged the onus of establishing fraudulent intention.

Hotel de L'Europe Ltd v WD Currie-Fryer & Anor [1956] 3 MC 89 Privy Council Appeal from Singapore (Earl Jowitt, Lord Oaksey, Lord Tucker and LMD de Silva).

In this action, the plaintiff, an illiterate Indian woman rubber tapper, claimed against the defendant a declaration and rescission of an agreement of sale dated 7 January 1977 and other documents executed by her, on the ground of false or fraudulent misrepresentation on the defendant's part relating to her land, Lot 736, District of Port Dickson. She also claimed damages and interest. The defendant, a housing developer, denied the claim and counterclaimed for specific performance and damages. The parties listed six issues for determination by the court. The plaintiff sought to prove that the defendant with the aid of his advocate and solicitor had taken unfair advantage of her ignorance. The defendant had fraudulently misrepresented to her that she had to sign some documents, which were in the English language, for the loan she took from him and for the discharge of charge. She executed these documents not knowing she was in fact signing a sale agreement relating to her land and three other agreements for the purchase of three sub-lots in her own land. The defendant, however, contended that the documents in question were properly witnessed by his solicitor who had explained them to the plaintiff.

Held, allowing the claim and dismissing the counterclaim: (1) the plaintiff had proved fraudulent misrepresentation, the truth of which the defendant did not believe in. The six issues must be answered in favour of the plaintiff; (2) the agreement of 7 January 1977 relating to the sale of the land and the three agreements to the three sub-lots must be rescinded; (3) the plaintiff is entitled to damages for her losses arising out of the fraudulent misrepresentation by the defendant; (4) the defendant must not benefit from his fraudulent misrepresentation, and specific performance and damages claimed by him must be refused. Observations on the duty of an advocate and solicitor in a transaction.

Letchemy Arumugan v N Annamalay [1982] 2 MLJ 198 High Court, Seremban (Wong Kim Fatt JC).

In this case, the defendants had made a successful bid for a tournadozer which was described in the auctioner's list as being in good condition. The written contract of sale contained a condition that the lots were sold as they lie with all faults and errors of description. After the sale the defendants alleged that the tournadozer was not in good condition. It was subsequently resold and the plaintiffs thereupon claimed the sum of $3,905.50 being the difference on the resale and costs. The defendants pleaded that there was innocent misrepresentation on behalf of the plaintiffs that the tournadozer was in good condition or alternatively that there had been fraudulent misrepresentation by the auctioneers on behalf of the plaintiffs.

Held: (1) on the facts there was no fraudulent misrepresentation on the part of the plaintiffs or their agents; (2) even if there had been innocent misrepresentation the remedy for it was damages for breach of warranty and not rescission, and as no claim for damages was made in this case by the defendants, the court could not come to any finding on it; (3) the plaintiffs were therefore entitled to damages for breach of contract.

Malayan Miners Co (M) Ltd v Lian Hock & Co 1965 High Court, Singapore (Winslow J).

Maria Chia Sook Lan v Bank of China 1975 Privy Council Appeal from Singapore (Lord Simon of Glaisdale, Lord Morris of Borth-Y-Gest, Lord Salmon, Lord Fraser of Tullybelton and Lord Russell of Killowen).

See CONTRACT, Vol 3, para 2070.

See contract, para IV [28].

Bank Industri Malaysia Bhd v Huston Electronics Co (M) Sdn Bhd & Ors [1997] 1 MLJ 818 High Court, Kuala Lumpur (Kamalanathan Ratnam JC).

Chan Chor Tng & Ors v Housing & Urban Development Co (Pte) Ltd 1980 High Court, Singapore (Wee Chong Jin CJ).

See CONTRACT, Vol 3, para 3038.

The appellant company sold a diesel engine to the respondent under a written contract which stated 'delivery four to six months ex works UK'. The assistant manager told the respondent this meant the engine would arrive in Sandakan in four to six months from the date of the contract. The engine did not arrive until later and the respondent refused delivery and claimed to be entitled to rescind the contract.

Held: the statement of the assistant manager was an innocent misrepresentation on which the respondent was entitled to rely, notwithstanding the terms of the written contract. The respondent was therefore entitled to rescind the contract.

New Borneo Merchant Co Ltd v Hajad bin Ibrahim 1960 Supreme Court, Sarawak, North Borneo and Brunei

X, the customer, agreed with D to buy on hire purchase a second-hand car for £7,600, of which a deposit of £1,200 was to be paid. P, which finance hire purchase sales, had a policy that it would not accept a hire purchase transaction unless the deposit represented at least 20% of the total price. In a proposal submitted to P, D mis-stated that the total price of the car was £8,000 and that a £1,600 deposit had been paid by X. X wrongfully sold the car. P brought an action claiming, inter alia, damages from D for innocent misrepresentation under s 2(1) of the Misrepresentation Act 1967. The judge assessed damages at £1,600, on a basis, which neither side sought to uphold, involving a hypothetical sale of the car. D appealed and P cross-appealed.

Held, dismissing the appeal and allowing the cross-appeal: (1) the right measure of damages under s 2(1) was the tortious measure; (2) that measure was that for fraudulent misrepresentation and not that for negligence at common law. P was entitled to recover all losses flowing from the misrepresentation, including unforseeable losses, provided they were not too remote; (3) since it was reasonably forseeable by D that X might wrongfully sell the car and P thereby suffer loss which it did, the sale by X was not a novus actus interveniens and did not break the chain of causation; (4) accordingly, judgment would be entered for P for damages of £3,625.24 plus interest.

Royscot Trust Ltd v Rogerson & Anor [1991] 3 All ER 294 Court of Appeal, England (Balcombe and Ralph Gibson LJJ).

Pursuant to an agreement of 7 October 1974, the plaintiffs agreed to buy from the defendants an office for the price of $350,020 on the basis of $220 per sq ft. The First Schedule annexed to the said agreement stated that the area of the office was 1,591 sq ft. Clause 27 of the agreement referred to the area as 'an estimate'. The office purchased by the defendants was then known as unit 505. In May 1975, the plaintiffs requested a brick partition wall to be erected in the office. Thereafter the office became two units known as units 505/505A. By a letter dated 11 November 1976, the defendants informed the plaintiffs that the total area purchased by the latter was 1888 sq ft. The price of the extra 297 sq ft at the rate of $220 per sq ft would be $65,340. Subsequently, several correspondence ensued between the parties in which the plaintiffs made it clear that they wished 'to resile from the contract'. The plaintiffs had paid the defendants $315,018 leaving 10% of the purchase price still unpaid. The issue before the court was whether the plaintiffs were entitled to rescind the agreement when they were told that the area of the premises was 1888 sq ft and not 1591 sq ft. The defendants argued, inter alia, that they had, at the request of the plaintiffs, sub-divided the premises into two units by constructing a brick wall and in consequence the plaintiffs were not entitled to a remedy and that rescission was not the appropriate remedy.

Held: (1) there had been a misdescription of the premises due to carelessness on the part of the defendants. The plaintiffs had been greatly prejudiced by the said misdescription and had every right to rescission; (2) there could be no question of waiver in this case as the partitioning of the premises was carried out more than one year before the plaintiffs were informed of the increased area.

Asia Commodity Traders Pte Ltd v Fook Hai Development Pte Ltd 1978 High Court, Singapore (Chua J).

The appellants were the owners of a shopping complex in Orchard Road, and the respondents were the operators of a cafe in Holland Village. In 1989, the respondents sought a location along Orchard Road which would attract 'pedestrian traffic' with a view to expanding their business. They became interested in three adjacent units on the ground floor of Forum Galleria, which were in fact located below the road level of Orchard Road. There was a 'sunken pedestrian mall' which ran between Forum Galleria and the side walk of Orchard Road, and the units were located on the same level as this 'mall'. Access to the 'mall' from Orchard Road was by a flight of steps. There was, however, a brick wall extending upwards from the side of the 'mall' which obstructed the view of the units from the sidewalk of Orchard Road. The respondents felt that the brick wall would curtail exposure of the cafe to the pedestrians along Orchard Road. In the course of negotiations between the parties, the appellant's leasing manager, relying on what her principal had told her, told a representative of the respondents that the brick wall would be replaced by glass panels by the end of 1990 (the representation). As a result, in February 1990, the respondents took a tenancy of the premises for a term of three years. As it turned out, the brick wall was never taken down. On 1 February 1991, the respondents commenced proceedings for rescission of the lease ab initio, on the ground of misrepresentation, and for other consequential losses including loss of profit and the cost of renovating the demised premises. They vacated the premises altogether on 20 July 1991 but rent was only paid up to 31 January 1991. The appellants, on the other hand, commenced proceedings for arrears of rent and damages for wrongful repudiation of the lease. In the High Court, the trial judge found that the respondents were induced to enter into the lease by the misrepresentation that the brick wall would be replaced by a glass wall. He allowed the claim for the rescission of the lease ab initio, and ordered the return to the respondents of the deposit, and all rent and service charges paid, but disallowed the claim for other consequential losses. This was the subject of CA 167/93. The respondents filed a respondent's notice against the dismissal of the claim for consequential losses. At the same time, the trial judge dismissed the appellant's claim for arrears of rent and damages for wrongful repudiation of the lease. Against this decision, the appellants appealed vide CA 168/93.

Held, varying the orders with respect to CA 167/93 and allowing the appeal in CA 168/93 in part: (1) on the evidence, the knowledge the leasing manager had when she made the representation was founded on a tentative expectation, and not on any factual basis. The representation was clearly false when it was made, albeit innocently, and had induced the respondents into entering the lease agreement. As a result, the respondents were entitled to a rescission of the lease and to an indemnity in respect of all obligations under the lease; (2) the principle to be applied on a rescission of a contract on the ground of innocent misrepresentation is restitutio in integrum. The respondents were entitled to a refund of the deposit paid under the lease and all rents and service charges paid up to 31 January 1991. The commission paid to the property agent was not contingent on the respondent's obligations under the lease and was therefore not recoverable. However, the claim for expenses incurred in setting up the premises for business should be allowed. At the same time, the respondents were to account for the profits made from the use of the premises up to 31 January 1991, as it would not only be inequitable but also unconscionable for the respondent not to have to pay rent for the use of the demised premises and yet retain the profits from the use of the premises, notwithstanding the appellants' innocent misrepresentation; (3) as a matter of 'practical justice', the appellants had a right to be compensated for the use of and occupation of the demised premises from 1 February to 20 July 1991. A proper measure of the compensation would be a sum equal to the rent and service charges payable under the lease.

Forum Development Pte Ltd v Global Accent Trading Pte Ltd and another appeal [1995] 1 SLR 474 Court of Appeal, Singapore (Yong Pung How CJ, Karthigesu and LP Thean JJA).

In this case, the appellant had entered into an agreement on 14 August 1968 to take a loader on hire purchase as hirer with the first respondent as dealer and the second respondent as owner. He was given a written guarantee by the first respondent for a period of six months against faulty parts and for the supply of spare parts. The machine developed faults when put to use and this necessitated repairs and replacement of some parts. The appellant alleged that certain fraudulent misrepresentations were made to him which led to his entering into the hire-purchase agreement and he purported to rescind the contract of sale. The machine was repossessed by the first respondent on behalf of the second respondent on 6 October 1969 as six instalments under the hire-purchase agreement were due. The appellant instituted proceedings for declarations that the contract of sale had been rescinded, for the refund of money paid by him and for damages for breach of warranty by the respondents. The respondents traversed these allegations and the first respondent counterclaimed for the payment of moneys due to it under the Hire Purchase Act 1967 (Act 212) and for work done and spare parts supplied to the appellant. The learned trial judge gave judgment for the appellant against the first respondent for breach of warranty and undertaking in the sum of $2,250, dismissed the appellant's claim against the second respondent and on the first respondent's counterclaim awarded the sum of $17,772.24 under s 15(5) of the Hire Purchase Act 1967 and a further sum of $202.10 for the cost of articles supplied but not under the warranty relating to faulty parts. The appellant and the first respondent appealed and cross-appealed against the decision of the learned trial judge.

