IN THE COURT OF APPEAL OF MALAYSIA

(APPELLATE JURISDICTION)
CIVIL APPEAL NO: 123/203

BETWEEN:
AB CONSTRUCTION SDN BHD APPELLANT

AND

MALURI UNITED BERHAD RESPONDENT

(In the matter of Civil Suit No.34 of 2023

In the High Court in Malaya at Kuala Lumpur
Between
AB Construction Sdn Bhd … Plaintiff
And
Maluri United Berhad … Defendant)

THE RESPONDENT’S BUNDLE OF

AUTHORITIES

Prepared by the Solicitors for the Respondent:

Taylor’s University,
No.1, Jalan Taylor’s,
Petaling Jaya,
Selangor Darul Ehsan.
 2

INDEX
NO. NAME OF AUTHORITY PAGE NO.
1. CHENG KENG HONG v GOVERNMENT OF THE 3
FEDERATION OF MALAYA [1966] 2 MLJ 33, 38
2. CHIN WELL FASTENERS CO SDN BHD v SAMPATH 11
KUMAR VELLINGIRI & ORS [2006] 1 MLJ 117, 26
3. THE GOLF CHEQUE BOOK SDN BHD v NILAI SPRINGS 23
BHD [2006] 1 MLJ 554, 561
4. TAMPLIN v JAMES [1880] 15 Ch.D 215, 221 31
5. THAM KHONG v OH NIAM & ORS [1968] 1 MLJ 44, 48 40
6. CONTRACTS ACT 1950 – SECTION 23 50
7. DATO SERI VISU SINNADURAI, LAW OF CONTRACT 51
(THIRD EDITION, LEXIS NEXIS BUTTERWORTH, 2004)
8. STILK v MYRICK [1809] 170 ER 1168 53
9. ONG TIAW KOK & ANOR v BIAN CHIANG BANK [1972] 2 56
MLJ 134
10. WILLIAMS v ROFFEY BROS AND NICHOLLS 81
(CONTRACTORS) LTD [1990] 1 All ER 512
11. PAO ON v LAU YIU LONG [1980] AC 614, 635 97
12. TECK GUAN TRADING SDN BHD v HYDROTEK 113
ENGINEERING (S) SDN BHD [1996] 4 MLJ 331, 339
13. OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY 122
KNOWN AS SYKT TAN, CHOW & LOH SECURITIES SDN
BHD) v KOH KEE HUAT [2004] 2 MLJ 110, 111
14. BERGAMO DEVELOPMENT (M) SDN BHD v ECK 130
DEVELOPMENT SDN BHD & ANOR [2018] MLJU 555, 66
15. COMBE v COMBE [1951] 2 KB 215 167
16. CHENG HANG GUAN & OTHERS v PERUMAHAN FARLIM 175
(PENANG) SDN BHD & OTHERS [1993] 3 MLJ 352, 357
17. D&C BUILDERS LTD v REES [1966] 2 QB 617 230
 3

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 6:04:00PM MYT
Job Number: 209341761

Document (1)

1. CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

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 4

CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA

CaseAnalysis | [1966] 2 MLJ 33

CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA

[1966] 2 MLJ 33
Malayan Law Journal Reports · 5 pages

OCJ KL
RAJA AZLAN SHAH J
ORIGINATING SUMMONS NO 39 OF 1965
28 February 1966
Case Summary
Contract — Tender — Acceptance of tender — Whether principal bound by representations of agent —
Trade usage — Powers of arbitrator — Contracts (Malay States) Ordinance, 1950 — Evidence Ordinance,
1950, S 92.

In this case the Chief Architect of the Ministry of Education had issued a notice inviting tenders for the erection of a
school. The applicant tendered for the work and his tender was accepted. A contract was entered into which recited
the drawings and specifications according to which the work was to be done. The applicant discovered that the
specification for electrical service was at variance with the layout drawings and thereupon wrote to the Chief
Architect. He received a letter from a Mr. Hewish for the Chief Architect that extra payment would be paid for
fittings, other than those mentioned in the specifications. Mr. Hewish was an architect appointed to supervise the
work. Subsequently the Government refused to pay any extra payment and the matter was referred to arbitration.
Clause 40 of the contract provided for arbitration and stated that the arbitrator should have power to review and
revise any certificate, opinion, decision, requisition or notice and to determine all matters in dispute submitted to him
in the same manner as if no such certificate, opinion, decision, requisition or notice had been given. The arbitrator
found that the applicant was justified in assuming that Mr. Hewish had authority to act for the Government but held
that he could go behind the letter of Hewish and hold that the applicant was not entitled to extra payment. The
arbitrator referred the following two questions to the court – (1) whether the letter signed by Mr. Hewish is binding
on the respondents and/or gives rise to an estoppel whereby the respondents are precluded from disputing the
authority of Mr. Hewish; (2) in the event that question (1) be answered in the affirmative whether the arbitrator was
entitled under clause 40 of the contract to review the letter itself and to hold that the decision contained in the letter
was wrong in principle and that no extra payment should be made to the applicant for the fittings in question.
Held:

(1) although Mr. Hewish had no authority to sign the letter for the Chief Architect, the respondents had by their
conduct represented or permitted to be represented to the applicant that Mr. Hewish had the authority to
act on their behalf and consequently the respondents were bound by their acts to the same extent as if he
had the authority; therefore in the circumstances the respondents were estopped from disputing the
authority of Mr. Hewish;
(2) the arbitrator had power to review the letter under clause 40 of the contract and that in the circumstances
of this case the arbitrator was justified in going behind the letter and holding that the decision to pay the
extra payment for the electrical fittings was wrong;
(3) there was no custom as alleged that if any work was done according to the drawings which was not set out
in the specification, extra payment would be made, as such usage would be inconsistent with the contract,
which consists of the tender, acceptance and other relevant documents. [*34]

Cases referred to

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 Page 2 of 7 5
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

Attorney-General for Ceylon AD De Silva [1953] AC 461 at p 479

Lakshmi Narainsingha Swami v Patta Sahuani AIR 1957 Orissa 86

Ramsden Dyson 14 WR 926 at p 933

Ram Pertab Marshall (1899), ILR 26 Cal 701

Tersons Ltd Stevenage Development Corporation [1965] 1 QB 37 51

London Export Corporation Ltd Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 661
ORIGINATING SUMMONS

Heng Cheng Swee for the applicants.

Mrs Ng Mann Sau (Federal Counsel) for respondents.

RAJA AZLAN SHAH J

The award of the arbitrator, dated 26th July 1964, was stated in the form of a special case.

The Chief Architect to the Ministry of Education on behalf of the Government of the Federation of Malaya issued a
notice inviting tenders for the erection and completion of Sekolah Lanjutan Kampong at Mukim of Sungei Pasir,
District of Kuala Muda, Kedah. Copies of the contract agreement, drawings and specification could be seen at the
place specified in the tender notice during office hours on any working day. The applicant tendered for the work and
his tender was accepted. A contract designated as Contract No. ME/AB 42 of 1962 was entered into between the
applicant and the Government on 15th May 1962. The contract recites:
"WHEREAS the Government is desirous of erecting and completing Sekolah Lanjutan Kampong at Mukim of Sungei Pasir,
District of Kuala Muda, Kedah, and has caused drawings and a specification describing the work to be done to be prepared:
AND WHEREAS the said drawings numbered (there are several of them included electrical layout drawings annexed)
(hereinafter referred to as the contract drawings), and the specification schedule of rates, form of tender and letter of
acceptance of tender have been signed by or on behalf of the parties hereto: …".
The relevant paragraphs of the said contract are clause (3) which defines the term 'contract' as "the documents
forming the tender and acceptance thereof, together with the documents referred to therein including the conditions
annexed hereto, the specification, schedule of rates and drawings and all these documents taken together shall be
deemed to form one contract and shall be complementary to one another", and clause (4) which defines
'superintending officer' as "the Chief Architect, Ministry of Educaton, and his successors in office and also such
person or persons as may be deputed by him in writing to act on his behalf for the purpose of this contract".

The contract documents comprise the following:

(a) The contract form (P.W.D. 203).

(b) Conditions of contract. The relevant clauses are:

"(4). The contractor shall provide everything necessary for the proper execution of the works according to the true
intent and meaning of the drawings and specification taken together whether the same may or may not be particularly
shown or described provided that the same is reasonably to be inferred therefrom and if the contractor finds any
discrepancy therein he shall immediately and in writing refer the same to the superintending officer who shall decide
which shall be followed … "and "(40). Provided always that in case any dispute or difference. … The arbitrator shall
have power to review and revise any certificate, opinion, decision, requisition or notice and to determine all matters in
dispute which shall be submitted to him, and of which notice shall have been given as aforesaid, in the same manner
as if no such certificate, opinion, decision, requisition or notice had been given".

See Yi Vonne
 Page 3 of 7 6
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

(c) Form of tender which reads inter alia: "Tender for the erection and completion of Sekolah Lanjutan Kampong … in
accordance with drawings number (a list of contract drawings was annexed) and any other detail drawings supplied in
application thereof".

(d) Summary of tenders which gives the description of works in respect of each building including electrical
installations. The preamble reads: "All the drawings upon which this tender is to be based are listed on the 'form of
contract' (P.W.D. 203) included in the tender table documents. For full particulars of the works listed below the
Tenderer should refer to the above drawings and the specifications. The tender will be deemed to include for
everything shown or described therein including all ancillary works. Works described as including 'electrical installation'
shall be deemed to include for all electric fittings shown on the electrical layout drawings and described in the
specification for 'electric service'".

(e) Acceptance of tender which is "subject to the conditions of contract, specification and/or bills of quantities, form of
tender and this letter …".

(f) Specification which "should not be read wholly, but in conjunction with the drawings and appendices which are
affixed to the basic specification".

(g) Appendices eight in number to basic building specification.

(h) Electrical service clause (1) reads: "The scope of work under this heading comprises the supply of all materials,
fittings, labour, cartage, tools etc. necessary for the execution and completion of the electric light and power
installations to all the buildings built under the contract in accordance with this specification, schedule, plans and
agreement to the satisfaction of the Senior Architect"; clause (18), "All light points, shown on plans, shall be fitted with
ceiling roses, twin flexible coils, lamp-holders and 10" opal or white plastic shades and 60 watt frosted bulbs"; clause
(19), "Two 60" G.E.C. ceiling fans complete with all accessories and connections shall be provided one in each
headmaster's office. Two fan points (without fans) shall be provided one in each teacher's room and one in the clerks'
section".

(i) Contract drawings as defined in the recital to the contract.

The applicant discovered that the specification for electrical service, namely clauses 18 and 19, were at variance
with the electrical layout [*35]
drawings. Accordingly on 19th May 1962 he wrote to the Chief Architect at Kuala Lumpur for clarification pursuant
to clause 4 of the Conditions of Contract. It is pertinent to refer to the said letter which is as follows:
"19th May, 1962,

Confidential.

The Chief Architect,

Ministry of Education,

Young Road,

Kuala Lumpur.

Sir,

Construction of Primary Schools at

Slim River, Perak, & Sekolah

Lanjutan Kampong at Mukim of

Sungei Pasir, District of Kuala

See Yi Vonne
 Page 4 of 7 7
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

Muds, Kedah.

I beg to advise that in tendering for the above contracts I had based my estimate of tender on the specifications included in
the tender table documents. I now find that the plans do not accord fully with the specifications in respect of electrical
works.

Since these specifications are basic documents wherein the scope of a particular type of works is described and indicated
and as my tenders have been based thereon I shall be grateful if you will confirm that the above contracts should be
undertaken under the requirements of the specifications.
Yours faithfully,

(Sgd) Cheng Keng Hoong."

On 8th June 1962 the applicant received the following reply:
Ministry of Education,

Kuala Lumpur.

8th June, 1962.

Mr. Cheng Keng Hoong,

12[5/7], Cowan Street,

Ipoh.

Technical Education, Perak.

Sekolah Lanjutan Kampong (Boys),

Sungei Patani.

With reference to your letter dated the 19th May 1962, I confirm that only the electrical fittings described in the specification
are included in the contract.

Please supply and fix the electrical fittings shown on the drawings. Any fittings, other than those mentioned in the
specification, will be paid for as an extra amount shown in the contract.

(Sgd) R.A. Hewish, Arch. (N).

for Chief Architect,

Ministry of Education."
In accordance with instructions (supra) the applicant executed the "extra" work. In January 1963 all Ministry of
Education contracts were taken over by the Public Works Department. The applicant duly completed the contract
on 6th May 1963 and in due course submitted a bill for $31,592.44 as representing the cost of extra supplied by
way of electrical fittings. On 11th July 1963 Jurutera Negeri, Kedah & Perlis, on the instruction of the Director of
Public Works wrote to the applicant "that no extra payments will be made for the electrical fittings in dispute".

The matter was referred to arbitration on 20th October 1964 and the arbitrator gave his award on 26th November
1964. The arbitrator found the following facts: (i) The applicant noticed the discrepancy between the specification
and the drawings at the time of tendering but put in an unqualified tender in the expectation that he would be paid
extra for the electrical work shown in the drawings but not mentioned in the specification; (ii) After acceptance of his
tender he wrote to the Chief Architect, Ministry of Education, on the 19th May 1962 drawing attention to the
discrepancy and he received by way of reply the said letter of the 8th June 1962; (iii) Mr. Hewish had the physical
supervision of the contract so far as it had been performed up to the 8th June 1962, and continued so to supervise
up to October 1962, and during this time wrote a number of letters on Government letterhead signed 'for Chief

See Yi Vonne
 Page 5 of 7 8
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

Architect, Ministry of Education'. The applicant was accordingly justified in looking to Mr. Hewish and in assuming
that Mr. Hewish was the proper authority to give him instructions and to make decisions in connection with the work.
Mr. Hewish was held out by the Government in effect as their representative and agent in the performance of this
contract; (iv) The applicant acted in bad faith in deliberately not qualifying his tender although he was aware of the
discrepancy aforementioned. The applicant knew that on previous occasions in such tenders he and other
contractors had received payment of extra on the basis now claimed; (v) In a tender of this nature (without bills of
quantities) the extent of the work must be shown on the drawings to enable the tenderer to measure what is
required and give details of preliminary items. A reading of the whole of the contract documents including the
drawings shows quite clearly that the intention was that the applicant was to include in the contract price the whole
of the electrical fittings shown on the drawings; (vi) Mr. Hewish in writing the letter of the 8th June 1962 was wrong
in agreeing to pay extra for electrical fittings shown on the drawings but not mentioned in the specification, and
should have informed the applicant that he was obliged to instal all electrical fittings shown on the drawings without
extra payment.

The questions for the court are (i) whether the said letter of the 8th June 1962 signed by Mr. R. A. Hewish is binding
upon the respondents and/or it gives rise to an estoppel whereby the respondents are precluded from disputing the
authority of Mr. Hewish; (ii) in the event that question (i) above be answered in the affirmative, whether clause 40 of
the conditions of contract entitled the arbitrator to review the letter itself and to hold that the decision contained in
the said letter was wrong in principle and that no extra payment should be made to the applicant for the fittings in
question. [*36]

Subject to the opinion of the court the arbitrator awarded (1) in the event the court deciding the first question of law
in the affirmative and the second question in the negative, the applicant would be paid the sum of $31,592.44 for
electrical light fittings and ceiling fans as shown in Appendix 'A' of his statement of claim dated 23rd November
1963, the respondents would pay all costs in connection with this arbitration, and the respondents would pay the
arbitrator's charges and expenses of $1,375.69 plus $200.00 the cost of preparing this award, making a total of
$1,575.69; (2) in the event the court deciding the first question of law in the negative, or the first and second
questions of law in the affirmative, the applicant would provide and fix all electrical light fittings and ceiling fans as
shown on the electrical layout drawings without any addition to his contract amount for so doing, the applicant
would pay all costs in connection with this arbitration and the applicant would pay the arbitrator's charges and
expenses of $1,375.69 plus $200.00 the cost of preparing this award, making a total of $1,575.69.

The first question I have to consider is whether the said letter of 8th June 1962 gives rise to an estoppel whereby
the respondents are precluded from disputing the authority of Hewish.

In substance, the argument for the applicant was that acting on the faith of the representation of the said letter
which was written on a Ministry of Education letter-head and signed for the Chief Architect he bona fide believed
that Hewish had authority to sign it. It was further argued that Hewish had written similar letters on these letter-
heads and had signed them for the Chief Architect. The respondents contended that Hewish was only an agent so
far as supervision was concerned; there was no written letter deputising him as superintending officer as required
under clause 4 of the contract. In the circumstances they said that the question of estoppel by representation did
not arise. The arbitrator had found as a matter of fact that Hewish had supervision of the contract up to October
1962 and during that time had written a number of letters on Government letter-head and had signed for the Chief
Architect. He accordingly found that the applicant was justified in assuming that Hewish had the authority and under
the circumstances that he was held up by the Government as their representative and agent in the performance of
the contract.

The general proposition of law on agency by "holding out" was stated by the Privy Council in Attorney-General for
Ceylon AD De Silva [1953] AC 461 at p 479.
"All 'ostensible' authority involves a representation by the principal as to the extent of the agent's authority. No
representation by the agent as to the extent of his authority can amount to a 'holding out' by the principal".
This brings me to section 190 of the Contracts (Malay States) Ordinance, 1950, which enacts that where a principal
induces a belief that the unauthorised acts of an agent are authorised he is bound by the consequences. The
section reads:
"When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the
principal is bound by such acts or obligation if he has by his words or conduct induced such third persons to believe that
such acts and obligations were within the scope of the agent's authority".
For the section to apply there must be an allegation or proof that the principal either by his words or conduct has
induced a third person to believe that the acts done or obligations are within the scope of the agent's authority:

See Yi Vonne
 Page 6 of 7 9
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

Lakshmi Narainsingha Swami Patta Sahuani AIR 1957 Orissa 86. The section enacts a rule of estoppel. Lord
Cranworth observed in Ramsden Dyson 14 WR 926 at p 933:
"If, indeed the principal knows that persons dealing with his agent have so dealt in consequence of their believing that all
statements made by him had been warranted by the principal and, knowing this, allows the person so dealing to spend
money in the belief that the agent had an authority, which, in fact, he had not, it may be that in such a case a Court of
Equity would not allow the principal afterwards to set up want of authority in the agent",
The Privy Council case of Ram Pertab Marshall (1899), ILR 26 Cal 701 which, however, was not decided with
reference to the section, affords a guiding illustration. In that case the principal was held liable upon a contract
entered into by his agent in excess of his authority, the evidence showing that the contracting party might honestly
and reasonably have believed in the existence of the authority to the extent apparent to him.

Applying the law to the present case, I find that although Hewish had no authority to sign the said letter for the Chief
Architect the respondents had by their conduct represented or permitted to be represented to the applicant that
Hewish had the authority to act on their behalf and consequently the respondents are bound by his acts to the same
extent as if he had the authority. In the circumstances the respondents are estopped from disputing the authority of
Hewish.

With regard to the second question, two considerations arise: firstly, whether under clause 40 of the conditions of
contract the arbitrator had power to review the said letter. It was argued on behalf of the applicant that in the
absence of ambiguity the arbitrator had no power to review the said letter. It was submitted that the contents of the
letter were not in dispute. The respondents contended that the arbitrator had power to decide as a matter of fact. In
my view, an arbitrator derives his authority from the agreement between the parties and therefore [*37]
his powers and duties are those that the parties have agreed to place upon him. It is therefore necessary to see
what the agreement stipulates. Clause 40 inter alia states that "in case of any dispute or difference the arbitrator
shall have power to review amongst other things any opinion or decision". It is perfectly clear that the submission
covers any dispute or difference. Now the dispute in issue is the said letter which contains a decision. The applicant
contended that Hewish could have written it as an agent whereby the respondents are estopped from disputing his
authority; on the other hand the respondents claimed that Hewish had no authority to write the letter. That issue
went for arbitration as a dispute or difference arising between the parties. Accordingly I hold that the arbitrator had
power under clause 40 to review that letter.

The second consideration is whether the arbitrator had power to go behind the said letter and to hold that the
decision contained therein was wrong and that no extra payment should be paid to the applicant for the electrical
fittings. Insofar as the question whether there was evidence upon which an arbitrator could reach a conclusion of
fact is one of law. The court is not concerned with his finding of fact; the court is concerned only to see that there
was evidence to support his finding: per Upjohn L.J. in Tersons Ltd Stevenage Development Corporation [1965] 1
QB 37 51. Re-stating the arbitrator's finding of fact, he said that the applicant knew of the discrepancy between the
specification and the drawings at the time of tendering but put in an unqualified tender which was based on the
hypothesis that in the past he and other contractors had been given additional payment in respect of Ministry of
Education contracts under similar circumstances. He held that in a tender of this nature (without bills of quantities)
the extent of the work must be borne on the drawings to enable the tenderer to measure what was required; the
specification should state the quality and type of materials required and details of preliminary items should be given.
He came to the conclusion that upon reading the contract documents as a whole it was the intention that the
applicant was to include in the contract price the whole of the electrical fittings as shown in the drawings. The point
to consider is whether there was sufficient evidence to support the arbitrator's finding.

Before doing so I wish to consider a point raised on behalf of the applicant. It was contended that contractors
working for the Ministry of Education in the past had put in their tenders based on the specification and not on the
drawings for the sole reason that they had to work their tenders on a very competitive basis and therefore they were
obliged to work on the minimum which was conveyed in the specification and whatever work they put in in
accordance with the drawings were paid as "extras". It is now claimed that this procedure was the accepted practice
and on behalf of the applicant it was said that Hewish's letter of 8th June was tantamount to a confirmation of such
practice. It was further suggested that the fact that a similar contract at about the same period was given to the
applicant to put up a school in Slim River and had been paid "extra" for the electrical fittings as shown in the
drawings but not in the specification lends colour to such a proposition. That being so, it was contended that the
said letter was not against the weight of evidence. Nothing could be more ingenious and able than the argument
which I have heard in support of the case for the applicant. But that argument, ingenious and able as it appeared to
be, has certainly not occasioned any doubt in my mind as to the conclusion which I shall reach, especially in the
light of the authorities I am about to refer.

See Yi Vonne
 Page 7 of 7 10
CHENG KENG HONG v GOVERNMENT OF THE FEDERATION OF MALAYA, [1966] 2 MLJ 33

This so-called practice, more correctly in law called trade usage or custom, may possibly form part of a contract
although not expressly incorporated in the written agreement. The incorporation of a trade usage is, however,
subject to well defined principles of law and that is it must be reasonable and not so as to contradict the tenor of the
contract as a whole. Jenkins L.J. in London Export Corporation Ltd Jubilee Coffee Roasting Co Ltd [1958] 1 WLR
661 after exhaustively reviewing the authorities said at page 675:
"I do not think there are any other authorities to which I can usefully refer. It appears to me, when all have been looked at,
that the relevant principle of law cannot be stated with any greater precision than this: that an alleged custom can only be
incorporated into a contract if there is nothing in the express or necessarily implied terms of the contract to prevent such
inclusion and, further, that a custom will only be imported into a contract where it can be so imported consistently with the
tenor of the document as a whole".
Consistent with the above principles, proviso (e) of section 92 of the Evidence Ordinance, 1950, enacts that oral
evidence is admissible to establish a trade usage to be annexed to the written contract, but as has been noted
above, such usage must be consistent with the terms and tenor of the written contract.

I have now to consider whether the alleged custom can be annexed to the contract documents in which case the
applicant would be entitled to succeed, or whether the contract documents as a whole contain upon their true
construction sufficient indications to support the conclusion of the arbitrator. The law with regard to acceptance of a
tender is perfectly clear. The unconditional acceptance of a tender by the employer binds both parties, and a
contract is thereby formed, the terms of which are ascertainable from the invitation to tender, the [*38]
tender, the acceptance, and any other relevant documents: see 3 Halsbury's Laws of England (3rd ed.) at page
423. In the instant case the contract documents as defined in clause 3 (supra) mean all documents forming the
tender and acceptance together with the documents referred to therein, that is the drawings mentioned and
annexed to the form of tender, the summary of tender including the tender table documents, the conditions of
contract, the specification, schedule of rates and drawings, "and all these documents taken together shall be
deemed to form the contract and shall be complementary to one another". The answer is therefore obvious even to
the most indulgent eye. If I accede to the applicant's argument that the specification and the drawings must each be
read separately and distinctly the answer would be inconsistent with the general tenor of the documents. The
specification states that the contractor was to supply all materials, fittings etc. necessary for the execution and
completion of the electric light and power installations. The installations are referred to in the summary of tender
which describe "to include for all electrical fittings shown on the electrical layout drawings and described in the
specification for 'electrical service'". In the summary of tender, both the intent and meaning in the sense ascribed to
them in clause 4 of the conditions of contract (supra) are clear, that is that the electrical installation as shown on the
electrical layout drawings and described in the specification for electrical service is to be read into and form part of
the contract. In the absence of any qualification as to electrical fittings it is not unreasonable to assume that the
applicant had priced his tender inclusive of the electrical installation as shown on the electrical layout drawings. To
read the electrical layout drawings in the sense contended for by the applicant gives them viability which amounts to
a violation of clause 3 of the contract. I am not impressed by the arguments of the applicant that the electrical layout
drawings are specific provisions which exist independently of and separate from the rest of the contract documents.
For all these reasons I think the arbitrator came to the correct conclusion based on the evidence. In my judgment
the alleged custom was not only a blind confidence of the most unreasonable description but also repugnant to the
terms and tenor of the contract and as such was not a trade custom but merely a long established irregularity.

I therefore answer both the arbitrator's questions in the affirmative and that means the second award must stand.
Questions answered in the affirmative.

Solicitors: Heng, Chen & Co.

End of Document

See Yi Vonne
 11

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 6:11:00PM MYT
Job Number: 209341997

Document (1)

1. Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors, [2006] 1 MLJ 117
Client/Matter: -None-
Search Terms: chin well fasteners co sdn bhd v sampath kumar vellingiri & ors - [2006] 1 mlj 117
Search Type: Natural Language
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 12

CHIN WELL FASTENERS CO SDN BHD v SAMPATH KUMAR

VELLINGIRI & ORS
CaseAnalysis
| [2006] 1 MLJ 117 | [2005] MLJU 390 | [2005] 6 AMR 102 | [2005] 4 CLJ 394

Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors [2006] 1
MLJ 117
Malayan Law Journal Reports · 16 pages

COURT OF APPEAL (PUTRAJAYA)

MOKHTAR SIDIN, MOHD GHAZALI JJCA AND AUGUSTINE PAUL FCJ
CIVIL APPEAL NO P–02–511 OF 2003
30 September 2005
Case Summary
Contract — Construction of terms of contract — Employment — Purpose contract was intended to be use
— Whether plaintiffs can claim benefits contained in contract of employment even though they did not sign
it — Whether defendant bound by it

Labour Law — Employment — Contract of employment — Mandatory requirements imposed by Indian

government — Whether can be varied

An agreement was entered into between Malaysia and India for the latter to supply expert and manual workers to
work in Malaysia. In order to protect its citizens and to ensure that they obtain fair and reasonable wages and
treatment, the Indian Government had imposed certain mandatory requirements which a prospective foreign
employer must meet before the Indian Government would release its citizens for such employment. The prospective
employer would have to submit: (a) a demand letter for recruitment of workers from India; (b) a contract of
employment; (c) a power of attorney; (d) an affidavit from the employer. It was the finding of the learned trial judge
that the plaintiffs were entitled to the benefits contained in the contract of employment. However, the contract of
employment though signed by the defendant was not signed by the plaintiffs nor did they know of its existence until
the dispute between the parties arose, while the defendant had, being not fully aware of its contents, considered it
to be a mere formality to obtain the release of the plaintiffs. Accordingly, learned counsel for the defendant
contended that they were not bound by it. The critical issue for determination was therefore the legal effect of the
contract of employment in such circumstances. The High Court gave judgment for the plaintiffs. This appeal was by
the defendant.
Held, dismissing the appeal:

(1) Clause 20(b) of the contract of employment stipulated that the employer will not enter into any other
agreement with the employee unless it is approved. Obviously, the approval must be that of the Indian
authorities and not the employee. It was therefore manifestly patent that the dominant force in the contract
of employment was the relevant Indian authority and not the employee. It was based on its terms that the
plaintiffs were allowed to leave India. The defendant had used it for the purpose it was intended. The
defendant must therefore be considered to have agreed to the terms. The fact that the defendant's
representative did not appreciate its contents when he signed it did not affect its validity (see para 26).
(2) As the defendant had agreed to its terms and had benefited from it by its use [*118]
to obtain the release of the plaintiffs, the defendant was bound by it even though it was not signed by the
plaintiffs. It must also be observed that the obligation to ensure that the contract of employment was
executed by the plaintiffs was that of the defendant. It was through their willful conduct that it was not
signed by the plaintiffs (see paras 26 and 28).

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Satu perjanjian dimasuki antara Malaysia dan India di mana India akan membekalkan pekerja-pekerja mahir dan
juga buruh ke Malaysia. Untuk memastikan bahawa rakyatnya dilindungi dan dibayar gaji dan layanan yang
berpatutan dan munasabah, Kerajaan India telah mengenakan syarat-syarat mandatori yang tertentu yang perlu
dipenuhi oleh bakal majikan asing sebelum Kerajaan India melepaskan warganya untuk bekerja di sini. Bakal
majikan dikehendaki menyerahkan: (a) surat tuntutan untuk merekrut pekerja-pekerja dari India; (b) perjanjian
pekerjaan; (c) surat kuasa wakil; (d) afidavit daripada majikan. Ia merupakan pendapat hakim perbicaraan yang
bijaksana bahawa plaintif-plaintif adalah berhak kepada manfaat-manfaat yang terkandung di dalam perjanjian
pekerjaan akan tetapi, perjanjian pekerjaan, walaupun ditandatangani oleh defendan, tidak ditandatangani oleh
plaintif-plaintif dan mereka juga tidak tahu akan kewujudan perjanjian tersebut sehingga pertikaian di antara pihak-
pihak timbul, dan sementara defendan, walaupun tidak mengetahui sepenuhnya terma-terma perjanjian tersebut,
telah menganggap ia sebagai cuma satu formaliti sahaja untuk memperolehi perlepasan plaintif-plaintif. Dengan itu,
peguamcara defendan telah menegaskan mereka tidak terikat dengannya. Isu yang kritikal untuk diputuskan ialah
efek undang-undang terhadap perjanjian pekerjaan dalam keadaan ini. Mahkamah Tinggi telah memberi
penghakiman kepada plaintif-plaintif. Rayuan ini adalah oleh defendan.

Diputuskan, menolak rayuan:

(1) Klausa 20(b) perjanjian perkerjaan mensyaratkan bahawa majikan tidak akan memasuki sebarang
perjanjian dengan pekerjanya kecuali diluluskan. Adalah nyata bahawa kelulusan ini adalah dari pihak
berkuasa India dan bukannya dari pekerja. Dengan ini, ia adalah cukup ketara bahawa kuasa yang
berpengaruh di dalam perjanjian pekerjaan ini ialah pihak berkuasa India dan bukannya pekerja.
Berdasarkan terma-terma perjanjian itu, plaintif-plaintif dibenarkan keluar dari India. Defendan telah
menggunakan perjanjian tersebut untuk tujuan yang diinginkannya. Dengan itu, defendan dianggap
bersetuju dengan terma-termanya. Walaupun pihak defendan yang menandatangani perjanjian tersebut
tidak menyedari isi kandungan perjanjian tersebut, namun ia tidak menjejaskan kesahan Perjanjian
tersebut (lihat perenggan 26).
(2) Oleh kerana defendan bersetuju dengan terma-terma dan telah mendapatkan manfaat daripadanya untuk
memperolehi pelepasan plaintif-plaintif, defendan adalah terikat dengannya walaupun perjanjian tersebut
tidak ditandatangani oleh plaintif-plaintif. Ia juga perlu diperhatikan bahawa obligasi untuk [*119]
memastikan perjanjian pekerjaan ditandatangani oleh plaintif-plaintif adalah atas defendan. Ia adalah
kelakuan defendan yang disengajakan yang mengakibatkan perjanjian tersebut tidak ditandatangani oleh
plaintif-plaintif (lihat perenggan 26 dan 28).

Notes

For cases on construction of terms of employment contract, see 3(2) Mallal's Digest (4th Ed, 2003 Reissue) paras
2753–2755.

For cases on contract of employment, see 8(1) Mallal's Digest (4th Ed, 2003 Reissue) paras 796–817.
Cases referred to

Alghussein Establishment v Eton College [1991] 1 All ER 267

Foley v Classique Coaches Ltd [1934] 2 KB 1

Heller Factoring Sdn Bhd v Metalco Industries [1995] 2 MLJ 153

L'Estrange v Graucob [1934] 2 KB 394

Majumder v AG of Sarawak [1966] 1 MLJ 41

New Zealand Shipping Co v Societe des Ateliers Chantiers de France [1917] 2 KB 717

Serangoon Garden Estate Ltd v Marion Chye [1959] MLJ 113

Sudbrook Trading Ltd v Eggleton [1983] 1 AC 444

Appeal from: Civil Suit No 22–593 of 2002 (MT4) (High Court, Pulau Pinang)

Dato' Ghazi bin Ishak (Ong Kheng Leong with him) (Ghazi & Lim) for the appellant.

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Raja Aziz Addruse '(M Thayalan and Jessica Ram Binwani with him) (Meena Raman & Partners) for the
respondents.

Augustine Paul FCJ (delivering judgment of the court):

[1] The claim in this appeal arose from the recruitment of the plaintiffs (the respondents before us), foreign workers
from India, by the defendant (the appellant before us). The High Court gave judgment for the plaintiffs. This appeal
is by the defendant.

[2] The facts of the case as found by the learned trial judge are as follows. An agreement was entered into between
Malaysia and India for the latter to supply expert and manual workers to work in Malaysia. In order to protect its
citizens and to ensure that they obtain fair and reasonable wages and treatment, the Indian Government had
imposed certain mandatory requirements which a prospective foreign employer must meet before the Indian
Government would release its citizens for such employment. The prospective employer would have to submit the
following documents:
(a) a demand letter for recruitment of workers from India;

(b) a contract of employment; [*120]

(c) a power of attorney;
(d) an affidavit from the employer.

[3] The learned trial judge dealt with the requirements of these documents based on the evidence adduced.
(a) The Demand Letter

[4] The letter was in the defendant's letter head and addressed to their agent Mithun Travels Pte Ltd ('Mithun') in
India. This letter dated 11 July 2002 requested for 100 general workers between the ages of 21 and 35 years. It
also stated that their monthly basic salary would be RM600 with overtime provided. It stipulated that the workers
would work six days a week for eight hours a day. Accommodation and transport would be provided free. The letter
also stipulated that the employer would be responsible for all government levy and other immigration charges and
that the employer would provide the employees with free return air-tickets from India to Malaysia.
(b) The Contract of Employment

[5] The contract of employment ('the contract of employment') was also on the defendant's letter head. It defined the
defendant as the employer and the worker as employee. It contained 22 clauses almost identical in terms to those
contained in the demand letter. It was signed by the employer's representative one Tsai Yang Chuan who was the
defendant's first witness in these proceedings and who described himself as the managing director of the
defendant. He signed it in the High Commission of India in Kuala Lumpur before a local Notary Public, Mr Inderjit
Singh. Besides his signature, he also declared that he had gone through the contents of the contract of employment
and understood it completely. He undertook not to violate any clause mentioned in the contract of employment and
he agreed that he was liable for action in case of any violation. His signature was attested by the Second Secretary
to the High Commission of India in Kuala Lumpur. However, the contract of employment was not signed by the
employees.
(c) Power of Attorney

[6] There was a power of attorney given to Mithun by the defendant to enable Mithun to handle all the defendant's
affairs associated with the recruitment of workers for employment with the defendant. It was again signed by Tsai
Yang Chuan.
(d) Affidavit

[7] The document entitled as an 'affidavit', stated that the management of the defendant which intended to employ
100 Indian workers as production operators, undertook the responsibility of repatriating any Indian worker as a
result of breach [*121]
of contract by either side, by providing a return air-ticket at the defendant's expense and settling the employees'
dues, besides returning the passports to the holders.

