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1. OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH
SECURITIES SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110
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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN,
CHOW & LOH SECURITIES SDN BHD) v KOH KEE HUAT
CaseAnalysis | [2004] 2 MLJ 110

OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT

TAN, CHOW & LOH SECURITIES SDN BHD) v KOH KEE HUAT [2004] 2 MLJ
110
Malayan Law Journal Reports · 8 pages

HIGH COURT (MELAKA)

LOW HOP BING J
CIVIL APPEAL NO 12–43 OF 2000
3 December 2003

Case Summary

Contract — Duress — Economic Duress — Whether indemnity rendered voidable by economic duress —
Contracts Act 1950 ss 15, 73

This is an appeal by the plaintiff against the decision of the learned sessions court judge dismissing the plaintiff's
claim with costs. The plaintiff's claim against the defendant was for a sum of RM36,667.57 pursuant to an indemnity
executed by the defendant in favour of the plaintiff. The defendant worked in the plaintiff company as a remisier
from 1982 to 1991. He was required to deposit a sum of RM65,000 with the plaintiff. He resigned in April 1991 to
join another securities company. The defendant requested for the release of the deposit to him. The deposit was
released upon the defendant's execution of the indemnity, at the request of the plaintiff's director-cum-general
manager.The defendant contended that the indemnity was signed as a result of economic duress. The issue here is
whether the sessions court had correctly applied the law of economic duress to the specific facts set out above,
having regard to ss 15 and 73 of the Contracts Act 1950.
Held, allowing the appeal with costs and setting aside the decision of the sessions court:

(1) Although s 15 does not provide for duress as a defence, in Malaysia the concept of duress and that of
coercion have been used interchangeably. The facts of the case does not come within the ambit and
purview of 'coercion' as defined in s 15 (see paras 13–14).
(2) From the authorities dealing with the concept of duress, the following principles may be distilled: (a) our
courts are slow in invoking the concept of duress as defined in s 15 or to import the concept of economic
duress unless there is positive evidence to that effect, which must satisfy the guidelines given by the Privy
Council in Pao On & Ors v Lou Yiu Long & Ors (1980) AC 614; (b) the defence of duress or economic
duress must be such so as to vitiate free consent in order to render the contract voidable; (c) the concept
of coercion as defined in s 15 cannot be equated with that in s 73 in which the word 'coercion' should be
given an ordinary and general meaning; and (d) s 73 requires a person to whom money has been paid
under coercion to repay or return it (see para 25).
(3) On the facts as specifically found by the court below, there is nothing to indicate that the defendant has
established any of the guidelines given in Pao On. The words purportedly uttered by the plaintiff's director-
cum-general manager, even if accepted in toto, cannot constitute economic duress to render the indemnity
voidable (see para 26). [*111]
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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
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(4) There was no allegation by the defendant that payment of the original deposit of RM65,000 to the plaintiff
was paid as a result of the exertion of any economic duress by the plaintiff. Hence, the facts do not attract
the application of s 73 (see para 27).

[ Bahasa Malaysia summary

Ini merupakan rayuan plaintif terhadap keputusan hakim mahkamah sesyen, yang menolak tuntutan plaintif dengan
kos. Tuntutan plaintif terhadap defendan adalah untuk mendapatkan sebanyak RM36,667.57 selaras dengan suatu
indemniti yang dilaksanakan oleh defendan bagi manfaat plaintif. Defendan bekerja dalam syarikat plaintif sebagai
remiser dari tahun 1982 hingga 1991. Beliau dikehendaki mendepositkan sebanyak RM65,000 dengan plaintif.
Beliau meletakkan jawatan pada bulan April 1991 untuk bekerja dengan syarikat sekuriti yang lain. Defendan
meminta supaya deposit berkenaan dilepaskan kepadanya. Deposit tersebut dilepaskan setelah defendan
melaksanakan indemniti berkenaan dan itu dilakukan atas permintaan pengarah yang juga merupakan pengurus
besar plaintif. Defendan menghujah bahawa indemniti berkenaan ditandatangani lantaran dures ekonomi. Isunya di
sini ialah sama ada mahkamah sesyen telah memakai undang-undang tentang dures ekonomi itu dengan betul
terhadap fakta-fakta khusus yang dibentangkan di atas setelah mengambil kira ss 15 dan 73 Akta Kontrak 1950.