Held, dismissing the appeal and counter-appeal: (1) there was no active duty on the first respondent's part to inform the appellant of the year of manufacture of the machine and the fact that it had been involved in a minor accident in a previous demonstration. These two matters were not material in the sense that non-disclosure was intended to deceive the appellant or to induce him to enter into the hire-purchase transaction; (2) the breach of warranty against faulty parts contained in the written guarantee of the first respondent did not give rise to a right to rescind the hire-purchase agreement but to a claim for damages. The right of action for damages would lie only against the first respondent; (3) on the facts the learned judge was correct in finding that it was never represented to the appellant that the machine was in fact manufactured in 1968; (4) the learned judge was also right in concluding that the machine in question was new and not secondhand merely because it had been used once previously for demonstration and had been involved in a minor accident and there was therefore no misrepresentation by the first respondent on this point; (5) there was a breach by the first respondent of the warranty contained in the written guarantee but this did not entitle the appellant to rescind the agreement but only to damages therefor; (6) the learned trial judge was correct in awarding $17,772.24 under the Hire Purchase Act and $202.10 for spare parts not covered by the guarantee.

Lau Chee Teah v Hargill Engineering Sdn Bhd & Anor [1980] 1 MLJ 145 Federal Court, Ipoh (Raja Azlan Shah CJ, Salleh Abas FJ and Abdoolcader J).

The plaintiffs were a company providing hire-purchase financing. On 17 May 1983 the plaintiffs had sold a yacht to a company, CMCS, by way of lease. The first and second defendants signed as guarantors in their alleged capacity of directors of CMCS. The company defaulted in its repayments and the plaintiffs demanded payment. At this time the plaintiffs also discovered that CMCS was not a company, as previously represented to them by the first defendant, but a partnership. The plaintiffs repossessed the yacht and had it sold. On 6 May 1987 the plaintiffs issued process against both defendants alleging misrepresentation. The second defendant did not enter an appearance and judgment was entered against him with damages to be assessed. The first defendant contested the claim. At trial he denied that he had represented CMCS as a company in existence in Singapore. He claimed that he had signed the guarantee as a favour to the second defendant. He also claimed that the guarantee was invalid as there was no principal debtor.

Held, entering judgment for the plaintiffs with damages to be assessed: (1) it was clear from the first defendant's evidence that he knew he was to be CMCS's guarantor for the lease as this had been told to him by the second defendant. The first defendant agreed under cross-examination that he would have acted as guarantor if the second defendant and not CMCS had been the lessee. The first defendant therefore could not complain that he did not know the full implication of his obligations; (2) the evidence clearly showed that the plaintiffs were led to believe that CMCS existed and that the first defendant would be working for the company; (3) there was negligent misrepresentation on the part of both defendants; (4) just because there was no principal debtor did not mean that the first defendant was not liable under the guarantee. The lease was a pre-incorporation contract under s 41(1) of the Companies Act (Cap 50) and the second defendant was personally bound under s 41(2) thereof prior to incorporation. The second defendant was equally liable under common law; (5) as the second defendant had defaulted under the lease both as principal debtor and as guarantor, it followed that the first defendant was liable to the plaintiffs as guarantor for the second defendant's principal obligations under the lease and also as the latter's guarantor; (6) the first defendant's evidence that he did not know CMCS was not incorporated when the lease was signed was not accepted. The first defendant was therefore also liable to the plaintiffs for breach of warranty.

Probo Pacific Ltd v Quah Poh Hoe Peter & Anor (1992) CSLR III[252] High Court, Singapore (Lai Siu Chiu JC).

The present claim involved the first plaintiff and the defendants. The first plaintiff owned a house and land in Kuching, North Land District. The first defendant was the owner of land at Sibu. The second defendant was the husband of the first defendant. On 14 February 1974, two brokers met the plaintiff. They wanted to buy his house and at the same time, they wanted to sell him a piece of land described to him as 'near the airport at Sibu'. The price was $75,000. On 15 February 1974, the brokers returned with one Siew who offered to buy the Sibu land for $94,000. Subsequently, the plaintiff met the first defendant who agreed to buy the plaintiff's house at $38,000 (from the proceeds from the sale of her Sibu land to the plaintiff). The plaintiff then instructed his solicitor to make a search on the title to the Sibu land. An agreement was also made between the plaintiff and Siew in which the latter agreed to purchase the Sibu land at the price of $94,000. On 16 February 1974, the plaintiff instructed his solicitor to prepare the document of transfer of the Sibu land to him after, he said, the first defendant had assured him that the land was 'near the Sibu airport'. He also instructed the solicitor to prepare another document transferring his house to the first defendant. Both transfers were completed and executed and payment of $37,000 was made to the first defendant. Siew, however, never appeared to take the transfer of the Sibu land. The plaintiff, on the other hand, discovered subsequently that the land was eight to nine miles away from the Sibu airport. The issue before the court was whether the plaintiff had acted on the alleged misrepresentation when he decided to buy the Sibu land.

Held, dismissing the plaintiff's claim: (1) there was no representation in any way made by the first or second defendant at the stage of negotiation which induced the plaintiff to purchase the Sibu land; (2) the plaintiff had earlier instructed his solicitor to investigate that title and in consequence of this investigation he was advised that the Sibu land was a good buy; (3) the defect on which the plaintiff sought to rely was a patent defect of quality of the land he purchased which was discoverable by inspection and ordinary vigilance on the part of the purchaser; (4) the plaintiff in this case had chosen not to inspect the land before executing the transfer with the first defendant in view of his other considerations in making a quick profit and in this regard he could not complain on discovering the defects after his venture with Siew had failed; (5) even assuming that the plaintiff relied on the description of the land as 'near Sibu airport' which induced him to purchase it, it was apparent from the evidence that he was not misled by that statement;based on the same facts, the first defendant's counterclaim should succeed and the transfer of the house and land in North Land District be effected in favour of the first defendant.

Wei Tah Construction (B) Co Sdn Bhd & Anor v Law Wun Ing [1981] 2 MLJ 157 High Court, Kuching (Yusoff Mohamed J).

The respondents were the developers of the development known as Amara Hotel. By an agreement in writing made on 30 December 1985, the respondents agreed to grant, and the appellants agreed to take, a lease of units #02-K1, #02-14 and #02-15 at the Amara Hotel. The appellants relied on a brochure issued by the respondents' agent, which described the Amara Hotel as a development which would have an array of reputable tenants including a Wendy's hamburger restaurant and a Yaohan Supermarket. Pursuant to the agreement, the parties executed the lease on 5 September 1986. The appellants took possession of the premises on 11 June 1986. No rent was charged until 1 August 1986. The appellants vacated the premises on 26 August 1987. During the period the appellants occupied the premises, they only paid the sum of S$4,000 for the rent, leaving the sum of S$45,400 unpaid as arrears of rent. The respondents issued process to recover the arrears of rent. In their defence the appellants alleged that as a result of certain oral representations made by the respondents, their servants or agent, they were induced into signing the agreement for a lease and they subsequently completed the said agreement by executing the lease. They claimed that they were therefore entitled to rescind the lease and counterclaimed for damages for misrepresentation. The misrepresentations relied on by the appellants were the statements that a fast food restaurant and a supermarket would be located at the development. No fast food restaurant or supermarket was located in the development. The respondents succeeded in the district court, the judge holding that the brochure was only an invitation to treat. The appellants' counterclaim was dismissed. They appealed.

Held, dismissing the appeal: (1) it was clear that the brochure was meant to represent that the Amara Hotel would have a supermarket, department store and a fast food chain.The respondents had also called oral evidence that representations were made by the respondents' marketing agent that there would be a supermarket and a fast food restaurant; (2) the traditional rule is that a representation must be a statement of fact, past or present, as distinct from a statement of opinion, or of intention, or of law. A mere statement of opinion which proves to be unfounded will not be treated as a misrepresentation. However, in certain circumstances a statement of opinion or of intention may be regarded as a statement of fact, and therefore as a ground for avoiding a contract if the statement was false; (3) the respondents as owners of the Amara Hotel were in a position to adopt a policy for the selection of tenants for the development and there must be implied the further representation that the respondents would carry out their intention, and in the circumstances of this case, the statement of opinion or future intention may be regarded as a statement of fact. The statement of intention in the brochure that the respondents or their marketing agents would choose reputable anchor tenants and restaurateurs to take up space at the development should be regarded as a statement of fact; (4) the representations that the respondents would choose a supermarket and a fast food restaurant as tenants were false. These representations had induced the appellants to enter into the agreement with the appellants and sign the lease; (5) the appellants were, however, not entitled to unilaterally terminate the lease and set up misrepresentation as a defence to the respondents' claim for arrears of rent as the appellants had affirmed the lease; (6) affirmation of a contract was complete and binding when the representee, with full knowledge of the facts and of the representation, either declares his intention to proceed with the contract or does some act from which such an intention may reasonably be inferred. The appellants knew of the misrepresentations at least in August 1986 and they did not pay rent after the first month. Instead of claiming rescission in August 1986 or soon thereafter, they continued to occupy the premises until 26 August 1987 when they vacated the premises. Soon after the appellants discovered the misrepresentation they did not write any letter to the respondents stating that they would move out immediately unless the rent was reduced or that they would affirm the lease and reserve their rights to sue for damages for misrepresentation. Having affirmed the lease, the appellants could not subsequently seek a rescission of the lease.

Song Ching Pte Ltd v Amara Hotel Properties Pte Ltd Civil Appeal No 8 of 1991 High Court, Singapore (Goh Phai Cheng JC).

The plaintiff/respondent had paid the sum of $20,000 to the defendant/appellant for five shares of the defendant's holdings in a firm of share and stock brokers. She alleged that the sum had been paid as a result of untrue representations as to the financial position and prospects of the firm. The plaintiff claimed the return of the sum of $20,000. The trial judge dismissed the claim but on appeal to the Court of Appeal, it was held that the plaintiff was entitled to rescind the contract and recover the sum paid by her ([1963] MLJ 43). On appeal to the Privy Council, it was argued that the plaintiff was not entitled to recover as (a) she had affirmed her contract and elected to treat it as binding after she became aware of the misrepresentation; (b) it was too late for her to rescind because it was not possible to make restitutio in integrum; and (c) she had acted as and had become a partner and her contract therefore had become an executed contract.

Held: (1) on the facts, the plaintiff was not entitled to recover on the basis that there had been a total failure of consideration as it was not shown the shares were valueless at the time she agreed to buy them; (2) the plaintiff was entitled to rescind the contract because of false representation and had elected to do so and she was therefore entitled to the return of the money paid by her; (3) in the present case there was no technical bar which prevented the plaintiff from succeeding in her claim. It was impossible to say on the facts that the plaintiff had affirmed the contract or that in any way she had precluded herself from taking the course that she adopted. The plaintiff had entered into a contract with the defendant and there was no difficulty about restitutio in integrum as between them. She could have her money back and his share in the partnership would not be diminished. The arrangement between the plaintiff and the respondent contemplated a continuing relationship and it would be inapposite to use the word 'executed' as being applicable to the contract they had made. The substantial questions were whether restitutio in integrum was substantially possible and whether rescission was timely and just and fair, and on the facts it was clearly possible for the defendant to effect substantial restitution and it would be unjust if the plaintiff could not rescind.