[8] Upon being satisfied that its citizens have been properly secured of an employment with the required basic
salary, the Protector of Emigrants would then issue a clearance for the citizen to leave India and the protector's

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clearance would be endorsed on the employee's passport, as was done in this case. Sampath Kumar (PW1)
exhibited the relevant page of his passport bearing this clearance which bore the contract number of the contract of
employment between the parties.

[9] At the trial, it was agreed that the evidence of three of the plaintiffs would be sufficient. The defendant appointed
Mithun to recruit the 52 plaintiffs. Mithun advertised in the local newspapers in India for workers needed by the
defendant. PW1, whose evidence was almost identical to that of the other two, testified that upon seeing the
advertisement in his local newspaper he went to Mithun where he had to pay Rs150 to register his name to attend
an interview. He was told that a little education was sufficient for the job but that he had to pay Rs100,000 to secure
the job. The said Rs100,000 would include the charges for the medical check-up, visa, immigration, air-ticket and
the Malaysian Government's levy for three years. He could not pay the Rs100,000 immediately. Initially he paid
Rs2,000 for the medical check-up. After he had passed the medical examination, he paid a further Rs10,000 as
advance payment. After obtaining the visa, he paid another Rs8,950 for the air-ticket and Rs640 to the Malaysian
High Commission at Madras, being the cost for stamping his visa. Then a day before his departure, he paid Mithun
Rs78,410 being the balance. He paid the said sum to one Ranjit, of Mithun. He was told that he would get Rs10,000
per month as basic salary with additional overtime. He was not given any written terms of employment. He then left
for Malaysia on 28 August 2002. As he did not have the said sum of Rs100,000, he went with his parents and
borrowed the said sum from two persons. He produced as exhibits two promissory notes each for Rs50,000. His
father signed as the borrower and his mother signed as the witness.

[10] He said that when he entered Malaysia he brought with him USD1,000. This was his money as it was cashed
for him from the Rs100,000 he had paid to Mithun in India. Mithun had handed him the USD1,000 and had
instructed PW1 as well as all the other workers to hand over the said sum (although some paid only USD950) to
their local agent, one Amarjeet Singh who would meet them on arrival. Amarjeet Singh collected the money from all
of them before clearing immigration and customs. They were then put in a bus and sent to the defendant's factory in
Butterworth. The sum of USD1,000 has been endorsed on PW1's passport. At the factory the workers were met by
the defendant's public relations officer, one Miss Teoh, who collected their passports. They commenced work on 2
September 2002. Before this group there was another group that had arrived on 23 August 2002. A third group
arrived on 9 September 2002. They received their first pay on 5 October 2002 and in the words of the witness,
received two shocks. Firstly, they received a basic salary of RM350 instead of the equivalent of Rs10,000 which
was RM750. Secondly, they were told a levy would be deducted from the RM350.00. This was told to them by one
Miss Hwa Mei Ling. When they protested she together with one [*122]
Mr Michael (in charge of production), and Mr Kaw (the production engineer) told them to wait in the canteen to sort
out the matter. At about 2.30pm, the three of them arrived with all the supervisors and told them that in so far as the
defendant was concerned the salary to be paid was only RM350 per month and they told the workers that they did
not know what 'your agent had promised you'. They were then told to go back to the hostel.

[11] When they met with other Indian nationals who were working in other companies they were advised to go to the
Indian High Commission in Kuala Lumpur and to obtain a copy of their contract of employment from the High
Commission and then to talk to their employer. They selected 10 representatives from amongst them to go to Kuala
Lumpur. There they met with the First Secretary to the High Commission and from him they obtained a copy of the
contract of employment which was signed by the defendant's managing director. The First Secretary explained the
contents of the agreement to them which they had never seen before and which they had not signed. When they
returned to work the following day their punch cards were missing. They were told that if they wished to return to
work they had to sign another contract with a basic salary of RM350. They refused to sign this and the employer
refused to allow them to work. The employer then explained to the workers that what they thought was an
agreement which was signed by the defendant's managing director was actually not the agreement but a document
which was a mere formality to bring them into Malaysia from India. Mr Michael and Mr Kaw informed them that they
would be permitted to resume work only if they signed the fresh agreement.

[12] On 16 October 2002 at about 2.30pm, they received a further shock. They were informed by Mr Michael that
the defendant had decided to send them all back. They were not given any termination letters but they were told to
pack and to be ready for departure to India. There were four of them. They then decided to lodge a police report at
the Bukit Mertajam Police Station since their complaint to the Labour Department was not acted upon. At about
4.00pm on that day, the four of them were given back their passports so that they could be sent back. They then
retained solicitors. Since they refused to leave the hostel, the defendant cut the water and electricity supplies to the
hostel until the High Court granted an injunction to restrain the defendant from doing so. About six workers, whose
commitment would not permit them to remain unemployed, signed two documents. They are:
(a) a fresh contract with a basic salary of RM350;

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(b) a voluntary declaration that they withdraw from this case.

[13] These documents were exhibited in the agreed bundle of documents. Under cross-examination, PW1 agreed
that his claim was based on the contract of employment signed by the managing director where his basic wage was
stated as RM600.

[14] The evidence of Periyathambi Gunasekaran (PW2) was almost similar to that of PW1. He reiterated that he was
told by Mithun that he would be paid Rs10,000 per month with overtime payment. He was from the third batch
having left India on [*123]
9 September 2002. He too gave Amarjeet Singh the USD1,000 being the levy. This witness testified that the levy
asked for, when he received his first pay, was RM120 which was to be deducted from the RM350. He was one of
those who had signed the fresh agreement and the withdrawal letter and had gone back to work. He was compelled
to sign the said document because he was eating only one meal for 10 days and he could not stand the hunger.
Under cross-examination, the defence put to the witness that Mithun had told the workers that they would be paid a
total of RM710 inclusive of overtime and that they had to work 12 hours a day and not eight hours. These
suggestions were denied by the witness. He also denied a suggestion that Mithun had represented to him that the
levy would be deducted monthly from their salary. When questioned about Amarjeet Singh, the witness testified that
Amarjeet Singh himself had informed them that he was the agent of the defendant when he met them at the airport.
Amarjeet Singh had informed them that the USD1,000 was for the three-year Government levy. He denied a
suggestion that they were paid a daily food allowance of RM1.50, and that there was a food subsidy added to the
pay. Even during overtime working hours, they were not given any food allowance. However, he agreed that if they
worked the full 25 days they would be given an incentive allowance of RM60, and RM30 if they worked for half the
month.

[15] Abdul Mohamed Noor Mohamed's (PW3) evidence was similar to that of the other two witnesses. He said that
he arrived in Malaysia on 23 August 2002. He too paid USD950 as levy to Amarjeet Singh. He testified that he had
no savings and had to sell his wife's jewelleries to raise the Rs100,000. With these witnesses the plaintiffs closed
their case on the issue of liability.

[16] The defendant's managing director, Mr Tsai Yang Chuan (DW1) testified as the first defence witness. Since the
company had decided to employ workers from India, he left it to one Richard Yap to do the recruitment. He
personally was not aware of the procedures involved in recruiting foreign workers. With regard to the contract of
employment that he had signed, he testified that although his signature appeared on it, someone had prepared the
documents and he was requested by him to sign them. He was shown all the four documents referred to earlier
bearing his signature and he said that he signed them because Richard Yap had informed him that all these
documents were necessary only for the purpose of obtaining the visa. Under cross-examination, he said that whilst
the official had explained to him the terms, it was made known to him that the workers' salary was RM350 per
month. He was told that the RM600.00 stated in the demand letter and in the contract of employment was only for
the purpose of applying for the workers' visa but that the actual salary was only RM350. He was also not explained
that he had to pay the air passage of the workers. He was also told that the levy was to be paid by the worker. He
admitted that he studied English although his evidence was in Mandarin.

[17] The second witness for the defence was Richard Yap (DW2), the senior administration manager of the
defendant. Under cross-examination, he said that a statement of the terms of employment was given to their
consultant, Amarjeet Singh in May 2002 for him to pass on to their agent in India to recruit workers based on those
terms and conditions. There was also a demand letter but it contained terms totally different from those contained in
the demand letter earlier referred to as being [*124]
one of the four documents necessary to be submitted by the prospective employer to the Indian Government before
the Protector of Emigrants could grant his approval for the worker to leave India. This demand letter was given to
Amarjeet Singh. It stated that the salary was to be RM350 per month with a food subsidy of RM1.50 per day and a
night shift allowance of RM4.50 per shift worked, and that if there was overtime of more than three hours, free food
would be served. The employer would provide for the worker's passage out of India but the worker would have to
pay for his return ticket. DW2 told the court that he found out from Amarjeet Singh that the latter had indeed sent
the letter of demand dated 30 May 2002 to Mithun. When the workers refused to sign the new agreement he
informed them that the agreement was that they would be paid a nett sum of RM710 per month including overtime.
He also testified that the document his managing director signed was only for attestation purposes and not to be
used as the basis of a contract.

[18] The last witness for the defence was Amarjeet Singh (DW3). He said that he is a Foreign Workers Recruitment
Consultant. However, under cross-examination, it was revealed that he had no consultancy firm and has not even

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registered such a business. He did not receive any payment from the defendant for his services, but he collected
his commission from Mithun. He brazenly admitted that he collected USD950 per person as his commission. He
also sent the demand letter dated 30 May 2002 to Mithun but he has no record to show that he had sent it. He
testified that Mithun was to explain to the workers that they were to be paid RM350 per month. This, he said, was
the first time that he had recruited workers from India. However, when it was pointed out to him that in his witness
statement, which he had affirmed as containing the truth, he had said that he had recruited workers from India since
1995, he said that what was stated in his witness statement was not true. When shown the demand letter which
stated the basic salary as RM600, he admitted he had also sent this document to Mithun. He also confirmed that
the levy was to be paid by the employer together with the air fares to and fro. When asked to explain why he had
sent two demand letters, one stating a salary of RM350 and the other RM600, he testified that the first was the
actual salary whereas the second was a mere formality so as to get their clearance. He agreed that Mithun would
not be able to get the clearance if only the first letter had been shown to the Government of India, as the basic
wage the Government demanded for its citizens was RM600. Regarding the USD950, he said it was for him and
was not for payment of the levy. To a question by the court as to whether he had issued a receipt to Mithun for the
money he had collected from the 52 workers he said he had not.

[19] The claim of the plaintiffs is based on a breach of the contract of employment by the defendant. The relevant
parts of the statement of claim of the plaintiffs on the damages claimed by them read as follows:
9. Defenden telah memungkiri terma-terma perjanjian pertama tersebut atau secara alternatifnya perjanjian kedua tersebut
seperti berikut:BUTIR-BUTIR KEMUNGKIRAN

(a) Defendan telah gagal membayar gaji pokok minima sebanyak RM750 seperti yang dinyatakan di perenggan 4
di atas, atau secara alternatifnya defendan gagal membayar gaji pokok sebanyak RM600 sebulan di
perenggan 3 di atas. [*125]

(b) Defendan telah memaksa dan mewajibkan plaintif-plantif untuk membuat kerja-kerja lebih masa sebanyak 5
hingga 7 jam tiap-tiap hari.

(c) Defendan telah memaksa sesetengah daripada plaintif-plaintif untuk bekerja pada hari rehat mereka dan
defendan tidak membayar 2 kali ganda gaji seperti tertera di dalam perjanjian pertama tersebut atau secara
alternatifnya perjanjian kedua tersebut.

(d) Defendan telah merampas paspot- paspot untuk plaintif-plaintif ke-5 hingga ke- 79 tanpa kebenaran mereka.

(e) Defendan secara 'unilateral' telah cuba meminda perjanjian pertama tersebut dan secara alternatifnya
perjanjian kedua tersebut dengan mengemukakan perjanjian yang dipinda tersebut.

(f) Defendan telah cuba memaksa plaintif-plaintif ke-5 hingga ke-79 menandatangani perjanjian yang dipinda
tersebut yang mana terma-termanya telah dipinda oleh defendan sendiri secara 'unilateral'.

(g) Defendan tidak menzahirkan (disclose) perjanjian pertama tersebut kepada kesemua plaintif-plaintif dari
permulaan pekerjaan sehingga kini.

(h) Defendan telah gagal dalam tugasnya untuk memberitahu plaintif-plaintif mengenai perjanjian pertama
tersebut.

(i) Defendan telah mengambil kesempatan kejahilan plaintif-plaintif yang merupakan pekerja-pekerja asing untuk
kepentingan diri defendan.

(j) Defendan telah memotong cukai (levy) daripada gaji semua plaintif-pPlaintif walaupun cukai (levy) ini telahpun
dibayar terlebih dahulu kepada ajen defendan.

(k) Defendan tidak memberi masa untuk bersembahyang kepada plaintif-plaintif yang beragama Islam.

10. Oleh kerana kemungkiran-kemungkiran defendan atas perjanjian pertama tersebut atau secara alternatifnya perjanjian
kedua tersebut, plaintif-plaintif telah mengalami kerugian dan masih mengalami kerugian dan kehilangan.BUTIR-BUTIR
KERUGIAN PLAINTIF-PLAINTIF
(a) Bayaran yang dibuat oleh setiap plaintif bagi:
(i) tiket penerbangan satu perjalanan dari Chennai, India ke Malaysia RM1,078.31 (Rs8,950)

(ii) bayaran pemprosesan visa RM77.10 (Rs640)

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(iii) perbelanjaan sehingga kini untuk makanan, pembelian barang-barang keperluan, ulang-alik ke
Pesuruhjaya Tinggi India di Kuala Lumpur dan Persatuan Pengguna Pulau Pinang dan sebagainya.
RM800

Jumlah bagi setiap plaintif RM1,955.41

(b) Bayaran yang dibuat oleh plaintif pertama, Ke-18, Ke-21, Ke-22, Ke-24, Ke-26, Ke-28, Ke-32, Ke-34, Ke-42,
Ke-49, Ke-53, Ke-57, Ke-60, Ke-69 dan Ke-71 setiap satu kepada ajen defendan bagi tujuan bayaran levi
kepada Kerajaan Malaysia

RM3,800 (USD1,000)

(c) Bayaran yang dibuat oleh plaintif Ke-3, Ke-5, Ke-8, Ke-12, Ke-13, Ke-14, Ke-15, Ke- 17, Ke-19, Ke-20, Ke-29,
Ke-31, Ke-33, Ke- 38, Ke-40, Ke-43, Ke-44, Ke-45, Ke-46, Ke- 50, Ke-51, Ke-54, Ke-55, Ke-56, Ke-58, Ke-
59, Ke-61, Ke-65, Ke-66, [*126]

Ke-67, Ke-70, Ke- 73, Ke-74, Ke-75, Ke-78 dan Ke-79 setiap satu kepada ajen defendan bagi tujuan bayaran
levi kepada Kerajaan Malaysia

RM3,610 (USD950)

(d) Gaji tunggakan bagi tempoh plaintif-plaintif tidak dibenarkan bekerja di kilang defendan pada kadar RM750
sebulan seperti berikut:

(i) bagi plaintif-plaintif ke-8 dan ke-42 untuk bulan Oktober 2002, November 2002 dan Disember 2002;

(ii) bagi setiap plaintif kecuali plaintif-plaintif Ke-8, Ke-17, Ke-21, Ke-22, Ke-42, Ke-66 dan Ke-75 untuk
bulan Oktober 2002, November 2002, Disember 2002 dan Januari 2003;

(iii) bagi plaintif-plaintif Ke-17, Ke-21, Ke-22, Ke-66 dan Ke-75 untuk bulan Oktober 2002.

(e) Perbezaan di antara gaji minima yang dibayar oleh defendan sekarang kepada plaintif-plaintif mengikut terma-
terma di dalam perjanjian yang dipinda tersebut dan gaji minima di bawah perjanjian kedua tersebut iaitu
sebanyak RM400 sebulan, seperti berikut:

(i) untuk semua plaintif-plaintif bagi bulan September 2002;

(ii) untuk plaintif-plaintif Ke-17, Ke-21, Ke-22, Ke-66 dan Ke-75, untuk bulan November 2002, Disember
2002 dan Januari 2003;

(iii) untuk semua plaintif-plaintif kecuali plaintif-plaintif ke-8, Ke-29 dan Ke-42 dikira dari bulan Februari 2003
sehingga tarikh kes ini diputuskan oleh mahkamah;

(f) Tikit penerbangan balik dari Pulau Pinang ke India bagi plaintif-plaintif Ke-8, Ke- 29 dan Ke-42 untuk jumlah
RM880 setiap satu plaintif,

14. Oleh yang demikian, plaintif-plaintif menuntut tehadap defendan seperti berikut:

(a) Gantirugi khas bagi setiap plaintif sebanyak RM1,955.41;

(b) Gantirugi khas bagi plaintif pertama, Ke-18, Ke-21, Ke-22, Ke-24, Ke-26, Ke-28, Ke-32, Ke-34, Ke-42, Ke-49,
Ke-53, Ke-57, Ke-60, Ke-69 dan Ke-71 sebanyak RM3,800 bagi setiap plaintif;

(c) Gantirugi khas bagi plaintif Ke-3, Ke-5, Ke-8, Ke-12, Ke-13, Ke-14, Ke-15, Ke-17, Ke- 19, Ke-20, Ke-29, Ke-
31, Ke-33, Ke-38, Ke- 40, Ke-43, Ke-44, Ke-45, Ke-46, Ke-50, Ke- 51, Ke-54, Ke-55, Ke-56, Ke-58, Ke-59,
Ke- 61, Ke-65, Ke-66, Ke-67, Ke-70, Ke-73, Ke- 74, Ke-75, Ke-78 dan Ke-79 sebanyak RM3,610 setiap
plaintif.

(d) Gaji tunggakan bagi tempoh plaintif-plaintif tidak dibenarkan bekerja di kilang defendan pada kadar RM750
sebulan seperti berikut:

(i) bagi plaintif-plaintif Ke-8 dan Ke-42 untuk bulan Oktober 2002, November 2002 dan Disember 2002;

(ii) bagi setiap plaintif kecuali plaintif-plaintif ke-8, Ke-17, Ke-21, Ke-22, Ke-42, Ke-66 dan Ke-75, untuk
bulan Oktober 2002, November 2002, Disember 2002 dan Januari 2003;

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Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors, [2006] 1 MLJ 117

(iii) bagi plaintif-plaintif Ke-17, Ke-21, Ke-22, Ke-66 dan Ke-75 untuk bulan Oktober 2002.

(e) Perbezaan di antara gaji minima yang dibayar oleh defendan sekarang kepada [*127]

plaintif-plaintif mengikut terma-terma di dalam perjanjian yang dipinda tersebut dan gaji minima di bawah
perjanjian kedua tersebut iaitu sebanyak RM400 sebulan, seperti berikut;

(i) untuk semua plaintif-plaintif bagi bulan September 2002;

(ii) untuk plaintif-plaintif Ke-17, Ke-21, Ke-22, Ke-66 dan Ke-75, untuk bulan November 2002, Disember
2002 dan Januari 2003;

(iii) untuk semua plaintif-plaintif kecuali plaintif-plaintif Ke-8, Ke-29 dan Ke-42 dikira dari bulan Februari
2003 sehingga tarikh kes ini diputuskan oleh mahkamah.

(f) Tiket penerbangan balik dari Pulau Pinang ke India bagi plaintif-plaintif Ke-8, Ke- 29 dan Ke-42 untuk jumlah
RM880 setiap satu plaintif;

(g) Gantirugi Teladan;

(h) Gantirugi Am;

(i) Faedah 8% dari tarikh pemfailan writ sehingga penyelesaian penuh jumlah ini;

(j) Kos tindakan ini; dan

(k) Lain-lain perintah atau relif yang difikirkan adil dan suaimanfaat oleh mahkamah yang mulia ini.

[20] In making his findings on the claim made by the plaintiffs, the learned trial judge said:
Having considered the entire evidence it is my judgment that notwithstanding the fact that the plaintiffs had not signed the
agreement, the very fact that they came on the representation made by the defendant's agent and the fact that the
defendant's Managing Director, himself had signed the contract of employment, are sufficient grounds to hold that there
indeed was a contract between the plaintiffs and the defendant and that they had been promised a sum of Rs10,000 whose
equivalent is RM750 per month with overtime to be calculated. The plaintiffs will also be entitled to all the benefits as stated
in the earlier letter of demand and as stated in the contract document signed by the Managing Director. The plaintiffs are
also entitled to the levies which they had paid that is either USD1,000 or USD950 as endorsed in their respective
passports, since there is no provision in the Employment Act 1957 that enables the defendant to deduct such levies. The
plaintiffs will also be entitled to the air fares to and from Malaysia and costs of the suit.

The senior assistant registrar will work out the damages due to each of the plaintiffs.
[21] With regard to proof of special damages, the learned trial judge's direction to the parties as contained in p 15 of
his grounds of judgment reads as follows:
Since the parties were not fully prepared to prove their special damages this court informed them on the next hearing date
that it would only decide the issue as to whether there was a contract of employment and whether the wages were to be
RM350 or RM600 or RM750 per month. The matter would go before the learned senior assistant registrar for assessment
of damages.
[22] It must therefore be stressed that the judgment of the High Court is based only on the issue of liability. This is
made abundantly clear by the order of court that was extracted which showed that the order of the court is only on
the issue of liability.
[*128]

[23] It was the finding of the learned trial judge that the plaintiffs are entitled to the benefits contained in the contract
of employment. However, the contract of employment though signed by the defendant was not signed by the
plaintiffs. The defendant had considered it as a mere formality to obtain the release of the plaintiffs. Accordingly,
learned counsel for the defendant contended that they are not bound by it. The critical issue for determination is
therefore the legal effect of the contract of employment in such circumstances. It was signed for the defendant by its
agent in the High Commission of India in Kuala Lumpur with the following declaration:
I Tsai Yang Chuan hereby declare that I have gone through the contents of the 'Contract of Employment' and understand it
completely. I shall not violate any clause mentioned in the 'Contract of Employment' and I am liable for action in case of any
violation of the 'Contract of Employment'.
[24] Some of the significant clauses of the contract of employment read as follows:
18. VARIATION

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Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors, [2006] 1 MLJ 117

Any variation or addition/deletion to the terms of this contract during its normal duration will be made with the consent of the
competent authority in India/the High Commission of India in Kuala Lumpur.

20. SIGNING OF THE CONTRACT

This Contract will be signed in Malaysia by the Employer in Indian High Commission and by the Employee in India before
the Protector of Emigrants the competent authority to whom all complaints concerning the execution of this Contract should
be made.

The Employer will not enter into any other agreement with the Employee other than approved. Employee will provide copy
of collective Trade Agreement with Trade Unions, if any.

(c) The Employer accede to the request of the Mission officials to visit the workplaces and workers hostel with prior
information to look into the welfare of the Indian workers.

21. COMPLAINTS

(d) The Employer agree that in the event of failure to comply with the above, the aggrieved worker may seek redress from
the relevant authorities in Malaysia.
[25] Before embarking upon a consideration of the legal effect of the contract of employment it is perhaps pertinent
to bear in mind the sagacious words of Greer LJ in Foley v Classique Coaches Ltd [1934] 2 KB 1 at p12
It is a common observation that a decision upon the construction of one contract is not an authority upon the construction of
another contract in different words and entered into in different circumstances.
[26] As stated earlier, the contract of employment was not signed by the plaintiffs nor did they know of its existence
till the dispute between the parties arose while the defendant had, being not fully aware of its contents, considered it
to be a mere formality. It is common ground that it is a mandatory requirement of the relevant Indian authorities that
before Indian nationals are allowed to work in Malaysia a [*129]
prospective employer would have to execute, inter alia, a document in the form of the contract of employment. It is
a significant document. Clause 18 of it provides in clear terms that any variation of it can be done only with the
consent of the competent authority in India or the High Commission of India, Kuala Lumpur. Clause 20(b) stipulates
that the employer will not enter into any other agreement with the employee unless it is approved. Obviously, the
approval must be that of the Indian authorities and not the employee. It is therefore manifestly patent that the
dominant force in the contract of employment is the relevant Indian authority and not the employee. It is based on
its terms that the plaintiffs were allowed to leave India. The defendant had used it for the purpose it was intended.
The defendant must therefore be considered to have agreed to the terms. The fact that the defendant's
representative did not appreciate its contents when he signed it does not affect its validity. It has been held that in
the absence of fraud or misrepresentation, a person is bound by a writing to which he has put his signature,
whether he has read its contents or has chosen to have them unread (see L'Estrange v Graucob [1934] 2 KB 394;
Serangoon Garden Estate Ltd v Marion Chye [1959] MLJ 113; Majumder v AG of Sarawak [1966] 1 MLJ 41). The
defendant is therefore bound by the contract of employment. The next issue to be determined is whether the
plaintiffs can claim the benefits contained in the contract of employment as they have not signed it. As the
defendant had agreed to its terms and had benefited from it by its use to obtain the release of the plaintiffs, the
defendant is bound by it even though it is not signed by the plaintiffs. In support of this finding, reference may be
made to Heller Factoring Sdn Bhd v Metalco Industries [1995] 2 MLJ 153 where Mahadev Shankar JCA said at p
174:
It was strenuously submitted that because Matang had not dated or signed this document, there could be no concluded
contract. We are unable to subscribe to this view. The true position is that where a contract has been signed by one party
only, it can be enforced where there is evidence that the other party has elected to be bound by it. (See the cases in 12
English and Empire Digest (Contract) at p 193 para 1166 where Backhouse v Coossby (1737) 2 Eq Cas Abr 32; 22 ER 28;
and other cases are referred to. Part performance by one party, accepted by the other, is such other evidence.
[27] Similarly in Sudbrook Trading Ltd v Eggleton [1983] 1 AC 444 at p 484, Lord Fraser said
Where an agreement which would otherwise be unenforceable for want of certainty or finality in an essential stipulation has
been partly performed so that the intervention of the court is necessary in aid of a grant that has already taken effect, the
court will strain to the utmost to supply the want of certainty even to the extent of providing a substitute machinery.
[28] It must also be observed that the obligation to ensure that the contract of employment is executed by the
plaintiffs is that of the defendant. It is through their wilful conduct that it was not signed by the plaintiffs. In
Alghussein Establishment v Eton College [1991] 1 All ER 267, the House of Lords reviewed a long line of
authorities which reiterated the salutary principle that a person cannot take advantage [*130]

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Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors, [2006] 1 MLJ 117

of his own wrong or default. In that case reference was made to New Zealand Shipping Co v Societe des Ateliers
Chantiers de France [1917] 2 KB 717 where Viscount Reading CJ said at pp 723–724:
Unless the language of the contract constrains the Court to hold otherwise, the law of England never permits a party to take
advantage of his own default or wrong. In Mating v Freeman (1838) 4 Bing NC 395 at p 399; 132 ER 839 at p 841 Coltman
J said:

It is so contrary to justice that a party should avoid his own contract by his own wrong, that unless constrained, we
should not adopt a construction favourable to such a purpose.

That appears to me to be the true underlying principle of the cases in which the word 'void' has been construed as if it
meant voidable. Unless there are clear words to the contrary, a clause making a contract void must be read subject to the
condition that the party who is seeking to set up the invalidity is not himself in default.
[29] And Scrutton LJ said:
… I think that clause 12 and all other clauses are to be read subject to an overriding condition or proviso that the party shall
not take advantage of his own wrong, and therefore is estopped from alleging invalidity of which his own breach of contract
is the case.
[30] The defendant led no evidence to show that it was not in default in ensuring that the contract of employment
was executed by the plaintiffs. It follows that the failure by the plaintiffs to sign it is not fatal. The defendant cannot
therefore rely on the non-execution of the contract of employment by the plaintiffs to its advantage. In the
circumstances, the defendant is bound by its terms. This means that all other terms of employment offered by the
defendant to the plaintiffs are invalid due to the operation of cl 18 of the contract of employment.

[31] It follows that the plaintiffs are entitled to the benefits contained in the contract of employment. They include:

4. DURATIONS:

The duration of the Contract will be for a period of three (3) years commencing on the day of arrival of the
Employee in Malaysia. This term of service may be determined as extended as hereinafter provided in clause
17 of this Contract.

5. WAGES:

(a) The Employee will receive a minimum wage/salary of RM600 per month (excluding allowances and overtime).
The Employer undertakes to provide the Employee with not less than 6 days' per week (as prescribed by the
Ministry of Labour, Malaysia).

(b) At the request of the Employee, the Employer will advance an amount not exceeding 4 weeks' Wages/Salary
prior to embarkation in Malaysia. The advance will be repaid by the Employee in (12 weeks/3 months)
installments to be deducted from his/their wages/salaries.

(c) Wages will be paid by the Employer at the end of the month.

6. HOURS OF WORK: [*131]

Hours of work shall be eight (8) hours from Monday to Saturday.

7. OVERTIME:

The basic pay per month without OT is RM600. If the Employee works more than eight (8) hours on any
working day, he will receive overtime allowance payment at the rate of time and a half of ordinary time. The
Employee may only be asked to work overtime with his consent and shall not be permitted to work overtime
for more than two hours in any period of twenty-four hours.

10. PASSAGE:

(a) The employer will provide the Employee with free air passage from India to Malaysia. Likewise the Employee
will receive free return air passage on the expiration of the contract. The Employee must be prepared to
travel by air as The Employer shall direct.

(b) Should the Employee be unavoidably delayed in Malaysia after the termination or expiry of the contract will
continue to receive his wages pro rate until the day on which he bark for.

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Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri & Ors, [2006] 1 MLJ 117

(c) Should the Employee fail to fulfill the expectation of the employer, his salary shall not be reduced or deducted
in any way. The Employer will provide the return air ticket for his repatriation after settling the dues, if any.

11. TRAVEL DOCUMENT AND MEDICAL EXAMINATION:

(a) The Employer will undertake to obtain on the Employee's behalf all necessary travel document free of charge
to the Employee and will further arrange for the Employee to be examined free of charge by a Registered
Medical Practitioner.
(b) The Employer/Company shall undertake to renew the work permit in time.

(c) The Employer will undertake to apply for worker's pass from the Immigration to enable the Employee to travel
freely in the vicinity area - place of stay.

(d) In the event of detention of the employee by the Immigration/police for whatsoever reasons, the employer shall
arrange release of said employee and continue to employ. In case the employee is unable to be taken back
for work, the employer shall arrange repatriation at his own cost.

(e) The Employer will not engage any agent to renew the passport/work permits of the employees. The Employer
or and authorized officer of the organization will undertake all the necessary steps for this purpose.
(f) The Employee recruited will be received by the Employer on arrival at the airport.

13. MEDICAL AND ACCOMMODATION (LEVY & WORK PASS):

The employer shall provide to the employee, during the term of service the following:

(a) Free medical attention.

(b) Free accommodation - the accommodation should contain at the minimum, cot with mattress, locker facilities
and other basic amenities including convenient and sufficient toilet facilities.

(c) The charges for work pass and levy will be borne fully by the Employer and he will not deduct from the
wages/salaries of the employee.

(d) The premium of Bank Guarantee given by the Employer to the Immigration shall not be deducted from the
wages/salaries of the employee.

(e) Free transportation from the place of resident to work place and back.
[*132]

[32] The defendant is in clear breach of the contract of employment. The plaintiffs are entitled to the damages
claimed. The defence has conceded to the salary of the plaintiffs as being RM750 per month and to the claims
enumerated in para 14c, d and e of the statement of claim. The other heads of special damages claimed by the
plaintiffs fall within the terms of the contract of employment and for damages following its breach. The plaintiffs are
entitled to them. No award under the head of general damages can be made as the plaintiffs had abandoned the
claim in the middle of the trial in the High Court.

[33] In the upshot, we are of the unanimous view that the appeal should be dismissed with costs.
Appeal dismissed.
Reported by Sally Kee

End of Document

See Yi Vonne
 23

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 6:14:00PM MYT
Job Number: 209342122

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 24

THE GOLF CHEQUE BOOK SDN BHD & ANOR v NILAI SPRINGS BHD
CaseAnalysis
| [2006] 1 MLJ 554 | [2006] 1 CLJ 259 | [2005] MLJU 472

The Golf Cheque Book Sdn Bhd & Anor v Nilai Springs Bhd [2006] 1 MLJ
554
Malayan Law Journal Reports · 9 pages

COURT OF APPEAL (PUTRAJAYA)

GOPAL SRI RAM, AZMEL AND ZALEHA ZAHARI JJCA
CIVIL APPEAL NO N–02–4 OF 2002
26 November 2005
Case Summary
Civil Procedure — Striking out — Action — Whether action against defendants should be struck out —
Plaintiff's claim for breach of contract appeared quite strong — Issue of unilateral mistake — Whether
pleadings disclosed facts which merit a trial of the action — Rules of the High Court 1980 O 18 r 19

The defendant company owned a golf course. It had contracted supposedly with the first plaintiff by way of a letter
dated 30 October 1999 written on a letterhead of 'The Golf Cheque Book' ('the first plaintiff'). However, no such
entity as 'The Golf Cheque Book' existed at the date of the contract. It was also in evidence that the first plaintiff
made payments to the defendant from time to time. The defendant's case was that it was not aware that the first
plaintiff was not in existence at the time the contract was made. After it discovered this fact, it returned the
payments made by the plaintiff. A resolution of the first plaintiff's board of directors was passed on 3 March 2000
whereby it was resolved that the plaintiff takes over the product known as 'The Golf Cheque Book' business. The
plaintiffs brought an action against the defendant for breach of contract. The High Court struck out the plaintiff's
statement of claim. Dissatisfied, the plaintiffs appealed to this court. The issue was the effect in law where a
contract was made on behalf of a company that was non-existent when the contract was made.
Held, allowing the appeal:
(1) An application to strike out an action under O 18 r 19 should not descend into a trial on affidavits. What the
court is really concerned with is to determine whether the pleading disclosed facts which merit a trial of the
action (see para4).
(2) Learned counsel for the plaintiffs argued that the payments made by the first plaintiff after its incorporation
to the defendant was evidence of conduct amounting to ratification. This was certainly a matter that must
be looked into in some greater detail by the High Court at trial. So, here, even on the defendant's own case
the requirements of s 35(1) of the Companies Act 1965 appeared prima facie to be satisfied. Hence, both
on the facts and the law, the first plaintiff's claim for breach of contract appeared to be far from frivolous or
vexatious. In fact it appeared quite strong (see para 16).
(3) The issue of unilateral mistake was a very serious point in this case and one that must be thoroughly
investigated at the trial. If the trial judge finds that the identity of the person with whom the defendant was
seeking to contract with was, objectively speaking, of importance to the defendant, then the contract would,
as a matter of law be void for unilateral mistake. But, if there was no [*555]
mistake from an objective standpoint then the returning of the monies by the defendant, as pointed out to
counsel in the course of argument, was a clear breach of contract. These were other reasons why the
plaintiffs' claim could not be struck out and why there must be a trial of the action (see para 17).