Diputuskan, membenarkan rayuan dengan kos dan mengetepikan keputusan mahkamah sesyen:

(1) Meskipun s 15 tidak memperuntukkan dures sebagai suatu pembelaan, di Malaysia, konsep dures dan
konsep paksaan telah digunakan saling bertukar ganti. Fakta-fakta kes berkenaan tidak terletak dalam
batas dan skop 'paksaan' sebagaimana yang ditakrif di dalam s 15 (lihat perenggan-perenggan 13–14).
(2) Daripada autoriti-autoriti yang menangani konsep dures, prinsip-prinsip yang berikut boleh disari: (a)
mahkamah-mahkamah kita memakan masa untuk menggunakan konsep dures seperti yang ditakrif di
dalam s 15 atau untuk menggunakan konsep dures ekonomi kecuali jika terdapat keterangan yang positif
yang mendatangkan kesan atau natijah sedemikian, dan ini mestilah memenuhi garis panduan yang diberi
oleh Majlis Privi dalam kes Pao On & Ors v Lou Yiu Long & Ors [1980] AC 614; (b) dures atau dures
ekonomi hanya boleh digunakan sebagai pembelaan jika ia merosakkan keizinan bebas bagi menjadikan
kontrak berkenaan boleh batal; (c) konsep paksaan seperti yang ditakrif dalam s 15 tidak boleh disamakan
dengan konsep yang terdapat dalam s 73 yang di dalamnya perkataan 'paksaan' hendaklah diberi makna
biasa dan am; dan (d) s 73 menghendaki seseorang yang kepadanya wang telah dibayar di bawah
paksaan supaya membayar balik atau mengembalikan wang berkenaan (lihat perenggan 25).
(3) Berdasarkan fakta-fakta seperti yang ditemui secara khusus oleh mahkamah bawahan, tidak terdapat apa-
apa jua pun yang menunjukkan [*112]
bahawa defendan telah membuktikan mana-mana satu garis panduan yang diberi dalam kes Pao On.
Perkataan yang kononnya diujarkan oleh pengarah merangkap pengurus besar plaintif itu, kalaulah
diterima secara in toto sekalipun, tidak membentuk dures ekonomi yang menjadikan indemniti itu boleh
batal (lihat perenggan 26).
(4) Tidak terdapat sebarang dakwaan oleh defendan bahawa bayaran deposit asal sebanyak RM65,000
kepada plaintif itu telah dibayar akibat tindakan plaintif mengenakan dures ekonomi. Justeru, fakta-fakta
tersebut tidak menggamit pemakaian s 73 (lihat perenggan 27).]

Notes

For cases on economic duress, see 3(1) Mallal's Digest (4 th Ed, 2003 Reissue) paras 3040–3042.
Cases referred to

Alec Lobb (Garages) Ltd & Ors v Total Oil GB Ltd [1983] 1 All ER 944 (refd)

Barton v Armstrong [1976] AC 104 (refd)

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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
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Maskell v Homer [1915] 3 KB 106

Chin Nam Bee Development Sdn Bhd v Tai Kim Choo & 4 Ors [1988] 2 MLJ 117 (refd)

Emar Sdn Bhd (under receivership) v Aidigi Sdn Bhd and another appeal [1992] 2 MLJ 734 (refd)

Kanhaya Lai v National Bank of India Ltd [1913] ILR Vol XL (Calcutta series) 598 (refd)

Mohd Fariq Subramaniam v Naza Motor Trading Sdn Bhd [1998] 6 MLJ 193 (refd)

Occidental Worldwide Investment Corporation v Skibs A/S Avanti [1976] 1 Lloyd's Rep 293 (refd)

Ooi Kiah Inn Charles & Anor v Kukuh Maju Industries Sdn Bhd (formerly known as Pembinaan Muncul Hebat
Sdn Bhd [1993] 2 MLJ 224 (refd)

Pamaron Holdings Sdn Bhd v Ganda Holdings Bhd [1988] 3 MLJ 346 (refd)

Pao On & Ors v Lou Yiu Long & Ors [1980] AC 614 (folld)

Perlis Plantation Berhad v Mohamad Abdullah Ang [1988] 1 CLJ 670 (refd)

Schanka v Employment National (Administration) Pty Ltd and others [2000] 170 ALR 42 (refd)

Teck Guan Trading Sdn Bhd v Hydrotek Engineering Sdn Bhd & Ors [1996] 4 MLJ 331 (refd)

Third World Development Ltd and Anor v Atang Latief and Anor [1990] 1 MLJ 385 (refd)
Legislation referred to

Contracts Act 1950 ss 15, 73

Evidence Act 1950 ss 102, 103, 114(g), 134

Appeal from

Civil Suit No 52–646 of 1992 (Sessions Court, Melaka)

Shaari Nor (Shaari Nor & Co) for the defendant.