Senanayake v Annie Yeo [1965] 2 MLJ 241 Privy Council Appeal from Singapore (Lord Morris of Borth-Y-Gest, Lord Pearce and Lord Wilberforce).

Sheriffa Taibah bte Abdul Rahman v Lim Kim Som [1992] 2 SLR 516 High Court, Singapore (Michael Hwang JC).

See CONTRACT, Vol 3, para 2237.

Tay Tho Bok & Anor v Segar Oil Palm Estate Sdn Bhd [1996] 3 MLJ 181 High Court, Johor Bahru (Mohd Ghazali J).

See CONTRACT, Vol 3, para 2853.

The plaintiffs were real estate developers. In March 1990, the plaintiffs agreed in principle to purchase the defendant's landed residential property ('the subject property') for the consideration of S$2.7m. At the very last minute, the plaintiffs withdrew from the sale and purchase. The defendant was unhappy about this and when one SL, an estate agent, subsequently negotiated for the grant of an option to one HPL for the purchase of the subject property at S$2.025m, the defendant specifically asked if HPL was connected with the plaintiffs. SL informed him that HPL was purchasing the property for her own residential purposes and she was not connected with the plaintiffs. A similar representation was made by another estate agent, one YL, to the defendant's wife who conveyed the representation to the defendant. The option was subsequently granted to HPL and it provided that it could be exercised by HPL and/or her nominee. Later, the defendant learnt that the plaintiffs' representatives had been saying that they had an option to purchase the subject property and he revoked the option. On the same day, the plaintiffs purported to exercise the option as HPL's nominees. The plaintiffs sued for specific performance of the alleged agreement.

Held, dismissing the action: (1) on the facts, HPL was closely connected with the plaintiffs. The plaintiffs had deliberately used her name in order to purchase the subject property at a lower price. The plaintiffs had misinformed SL and YL with the intention that they should convey the misrepresentation to the defendant. As the defendant was induced by the misrepresentation to grant HPL the option, he was entitled to rescind the option and, if an agreement had come into existence, the agreement for the sale of the subject property; (2) the defendant could rely on the fact of the misrepresentation although he was not aware of it at the time he revoked the option; (3) the definition of 'director' in the Companies Act (Cap 50) applies to the term when it is used in the Residential Property Act (Cap 274). On the facts, the general manager of the plaintiffs, who was not a Singapore citizen, was a de facto director of the company even though he was not appointed as a director in name. A de facto director came within the definition of director in the Residential Property Act (Cap 274) and the plaintiffs were therefore a foreign company within the meaning of that Act. Accordingly, the plaintiffs could not enforce the agreement (if any) for the sale and purchase of the subject property; (4) (per curiam) a firm of solicitors will be in conflict of interest if there was reasonable anticipation or likelihood that allowing them to act for a party would lead to mischief; (5) (per curiam) an amendment to the defence may be allowed even though it is made only after the close of the plaintiffs' case if it does not cause any prejudice which cannot be compensated for in costs and the fact to be pleaded had been set out in an affidavit filed in the proceedings and had been put to the plaintiffs' witness in cross-examination; (6) (per curiam) a witness will only be called by the court if both the plaintiffs and the defendants consent; (7) (per curiam) evidence in rebuttal will only be permitted to a plaintiff (i) if a matter or a development arose quite unexpectedly during trial and could not reasonably have been anticipated; or (ii) in answer to evidence of the defendant on an issue on which the defendant bears the burden of proof.

Alrich Development Pte Ltd v Rafiq Jumabhoy [1994] 3 SLR 1 High Court, Singapore (Chao Hick Tin J).

The appellants were a company incorporated in Singapore. The appellants received clearance from the Controller of Residential Property permitting them to acquire and retain residential property subject to all the members of the appellants being Singapore citizens. The shareholders and director of the company were at the material time Singapore citizens. Lim, the general manager, was, however, the man in control of the appellants. He was not, at the material time, a Singapore citizen. Sometime around March 1990 the respondent agreed to sell a residential property, 36 Ewe Boon Road (36 EBR), to the appellants for S$2.7m. However, the appellants withdrew from the purchase before a binding contract was concluded. In June 1990, the respondent, acting through an attorney, granted to one Ho an option to purchase 36 EBR for S$2.025m on payment of 2% of the purchase price as option fee. The option, which was entered into following the efforts of two real estate brokers, SL and YL, contained a nominee clause under which Ho could nominate someone else to exercise the option. It was signed on behalf of the respondent by his attorney in his absence. Prior to the expiry of the option, the respondent purported to revoke the option. That was not accepted by Ho, who nominated the appellants to exercise the option. The respondent rejected the appellants' exercise of the option. The appellants then claimed specific performance of the contract and/or damages. The respondent resisted the claim, alleging that misrepresentations were made by SL and YL on behalf of Ho and/or the appellants that the purchaser was an elderly lady purchasing 36 EBR for her own occupation and that the appellants were not involved in the purchase. Alternatively, the respondent claimed that the option had been revoked prior to acceptance and was incapable of acceptance by the appellants as they were not privy to the option. The respondent claimed that there was no sufficient note or memorandum of agreement signed by the respondent or his authorized agent. Lastly, the respondent claimed that Lim was at the time a de facto director of the appellants and that the appellants, being a 'foreign person' within the meaning of s 2(1) of the Residential Property Act (Cap 274) (RPA), were thereby prohibited from acquiring any interest in 36 EBR. The trial judge held that the misrepresentations from SL and YL originated from the Lim, so the respondent was entitled to rescind the option granted to Ho and the agreement made with the appellants. Alternatively, the purported purchase by the appellants of 36 EBR was null and void under the RPA. (See [1994] 3 SLR 1.) The appellants appealed.

Held, dismissing the appeal: (1) there was no evidence that SL's misrepresentations originated from Wan or that Wan made use of him and YL as a conduit to transmit the misrepresentations to the respondent; (2) although YL's representations originated from the appellants, the representations were not material for inducing the respondent to grant the option. It was clearly not material to the respondent that the purchaser was an elderly lady who intended to buy the property for her own occupation. What was material to them was that the appellants were not involved in the purchase. There was no evidence that YL denied this; (3) in any event, the respondent must be taken to have agreed to the nominee clause and was bound by it since the option was signed on his behalf and there was no evidence that the respondent had been dissatisfied with the presence of the nominee clause and had sought a rectification of the option or of that clause. The inference was therefore that the respondent was happy with the option which contained the nominee clause. The presence of such a clause wiped out the materiality of the representations made by YL. Accordingly, the defence of misrepresentation failed; (4) what the appellants were seeking to enforce was not the option, but the sale and purchase agreement. If Ho had wanted to avail herself of the benefit of the option after the respondent had revoked it, all she had to do was to exercise the option and the respondent would be bound. If she then sued for specific performance, she sued on the sale and purchase agreement. The option and the sale and purchase agreement were one. The revocation of the option by the respondent was a unilateral repudiation of that contract. Such a repudiation, unless accepted, had no effect. In this case, the repudiation was not accepted and therefore survived, and could be exercised in accordance with its terms; (5) the exercise form signed on behalf of the appellants was contained in and formed part of the option, as was the nomination form which was signed by Lim on behalf of Ho. Both documents were stipulated in the option as part and parcel of the mechanism by which a person could be nominated by Ho and by which the option could be exercised. In these circumstances, it was a sufficient memorandum in writing evidencing the sale and purchase agreement if the option was signed by or on behalf of the respondent; (6) the penal provisions in the RPA were designed to bolster the operation of the Act. Thus it was wrong to allow a consideration that penal provisions must be construed strictly to defeat the very purpose of the statute these provisions were meant to support; (7) whether it was permissible in the interpretation of the RPA to refer to the Companies Act (Cap 50, 1994 Ed) for the purpose of ascertaining the meaning of the word 'director' depended on whether the word 'director' was used in the same sense in the two statutes. In this connection, while it was true that the two statutes dealt with different subject matters - the RPA was designed to prevent foreigners from dealing and speculating in certain residential property in Singapore, while the Companies Act was largely concerned with the constitution, administration and regulation of companies - where the sections of the RPA referred to a director, those sections dealt with the persons in control of a company, which matter was properly within the ambit of the Companies Act. The word 'director' in the RPA therefore had the same meaning as that given to it in s 4(1) of the Companies Act. On this definition, Lim was a director of the appellants, and the appellants were not, at the material time, a Singapore company under the RPA; (8) the contract between the appellants and the respondent was therefore an illegal contract and was void and the appellants could not enforce it against the respondent. The twin maxims ex turpi causa non oritur actio and in pari delicto potior est conditio defendentis applied. The appellants, having contravened the provisions of the RPA and having failed to comply with the terms or conditions of the certificate from the Controller of Residential Property, could not rely on such certificate to enforce a contract for the purchase of a residential property against the vendor; (9) (per curiam) the certificate issued by the Controller under s 10(3) of the RPA was intended for the benefit of outside parties, such as purchasers or vendors, dealing with a Singapore company. It constituted prima facie evidence that the Singapore company (described therein) had complied with the RPA and remained as such. The certificate could therefore be relied upon by such parties dealing bona fide with that company and without notice of any breach by that company of the provisions of the RPAl; (10) even if a company purporting to be a Singapore company had acquired illegally a residential property, such acquisition need not necessarily be void and a subsequent purchaser from that company could acquire a good title. This was the necessary implication from s 14(2) of the RPA. On the basis of this provision, a conveyance or transfer of a residential property to a non-Singapore company in the situation contemplated in s 14(2) would not be null and void with the consequence that no title passed to the company; (11) in the case of residential property governed by the Land Titles Act, if a company purporting to be a Singapore company had illegally purchased a residential property, then upon registration of the transfer in its favour, it became a registered proprietor. As such, it could thereafter pass the title of the property to a subsequent purchaser.

Alrich Development Pte Ltd v Rafiq Jumabhoy [1995] 2 SLR 401 Court of Appeal, Singapore (LP Thean JA, Goh Joon Seng and S Rajendran JJ).

At a sale by auction of landed property, the defendant bid a lump sum for a lot containing an area of over 15 acres and it was knocked down to him. On discovering that his bidding had been accepted as being by the acre and not for the whole area, he refused to sign the contract, whereupon the auctioneers signed it as 'his agent'. The printed particulars, conditions and annexed form of contract had been prepared for a sale of the land as a whole, and the biddings were prior to the land put up being announced by the auctioneers verbally to be according to acre, but by inadvertence such statement was not referred to in the printed particulars, conditions and form of contract.

Held: (1) that the omission to state in the printed particulars, condition and form of contract that the land was to be sold by the acre was material and that the particulars and conditions were misleading; (2) that the plaintiff had failed to show that the defendant was not actually misled, and that there was no consensus ad idem to support an action by the vendors for breach of contract.

Yeo Jee Neo & Anor v Chia Ong Tin [1904] 8 SSLR 76 High Court, Straits Settlements (Hyndman-Jones J).

Where the plaintiffs paid money to the defendants with a view of getting back certain title deeds deposited with the latter by a third party without the authority of the plaintiffs, and the defendants misunderstood the purpose for which the payment was made,

Held: as there was no mutual agreement between the parties and hence no contract, the plaintiffs were entitled to recover the money paid by them under a mistake of fact.