Syarikat defendan memiliki padang golf. Ia telah memasuki kontrak dengan plaintif pertama melalui sepucuk surat
bertarikh 30 Oktober 1999 yang tertera pada kepala surat 'The Golf Cheque Book' ('plaintif pertama'). Namun, tiada
entiti bernama 'The Golf Cheque Book' wujud pada tarikh kontrak dimasuki. Dalam keterangan juga menunjukkan

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The Golf Cheque Book Sdn Bhd & Anor v Nilai Springs Bhd, [2006] 1 MLJ 554

bahawa plaintif pertama telah membuat bayaran kepada defendan dari masa ke semasa. Kes defendan adalah di
mana tiada kesedaran bahawa plaintif pertama tidak wujud pada masa kontrak dibuat. Selepas fakta ini disedari
olehnya, ia telah memulangkan bayaran yang dibuat oleh plaintif. Satu resolusi lembaga pengarah plaintif pertama
telah diluluskan pada 3 Mac 2000 di mana ia telah memutuskan bahawa plaintif akan mengambil alih produk yang
dikenali sebagai perniagaan 'The Golf Cheque Book'. Plainitf telah memulakan tindakan terhadap defendan kerana
perlanggaran kontrak. Mahkamah Tinggi telah membatalkan pernyataan tuntutan plaintif. Berasa tidak puas hati,
plaintif telah merayu ke mahkamah ini. Persoalannya adalah kesan undang-undang di mana suatu kontrak dibuat
bagi pihak syarikat yang tidak wujud apabila kontrak dibuat.

Diputuskan, membenarkan rayuan tersebut:

(1) Satu permohonan untuk membatalkan satu tindakan di bawah A 18 k 19 tidak boleh dijadikan satu
perbicaraan berdasarkan afidavit. Apa yang mahkamah perlu beri perhatian adalah untuk menentukan
sama ada pliding mendedahkan fakta yang memeritkan satu perbicaraan berhubung tindakan tersebut
(lihat perenggan 4).
(2) Peguam yang bijaksana bagi pihak plaintif berhujah bahawa bayaran yang dibuat oleh plaintif pertama
selepas ia ditubuhkan kepada defendan adalah keterangan perlakuan yang membentuk ratifikasi. Ini
sememangnya perkara yang perlu diberi penelitian oleh Mahkamah Tinggi semasa perbicaraan. Oleh itu,
di sini berdasarkan kes defendan sendiri keperluan s 35(1) Akta Syarikat 1965 kelihatan memuaskan
secara prima facie. Justeru itu, berdasarkan fakta dan undang-undang, tuntutan plaintif pertama untuk
perlanggaran kontrak kelihatan jauh daripada suatu yang remah dan menyusahkan. Bahkan ia kelihatan
kukuh (lihat perenggan 16).
(3) Persoalan tentang kesilapan di satu pihak adalah suatu yang serius dalam kes ini dan perlu disiasat
dengan teliti semasa perbicaraan. Jika hakim perbicaraan mendapati bahawa identiti seseorang yang
defendan ingin memasuki kontrak bersama adalah, bercakap secara objektifnya, penting kepada
defendan, maka kontrak itu akan, dari segi undang-undang menjadi tidak sah kerana kesilapan di satu
pihak. Namun, jika tiada kesilapan daripada sudut objektif maka pemulangan wang oleh defendan, seperti
mana yang dikemukakan oleh peguam semasa penghujahan, adalah jelas satu perlanggaran kontrak.
Terdapat [*556]
sebab lain kenapa tuntutan plaintif tidak boleh dibatalkan dan kenapa perlu ada perbicaraan berhubung
tindakan itu (lihat perenggan 17).

Notes

For cases on striking out of action, see 2(2) Mallal's Digest (4th Ed, 2004 Reissue) paras 2526–2557.
Cases referred to

Ahmad bin Salleh & Ors v Rawang Hills Resort Sdn Bhd [1995] 3 MLJ 211

Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36

Cosmic Insurance Corpn Ltd v Khoo Chiang Poh [1981] 1 MLJ 61

Cundy v Lindsay (1878) 3 App Cas 459

Gwinner v Alberta (Minister of Human Resources and Employment [2002] 116 ACWS (3d) 407

Hodgson Bros v South African Railways 1928 CPD 257

Kelner v Baxter (1866) 2 CP 174

Kennett v Superior Millwork Ltd 125 ACWS (3d) 442

MacDougall v Knight (1890) 25 QBD 1

Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45

Thai Hwa Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [1996] MLJU 317; [1997] 1 CLJ Supp 418

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The Golf Cheque Book Sdn Bhd & Anor v Nilai Springs Bhd, [2006] 1 MLJ 554

Tractors Malaysia Bhd v Tio Chee Hing [1975] 2 MLJ 1

Legislation referred to

Companies Act 1965s 35(1)

Companies Act [Sing]s 41

Contracts Act 1950s 150

Rules of the High Court 1980O 18 r 19

Appeal from: Civil Suit No 22–172 of 2000 (High Court (Civil Division), Seremban)

CK Ng (Patrick Fam with him) (Wong & Associates) for the appellants.
Harmeet Singh (Raja Eleena Siew Ang & Associates) for the respondent.

Gopal Sri Ram JCA (delivering judgment of the court):

[1] The plaintiffs (appellants before us) brought an action against the defendant (respondent before us) for breach of
contract. The defendant applied to strike out the statement of claim on the ground that the first plaintiff was not privy
to the contract as asserted by the plaintiffs. It also delivered a defence and counterclaim. The High Court granted
the defendant's application and struck out the statement of claim. The counterclaim was directed to be separately
tried. The trial of the counterclaim is set for hearing and disposal on 11 January 2006. Dissatisfied with the High
Court's order of striking out the statement of claim the plaintiffs appealed to this court. We heard this appeal on 21
November 2005 and allowed it. We did not give reasons at [*557]
once. Ordinarily a case such this would not warrant a judgment because the principles governing applications to
strike out a pleading are trite and each case really turns on its own peculiar facts. But this case has a company law
dimension to it which is of interest to the legal profession. So, a judgment is called for. The facts are fairly
straightforward.

[2] The defendant company owns a golf course. Members of the public have to pay a fee to play on the course. The
second plaintiff was the sole proprietor of a firm called LH Wong & Associates. There is no dispute that there is a
contract and that it is evidenced by a letter dated 30 October 1999. That letter was written on a letterhead that read
'The Golf Cheque Book'. It was a term of the contract that a sum of RM80,000 was to be paid to the defendant. In
return the defendant was to allow persons producing golf cheques issued to them by the firm to use the course. The
letter in question was signed on the defendant's behalf accepting the terms. It was also signed by one Md Ibrahim A
Karim under whose signature appear the typewritten words 'for The Golf Cheque Book'. It is common ground that
no such entity as 'The Golf Cheque Book' existed at the date of the contract. In fact, a private limited company
called The Golf Cheque Book Sdn Bhd, that is to say, the first plaintiff was incorporated only on 23 March 2000,
some five months after the contract was made. It is also in evidence that the first plaintiff made payments to the
defendant from time to time. The defendant's case is that it was not aware that the first plaintiff was not in existence
at the time the contract was made. After it discovered this fact, it returned the payments made by the plaintiff. For
completeness, I must mention that a resolution of the first plaintiff's board of directors was passed on 3 March 2000
whereby it was resolved that the plaintiff takes over the product known as The Golf Cheque Book business from the
firm.

[3] The issue whether there was a valid, binding and enforceable contract between the first plaintiff and the
defendant turns upon the interpretation of the facts surrounding the making of the contract and the application of s
35(1) of the Companies Act 1965. In my judgment, the first is a question that may require viva voce evidence. At
any rate, both the first and the second call for careful and mature argument and judicial consideration. At the
invitation of the defendant, the learned judge appears to have undertaken a microscopic examination of the facts
and made specific findings upon the material presented to him. In short, there appears to have been a trial on
affidavits before him. This in my very respectful view is an incorrect approach in a case as the present. My reasons
for this view now follow.

[4] An application to strike out an action under O 18 r 19 of the Rules of the High Court 1980 ('the RHC') should not
descend into a trial on affidavits. What the court is really concerned with is to determine whether the pleading

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discloses facts which merit a trial of the action. There is a surfeit of authorities on the point and I need only cite one.
In Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36, the Supreme Court
said this:

The principles upon which the court acts in exercising its power under any of the four limbs of O 18 r 19(1) of the RHC are
well settled. It is only in plain and obvious cases that recourse should be had to the summary process under this rule (per
Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd [1899] 1 QB 86, and this summary procedure can
[*558]
only be adopted when it can be clearly seen that a claim or answer is on the face of it 'obviously unsustainable' (see AG of
Duchy of Lancaster v L & NW Rly Co [1892] 3 Ch 274). It cannot be exercised bv a minute examination of the documents
and facts of the case, in order to see whether the party has a cause of action or a defence (see Wenlock v Moloney & Ors
[1965] 1 WLR 1238). The authorities further show that if there is a point of law which requires serious discussion, an
objection should be taken on the pleadings and the point set down for argument under O 33 r 3 (which is in pari materia
with our O 33 r 2 of the RHC) (see Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd). The court must be satisfied
that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not
arguable. (Emphasis added.)

[5] But this, like many rules of practice is not absolute. It does not, for example, apply to cases where a plaintiff is
abusing the process of the court, for example, by filing two writs for libel, one for each passage appearing in the
same publication (see MacDougall v Knight (1890) 25 QBD 1 at p 10, per Fry LJ). Another instance is where there
has been a history of previous litigation with an attempt by a plaintiff to re-agitate issues that were either raised and
dealt with, or ought reasonably to have been raised, in an earlier suit. In such cases, the court is entitled, and
indeed under a duty, to carefully scrutinise the factual background to ensure that the second action that is being
sought to be struck out is not an abuse of the court's process. Tractors Malaysia Bhd v Tio Chee Hing [1975] 2 MLJ
1 was such a case. There, Lord Diplock said:

The question that it raises is whether an action (herein called 'the new action') brought by the respondent against the
appellant in the High Court in Borneo by a writ and statement of claim dated 16 May 1972 ought to be summarily dismissed
as frivolous and vexatious. The principal relief sought in the new action was to set aside a judgment entered against the
respondent on 27 December 1969 in a previous action (herein called 'the old action') between the same parties for the sum
of $718,266.85, due under an agreement of 21November 1968. The appellant's application to set aside the writ and all
subsequent proceedings in the new action was based on the inherent jurisdiction of the court to prevent abuse of its
process. Affidavit evidence was adduced by each party. Upon consideration of this evidence the High Court (Lee Hun Hoe
J) was satisfied that the new action was frivolous and vexatious and brought 'to defeat the course of justice in the hope of
delaying the execution of a judgment', sc. in the old action. He, accordingly, set aside the proceedings.

Upon appeal from the High Court in Borneo, the Federal Court of Malaysia appear to have treated the appellant's
application as if it had been made only under O XXV r 4, and not under the inherent jurisdiction of the court. They
considered that the statement of claim raised triable issues and regarded themselves as precluded from examining the
evidence for the purpose of determining whether it was an ineluctable inference from facts in evidence which were
undisputed, that the new action was bound to fail.

The power to dismiss an action summarily without permitting the plaintiff to proceed to trial is a drastic power. It should be
exercised with the utmost caution. Had the matter depended upon the contents of the statement of claim alone, their
Lordships would have been loath to differ from the opinion of the Federal Court that, despite imperfections in drafting (which
however might have been capable of cure by amendment) the statement of claim, at any rate as respects some of the
claims to alternative relief, did raise questions of law that were sufficiently arguable to justify proceeding to trial. In refusing
to submit the evidence to critical examination, however, the Federal Court erred in law. This makes it [*559]
necessary for their Lordships to state briefly the facts disclosed by the evidence which, in their view, lead to the conclusion
that the new action could not possibly succeed.

[6] The present instance is, of course, not one where there is a history of previous litigation. So no issue of an abuse
of the court's process arises. It therefore comes within the general principle adverted to by the Supreme Court in
Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd. And so I come to the vital question: is
this a case which is frivolous or vexatious? In my view it does not. There are here issues of fact and law that require
investigation and mature consideration after hearing full argument.

[7] Let me take the facts first. The defendant's case is that at all material times when the second plaintiff dealt with

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the defendant, the former was contracting on behalf of the non-existent first plaintiff. Learned counsel for the
defendant says that once the learned judge found this to be so on a reading of the documents, the doctrine of privity
came into operation. Apart from saying that I must be forgiven for finding this argument wholly incomprehensible,
there are some observations that I would make.

[8] The doctrine of privity of contract applies where parties to a contract purport to confer a benefit or to impose a
burden on a third party. In that fact pattern the third party cannot sue on the contract to recover the benefit. Nor may
either party to the contract seek to make the third party liable on the obligations imposed upon him or her by them.
But it is central to the doctrine of privity of contract that the parties to the contract are contracting on their own
behalf and not as the agent of some third party, be that third party a disclosed or an undisclosed principal. Because
it is a well established principle that agency is an exception to the privity doctrine.

[9] Now for the law. The real issue in this case is the effect in law where a contract is made on behalf of a company
that was non-existent when the contract was made. The position at common law is illustrated by Newborne v
Sensolid (Great Britain) Ltd [1954] 1 QB 45 where the facts were these. The promoter and prospective director of a
limited company, Leopold Newborne (London) Ltd, which had not been registered at the material time entered into
a contract for the supply of goods to the defendants. The contract was signed: 'Leopold Newborne (London) Ltd'
and the plaintiff's name, 'Leopold Newborne', was written underneath. The plaintiff sued the defendant for breach of
the contract. It was held that the contract had been made with the non-existent company and was therefore void for
want of competent parties. The contract could not be adopted by the plaintiff. Nor could he sue on it. Lord Goddard
CJ said:

What we cannot find in this case is that Mr Newborne ever purported to contract to sell as agent or as principal. The
contract was one which he was making for the company, and although Mr Diplock has argued that in signing as he did Mr
Newborne must have signed as agent, since the company could only contract through agents, that was not really the true
position. The company makes the contract. No doubt the company must do its physical acts, and so forth, through the
directors, but it is not the ordinary case of principal and agent. It is a case in which the company is contracting and the
company's contract is authenticated by the signature of one of the directors. This contract purports to be a [*560]
contract by the company; it does not purport to be a contract by Mr Newborne. He does not purport to be selling his goods
but to be selling the company's goods.

[10] It is a principle of the law of agency that a principal may ratify the acts of his agent. That principle is housed in
our s 149 of the Contracts Act, 1950 which reads as follows: Where acts are done by one person on behalf of
another but without his knowledge or authority, he may elect to ratify or to disown the acts. If he ratifies them, the
same effects will follow as if they had been performed by his authority.

[11] But it is a precondition of ratification that the principal must have been in existence when the contract was
made. That common law rule was laid down in the seminal case of Kelner v Baxter (1866) 2 CP 174. When applied
in the environment of company law the principle is that:

A company cannot ratify a contract made for its benefit before it was formed; nor can it adopt such contract by resolution. A
new agreement on identical lines is necessary. The result may sometimes be unfortunate, but follows logically from an
application of the doctrine that a principal not in being at the date of an agreement, and therefore not in a position to be
bound by it then, cannot ratify it thereafter' (per Innes CJ in Mccullogh v Fernwood Estate Ltd [1920] AD 204).

[12] In Thai Hwa Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [1996] MLJU 317; [1997] 1 CLJ Supp 418,
Suriyadi Halim Omar J summed up the position at common law as follows:

Contracts entered into prior to a company's registration at common law could be completely null and void unless the person
or persons signing on behalf of the company were the real principals (Newborne v Sensolid (Great Britain) Ld [1954] 1 QB
45). Though, however, '… in some circumstances a company may acquire rights or incur liabilities at law or equity in
respect of a transaction originally entered into before the incorporation of the company. Broadly speaking, for a company to
be so liable it must enter into a new contract after it has been incorporated.' (Chitty on Contracts (25th Ed) Vol I General
Principles).

[13] As you can see, the common law could and did produce illogical and unjust results. The Companies Act 1965
('the Act'), unlike its precursors, addressed this issue. By s 35(1) it provided as follows:

Any contract or other transaction purporting to be entered into by a company prior to its formation or by any person on

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behalf of a company prior to its formation may be ratified by the company after its formation and thereupon the company
shall become bound by and entitled to the benefit thereof as if it had been in existence at the date of the contract or other
transaction and had been a party thereto.

[14] In Cosmic Insurance Corpn Ltd v Khoo Chiang Poh [1981] 1 MLJ 61, the udicial Committee of the Privy Council
had occasion to consider the former s 35(1) (now s 41) of the Singapore Companies Act. Lord Roskill when
delivering the advice of the Privy Council said of the Singapore provision:

Their Lordships note three things about this subsection. First, so far as presently relevant before s 35(1) can be
successfully invoked the alleged 'contract or other transaction' must [*561]
purport to have been entered into 'by any person on behalf of a company prior to its formation'. Secondly, it is only after that
first condition is satisfied that such a contract 'may be ratified by the company after its formation…'. Thirdly, it is only if both
those conditions are satisfied that such a contract upon such ratification is ante-dated to the date when it first purported to
have been made.

[15]I would note a fourth and fifth thing about s 35(1). Fourth, it reverses the common law on the subject and is
therefore remedial. Hence, it must receive 'a fair, large and liberal construction that gives effect to the statute's
legislative purpose' (perPerras J in Kennett v Superior Millwork Ltd 125 ACWS (3d) 442). Or, to put it in slightly
different language, the subsection 'ought to be expansively interpreted to give effect to the purposes of the Act,'
(Gwinner v Alberta (Minister of Human Resources and Employment [2002] 116 ACWS (3d) 407 per SJ Greckol).
Fifth, the subsection uses the phrase 'ratified by the company' without specifying any particular manner in which the
ratification may take place. In Ahmad bin Salleh & Ors v Rawang Hills Resort Sdn Bhd [1995] 3 MLJ 211, the High
Court considered s 35(1) in the context of a resolution that had been passed by the company adopting the pre-
incorporation contract in that case. There are passages in the judgment in that case which are certainly open to the
interpretation that ratification must be done by way of a formal resolution. If that indeed be the suggestion, then it
would be incorrect as such an approach to interpretation would cut across the legislative purpose of enacting the
section. Further, there is s 150 of the Companies Act 1965 which reads: Ratification may be expressed or may be
implied in the conduct of the person on whose behalf the acts are done.

[16] Before us, learned counsel for the plaintiffs argued that the payments made by the first plaintiff after its
incorporation to the defendant is evidence of conduct amounting to ratification. This is certainly a matter that must
be looked into in some greater detail by the High Court at trial. So, here, even on the defendant's own case the
requirements of s 35(1) appear prima facie to be satisfied. Hence, both on the facts and the law, the first plaintiffs
claim for breach of contract appears to be far from frivolous or vexatious. In fact it appears quite strong.

[17] There is another matter. It has to do with the argument of learned counsel for the defendant in response to the
appeal. To recall, he said that the moment his client became aware that the first plaintiff had not been in existence
at the time of the making of the contract, it returned to the plaintiff the monies received under the contract. This,
said counsel, is because the defendant would never have entered into the contract if it had known that the first
plaintiff did not exist. This issue, namely, unilateral mistake, is a very serious point and one that must be thoroughly
investigated at the trial. If the trial judge finds that the identity of the person with whom the defendant was seeking
to contract with was, objectively speaking, of importance to the defendant, then the contract would, as a matter of
law be void for unilateral mistake (see Cundy v Lindsay (1878) 3 App Cas 459). But, if there was no mistake from
an objective standpoint then the returning of the monies by the defendant, as pointed out to counsel in the course of
argument, a clear breach of contract. These are other reasons why the plaintiffs' claim cannot be struck out and
why there must be a trial of the action.
[*562]

[18]I have in paragraph 17 used the expression 'objectively speaking'. I have used it advisedly. Because the test in
the law of contract is always objective. And I can do no better than to quote from Acting Judge President Benjamin
in Hodgson Bros v South African Railways 1928 CPD 257 : If whatever a man's real intention may be, he so
conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other
party and that other party upon that belief enters into the contract with him, the man thus conducting himself would
be equally bound as if he intended to agree to the other party's terms.

[19] For the reasons already given, the appeal was allowed. The orders of the High Court were set aside and the
writ was ordered to be returned to file. The defendant was ordered to pay the costs of the appeal and those incurred
in the court below. We remitted the case to the High Court and directed that the plaintiff's action be tried with the
counterclaim on 11 January 2006.

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[20] My learned brother Azmel and my learned sister Zaleha Zahari JJCA have seen this judgment in draft and have
expressed their agreement with it.
Appeal allowed.
Reported by Loo Lai Mee

End of Document

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 31

VOL. XV.] CHANCERY DIVISION. 215

TAMPLIN v. JAMES. ] O.A.

187 9
[1878 T. 19.1
BAGGAL-
Mistake—Specific Performance—Damages. ' LAY, L.J.
For V.-C. M.
Property was put up for sale under the description of " All that inn with March 17, 18,
the brewhouse, outbuildings, and premises known as The Ship, together with
the saddler's shop and premises adjoining thereto, situate at N., Nos. 454 and 0. A.
455 on the tithe map, and containing by admeasurement twenty perches 1880
more or less." In the sale-room were plans of the property, which con- July 12.13.
sisted of the closes numbered 454 and 455 on the tithe map. At the
back of the property were two pieces of garden ground containing together
about twenty perches, not belonging to the vendors, one of which had for
many years been occupied with the inn and the other with the saddler's shop,
and which were hardly at all fenced off from the premises with which they
were occupied. The Defendant, who was acquainted with the property and
knew that the gardens were occupied along with the inn and saddler's shop,
did not look at the plans, and bought in the belief that he was buying the
whole of the property in the occupation of the tenants:—
Held, by Baggallay, L.J., sitting for Malins, V.C., and by the Court of
Appeal, that the purchaser could not resist specific performance on the
ground of mistake.
Where specific performance is refused on the ground of mistake by the
Defendant, so that under the old practice a bill for specific performance
would have been dismissed without prejudice to an action, the Court will
proceed to consider the question of damages.

THIS was an action by vendors for specific performance.

On the 25th of July the Plaintiffs, who were the trustees of a
will, put up certain parts of their testator's property for sale in
lots. Lot 1 was described as follows:—
" All that well-accustomed inn, with the brewhouse, outbuild-
ings, and premises known as The Ship, together with the messuage,
saddler's shop, and premises adjoining thereto, situate at Newerne,
in the same parish, No. 454 and 455 on the said tithe map, and
containing by admeasurement twenty perches, more or less, now
in the occupation of Mrs. Knowles and Mr. S. Merrick.
" This lot is situate close to the Lydney Town station, on the
Severn and Wye Railway, and abuts on other premises of the
vendors, on the canal, and on lands now or late of the Rev. W. H.
Bathurst."
 32
CHANCEEY DIVISION. [VOL. XV.

Lot 1 was not sold at the auction, but immediately afterwards

the Defendant, who had been present at the auction, made an
offer for it which was accepted, and signed a contract for purchase
according to the conditions of sale at the price of £ 750.
At the back of Lot 1, and of the house adjoining it, lay three-
plots of garden ground, which had formerly belonged to the Bev.
W. H. Bathurst, but had since been purchased by the railway
company. One of these pieces of ground was in the occupation of
the tenant of the messuage and saddler's shop, and the other in
the occupation of the tenant of The Ship Inn. The tenants each
held his house and the garden ground at one rent, which was-
paid to the vendors' agent, who accounted to the owners of the
garden ground for their proportions of the rent. The origin
of this arrangement, which had been acted upon for many
years, did not appear. The rent paid for the gardens was 10&
a year each. Each of these two pieces, which together contained
about twenty perches, was partially divided by a fence from the
premises with which it was occupied, but there was no boundary
of such a nature as to suggest that it belonged to a different
owner.
I t appeared that at the auction two plans of Lot 1 were lying
on the table, and the auctioneer called the attention of the persons
present to them. One of them was a tracing from the tithe map,
the other was a tracing on a much larger scale from a map
belonging to the railway company. On this latter plan the
pieces of garden ground were marked as belonging to the railway
company, and in each plan the property forming Lot 1 was
coloured, so as to distinguish it from the adjoining property. I t
was correctly described as being 454 and 455 on the tithe map,
and included the whole of the closes so numbered.
The Defendant deposed that he had not seen the plans, and was
not aware of there being any plans in the room; that he had
known the property from a boy, and knew that the two plots of
garden ground had all along been occupied with The Ship Inn and
the saddler's shop respectively; and that he bought in the full
belief that he was buying all that was in the occupation of the-
tenants, and he declined to complete unless the gardens were
conveyed to him.
 33
VOL. XV.] CHANCERY DIVISION. 217

The hearing took place before Lord Justice Baggallay, in con- O.A.
sequence of the illness of Vice-Chancellor Malins, on the 17th 1880
and 18th of March, 1879. "^
TAMPLIN
t>.
JAMES.
J. Pearson, Q.C., and Cozens-Hardy, for the Plaintiffs.

Biggins, Q.C., and W. Barber, for the Defendant.

1879. March 20. BAGGALLAY, L.J., after stating the leading

facts, continued:—
The Defendant insists in his statement of defence that he signed
the memorandum in the reasonable belief that the property com-
prised therein included the whole of the premises in the occupa-
tion of Mrs. Knowles and of Mr. Samuel Merrick, and not merely
the messuages and hereditaments which the Plaintiffs allege to be
the only property comprised therein, and that such his belief was
induced and confirmed by the acts and words of the auctioneer at
the sale. The Defendant has sworn positively that he had such a
belief at the time he signed the memorandum, and I see no reason
to doubt the statement so made by him; but was such a belief a
reasonable belief?
I t is doubtless well established that a Court of Equity will
refuse specific performance of an agreement when the Defendant
has entered into it under a mistake, and where injustice would be
done to him were performance to be enforced. The most common
instances of such refusal on the ground of mistake are cases in
which there has been some unintentional misrepresentation on
the part of the Plaintiff (I am not now referring to cases of
intentional misrepresentation which would fall rather under the
category of fraud), or where from the ambiguity of the agreement
different meanings have been given to it by the different parties.
The case of Manser v. Bach (1) is a well-known illustration of this.
I t is true also that specific performance has been refused in cases
not coming under either of these heads, as in Malins v. Freeman (2).
But where there has been no misrepresentation, and where there
is no ambiguity in the terms of the contract, the Defendant cannot
be allowed to evade the performance of it by the simple statement
(1) 6 Hare, 443. (2) 2 Keen, 25.
 34

218 CHANCERY DIVISION. [VOL. XV.

C. A. that he has made a mistake. Were such to be the law the per-
1880 formance of a contract could rarely be enforced upon an unwilling
TAMPLIN party who was also unscrupulous. I think that the law is correctly
JAMES stated by Lord Bomilly in Swaisland v. Dearsley (1): " The prin-
ciple on which the Court proceeds in cases of mistake is this—if it
appears upon the evidence that there was in the description of the
property a matter on which a person might lond fide make a mis-
take, and he swears positively that he did make such mistake, and
his evidence is not disproved, this Court cannot enforce the specific
performance against him. If there appears on the particulars no
ground for the mistake, if no man with his senses about him could
have misapprehended the character of the parcels, then I do not
think it is sufficient for the purchaser to swear that he made a
mistake, or that he did not understand what he was about." The
observations of Vice-Chancellor Wigram in Manser v. Back (2)
seem to me to tend in the same direction.
Now does it appear, or can it safely be held in this case that
the Defendant reasonably entertained a belief that the gardens
were included in the property purchased by him. ? I will consider
first the terms of the contract itself, and then the allegations as to
the acts and words of the auctioneer and other agents of the
Plaintiffs, for it is possible that although the terms of the agree-
ment taken per se may have been free from doubt, enough may
have been said or done by the Plaintiffs' agents to lead the Defen-
dant to attribute a different meaning to its terms.
Mr. Pearson admitted, and I think he could not well have
avoided admitting, that if the vendors had merely referred to the
property as being in the occupation of Mrs. Knowles and Mr. Mer-
rick without more, there would have been at any rate such an
amount of ambiguity that the Defendant might reasonably have
understood that he was purchasing the whole of the property in
their occupation. But the particulars go on to state that the
property sold is Nos. 454 and 455 on the tithe map and contains
twenty perches. The additional land which the Defendant claims
to have included is about twenty perches more. Therefore, if he
is right in his contention, he would be entitled to double the
amount which the printed particulars state the lot to contain.
(1) 29 Beav. 430, 433. (2) G Hare, 443, 448.
 35

VOL. XV.] CHANCERY DIVISION. 219

There, no doubt, is force in the argument that a person unaccus- C. A.

tomed to measuring would not know whether a property contained 1880
twenty perches or forty perches, but that does not get rid of the TAMPLIN
effect of the reference to the tithe map. The Defendant appears T "•
J AMES.
to have purchased in reliance upon his knowledge of the occupa-
tion of the premises without looking at the plans, and probably
without paying any attention to the details of the particulars of
Lot 1, but is a person justified in relying upon knowledge of that
kind when he has the means of ascertaining what he buys ? I
think not. I think that he is not entitled to say to any effectual
purpose that he was under a mistake, when he did not think it
worth while to read the particulars and look at the plans. If that
were to be allowed, a person might always escape from completing
a contract by swearing that he was mistaken as to what he bought,
and great temptation to perjury would be offered. Here the de-
scription of the property is accurate and free from ambiguity, and
the case is wholly unaffected by Manser v. Bach (1) and the other
cases in which the Defendant has escaped from performance of a
contract on the ground of its ambiguity.
[His Lordship then entered into an examination of what passed
at the sale, and stated his reasons for coming to the conclusion that
nothing had been said or done by the vendors' agents which could
lead the purchaser to misconstrue the particulars.]
A decree for specific performance was therefore made.

From this decision the Defendant appealed. The appeal came C. A.

on to be heard on the 12th of July, 1880.

Eiggins, Q.C., and W. Barber, for the Appellan t: —

The Court will not enforce specific performance where there is
a clear mistake on the part of the Defendant, even though the
Plaintiff is in no way responsible for i t : Fry on Specific Perform-
ance (2) ; Wycombe Railway Company v. Bonnington Hospital (3) ;
Malins v. Freeman (4).
[BRETT, L. J.: —I f the Defendant relied on his knowledge of the

(1) 6 Hare, 443. (3) Law Eep. 1 Ch. 268.

(2) Page 214. (4) 2 Keen, 25.
 36
220 CHANCEEY DIVISION. [VOL. XV.

0. A. property and misled himself without any fault of the vendors, can
1880 he be let off?]
TAMPLIN Yes; the other party need not have contributed to the mistake :
JAMES. Webster v. Cecil (1).
[JAMES, L. J.: —D o you say that if a purchaser says, " I thought
the property contained 100 acres and it only contains eighty/' he
must be let off?]
No; a reasonable ground for mistake must be shewn. Here
the vendors framed their description in such a way that the pur-
chaser might reasonably suppose that he was buying all that was
in the occupation of the tenants, there being no visible boundary.
They ought to have stated that other property was comprised in
the holdings for which rent was paid to some one else. This is
much more misleading than anything in Denny v. Hancock ( 2 ) ;
Weston v. Bird (3), Neap v. Abbott (4), or Moxey v. Bigivood (5),
in all which cases specific performance was refused. The Defen-
dant was not bound to look at the plans, and his not looking at
them does not fix him with notice of what he might have learnt
by doing so. The action ought to be dismissed.

J. Pearson, Q.O., and Cozens-Hardy, contra, were not called

upon.

JAMES, L . J . : —
In my opinion, the order under appeal is right. The vendors
did nothing tending to mislead. In the particulars of sale they
described the property as consisting of Nos. 454 and 455 on the
tithe map, and this was quite correct. The purchaser says that
the tithe map is on so small a scale as not to give sufficient infor-
mation, but he never looked at it. He must be presumed to
have looked at it, and at the particulars of sale. He says he
knew the property, and was aware that the gardens were held
with the other property in the occupation of the tenants, and he
came to the conclusion that what was offered for sale was the

(1) 30 Beav. 62. (4) C. P. Coop. 333.

(2) Law Eep. 6 Ch. 1. (5) 8 Jur. (N.S.) 803 ; S. 0.10 Jur.
(3) 2 W. B. 145. (N.S.) 597, in D. P.
 37

VOL. XV.] CHANCERY DIVISION.

whole of what was in the occupation of the tenants, but he asked

no question about it. If a man will not take reasonable care to
ascertain what he is buying, he must take the consequences. The
defence on the ground of mistake cannot be sustained. It is not
enough for a purchaser to swear, " I thought the farm sold con-
tained twelve fields which I knew, and I find it does not inlude
them all," or, " I thought it contained 100 acres and it only con-
tains eighty." I t would open the door to fraud if such a defence
was to be allowed. Perhaps some of the cases on this subject go
too far, but for the most part the cases where a Defendant has
escaped on the ground of a mistake not contributed to by the
Plaintiff, have been cases where a hardship amounting to injustice
would have been inflicted upon him by holding him to his bargain,
and it was unreasonable to hold him to it. Webster v. Cecil (1) is
a good instance of that, being a case where a person snapped at
an offer which he must have perfectly well-known to be made by
mistake, and the only fault I find with the case is that, in my
opinion, the bill ought to have been dismissed with costs. I t is
said that it is hard to hold a man to a bargain entered into under
a mistake, but we must consider the hardship on the other side.
Here are trustees realizing their testator's estate, and the reckless
conduct of the Defendant may have prevented their selling to
somebody else. If a man makes a mistake of this kind without
any reasonable excuse he ought to be held to his bargain.

BEETT, L . J . : —
It would be dangerous to attempt an exhaustive definition of the
cases in which the Court will refuse specific performance. The
jurisdiction is a delicate one, and the more so since the fusion of
Law and Equity, for if the Court refuses specific performance it
must now, in my opinion, consider the question of damages. Here
the property was put up for sale by a description which could not
mislead anybody who took reasonable care, for it is defined by
reference to the numbers on the tithe map, what follows being
only a further description of what is included in the two specified
closes on the tithe map. According to the finding of Lord Justice

(1) 30 Bear. 02.

 38

222 GHANCEKY DIVISION. [VOL. XV.

C.A. Baggallay the Defendant bought under a mistake, but it was a

1880 mistake into which he was led solely by his not taking reasonable
TAMPLIN care. The Defendant therefore has to support the proposition
V. that although there is nothing misleading in the particulars, and
JAMES.
his mistake was not on a point of vital importance, and arose
entirely from his own negligence, he is to be relieved. I think
that such a proposition cannot be maintained. In Webster v.
Cecil (1) the purchaser was acting fraudulently in seeking to take
advantage of what he knew to be a mistake.

COTTON, L.J.:—
I t has been urged that if specific performance is refused the
action must simply be dismissed. But in my judgment—and
I believe the Lord Justice James is of the same opinion—as both
legal and equitable remedies are now given by the same Court,
and this is a case where, under the old practice, the bill, if dis-
missed, would have been dismissed, without prejudice to an action,
we should, if we were to refuse specific performance, be bound to
consider the question of damages.
But in my opinion the decision of Lord Justice Baggallay is
right. I will not attempt to define the cases in which the Court
will refuse specific performance on the ground of mistake. The
circumstances of each case have to be considered. Here in the
particulars there is no specific reference to gardens, but there is a
specific reference to the closes 454, 455, on the tithe map as com-
prising the property. The Defendant says, " I was under a mis-
take, and believed, that my purchase comprised something not
included in those closes." He had no right to make such a
mistake, and though he knew that the gardens had for years been
occupied and held together with these tenements, he was bound to
take notice of the description. In one sense he was not bound to
look at it, but he cannot abstain from looking at it and say that he
bought under a reasonable ^belief that he was buying something
not included in it. There is no injustice in holding a man to
a contract which specifically describes the property sold in a way
not calculated to mislead.