LK Tiu (Koh Kim Leng & Co) for the plaintiff. [*113]

Low Hop Bing J

:
APPEAL

1 This is an appeal by the appellant-plaintiff ('the plaintiff') against the decision of the learned sessions court judge
who on 27 July 2000 dismissed the plaintiff's claim with costs.
FACTS OF THE CASE

2 The plaintiff's claim against the respondent-defendant ('the defendant') was for a sum of RM36,667.57 pursuant to
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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT

an indemnity executed by the defendant on 19 April 1991 in favour of the plaintiff ('the indemnity') in the following
terms:
To M/s Sykt Tan Chow & Loh Securities Sdn Bhd, Malacca.

Re : Indemnity

IN CONSIDERATION of our agreement and the terms of employment as a Remisier with your company AND IN
CONSIDERATION of your releasing me to join another Stockbroking Company and your releasing the deposit to me before
ascertaining all the losses I am responsible for MR KOH KEE HUAT I the undersigned HEREBY AGREE AND CONFIRM
to indemnify you and keep you indemnified against all losses, claims and actions arising out of all the transactions handled
by me between my own clients and yourselves and the delivery of all shares by all my selling clients in the event that the
scripts as delivered shall for any reason whatsoever turn out to be not good for delivery.

AND I FURTHER AGREE that I shall pay for such losses, claims and/or judgment within 14 days of a notice of demand
made on me and after such notice the sum so claimed shall be deemed to be a liquidated debt and may become actionable
forthwith.

The indemnity shall be continuing and shall be determined by the full payment of the sum or sums as demanded by you
and shall be binding on myself and my personal representatives.

Dated this 19 day of April 1991.

Name : MR KOH KEE HUAT

IC No : 5464297

Address: 7222-C, 8 milestone

Paya Rumput

MELAKA

WITNESS

(TAN TIONG HOE)

I/C: 0869587
3 The defendant who served in the plaintiff company from 1982 to 1991 as a remisier was required to deposit a sum
of RM65,000 with the [*114]
plaintiff. He resigned on 12 April 1991 in order to join another securities company, ie Street Securities Sdn Bhd for
which he was required to deposit a sum of RM100,000. In order to meet this requirement, the defendant requested
the plaintiff to release the deposit of RM65,000 to him, which was effected upon the defendant's execution of the
indemnity, at the instance of the plaintiff's director-cum-general manager, one Latif bin Dato Tamby Chik ('Latif'),
who told the defendant:
The choice is yours. If you sign, you will get your money. If you don't sign, you won't get your money.
4 The learned sessions court judge found that the defendant has successfully discharged the burden of proving
duress in the execution of the indemnity and that the plaintiff has failed to call Latif, thereby invoking s 114(g) of the
Evidence Act 1950 to raise an adverse inference against the plaintiff. In the circumstances, the defence of duress
was upheld by the court below.
COUNSEL'S SUBMISSIONS AND DECISION BY COURT

Burden of proof

5 The learned sessions court judge and the respective learned counsel are of the same view that the burden of
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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
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proof is cast upon the defendant to establish the defence of duress: ss 102 and 103 of the Evidence Act 1950.
However, the dispute here is whether the defendant has discharged this burden.

6 It was contended by En Shaari Nor, learned counsel for the defendant, that the defendant has successfully
discharged the burden notwithstanding that Latif was not called by the defendant and that the plaintiffs failure to call
Latif as a witness would attract the application of s 114(g) of the Evidence Act 1950.

7 Mr LK Tiu, the plaintiff's learned counsel, responded that s 114(g) should be invoked against the defendant who
has failed to call Latif as a witness.

8 In my judgment, notwithstanding s 114(g) relied upon by the respective counsel, it is important to look at s 134 of
the Evidence Act 1950 which provides that no particular number of witnesses shall in any case be required for the
proof of any fact, in line with the well recognized maxim that 'evidence has to be weighed and not counted'; see p
710 of Evidence, Practice and Procedure by Augustine Paul J (now JCA).

9 Having said that, in my view, the issue is: has the court below correctly applied the law of economic duress to the
specific facts as alluded to above, having regard to ss 15 and 73 of the Contracts Act 1950.
Defence of duress

10 Duress is a concept of English common law. [*115]

11 In Malaysia, our law of contract has been codified in the Contracts Act 1950 which did not specifically provide for
duress as a defence. Section 15 thereof however incorporates the concept of coercion as a factor vitiating free
consent which is essential in the formation of a legally binding and valid contract. Section 15 defines 'coercion' as
'the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or
threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement.'