Tan Hong Tee & Co v P & O Banking Corp Ltd [1932] MLJ 68 Court of Appeal, Straits Settlements (Murison CJ, Terrell and Burton JJ).

On or about 13 January 1981, the defendants/respondents sold to the plaintiffs/appellants 543 bags of cummin seeds for $75,051.60. The plaintiffs claimed to have negotiated from the defendants a 10% discount of the purchase price. Accordingly, the plaintiffs paid the defendants $67,545.90 less $7,505.70, representing the discount. The defendants appeared to have accepted the payment. On 30 January 1982, Exim Agencies Pte Ltd ('Exim'), an associate company of the plaintiffs, agreed to sell to the defendants 188 bags of Turkish gallnuts for $53,942.40. The invoice was by mistake made out in the name of the plaintiffs as the vendor. The defendants did not consider a rectification necessary and accordingly paid the plaintiffs $46,438.70. They refused to pay the balance of $7,505.70, contending that it was a set-off from the plaintiffs' debt to them in an equivalent amount as the balance of the purchase price for the cummin seeds sold to the plaintiffs in January 1981. The learned district judge dismissed the plaintiffs' claim for this amount as he held that the contract was made between Exim and the defendants and the plaintiffs were not 'a party privy to this contract', and there was no evidence of any novation of the contract. The plaintiffs appealed.

Held: (1) the court cannot decide on issues not raised in the pleadings; (2) plainly the parties, namely Exim, the plaintiffs and the defendants, must be taken to have agreed that the contract was to be treated as having been made between the plaintiffs and the defendants. There was a novation of the contract and the parties intended that the contract was between the plaintiffs and the defendants; (3) parties are bound by their pleadings and by the agreement or admissions made in court;on the basis of the pleadings and the agreement reached between the parties in court, the burden of establishing the set-off rested squarely with defendants. The defendants had failed to discharge the burden.

Panachand & Co (Pte) Ltd v Riko International Pte Ltd [1986] 1 MLJ 294 High Court, Singapore (Thean J).

Maria Chia Sook Lan v Bank of China 1975 Privy Council Appeal from Singapore (Lord Simon Glaisdale, Lord Morris of Borth-Y-Gest, Lord Salmon, Lord Fraser of Tullybelton and Lord Russell of Killowen).

See CONTRACT, Vol 3, para 2070.

3 [2703] CONTRACT Mistake – Mistake of fact – Restitutio in integrum – Whether contract will be set aside if misrepresentation not fraudulent or fundamental – Rolled Steel Products (Holdings) Ltd v British Steel Corp & Ors [1986] 1 Ch 246 (refd) Solle v Butcher [1950] 1 KB 671 (folld) Torrance v Bolton (1872) 8 Ch App 118 (refd)

The fourth defendant was the director and shareholder of the first, second and third defendants which are all companies. In August 1980, the plaintiffs granted credit facilities to the first defendants, a company dealing in electrical goods for up to S$3.6m. By early 1985, the first defendants were in financial difficulties. As such, Philips Singapore Pte Ltd, one of the first defendants' major suppliers, presented a winding-up petition and an order was consequently made for the compulsory winding-up of the first defen-dants on 16 August 1985. Philips also obtained a Mareva injunction against the fourth defendant restraining him from disposing of or dealing with his property. Sometime in April 1985, the plaintiffs agreed to extend banking facilities to the second defendants for the purposes of settling the first defendants' loan with the plaintiffs. These facilities were secured by two mortgages on the fourth defen-dant's properties. On 21 August 1985, the fourth defendant, as the authorized signatory of the second defendants, drew three cheques totalling S$3,534,502.02 on the credit facilities given to them in favour of the first defendants. The three cheques were then credited into the first defendants' account in settlement of their outstanding indebtedness. On 30 August 1985, the plaintiffs were informed by the Registry of Titles that the mortgage documents lodged earlier could not be registered as there was a subsisting caveat by Philips. Upon searching at the Registry of Titles and the Registry of the Supreme Court, the plaintiffs discovered the existence of the Mareva injunction against the fourth defendant, the order for the winding-up of the first defendants and the caveat of Philips against the fourth defendant's property. The plaintiffs applied for declarations, which in effect sought for the rescission of the transactions effected by the parties.

Held, allowing the application: (1) or if one party, knowing that the other is mistaken about the terms of an offer, or the identity of the person by whom it is made, lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake; (2) the fourth defendant had misrepresented to the plaintiffs that the first defendants were still trading, was not in liquidation and could still make a valid payment to the plaintiffs to discharge its indebtedness, and in executing the new mortgage, the fourth defen-dant further misrepresented to the plaintiffs that there was no restriction on his dealing with his property. These facts engendered misrepresentations which entitled the plaintiffs to rescind the transactions; (3) it is clear that a contract will be set aside if the mistake of the one party has been induced by a material misrepresentation of the other, even though it was not fraudulent or fundamental;the plaintiffs allowed the second defendants to draw on their facilities and made the payments because they were under a mistake of fact due to the fourth defendant's misrepresentations. They were, therefore, entitled to rescind the transactions.

United Overseas Bank Ltd v Malaysia Electric (Geylang) Co Pte Ltd & Ors Originating Summons No 1055 of 1986 High Court, Singapore (Sinnathuray J).

The plaintiff sued the defendant for $1,000 being money lent. The defendant had signed a written acknowledgment in the English language of the loan but in his defence he stated that he thought he was only signing as surety. The learned magistrate rejected the defence of mistake of fact but went on to hold that as the defendant had signed the document on the understanding that the debt was due from his brother and had given no consent that he himself would be liable to the plaintiff, there was in fact no consent given and therefore no contract.

Held: (1) despite the fact that the defendant was ignorant of the English language, he would be bound by the written contract entered into by him in the absence of fraud or misrepresentation; (2) in this case, the learned magistrate having rejected the defence of mistake of fact and there being no evidence of coercion, fraud or misrepresentation, the learned magistrate should have given judgement in favour of the plaintiff.

Subramanian v Retnam [1966] 1 MLJ 172 High Court, Kuala Lumpur (Gill J).

Serangoon Garden Estate Ltd v Marian Chye [1959] MLJ 113 High Court, Singapore (Chua J).

See CONTRACT, Vol 3, para 1768.

Seck v Wong & Lee [1940] MLJ 182 High Court, Straits Settlements (Terrell Ag CJ).

See CONTRACT, Vol 3, para 1769.

This was an appeal from the decision of the Federal Court ([1968] 1 MLJ 44) which reversed the decision of Gill J ([1967] 1 MLJ 65). The parties had entered into a contract for the sale of certain pieces of land certified as rubber land but the written agreement and the transfer dealt not only with the rubber land but also a land on which stood a house. Gill J set aside the sale and transfer of the land on which stood the house, on the ground that there was a common mistake. On appeal, the Federal Court held that there was no mutual or common mistake and the appeal was allowed. The appellants appealed.

Held: (1) in this case the learned judge had rejected the evidence given by the defendant in support of his contention that it was intended on both sides to include the lot in the contract of sale and he was entitled to form that view of the evidence. Accordingly the learned judge was entitled to find that there was a case of mistake common to both vendor and purchaser and the Federal Court was wrong in arriving at a diametrically opposite view to that taken by the trial judge on which evidence should be accepted; (2) the learned trial judge was right in concluding that the evidence of the common mistake was of a sufficiently convincing cogency to enable him to order rectification of the transfer; (3) the intervention of equity by a remedy in personam based upon a transaction to which the plaintiff and the defendant were parties could not be said to be ousted by the provisions of the relevant Land Code and therefore the learned trial judge was correct in ordering rectification.

Oh Hiam & Ors v Tham Kong [1980] 2 MLJ 159 Privy Council Appeal from Malaysia (Lord Wilberforce, Lord Diplock, Lord Russell of Killowen, Lord Keith of Kinkel and Lord Lane).

In this case, the parties had entered into a contract for the sale of certain lands at Gombak but by a mistake common to both parties the written agreement and the transfer dealt not only with the lands agreed to be sold but also a piece of land at Setapak. The plaintiffs applied to set aside the transfer of the land at Setapak.

Held: (1) the agreement in this case was not a nullity and the court could in equity order rectification of the agreement; (2) the rules of equity pertaining to rectification were applicable although the transfer of the land had been registered under the Land Code (Cap 138).

Oh Hiam & Ors v Tham Kong [1967] 1 MLJ 65 High Court, Kuala Lumpur (Gill J).

[Annotation: See the decisions of the Federal Court ([1968] 1 MLJ 44) and the Privy Council ([1980] 2 MLJ 159).]

Maxwell v Low Boon Tit [1907] 1 FMSLR 3 High Court, Federated Malay States (Belfield ACJC).

See CONTRACT, Vol 3, para 2734.

This was an appeal against the decision of Gill J ([1967] 1 MLJ 65) setting aside the sale and transfer of a half acre of land, out of a total area of 34[1/2] acres sold, on the ground that the transferor (since deceased), while making the sale, was under the mistaken belief that she was selling rubber land, whereas this particular piece of land contained an old plank house but no rubber trees. By an agreement dated 30 September 1956, the first respondent (Oh Hiam) as administratrix of her husband's estate, contracted to sell at $450 per acre to the appellant seven pieces of land certified as rubber land. Six pieces were contiguous and situated at Gombak, one piece was in a different locality at Setapak Road on which stood an old plank house among some old rubber trees and its area was about half an acre. Respondents two to nine are joint beneficiaries in the estate with their mother, the first respondent. On 23 September 1957, the first respondent, pursuant to the said agreement, obtained court approval of the sale to the appellant under the Probate and Administration Enactment. Formal transfer of the seven pieces of the land were thereafter effected by her on 20 January 1958. One of the beneficiaries, Teo Kim Choon, realized that the Setapak Road land had a house on it and was therefore, not strictly rubber land and took the view that it was sold by mistake with the other six pieces of land. The value at this time was nothing like $450 per acre due to potential building development. So overtures were made to obtain a reconveyance from the purchaser which failed. This beneficiary was the prime mover in this scheme to obtain a return to the status quo. On 30 July 1958, action was commenced in the name of the respondents and their mother, to have a rectification of the contract and all that had taken place to be set aside, on ground of the mistake of inclusion of the Setapak Road land in the contract. Soon after the commencement of the action the first respondent died, and the second and seventh plaintiffs were substituted in her place after grant to them of letters of administration de bonis non. The main grounds of appeal were, first, that the learned judge erred in his finding of mutual mistake, contrary to a specific plea of unilateral mistake, and second, that he erred in holding the respondents entitled, on the evidence, to the relief of rectification.

Held: the vendor intended to sell all seven pieces and the purchaser intended to buy the same and there was no mutual mistake or common mistake. Appeal allowed.

Tham Kong v Oh Hiam & Ors [1968] 1 MLJ 44 Federal Court, Kuala Lumpur (Barakbah LP, Azmi CJ (Malaya).

[Annotation: See the decision of the Privy Council, [1980] 2 MLJ 159.]

The plaintiff's agent by a forged power of attorney purported to mortgage certain properties to the first and second defendants as security for the repayment of a loan of $6,000. Subsequently the first and second defendants sold and conveyed the properties to the third defendant in exercise of the power of sale conferred on them as mortgagees. The plaintiff brought an action for a declaration that the purported mortgage and conveyance were null and void and judgment was entered in his favour against all three defendants. The third defendant thereupon claimed recovery of the purchase price and costs against the first and second defendants on the ground that the conveyance to him was null and void and that there was a total failure of consideration.