(1) 30 Beav. 62.

 39
VOL. XV.] CHANCEKY DIVISION. 223
JAM ES, L. J . : — C. A.
188
I also am of opinion that where an action is brought for specific °
performance, and specific performance is refused on the sole ground TAMPHN;
of a mistake by the Defendant, the Court ought to give the same JAMBS.
damages as would, under the old practice, have been given in an
action at law.

Solicitors: Abbott, Jenkins, & Abbott; James J. James.

Ex parte BAYLY. In re HART^ C. A.

1880
Liquidation Petition—Mortgagee in Possession—Injunction—Jurisdiction— ^ ^ ^,
Bankruptcy Act, 1869 (32 & 33 Vict. c. 71), ss. 12, 13, 65, 72—Bankruptcy July 15.
Rules, 1870, r. 260.

When at the time of the filing of a liquidation petition the grantee of a

bill of sale given by the debtor is in actual uncontrolled possession of the
property comprised in the deed, the Court ought not to interfere by injunc-
tion with the exercise of the grantee's legal rights upon the mere suggestion
that, if an injunction is granted, it is possible that the trustee in the liquida-
tion, when appointed, may be able to raise a case for impeaching the
validity of the deed.
In order to justify such an interference the applicant for the injunction
must at least swear to his belief of some facts which, if established, would
render the deed invalid as against the trustee in the liquidation.

THIS was an appeal from a decision of Mr. Registrar Brougham,

acting as Chief Judge in Bankruptcy.
On the 11th of May, 1877, L. A. Hart, a cigar merchant and
dealer, who carried on his business at No. 15, St. Swithin's Lane,
in the city of London, executed a mortgage deed in consideration
of £ 2500 advanced to him by A. 0. Bayly, whereby he demised to
Bayly, his executors, administrators, and assigns, the house and
premises No. 15, St. Swithin's Lane, for the unexpired residue of
the term granted by the lease under which Hart held the same,
less the last day thereof, subject to the proviso for redemption
thereinafter contained. And Hart thereby also assigned to Bayly
the goodwill of his business, and all the goods, wares, merchan-
dise, stock-in-trade, fixtures, furniture, articles, effects, and things
belonging to Hart in respect of his business or used in the same,
 40

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THAM KONG v OH HIAM & ORS

CaseAnalysis | [1968] 1 MLJ 44

THAM KONG v OH HIAM & ORS [1968] 1 MLJ 44

Malayan Law Journal Reports · 7 pages

FEDERAL COURT KL
BARAKBAH LP, AZMI CJ (MALAYA) & ONG HOCK THYE FJ
CIVIL APPEAL NO X 70 OF 1966
18 September 1967
Case Summary
Contract — Sale of rubber land — Sale effected pursuant to court approval — Rectification of the contract
on ground of mistake — Unilateral mistake — Question of fact — Contracts (Malay States) Ordinance, 1950,
s 21 — Evidence Ordinance, 1950, ss 91 & 92

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 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 September 30, 1956 the 1st 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 acre. Respondents 2 to 9 are joint
beneficiaries in the estate with their mother the 1st respondent.

On September 23, 1957 the 1st 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 was
thereafter effected by her on January 20, 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 July 30, 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 1st
respondent died, and the 2nd and 7th 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 secondly, 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.
Cases referred to

Okill Whittaker (1847) 2 Ph 338; 41 ER 973

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 Page 2 of 9 42
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

FE Rose Ltd v Wm H Pim Ltd [1953] 2 All ER 739

Blay Pollard & Morris [1930] 1 KB 628 634

Esso Petroleum Co Ltd Southport Corporation [1956] 2 WLR 81 90–91

Tamplin James (1880) 15 Ch D 215 217221

Hasham Zenab [1960] 2 WLR 374 381

Chin Keow Government of Malaysia [1967] 2 MLJ 45

Yuill Yuill [1945] P 15 19

Watt or Thomas Thomas [1947] AC 484

Norwich Union Fire Insurance Society William H Price Ltd [1934] AC 455 463
FEDERAL COURT

KK Lam for the appellant.

SDK Peddie for the respondents.

BARAKBAH LP

By an agreement dated 30th September, 1956 (Exhibit D.6), the first respondent, the administratrix of the estate of
Teo Teow Guan, deceased, agreed to sell to the appellant seven pieces of land held under E.M.R. Nos. 4139,
4140, 5339, 4219, 4076, 5634 and 5633 in the Mukim of Setapak for Lots Nos. 2663, [*45]
2664, 3660, 2771, 2562, 1538 and 1537 respectively for the sum of $450 per acre. Respondents 2 to 9 are the
beneficiaries of the said estate. On 1st August, 1967, the first respondent made an application to the court for an
order that she be at liberty to sell all the seven pieces of land to the appellant. On 23rd September, 1957, an order
was duly made in terms of the said application and on 20th January, 1958, a formal transfer was made by the first
respondent to the appellant. Among the seven pieces of land was one piece held under E.M.R. No. 5339 for Lot No.
3660 (hereinafter referred to as the "said land") which is just under half an acre in area and was situated at the 3rd
mile Setapak Road, Kuala Lumpur, whereas the other six pieces with a total area of about 34 acres were situated at
the 11th mile, Gombak. The said land had a house on it known as No. 99 Klang Gates Road, Kuala Lumpur. The
respondents alleged that the first respondent intended to sell only the rubber lands at Gombak and the said land at
Setapak Road was included by mistake and on 30th July, 1958, they filed this suit in court praying for:–
"(i) an order that the said order of court dated the 23rd day of September 1957, be set aside;

(ii) that the sale of the said lands aforesaid be also set aside or in the alternative that such sale be set aside in so far as it
conveys lot No. 3660 to the defendant;

(iii) an order that the said agreement of sale between the 1st plaintiff and the defendant be set aside or in the alternative
that it be set aside in so far as it agrees to convey Lot No. 3660 to the defendant;

(iv) an injunction restraining the defendant from disposing of or dealing in any other manner with the said lands until the
determination of this case or alternatively for damages; and

(v) for such further or other order as the court deems fit and just."

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 Page 3 of 9 43
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

On 24th August, 1958, the first respondent Madam Oh Hiam died and respondents 2 to 9 obtained letters of
administration de bonis non. On 18th August, 1966, judgment was given in their favour and the appellant now
appeals to this court.

It is not disputed that the seven pieces of land were mentioned in the grant of letters of administration (Exhibit P.3),
that there was a proper sale and transfer by order of court and that all the title deeds were registered in the Land
Office. According to the Certificate of Registration of Cultivation (Exhibit D.9), all the seven pieces of land were
certified as rubber lands and the dispute before us now is in connection with the said land only which happened to
have a house on it and is just under half an acre in area, situated at the 3rd mile Setapak Road. It was alleged by
the respondents that it was never their intention to include the said land in the agreement for sale. The first
respondent had included it by mistake.

According to section 21 of the Contracts (Malay States) Ordinance, 1950, where both the parties to an agreement
are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Mistakes may be
classified into:– (1) common mistake; (2) mutual mistake; and (3) unilateral mistake. Mistake is common where both
parties make the same mistake. Each knows the intention of the other and accepts it, but each is mistaken about
some underlying and fundamental fact. The mistake is mutual where the parties misunderstand each other and are
at cross-purposes. In unilateral mistake one only of the parties suffers from some mistake. The statement of claim
alleges there was a unilateral mistake on the part of the respondents, but the learned judge found that there was a
common mistake. I do not think I need go into the question of whether there was a unilateral, common or mutual
mistake as according to the evidence on record I hold the view that there was no mistake at all on the part of either
or both parties for reasons which I am about to state.

In the grant of letters of administration (Exhibit P.3) all the seven pieces of land were grouped together and so were
they in the agreement (Exhibit D.6) which was prepared by P.W.1, an advocate and solicitor, who stated that as far
as he could remember the lands to be sold were rubber lands. He also prepared the affidavit in support of Madam
Oh Hiam's application for leave to sell the lands and nothing was said to him about the existence of any house on
any piece of land. He admitted that the seven separate deeds were handed to him by Madam Oh Hiam. He also
prepared the transfer after obtaining the court order.

P.W.3, P.W.4, P.W.5 and P.W.6 in their evidence stated that the sale was due to the fact that their mother needed
money to go to Australia for treatment as she was sick. They did not know that the said land was included in the
seven pieces of land to be sold. I am unable to accept this piece of evidence. The originating summons which
mentioned the seven title deeds was served on them and they chose not to attend court at the hearing. The order
for sale was made by the court on the certificate of non-appearance of the respondents. They were not minors and
in my view they cannot now come to court and deny that they were aware of the sale of the said land. The
respondents in their statement of claim stated that it was not the real intention of the first respondent to convey to
the appellant any land except rubber lands. According to the Rubber Cultivation Book all the seven pieces were
registered as rubber lands and the fact that one of them with a house on it was situated some miles away from the
other pieces did not alter the condition of the land. Furthermore it was alleged in the statement of claim that the
said [*46]
land was sold for $450 per acre only whereas it was actually worth $25,000 per acre as it was situated within the
village of Setapak and within the Municipal boundaries. P.W.3 gave evidence that according to his estimate its
value in 1956 was $40,000 but he did not have it properly valued. It must be remembered that the agreement for
sale was made during the emergency period and Setapak was a black area. In her affidavit dated 30th July, 1957,
in Originating Summons No. 122 of 1957 Madam Oh Hiam stated:–
"4. Since the emergency began in June, 1948 no tapping for rubber was carried on on the said lands because of the
difficulty of getting tappers. The area was also considered a bad area for security reasons.

5. What was once considered an asset became a liability to the estate as the annual quit rents have to be paid. Moreover,
owing to the difficulty of supervision and the lack of labourers for reasons given above the whole area is now overgrown
with weeds and lallang.

6. In order to save the estate from waste as I am of the opinion this whole area may be covered with secondary jungle, I
have on the 30th day of September, 1956, entered into an agreement of sale of the said lands to one Tham Kong of No.
28C, San Peng Road, Kuala Lumpur, at the agreed price of $450 an acre."
Although the said land was in the village of Setapak it was not possible to get a ready purchaser for it at the normal
price. It is common knowledge that the value of land in black areas was at its lowest ebb as people were scared of

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 Page 4 of 9 44
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

living there. As the first respondent needed money badly for her treatment in Australia she had to sell the property
for $15,500 to the appellant. According to her affidavit "This amounts to $15,500 for the whole area and therefore
compares favourably with the value set on the said lands by the Collector of Estate Duty of $13,200." The certificate
of the Collector of Estate Duty was made on 21st December, 2603 (1943), during the latter part of the Japanese
occupation period. Therefore the value could be very much less in Malayan currency.

But in 1956, according to P.W.3, housing projects were coming up just opposite and right behind the said land and
consequently there would be inflation in the value and the said land would be worth about $40,000. But there was
no evidence on record of the market value of the said land. In my view there had been no mistake at all. The lands
were sold for what they were worth at the time of the emergency and in the words of Lord Cottenham, Lord
Chancellor, in Okill Whittaker (1847) 2 Ph 338 (at p 974) 41 ER 973:–
"Suppose a party proposed to sell a farm, describing it as 'all my farm of 200 acres', and the price was fixed on that
supposition, but it afterwards turned out to be 250 acres, could he afterwards come and ask for a re-conveyance of the
farm, or payment of the difference? Clearly not; the only equity being that the thing turns out more valuable than either of
the parties supposed. And whether the additional value consists in a longer term or a larger acreage is immaterial."
I would, therefore, allow the appeal with costs here and in the court below.

AZMI CJ (MALAYA)

I have had the opportunity of reading both the judgments of my lord the Lord President and of my brother Ong Hock
Thye F.J. and wish to express agreement with them.

I would, however, like to say the following few words on the question of burden of proof.

In a case of this nature the burden of proof is a heavy one and in support of this view I would refer to the judgment
of Singleton L.J. in the case referred to by the learned trial judge himself when dealing with the question of
rectification i.e. FE Rose Ltd Wm H Pim Ltd [1953] 2 All ER 739 at p 744:
"The sole question is whether the buyers are entitled to rectification of the contracts. This depends, not on intention, but on
proof that the written contract is not the contract into which the parties entered, and the terms of the contract into which they
had entered must be clearly proved. In Crane v Hegeman-Harris Co Inc ([1939] 1 All ER 665) Simonds J. said:–

'I would rather, I think, say that the court can only act if it is satisfied beyond all reasonable doubt that the instrument
does not represent their common intention, and is further satisfied as to what their common intention was. For let it be
clear that it is not sufficient to show that the written instrument does not represent their common intention unless
positively also one can show what their common intention was. It is in the light of those principles that I must examine
the facts of this somewhat complicated case.'

When that case was before the Court of Appeal Sir Wilfred Greene M.R., ( [1939] 4 All ER 71) spoke of the 'high degree of
conviction which unquestionably is to be insisted upon in rectification cases.' "
In the instant case what evidence have we got upon which the learned judge ordered the rectification not only of the
contract but of the register of titles? The evidence appears to be first, the evidence of the four respondents who
stated that they merely agreed to the sale of the other 6 pieces of land which were rubber land; secondly, that these
pieces of land being in a residential area cannot therefore be intended to be included; thirdly, that the price of land
is much higher than the price at which it was sold and fourthly, the evidence of the broker who said that he never
took the intended purchaser to the land in question.

Against this oral evidence there was the fact that the matter was handled by a solicitor to whom was shown all the
titles and also the fact that even after the sale the Land Office still considered these pieces of land as rubber land.
See Certificate of Registration of Cultivation Exh. D.9.

In my view the plaintiffs/respondents have failed to discharge their burden.

ONG HOCK THYE FJ

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 Page 5 of 9 45
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

This is an appeal against the decision of Gill J. in the High Court [*47]
at Kuala Lumpur, setting aside the sale and transfer of a half-acre of land, out of a total area of approximately 34
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 in writing dated September 30, 1956, Oh Hiam, administratrix of the estate of Teoh Teow Guan
deceased, contracted to sell to the appellant seven pieces of land, all of which are situate in the Mukim of Setapak,
at the price of $450 per acre, subject to approval of such sale by the court, pursuant to the provisions of section
94(iii) of the Probate and Administration Enactment (now section 60(4) of the Probate and Administration
Ordinance, 1959). Six pieces, containing very old rubber trees, are contiguous and situate at Gombak, at the 11th
mile on the road between Kuala Lumpur and Bentong. The seventh, Lot 3660, is at the 3rd mile, Setapak Road,
Kuala Lumpur, in area 4 poles short of half-an-acre. On it stands an old plank house, No. 99 Klang Gates Road,
which was there at all material times. The transfer set aside affects only this particular property, which was ordered
to be retransferred by the appellant to the 2nd and 7th respondents, as representatives, upon payment by them of
the sum of $250.

Pursuant to the said agreement, Oh Hiam duly applied, by way of Originating Summons No. 122 of 1957, for leave
of the court to sell these lands, citing as interested parties her eight children who were joint beneficiaries with her in
the estate of their father. After service, they entered no appearance and on September 23, 1957 an order was
made for sale and distribution of the proceeds among the beneficiaries entitled under the Distribution Enactment
(Cap. 71).

On January 20, 1958, pursuant to the said order, Oh Hiam transferred E.M.R. 3633 and 5339, for Lots 1537 and
3660, to the appellant. Their aggregate area was 8 acres 1 rood 26 poles, and the consideration therefor $3,786, at
the rate of $450 per acre. No claim was made by the respondents in respect of Lot 1537. By three other transfers of
the same date the other five titles were acquired by the appellant's wife, brother-in-law and mother-in-law. No
question was raised regarding these transfers.

On June 3, 1958 the appellant, by his solicitors, sent a notice to the tenant of No. 99 Klang Gates Road, requiring
him to pay all future rents to his new landlord. As a result Teo Kim Choon, one of the beneficiaries, came to realise
that Lot 3660 had been sold together with the other six pieces of land. On June 16, 1958 Teo Kim Choon,
purporting to represent the administratrix and all other beneficiaries, instructed his solicitor to write to Mr. Y. S. Lee,
the solicitor who had prepared the sale agreement and subsequent transfers, offering the appellant the eirenicon of
retransferring this property as the alternative to litigation. The appellant rejected the overtures.

On July 30, 1958 action was commenced in the name of the respondents and their mother. The prime mover was
Teo Kim Choon: as he put it, "I then gave instructions to my solicitors to have the sale set aside." Oh Hiam died on
August 24, 1958, having been seriously ill of cancer since 1956, and the 2nd and 7th plaintiffs were substituted in
her place after grant to them of letters of administration de bonis non. This explains why, as to one fact in acute
controversy, namely, the identity of the successful broker concerned in the transaction, Oh Hiam's evidence was
missing. Except as to facts turning on this point, there was no dispute as to the relevant facts.

Of the several grounds of appeal the main ones are, first, that the learned judge erred in his finding of a mutual
mistake, contrary to a specific plea of unilateral mistake, and secondly, that he erred in holding the respondents
entitled, on the evidence, to the relief of rectification. As to the first ground, mistake was pleaded in paragraph 6 of
the statement of claim as follows:–
"The plaintiffs aver that at the time the said agreement was made the defendant knew that the 1st plaintiff had by mistake
agreed to sell to him the said Lot No. 3660 at $450 per acre which was a gross undervalue of the actual price of the said
property and that it was not the real intention of the 1st plaintiff to convey to the defendant any lands except rubber lands.
By reason thereof, the plaintiffs aver that the said agreement was null and void and of no effect."
These allegations were denied by the appellant in his defence. By an amendment, agreed to during the trial, he
further pleaded that the first plaintiff was estopped from contending that she was mistaken as to the contents of the
sale agreement. No argument, however, was addressed by counsel for either of the parties on this point and the
trial judge was content to decide the action entirely on the issue of mistake. While estoppel is now raised again as a
subsidiary ground of appeal, I do not think the point calls for consideration, for reasons which will appear later.

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THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

Reverting to the plea of mistake, different considerations, of course, applied according as the mistake was mutual
or unilateral. The statement of claim in categorical terms had alleged a unilateral mistake. Nevertheless, the learned
trial judge rested his decision on his finding that "it was as clear a case of common mistake as could occur." This
was in line with the argument of counsel for the plaintiffs, although no amendment of the pleadings was ever
applied for or made. It is clear law, as [*48]
stated by Scrutton L.J. in Blay Pollard & Morris [1930] 1 KB 628 634, that "cases must be decided on the issues on
the record; and if it is desired to raise other issues, they must be placed on the record by amendment." See also the
judgment of Lord Radcliffe in Esso Petroleum Co Ltd Southport Corporation [1956] 2 WLR 81 90–91. However, rule
8(1) of the Federal Court (Civil Appeals) (Transitional) Rules, 1963 gives this court "all the powers and duties, as to
amendment or otherwise of the appropriate High Court." For my own part, therefore, I would assume that the
pleadings were duly amended, so that all matters in controversy between the parties may be disposed of here and
now. I am persuaded to do so after perusal of the record, since it is plain that such an amendment, even at this
stage, in no way prejudices the appellant, for no further useful evidence can possibly be called by either side
affecting the issue.

Before passing to the question of mutual or common mistake, I would first say a few words on the plea of unilateral
mistake. The law covering the circumstances of this case is thus set out in 26 Halsbury (3rd Ed.) p.898, citing
Tamplin James (1880) 15 Ch D 215 217221:–
"When the contract is clear the mistake of one party only will not, as a general rule, prevent the formation of a contract and
consequent liability in damages being incurred for non-performance, for, if a man will not take reasonable care to ascertain
what he is contracting about, he must take the consequences. Even if the mistake is such as a reasonably diligent man
might fall into, a party cannot successfully resist an action for damages, nor, as a rule, specific performance, by a simple
statement that he has made a mistake where there has been no misrepresentation and where there is no ambiguity in the
terms of the contract."
According to the evidence and the relevant findings, there can be no doubt that, howsoever the mistake arose on
the part of the vendor, it did so for reasons entirely unconnected with the appellant and for which he was in no way
responsible. In a recent East African case, Hasham Zenab [1960] 2 WLR 374 381 which shows several points of
resemblance to the present appeal, Lord Tucker, delivering the judgment of the Privy Council, said:
"Their Lordships have, accordingly, reviewed the whole of the evidence in the light of the above considerations and having
regard to the pleadings. In this connection reference must be made to paragraph 11 of the defence. It reads as follows: 'In
the further alternative the agreement sued upon was entered into by mistake in that the terms thereof have been drawn up
as to contravene the intention of the parties by purporting to refer to the whole of the plot 58/1 L.R. 209 as aforesaid,
whereas as it should have referred to the said portion of land only'. This is a plea of mistake common to both parties which
was not the case made by the defendant. Treating it, however, as a plea of unilateral mistake it could, in the absence of
fraud, only afford ground for rescission if the mistake was induced by some innocent misrepresentation made by or on
behalf of the plaintiff or by some misleading conduct on his part."
In the absence of any proof of fraud or misrepresentation, neither of which was pleaded or disclosed in the
evidence, the respondents, therefore, must fail, had they relied on unilateral mistake.

Turning to the alternative, namely, a mistake common to both parties, the respondents' case, as the judge put it
was:
"That Oh Hiam as administratrix intended to sell the rubber lands at Gombak, which were the only lands shown to the
defendant, that there were no negotiations for the sale of the land at Setapak and that the grant relating to the land at
Setapak got included in the agreement in the mistaken belief that it related to the several pieces of land at Gombak."
After a review of all the evidence, the learned judge came to the following conclusion:–
"Taking the evidence as a whole, I am satisfied that during the course of negotiations between the parties there was no
mention made about the land at Setapak. The negotiations were in respect of rubber estate at the 11th mile, Gombak
Road. There were six different titles to contiguous lands which the plaintiffs have described as the rubber estate belonging
to the estate. The seventh title was handed along with the other titles to Mr. Lee at the time of the preparation of the
agreement in the mistaken belief that it also related to a piece of land which formed part of the rubber estate."
In short, then, the judge held that the respondents, as plaintiffs, had proved their case. But what was the evidence
on which he based his conclusions? Oh Hiam, being dead, could not testify to her real intention. True, she had
sworn an affidavit in support of her application for leave to sell. But nowhere in the judgment does it appear that the
statements in her affidavit influenced the judge in coming to his decision. Instead, he recounted what he thought
was material evidence given by certain of the beneficiaries: to quote him,

See Yi Vonne
 Page 7 of 9 47
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

"four of the plaintiffs (P.W.3, P.W.4, P.W.5 and P.W.6) have given evidence to say that their mother consulted them with
regard to the proposed sale and that at no time was any mention made of the land at Setapak as being one of the lands
intended to be sold."
With respect, I think the judge was in error in thus taking account of inadmissible evidence. Under section 32 of the
Evidence Ordinance, 1950, statements, written or verbal, of relevant facts made by a person who is dead are
relevant only when they relate to the cause of death, or were made in the ordinary course of business, or against
the interest of the maker etc. What the deceased lady said or did not say, regarded as a pregnant negative, by way
of disclosing her intentions, was clearly irrelevant under section 32 and should not have been admitted.

Then again, on another question of fact, the judge seems to have preferred the evidence of one broker, Lee Kim
Seng, the respondents' witness, to the complete exclusion of that of another, Chow Wing Hing, who was called by
the appellant. I quote from the judgment: [*49]

"I have considered the evidence of the two brokers very carefully and have come to the conclusion that, notwithstanding
some apparent discrepancies in the evidence, Lee Kim Seng was the only broker in this case because he struck me as
being a more truthful witness than Chow Wing Hing. Moreover, he is an independent witness and his evidence is
corroborated by the evidence of Saw Ban Huat, another independent witness. Chow Wing Hing, on the other hand, is very
much an interested party as he bought one of the rubber lands."
I regret to say that I find myself in disagreement again with these conclusions of the learned trial judge. It is true, as
Sir Hugh Wooding said recently in Chin Keow Government of Malaysia [1967] 2 MLJ 45 :
"He saw and heard the witnesses. His notes were not a verbatim reproduction of the viva voce proceedings but his own
recorded account of the evidence. He was nonetheless aware of the questions asked and in a position of advantage to
assess the answers given. He had thus impressed upon him the scope and nature of the evidence in a way denied to the
appellate tribunal. No such tribunal could therefore have the same vivid appreciation of what the witnesses said and what
they meant by what they deposed."
Nevertheless, despite the advantage he had, I think that, in coming to his conclusions, he was going much further
than is justified by the evidence. In holding Lee Kim Seng to be a truthful witness, the judge overlooked or did not
pause to consider certain cogent facts, which are facts in issue and not merely "apparent discrepancies". In the first
place, Lee Kim Seng said:
" The option was signed by P.W.5. He and I signed: only both of us signed the option. Oh Hiam knew about the option … I
remember the price written on the option was $500 an acre … I was given an option by P.W.5 The option was written in
English. The paper on which the option was written was 9 inches by 6 inches."
But, was he corroborated by P.W.5, who was Teo Peng Yong? Far from doing so, Teo said:
"I did not prepare any documents relating to the sale of the lands. I remember my mother informing me that she had asked
an Indian to prepare some documents … An option was given to a taxi driver named Mr. Lee … My mother gave him the
option. I did not know whether he found the buyer or not. I remember that the price was $400 per acre when the option was
given … I did not see the option."
Now, I can well understand that the minor discrepancy as to the price might be a simple mistake due to the lapse of
years. But the acid test of the truth of Lee Kim Seng's story was (a) his allegation that he obtained the option from
Teo Peng Yong, a statement of fact flatly denied by the latter; and (b) Teo Peng Yong manifestly could not have
given an option which he had no power to do.

In the second place, assuming that Lee Kim Seng did hold an option to sell at $ 500 per acre, and that Saw Ban
Huat, another independent witness, corroborated Lee as to his own refusal to buy the land at that price, the fact
remains that Lee had failed to find a buyer. Giving another option to a different broker was a perfectly reasonable
explanation for Chow Wing Hing coming into the picture. In fact both the appellant and Chow Wing Hing, the
second broker, stated that the option given to Chow was at a different and lower price of $450. Why should Chow
on any account be disbelieved? Why should there have been only one broker? After Lee had failed, was it not on
the cards that Oh Hiam, being anxious to raise money, should have given an option to Chow at the lower price? In
my judgment, therefore, even were the judge to believe in Lee, that was no reason whatever to reject the evidence
of the second broker Chow. The latter was, moreover, regarded with some suspicion as an "interested party". I
should observe that the decision, one way or the other, concerning Lot 3660, could result in neither benefit nor
detriment to him. I do not agree that merely because a person had an interest in the outcome, his evidence should
be discounted.

Having thus stated, as I am bound to do, my reasons for disagreeing with the learned trial judge's conclusions, I feel
again no less diffident in accepting his opinion on a material fact, for which he gave no reasons, that Lot 3660 was
"essentially residential land." The building, a temporary dwelling house, according to Teo Boon See, occupied a

See Yi Vonne
 Page 8 of 9 48
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

superficial area of approximately 1,900 square foot. The area of Lot 3660 is 20,691 square feet. Was the presence
of the building, occupying one-tenth the total area, sufficient ipso facto, to convert rubber land into residential land?
What if the land was a rubber estate of, say, 5 acres and the owner builds himself a house therein? Does it then
become "essentially residential land"? Where and how does one draw the line? At any rate, it seems to have been
ovelooked that, when Oh Hiam transferred this piece of land to the appellant, he was at the same time given the
rubber cultivation book (Certificate of Registration of Rubber Cultivation) which every rubber estate owner is
required by law to possess: see Rubber Supervision Enactment, 1937. The appellant duly exchanged the old book
for a new one (Ex. D.9) which is still a valid document. With respect, therefore, I am unable to agree with the
learned judge that Lot 3660 was "essentially residential land", if by that term he meant that no reasonable person
would be likely to regard it as rubber land. It should further be remembered that Oh Hiam herself, in her estate duty
affidavit, had grouped Lot 3660 with the other 6 lots as rubber land, and these 7 pieces were, on that basis, valued
in 1948 at $13,200. These lands were again grouped together in the grant of letters of administration de bonis non:
(see Exhibits P.1 & P.3), this subsequent grant being made on the application of two of these respondents after
commencement of the action herein. [*50]

Be that as it may, the judge found that "it was only after the transfers were executed in January 1958 that (the
appellant) came to know that he had obtained a transfer in respect of this piece of land in Setapak." In the result he
held that "neither side knew about the inclusion of the property at Setapak in the agreement until after the transfers"
and that it was "neither the intention of Oh Hiam to sell nor the intention of the defendant to purchase" such land.

This conclusion, of course, postulated that the evidence given to the contrary by the second broker Chow Wing
Hing, and by the appellant himself, was rejected by the judge. He had indeed done so on the ground that there was
only one broker, Lee Kim Seng. Consequently, in his opinion, both the appellant and Chow, gave false evidence.
Speaking for myself, I do not think there is any evidence on the record showing that Chow Wing Hing was
untruthful. The same cannot, in my judgment, be said of Lee Kim Seng. Since the decision of the learned trial judge
was based on his belief in Lee as a witness of truth, it is on that account erroneous on the facts. His finding, for
instance, that the appellant did not know, until much later, that he had bought Lot 3660, is an inference of doubtful
validity. Apart from the fact that the appellant denied it, the mere inspection of the two titles and the plans thereon
makes it impossible for anyone to say that the appellant did not know he was buying two pieces of land that were
miles apart. Why did he choose to do so unless he knew what he was doing? As option-holder he should have had
the first pick. If the answer is in the affirmative, on what grounds could there be a finding of common mistake?

In disagreeing with several of the learned trial judge's conclusions, as I have done, I would say no more than that I
do so on the authority of their Lordships' pronouncements in Yuill Yuill [1945] P 15 19 and Watt or Thomas Thomas
[1947] AC 484.

In my judgment, however, these differences of opinion call for no retrial. What was agreed to be sold by the
agreement of September 30, 1956 was land quâ land. The agreement was expressed to be for the sale and
purchase of land simpliciter. Hence the real question is whether, when this vendor intended to sell land and this
purchaser likewise intended to buy land, and their expressed intention goes no further, it could necessarily be
implied from surrounding circumstances that the nature or quality of one small piece of land was, nevertheless, a
basic or fundamental term of the contract. In other words, would there have been a fundamental breach, had the
land been bare or contained only a few scattered rubber trees, so that the purchaser could have resiled from the
contract? If he could not, then the principle of mutuality should apply equally to the vendor who was concerned to
evade a bad bargain. Consequently, I do not think that mental reservations on the part of either party should be
permitted to prevail so as to invalidate a clear agreement in writing. In my view, the provisions of sections 91 and 92
of the Evidence Ordinance should apply to exclude all oral evidence contradicting, varying, adding to or subtracting
from the terms of a written contract unless, in the case of any mistake, the same relates to an essential or integral
matter sufficient to invalidate the contract. I am fortified in this view by the law thus stated in 26 Halsbury (3rd Ed.)
at pages 898—9:–
"Where parties enter into a contract under a mutual mistake as to the existence of the subject matter or of some fact or
facts forming an essential and integral element of the subject matter, their consent is nullified and the contract is void….

When, however, the contract is for the sale of the subject thereof absolutely and not with reference to any collateral
circumstances, the agreement is binding if the subject matter exists, notwithstanding that it is not in the condition
supposed."
The vendor's alleged intention to sell nothing but rubber land was never disclosed to the appellant nor, by any
admissible evidence, to her children. On the other hand, her intention to sell Lot 3660, together with the other six

See Yi Vonne
 Page 9 of 9 49
THAM KONG v OH HIAM & ORS, [1968] 1 MLJ 44

pieces of land, which was expressed in writing by the sale agreement, continued unchanged for over 15 months
until January 20, 1958, when she executed the formal transfers. Was it not, therefore, an even possibility that it was
actually Teo Kim Choon who decided, or persuaded her, to renegue on the sale only after his subsequent discovery
that the activities of property developers in the vicinity of Lot 3660 had rendered this land more valuable? It was he
who gave instructions for the action: she did not, as she must have been very near death then. In fact, there is no
real evidence that she repented of the sale.

As to the ascertainment of the intention of contracting parties, in Norwich Union Fire Insurance Society William H
Price Ltd [1934] AC 455 463, Lord Wright said:–
"It is true that in general the test of intention in the formation of contracts and the transfer of property is objective; that is,
intention is to be ascertained from what the parties said or did. But proof of mistake affirmatively excludes intention. It is,
however, essential that the mistake relied on should be of such a nature that it can be properly described as a mistake in
respect of the underlying assumption of the contract or transaction or as being fundamental or basic. Whether the mistake
does satisfy this description may often be a matter of great difficulty."
With the greatest respect to the learned trial judge, therefore, I do not think the mistake in the instant case presents
a very difficult problem. After all, it related to the sale of a half-acre only, out of approximately 34 acres. In point of
fact, was this half-acre so conspicuously different from the rest that it should not have been lumped together with
them? Oh Hiam [*51]
herself considered it as rubber land, in spite of the house thereon, when she filed her estate duty affidavit in 1948.
Had it been as valuable in 1956 as the respondents contended (remembering that they had made no attempt to
support their contention by producing any valuation thereof at the trial) one should have thought that Oh Hiam
herself could not have been oblivious of such a valuable piece of property, which by itself should have readily
fetched a price more than sufficient to pay for her trip to the hospital in Australia. In any event, event if she made a
mistake, which I doubt, it was not such a fundamental mistake as to entitle the respondents to relief. As long ago as
1847, an English Court in Okill Whittaker (1847) 2 Ph 338; 41 ER 973 decided that, under somewhat similar
circumstances, a conveyance should be upheld. In that case, premises were sold for the residue of a term, of which
both parties at the time supposed that 8 years only were unexpired, and the price was fixed accordingly, but it
afterwards appeared that 20 years were in fact unexpired at the time of the sale. Upon the vendor seeking to make
the purchaser a trustee of the term for the additional 12 years, Lord Cottenham L.C., dismissing the bill, said:–
"Suppose a party proposed to sell a farm, describing it as 'all my farm of 200 acres', and the price was fixed on that
supposition, but it afterwards turned out to be 250 acres, could he afterwards come and ask for a reconveyance of the farm,
or payment of the difference? Clearly not; the only equity being that the thing turns out more valuable than either of the
parties supposed. And whether the additional value consists in a longer term or a larger acreage is immaterial."
With respect, I would apply the same reasoning to this case. I do not think that what essentially was a mistake, due
entirely to the fault of the vendor herself, should serve as a ground sufficient in law to deprive the blameless
purchaser of a bargain. The maxim, caveat emptor is not wholly one-sided.

It was urged, on behalf of the respondents, that they were induced by a mistake on the part of their mother, the
administratrix, to consent to the order of sale, and that a consent given under a mistake was no consent at all;
consequently the order given as regards this particular piece of land should be set aside. The other 34 acres had
already been resold; hence, admittedly, the order cannot be set aside concerning these six lots. For my own part, I
am far from satisfied as to the merits of this argument. The mistake, if at all it was one, was not a fundamental
mistake. The respondents were all adults. If they chose to give their consent blindly, and none of them claimed to
have made any enquiries before doing so, they had only themselves to blame. I do not think there is any equity in
their favour under the circumstances.