12 Apparently, the learned sessions court judge in his grounds of decision, specifically at p 66 of the appeal record,
construed s 15 as including economic duress and applied it to the aforesaid facts of the case to conclude that the
indemnity was thereby vitiated, on the basis of Teck Guan Trading Sdn Bhd v Hydrotek Engineering (S) Sdn Bhd &
Ors [1996] 4 MLJ 331; The Law of Contract In Malaysia And Singapore, Cases and Commentary (2nd Ed) 253 et
seq by Visu Sinnadurai J (as he then was); and Schanka v Employment National (Administration) Pty Ltd and
others [2000] 170 ALR 42.

13 At this juncture, it is appropriate for me to state that although s 15 does not provide for duress as a defence, in
Malaysia the concept of duress and that of coercion have been used interchangeably. I shall therefore treat them as
such here.

14 In my judgment, the facts of the case obviously do not come within the ambit and purview of 'coercion' as
defined in s 15 as there was no evidence of any committing or threatening to commit any act forbidden by the Penal
Code, or the unlawful detaining or threatening to detain, any property, with the intention of causing any person to
enter into an agreement. At p 516, Cheshire, Fifoot and Furmston's Law of Contract (2nd Singapore and Malaysian
Ed) the learned author, Andrew Phang opined that the concept of economic duress is not encompassed within s 15.

15 In Teck Guan Trading, the plaintiff agreed to sell round bars to the first defendant, Hydrotek Engineering the
payment for which was guaranteed by the third and the fourth defendants. The price of the bars was disputed by
the parties, viz RM1,180 according to the defendants and RM1,244 as the plaintiff has alleged. Although the first
defendant refused to pay the price at RM1,244, the first defendant later agreed as the plaintiff persistently refused
to supply. The bars were delivered which the first defendant accepted. The plaintiff sent a notice of demand as a
result of the defendants' failure to pay for the balance of payment for the bars. Before the registrar, plaintiff obtained
summary judgment against the defendants whose counterclaim was also struck out. The defendants appealed
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OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
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against the decision, alleging that on the facts, there was an inference of, inter alia, coercion with reference to
'economic blackmail'.

16 Ian Chin J held that s 15 defined only two ways of committing coercion and on the facts concluded that there
was no question of coercion being committed on the first defendant. The learned judge added that the contention of
'economic blackmail' as 'economic duress' under English law was not applicable as the parties were dealing with
each other at arm's length, following [*116]
the doctrine of economic duress in English law as stated by Lord Scarman of the Privy Council in Pao On & Ors v
Lau Yiu Long & Ors [1980] AC 614, in the following words:
Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observation
of Kerr J in Occidental Worldwide Investment Corporation v Stobs A/S Avanti [1976] 1 Lloyd's Rep 293 at p 336 that in a
contractual situation commercial pressure is not enough. There must be present some factor 'which could in law be
regarded as a coercion of his will so as to vitiate his consent.' This conception is in line with what was said in this Board's
decision in Barton v Armstrong [1976] AC 104 at p 121 by Lord Wilberforce and Lord Simon of Glaisdale — observations
with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that
there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest;
whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to
him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he
took steps to avoid it. All these matters are, as was recognized in Maskell v Homer [1915] 3 KB 106, relevant in determining
whether he acted voluntarily or not.
17 The above judgment of Ian Chin J read together with Pao On, do not seem to support the respondent's
contention based on 'economic duress'.

18 In Perlis Plantation Berhad v Mohamad Abdullah Ang [1988] 1 CLJ 670, duress was raised as a defence. In
considering this defence, VC George J (later JCA) held that the defendant should be able to show that his consent
to the agreement he had entered into was not free in that such consent was caused by coercion as defined by s 15
and that our Contracts Act 1950 did not provide for any other form of coercion other than as defined by s 15.

19 Duress was one of the defences raised in Pamaron Holdings Sdn Bhd v Ganda Holdings Bhd [1988] 3 MLJ 346
in order to avoid a written sale and purchase agreement of shares, but the exact acts of duress were not divulged.
In any event, the alleged duress which was said to have been applied prior to the agreement was subsequently
completed without any protest, as a result of which VC George J (later JCA) held, inter alia, that this did not show
that the duress defence was made bona fide and hence lacking in merit in that it can be said to be frivolous and
vexatious. No reference was made to any provisions of the Contracts Act 1950.