Held: (1) equity will not undo a sale of land after conveyance on the ground of mistake unless there has been a total failure of consideration; (2) in this case there has been a total failure of consideration resulting from mutual fundamental mistake and therefore the third defendant was entitled to recover the purchase money from the first and second defendants. Per Choor Singh J: A purchaser who after completion of the contract discovers that he has obtained a defective title to the land may sue for rescission of the contract and the return of the purchase money, if the agreement of sale was entered into under a mistake common to both parties, as to some fact which was a condition precedent to their contracting.

Alsagoff v Robin & Ors [1965] 1 MLJ 56 High Court, Singapore (Choor Singh J).

Ong & Co Pte Ltd v Ong Choon Huat Watson [1994] 1 SLR 491 High Court, Singapore (Lai Siu Chiu JC).

See CONTRACT, Vol 3, para 2929.

Choon Fook Realty Pte Ltd (the first defendant) granted Kok, the first plaintiff in OS 129/95, an option (the option) for the purchase of 'Nos 3, 3A, 3B, 3C, 3D and 3E Balmoral Crescent' (the property). The directors of the first defendant were the other defendants. The second plaintiff was Kok's nominee, a property development company run by her husband, Ong. The parties had acted through an agent, Ang, who had represented to Ong that the plot concerned was 23,090 sq ft and was known as lot 14-35. It turned out later that the property registered in the name of the first defendant was only 22,381 sq ft, and was known as lot 640. Apparently lot 14-35 had been subdivided much earlier into this lot and lot 641. Lot 641 was registered in the names of other defendants, and the URA had given granted permission for the development of lot 640 only if lot 641 were amalgamated with it. The defendants denied having known before the contract that the plaintiffs had bought lot 640 with the intention of developing it. The plaintiffs refused to complete. The first defendant's solicitors served notice to complete. The plaintiffs contended the notice was invalid. The plaintiffs in OS 129/95 claimed, inter alia, (1) rectification of the agreement to include both lots 640 and 641 in the conveyance; and (2) that the option was granted on behalf of both the first defendant and the other defendants. In OS 242/95, the plaintiffs claimed, inter alia, a declaration that the first defendant was not entitled to serve notice to complete and had not shown good title to the property. The defendants, on the other hand, contended that the option had been rescinded by reason of failure to complete after the completion notice. They counterclaimed for forfeiture of 10% of the purchase price, for an order that the plaintiffs withdrew the caveat and claimed damages.

Held, dismissing plaintiffs' claims: (1) the court would only allow rectification of a contract where a common mistake was expressed in the document. Alternatively, a party seeking rectification could also show he was unilaterally mistaken in believing that the agreement contained all the correct terms, and that the other party was aware of his mistake but did nothing to draw it to his attention. Strong irrefutable evidence, ie something more than the highest degree of probability, had to be shown; (2) the plaintiffs could not assert that it was their intention, let alone that it was both parties' intention, to buy and sell lot 640 as well as lot 641. In any event, lot 641 was owned by the other defendants, and not the first defendant, so even if rectification had been granted, specific performance would not be ordered; (3) since Ang did not act as the first defendant's agent, the first defendant was not bound by any representations she had made about the property; (4) a company could only act through human agencies; (5) in the circumstances, the first defendant had shown good title to the property to be sold. The defendants were, therefore, entitled to the relief claimed in their counterclaim but not for damages because they had not shown any loss; (6) the first defendant could not act as the agent for the other defendants;(per curiam) buyers should satisfy themselves on the specifications of properties to be purchased and the identities of the persons selling before they allowed themselves to be rushed into a transaction. While the courts would strive to balance the scales of justice between buyer and seller, they could not do so by remaking the parties' contracts ex post facto.

Kok Lee Kuen & Anor v Choon Fok Realty Pte Ltd & Ors and another application [1996] 2 SLR 572 High Court, Singapore (Lai Siu Chiu J).

Associated Japanese Bank (International) Ltd v Credit Du Nord SA & Anor [1988] 3 All ER 902 High Court, England (Steyn J).

See CONTRACT, Vol 3, para 3057.

Where a party alleges that a formal agreement signed by him did not carry out the intention of both parties he must prove that there was a prior agreement verbal or otherwise which did give effect to such intention. Rectification of the formal agreement is an essential part of the relief which he should have claimed if he could prove his allegation of mutual mistake. In the absence of misrepresentation a mistake by a party to a contract as to the obligation he has undertaken when the contract has been reduced to writing gives no right to rescind. Nor will relief be granted where ignorance of the obligation entered into was due to the neglience of the parties' legal adviser. In the case of a solicitor acting for both parties failing to carry out their common intention, equity might give relief where such solicitor has innocently misled them as to the legal effect of the document. In February 1930 the managing director of the plaintiff company entered into an arrangement with SYJ and OTS whereby the company was to order goods from England on the advice of SYJ who was to act as compradore and to be in charge of the same, undertaking responsibility for any bad debts and making himself answerable for half the loss suffered in the case of goods ordered on his advice and OTS was to guarantee SYJ against such bad debts. The verbal arrangement, embodied in rough notes, accompanying a letter written by the managing director to SYJ was finally set out in two agreements of which one was a service agreement between the company and SYJ and the other an agreement of guarantee between the company, SYJ and OTS. The written agreements differed from the rough notes in various particulars, the most material variation being that whereas in the rough notes the period of appointment was stated to be for a definite period of three years with an option of continuing the same for a further period of four years by giving six months' notice before the expiration of three years, the agreements of 14 March provided that the engagement was for three years subject to determination by either party giving to the other six months' previous notice in writing before the expiration thereof. The first defendant took up duties on 18 February 1930 and continued business until 11 March 1931 when the company gave him six months' notice determining the agreement. Prior to the execution of these agreements, draft agreements were prepared by the plaintiffs' solicitor and handed to SYJ who discussed them with OTS. The latter instructed his solicitor to approve the agreements on his behalf and on behalf of SYJ. The service agreement was duly approved by their solicitor and no alterations were made therein. SYJ continued to work until the expiration of the six months' notice and on the day following the termination of his services he protested through his solicitor against his dismissal. OTS the guarantor made no protests in the matter. On 17 September 1931 SYJ issued his writ in Suit No 1148 of 1931 claiming damages for wrongful dismissal. The defendant contended that the service agreement was not binding in that he was under the impression that the period of service was for three years certain. In this action the plaintiffs counter-claimed in respect of cash advances made by them to SYJ and there was no dispute regarding the counterclaim except as to quantum.

Held, (on the evidence): the mistake being unilateral, the first defendant was not entitled to the relief claimed and the second defendant was liable on his guarantee.

AR Holden & Co Ltd v Soh Yew Jin & Anor [1933] MLJ 64 High Court, Straits Settlements (Terrell J).

The plaintiff was a company dealing in computer hardware and software as well as computer accessories. Some time in May 1990, the plaintiff's managing director, one Steven Lek Kee Meng (Lek) met the first defendant (Goh) who was the honorary chairman of both Cash Box and Regent nightclubs. The plaintiff alleged that Goh had instructed Lek to install a computer system at Cash Box and Regent which should have the capability of taking multiple orders for drinks, selection of songs and booking of hostesses. Goh, however, claimed that it was in fact Lek who had approached him and said that he (Lek) had new computer technology which could enhance the business efficiency of Cash Box and Regent. He said that Lek claimed to have a new computer system which was able to shorten the time taken for placing orders for food and beverages, selection of songs and booking of hostesses through a remote control hand-held terminal. This new technology would therefore obviate the need to take orders manually which had all along been the practice in Cash Box and Regent, hence saving time and manpower. Lek had thus recommended that this new computer system be installed at the premises of Cash Box and Regent on a trial basis. If the systems proved suitable for use, they could be purchased. Otherwise, the plaintiff would dismantle and remove them without charge. Goh agreed to try out the new system. Pursuant to their discussion, Lek flew to Japan to source for a system to meet Goh's requirements for the nightclubs. The computer systems arrived in Singapore on 1 August 1990. On 20 August 1990, the first set was installed at Regent. Lek claimed that the system was tested and it worked properly. The staff at Regent were also trained to use the new system. Lek then claimed that the second system was also installed at Cash Box some time in September 1990. Goh admitted that the wiring was done in Cash Box, but denied that the system was fully installed. In any event, both systems were found to be unsatisfactory for use in the nightclubs. Lek was subsequently verbally requested to dismantle the systems and take them back. He refused and asked for more time to make adjustments but was unable to rectify the faults. After repeated requests to remove the systems which met with no success, the defendants finally dismantled the systems themselves, but they did not return them to the plaintiff. The plaintiff claimed that there was a contract between the parties and the defendants were liable to pay for both systems. It also claimed that, by failing to return the systems, the defendants could be deemed to have accepted them.

Held, dismissing the plaintiff's claim: (1) on the evidence, the parties had agreed that the computer systems were to be installed on a trial basis which gave rise to three possible interpretations of their agreement. First, assuming that the agreement was on a `subject to contract' basis, the defendants were under no obligation to pay because no formal contract was ever signed; (2) second, assuming that there was a condition precedent that the computer systems be fully installed and found suitable for use in the nightclubs, then there was no contract because the condition precedent itself was so uncertain that any agreement made would be void for uncertainty. In any case, even if the condition precedent was not void, it had not been satisfied. Therefore, no contract came into existence and accordingly there was no contractual liability to pay; (3) third, assuming that the trial basis was meant to create an agreement on a `sale or return' or `approval' basis, the defendants had disapproved of the computer systems and were hence entitled to reject them. On the facts, no approval could be deemed even though the systems were not returned because the final notice to reject had been made within a reasonable time. Since no contract of sale came into existence, it was not open to the plaintiff to demand any payment for the systems; (4) in any event, even if there was an outright sale, the defendants were under no obligation to pay for the computer systems. On the facts, they had a right to reject the systems which were unfit for their purpose, and the rejection was made within a reasonable time. Having intimated the intention to reject, the defendants were under no obligation to return the systems.

Computer Supermarkets (S) Pte Ltd v Goh Chin Soon Ricky & Ors [1997] 2 SLR 283 High Court, Singapore (Lai Siu Chiu J).

Lai Kwee Lan & Ors v Ng Yew Lay & Anor [1989] SLR 863 High Court, Singapore (Chan Sek Keong J).

See CONTRACT, Vol 3, para 3133.

This was an appeal by the appellant for the recovery of RM10,000. The appellant, a motorcar salesman, alleged that he had entered into a valid and enforceable contract to purchase a Toyota Corolla ('the Corolla') from the respondent. The appellant further alleged that he had paid the purchase price of RM10,000 to the respondent, which the respondent categorically denied having received. The respondent pleaded non est factum on the ground that he believed that the 'bill of sale' in question which he had signed related to his earlier purchase of a Volkswagen ('the Volkswagen') from the appellant. It was clear that when the respondent purchased the Volkswagen, he was given a set of documents pertaining to the Volkswagen, including a 'bill of sale' which was blank, and on which he was asked to sign. It was also in evidence that at the material time of the alleged sale of the Corolla, it was actually being detained at the Penang RIMV. When the respondent took custody of it from the Penang RIMV, the appellant re-offered to purchase it from the respondent for RM5,000, which the respondent rejected. The sessions court accepted the respondent's version that he had signed the 'bill of sale' in the belief that it was for his purchase of the Volkswagen, and not for the alleged sale of his Corolla.