I would accordingly allow this appeal and set aside the order of the court below, with costs in both courts to the
appellant.
Appeal allowed.

Solicitors: Oorjitham & Lam; Skrine & Co

End of Document

See Yi Vonne
 50

CONTRACTS ACT 1950

Act 136
Contract caused by mistake of one party as to matter of fact
23. A contract is not voidable merely because it was caused by one of the parties to it being
under a mistake as to a matter of fact.
51
52
 53

1168 BOWMAN V. MANZELMAN 2 CAMP. 310.

Gurney and Runningtou for the plaintiffs.

Garrow and Taddy for the defendants.
[Attornies, Russell and Ellis.]

Saturday, Dec. 16, 1809.

BOWMAN V. MANZELMAN.
(In an action for seaman's wages, the plaintiff may under 2 Geo. I I . c. 36, give evidence
of the contents of the ship's articles, without having served a notice to produce
them.)
Action for seaman's wages.
It appeared that the defendant had agreed to pay the plaintiff £ 7 a month ;
but that there were ship's articles, which the plaintiff afterwards signed.
[316] I t being objected that the articles should be produced, statute 2 Geo. II.
c. 36, s. 8, was cited, whereby it is enacted, that " no seaman or mariner, by entering
into or signing such contract or agreement, shall be deprived of, or hindered from using
any means or methods for the recovering of wages against any ship, the master or
owners thereof, which he may now lawfully make use of ; arid that in all cases where
it shall or may be necessary that the contract or agreement in writing should be
produced in Court, no obligation shall lie on any seaman or mariner to produce the
same, but on the master, owner, or owners of the ship, for which the wages shall be
demanded ; and no seaman or mariner shall fail in any suit, action, or process, for
recovery of wages for want of such agreement or contract being produced, &c."
The defendant's counsel still insisted that, according to the invariable rule of law,
the mariner was bound to give the captain notice to produce the articles before
entering into parol evidence of their contents ; and that the object of the legislature
must be understood to have been, to impose the obligation of producing them upon
the captain or owners, after receiving such notice, in whose custody soever they
might be. —But
Lord Ellenborough held, that the statute introduced an exception to the general
rule upon this subject; and required the captain, without notice, to produce the
articles at [317] the trial, if he would found any objection upon them, or resort to
them for any purpose whatever in making his defence.
The plaintiff had a verdict without the articles being produced.*
The Attorney-General, Park, and Espinasse for the plaintiff.
Garrow and Wigley for the defendant.
[Attornies, Rippinghain and Willett.]

Saturday, Dec. 16, 1809.

STILK V. MYRICK.
(In the course of a voyage some of the seamen desert, and the captain not being
able to find others to supply their place, promises to divide the wages which
would have become due to them among the remainder of the crew. This
promise is void for want of consideration.)
[S. C. 6 Esp. 129.]
This was an action for seaman's wages, on a voyage from London to the Baltic
and back.
By the ship's articles, executed before the commencement [318] of the voyage,
the plaintiff was to be paid at the rate of £ 5 a month ; and the principal question
in the cause was, whether he was entitled to a higher rate of wages ?—In the course of
the voyage two of the seamen deserted ; and th° captain having in vain attempted
to supply their places at Cronstadt, there entered into an agreement with the
rest of the crew, that they should have the wages of the two who had deserted equally

within two months of the suing out of the commission, Sir S. Romilly's Act, 46 Geo.
III. c. 135, s. I, having rendered valid and effectual, notwithstanding any secret act
of bankruptcy, all conveyances by. all payments by and to, and all contracts and other
dealings and transactions by and with any bankrupt, bona fide made or entered into
more than two calendar months before the date of the commission.
* 2 Geo. I I . c. 36, s. 1, requires that the agreement for seamen's wages shall be
in writing ; and this written document is necessarily in the custody of the master
or owners of the ship. See Abbott on Shipping, part iv. c. I.
 54

2 CAMP. 319. STILK V. MYRICK 1169

divided among them, if he could not procure two other hands at Gottenburgh.
This was found impossible ; and the ship was worked back to London by the plaintiff
and eight more of the original crew, with whom the agreement had been made at
Cronstadt.
Garrow for the defendant insisted, that this agreement was contrary to public
policy, and utterly void. In West India voyages, crews are often thinned greatly
by death and desertion ; and if a promise of advanced wages were valid, exorbitant
claims would be set up on all such occasions. This ground was strongly taken by
Lord Kenyon in Harris v. Watson, Peak. Cas. 72, where that learned Judge held,
that no action would lie at the suit of a sailor on a promise of a captain to pay him
extra wages, in consideration of his doing more than the ordinary share of duty in
navigating the ship; and his Lordship said, that if such a promise could be enforced,
sailors would in many cases suffer a ship to sink unless the captain would accede to
any extravagant demand they might think proper to make.
[319] The Attorney-General, contra, distinguished this case from Harris v.
Watsont as the agreement here was made on shore, when there was no danger or
pressing emergency, and when the captain could not be supposed to be under any
constraint or apprehension. The mariners were not to be permitted on any sudden
danger to force concessions from the captain ; —b ut why should they be deprived
of the compensation he voluntarily offers them in perfect security for their extra
labour during the remainder of the voyage ?
Lord Ellenborough.—I think Harris v. Watson was rightly decided ; but I doubt
whether the ground of public policy, upon which Lord Kenyon is stated to have
proceeded, be the true principle on which the decision is to be supported. Here, I
say, the agreement is void for want of consideration. There was no consideration
for the ulterior pay promised to the mariners who remained with the ship. Before
they sailed from London they had undertaken to do all that they could under all
the emergencies of the voyage. They had sold all their services till the voyage
should be completed. If they had been at liberty to quit the vessel at Cronstadt,
the case would have been quite different; or if the captain had capriciously dis-
charged the two men who were wanting, the others might not have been compellable
to take the whole duty upon themselves, and their agreeing to do so might have
been a sufficient consideration for the promise of an advance of wages. But the
desertion of a part of the crew is to be [320] considered an emergency of the voyage
as much as their death ; and those who remain are bound by the terms of their
original contract to exert themselves to the utmost to bring the ship in safety to her
destined port. Therefore, without looking to the policy of this agreement, I think
it is void for want of consideration, and that the plaintiff can only recover at the
rate of £ 5 a month.
Verdict accordingly.*
The Attorney-General and Espinasse for the plaintiff.
Garrow and Reader for the defendant.
f Attornies, Rippingham and Warry.]

* But where a seaman performs some service beyond the scope of his original
contract, the case is otherwise. Thus before the ransoming of ships was prohibited,
a promise by the captain of a captured ship to pay monthly wages, to one of the sailors,
in order to induce him to become a hostage, was held Innding on the owners* although
they abandoned the ship and cargo. Yates v. Hall, I T. K. 73.
A seaman at monthly wages, who is impressed or enters from a merchant ship
into the royal navy during a voyage is not entitled to wages to the time of his quitting
the ship, unless the voyage be completed.
Anon, coram Lord Ellenborough, at Guildhall, December 11th, 1806.
Action for seaman's wages.—The plaintiff entered on board the defendant's ship
at Shields, and was to have the monthly wages of £ 6, 3s. The ship was bound to
Gibraltar with a cargo of coals, and she arrived there in safety. She then sailed for
Zante, where she was to take in a cargo, with which she was to return to England.
In the course of this voyage, the plaintiff was impressed ; and before it was com-
pleted the ship was captured. The defend-[321]-ant had paid into Court the amount
of the plaintiff's wages to Gibraltar ;—rand the question was, whether anything more
was due ?—On the part of the plaintiff, it was contended that by virtue of stat. 2
 55

1170 ROSE V. BRYANT 2 CAMP. 322.

Monday, Dec. 18, 1809.

ROSE, ADMINISTRATOR, &C. V. BRYANT.
(Indorsements on a bond acknowledging the receipt of interest or payment of part
of the principal, are not evidence against the obligor to prove that the bond
was on foot, without shewing that they were on the bond recently after their
dates, and at a time when their purport was contrary to the interest of the
obligee.)
Debt on bond dated in the year 1785.
Pleas, payment at and after the day.
Several indorsements on the bond, acknowledging the receipt [322] of interest
down to 1793, were proved to be in the hand-writing of the defendant, and signed by
the intestate. These wrere allowed to be good evidence of the bond remaining un-
satisfied at the date of the last indorsement. The presumption from lapse of time
being thus repelled, the plaintiff for the purpose of meeting certain direct evidence
of payment in the year 1794, proposed to read other indorsements on the bond down
to the year 1795, acknowledging the receipt of interest and part of the principal :
but these latter indorsements were not in the defendant's hand, nor did it appear
when they were written, or even that they existed during the intestate's lifetime.
An objection being taken to their being read , —
Topping for the plaintiff insisted, that they were good evidence. The practice
was, to admit all indorsements of this sort which appeared upon the bond ; and
these were not to be looked to with suspicion, as they could not have been made to
repel the. presumption of payment, 20 years not having elapsed since the last indorse-
ment in the defendant's own hand-writing. The bond remaining uncancelled in the
hands of the obligee or his personal representative, it must be taken to be unsatis-
fied ; and these indorsements of part payment were contrary to the interest of the
party making them.
Lord Ellenborough.—I think you must prove that these indorsements were on
the bond at, or recently after, the times when they bear date, before you are entitled
to read them. Although it may seem at first sight against [323] the interest of the
obligee to admit part payment, he may thereby in many cases set up the bond for
the residue of the sum secured. If such indorsements were receivable whensoever
they may have been written, this would be allowing the obligee to manufacture
evidence for himself to contradict the fact of payment. I have been at a loss to see
the principle on which these receipts, in the hand-writing of the creditor, have some-
times been admitted as evidence against the debtor ; and I am of opinion they cannot
be properly admitted, unless they are proved to have been written at a time wThen
the effect of them was clearly in contradiction to the writer's interest.
The plaintiff submitted to be nonsuited.*
Topping and Clarke for the plaintiff.
Garrow and Espinasse for the defendant.
[Attornies, AVinchley and Warry.]

Geo. I I . c. 36, s. 13, he was entitled to recover his wages from his leaving Gibraltar
to the period of his being impressed. I t is thereby enacted " t h a t nothing in that
Act contained shall extend, or be construed to extend, to debar any seaman or mariner
belonging to any merchant ship or vessel, from entering or being entered into the
service of his Majesty, his heirs, &c. on board of any of his or their ships or vessels ;
nor shall such seaman or mariner for such entry forfeit the wages due to him during
the term of his service in such merchant ship or vessel." And even before the
passing of that statute, it was held by Holt, C. J. (Wiggins v. Iriglelon, 2 Ld. Raym.
1211) that an impressed seaman is entitled to his wages pro tarda. I t followed, that
the plaintiff was entitled to payment at the time when he left the ship, and therefore
that he could not be affected by the subsequent casualties of the voyage.—But
Lord Ellenborough held, that the plaintiff was not placed in a better situation
than the other seamen ; and was not entitled to any apportionment of wages for
his service during a voyage which had not been completed.
* In Searle v. Lord Barrington, 2 Stra. 826 ; 2 Ld. Baym. 1370, which was an action
brought in 1728 on a bond dated 24th June 1697, to rebut the presumption of pay-
ment, indorsements of the receipt of interest in the obligee's own hand, dated in 1699
and 1707, were admitted to be read in evidence ; and a bill of exceptions being
 56

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 57

ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD

CaseAnalysis | [1972] 2 MLJ 134

ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD [1972] 2 MLJ 134
Malayan Law Journal Reports · 13 pages

OCJ KUCHING
BTH LEE J
CIVIL SUIT NO K 34 OF 1968
12 November 1971
Case Summary
Banking — Contract — Loan by a bank — Charge on land — Whether borrower had assented or acquiesced
to charging of compound interest — Whether there was agreement for partial releases of land — Estoppel
by conduct — Accounts

The plaintiffs had been granted a loan in order to start a housing enterprise. They executed a charge for the sum of
$110,000 in favour of the defendant bank at a monthly interest of 9.6% per annum, giving by way of security a
charge on certain lands belonging to them. Subsequently they executed another charge upon security of the land
for the sum of $440,000 at the interest set out in the charge. They claimed a declaration that they were entitled to
have released from the said charges by the defendant the lots of land under the said charges upon payment of
$8,000 for each lot, a further declaration that the rate of interest chargeable by the defendant should be 9.6% per
annum and calculated at monthly rests and an account of the interest overcharged by the defendant.

The defendant bank alleged that the plaintiffs had agreed to pay or acquiesced in the payment of compound
interest. The defendant also denied any agreement for partial releases of the land, and contended that even if there
was such an agreement, it was unenforceable for lack of consideration.
Held:

(1) the plaintiffs had never agreed to or acquiesced in the payment of compound interest and therefore the
defendant bank was not entitled to charge such compound interest;
(2) although there was no consideration for the agreement for partial releases of the land, the promise of the
defendant to give such partial releases had in fact been acted upon by the plaintiffs and therefore was
binding on the defendant;
(3) in the circumstances there must be an inquiry to determine the amount of interest overcharged by the
defendant bank.

Cases referred to

Majumder v Attorney-General of Sarawak [1969] 1 MLJ 132 at p 134

Moore & Ors Assignees of Sheath & Ors v Voughton (1816) 1 Start 487; 171 ER 538

Dawes v Pinner (1801) 2 Camp 480

Re Williams (1869) IR 3 Eq 346

Eaton v Bell (1821) 5 B & Ald 34; 106 ER 1166

Williamson v Williamson (1869) LR 7 Eq 542; 20 LT 389

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 Page 2 of 24 58
ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

Spencer v Wakefield (1887) 4 TLR 194

Ferguson v Fyffe (1841) 8 Cl & Fin 121 140 8 ER 49

Overseas Chinese Banking Corporation v Tan Cheng Hoe [1967] 1 MLJ 98

Mahomed Salleh v Nacodah Merican (1889) 4 Ky 463

Brooks & Co v Blackburn Benefit Society (1884) 9 App Cas 857 HL

Parkinson v Wakefield & Co (1889) 5 TLR 646 CA

Currie v Misa (1875) LR 10 Ex 153 at p 162

Stilk v Myrick (1809) 170 ER 1168

Vanbergen v St Edmund's Properties Ltd [1933] All ER 488

Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130

Combe v Combe [1951] 1 All ER 767 at p 770

Robertson v Minister of Pensions [1949] 1 KB 227

Kepitigalla Rubber Estate Ltd v National Bank of India Ltd [1909] 2 KB 1011 at p 1028

Murugesam Pillai v Gnana Sambandha AIR 1917 PC 6 at p 8

Rameshwar Singh v Bajit Lal Pathak & Ors AIR 1929 PC 95 at p 99

CIVIL SUIT

Patrick Tan for the plaintiffs.

TO Thomas for the defendant.

BTH LEE J
To appreciate the points canvassed before the court a few facts need be mentioned before I come to the pleadings
which are somewhat elaborate.

Sometime about May, 1957, Ong Tiaw Kok, the first plaintiff and his brother, Ong Tiaw Sian, the second plaintiff in
this suit applied to the defendant, Bian Chiang Bank Ltd., Kuching, (hereinafter called "the bank") for a loan in order
to start a housing enterprise, comprising six shophouses and 97 terrace houses.

The plaintiffs executed a charge for the sum of $110,000 in favour of the defendant bank at a monthly interest of
9.6% per annum, giving by way of security certain lands belonging to plaintiffs.

Upon the charge, the plaintiffs were allowed to overdraw.

The plaintiffs continued the account in this way until August, 1967, when they executed another charge upon
security of land for the sum of $440,000 at an interest set out in that charge.

The second plaintiff, Ong Tiaw Sian, was at all material times a sleeping partner and has given his brother, the first
plaintiff full power and authority to manage their joint business. [*135]

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

It is also useful to note that the parties are related. The first plaintiff is the uncle of the director of the bank, Dato
Wee Hood Teck (DW2) who is the nephew. The first plaintiff is also the brother-in-law of Harry Tnay (DW1) the
manager and secretary of the bank having married the first plaintiff's niece. Finally Dato Wee and Harry Tnay
(DW1) are brothers-in-law by marriage.

[The learned judge set out the pleadings and then continued:]

The substance of the plaintiff's evidence is that he bought over the estate of his father with the money his brother-
in-law, Dato Wee Kheng Chiang (the father of Dato Wee Hood Teck – DW2) lent him from the bank. He charged
two pieces of land i.e. Lot 175 and Lot 180 for the sum of $110,000 (Exhibit P3(1)) with interest at the rate of 9.6%
per annum.

Whereupon he started an account with the bank called the Ong Tiaw Kok Account (referred to hereinafter as
"Account No. 1") on 25th May, 1957.

Subsequently another account called the Ong Construction Company Account (referred to hereinafter as "Account
No. 2") began on 31st October, 1963.

As will be seen later the facts are of some importance. I will set them out in some detail.

The plaintiff alleged that he had discussions with Dato Wee Hood Teck (DW2) (to whom I shall henceforth refer as
"Dato Wee") who agreed to help and support him in financing his housing estate. His plan was to build 103 houses,
i.e. 6 shophouses and 97 terrace houses. The amount needed was about 2—3 million dollars.

He drew from Account No. 1 to pay towards the cost of sub-division of the land, and to clear the site and for filling.

Until September 1966 when Account No. 1 was closed he was not informed of any change of the rate of interest.
Nor has he agreed to any higher rate of interest.

Sometime in June 1966 he was asked by Harry Tnay to close his Account No. 1 and transfer the balance to
Account No. 2. Accordingly, he drew a cheque for the sum of $167,033.60 on 30th September 1966 to clear the
debt in respect of Account No. 1.

The amount of $167,033.60 was worked out by Harry Tnay.

The plaintiff stated that he was led to the impression that the sum of $167,033.60 included the sum of $110,000.

He had not received any statements of account from the bank as to the balance owing by him on 30th September,
1966. Nor did he receive the statements of account for periods from 1st July, 1957 to 30th June, 1960; 1st January
1961 to 31st May, 1963 and the month of February, 1964.

He was surprised to receive sometime before October, 1963, a demand for the sum of $105,000 from the bank in
respect of the charge which he thought he had already settled.

Sometime in 1966 he executed another charge for $440,000 at the request of Harry Tnay on the instructions of
Dato Wee. This charge was not registered because the lot numbers did not tally with the numbers given by the
Land Office.

When Account No. 2 was opened, the first charge had not been discharged, the land titles in respect of the charged
lands were still with the bank.

The two lots, i.e. Lot 175 and Lot 180, were subdivided into several lots, the titles of which were with the bank until
they were partially released or the charge completely discharged.

He made drawings on Account No. 2 but he could not pay into the account until he had received the moneys from
Borneo Housing Company which were proceeds derived from houses sold to purchasers who had obtained loans
from Borneo Housing Company.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

Up to 1968 when the writ of summons was issued he had completed a little more than 30 houses, and had
arranged to sell the completed houses.

Although the houses were sold, he could not execute the necessary transfers because the title deeds were with the
bank.

He consulted Dato Wee who agreed to release the titles on payment of $2,000 to $3,000 for each lot.

The payments were made for partial releases.

After the execution of the second charge he paid into the bank $8,000 for one lot partially discharged. Eight lots
were thereupon released.

He said an arrangement was come to between himself, Harry Tnay and Dato Wee sometime in March, 1967. He
was told he cannot draw any more money from the bank. For the discharge of each lot he had to pay $8,000.

Had he paid more than $8,000 in the bank, he was allowed to use the balance after deducting $8,000.

He applied for further releases, but they were refused by the bank. Dato Wee wanted payment of the whole loan of
$554,260.95 made up of $105,000 and $449,260.95 whereupon he instructed his solicitors to write to the bank. The
letter reads as follows:
"SY/223/67 4th December, 1967.

Messrs. Bian Chiang Bank Ltd.

2 & 3, Main Bazaar,

Kuching.

Dear Sirs,

Re:Charge No. L.1113/57

Charge No. L.3229/67

by Ong Tiaw Kok & Ong Tiaw Sian

Further to our letter of 30th ultimo, we are informed by Mr. Ong Tiaw Kok that it was agreed between you and them that on
tender of $8,000 for any lot you would release the lot from the charges. Considering the number of lots which have been
mutated from the original parcel of land the Charges would be secured.

There are 69 lots of the land still remain under the Charges and there are 21 lots which had been sold and payments
are [*136]
forthcoming if you will release them from the Charges. We give you below the particulars:–

Lot Payment to be received From Whom Total

1228 $10,1000.- Purchaser

1229 9,600.- Purchaser

1230 28,000.- Purchaser

1231 13,640.- Purchaser

1232 16,800.- Purchaser $ 78,040-

1001 16,000.- Purchaser

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

Lot Payment to be received From Whom Total

1011 6,000. Purchaser

1012 12,665. Purchaser

1018 5,000.- Purchaser $ 39,665.-

1013 15,000.- BDCL

1014 15,000.- BDCL

1016 16,800.- BDCL

1017 15,000.- BDCL

1020 23,500.- BDCL

1035 15,000.- BDCL

1241 15,000.- BDCL

1240 17,000.- BDCL

1242 23,500.- BDCL

1245 12,000.- BDCL

1246 10,000.- BDCL

1247 12,000.- BDCL $189,800.-

$307,505.-

Enquiries have been received for purchase of the other remaining lots and no doubt the Chargors will be able to pay the
amount of debt which may be found to be owing to you.

We understand that the development project was launched with assurance of your support and so far it has worked to the
benefit of both parties. Our clients would not have embarked on the development scheme if you had not given them the
assurance and support. Our clients are grateful to you for the support but would appeal to you to adhere to your agreement
of partial releases of individual lots.

If necessary, we will undertake to collect all the payments stated above as they come in, providing that you will execute the
partial discharge in respect of any of them for which (by notice to you) payment will be made, and pay over the same to
you.

We hope that this proposal is acceptable to you.

Yours faithfully,

Sgd: Yong & Co."

The bank replied refusing to release the lands requested.

Thereafter the bank instituted proceedings by way of originating summons.

On 26 September 1967 the plaintiff received a letter of demand from the bank.

It was not until then that he checked his bank statements with the help of an accountant and he found the interest
had been over-charged.

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Messrs. Aslam Wong Salleh & Co. have worked out the interest for nearly ten years. The interest varied from 9.6%
to 17%.

Towards the end of 1967 the interest calculated by the bank and payable each month come to about $5,000.

Efforts were made to settle the account, and he sought the assistance of other banks.

He disputed the rate of interest as charged and requested his solicitors to write to the bank accordingly. (See
Exhibits E.10 and E.11).

The case came on for hearing on 24th June, 1968. He was however willing to settle the amount which he did so
without prejudice.

The figure worked out and given by the bank was $592,358.23. Accordingly, a cheque for that amount was paid to
the counsel for the bank The discharge having been executed he received back all his titles relating to Ong
Construction.

He agreed in cross-examination that he received regular statements of account for Ong Construction Account No. 2
from 1963 October to 1967 December (except for February, 1967).

He discovered that interest was over-charged when he received the summons. He did not take up the matter of
interest at the hearing of originating summons, because he assumed the interest was correct at 9.6%.

Although he had a look at the bank statement received he did not know the rate of interest charged. He agreed that
the account was always overdrawn except for one day.

This was owing to the fact that he lacked funds and depended on the assistance of Dato Wee.

He had received statements of accounts for Account No. 1 for 47 months, but had not received the statements of
accounts for 66 months in respect of the same account. He admitted he saw the figures "interest" inscribed in
Chinese in the accounts but believed the interest is as stated in the memorandum of charge.

He was asked by Dato Wee to pay $167,033.60 to close No. 1 Account in September, 1966, but he did not know
what the sum represented.

He believed Harry Tnay, when the latter showed him the statement showing the balance.

He denied he knew all along that the interest on clean advances i.e. overdrafts was 1.2% per month without
security, nor did Harry Tnay inform him about it.

He had mentioned that he required 2—3 millions for his project but he did not require that much to start with. The
amount was not given in a lump sum. The sums given depended on the progress of the work done.

It was true that when Account No. 1 was closed he did not protest about the interest.

He also agreed that the Account No. 2 was overdrawn in the sum of $468,189.96 on 31st December 1967.

At the close of September, 1966, he owed the bank on the charge $110,000 and $536,479.52 on Account No. 2.

No further drawings were made on the account because Dato Wee stopped him from drawing any more money.

He denied that Dato Wee said it was a large unsecured debt. He said he must obtain Dato Wee's permission. It was
at this stage that he charged his land for $440,000. [*137]

This was done in order to enhance the value of land because he had dumped money into the land. I will quote what
was said in cross-examination.

Q. Not to provide enhancement but to provide security for the overdraft.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

A. It was his proposal.

Q. Bank not concerned with enhancement but to secure the unsecured debt.

A. Land is worth that much.

According to him land values were rising from $17,000 in 1957 to $100,000 per acre in 1966, and the abortive
charge was executed in September, 1966 for $440,000.

In 1965 the first building was completed. $20,000 received from Borneo Housing was credited to Account No. 2
when 8 lots were sold on hire-purchase.

Whenever releases were made the sums were credited into the account in order to keep down the overdraft. This
practice continued in 1965 and 1966.

He disagreed with the three conditions stipulated by Dato Wee. They were to pay the bank $50,000 before 19th
November, 1966; to pay $77,300 due from Borneo Housing Development; and to sell certain lands in plaintiff's own
name and to pay in the proceeds.

As far as he knew Dato Wee was the managing director in 1960 and 1961.

On 30th December, 1966 he paid $30,000 in two sums.

He also said that he received $77,300 from Borneo Housing and he paid the sum into the bank, but not in a lump
sum.

The sum of $307,505 mentioned in his letter dated 5th December, 1967, was not paid into the bank.

In re-examination he said $307,505 was not paid into the bank because the bank refused to release the partial
discharge.

The bank was not agreeable to the proposal mentioned in the letter.

He had paid the sum of $77,300.00 as shown in Exhibit E.2.

They were $10,000 paid on 17th August, 1966; $18,000 each paid on 14th September, 1966, and 29th October,
1966; $9,000 on 8th November, 1966; $15,000 on 19th November, 1966; $23,000 on 9th December, 1966; $1,000
on 11th December, 1966 and $20,000 and $10,000 on 30th December, 1966.

On 30th September, 1966, according to the statement he owed the bank $167,033.60.

He disputed that on 14th September, 1966, he was owing $364,875.38 nor was he owing the amount of
$531,908.98 on 30th September, 1966.

He paid into the bank the purchase money he received from the sale of houses.

As the full accounts have not been received from the bank at the time originating summons was heard, hearing was
stayed at his request.

He trusted the bank and he did not ask anyone to check the accounts before the two letters of demand were
received from the defendant.

Salleh bin Yusof, a chartered and certified accountant (PW2) said he checked some of the figures in respect of Ong
Tiaw Kok (Account No. 1) and Ong Construction Company (Account No. 2).

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

On the basis of the statements supplied he reconstructed such statements ignoring all interest elements and
substituting thereon interest calculated at the rate of 9.6% on daily balance and on monthly rests.

He noticed that in respect of Account No. 1 the interest charged is in excess of 9.6%.

For the month of May, 1957 the rate was 9.7% per annum.

For January 1958 the interest was 9.1%; March, 1958, it was 9.8%; September 1958 it was 9.9%; December 1958
it was 10%; March 1960 it was 10.3%; March 1962 it was 10.9%; January 1963 it was 11.5%.

He worked out the figures on the basis of actual daily balances as shown in the bank statement supplied to him.

The workings were on monthly rests i.e. the interest at the end of the month is compounded. In other words, the
interest added at the end of the month forms part of the balance upon which further interest will be charged.

If the interest is calculated on basis of simple interest it will be less.

He added that there was nothing wrong if the arrangement between bank and customer is by compound.

On the assumption that $110,000 was a fixed loan, interest charged by the bank was 1.56% per mensem in April
1959.

In April 1962 interest was at the rate of 1.2% per mensem.

In April 1963 it was 1.2% per mensem.

In April 1965 it was 1.26% per mensem.

In November 1965 the rate of interest was 1.25% per mensem.

And in December 1965 interest was at the rate of 1.3% per mensem.

The assumption was that interest of fixed loan of $110,000 at 9.6% per annum is $880 per mensem and that
balance of interest charged by the bank monthly i.e. after deducting the $880 per mensem represents the interest in
the current overdraft balances.

In respect of Account No. 2 he checked only one calculation on this for the month of November 1966 on the same
assumption as in No. 1 Account.

He found that the interest charged by the bank was more than the rate of 1.2% per month. [*138]

He also found that the interest of $880 per mensem was debited against Account No. 1.

Before September, 1966, when $167,033.60 was paid into Account No. 1 the interest on $110,000 at 9.6% per
annum was debited into this account although the principal was not shown in Account No. 1.

The rate charged by the bank in respect of Account No. 2 was 14.6% per annum. This was calculated on the actual
interest charged by the bank in relation to the outstanding balances in that account month by month.

In the majority of months it was 14.6%.

For the month of June, 1966, it was 15.1 % per annum.

After the month of September, 1966, to month of August, 1967, the rate was 16% and above.

He assumed that the interest on fixed loan of $110,000 was debited to Account No. 2 as at October, 1966.

After September, 1966, assuming interest on $110,000 was not charged to Account No. 2 the rate of interest was

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

calculated at 12% per annum for September, October and November, 1967, and 13% per annum for December,
1967.

Assuming that interest on $110,000 was charged to Account No. 2 the interest rate was 9.9% in September; 9.6%
in October; 9.9% in November and 10.5% in December, 1967.

In April 1967 the rate of interest was 17% per annum and 13.9% on the other assumption.

The rates calculated are in excess of 9.6%.

The overdraft outstanding including interest up to 30th September 1966, was repaid on 30th September 1966 in the
sum of $167,033.60.

The interest rate for November 1967 on assumption that the fixed loan of $110,000 is charged at 9.6% is equivalent
to $880 per mensem.

The rate of interest on the current overdraft is at 0.8142% per mensem which is approximately 9.8% per annum.

In cross-examination he said 9.9% interest for September 1967 was on assumption that interest charged includes
interest for fixed loan of $110,000.

12% was interest charged for overdraft assuming that interest does not include the $110,000.

Q. Take $880 from interest September, October, November and December each 1967, the interest is on average
9.6%.

A. No. The interest for month of September, 1967, was $4,612.29.

The interest on $440,000 and $97,000 at 9.6% = $4,237.15 on a 30 day month.

The interest on $13,873 (unsecured) at 1.2% = $116.48.

Basing on his calculations the interest is 1.3% for September 1967 and not 1.2%.

Interest varies according to arrangement between parties. Interest on an unsecured loan is normally different from a
secured loan. That is the usual banking practice in Malaya.

In re-examination he said the interest on $537,000 on a 30-day month basis at the rate of 9.6% per annum is
$4,237.15 for month of September.

$537,000 = $440,000 + $97,000 (Balance of $110,000).

The interest on $537,000 at 9.6% for 30 days is $4,237.15.

The figure for 31 days is $4,378.39.

After paying the interest $4,237.15 the interest on the balance is $375.54. The balance is $28,260.

The interest charged for the month of September 1967 is 1.3%.

The rate charged for October is 1.4%; November 2% per mensem and December 3.2% per mensem.

These are all on overdrafts on per month basis.

The manager of Borneo Housing, Wong Syn Leong (PW3) said that Ong Tiaw Kok Construction is an approved
estate under the Loan Housing Scheme.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

Loans were released or paid out by instalment according to the progress of construction work.

On receipt of registered mortgage documents, releases were made according to the stage of construction of the
building.

Before 5th December, 1967, seven cases were approved. The amount involved was $125,300.00.

Soon after December, 1967, five further cases were approved. The amount involved was $65,000.00.

The loans would be released as soon as the charges are transferred and registered.

The loans finally given were in respect of the 12 cases

Evidence was given by Harry Tnay (DW1), Secretary to the bank. He said he is now director and secretary of the
bank.

He said the plaintiff signed a charge for $110,000 in 1957 at the rate of 9.6% per annum (Exhibit 3(1)). It is 0.08%
per month.

The plaintiff opened an account in his own name in the sum of $500. The bank issued a cheque for $110,000 to the
plaintiff. He paid the sum into the bank and on the same day drew a cheque for $110,000 on the same account.

The arrangement was one by which interest due every month should be debited to his personal account. The
account was thus kept on as arranged in the course of business with withdrawals and payings in. This account
became an overdraft.

The interest charged on personal account was 1.2%. He alleged this was made clear to the plaintiff. The account
being unsecured carries a higher rate of interest. [*139]

The bank draws a distinction between clean loans and secured loans. In the case of clean loans no security is
furnished.

9.6% was charged as a result of plaintiff's request.

This account was closed subsequently by drawing a cheque on Account No. 2.

Account No. 2 was opened in 1963 and soon this account grew into a large overdraft.

The interest charged on the overdraft is 1.2% per month.

The plaintiff was aware of this rate of interest. The communication was verbal.

The account shows a debit balance of $321,281.71 in December 1965 (see Exhibit P2).

On 31st December, 1966 there was a debit balance of $482,462.83.

On 30th September, 1966, a cheque was drawn in the sum of $167,033.60, to clear up the Account No. 1.

The position on 30th September, 1966, was such that there was a debit balance of $536,479.52. This was in
addition to the second loan of $110,000.

Piece-meal releases were made by the bank when some buildings were completed and payments were made into
this account.

The arrangement was that the sums realised from the releases be paid into Account No. 2 to keep down the
unsecured debt.

There was no agreement, but this was merely an accommodation to assist the plaintiff.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

At that time there was still a charge hanging over the whole advance i.e. unsecured sum.

The bank wanted a charge to cover clean advances. For some reason the charge was delayed and not registered
in the Land Office (see Exhibit P4).

There was no agreement for partial releases upon payment of $8,000.

A meeting took place in early September, 1966 (not in March, 1966) in order to regularise the account. Bank
Negara was unhappy. It was agreed that a second charge for $440,000 be executed. In addition there were three
conditions to keep down the account, which were recorded (See Exhibit D12).

The plaintiff did not keep the conditions. The sum of $77,000 was not received on the target date i.e. November,
1966, although the bank received the sum in instalments subsequently.

According to law, banks cannot charge more than 15% per annum.

Although the note mentioned $550,000 the bank was never prepared to accept $440,000 on the second charge.

He agreed that the land could be worth $440,000.

Account No. 1 was closed on September 30, 1966.

Since the meeting various payments were made into the account but they did not amount to $50,000.

Lot 1002 was released on 14th October 1966. Lots 1008 and 1005 were also released on 14th October 1966.
These were the only 3 lots released before November, 1966.

Eight partial releases were made on 5th May, 1967, 21st September, 1967 and 24th October, 1967.

Total sum of $64,000 was paid on 29th August, 1967, for the release of eight lots.

In August, 1967, the second charge was registered (Exhibit 3(2)), for $440,000 at 9.6% with monthly rests.

At this time Account No. 2 owed $468,260.95.

The second charge was executed for $440,000 because the bank expected the 3 conditions to be fulfilled.

On 31st August, 1967, the interest charged was 1.2% per month.

The interest was calculated to include interests on secured loan of $110,000 at 9.6% per annum and $468,260.95
at 1.2% per month.

This gives the combined figure of $6,677.28.

The rate of interest is 9.6% per annum of $110,000 minus $13,000 = $97,000.