20 In Emar Sdn Bhd (under receivership) v Aidigi Sdn Bhd and another appeal [1992] 2 MLJ 734 (SC), in the court
of first instance, the learned judge found that the first debenture was void as it was signed as a result of economic
duress within the meaning of Pao On, and A Zee Lobb (Garages) Ltd & Ors v Total Oil GB Ltd [1983] 1 All ER 944.
On appeal, the Supreme Court through the judgment of Edgar Joseph Jr SCJ (as he then was) held that the first
debenture was not void but voidable, at the instance of the developer and not the contractor who was not a party
thereto. However, no provision in the Contracts Act 1950 had been referred to. [*117]

21 The defence of duress was pleaded in Ooi Kiah Inn Charles & Anor v Kukuh Maju Industries Sdn Bhd (formerly
known as Pembinaan Muncul Hebat Sdn Bhd [1993] 2 MLJ 224 (SC), but there was no evidence to support the
defence. Hence, the trial judge and the Supreme Court made a concurrent finding rejecting the defence of duress.
However s 15 was not referred to.

22 In Mohd Fariq Subramaniam v Naza Motor Trading Sdn Bhd [1998] 6 MLJ 193 (HC), the plaintiff explained that
if he did not sign P3 which was a variation to the agreement for operation of taxis, the defendant would not have
released the taxi to him, thereby depriving the plaintiff of his livelihood. James Foong J held that the plaintiff made
no protest of any form or manner either before or after P3 was executed that he was coerced into executing it, as a
result of which the defence of economic duress was not sustained.The learned Judge followed the judgment of the
Singapore Court of Appeal in Third World Development Ltd and Anor v Atang Latief and Anor [1990] 1 MLJ 385
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(CA) Singapore which in turn referred to Pao On, and held that assuming that there was some pressure —
commercial pressure — exerted on the appellant at the time of his execution of the undertaking, such pressure
does not constitute economic duress unless it amounts to a coercion of his will which vitiates consent. However s
15 was also not referred to in Mohd Rafiq.

23 Sections 15 and 73 were specifically considered by Eusoff Chin J (later Chief Justice Malaysia) in Chin Nam Bee
Development Sdn Bhd v Tai Kim Choo & 4 Ors [1988] 2 MLJ 117 (HC). The dispute related to the payment of an
additional sum of RM4,000 by each of the respondents (the plaintiffs in the magistrate's court) to the appellant (the
defendant) pursuant to a sale and purchase agreement to purchase a house each at RM29,500. The magistrate
found that the payment was not voluntary but made under a threat by the appellant to cancel the respondents'
booking for their houses. There was a protest by the respondents over the payment. The magistrate ordered the
refund of the RM4,000 to the respondents and on appeal the order was affirmed by Eusoff Chin J (later Chief
Justice Malaysia) who applied ss 15 and 73 of the Contracts Act 1950. The eminent and learned judge rejected the
appellant's contention that the threat to cancel the bookings of the houses did not amount to coercion as defined
under s 15. His Lordship further considered s 73 which, where relevant, reads as follows:
73 A person to whom money has been paid under coercion, must repay or return it.
24 His Lordship followed the Privy Council decision in Kanhaya Lai v National Bank of India Ltd [1913] ILR Vol XL
(Calcutta series) 598 and held that the word 'coercion' in the context of s 73 should be given its ordinary and
general meaning, while the definition of coercion in s 15 should only apply for the purpose contained in s 14 which
regulates free consent.

25 From all the aforesaid authorities in which the concept of duress, including economic duress, has been
enunciated, the following principles may be culled:
1 Our courts are slow in invoking the concept of duress as defined in s 15 or to import the concept of
economic duress unless there is positive evidence [*118]
to that effect, which must satisfy the guidelines given by the Privy Council in Pao On.
2 The defence of duress or economic duress must be such as to vitiate free consent in order to render a
contract voidable.
3 The concept of coercion as defined in s 15 cannot be equated with that in s 73 in which the word 'coercion'
should be given an ordinary and general meaning.
4 Section 73 requires a person to whom money has been paid under coercion to repay or return it.

26 On the facts as specifically found by the court below, there is nothing to indicate that the defendant established
any of the guidelines given in Pao On. The words purportedly said by Latif, even if accepted in toto, cannot
constitute economic duress to render the indemnity voidable.

27 There was no allegation by the defendant that his payment of the original deposit of RM65,000 to the plaintiff
was paid pursuant to the exertion of any economic duress by the plaintiff. Hence, the facts do not attract the
application of s 73.
CONCLUSION

28 On the foregoing grounds, I hold that the decision of the sessions court could not be upheld and is hereby set
aside. The appeal is hereby allowed and the plaintiffs claim is allowed with costs.
Appeal allowed with costs and decision of the sessions court set aside.
Reported by Eugene Jayaraj

End of Document