Held, dismissing the appellant's appeal: (1) the signatory seeking to disown a document on a plea of non est factum must show that in signing the document, he acted with reasonable care. Further, the signatory must show that he signed the document in the belief that it was radically different from what it was in fact, and that his failure to read and understand the document was not due to negligence or carelessness on his part; (2) the court accepted the respondent's version that he had signed the said 'bill of sale' in the belief that it was for his earlier purchase of the Volkswagen, and not for the alleged sale of his Corolla. Thus the respondent had succeeded in raising the plea of non est factum; (3) the appellant's re-offer to purchase the Corolla from the respondent at RM5,000 after he had allegedly paid RM10,000 to the respondent, amounted to an action which could be construed against the appellant's case; (4) the sessions court in accepting the respondent's version as the more probable one, had the advantage of seeing and hearing the witnesses and assessing their credibility. Devoid of such an advantage, the court was reluctant to interfere with the findings of the sessions court in the circumstances of the instant case.

Wong Ah Koi v Lee Ah Yew Civil Appeal No 12-38-1992 High Court, Taiping (Abdul Malik Ishak JC).

This is an application by the plaintiff under s 148(2)(c) of the Land Code (Cap 81) for sale of the defendant's land charged to the plaintiff to secure repayment of a loan advanced by the plaintiff to the defendant. In opposing the application, the defendant contended that: (a) the memorandum of charge was not explained to him (ie the defence of non est factum); (b) he did not receive the loan or any part thereof; (c) he did not receive or read the notices of demand given by the plaintiff; (d) the interest rate of 12% pa is excessive and unconscionable; and (e) the plaintiff's claim was illegal, void and unenforceable by virtue of the provisions of the Moneylenders Ordinance (Cap 114), as the plaintiff is an unlicensed moneylender and the loan was a moneylending transaction.

Held, allowing the application: (1) to establish the plea of non est factum, there must be clear and positive evidence. The burden lies on the party seeking to disown the document which includes the burden of showing that in signing the document, he acted with reasonable care. He must show that the document signed was radically different from what he thought it was. The evidence of the defendant falls far short of establishing the plea of non est factum; (2) the defendant has not proved on a balance of probabilities the allegation that he did not receive the loan or any part of it; (3) the fact that a defendant did not receive the notice of demand or read the gazette notification constitutes no ground for refusing the application; (4) the allegation that the interest rate of 12% pa is excessive and unconscionable has no merit at all; (5) it is for the court to decide in each case whether a person or a company is a 'moneylender' within the ambit of the Moneylenders Ordinance. On the evidence adduced, the defendant has failed to discharge the onus of establishing on a balance of probabilities that the plaintiff is a 'moneylender' and that the ordinance applies to the impugned transaction between the parties.

Lii Tat Credit & Mortgage Sdn Bhd v Tang Liing Kang [1988] 3 MLJ 104 High Court, Sibu (Chong Siew Fai J).

P sued D1 as principal of two leasing agreements and D2-D4 as guarantors under two letters of guarantee and indemnity. D2 and D3 were directors of D1 and D4. In this appeal against an O 18 r 19 judgment, D contended, inter alia, that the lease agreements were void as they were hire purchase agreements which had contravened the Hire Purchase Act 1967. D also relied on the plea of non est factum on the ground that D1 had executed the agreements under a misapprehension as to the true nature of the transactions involved.

Held, dismissing the appeal: (1) in the instant case, the preambles to the two lease agreements clearly showed that the transactions were related to leasing arrangements. All other relevant documents referred to the transactions as being that arising out of a leasing arrangement and D could not now in an attempt to avoid liability, plead such transactions as being hire-purchase agreements; (2) by the very manner in which D2 and D3 had conducted their business, they could not now claim that the documents they had signed related to matters of which they were not aware of. Want of care on their part was most relevant and since the burden of proving non est factum was on D2 and D3, this included proof that they had taken care that what they had signed represented what they had in mind. As no such proof had been disclosed, D could not possibly succeed on their plea of non est factum.

Supreme Leasing Sdn Bhd v Foong Heng Loong Mining Co Sdn Bhd & Ors Suit No C23-1194-86 High Court, Kuala Lumpur (Siti Norma Yaakob J).

The plaintiff was the registered proprietor of a piece of land (`the land'). In April 1985, the plaintiff gave an irrevocable power of attorney in favour of the first defendant for the purpose of an intended joint venture under a partnership to be known as Syarikat Pembinaan Hayat (`the syarikat') to develop the land into housing schemes. The first defendant was empowered to charge or mortgage the land and to execute the necessary charge and other documents for the purpose. In consequence thereof the plaintiff handed over the document of title to the land to the first defendant. In 1985, the first defendant charged the land to the second defendant (`the bank') for an overdraft facility of RM40,000 allegedly for the said joint venture. The housing project however never got off the ground and the first defendant defaulted in payment. The plaintiff claimed that the first defendant fraudulently represented to him that the power of attorney was for the agreement for the joint venture. Though he did not understand the contents of the agreement nor read or write English, he affixed his thumbprints on the document. He further stated that he handed the document of title to the first defendant because the first defendant told him that the syarikat had wanted to borrow money from the bank and that the title was required only for sight from the bank and that thereafter it would be returned to him. The plaintiff pleaded non est factum and alleged that the power of attorney was obtained from him by fraud on the part of the first defendant. He also contended that the power of attorney was void because it had no jurat and therefore, the charge created in favour of the the bank was also null and void and of no effect. The bank relied on s 340(3) of the National Land Code 1965 (`the Code') claiming to be a purchaser in good faith and for valuable consideration.

Held, dismissing the claim: (1) in order to succeed on the plea of non est factum, the plaintiff had to prove on the balance of probability that he had, without negligence, been induced to sign the power of attorney by a misrepresentation as to its class and character. On the evidence, the plaintiff had failed to do so on the grounds that: (i) the plaintiff had actually known that the land would be charged to the bank to raise money for the joint venture business. Under such circumstances, he should have taken reasonable care before affixing his thumbprints on the power of attorney; (ii) the plaintiff had known the first defendant for only a short while and it was unreasonable for the plaintiff to have handed over the title to the land to such person unless he knew the true purpose of the transaction; (iii) the plaintiff had applied for approval to charge the land and such approval was given in 1979, ie six years earlier before the power of attorney was executed. Though the approval was not necesssarily related to the joint venture transaction under the syarikat, it was evidence all along that the plaintiff was conscious that the land was available for use as security for any purpose at any time; (2) the plaintiff had also failed to prove fraud beyond a reasonable doubt; (3) the power of attorney was valid notwithstanding that it had no jurat because it was executed in the manner as prescribed by s 3 of the Power of Attorney Act 1949; (4) the requirement of the jurat in the case of a blind or illiterate person who did not understand the language written in a document was applicable only to a power of attorney authenticated by a commisioner for oath on and after 1 April 1993 when the Commissioner for Oath Rules 1993 came into force. Before that date under the previous rules which were relevant to the impugned power of attorney there was no provision specifying such requirement. There was no retrospective effect of the rules; (5) as the power of attorney was valid and a true copy had been deposited with the senior assistant registrar, the charge executed by the first defendant in accordance with s 309 of the Code in favour of the bank was valid - and by reason of s 340 of the Code, the interest of bank was also valid; (6) even if the charge was not valid, the interest of the defendant was still intact by virtue of the proviso to s 340(3) of the Code since the second defendant was a purchaser in good faith and for valuable consideration.

Ahmad bin Suratman v Azizi bin Mohd Salip & Anor Code No F22-432-1986—High Court Kuala Lumpur (Mohd Noor J).

The plaintiff sued the defendants for damages for breach of contract. It appeared that the first defendant, who did not know English, was induced by the second defendant, his brother, to sign the document containing the contract, on the understanding that it was a matter of witnessing his brother's signature.

Held: on the facts, the defence of non est factum was open to the first defendant and the first defendant could not be held liable on the contract.

Omar v Haji Omar & Anor [1949] MLJ Supp 28 High Court, Johore (Laville J).

In this case, the appellant was a successful landbroker for 17/18 years. She contended that she did not know that the document which she signed was a guarantee for an unlimited amount, otherwise she would not have signed it. Although her plea of non est factum was accepted by the trial court, this judgement was reversed by the Court of Appeal - see [1982] 2 MLJ 100. The appellant appealed.

Held: the appeal must be dismissed as the Court of Appeal was correct in rejecting the plea of non est factum.

Tan Lai Wah v First National Bank of Chicago [1984] 1 MLJ 150 Privy Council Appeal from Singapore (Lord Diplock, Lord Keith of Kinkel, Lord Scarman, Lord Brightman and Sir Denys Buckley).

The plaintiff brought this action to set aside a mortgage granted by her and her now deceased husband over a property in their joint names to the second defendant for the purpose of securing a joint and several guarantee by them of facilities granted by the latter to the first defendant. Her husband's signature on the document had been forged by her son and she had signed after being told by her son that the document was a testimonial as to his character. The document was executed after her husband's death. The signatures were witnessed and attested to by a legal assistant in the employ of the third defendants. The first defendant did not enter an appearance. In a third party action, the second defendant claimed an indemnity from the first and third defendants and the legal assistant. The third defendants further claimed indemnity or damages against the legal assistant in fourth party proceedings.

Held, dismissing the plaintiff's claim against the second defendants, allowing the second defendants' counterclaim, allowing the plaintiff's claim against the third defendants in part and allowing the third defendant's claim against the legal assistant: (1) in order for relief to be granted on her plea of non est factum, the plaintiff had to show that the document she executed was fundamentally different from that which she believed it to be and that she was not negligent in signing the document but took the precautions which a reasonably prudent person would have taken before signing it. The latter is a question of fact; (2) on the facts, the plaintiff had been tricked by her son into signing the mortgage and that, when she signed the last two pages of the mortgage document, she did not know the nature of the document. The documents signed by the plaintiff were fundamentally different from the documents which she believed them to be. However, she had been careless in signing the mortgage document. She deliberately chose not to read the pages she signed and relied instead on her son's explanation as sufficient without querying or checking, thereby depriving herself of the opportunity to be put on notice. Given that she was semi-literate in English and her working experience as a teacher, with a reasonable amount of common sense she should have realized that the pages she had been asked to sign were inconsistent with a testimonial. The onus of proving that she had not been careless lay on the plaintiff and she had not discharged it; (3) on the facts, the legal assistant had assumed the responsibility of acting as solicitor for the plaintiff and her husband even though he had not met them and had not been contractually retained by them. It followed that the legal assistant owed the plaintiff the same duty and standard of care that he owed to a paying client. His conduct in signing the mortgage as a witness and issuing his attestation certificate had clearly been negligent; (4) it was no objection to the plaintiff's claim based on the tort of negligence that the loss suffered by her was purely economic or that the statements made by the legal assistant were made to a third party resulting in financial loss to the plaintiff. It was also clear that the legal assistant's negligence had placed the plaintiff in a position she should never have been in where she was at risk as a guarantor and mortgagor, and the only dispute was the extent of responsibility to attribute to him; (5) clearly, he did negligently what he was employed to do carefully; (6) however, the plaintiff had been contributorily negligent in executing the mortgage for the same reasons as those for which her plea of non est factum failed. On the facts, liability was apportioned in equal shares between the plaintiff and the third defendants as the employers of the negligent legal assistant; (7) although the third defendants had not pleaded contributory negligence and had only applied to amend their defence to plead contributory negligence after closing submissions had been made, the balance of justice demanded that the amendment be allowed because the true defendant was the legal assistant, a personal litigant who would bear the primary responsibility for satisfying any judgment, and the plaintiff's plea of non est factum had put the issue of her own carelessness at the forefront of the case. In any event, the third defendants had, in their original defence, pleaded that the plaintiff had acted recklessly or negligently in signing the document; (8) the legal assistant had acted in breach of the implied obligations under his contract of employment with the third defendants that he would exercise reasonable skill and knowledge, care and diligence. The third defendants were therefore entitled to full indemnity from the legal assistant in the fourth party action; (9) the third defendants were vicariously liable for the legal assistant's negligence. It cannot be said on any criterion that what the legal assistant did was wholly outside his job;(per curiam) the present judicial attitude is to restrict the scope of the plea of non est factum as signatures on documents ought to be valid.