The same interest is charged for $440,000.

Anything owing above the $440,000 and $97,000 would be treated as unsecured and charged at 1.2%.

$110,000 was a different fixed loan account.

Interest on $110,000 was never paid physically and it was debited to Account No. 1 and carried interest at 1.2% per
month.

I now turn to the evidence of Dato Wee Hood Teck (DW2).

His evidence was to the effect that he was managing director of Bian Chiang Bank in July, 1962.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

He was not in a position to give any assurance to the plaintiff that he would finance his housing estate since he was
not the managing director in 1961.

The sum of $110,000 at the rate of 9.6% was arranged through Dato Ong Kee Hui who was the manager then and
approved by his father Dato Wee Kheng Chiang.

There was some discussion in September 1966 between himself, the plaintiff and Harry Tnay about the release of
lots subject to three conditions. The conditions were not fulfilled.

At that time the whole overdraft amounted to over $660,000 and the secured amount was only $110,000. He had
released certain lots in order to accommodate the plaintiff.

Originally the releases were made upon payment of $2,000 and $3,000 but when the overdrafts grew larger the
bank asked for $8,000.

That is the sum of evidence adduced by both parties.

It is to be observed that there are four prayers to the statement of claim. At the hearing the first two prayers were
abandoned by counsel for the plaintiffs as it was suggested by counsel for defendant and [*140]
indeed conceded by counsel for plaintiffs that the effort would be more than an academic exercise. (See Majumder
v Attorney-General of Sarawak [1969] 1 MLJ 132 at p 134 at page 134 and S. A. de Smith's Judicial Review of
Administrative Action (1959) Edition page 394).

In the state of pleadings the remaining points that arise for consideration of the court fall into four distinct questions
namely:
(a) Whether the plaintiff agreed to pay interest on the loans at the rate more than 9.6% per annum and to pay
compound interest?

(b) Whether there was an unsecured account? If so, whether the plaintiff has agreed to pay interest at 1.2% per month
or more on such unsecured account?

(c) Whether there was any previous agreement for partial releases upon payment of $2,000 or $3,000?

(d) Whether there was any agreement reached between the parties for the partial releases of titles from the first
charge (Exhibit 3(1)) upon payment of $8,000 for each lot.

I will deal with the first and second of these questions and confine myself to stating as briefly as I can the matters
which appear to me to be relevant to the points argued before the court.

It was contended by the plaintiffs that they borrowed the sum of $110,000 to buy up the other shares of the estate.
As security for the loan the plaintiffs charged to the bank the lands comprised in the estate i.e. Lots 175 and 180.

The first clause of the first charge (Exhibit 3(1)) is expressed as follows:–
"… do hereby jointly and severally promise the (sic) repay the same on demand and until payment to pay interest thereon
monthly at the rate of 9.6 per centum per annum."
The second clause reads as follows:–
"As security for the above sum and interest we hereby charge to the chargee all our right title share and interest in all those
two parcels of land described in the Schedule hereto."
Then follows the Schedule.

It was submitted on behalf of the plaintiffs that the defendant is only entitled to charge simple interest on the loan of
$110,000 for the period the sum or the balance thereof remained owing.

It appears that interest was charged on the arrears of interest to Account No. 1 and Account No. 2 up to August,
1967, when the second charge (Exhibit 3(2)) was executed.

It was also contended that there was no provision for the payment of compound interest in the first charge as no
mention of "rests" was made in that charge.

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In support of his contention, counsel for the plaintiffs cited two cases Moore and Others, Assignees of Sheath and
Others v Voughton (1816) 1 Start 487; 171 ER 538 and Dawes v Pinner (1801) 2 Camp 480 also reported at page
297 of English and Empire Digest Vol. III paragraphs 920 and 922 respectively.

In Moore and Others, Assignees of Sheath and Others v. Voughton action was brought to recover the interest upon
monies advanced to the defendant by the bank. It was there held that it was not sufficient to show that it was the
general custom of the house to charge interest calculated upon half-yearly rests, without also showing that
defendant knew that such was the practice such knowledge of the customer must be proved by the bank. The bank
were therefore only given a verdict for the principal sums advanced with interest calculated upon each sum from the
time of the advance but without rests.

In Dawes v. Pinner, the bankers sued to recover an overdraft. In making up the account the bankers had struck a
balance at stated times and charged interest upon sums found to be due. It was held that the bankers could only
recover simple interest.

It is convenient to observe that Forms are prescribed under NLCe" print="no">NLCe.s146" pinpointlabel="section"
pinpointnum="146">NLCe.s146" pinpointlabel="section" pinpointnum="146">section 146 of the Land Code for the
alteration of terms of the charge. They are Form I – which is a memorandum of increase or reduction of amount
owing under charge, and Form J – which is a memorandum of increase or reduction in rate of interest.

There is nothing in the evidence to show that there was a subsequent agreement to vary the interest to one at the
rate of 1.2% per month as alleged by the defendant.

Even assuming that there was an oral agreement, it cannot affect the terms of the first charge, by virtue of the
provisions of sections 93 and 94 of the Sarawak Evidence Ordinance (Cap. 54), which exclude all oral evidence
contradicting, varying adding to or subtracting from the terms of the charge.

Any variation of the terms of the first charge must be made in the manner prescribed in the Land Code.

It is to be observed that such a Form is also prescribed under section 146 of the Land Code for the alteration of the
terms of the charge.

I refer to Form J which is a memorandum of increase or reduction in rate of interest.

Section 143 of the Sarawak Land Code (Cap. 81) sets out the provisions in regard to forms of charges which are
prescribed in the First Schedule.

It may be here observed that all three charges were executed substantially in the Form H(1) as prescribed. They
are:
(a) First charge executed on 24th May, 1957 in respect of the sum of $110,000 (Exhibit 3(1)).

(b) Second charge executed on 29th September, 1966, in respect of the sum of $440,000 (Exhibit 4).

(c) Third charge executed on 25th August, 1967, in respect of the sum of $440,000 (Exhibit 3(2)).

At this stage it is desirable to point out that the second charge executed on 29th September, 1966 (Exhibit 4) was
for the same sum of $440,000 and follows the same provisions as the third charge (Exhibit 3(2)), except that the
number of parcels of land in this case is 88 and not 77 as in the third charge.

This second charge was rejected by the Land Office when it was presented for registration by reason of the errors
in the lot numbers of some of the parcels of land mentioned therein.

It is convenient to set out the material parts of the first and third charges, which are as follows: [*141]

The first charge is as follows:

"We, Ong Tiaw Kok (NRIC.S. 014525) and Ong Tiaw Sian (NRIC.S. 444644) (both Hokkien) of 2nd Mile, Rock Road,
Kuching, Sarawak, being the registered co-proprietors holding one half undivided share each of the property hereinafter
described IN CONSIDERATION OF the Bian Chiang Bank Limited, … having advanced to us the sum of Dollars one

See Yi Vonne
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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

hundred and ten thousand only ($110,000) the receipt of which sum we hereby acknowledge do hereby jointly and
severally promise the (sic) repay the same on demand and until payment to pay interest thereon monthly at the rate of 9.6
per centum per annum.

As security for the above sum and interest we hereby charge to the chargee all our right title share and interest in all those
two parcels of land described in the Schedule hereto."
Then follows the Schedule. The third charge is as follows:
"We, ONG TIAW KOK alias ONG SAY KOW (NRIC.S. 014525) replaced by S.I.C. 598899) and ONG TIAW SIAN (NRIC.S.
444644) both of 2 Mile, Rock Road, Kuching, Sarawak, (hereinafter called the chargors) being the registered co- proprietors
holding one-half undivided share each of the land hereinafter described in consideration of the BIAN CHIANG BANK
LIMITED, … granting or continuing to grant accommodation to ONG CONSTRUCTION COMPANY, of 2 Mile, Rock Road,
Kuching, Sarawak, … by way of a fluctuating overdraft or otherwise to the extent of Dollars Four hundred and forty
thousand only ($440,000.00) DO HEREBY JOINTLY AND SEVERALLY promise to repay the same on demand or to repay
the balance which at the date of such demand shall be owing to the chargee … including interest at the rate of Nine point
six per centum (9.6%) per annum calculated on daily balances with monthly rests, commission and other customary
banking charges and the costs of the preparation execution, stamping and registration of this charge, and also to pay
interest at the rate of Nine point six per centum (9.6%) per annum on such balance from the date of such demand until
payment.

As security for the above sum and interest or for any moneys that may become payable hereunder we hereby charge to the
chargee the following parcels of land, viz:– All our undivided right title share and interest in all those 77 parcels of land
together with all the buildings and appurtenances thereon situate at 2 Mile, Rock Road, Kuching, Sarawak, containing an
area of…."
Then follows the descriptions of those 77 parcels of land. (Underlining is mine).

For our purpose it will be relevant to refer to two charges only, namely (a) and (c) above, which for convenience will
be called "the first charge" and "second charge" respectively.

The defendant contended (by paragraph 11 of the defence) that he was entitled to charge and had charged 1.2%
per month interest on clean advances (i.e. unsecured advances).

It was the plaintiff's contention that there has been no clean or unsecured advances or overdraft. The original loan
of $110,000 was secured by the first charge (Exhibit 3(1)).

The interest on this amount not having been paid by the plaintiff was charged to Account No. 1 and subsequently
merged with Account No. 2 sometime in September, 1966.

To charge interest in this manner would mean charging at compound interest which was not provided for.

Notwithstanding they were not secured by the first charge (Exhibit 3(1)), these drawings together with the interest
charged by the bank (assuming they were entitled to do so) were secured by the two parcels of land (Lots 175 and
180) which have been sub-divided and built on. Consequently the land values had appreciated to a considerable
extent, all drawings from the bank having been expended in making preparations on the said lands for building on
the said lands.

Action was accordingly taken to create another charge in the sum of $440,000 at an interest of 9.6% per annum
with monthly rests over the same parcel of lands which by then had been subdivided into 88 lots.

This charge was rejected by the Land Office for the reasons stated in the evidence of the plaintiff.

Subsequently in August, 1967, a second charge was executed (Exhibit 3(2)), the lands being subdivided into 77
parcels.

All the titles were held by the bank as security at all material times until the accounts were paid off on 25th June,
1968, without prejudice to the case (except those titles which were released from the first charge for an agreed
sum).

It necessarily follows that at no stage were the plaintiffs' accounts unsecured.

See Yi Vonne
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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

It is further contended that even before 1966 or 1967 the securities were already in the hands of the bank, pledged
to the bank as security for all advances.

Counsel for the plaintiffs referred to a case Re Williams (1869) IR 3 Eq 346, where it was decided that the deposit
of all the titles with the bank was to cover all overdraft and such overdue monies outstanding from the plaintiff's
account.

A pledge by the plaintiffs of their titles to secure their overdraft creates an equitable charge over those properties
under section 119(4) of the Sarawak Land Code.

It is said by counsel for the plaintiffs that at the least the value of the land was about $550,000 in or about
September, 1966. It is to be observed that Harry Tnay's evidence stated that "he agreed the land could be worth
$440,000."

The plaintiffs' overdraft was secured at least to the value of $550,000 in September, 1968, notwithstanding there
was no legal charge for that extent.

In September 1966 the two accounts merged. Now, assuming the bank was entitled to charge interest as it did it
only amounted to $531,908.98. Taking into account the fixed loan of $110,000 the total is $641,908.98. This is the
amount as at 30th September 1966 when the second charge (Exhibit 4) was created.

In the state of things it seems the clean overdraft or advances will only amount to $91,908.98 ($641,908.98 less
$550,000, the value of the lands then).

The defendant had on the other hand treated the sum of $531,908.98 as clean overdraft and charged a high rate of
interest at 1.2% per mensem and in some cases in excess of that rate.

It is contended that the normal practice of banks is to have a signed undertaking or "letter" by the borrower when
clean advances are given and a rate of interest agreed upon. [*142]

No such document has been produced by the defendant showing that the first plaintiff has agreed to pay 1.2% and
more per month interest on any clean advances given by the bank.

Again, assuming they were clean advances as alleged, the question arises – did the plaintiff agree to pay interest at
the rate fluctuating between 1.2% per month and 3.2% per month?

Reference was made to three authorities, on the question of failure to raise any objections when the statement of
accounts were furnished to the plaintiff.

In the case of Eaton v Bell (1821) 5 B & Ald 34; 106 ER 1166, the bankers charged the defendants interest with
half-yearly rests in accordance with their general practice. The defendants were in the habit of taking their banking
books to the bankers to have the account made up and no objection was made by the defendants to the charges for
compound interests. It was held that the defendants, having assented to the mode of keeping accounts, it was not
unlawful.

In the case of Williamson v Williamson (1869) LR 7 Eq 542; 20 LT 389, it was held that the charge of commission
has been acquiesced in and was valid for the half year ending in that year, but acquiescence could not be inferred
for subsequent half-years.

In Spencer v Wakefield (1887) 4 TLR 194, the plaintiff in 1874 obtained an advance from the defendants, bankers,
upon security. The defendants issued a pass-book to the plaintiff, in which they made half-yearly rests and entered
charges for "interest and commission" The plaintiff from time to time paid in sums to the credit of the account, but
never drew on it. The pass-book was from time to time received by the plaintiff and on two occasions he wrote to
the defendants acknowledging the accounts to be correct. In December, 1884, the plaintiff paid the balance
appearing in the pass-book to be due to the defendants and closed the account. Two years later the plaintiff sued
the defendants to recover the sum of 95, being the aggregate amount of the commissions charged, on the ground
that commission was not chargeable on a single advance with gradual repayments. It was held that the plaintiff had
assented to the accounts and had no cause of action.

See Yi Vonne
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The question for determination here is whether there is evidence to show that the plaintiffs had assented or
acquiesced to the charging of compound interest.

The defence has contended that the capital and interest as claimed by the defendant had been paid by the plaintiffs
on 26 June, 1968, and the accounts between the parties settled. That being so it is not open to the plaintiffs to open
the settled accounts and they are estopped from doing so now.

It was contended that the plaintiffs were charged interest with periodical rests or compound interest at the rates
shown in the statements which was with the express consent of the plaintiffs.

Further the plaintiffs have acquiesced in the accounts being kept on that basis, and had received the respective
accounts regularly for many years.

No complaint in respect of non-receipt of account except for the periods mentioned was made.

The statements of account showed clearly the interests charged. If the plaintiffs had any doubts about the
statements they should have obtained clarification from the bank.

Counsel for the defendant then referred to Chitty on Contracts (Specific Contracts) 22nd Edition paragraphs 943
and 944 on the question of interest.
"943. Interest payable by agreement, course of dealing or usage. Interest may be claimed in all cases where there is a
contract for the payment of it. Such a contract may be inferred from the course of dealing between the parties; e.g., if it has
been frequently charged and paid without objection in former and similar accounts. So, if it appears to be the invariable
custom or usage in any particular trade or business to charge interest, this may amount to evidence of a contract to allow it
between parties having transactions therein. Thus interest has been held to be payable on an account stated for money
lent, as between merchants. Where a contract to repay money on a certain date provides for repayment with a certain rate
of interest up to that day, there is no implied contract that interest at the same rate is to be payable afterwards. But where
there is a contract to pay a sum of money with interest on a certain day the jury may give interest by way of damages for
the detention of the debt beyond that day."

"944. Compound interest. Compound interest is not payable upon money lent, unless there is a contract for its payment
expressed, or implied from the mode of dealing with former accounts, or from custom. By the practice of bankers, interest
upon the customer's indebtedness is periodically added to the capital sum advanced, so that, in effect, compound interest is
secured, and this practice is binding upon those who acquiesce in it. A customer is not bound or affected by the practice of
his bankers to charge interest upon interest by making rests in their accounts at stated intervals, unless it is proved that he
was aware that this was their custom. An executor or trustee may be charged with compound interest upon trust money in
his hands, if he has or ought to have received such interest."
Counsel for plaintiff submitted that in the instant case there has not been any acknowledgment of the correctness of
the account and the accounts were "settled" in June 1968 upon a "without prejudice" basis in order to save further
interest.

The first plaintiff had no idea how the interest was calculated, whether it was compound or simple interest, nor the
rate, interest was charged.

Reference was made to Fergusson v Fyffe (1841) 8 Cl & Fin 121 140 8 ER 49 and Overseas Chinese Banking
Corporation v Tan Cheng Hoe [1967] 1 MLJ 98. The cases cited held that unless the customer is proved to have
agreed or acquiesced in the charging of compound interest, knowing the custom or practice of the bank, no
compound interest can be charged.

See also Chorley on Law of Banking (5th Edition) page 145:

"Mistakes to Customer's Detriment

In the English cases so far as they go it does not appear that there is any estoppel against a customer who by returning his
passbook to his banker, whether initialled or not, represents that the items are correctly stated. Even if this amounts to a
representation, which is questionable, it is difficult to see how the banker can act upon it so as to alter his legal position."

"No Duty to Examine

See Yi Vonne
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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

An endeavour has been made to put the matter on another footing by the contention that the customer who does not
examine his pass-book and discover the errors is guilty of [*143]
negligence, and that this negligence disentitles him from claiming to have the account stated set aside, or surcharged and
falsified. But before there can be negligence in law there must be a duty to take care. There appears to be no duty on a
customer to read his pass book, so that there can hardly be a duty to exercise care in doing so when he does read it."
See also Halsbury's Laws of England Volume 2 (3rd Edition) page 229:
"Interest. By the universal custom of bankers, a banker has the right to charge simple interest at a reasonable rate on all
overdrafts. An unusual rate of interest, interest with periodical rests, or compound interest can only be justified, in the
absence of express agreement, where the customer is shown or must be taken to have acquiesced in the account being
kept on that basis. Whether such acquiescence can be assumed from the return without comment of the passbook showing
interest so charged is doubtful."
I have considered the cases cited by both counsel and it seems to me that the cases of Fergusson v. Fyffe and
Spencer v. Wakefield are important, for they recognize the system of bankers in turning interest into capital as usual
and binding on the parties who have acquiesced in it. It seems to be a question in each case whether the customer
did acquiesce in it.

Applying the principles stated in the cases to the circumstances of the present case it must therefore be concluded
that the defendant bank is not entitled to charge compound interest and in the form of interest at 1.2% per mensem
and more unless the plaintiffs acquiesce in it.

In my opinion acquiescence arises only where the plaintiff acquiesced in the interest to be charged with full
knowledge of the facts i.e. secured and unsecured loans.

On these matters therefore where there is a conflict of evidence between the first plaintiff and Harry Tnay, I accept
the first plaintiff's version in preference to that of Harry Tnay.

Taking all the circumstances of the case into consideration as well as the arguments of counsel, I see no reason to
doubt that this is clearly a case where the plaintiff honestly entertained that belief that the interest charged by the
bank was 9.6% and that the transaction between the plaintiffs and the defendant bank operated on that
understanding, and I hold and find as a fact that the plaintiffs never did acquiesce in the compound interest. I think
that there was never an agreement to pay 1.2% and more per month interest on any clean advances.

I also find as a fact that the plaintiffs drew the cheque for $167,033.60 of Account No. 2 and pay to Account No. 1 at
the request of the defendant without knowing the real reason therefor.

I turn to the third and fourth of these questions and will deal with them together, viz:–
"(c) Whether there was any previous agreement for partial releases upon payment of $2,000 or $3,000.

(d) Whether there was any agreement reached between the parties for the partial releases of titles from the first
charge (Exhibit 3(1)) upon payment of $8,000 for each lot."

The evidence of the manager of Borneo Housing seems to be relevant here.

According to the evidence of the manager of Borneo Housing (PW3), Ong Construction is an approved estate
under Loan Housing Scheme.

When mortgage documents have been registered and received by the company loans are released by instalments
according to the progress of construction work.

In so far as this construction is concerned, loans were approved before December, 1967, in seven cases,
amounting to $125,300.

Shortly after December, 1967, five further cases were approved amounting to $65,000.

Apparently this procedure was followed until it was stopped in March, 1967.

It was contended that the indorsement on the first charge clearly shows that releases were made on such
payments, namely $2,000 or $3,000.

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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

It was the plaintiff's evidence that there was originally this arrangement which would facilitate transfers of the
completed lots to various purchasers who have to obtain loans from Borneo Housing.

As explained by the manager of Borneo Housing, the charge would be done simultaneously with the transfer and
registered.

Moneys for the charge would then be released by Borneo Housing after the registration of discharge transfer and
charge in respect of any particular lot.

The moneys so released would then be paid into the plaintiffs' account with the defendant.

This procedure was followed for the many lots listed in the first charge until it was stopped in March, 1967.

It was also contended that there was an agreement reached whereby the plaintiffs pay $8,000 for the release of
further eight lots, namely Lots 1032, 1036, 1266, 1003, 1031, 1033, 1034 and 1233. The payments for these
releases appeared in the statements of account of Ong Construction.
They are:

$16,000 on 27th April, 1967;

$16,000 on 29th August, 1967;

$16,000 on 11th September, 1967;

$19,000, $5,000 being credited towards reducing the fixed loan of $110,000;

and a further $8,000 on 29th September 1967 (which was also credited towards the fixed loan account).
It was contended that the consideration being that the plaintiffs agree not to draw any further sums out of the
accounts but to pay $8,000 for each lot the plaintiffs wanted released. This consideration was given in September
1966 as the date the defendant says the meeting was alleged to have been held.

This agreement was part performed by the plaintiff as shown above i.e. the partial release of the above 8 lots upon
payment of the total sum of $64,000 and the plaintiff was willing and able to continue to fulfil such agreement. If
there was no such agreement for releases, the plaintiffs would not have been required to pay the $64,000 and the
defendant would not have given the releases. [*144]

These releases were not mere acts of grace as the defendant alleged, but made in order to induce the plaintiffs to
execute the second charge.

It was argued that these are acts of part performance consistent with the agreement.

The letter of 5th December, 1967, shows that the first plaintiff was still ready and willing to carry out his part of the
bargain, but the bank did not keep up with its bargain to allow further releases and took out originating summons for
the sale of the charged lands.

The agreement was reached sometime in March 1967 (defendant says it was in September 1966). It was
contended that in fact there was an agreement on these terms and the plaintiff has part performed the agreement
thus invoking the doctrine of part performance as the first plaintiff has fulfilled the three requisites as required in
Chitty on Contract at page 141 (21st Edition), namely:
"(1) The part performance must be by the party (plaintiff) seeking to enforce the contract;

(2) The acts of part performance relied on must be unequivocally and in their own nature referable to some such
agreement as that alleged to exist;

(3) The acts of part performance must be consistent with the agreement and with nothing else;"

Attention has also been drawn to the case of Mahomed Salleh v Nacodah Merican (1889) 4 Ky 463 :

See Yi Vonne
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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

"That was a case where the defendant on the marriage of his daughter to the plaintiff promised in writing, inter alia to 'build
and give' to the plaintiff 'a suitable house'. The defendant afterwards built a house and the court was satisfied on the
evidence he did it for the plaintiff and had let plaintiff into possession of it in pursuance of the promise. After residing there
some years, the plaintiff fell out with the defendant and quitted the house and some time after brought a suit for specific
performance by the defendant of his promise by 'building and giving' him 'a suitable house'.

It was there held that though the promise was void under the Statute of Frauds for uncertainty as to the house intended,
and the court could not say what was 'a suitable house' yet the parties had by their acts pointed out the house intended and
the letting plaintiff into possession thereof, was a part performance which took the case out of the statute…."
The three conditions which were mentioned by the defence may have been stipulated. They are, however,
conditions subsequent to the performance of the agreement.

It is within the knowledge of defendant that unless partial releases were given the plaintiffs cannot sell the lands and
cannot obtain the money to pay into the account with the defendant.

Indeed, some of the parcels mentioned in Exhibit D13 were released and the moneys paid into Account No. 2 in
November and December, 1966.

For ease of reference I set out below the contents of Exhibit D13.
* "Transferor Transferee Grant of State Land Loan (B.H.
Dept. Ltd.)
Ong Tiaw Kok and Ong Tiaw Sian Lim Tiang Leong Lot 1009 Block 10 KCLD $24,300.00

(S.P. $
2,029,00)

Ong Tiaw Kok and Ong Tiaw Sian Chee Thien Siak Lot 1002 Block 10 KCLD $13,000.00

(S.P. $
1,027.00)

Ong Tiaw Kok and Ong Tiaw Sian Chin Lim Chong Lot 1045 Block 10 KCLD $15,000.00

Ong Tiaw Kok and Ong Tiaw Sian Vong Vui Lok Lot 1005 Block 10 KCLD $15,000.00

Ong Tiaw Kok and Ong Tiaw Sian Lai Ki Siew Lot 1008 Block 10 KCLD $10,000.00

$77,300.00

Payment of the above sum is assigned to Bank from BORNEO HOUSING DEVELOPMENT LIMITED (These are the lots
pending discharge)."

It was pointed out that if the defendant had observed the terms of the agreement the plaintiffs would have saved on
interest.

The moneys mentioned in the letter of 5th December, 1967, would have been paid earlier as the loans amounting to
$125,300 have been approved by Borneo Housing before 5th December, 1967, and there were other purchasers
buying the property for cash.

Refusing to comply with the agreement and allowing of partial releases the lots could not be sold, and money which
could be obtained towards reducing the debt owing to the bank was held back.

The bank chose to withhold the partial releases from the plaintiffs and charged interest instead.

As to the securities charged to the bank it was contended that they have enhanced in value since the lands had
been developed.

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It was in evidence that land value has gone up in price from $17,000 in 1957 to $100,000 per acre in 1966. The
acreage of the land in question is 8.72 acres. It therefore more than covers the two overdrafts.

Counsel for the defendant in his argument before the court contended that even assuming that they have proved
the alleged agreement/assurance, such agreement/assurance is not sufficient in point of law to sustain the action.

The plaintiffs had pleaded that they embarked upon their development enterprise pursuant to the assurance of Dato
Wee that the defendant could give him (i.e. the first plaintiff) the finance and support.

Such general statement cannot be treated as a binding contract, by reason of the uncertainty of its terms.

There was in the first place no limit put to the liability of the defendant to advance the plaintiffs. Such an obligation
should have been expressed in precise and clear terms before any court would enforce it. [*145]

It was pointed out that at the time the alleged assurance was given the plaintiffs were already in debt to the bank to
the extent of $110,000 secured on lands by the first charge.

The bank agreed to release 8 lots and there was no general agreement as alleged in paragraph 6 of the statement
of claim.

The consideration moving from the plaintiffs in respect of the purported releases is alleged to be "upon payments of
certain sum out of the purchase price of sub-divided lots which were sold".

Again in March, 1967, in consideration of the plaintiffs not drawing any money out of Ong Construction Company
Account, the defendant stipulated that for payment of every $8,000 the defendant would release one lot named by
the plaintiff and further pleaded by plaintiffs in the further and better particulars.

It was also pleaded by the plaintiffs that Dato Wee stated that so long as the plaintiffs did not withdraw any further
sums from the Ong Construction Company Account, the defendant would release any lot nominated by the first
plaintiff upon the payment of $8,000 for each lot nominated.

The point was taken that there are thus two different considerations pleaded in respect of the two allegations of
entitlement to partial releases by the plaintiffs.

The first consideration refers to payment of sums out of the purchase price of lots sold.

The second consideration refers to the abstention of the plaintiffs from making further drawings on No. 2 Account.

It is contended that the first consideration is not legal consideration. In February 1965 the plaintiffs were indebted to
the bank in the sum of $110,000 the subject matter of the first charge. In addition Account No. 1 was opened in
1957 and became an overdraft. Overdraft including interest amounted to $167,033.60 on 30th September, 1966,
when it was paid off out of Account No. 2.

Account No. 2 was opened on 31st October, 1963 and 31st December, 1964, it was overdrawn to the extent of
$164,962.02, and in February, 1965, to over $200,000. Therefore any sum of $8,000 paid by the plaintiffs was
payment made in discharge of an existing debt. Reference was made to the evidence of the secretary, Harry Tnay,
where he said any sums realised from the releases was paid into Account No. 2 to keep down the unsecured debt.

On the authorities, such a payment is not legal consideration. Whilst it might amount to an equitable defence, by
way of estoppel in appropriate cases, it cannot give rise to a legally enforceable contract

In so far as the second consideration is concerned, the claim pleaded by the plaintiffs presupposes that they were
entitled as a right to go on drawing on their No. 2 Account notwithstanding the fact that it was heavily overdrawn in
March 1967.

Reference was also made to Brooks and Co v Blackburn Benefit Society (1884) 9 App Cas 857 HL, which is
authority for the proposition that a banker is under no obligation to allow the plaintiffs as customers to overdraw,
and if the defendant had felt strongly about it he had in his power to determine the overdraft facilities summarily
(see Parkinson v Wakefield and Co (1889) 5 TLR 646 CA).

See Yi Vonne
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ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

The defendant had agreed to release 8 lots as stated in the particulars but it was argued that there was no general
agreement to release the sub-divided lots with completed buildings thereon from the paid charge upon payment of
certain sums out of the purchase price of the sub-divided lots which were sold

Such payment it is said is not legal consideration and cannot give rise to a legally enforceable contract.

Even if it was established in evidence that Dato' Wee had agreed to the releases it was suggested that the plaintiffs
gave no consideration for such agreement, since they had no right to increase their indebtedness under the
overdrafts, either under Account No. 1 or Account No. 2.

A valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing
to the one party, or some forbearance, detriment, loss, or responsibility, given suffered, or undertaken by the other.
Currie v Misa (1875) LR 10 Ex 153 at p 162.

Again, it was pointed out that performance of an existing duty owed to a promisor (i.e. the defendant in this case) is
unreal consideration. Anson on Contract, 23rd edition page 97. Stilk v Myrick (1809) 170 ER 1168.

Counsel for the defendant also drew the attention of the court to the decision in Vanbergen v St Edmund's
Properties Ltd [1933] All ER 488, where it was decided that a promise to pay to a creditor a sum which the debtor is
already bound to pay by law does not provide any consideration to support a valid contract.

There was here no evidence of any consideration moving from the plaintiff. That being so the agreement/assurance
of the defendant was really a nudum pactum and is not enforceable at law.

Counsel for the defendant has also sought to rely on the case of Central London Property Ltd v High Trees House
Ltd [1947] 1 KB 130 in which Lord Denning decided that a promise intended to be binding, intended to be acted on
and in fact acted on, is binding so far as its terms properly apply, but Birkett L.J. in Combe v Combe [1951] 1 All ER
767 at p 770 has made the point that the High Trees' case enables a person to use it as a shield and not as a
sword.

I must pause here for a moment and draw attention to paragraph 11 of the statement of claim which reads:
"11. In breach of the agreement/assurance aforesaid the defendant on 26th September, 1967, gave notice to the plaintiffs
demanding payment of the sums and interests alleged to be due under the said charges and refused to release the lots
which have been sold by the plaintiffs on payment of $8,000 for each lot."
On the other hand, paragraph 10 of the defence as amended reads as follows:–
"10. As to paragraph (11) of the statement of claim the defendant admits having given notice on 26th September, 1967, as
alleged and that it commenced proceedings in this Honourable Court by Originating Summons dated 8th day of February,
1968, to recover the sums due to the defendant under the said two charges, but denies breach of any
agreement/assurance." (Underlining is mine). [*146]

On the record, it seems to me that these proceedings were commenced in the first instance by the defendant by
giving the notice dated 26th September, 1967, which was followed by originating summons dated 8th February,
1968.

It necessarily follows, as it seems to me that these proceedings now before the court was in effect commenced not
by the plaintiffs but by the defendant and according to Combe v Combe [1951] 1 All ER 767 at p 770 (cited by
counsel for defendant) the plaintiffs are using it not as a sword but as a shield and that this is precisely what has
been done here.

In the case of Central London Property Trust Ltd v High Trees House Limited [1947] 1 KB 130 the head-note reads
as follows:
"That where parties enter into an arrangement which is intended to create legal relations between them and in pursuance of
such arrangement one party makes a promise to the other which he knows will be acted on and which is in fact acted on by
the promisee, the court will treat the promise as binding on the promisor to the extent that it will not allow him to act
inconsistently with it even though the promise may not be supported by consideration in the strict sense and the effect of
the arrangement made is to vary the terms of a contract under seal by one of less value."
Again, in the case of Combe v Combe [1951] 1 All ER 767 at p 770, Lord Denning said:

See Yi Vonne
 Page 22 of 24 78
ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

"The principle, as I understand it, is that, where one party has, by his words or conduct, made to the other a promise or
assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the
other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be
allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must
accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in
point of law by any consideration but only by his word."
and at page 224 Lord Birkett said:
"With regard to the second point, I think that the description given by Mr. Kee to the doctrine enunciated in the two cases to
which Denning, L.J., has referred, as one to be used as a shield and not as a sword, is very vivid."
and further down at page 225 Asquith L.J. said:
"What that case decides is that when a promise is given which (1) is intended to create legal relations, (2) is intended to be
acted upon by the promisee, and (3) is in fact so acted upon, that promisor cannot bring an action against the promisee
which involves the repudiation of his promise or is inconsistent with it."
The legal position is also set out in Halsbury's Laws of England, Volume 8, 3rd Edition at page 113.
"197. Nudum pactum.

It seems that where a promise is given without consideration but is intended by the promisor to affect an existing contract
between him and the promisee, and is intended to be acted upon by the promisee, and is in fact so acted upon, such a
promise may be set up as a defence by the promisee in an action by the promisor to enforce the original contract; but it
cannot be sued on as a separate cause of action by the promisee."
(See Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130, as explained in Combe v Combe
[1951] 1 All ER 767 at p 770, Robertson v Minister of Pensions [1949] 1 KB 227.)

Therefore assuming there was no consideration we have the situation where the defendant promised the plaintiffs
which was in fact acted on and is binding upon the defendant, notwithstanding the absence of consideration.

It was admitted by counsel for the defendant that for 66 months and in terms of period of years it is 5 years, no
statements of account were furnished to the plaintiff although his solicitors has written for them.

In the circumstances it seems to me that it was not possible for the plaintiffs to ascertain the true position. It was on
advice of his counsel (correctly if I may say so) that he had settled the account and had done so without prejudice.

In my opinion nothing that the plaintiffs have done in settling the accounts could have justified the defendant in
thinking that the matter has been settled nor in my judgment did the plaintiffs give such an impression.

It seems to me however on the evidence of the chartered and certified accountant (PW2) that the interest charged
by the bank is wholly inconsistent with much that was alleged to have been charged by Harry Tnay (DW1) himself
(with which I have earlier made a finding as to interest).

The request for the supply of the rest of the accounts by the plaintiffs was ignored although the state of accounts
withheld from the plaintiffs can hardly be judged without reference to those accounts.

I must also refer to an argument of the defendant based upon the fact that the accounts furnished to the plaintiffs
was balanced every year and the plaintiffs raised no objection, and therefore it was an account stated which could
not now be questioned.

But at the time the accounts were balanced the true amount of interest charged had not been discovered; and when
the discovery was made I do not see any reason why the items debited should not be questioned.

Return of pass-book without objection does not amount to a settlement of account as between the customer and
the bank in respect of those entries. See Kepitigalla Rubber Estate Ltd v National Bank of India Limited [1909] 2 KB
1011 at p 1028 and Chorley on Law of Banking under the headings of "Mistakes to Customer's Detriment" and "No
Duty to examine".

It never entered the heads of the plaintiffs even to enquire about the 5 years statements of account which were not
supplied, until sometime later.

I am satisfied that the first plaintiff was not told by the defendant and did not learn of the interest on clean loans,
until he received a notice to pay up.

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 Page 23 of 24 79
ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

That this is the true view seems to me to be borne by the fact that he did not ask for the 5 years statements of
account which the bank failed to furnish the plaintiffs, not until sometime in the early part of 1969.

Counsel for the plaintiffs applied at the outset of the hearing for the production of 66 months of statements of
account referred to in paragraph 12 of the statement of claim. [*147]

Counsel for the defendant submitted that it would be a waste of time if the court in its judgment came to the
conclusion that the interest as charged was in fact correct.

The court accordingly refused application by counsel for the plaintiffs at that stage.

Now according to counsel for the plaintiffs the statements of account for the 66 months were requested from
counsel for the defendant on 21st March 1969 and again on 9th April 1969 and 16th January 1970.

The answer given by counsel for the defendant at the outset of the trial was that there was no obligation to supply
since the account has been settled on 26th June 1968.

I am quite unable now upon the evidence to accept that argument.

The contention of the defendant seems to me to have overlooked the fact that on 14th March, 1968 when the writ of
summons was filed and issued (i.e. a little over 3 months before the date when the accounts were alleged to have
been settled by the plaintiffs) the plaintiff had by paragraph 12 of his statement of claim asked the defendant to do
so, but the defendant had ignored his request.

Why then was the legitimate request to supply the remaining accounts ignored by the defendant?

On this I would like to quote some observations of the Lordships of the Privy Council on section 114(g) of the Indian
Evidence Act which is in pari materia with section 116(g) of Sarawak Evidence Ordinance (Cap. 54) in Murugesam
Pillai v Gnana Sambandha AIR 1917 PC 6 at p 8 at page 8:
"… but with regard to the parties to the suit it is, in their Lordship's opinion, an inversion of sound practice for those desiring
to rely upon a certain state of facts to withhold from the court the written evidence in their possession which would throw
light upon the proposition. The present is a good instance of this bad practice…."
Then in Rameshwar Singh v Bajit Lal Pathak and Others AIR 1929 PC 95 at p 99 at page 99 their Lordships made
the following remarks:
"Their Lordships, in agreement with the High Court, consider that the excuses made by the defendant for the non-
production of these documents are unsatisfactory and unreliable, and, like the learned judges of the High Court, they
consider that their non-production is due to the fear that, if produced, they would either establish the plaintiff's claim, …"
I have heard no arguments upon the question whether an adverse inference ought in the circumstances to have
been inferred or not, and I refrain from expressing an opinion upon that aspect of the matter.

I am further of the view that the plaintiffs in those circumstances settled the accounts without prejudice otherwise
the interest would be staggering by the time the judgment (assuming that decision is entered against him) is given.

The first plaintiff gave his evidence in a straight-forward manner and I consider him to be an honest and truthful
witness and I accept his evidence. There is no doubt in my view and I am satisfied that the plaintiffs embarked on
the development of the housing estate on the faith of the representation and assurance given by the defendant
which I hold and find as a fact. I should add with reference to the housing enterprise that the plaintiffs placed full
reliance on the defendant in all matters financial bearing in mind their close family relationship.

It is the defendant's contention that as the plaintiffs have paid the capital and interest claimed by the defendant, the
accounts between the parties have been settled and they are estopped from opening the settled accounts.

It is perhaps right that I should point out that an interlocutory application to amend the defence to include the plea of
estoppel on the grounds that the plaintiffs have discharged their liabilities to the defendant on 26th June, 1968, was
refused by another judge in chambers on 7th November 1969.

The question arises whether the plaintiffs have an enforceable right to partial releases when payments of $2,000,
$3,000 or $8,000 were made in respect of an individual lot.

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 Page 24 of 24 80
ONG TIAW KOK & ANOR v BIAN CHIANG BANK LTD, [1972] 2 MLJ 134

Now, having considered all the evidence in this case and upon an examination of the cases cited by both counsel, it
is my view and I find as a fact on the balance of probabilities that there was a general agreement to partial releases
of the lots upon the payments stipulated above, namely $2,000, $3,000 or $8,000 as the case may be.

I am also of the view and I hold as a fact that the plaintiffs acted on the representation/arrangement and entered
into agreements with prospective purchasers for sale of the lots and buildings thereon.

I therefore direct that an enquiry be taken before the Registrar, High Court to determine the amount of the rate of
interest overcharged by the defendant and to credit the amount to Ong Construction Company therewith by way of
adjustment, and that the 66 months statements of account be supplied to the plaintiffs for this purpose.

One other matter falls to be mentioned. Whereas the parties agreed that a meeting took place, they differ as to
dates i.e. March, 1967, or September, 1966. The significance of one or the other has not been argued by counsel,
nor can I find any relevance in them.

I also order the payment of damages in the sum of interest the plaintiff would have saved if the defendant on his
part had adhered to the terms of the agreement.

There will therefore be judgment for the plaintiff with costs.

Judgment for the plaintiffs.

End of Document

See Yi Vonne
 81
Page 1

*1 Williams v Roffey Bros. & Nicholls (Contractors) Ltd.

Court of Appeal
23 November 1989

[1990] 2 W.L.R. 1153

[1991] 1 Q.B. 1
Purchas , Glidewell and Russell L.JJ.
1989 Nov. 2, 3; 23
Contract—Consideration—Performance of existing duty—Subcontract for carpentry work—Agreed
price too low for subcontractor to operate satisfactorily and at profit—Oral agreement by main
contractors to pay subcontractor additional sum for performance of existing contractual obligations on
time—Whether agreement enforceable—Whether sufficient consideration
The plaintiff entered into a subcontract with the defendants, who held the main building contract,
to carry out carpentry work in a block of 27 flats for an agreed price of £20,000. The plaintiff got
into financial difficulty because the agreed price was too low for him to operate satisfactorily and
at a profit. The main contract contained a time penalty clause and the defendants, worried lest
the plaintiff did not complete the carpentry work on time, made an oral agreement to pay the
plaintiff an additional sum of £10,300 at the rate of £575 for each flat on which the carpentry work
had been completed. Approximately seven weeks later, when the plaintiff had substantially
completed eight more flats, the defendants had made only one further payment of £1,500
whereupon the plaintiff ceased work on the flats. The plaintiff then sued the defendants for the
additional sum promised. The judge held that the agreement for payment of the additional sum
was enforceable and did not fail for lack of consideration, and gave judgment for the plaintiff.
On appeal by the defendants: -
, dismissing the appeal, (1) that where a party to a contract promised to make an additional
payment in return for the other party's promise to perform his existing contractual obligations and
as a result secured a benefit or avoided a detriment, the advantage secured by the promise to
make the additional payment was capable of constituting consideration therefor, provided that it
was not secured by economic duress or fraud; that the defendants' promise to pay the plaintiff
the additional sum of £10,300, in return for the plaintiff's promise to perform his existing
contractual obligations on time, resulted in a commercial advantage to the defendants; that the
benefit accruing to the defendants provided sufficient consideration to support the defendants'
promise to pay the additional sum; and that, accordingly, the agreement for payment of the
additional sum was enforceable (post, pp. 15G-16B, C, G, 19B-E, 23A-D).
Stilk v. Myrick (1809) 2 Camp. 317 distinguished.
(2) That substantial completion on the eight flats entitled the plaintiff to be paid part of the
£10,300 promised; and that, in the absence of payment, he had properly ceased further work on
the remaining flats (post, pp. 10D, 16H-17B, 23E).
Hoenig v. Isaacs [1952] 2 All E.R. 176 , C.A. applied.
*2
The following cases are referred to in the judgments:

Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd.
[1982] Q.B. 84 ; [1981] 2 W.L.R. 554; [1981] 1 All E.R. 923 ; [1981] 3 W.L.R. 565; [1981] 3 All
E.R. 577 , Robert Goff J. and C.A. .
De la Bere v. Pearson Ltd. [1908] 1 K.B. 280, C.A. .
Harris v. Watson (1791) 5 Peake 102
Hoenig v. Isaacs [1952] 2 All E.R. 176, C.A. .
 82
Page 2

North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705; [1979] 3
W.L.R. 419; [1978] 3 All E.R. 1170
Pao On v. Lau Yiu Long [1980] A.C. 614; [1979] 3 W.L.R. 435; [1979] 3 All E.R. 65, P.C. .
Stilk v. Myrick (1809) 2 Camp. 317
Syros Shipping Co. S.A. v. Elaghill Trading Co. [1980] 2 Lloyd's Rep. 390
Tweddle v. Atkinson (1861) 1 B. & S. 393
Ward v. Byham [1956] 1 W.L.R. 496; [1956] 2 All E.R. 318, C.A. .
Watkins & Sons Inc. v. Carrig (1941) 21 A. 2d 591
Williams v. Williams [1957] 1 W.L.R. 148; [1957] 1 All E.R. 305, C.A. .
Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [1972] A.C.
741; [1972] 2 W.L.R. 1090; [1972] 2 All E.R. 271, H.L.(E.) .
The following additional cases were cited in argument:

Atlas Express Ltd. v. Kafco (Importers and Distributors) Ltd. [1989] Q.B. 833; [1989] 3 W.L.R.
389; [1989] 1 All E.R. 641
Bush v. Whitehaven Port & Town Trustees (1888) 2 Hudson's B.C., 4th ed. 122, C.A. .
Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696; [1956] 3 W.L.R. 37;
[1956] 2 All E.R. 145, H.L.(E.) .
Finland Steamship Co. Ltd. v. Felixstowe Dock and Railway Co. [1980] 2 Lloyd's Rep. 287
APPEAL from the assistant recorder, Mr. R. Jackson Q.C., sitting at Kingston-upon-Thames County
Court.
By specially indorsed writ dated 10 March 1987 the plaintiff, Lester Williams, claimed against the
defendants, Roffey Bros. & Nicholls (Contractors) Ltd., the sum of £32,708.70. By re-amended
statement of claim dated 3 March 1988 the sum claimed was reduced to £10,847.07. Subsequently,
the action was transferred for trial to the county court. The assistant recorder gave judgment for the
plaintiff.
By notice of appeal dated 22 February 1989 and amended on 3 November 1989 the defendants
appealed on the grounds that (1) the assistant recorder erred in law in holding (i) that an agreement
between the parties reached on 9 April 1986 whereby the defendants agreed to pay to the plaintiff a
sum of £10,300 over and above the contract price originally agreed of £20,000 was enforceable by
the plaintiff and did not fail for lack of consideration; (ii) the plaintiff's pre-existing contractual
obligation to the defendants to carry out works was capable in law of constituting good consideration
for an additional sum of £10,300 in respect of identical works; (iii) notwithstanding the lack of
consideration moving from the plaintiff promisee, the benefit to the defendant promisors which might
result from payment of an increased contract *3 price was itself capable of constituting good
consideration for the increase; and (iv) a main contractor who agreed too low a price with a
subcontractor was acting contrary to his own interests, and that if the parties subsequently agreed
that additional moneys should be paid, such agreement was in the interests of both parties and for
that reason did not fail for lack of consideration; (2) alternatively, in the event that the plaintiff was
contractually entitled to the sum of £10,300 the assistant recorder erred in not holding that such
entitlement was limited to the sum of £575 per flat as and when the plaintiff's work in each flat had
been completed in its entirety, and that since no flats had been so completed no money was owing by
the defendants to the plaintiff; and (3) the assistant recorder was wrong in holding that (i) the
defendants repudiated the contract between the parties by their failure to pay the plaintiff interim
payments after 17 April 1986; and (ii) the plaintiff was entitled to leave the site.
By a respondent's notice the plaintiff contended that the judgment of the assistant recorder should be
affirmed on the additional grounds that (i) when a new price was agreed between the parties, in the
absence of duress and in the case of a commercially reasonable renegotiation, the promise to pay
that new price was enforceable and Stilk v. Myrick (1809) 2 Camp. 317 did not correctly state the
position in English law; (2) on the facts as found, the assistant recorder should have held that there
 83
Page 3

was a termination of the earlier agreement by mutual consent and that the parties entered into a new
agreement on 9 April 1986; and (3) alternatively, the assistant recorder should have held that there
was an implied term in the first agreement to the effect that in the event of both parties agreeing that
the price was too low, a higher price would be agreed and substituted for it.
The facts are stated in the judgment of Glidewell L.J.
Franklin Evans for the defendants. The defendants' promise to pay the plaintiff an additional sum of
£10,300, at the rate of £575 for each completed flat, is unenforceable since there was no
consideration for it. The trial judge held that it was in the interests of the defendants on the facts to
promise the extra payment. The benefits to the defendants which arose from their agreement to pay
the additional sum were (i) to ensure that the plaintiff continued work and did not stop in breach of the
subcontract; (ii) to avoid the penalty for delay; and (iii) to avoid the trouble and expense of engaging
other people to complete the carpentry work. However, those benefits are of a practical nature; the
defendants derived no benefit in law since the plaintiff was promising to do no more than he was
already bound to do by his subcontract, i.e., continue with the carpentry work and complete it on time.
Thus there was no consideration for the agreement: see Davis Contractors Ltd. v. Fareham Urban
District Council [1956] A.C. 696 , 716, per Viscount Simmonds. There was no finding of a mutual
discharge from the existing obligations and no new contract. None should be implied. The defendants
rely on the principle of law which, traditionally, is based on Stilk v. Myrick (1809) 2 Camp. 317 . In
North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705 , 712G-713E,
Mocatta J. regarded *4 the general principle in Stilk v. Myrick, 2 Camp. 317 , as still being good law
and referred to two earlier decisions of this court, dealing with wholly different subjects, in which
Denning L.J. sought to escape from the confines of the rule, but was not accompanied in his attempt
by the other members of the court: see Ward v. Byham [1956] 1 W.L.R. 496 , 498 and Williams v.
Williams [1957] 1 W.L.R. 148 , 151. [Reference was made to Syros Shipping Co. S.A. v. Elaghill
Trading Co. [1980] 2 Lloyd's Rep. 390 ; Atlas Express Ltd. v. Kafco (Importers and Distributors) Ltd.
[1989] 3 W.L.R. 389 and Bush v. Whitehaven Port & Town Trustees (1888) 2 Hudson's B.C., 4th ed.,
122]. On the facts of the present case the consideration, even if otherwise good, did not move from
the promisee: see Tweddle v. Atkinson (1861) 1 B. & S. 393 .
Even if there had been a contractual entitlement by the plaintiff to the additional sum promised, such
entitlement would only have been to payment thereof in accordance with the express terms of the
promise. Those terms were that the additional payment should be released to the plaintiff at the rate
of £575 per flat as and when the carpentry work on each flat had been completed in its entirety. The
trial judge found as a fact that no single flat had been completed as at the date when the plaintiff left
the site. Therefore even if the plaintiff had a contractual entitlement he had not acquired the right to
claim any part of it. There is a distinction between Hoenig v. Isaacs [1952] 2 All E.R. 176 and the
present case.
Christopher Makey for the plaintiff. It is in the interest of commercial reality that the parties should be
allowed to agree that if the contract price for a subcontracted job is too low it should be increased. It is
quite common practice in the building industry for main contractors to increase subcontractor's
payments. The proposition established in Finland Steamship Co. Ltd. v. Felixstowe Dock and Railway
Co. [1980] 2 Lloyd's Rep. 287 is that where there is an agreement between the parties for a variation
in the contract then there should be such a variation but not if there is a unilateral variation which the
other party objected to. It would be unfortunate if English law deprived an acceptable commercial
practice, which both parties to the agreement regard as beneficial, of legal effect. Such an agreement
has legal effect because either (i) there is consideration in the sense of benefits and detriments to
both parties; the subcontractor may be better off by breaking the contract, getting higher paid work
elsewhere and paying such damages as the contractor can recover against him; the contractor may
avoid penalties or incur lesser penalties for late completion if the subcontractor stays on the job and
finishes it; in that sense Stilk v. Myrick, 2 Camp. 317 , is distinguishable; or (ii) Stilk v. Myrick ,
although of general application, does not apply to this specific situation in the building industry, where
performance of existing obligations can constitute sufficient consideration; or (iii) now that the concept
of duress has been developed, the principle in Stilk v. Myrick is neither necessary nor desirable and
should no longer be regarded as good law. Where a new promise is made in the course of a
commercially reasonable renegotiation, it should be enforceable. The judgment of Mocatta J. in North
Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705 that such a *5 principle
forms no part of English law should be overruled and the American approach in Watkins & Sons Inc.
v. Carrig (1941) 21 A. 2d. 591 should be accepted as being part of English law.
The two cases, Harris v. Watson (1791) 5 Peake 102 and Stilk v. Myrick, 2 Camp. 317 , involved
 84
Page 4

circumstances of a very special nature, namely the extraordinary conditions existing at the turn of the
18th century under which seamen had to serve their contracts of employment on the high seas. There
were strong public policy grounds at that time to protect the master and owners of a ship from being
held to ransom by disaffected crews. Thus, the decision that the promise to pay extra wages even in
the circumstances established in those cases, was not supported by consideration is understandable.
Conditions today on the high seas have changed dramatically and it is at least questionable whether
those cases might not well have been decided differently if they were tried today. The modern cases
tend to depend more upon the defence of duress in a commercial context rather than lack of
consideration for the second agreement. For the possible application of the concept of economic
duress, see Pao On v. Lau Yiu Long [1980] A.C. 614 .
Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696 is a completely different
type of case - the contractor there carried out all the work and then asked for more money. The case
does not really assist the court. The judgment of the assistant recorder should be upheld.
Evans in reply. Pao On v. Lau Yiu Long [1980] A.C. 614 concerned a tripartite relationship and is
distinguishable on that basis. The new promise came from a stranger to the original contract.
Cur. adv. vult.
23 November. The following judgments were handed down
GLIDEWELL L.J.
This is an appeal against the decision of Mr. Rupert Jackson Q.C., an assistant recorder, given on 31
January 1989 at Kingson-upon-Thames County Court, entering judgment for the plaintiff for £3,500
damages with £1,400 interest and costs and dismissing the defendants' counterclaim.

The facts

The plaintiff is a carpenter. The defendants are building contractors who in September 1985 had
entered into a contract with Shepherds Bush Housing Association Ltd. to refurbish a block of flats
called Twynholm Mansions, Lillie Road, London S.W. 6. The defendants were the main contractors
for the works. There are 28 flats in Twynholm Mansions, but the work of refurbishment was to be
carried out in 27 of the flats.
The defendants engaged the plaintiff to carry out the carpentry work in the refurbishment of the 27
flats, including work to the structure of the roof. Originally the plaintiff was engaged on three separate
sub-contracts, but these were all superseded by a subcontract in writing *6 made on 21 January
1986 by which the plaintiff undertook to provide the labour for the carpentry work to the roof of the
block and for the first and second fix carpentry work required in each of the 27 flats for a total price of
£20,000.
The judge found that, though there was no express term providing for payment to be made in stages,
the contract of 21 January 1986 was subject to an implied term that the defendants would make
interim payments to the plaintiff, related to the amount of work done, at reasonable intervals.
The plaintiff and his men began work on 10 October 1985. The judge found that by 9 April 1986 the
plaintiff had completed the work to the roof, had carried out the first fix to all 27 flats, and had
substantially completed the second fix to nine flats. By this date the defendants had made interim
payments totalling £16,200.
It is common ground that by the end of March 1986 the plaintiff was in financial difficulty. The judge
found that there were two reasons for this, namely: (i) that the agreed price of £20,000 was too low to
enable the plaintiff to operate satisfactorily and at a profit; Mr. Cotterell, a surveyor employed by the
defendants said in evidence that a reasonable price for the works would have been £23,783; and (ii)
that the plaintiff failed to supervise his workmen adequately.
The defendants, as they made clear, were concerned lest the plaintiff did not complete the carpentry
work on time. The main contract contained a penalty clause. The judge found that on 9 April 1986 the
defendants promised to pay the plaintiff the further sum of £10,300, in addition to the £20,000, to be
paid at the rate of £575 for each flat in which the carpentry work was completed. The plaintiff and his
men continued work on the flats until the end of May 1986. By that date the defendants, after their
 85
Page 5

promise on 9 April 1986, had made only one further payment of £1,500. At the end of May the plaintiff
ceased work on the flats. I will describe later the work which, according to the judge's findings, then
remained to be done. Suffice it to say that the defendants engaged other carpenters to complete the
work, but in the result incurred one week's time penalty in their contract with the building owners.

The action

The plaintiff commenced this action by specially indorsed writ on 10 March 1987. He originally
claimed the sum of £32,708.70. In a re-amended statement of claim served on 3 March 1988 his
claim was reduced to £10,847.07. It was, I think, at about this time that the matter was transferred to
the county court.
It is not necessary to refer to the statement of claim. On every important issue on which the plaintiff's
case differed from that of the defendants, the judge found that the plaintiff was mistaken, and
preferred the evidence of the defendants. In particular, the plaintiff denied the defendants' promise of
9 April 1986 to pay him an additional £10,300, instead alleging an earlier and different agreement
which the judge found had not been made.
*7
In the amended defence the defendants' promise to pay an additional £10,300 was pleaded as part of
paragraph 5 in the following terms:

"In or about the month of May 1986 at a meeting at the offices of the defendants
between Mr. Hooper and the plaintiff on the one hand and Mr. Cottrell and Mr. Roffey on
the other hand it was agreed that the defendants would pay the plaintiff an extra
£10,300 over and above the contract sum of £20,000. Nine flats had been first and
second fixed completely at the date of this meeting and there were 18 flats left that had
been first fixed but on which the second fixing had not been completed. The sum of
£10,300 was to be paid at a rate of £575 per flat to be paid on the completion of each
flat."

The defence then alleged that neither the balance of the original contract sum nor the £10,300
addition was payable until the work was completed, that the plaintiff did not complete the work before
he left the site, and thus that no further sum was due to him. By their amended counterclaim the
defendants claimed that the plaintiff was in breach of contract in ceasing work at the end of May
1986, as a result of which they had suffered damage to the extent of £18,121.46.

The judge's conclusions

The judge found that the defendants' promise to pay an additional £10,300, at the rate of £575 per
completed flat, was part of an oral agreement made between the plaintiff and the defendants on 9
April 1986, by way of variation to the original contract.
The judge also found that before the plaintiff ceased work at the end of May 1986 the carpentry in 17
flats had been substantially (but not totally) completed. This means that between the making of the
agreement on 9 April 1986 and the date when the plaintiff ceased work, eight further flats were
substantially completed.
The judge calculated that this entitled the plaintiff to receive £4,600 (8 X £575) "less some small
deduction for defective and incomplete items." He held that the plaintiff was also entitled to a
reasonable proportion of the £2,200 which was outstanding from the original contract sum. I believe
this figure should be £2,300, but this makes no practical difference. Adding these two amounts, he
decided that the plaintiff was entitled to further payments totalling £5,000 against which he had only
received £1,500, and that the defendants were therefore in breach of contract, entitling the plaintiff to
cease work.

The issues

Before us Mr. Evans for the defendants advances two arguments. His principal submission is that the
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defendants' admitted promise to pay an additional £10,300, at the rate of £575 per completed flat, is
unenforceable since there was no consideration for it. This issue was not raised in the defence, but
we are told that the argument was advanced at the trial without objection, and that there was equally
no objection to it being argued before us.
*8
Mr. Evans' secondary argument is that the additional payment was only payable as each flat was
completed. On the judge's findings, eight further flats had been "substantially" completed. Substantial
completion was something less than completion. Thus none of the eight flats had been completed,
and no further payment was yet due from the defendants. I will deal with this subsidiary argument
first.

Does substantial completion entitle the plaintiff to payment?

The agreement which the judge found was made between the parties on 9 April 1986 provided for
payment as follows: "The sum of £10,300 was to be paid at the rate of £575 per flat to be paid on the
completion of each flat." Mr. Evans argues that the agreement provided for payment on completion,
not on substantial completion, of each flat. Since the judge did not find that the work in any additional
flat was completed after 9 April 1986, the defendants were under no obligation to pay any part of the
£10,300 before the plaintiff ceased work at the end of May.
In his judgment the judge does not explain why in his view substantial completion entitled the plaintiff
to payment. In support of the judgment on this issue, however, Mr. Makey for the plaintiff, refers us to
the decision of this court in Hoenig v. Isaacs [1952] 2 All E.R. 176 . In that case the plaintiff was
engaged to decorate and furnish the defendant's flat for £750, to be paid "net cash, as the work
proceeds, and balance on completion." The defendant paid £400, moved into the flat and used the
new furniture, but refused to pay the balance on the ground that some of the work was defective. The
official referee found that there were some defects, but that the contract had been substantially
performed. The Court of Appeal held that accordingly the plaintiff was entitled to be paid the balance
due, less only a deduction for the cost of making good the defects or omissions. Somervell L.J. said,
at p. 179:

"The learned official referee regarded H. Dakin & Co. Ltd. v. Lee [1916] 1 K.B. 566 as
laying down that the price must be paid subject to set-off or counterclaim if there was a
substantial compliance with the contract. I think on the facts of this case where the work
was finished in the ordinary sense, though in part defective, this is right. It expresses in
a convenient epithet what is put from another angle in the Sale of Goods Act 1893 . The
buyer cannot reject if he proves only the breach of a term collateral to the main purpose.
I have, therefore, come to the conclusion that the first point of counsel for the defendant
fails."

Denning L.J. said, at pp. 180-181:

"In determining this issue the first question is whether, on the true construction of the
contract, entire performance was a condition precedent to payment. It was a lump sum
contract, but that does not mean that entire performance was a condition precedent to
payment. When a contract provides for a specific sum to be paid on completion of
specified work, the courts lean against a construction of the contract which would
deprive the contractor of any payment at all simply because there are some defects or
omissions. The promise to complete the work is, therefore, construed as a term of *9
the contract, but not as a condition. It is not every breach of that term which absolves
the employer from his promise to pay the price, but only a breach which goes to the root
of the contract, such as an abandonment of the work when it is only half done. Unless
the breach does go to the root of the matter, the employer cannot resist payment of the
price. He must pay it and bring a cross-claim for the defects and omissions, or,
alternatively, set them up in diminution of the price. The measure is the amount which
the work is worth less by reason of the defects and omissions, and is usually calculated
by the cost of making them good: see Mondel v. Steel (1841) 8 M. & W. 858 ; H. Dakin
& Co. Ltd. v. Lee [1916] 1 K.B. 566 ; and the notes to Cutter v. Powell (1795) 6 Term
Rep. 320 in Smith's Leading Cases , 13th ed. (1929), vol. 2, pp. 19-21. It is, of course,
always open to the parties by express words to make entire performance a condition
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precedent. A familiar instance is when the contract provides for progress payments to
be made as the work proceeds, but for retention money to be held until completion.
Then entire performance is usually a condition precedent to payment of the retention
money, but not, of course, to the progress payments. The contractor is entitled to
payment pro rata as the work proceeds, less a deduction for retention money. But he is
not entitled to the retention money until the work is entirely finished, without defects or
omissions. In the present case the contract provided for 'net cash, as the work
proceeds; the balance on completion.' If the balance could be regarded as retention
money, then it might well be that the contractor ought to have done all the work
correctly, without defects or omissions, in order to be entitled to the balance. But I do
not think the balance should be regarded as retention money. Retention money is
usually only 10 per cent., or 15 per cent., whereas this balance was more than 50 per
cent. I think this contract should be regarded as an ordinary lump sum contract. It was
substantially performed. The contractor is entitled, therefore, to the contract price, less a
deduction for the defects."

Romer L.J. said, at pp. 182-183:

"The defendant's only attack on the plaintiff's performance of his obligations was in
relation to certain articles of furniture which the plaintiff supplied and which the
defendant says were faulty and defective in various important respects. The finding of
the learned official referee on this was 'that the furniture supplied constituted a
substantial compliance with the contract so far as the supply of furniture was
concerned.' That is a finding of fact, and whether or not another mind might have taken
a different view it appears to me impossible to say that there was no sufficient evidence
on which the finding could be based. This, then, being a lump sum contract for the
supply of furniture (and the carrying out of certain minor work) which was substantially
complied with by the plaintiff, the question is whether the official referee was wrong in
law in applying the principle of H. Dakin & Co. Ltd. v. Lee [1916] 1 K.B. 566 and
rejecting the defendant's submissions that the plaintiff had failed to *10 perform a
condition on the fulfilment of which his right to sue depended. In my judgment, he was
quite right in applying the H. Dakin & Co. Ltd. v. Lee principle to the facts of the present
case. I can see no reason why that principle should be approached with wariness and
applied with caution. In certain cases it is right that the rigid rule for which the defendant
contends should be applied, for example, if a man tells a contractor to build a ten foot
wall for him in his garden and agrees to pay £x for it, it would not be right that he should
be held liable for any part of the contract price if the contractor builds the wall to two feet
and then renounces further performance of the contract, or builds the wall of a totally
different material from that which was ordered, or builds it at the wrong end of the
garden. The work contracted for has not been done and the corresponding obligation to
pay consequently never arises. But when a man fully performs his contract in the sense
that he supplies all that he agreed to supply but what he supplies is subject to defects of
so minor a character that he can be said to have substantially performed his promise, it
is, in my judgment, far more equitable to apply the H. Dakin & Co. Ltd. v. Lee principle
than to deprive him wholly of his contractual rights and relegate him to such remedy (if
any) as he may have on a quantum meruit, nor, in my judgment, are we compelled to a
contrary view (having regard to the nature and terms of the agreement and the official
referee's finding) by any of the cases in the books."

In my view this authority entirely supports the judge's decision on this issue.

Was there consideration for the defendants' promise made on 9 April 1986 to pay an
additional price at the rate of £575 per completed flat?

The judge made the following findings of fact which are relevant on this issue. (i) The subcontract
price agreed was too low to enable the plaintiff to operate satisfactorily and at a profit. Mr. Cottrell, the
defendants' surveyor, agreed that this was so. (ii) Mr. Roffey (managing director of the defendants)
was persuaded by Mr. Cottrell that the defendants should pay a bonus to the plaintiff. The figure
agreed at the meeting on 9 April 1986 was £10,300.
 88
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The judge quoted and accepted the evidence of Mr. Cottrell to the effect that a main contractor who
agrees too low a price with a subcontractor is acting contrary to his own interests. He will never get
the job finished without paying more money. The judge therefore concluded:

"In my view where the original subcontract price is too low, and the parties subsequently
agree that additional moneys shall be paid to the subcontractor, this agreement is in the
interests of both parties. This is what happened in the present case, and in my opinion
the agreement of 9 April 1986 does not fail for lack of consideration."

In his address to us, Mr. Evans outlined the benefits to his clients, the defendants, which arose from
their agreement to pay the additional *11 £10,300 as: (i) seeking to ensure that the plaintiff continued
work and did not stop in breach of the subcontract; (ii) avoiding the penalty for delay; and (iii) avoiding
the trouble and expense of engaging other people to complete the carpentry work.
However, Mr. Evans submits that, though his clients may have derived, or hoped to derive, practical
benefits from their agreement to pay the "bonus," they derived no benefit in law, since the plaintiff was
promising to do no more than he was already bound to do by his subcontract, i.e., continue with the
carpentry work and complete it on time. Thus there was no consideration for the agreement. Mr.
Evans relies on the principle of law which, traditionally, is based on the decision in Stilk v. Myrick
(1809) 2 Camp. 317 . That was a decision at first instance of Lord Ellenborough C.J. On a voyage to
the Baltic, two seamen deserted. The captain agreed with the rest of the crew that if they worked the
ship back to London without the two seamen being replaced, he would divide between them the pay
which would have been due to the two deserters. On arrival at London this extra pay was refused,
and the plaintiff's action to recover his extra pay was dismissed. Counsel for the defendant argued
that such an agreement was contrary to public policy, but Lord Ellenborough C.J.'s judgment was
based on lack of consideration. It reads, at pp. 318-319:

"I think Harris v. Watson (1791) Peake 102 was rightly decided; but I doubt whether the
ground of public policy, upon which Lord Kenyon is stated to have proceeded, be the
true principle on which the decision is to be supported. Here, I say the agreement is void
for want of consideration. There was no consideration for the ulterior pay promised to
the mariners who remained with the ship. Before they sailed from London they had
undertaken to do all they could under all the emergencies of the voyage. They had sold
all their services till the voyage should be completed. If they had been at liberty to quit
the vessel at Cronstadt, the case would have been quite different; or if the captain had
capriciously discharged the two men who were wanting, the others might not have been
compellable to take the whole duty upon themselves, and their agreeing to do so might
have been a sufficient consideration for the promise of an advance of wages. But the
desertion of a part of the crew is to be considered an emergency of the voyage as much
as their death; and those who remain are bound by the terms of their original contract to
exert themselves to the utmost to bring the ship in safety to her destined port.
Therefore, without looking to the policy of this agreement, I think it is void for want of
consideration, and that the plaintiff can only recover at the rate of £5 a month."

In North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705 , Mocatta J.
regarded the general principle of the decision in Stilk v. Myrick, 2 Camp. 317 as still being good law.
He referred to two earlier decisions of this court, dealing with wholly different subjects, in which
Denning L.J. sought to escape from the confines of the rule, but was not accompanied in his attempt
by the other members of the court. In Ward v. Byham [1956] 1 W.L.R. 496 the plaintiff and the
defendant lived together unmarried for five years, during which time the plaintiff bore their child. After
the parties ended their relationship, the defendant promised to pay the plaintiff £1 per week to
maintain the child, provided that she was well looked after and happy. The defendant paid this sum
for some months, but ceased to pay when the plaintiff married another man. On her suing for the
amount due at £1 per week, he pleaded that there was no consideration for his agreement to pay for
the plaintiff to maintain her child, since she was obliged by law to do so: see section 42 of the
National Assistance Act 1948 . The county court judge upheld the plaintiff mother's claim, and this
court dismissed the defendant's appeal. Denning L.J. said, at p. 498:

"I approach the case, therefore, on the footing that the mother, in looking after the child,
is only doing what she is legally bound to do. Even so, I think that there was sufficient
consideration to support the promise. I have always thought that a promise to perform
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an existing duty, or the performance of it, should be regarded as good consideration,

because it is a benefit to the person to whom it is given. Take this very case. It is as
much a benefit for the father to have the child looked after by the mother as by a
neighbour. If he gets the benefit for which he stipulated, he ought to honour his promise;
and he ought not to avoid it by saying that the mother was herself under a duty to
maintain the child. I regard the father's promise in this case as what is sometimes called
a unilateral contract, a promise in return for an act, a promise by the father to pay £1 a
week in return for the mother's looking after the child. Once the mother embarked on the
task of looking after the child, there was a binding contract. So long as she looked after
the child, she would be entitled to £1 a week. The case seems to me to be within the
decision of Hicks v. Gregory (1849) 8 C.B. 378 on which the judge relied. I would
dismiss the appeal."

However, Morris L.J. put it rather differently. He said, at pp. 498-499:

"Mr. Lane submits that there was a duty on the mother to support the child; that no
affiliation proceedings were in prospect or were contemplated; and that the effect of the
arrangement that followed the letter was that the father was merely agreeing to pay a
bounty to the mother. It seems to me that the terms of the letter negative those
submissions, for the husband says 'providing you can prove that she' - that is Carol -
'will be well looked after and happy and also that she is allowed to decide for herself
whether or not she wishes to come and live with you.' The father goes on to say that
Carol is then well and happy and looking much stronger than ever before. 'If you decide
what to do let me know as soon as possible.' It seems to me, therefore, that the father
was saying, in effect: Irrespective of what may be the strict legal position, what I am
asking is that you shall prove that Carol will be well looked after and happy, and also
that you must agree that Carol is to be allowed to decide for herself whether or not she
wishes to come and live *13 with you. If those conditions were fulfilled the father was
agreeable to pay. Upon those terms, which in fact became operative, the father agreed
to pay £1 a week. In my judgment, there was ample consideration there to be found for
his promise, which I think was binding."