Lee Siew Chun v Sourgrapes Packaging Products Trading Pte Ltd & Ors [1993] 2 SLR 297 High Court, Singapore (Michael Hwang JC).

The plaintiffs prayed, inter alia, for a declaration that all documents purported to have been signed or thumb-printed by the first plaintiff for the purpose of creating a lien-holder's caveat over her land ('the land') be declared null and void and of no effect, and that the entries in respect of the said caveat lodged by the second defendant bank over the land be removed or expunged from the record of the proper authorities concerned. The plaintiffs were husband and wife. The first plaintiff claimed that she purchased the land from her savings acquired from her earnings as a rubber tapper for 25 years. She built a house on the land in which she was still residing. In February 1977 the first defendant asked for a loan of the plaintiffs' title deed to the house which he said he required in respect of some contract works which he wanted to perform. The first plaintiff was at first reluctant to do so but agreed to it after some persuasion, on condition that the said title be returned to her within a month or two. The first defendant subsequently brought a document for the first plaintiff to affix her thumb-print. She was not told anything about the contents of the document and affixed her thumb-print as she was told by the first defendant. The first defendant failed to return the title deed, and after a year finally admitted that the title deed had been handed to the second defendants as security for a loan, but promised that he would return it later. The plaintiffs waited for another year, and thereafter commenced this action. The first defendant claimed that he did inform both the plaintiffs at the material time that he required the title deed for the purpose of utilizing it as security for a loan.

Held, allowing the plaintiffs' claim: (1) it is highly incredible that the plaintiffs would be willing to embark on any transaction which might cause them to be deprived of their one single property. No reasonable person in the plaintiffs' shoes would be willing to take any risk of losing his land which he managed to buy from his savings accumulated over 25 years; (2) on the totality of the evidence, the court found that the first plaintiff categorically denied that the contents of the document were ever conveyed, let alone explained to her. The first plaintiff was therefore not fully aware of the effect and consequence of the document when she thumb-printed it; (3) furthermore, the first defendant initially admitted in cross-examination by the plaintiffs' counsel that he did not explain to the first plaintiff that he wanted the title deed to be retained as security for a loan; (4) the doctrine of non est factum was available to the plaintiffs as the first plaintiff had no knowledge at all regarding the contents of the document on which she affixed her thumb-print. This lack of knowledge resulted in her thinking she was signing a document which she believed would not have the legal effect as created by the document; (5) the first defendant did defraud the plaintiffs in order to get possession of the title; (6) as the possession of the title to the disputed land was obtained by the first defendant through fraud or misrepresentation, the deposit of title had never been authorized by the first plaintiff, the proprietor of the land. There was insufficient proof of the alleged Torrens lien or statutory lien purported to be created by the first plaintiff. On the contrary, the plaintiffs had discharged the burden of proving that the title of the land had been wrongfully taken from the first plaintiff. Therefore, the lien-holder's caveat was likewise wrongfully lodged on the land. The second defendants could be in no better position than the first defendant himself and therefore could not enforce the security. As a result the caveat was to be removed and the costs for the present action was to be borne by both the defendants.

Nallammal & Anor v Karuppanan & Anor [1993] 3 MLJ 476 High Court, Kuala Lumpur (Lim Beng Choon J).

The plaintiff claimed specific performance of an agreement for the sale by the defendant to him of certain land in Kuala Pilah. The defendant in his defence, alleged that the agreement of sale was not his deed, as he had signed it not knowing the essential nature of the contract. He also alleged that the agreement was obtained from him by fraud on the part of the plaintiff.

Held: on the facts, the defendant had failed to discharge the burden of proving non est factum and had also failed to prove fraud, which requires clear and strict proof.

Kiong Man v Kishen [1971] 1 MLJ 54 High Court, Seremban (Syed Agil Barakbah J).

Lee Cheong Fah v Soo Man Yoke [1996] 2 MLJ 627 High Court, Johor Bahru (Abdul Malik Ishak J).

See CONTRACT, Vol 3, para 2824.

P sought a declaration that an equitable mortgage purportedly created over her property was void. P was an illiterate woman 54 years of age at the material time. She worked as a cleaner and factory hand. In mid-September 1981 P handed the title deeds to her house to her son, who ostensibly wanted to check their correctness. The following month, she was taken to a solicitor's office to sign some documents so that she could get back her title deeds. It transpired that she had signed an equitable mortgage. The solicitor was acting for both parties in the transaction. P pleaded non est factum. The two issues before the court were (a) whether P had handed the title deeds to her son knowing that the property would be used as security for a debt; and (b) whether the documents that she signed at the solicitor's office were adequately explained to her.

Held, granting the declaration sought: (1) the general rule is that a party of full age and understanding is normally bound by his signature on a document; (2) if, however, the party is misled into signing a document essentially different from that which he intended to sign, he can plead non est factum in an action against him. The document is void in whosoever's hands it may come; (3) second, the signer must not be negligent (in the non-technical sense of careless) when he signed it; (4) on the evidence, the court was satisfied that P did not know that her title deeds were to be used as security. She had been deceived by her son. It was also found that the documents had not been explained to P adequately by the solicitors. The effect of the documents had been explained to the son, who had deceitfully not interpreted it to P; (5) two vital factors must be present before a party may successfully plead non est factum. First, the document which was signed must be significantly different from that which the signer believed it to be;there is a need for extra care on the part of solicitors in dealing with elderly and/or illiterate persons (or others under a disability), particularly when such persons are assuming responsibilities or liabilities of others. Where a solicitor is acting for all parties in a transaction, he must be conscious of a possible conflict of interest and should not hesitate to ask a party to seek independent legal advice.

Goh Jong Cheng v MB Melwani Pte Ltd [1990] SLR 951 High Court, Singapore (Chao Hick Tin JC).

United Asian Bank Bhd v Jayachandran & Ors Civil Suit No D2-23-34-87 High Court, Kuala Lumpur (Siti Norma Yaakob J).

See CONTRACT, Vol 3, para 2290.

Malaysian Assurance Alliance Bhd v Yeam Sai Ming & Ors [1996] 5 MLJ 345 High Court, Kuala Lumpur (KL Rekhraj JC).

See CONTRACT, Vol 3, para 2358.

Smallholders Corp Sdn Bhd & Anor v Utusan Transport Sdn Bhd [1995] 4 MLJ 587; (1995) CSLR XX[1676] High Court, Kuala Lumpur (Kamalanathan Ratnam JC).

See COMPANIES AND CORPORATIONS, Vol 3, para 781.

The effect of 'novation' is that the original debt is extinguished in the same manner as by actual payment. A new obligation however by which the creditor extends the time of payment is not, in the civil law, considered a 'novation'.

Shedumbrum Chetty v Keng Cheow & Co [1890] 4 Ky 587 High Court, Straits Settlements (Goldney J).

Bank Negara Malaysia v Mohd Ismail bin Ali Johor & Ors [1992] 1 MLJ 400 Supreme Court, Malaysia (Jemuri Serjan CJ (Borneo).

See CONTRACT, Vol 3, para 1580.

By a series of permits and subleases granted by one Leong Kee Nyean who was a director of certain private companies, one of which held a mining certificate, the appellant came to have eventually a contractual agreement transferred from Ipoh Mining to the respondents with whom now his mining operations were to continue. This was to work a certain mining land on a cliff, which required arduous work and costly preliminary outlay before the ore could be won and earn the stipulated remuneration per ton on delivery. After the said mining operations had progressed and begun to yield ore, so that deliveries were able to flow for some months by work of the appellant, the respondent company gave notice of halting the operations and terminating the agreement under the contract. The appellant claimed $290,000.45 which he itemised, being the value of the work done, outlay and materials used and labour and expenses. The trial judge held that there had been a breach of contract and found the respondents' share as 10[1/2]/24[3/4] of the total expenditure, and gave judgement for the respondents in the sum of $99,272 and costs. On being dissatisfied with the assessment of damages, the plaintiff appealed to the Federal Court. The only issue in the appeal was whether the judgement was right as to the principle applied in the assessment of damages.

Held: (1) in considering the question of damages the yardstick could either be loss of profits or, in the alternative, compensation for capital loss and expenses rendered futile by the breach; (2) the method of assessment adopted by the learned trial judge could not be justified either in logic or principle. It was clearly in the contemplation of the contracting parties that the appellant should not be denied the fullest opportunity to recoup all the moneys he had sunk into the enterprise. Such being the case there was no need for apportionment. There had been a novation, to which s 63 of the Contracts (Malay States) Ordinance 1950 applied; (3) on the claim, order of the court below set aside and (a) judgement entered for $121,220 with interest thereon at 5% per annum from 7 February 1963 and (b) an inquiry be held by the registrar as to the actual loss suffered by the appellant on item 8, and judgement for the further sum so found, with interest likewise at 5% per annum from 7 February 1963.

Teoh Kee Keong v Tambun Mining Co Ltd [1968] 1 MLJ 39 Federal Court, Ipoh (Barakbah LP, Azmi CJ (Malaya).

The first defendant in this case entered into an agreement with the plaintiff by the terms of which he was to be provided with a course of training for a period of two years. In return, the first defendant agreed to serve the plaintiff if so requested within 12 calendar months after the completion of such course for a period of five years as a teacher. The second and third defendants acted as sureties to the said agreement. The first defendant had successfully completed his course of training and was appointed as an attachment teacher with the Ministry of Education on 1 January 1972. On 2 October 1972 he was offered by the said ministry a temporary post of grade C teacher. This was followed by a formal offer of permanent and pensionable commission. One of the conditions stipulated in both offers was that the service of the first defendant may be terminated by one month's notice or by the payment of one month's salary in lieu of notice. On 12 November 1972, the first defendant accepted the first offer made by the Ministry of Education. However, on 29 November 1972, before the offer by the Public Service Commission was made, the first defendant gave a month's notice to resign his post. His application to resign was refused and returned to him. On 1 January 1973, when school reopened, the first defendant was absent. He had, by then, taken up his new appointment with the Armed Forces. After various correspondence, notices of demand were made to all three defendants to repay the plaintiff a sum of $5,400. Consequently there were several correspondence between the parties. The plaintiff on 20 October 1978 wrote to the first defendant stating the acceptance of the first defendant's original offer to pay $50 per month provided he would agree to a consent judgment being entered against him for the sum claimed with interest. The first defendant disputed this resulting in the present action. The defendants relied on the clause enabling each party to terminate the first defendant's service by one month's notice in both the offers made on 2 October 1972 and on 28 May 1973. By the inclusion of the said clause, they claimed that the plaintiff had substituted the original agreement with a new one and that by reason of s 62 of the Contracts Act 1950 (Act 136), the defendants need not perform their obligations under the original contract.

Held, allowing the plaintiff's claim: (1) for the operation of s 62 of the Contracts Act 1950, the party claiming such a relief must not only show the intention to novate or that the terms of the subsequent contract are so inconsistent with the former one as to imply that intention, but he must also prove that all the parties to the former contract have consented to the terms of the subsequent one; (2) for the principle of novation to apply there must be mutual consent of all the parties concerned; (3) in this case, whatever subsequent transactions between the parties were not carried out with the knowledge or consent of the second and third defendants. The defendants were therefore disentitled to the defence under s 62 of the Contracts Act.

Government of Malaysia v Adnan bin Awang & Ors [1980] 2 MLJ 291 High Court, Malacca (Wan Yahya J).

Goh Seng Thiam v Lee & Ceylon Sports Club [1965] 1 MLJ 206 Federal Court, Singapore (Barakbah CJ (Malaya).

See CONTRACT, Vol 3, para 1746.

P entered into a contract with D to sell certain shares to D. D paid a deposit of M$35,000 pursuant to the contract. Time was stated to be of the essence of the contract. D could not raise the money to go through with the transaction and instead offered to pay M$70,000 in lieu of taking over the shares. Upon D's failure to pay the said sum, P sold the shares to third parties and claimed against D for the loss of M$139,087.70, being the difference between the agreed and forced sales prices.

Held, dismissing P's claim: (1) in the instant case, by introducing the evidence of the settlement agreed upon at M$70,000, P had shown that he and D had agreed to rescind the original contract and to substitute another contract, the terms of which were that P was to retain the shares and D was to pay him M$70,000. In the light of s 63 of the Contracts Act 1950, the original contract need not be performed by the parties in the instant case; (2) P was, accordingly, disentitled to sue on the original contract and as he had not claimed in the alternative under the subsequent agreement, the court could not award him the balance sum of M$35,000 which he would have been entitled to.

Yew Wan Leong v Lai Kok Chye (No 1) Civil Suit No 153 of 1982 High Court, Malacca (Wan Yahya J).

[Annotation: Reversed on appeal. See [1990] 2 MLJ 152.]

These claims arose out of forward dealings in rubber in which one Pinto made contracts with the respondents in the name of the appellants. The appellants repudiated the contracts on the ground that Pinto had entered into them without authority. The parties agreed on certain issues to be tried separately from the other issue raised in the pleadings. The first issue which was not the subject of appeal was whether the transactions were gaming transactions and the learned trial judge held that they were not gaming unless both sides agreed that they will only pay and receive differences. As long as one or the other genuinely intends that physical rubber shall be shipped, the agreement is a contract. The other issued raised turned on a letter dated 3 October 1952 which the respondents' managing director wrote to the appellants in the following terms: '....we wish to inform you that Mr. Pinto has since come to an agreement with us. He undertakes to pay off the entire debt due by monthly instalments. He has since paid us an initial amount and undertakes to pay all the balance himself as arranged. In consideration of his undertakings to pay, we now relieve you of all liabilities and will not look to you for payment.' This letter raised two issues, one of which was based on the first part of para 9 of the defence, namely, whether the letter constitutes a full release and discharge of all liability. The other issue was raised by the second part of para 9 of the defence, namely whether the said letter constituted a novation whereby the respondents accepted Pinto as a contracting party in place of the appellants.

Held: (1) a release not by deed and without consideration could not discharge a debt; (2) the word 'novation' is a technical term of the civil law. If it is used in its usual meaning there must be a tripartite agreement between the original parties and the substituted party. This was not the case here. A stranger cannot acquire rights under a contract but it is inequitable for a person having been paid by a stranger a part or whole of the debt to recover the debt again. On equitable principles the respondents are not required to give credit for more than what they have actually received from Pinto.

Ramchand v Lam Soon Cannery Co Ltd [1954] MLJ 239 Court of Appeal, Singapore (Murray-Aynsley CJ, Mathew CJ (FM).

Panachand & Co (Pte) Ltd v Riko International Pte Ltd [1986] 1 MLJ 294 High Court, Singapore (LP Thean J).

See CONTRACT, Vol 3, para 2602.

Lee Chee Ming & Anor v Superview Development Sdn Bhd Civil Suit No S7-22-916-89 High Court, Kuala Lumpur (Lim Beng Choon J).

See CONTRACT, Vol 3, para 3114.

See contract, para IV [27].

Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng Chor, deceased) & Anor [1997] 1 MLJ 763 High Court, Ipoh (Kang Hwee Gee J).

Valentine Electronics (M) Sdn Bhd v Long Kim Originating Motion No 25-49-91 High Court, Penang (Edgar Joseph Jr J).

See CONTRACT, Vol 3, para 2653.

Tan Chee Hoe & Anor v Ram Jethmal Punjabi 1982 High Court, Singapore (Wee Chong Jin CJ).

See CONTRACT, Vol 3, para 2857.

Kwong Kum Sun (S) Pte Ltd v Lian Soon Siew & Ors 1984 Court of Appeal, Singapore (Wee Chong Jin CJ, Sinnathuray and Rajah JJ).

See CONTRACT, Vol 3, para 1815.

'Master Stelios'; The Monvia Motorship Corp v Keppel Shipyard (Pte) Ltd 1982 Privy Council Appeal from Singapore (Lord Fraser of Tulleybelton, Lord Scarman, Lord Bridge of Harwich, Lord Brandon of Oakbrook and Lord Templeman).

See CONTRACT, Vol 3, para 1651.

The plaintiff sued for the breach of contract to accept and pay for a steam launch to be built by the plaintiff for the defendant. The evidence of the contract consisted of three letters and some conversations between the plaintiff and the defendant's manager.

Held: (1) but to the last there was no definite consensus of minds; (2) there was no evidence to establish a complete and concluded contract. The letters amounted only to tentative proposals to which counter proposals were made;the defendant's agent had no authority and he had been expressly forbidden to enter upon this particular contract.

Gold Fields of Siam v Riley Hargreaves & Co [1892] SLR NS 55 Court of Appeal, Straits Settlements (O'Malley CJ, Wood and Goldney JJ).

P, D3 and D4 (a company in which P and D3 were members) were parties to a settlement agreement under which disputes amongst the parties were settled. Under the agreement assets of D4 were to be sold. If an offer was received from a person who was not a member of D4, the existing members of the company were entitled to make an offer to purchase the property at not less than the amount offered by the outside party (the 'right of first refusal'). D1 and D2 (the 'attorneys'), partners in an accounting firm, were given the task of implementing the sale of assets under a power of attorney executed by D4 under its corporate seal. The attorneys wrote to the members of D4, informing them that the right of first refusal had arisen in respect of a particular peice of property. Both D3 and P submitted bids for the property. As it appeared that more than one member of D4 wanted the property, the attorneys proposed that a second round of competitive bidding would be held and the property sold to the highest bidder. P protested at this and maintained that the initial bids should be opened and the property sold to the one who bid higher. However, later that day P indicated that she wanted to get the matter over with and asked for the competitive bidding to be advanced by a day. The competitive bids were duly submitted and when opened, D3's bid was higher than P's. At P's request, after the result was announced, the initial bids were opened; P's initial bid was higher than D3's. P commenced proceedings to set aside any agreement to sell the property to D3 and to force the attorneys to sell it to her instead on the basis of her original bid.

Held, dismissing the claim: (1) the settlement agreement made no specific provision for a situation in which more than one member of D4 wanted to exercise the right to purchase the company's property. All that the agreement provided was that the property should be shold to the highest bidder. In the absence of a clear direction in the power of attorney as to how the attorneys were to carry out the authorized act, the attorneys were entitled to choose any suitable method, provided that it was fair and reasonable and consistent with the intention of the parties to the settlement agreement. The method chosen had also to be made known to the parties concerned; (2) the procedure which the attorneys proposed to follow was set out clearly by them in correspondence with the parties concerned. The procedure adopted by the attorneys was eminently reasonable and consistent with the intention of the parties to the settlement agreement; (3) by voluntarily participating in the competitive bid, P was estopped by her conduct from seeking to enforce her rights to have the initial bids considered; (4) the submission of her second bid amounted in law to a revocation of her initial offer. She could not revive that original offer after the attorneys had accepted D3's higher second bid.

Png Siew Luan v Wong Tui San & Ors [1990] SLR 643 High Court, Singapore (Karthigesu JC).

A purchased the interest of S in five salvage claims on 23 October 1985. Prior to that, on 14 October, S had offered its interest in nine salvage claims (including the five subsequently purchased by A) to R. R had not accepted this offer. On 7 November S again offered to R four of the nine claims. R accepted this offer. A dispute arose as to the five claims purportedly purchased by A on 23 October. R alleged that the offer to them contained in the letter of 14 October remained open and that they had purchased the claims on 20 November without notice of A's rights. The trial judge held that R had priority over A as regards the five claims in question. A appealed. The sole question was whether R had bought the claims on 20 November.

Held, allowing the appeal: S's letter of 7 November stated clearly that it superseded the letter of 14 October. The effect of this was that the offer contained in the previous letter had been withdrawn and could no longer be accepted by R. Accordingly, their purported acceptance on 20 November was ineffective. As A had purchased the claims on 23 October, their rights took priority.

Banque Paribas v Citibank NA [1989] SLR 32 Court of Appeal, Singapore (Wee Chong Jin CJ, Lai Kew Chai and Thean JJ).

See contract, para IX [64].

Imperial Steel Drum Manufacturers Sdn Bhd v Wong Kin Heng [1997] 2 SLR 695 High Court, Singapore (S Rajendran J).

P were manufacturers of RAM microchips. D were manufacturers of personal computers and had been buying ramchips from P since 1986. P sued D for money owing together with interest and applied for summary judgment. D admitted the claim for the principal but contended that they were entitled to unconditional leave to defend on the ground that they had a set-off and counterclaim against P arising from P's alleged failure to supply ramchips under five purchase orders. P were granted summary judgment for substantially the amount claimed, except for interest. D appealed against the grant of summary judgment. D's evidence on their alleged counterclaim was that they would order ramchips from P by sending a purchase order in duplicate. P would return the duplicate acknowledging receipt and this D alleged constituted a binding contract. P's version was that whenever D wished to obtain supplies of ramchips, they would send to P their purchase orders setting out the desired quantities, prices and delivery dates. This would be acknowledged by P and the parties would then negotiate the terms of the orders. P then delivered the ramchips and invoices and delivery orders would be sent to D.

Held, dismissing D's appeal: (1) the court concluded that P's evidence was more likely to be the truth. The sending of the purchase order by D to P was an offer to purchase ramchips from P on terms set by D. There was no invitation to P to accept the order but merely to acknowledge it in the manner described. The form did not say or purport to say that the acknowledgment would constitute a binding contract. There was nothing in the form which suggested to a reasonable supplier that acknowledging the order would bind him to supply the goods on the terms stated therein. If that was the intention of the defendants, the form was wholly misleading; (2) the purchase order was in law a unilateral offer to pay the price stated therein for goods delivered in accordance with its terms. Such an offer may, in law, be accepted by the supplier by performance or by return of promise. This was consistent with the printed terms regarding delivery and cancellation (viz, that until delivery D were free to revoke or suspend the offer). Thus, there were no existing contracts that P could breach; (2) alternatively, the transactions on which the counterclaims arose were separate transactions from the ones on which P had obtained judgment. These counterclaims would not have entitled D to a stay of execution, much less unconditional leave to defend; (3) D's appeal against the grant of summary judgment was therefore dismissed and they were left to pursue their counterclaim.