Parker L.J. agreed. As I read the judgment of Morris L.J., he and Parker L.J. held that, though in
maintaining the child the plaintiff was doing no more than she was obliged to do by law, nevertheless
her promise that the child would be well looked after and happy was a practical benefit to the father
which amounted to consideration for his promise.
In Williams v. Williams [1957] 1 W.L.R. 148 , a wife left her husband, and he promised to make her a
weekly payment for her maintenance. On his failing to honour his promise, the wife claimed the
arrears of payment, but her husband pleaded that, since the wife was guilty of desertion she was
bound to maintain herself, and thus there was no consideration for his promise. Denning L.J., at p.
151, reiterated his view that:

"a promise to perform an existing duty is, I think, sufficient consideration to support a
promise, so long as there is nothing in the transaction which is contrary to the public
interest."

However, the other members of the court (Hodson and Morris L.JJ.) declined to agree with this
expression of view, though agreeing with Denning L.J. in finding that there was consideration
because the wife's desertion might not have been permanent, and thus there was a benefit to the
husband.
It was suggested to us in argument that, since the development of the doctrine of promissory
estoppel, it may well be possible for a person to whom a promise has been made, on which he has
relied, to make an additional payment for services which he is in any event bound to render under an
existing contract or by operation of law, to show that the promisor is estopped from claiming that there
was no consideration for his promise. However, the application of the doctrine of promissory estoppel
to facts such as those of the present case has not yet been fully developed: see e.g. the judgment of
Lloyd J. in Syros Shipping Co. S.A v. Elaghill Trading Co. [1980] 2 Lloyd's Rep. 390 , 392. Moreover,
this point was not argued in the court below, nor was it more than adumbrated before us. Interesting
though it is, no reliance can in my view be placed on this concept in the present case.
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There is, however, another legal concept of relatively recent development which is relevant, namely,
that of economic duress. Clearly if a subcontractor has agreed to undertake work at a fixed price, and
before he has completed the work declines to continue with it unless the contractor agrees to pay an
increased price, the subcontractor may be held guilty of securing the contractor's promise by taking
unfair advantage of the difficulties he will cause if he does not complete the work. In such a case an
agreement to pay an increased price may well be voidable because it was entered into under duress.
Thus this concept may provide another answer in law to the question of policy which has *14 troubled
the courts since before Stilk v. Myrick, 2 Camp. 317 , and no doubt led at the date of that decision to a
rigid adherence to the doctrine of consideration.
This possible application of the concept of economic duress was referred to by Lord Scarman,
delivering the judgment of the Judicial Committee of the Privy Council in Pao On v. Lau Yiu Long
[1980] A.C. 614 . He said, at p. 632:

"Their Lordships do not doubt that a promise to perform, or the performance of, a pre-
existing contractual obligation to a third party can be valid consideration. In New
Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd. (The Eurymedon) [1975]
A.C. 154 , 168 the rule and the reason for the rule were stated: 'An agreement to do an
act which the promisor is under an existing obligation to a third party to do, may quite
well amount to valid consideration . . . the promisee obtains the benefit of a direct
obligation. This proposition is illustrated and supported by Scotson v. Pegg (1861) 6
H. & N. 295 which their Lordships consider to be good law.' Unless, therefore, the
guarantee was void as having been made for an illegal consideration or voidable on the
ground of economic duress, the extrinsic evidence establishes that it was supported by
valid consideration. Mr. Leggatt for the defendants submits that the consideration is
illegal as being against public policy. He submits that to secure a party's promise by a
threat of repudiation of a pre-existing contractual obligation owed to another can be, and
in the circumstances of this case was, an abuse of a dominant bargaining position and
so contrary to public policy. This submission found favour with the majority in the
Court of Appeal. Their Lordships, however, considered it misconceived."

Lord Scarman then referred to Stilk v. Myrick, 2 Camp. 317 , and its predecessor Harris v. Watson
(1791) Peake 102 , and to Williams v. Williams [1957] 1 W.L.R. 148 , before turning to the
development of this branch of the law in the United States of America. He then said, at pp. 634-635:

"Their Lordships' knowledge of this developing branch of American law is necessarily

limited. In their judgment it would be carrying audacity to the point of foolhardiness for
them to attempt to extract from the American case law a principle to provide an answer
to the question now under consideration. That question, their Lordships repeat, is
whether, in a case where duress is not established, public policy may nevertheless
invalidate the consideration if there has been a threat to repudiate a pre-existing
contractual obligation or an unfair use of a dominating bargaining position. Their
Lordships' conclusion is that where businessmen are negotiating at arm's length it is
unnecessary for the achievement of justice, and unhelpful in the development of the
law, to invoke such a rule of public policy. It would also create unacceptable anomaly. It
is unnecessary because justice requires that men, who have negotiated at arm's length,
be held to their bargains unless it can be shown that their consent was vitiated by fraud,
mistake or duress. If a promise is induced by *15 coercion of a man's will, the doctrine
of duress suffices to do justice. The party coerced, if he chooses and acts in time, can
avoid the contract. If there is no coercion, there can be no reason for avoiding the
contract where there is shown to be a real consideration which is otherwise legal. Such
a rule of public policy as is now being considered would be unhelpful because it would
render the law uncertain. It would become a question of fact and degree to determine in
each case whether there had been, short of duress, an unfair use of a strong bargaining
position. It would create anomally because, if public policy invalidates the consideration,
the effect is to make the contract void. But unless the facts are such as to support a plea
of 'non est factum,' which is not suggested in this case, duress does no more than
confer upon the victim the opportunity, if taken in time, to avoid the contract. It would be
strange if conduct less than duress could render a contract void, whereas duress does
no more than render a contract voidable. Indeed, it is the defendants' case in this appeal
that such an anomaly is the correct result. Their case is that the plaintiffs, having lost by
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cancellation the safeguard of the subsidiary agreement, are without the safeguard of the
guarantee because its consideration is contrary to public policy, and that they are
debarred from restoration to their position under the subsidiary agreement because the
guarantee is void, not voidable. The logical consequence of Mr. Leggatt's submission is
that the safeguard which all were at all times agreed the plaintiffs should have - the
safeguard against fall in value of the shares - has been lost by the application of a rule
of public policy. The law is not, in their Lordships' judgment, reduced to countenancing
such stark injustice: nor is it necessary, when one bears in mind the protection offered
otherwise by the law to one who contracts in ignorance of what he is doing or under
duress. Accordingly, the submission that the additional consideration established by the
extrinsic evidence is invalid on the ground of public policy is rejected."

It is true that Pao On is a case of a tripartite relationship that is, a promise by A to perform a pre-
existing contractual obligation owed to B, in return for a promise of payment by C. But Lord Scarman's
words, at pp. 634-635, seem to me to be of general application, equally applicable to a promise made
by one of the original two parties to a contract.
Accordingly, following the view of the majority in Ward v. Byham [1956] 1 W.L.R. 496 and of the
whole court in Williams v. Williams [1957] 1 W.L.R. 148 and that of the Privy Council in Pao On [1980]
A.C. 614 the present state of the law on this subject can be expressed in the following proposition: (i)
if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for
payment by B; and (ii) at some stage before A has completely performed his obligations under the
contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and
(iii) B thereupon promises A an additional payment in return for A's promise to perform *16 his
contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a
benefit, or obviates a disbenefit; and (v) B's promise is not given as a result of economic duress or
fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B's promise, so
that the promise will be legally binding.
As I have said, Mr. Evans accepts that in the present case by promising to pay the extra £10,300 his
client secured benefits. There is no finding, and no suggestion, that in this case the promise was
given as a result of fraud or duress. If it be objected that the propositions above contravene the
principle in Stilk v. Myrick, 2 Camp. 317 , I answer that in my view they do not; they refine, and limit
the application of that principle, but they leave the principle unscathed e.g. where B secures no
benefit by his promise. It is not in my view surprising that a principle enunciated in relation to the
rigours of seafaring life during the Napoleonic wars should be subjected during the succeeding 180
years to a process of refinement and limitation in its application in the present day. It is therefore my
opinion that on his findings of fact in the present case, the judge was entitled to hold, as he did, that
the defendants' promise to pay the extra £10,300 was supported by valuable consideration, and thus
constituted an enforceable agreement.
As a subsidiary argument, Mr. Evans submits that on the facts of the present case the consideration,
even if otherwise good, did not "move from the promisee." This submission is based on the principle
illustrated in the decision in Tweddle v. Atkinson (1861) 1 B. & S. 393 . My understanding of the
meaning of the requirement that "consideration must move from the promisee" is that such
consideration must be provided by the promisee, or arise out of his contractual relationship with the
promisor. It is consideration provided by somebody else, not a party to the contract, which does not
"move from the promisee." This was the situation in Tweddle v. Atkinson , but it is, of course, not the
situation in the present case. Here the benefits to the defendants arose out of their agreement of 9
April 1986 with the plaintiff, the promisee. In this respect I would adopt the following passage from
Chitty on Contracts , 26th ed. (1989), p. 126, para. 183, and refer to the authorities there cited:

"The requirement that consideration must move from the promisee is most generally
satisfied where some detriment is suffered by him e.g. where he parts with money or
goods, or renders services, in exchange for the promise. But the requirement may
equally well be satisfied where the promisee confers a benefit on the promisor without in
fact suffering any detriment."

That is the situation in this case. I repeat, therefore, my opinion that the judge was, as a matter of law,
entitled to hold that there was valid consideration to support the agreement under which the
defendants promised to pay an additional £10,300 at the rate of £575 per flat. For these reasons I
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would dismiss this appeal.

RUSSELL L.J.
I agree with and have nothing to add to the judgment of Glidewell L.J. in so far as it relates to the
defendants' submission that *17 the plaintiff was not entitled to any part of the £10,300 because none
of the eight flats had been completed. The judge found that there had been substantial completion
and made a small deduction for defective and incomplete items. He did not identify those items nor
define the extent of his deductions but no complaint is made about that. For the reasons appearing in
the judgment of Glidewell L.J., supported as they are by Hoenig v. Isaacs [1952] 2 All E.R. 176 , I
have no doubt that the judge was right upon what Mr. Evans, on behalf of the defendants, referred to
as his secondary point.
I find his primary argument relating to consideration much more difficult. It is worth rehearsing some of
the facts. The judge found that the parties made an agreement on 9 April 1986. Subject to the date,
which was inaccurately pleaded, it was the defendants who pleaded the agreement in paragraph 5 of
their amended defence. The relevant passage reads:

"In or about the month of May 1986 at a meeting at the offices of the defendants
between Mr. Hooper and the plaintiff on the one hand and Mr. Cottrell and Mr. Roffey on
the other hand it was agreed that the defendants would pay the plaintiff an extra
£10,300 over and above the contract sum of £20,000. Nine flats had been first and
second fixed completely at the date of this meeting and there were 18 flats left that had
been first fixed but on which the second fixing had not been completed. The sum of
£10,300 was to be paid at a rate of £575 per flat to be paid on the completion of each
flat."

There is no hint in that pleading that the defendants were subjected to any duress to make the
agreement or that their promise to pay the extra £10,300 lacked consideration. As the judge found,
the plaintiff must have continued work in the belief that he would be paid £575 as he finished each of
the 18 uncompleted flats (although the arithmetic is not precisely accurate). For their part the
defendants recorded the new terms in their ledger. Can the defendants now escape liability on the
ground that the plaintiff undertook to do no more than he had originally contracted to do although,
quite clearly, the defendants, on 9 April 1986, were prepared to make the payment and only declined
to do so at a later stage. It would certainly be unconscionable if this were to be their legal entitlement.
The submissions advanced on both sides before this court ranged over a wide field. They went far
beyond the pleadings, and indeed it is worth noticing that the absence of consideration was never
pleaded, although argued before the assistant recorder, Mr. Rupert Jackson Q.C. Speaking for myself
- and I notice it is touched upon in the judgment of Glidewell L.J. - I would have welcomed the
development of argument, if it could have been properly raised in this court, on the basis that there
was here an estoppel and that the defendants, in the circumstances prevailing, were precluded from
raising the defence that their undertaking to pay the extra £10,300 was not binding. For example, in
Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B.
84 Robert Goff J. said, at p. 105: *18

"it is in my judgment not of itself a bar to an estoppel that its effect may be to enable a
party to enforce a cause of action which, without the estoppel, would not exist. It is
sometimes said that an estoppel cannot create a cause of action, or that an estoppel
can only act as a shield, not as a sword. In a sense this is true - in the sense that
estoppel is not, as a contract is, a source of legal obligation. But as Lord Denning M.R.
pointed out in Crabb v. Arun District Council [1976] Ch. 179 , 187, an estoppel may
have the effect that a party can enforce a cause of action which, without the estoppel,
he would not be able to do."

When the case came to the Court of Appeal Lord Denning M.R. said, at p. 122:

"The doctrine of estoppel is one of the most flexible and useful in the armoury of the law.
But it has become overloaded with cases. That is why I have not gone through them all
in this judgment. It has evolved during the last 150 years in a sequence of separate
developments: proprietary estoppel, estoppel by representation of fact, estoppel by
acquiescence, and promissory estoppel. At the same time it has been sought to be
 93
Page 13

limited by a series of maxims: estoppel is only a rule of evidence, estoppel cannot give
rise to a cause of action, estoppel cannot do away with the need for consideration, and
so forth. All these can now be seen to merge into one general principle shorn of
limitations. When the parties to a transaction proceed on the basis of an underlying
assumption - either of fact or of law - whether due to misrepresentation or mistake
makes no difference - on which they have conducted the dealings between them -
neither of them will be allowed to go back on that assumption when it would be unfair or
unjust to allow him to do so. If one of them does seek to go back on it, the courts will
give the other such remedy as the equity of the case demands."

Brandon L.J. said, at pp. 131-132:

"while a party cannot in terms found a cause of action on an estoppel, he may, as a

result of being able to rely on an estoppel, succeed on a cause of action on which,
without being able to rely on that estoppel, he would necessarily have failed."

These citations demonstrate that whilst consideration remains a fundamental requirement before a
contract not under seal can be enforced, the policy of the law in its search to do justice between the
parties has developed considerably since the early 19th century when Stilk v. Myrick, 2 Camp. 317
was decided by Lord Ellenborough C.J. In the late 20th century I do not believe that the rigid
approach to the concept of consideration to be found in Stilk v. Myrick is either necessary or
desirable. Consideration there must still be but, in my judgment, the courts nowadays should be more
ready to find its existence so as to reflect the intention of the parties to the contract where the
bargaining powers are not unequal and where the finding of consideration reflect the true intention of
the parties.
*19
What was the true intention of the parties when they arrived at the agreement pleaded by the
defendants in paragraph 5 of the amended defence? The plaintiff had got into financial difficulties.
The defendants, through their employee Mr. Cottrell, recognised the price that had been agreed
originally with the plaintiff was less than what Mr. Cottrell himself regarded as a reasonable price.
There was a desire on Mr. Cottrell's part to retain the services of the plaintiff so that the work could be
completed without the need to employ another subcontractor. There was further a need to replace
what had hitherto been a haphazard method of payment by a more formalised scheme involving the
payment of a specified sum on the completion of each flat. These were all advantages accruing to the
defendants which can fairly be said to have been in consideration of their undertaking to pay the
additional £10,300. True it was that the plaintiff did not undertake to do any work additional to that
which he had originally undertaken to do but the terms upon which he was to carry out the work were
varied and, in my judgment, that variation was supported by consideration which a pragmatic
approach to the true relationship between the parties readily demonstrates.
For my part I wish to make it plain that I do not base my judgment upon any reservation as to the
correctness of the law long ago enunciated in Stilk v. Myrick. A gratuitous promise, pure and simple,
remains unenforceable unless given under seal. But where, as in this case, a party undertakes to
make a payment because by so doing it will gain an advantage arising out of the continuing
relationship with the promisee the new bargain will not fail for want of consideration. As I read the
judgment of the assistant recorder this was his true ratio upon that part of the case wherein the
absence of consideration was raised in argument. For the reasons that I have endeavoured to outline,
I think that the assistant recorder came to a correct conclusion and I too would dismiss this appeal.
PURCHAS L.J.
The history and circumstances under which this appeal comes before the court have been set out in
the judgment of Glidewell L.J. whose exposition I gratefully adopt. I repeat here only for ease of
reference the significant features of the factual matrix against which the parties came together on 9
April 1986.
Evidence given by Mr. Cottrell, the defendants' surveyor, established that, to their knowledge, the
original contract price was too low to enable the plaintiff to operate satisfactorily and at a profit by
something a little over £3,780. It was also known that the plantiff was falling short in the supervision of
his own labour force with the result that productivity fell and his financial difficulties had been
aggravated. A further difficulty, which the judge found had arisen by the time of the meeting in April,
 94
Page 14

was that the plaintiff had been paid for more than 80 per cent. of the work but had not completed
anything like this percentage. These facts were all obviously known to the plaintiff as well as the
defendants. Also known to the defendants through Mr. Cottrell, and probably also appreciated by the
plaintiff, was that the carpentry work to be executed by the plaintiff was on what was known as "the
critical path of the *20 defendants' global operations." Failure to complete this work by the plaintiff, in
accordance with the contract, would seriously prejudice the defendants as main contractors vis-à-vis
the owners for whom they were working.
In these circumstances there were clearly incentives to both parties to make a further arrangement in
order to relieve the plaintiff of his financial difficulties and also to ensure that the plaintiff was in a
position, or alternatively was willing, to continue with the subcontract works to a reasonable and
timely completion. Against this context the judge found that on 9 April 1986 a meeting took place
between the plaintiff and a man called Hooper, on the one hand, and Mr. Cottrell and Mr. Roffey on
the other hand. The arrangement was that the defendants would pay the plaintiff an extra £10,300 by
way of increasing the lump sum for the total work. It was further agreed that the sum of £10,300 was
to be paid at the rate of £575 per flat on the completion of each flat. This arrangement was beneficial
to both sides. By completing one flat at a time rather than half completing all the flats the plaintiff was
able to receive moneys on account and the defendants were able to direct their other trades to do
work in the completed flats which otherwise would have been held up until the plaintiff had completed
his work.
The point of some difficulty which arises on this appeal is whether the judge was correct in his
conclusion that the agreement reached on 9 April did not fail for lack of consideration because the
principle established by the old cases of Stilk v. Myrick, 2 Camp. 317 approving Harris v. Watson ,
Peake 102 did not apply. Mr. Makey, who appeared for the plaintiff, was bold enough to submit that
Harris v. Watson , albeit a decision of Lord Kenyon, was a case tried at the Guildhall at nisi prius in
the Court of King's Bench and that Stilk v. Myrick was a decision also at nisi prius albeit a judgment of
no less a judge than Lord Ellenborough C.J. and that, therefore, this court was bound by neither
authority. I feel I must say at once that, for my part, I would not be prepared to overrule two cases of
such veneration involving judgments of judges of such distinction except on the strongest possible
grounds since they form a pillar stone of the law of contract which has been observed over the years
and is still recognised in principle in recent authority: see the decision of Stilk v. Myrick to be found in
North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B. 705 , 712 per Mocatta J.
With respect, I agree with his view of the two judgments by Denning L.J. in Ward v. Byham [1956] 1
W.L.R. 496 and Williams v. Williams [1957] 1 W.L.R. 148 in concluding that these judgments do not
provide a sound basis for avoiding the rule in Stilk v. Myrick, 2 Camp. 317 . Although this rule has
been the subject of some criticism it is still clearly recognised in current textbooks of authority: see
Chitty on Contracts, 28th ed. (1989) and Cheshire, Fifoot and Furmston's Law of Contract, 11th ed.
(1986). By the same token I find myself unable to accept the attractive invitation offered by Mr. Makey
to follow the decision of the Supreme Court of New Hampshire in Watkins and Sons Inc. v. Carrig
(1941) 21 A. 2d 591 .
*21
In my judgment, therefore, the rule in Stilk v. Myrick, 2 Camp. 317 remains valid as a matter of
principle, namely that a contract not under seal must be supported by consideration. Thus, where the
agreement upon which reliance is placed provides that an extra payment is to be made for work to be
done by the payee which he is already obliged to perform then unless some other consideration is
detected to support the agreement to pay the extra sum that agreement will not be enforceable. The
two cases, Harris v. Watson , Peake 102 and Stilk v. Myrick, 2 Camp. 317 involved circumstances of
a very special nature, namely the extraordinary conditions existing at the turn of the 18th century
under which seamen had to serve their contracts of employment on the high seas. There were strong
public policy grounds at that time to protect the master and owners of a ship from being held to
ransom by disaffected crews. Thus, the decision that the promise to pay extra wages even in the
circumstances established in those cases, was not supported by consideration is readily
understandable. Of course, conditions today on the high seas have changed dramatically and it is at
least questionable, as Mr. Makey submitted, whether these cases might not well have been decided
differently if they were tried today. The modern cases tend to depend more upon the defence of
duress in a commercial context rather than lack of consideration for the second agreement. In the
present case the question of duress does not arise. The initiative in coming to the agreement of 9
April came from Mr. Cottrell and not from the plaintiff. It would not, therefore, lie in the defendants'
mouth to assert a defence of duress. Nevertheless, the court is more ready in the presence of this
defence being available in the commercial context to look for mutual advantages which would amount
 95
Page 15

to sufficient consideration to support the second agreement under which the extra money is paid.
Although the passage cited below from the speech of Lord Hailsham of St. Marylebone L.C. in
Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [1972] A.C. 741 was
strictly obiter dicta I respectfully adopt it as an indication of the approach to be made in modern times.
The case involved an agreement to vary the currency in which the buyer's obligation should be met
which was subsequently affected by a depreciation in the currency involved. The case was decided
on an issue of estoppel but Lord Hailsham of St. Marylebone L.C. commented on the other issue,
namely the variation of the original contract in the following terms, at pp. 757-758:

"If the exchange of letters was not variation, I believe it was nothing. The buyers asked
for a variation in the mode of discharge of a contract of sale. If the proposal meant what
they claimed, and was accepted and acted upon, I venture to think that the vendors
would have been bound by their acceptance at least until they gave reasonable notice
to terminate, and I imagine that a modern court would have found no difficulty in
discovering consideration for such a promise. Business men know their own business
best even when they appear to grant an indulgence, and in the present case I do not
think that there would have been insuperable difficulty in spelling out consideration from
the earlier correspondence."

*22
In the light of those authorities the question now must be addressed: Was there evidence upon which
the judge was entitled to find that there was sufficient consideration to support the agreement of 9
April, as set out in the passage from his judgment already set out in the judgment of Glidewell L.J.?
The references to this problem in Chitty on Contracts 26th ed. (1989), are not wholly without some
conflict amongst themselves. In paragraph 1601 the editors turn to the question of consideration to
support an agreement to vary an existing contract:

"In many cases, consideration can be found in the mutual abandonment of existing
rights or the conferment of new benefits by each party on the other."

Reference is made to the Woodhouse case to which I have already referred:

"For example, an alteration of the money of account in a contract proposed or made by

one party and accepted by the other is binding on both parties, since either may benefit
from the variation. . . . However, an agreement whereby one party undertakes an
additional obligation, but the other party is merely bound to perform his existing
obligations, or an agreement whereby one party undertakes an additional obligation, but
for the benefit of that party alone, will not be effective to vary the contract as no
consideration is present."

These statements are based upon Stilk v. Myrick, 2 Camp. 317 and Syros Shipping Co. S.A. v.
Elaghill Trading Co. [1980] Lloyd's Rep. 390 . Reference is also made to paragraph 197 earlier in the
textbook where Stilk v. Myrick is considered at some length. On the other hand, at paragraph 183 the
editors make this proposition:

"The requirement that consideration must move from the promisee is most generally
satisfied where some detriment is suffered by him: e.g. where he parts with money or
goods, or renders services, in exchange for the promise. But the requirement may
equally well be satisfied where the promisee confers a benefit on the promisor without in
fact suffering any detriment. For example, in De la Bere v. Pearson Ltd. [1908] 1 K.B.
280 the defendants owned a newspaper and invited readers to apply for financial advice
on the terms that the defendants should be entitled to publish the readers' letters and
their own replies."

This is an accurate recital of the facts in De la Bere v. Pearson Ltd. [1908] 1 K.B. 280 but when the
argument and judgments are read the case turned on issues other than consideration, namely
remoteness of damage, etc. So the case is doubtful support for the proposition made in this
paragraph.
The question must be posed: what consideration has moved from the plaintiff to support the promise
to pay the extra £10,300 added to the lump sum provision? In the particular circumstances which I
have outlined above, there was clearly a commercial advantage to both sides from a pragmatic point
 96
Page 16

of view in reaching the agreement of 9 April. *23 The defendants were on risk that as a result of the
bargain they had struck the plaintiff would not or indeed possibly could not comply with his existing
obligations without further finance. As a result of the agreement the defendants secured their position
commercially. There was, however, no obligation added to the contractual duties imposed upon the
plaintiff under the original contract. Prima facie this would appear to be a classic Stilk v. Myrick case.
It was, however, open to the plaintiff to be in deliberate breach of the contract in order to "cut his
losses" commercially. In normal circumstances the suggestion that a contracting party can rely upon
his own breach to establish consideration is distinctly unattractive. In many cases it obviously would
be and if there was any element of duress brought upon the other contracting party under the modern
development of this branch of the law the proposed breaker of the contract would not benefit. With
some hesitation and comforted by the passage from the speech of Lord Hailsham of St. Marylebone
L.C. in Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [1972] A.C.
741 , 757-758, to which I have referred, I consider that the modern approach to the question of
consideration would be that where there were benefits derived by each party to a contract of variation
even though one party did not suffer a detriment this would not be fatal to the establishing of sufficient
consideration to support the agreement. If both parties benefit from an agreement it is not necessary
that each also suffers a detriment. In my judgment, on the facts as found by the judge, he was entitled
to reach the conclusion that consideration existed and in those circumstances I would not disturb that
finding. This is sufficient to determine the appeal. The judge found as a fact that the flats were
'substantially completed' and that payment was due to the plaintiff in respect of the number of flats
substantially completed which left an outstanding amount due from the defendants to the plaintiff in
the absence of the payment of which the plaintiff was entitled to remove from the site. For these
reasons and for the reasons which have already been given by Glidewell L.J. I would dismiss this
appeal.

Representation
Solicitors: John Pearson, New Malden ; Terence W. Lynch & Co .
Appeal dismissed with costs. Leave to appeal. (M. F. )

(c) Incorporated Council of Law Reporting for England & Wales

© 2022 Thomson Reuters

 97

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1. PAO ON AND OTHERS APPELLANTS AND LAU YIU LONG AND OTHERS RESPONDENTS [ON APPEAL
FROM THE COURT OF APPEAL OF HONG KONG] [1980] A.C. 614, [1980] A.C. 614
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 98

Pao On v Lau Yiu Long

Overview | [1980] AC 614, | [1979] 3 All ER 65, | [1979] 3 WLR 435, | 123 Sol Jo 319

PAO ON AND OTHERS APPELLANTS AND LAU YIU LONG AND OTHERS
RESPONDENTS [ON APPEAL FROM THE COURT OF APPEAL OF HONG
KONG] [1980] A.C. 614
[PRIVY COUNCIL] accordingly, they entered into a subsidiary agreement
by which the plaintiffs agreed to sell and the defendants
Lord Wilberforce, Viscount Dilhorne, Lord Simon of agreed to buy 60 per cent. of the allotted shares on or
Glaisdale, Lord Salmon and Lord Scarman before April 30, 1974, at $2.50 a share.
1979 Jan. 15, 16, 17, 18, 22, 23; April 9
In April 1973 the plaintiffs realised that in protecting
Contract — Consideration — Promise to perform themselves by the subsidiary agreement against a
existing duty — Sale to company — Allotment of possible fall in share prices they had in effect also
company's shares as purchase price with condition agreed to forgo any profit from a possible rise in the
that vendors defer sale of shares — Vendors market in respect of 60 per cent. of their holding. They
seeking indemnity from third parties for possible refused to complete the main agreement with the public
loss on future sale of shares — Agreement to company unless the defendants agreed to a
indemnify on threat of repudiation of contract with cancellation of the subsidiary agreement and its
company — Whether valid and sufficient replacement by the defendants' entering into a
consideration for indemnity — Whether agreement guarantee by way of indemnity. The defendants, fearing
contrary to public policy — Economic duress the delays of litigation and that if completion did not take
place forthwith the public would lose confidence in the
Contract — Validity — Commercial pressure — public company, decided to accede to the plaintiffs'
Agreement to indemnify on threat of repudiation of demands and signed a written contract
contract with third party — Whether consideration
for agreement — Whether agreement contrary to [*615]
public policy — Whether economic duress vitiating
consent of guarantee which stated that in consideration of the
plaintiffs having agreed to sell their shares in the private
The plaintiffs were the owners of the issued share company the defendants agreed to indemnify the
capital of a private company whose principal asset was plaintiffs (in the event of the closing market price of the
a building under construction. The defendants were the shares on April 30, 1974, falling below $2.50 a share)
majority shareholders of a public company which wished for any loss in respect of 60 per cent. of their holding.
to acquire the building. In February 1973 the plaintiffs The sale under the main agreement took place and the
agreed in writing with the public company (the main plaintiffs retained 60 per cent. of their shares in the
agreement) to sell their shares in the private company to public company. Before April 30, 1974 the share prices
the public company. The parties agreed that no money dropped, and the plaintiffs sought to rely on the contract
was to pass under the agreement but that the price of of indemnity. The defendants refused to indemnify them.
the shares was to be satisfied by an issue to the The plaintiffs successfully brought an action based on
plaintiffs of shares in the public company. So as not to the indemnity in the High Court but, on appeal, the
depress the market for the public company's shares the decision was reversed. The plaintiffs appealed to the
plaintiffs undertook at the defendants' request to retain Judicial Committee.
60 per cent. of their newly acquired shares until after
April 30, 1974. The plaintiffs and the defendants agreed On the questions whether there was consideration for
orally that the plaintiffs should be protected against any the contract of indemnity and whether the defendants'
loss from a possible fall in the value of those shares consent to the agreement was vitiated by duress: -
between the date of acquisition and April 30, 1974, and,

See Yi Vonne
 Page 2 of 15 99
PAO ON AND OTHERS APPELLANTS AND LAU YIU LONG AND OTHERS RESPONDENTS [ON APPEAL
FROM THE COURT OF APPEAL OF HONG KONG] [1980] A.C. 614, [1980] A.C. 614

Per curiam. There is nothing contrary to principle in

Held, allowing the appeal, (1) that an act done before recognising economic duress as a factor which may
the giving of a promise could be valid consideration render a contract voidable provided always that the
for that promise if the act had been done at the basis of such recognition is that it must amount to a
promisor's request, the parties had understood that coercion of will, which vitiates consent. It must be
the act was to be remunerated either by payment or shown that the payment made or the contract entered
conferment of a benefit and the payment or into was not a voluntary act (post, p. 636C-D).
conferment of a benefit would have been enforceable
Decision of the Court of Appeal of Hong Kong
had it been promised in advance that since the
reversed.
written guarantee itself referred to the plaintiffs'
antecedent promise not to sell the shares before April The following cases are referred to in the judgment:
30, 1974, it was not possible to treat the defendants' Astley v. Reynolds (1731) 2 Str. 915.
promise of an indemnity as independent of the
plaintiffs' antecedent promise made at the Barton v. Armstrong [1976] A.C. 104; [1975] 2 W.L.R.
defendants' request; and that, therefore, since the 1050; [1975] 2 All E.R. 465, P.C.
guarantee fixed the benefit on the faith of which the Casey's Patents, In re [1892] 1 Ch. 104, C.A.
plaintiffs' antecedent promise had been given, it
stated a valid consideration for the promise of Harris v. Watson (1791) Peake 102.
indemnity (post, pp. 628E, 629F-H, 630G - 631B). Lampleigh v. Brathwait (1615) Hobart 105.
In re Casey's Patents [1892] 1 Ch. 104, C.A. applied. Maskell v. Horner [1915] 3 K.B. 106, C.A.
(2) That, in the circumstances, extrinsic evidence was New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite
admissible to show that the real consideration for the & Co. Ltd. [1975] A.C. 154; [1974] 2 W.L.R. 865;
promise of indemnity was the plaintiffs' promise to the [1974] 1 All E.R. 1015, P.C.
defendants to perform their contractual obligations to
the public company under the main agreement, which North Ocean Shipping Co. Ltd. v. Hyundai
included the undertaking to defer sale of 60 per cent. Construction Co. Ltd. [1979] Q.B. 705; [1979] 3
of the shares; and that, since the plaintiffs' obligation W.L.R. 419; [1978] 3 All E.R. 1170; [1979] 1 Lloyd's
to the defendants to perform their contract with a third Rep. 89.
party could be sufficient consideration for the promise Occidental Worldwide Investment Corporation v.
of indemnity, the defendants were bound by the Skibs A/S Avanti [1976] 1 Lloyd's Rep. 293.
contract of guarantee unless there were grounds for
Skeate v. Beale (1840) 11 Ad. & E. 983.
avoiding the contract (post, pp. 631G - 632D).
Stilk v. Meyrick (1809) 6 Esp. 129; 2 Camp. 317.
New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite
& Co. Ltd. [1975] A.C. 154, P.C. applied. Williams v. Williams [1957] 1 W.L.R. 148; [1957] 1 All
E.R. 305, C.A.
(3) That, although the defendants had been subjected
to commercial pressure, the facts disclosed that they The following additional cases were cited in
had not been coerced into the contract of guarantee argument:
and, therefore, the contract was not voidable on the
Ashmole v. Wainwright (1842) 2 Q.B. 837.
ground of duress, that in the absence of duress,
public policy did not require a contract negotiated at Clifford v. Turrell (1845) 14 L.J.Ch. 390.
arm's length to be invalidated because a party had
D. & C. Builders Ltd. v. Rees [1966] 2 Q.B. 617;
either threatened to repudiate an existing contractual
[1966] 2 W.L.R. 288; [1965] 3 All E.R. 837, C.A.
obligation or had unfairly used his dominant
bargaining position in negotiating the agreement and Hardie and Lane Ltd. v. Chilton [1928] 2 K.B. 306,
that therefore, the defendants, having failed to show C.A.
that the contract of guarantee was either invalid or Harris v. Carter (1854) 3 E1. & B. 559.
voidable, were bound by its terms (post, pp. 634B-E,
635B-D). Hooper & Grass' Contract, In re [1949] V.L.R. 269.

[*616] Kaufman v. Gerson [1904] 1 K.B. 591, C.A.

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 Page 3 of 15 100
PAO ON AND OTHERS APPELLANTS AND LAU YIU LONG AND OTHERS RESPONDENTS [ON APPEAL
FROM THE COURT OF APPEAL OF HONG KONG] [1980] A.C. 614, [1980] A.C. 614

present. The grant of an option may constitute

Kennedy v. Broun (1863) 13 C.B.N.S. 677.
consideration.
Knutson v. Bourkes Syndicate [1941] 3 D.L.R. 593.
Nixon v. Furphy (1925) 25 S.R.(N.S.W.) 151. Extrinsic evidence is admissible to prove consideration.
It is common ground that the law is correctly stated in
Rookes v. Barnard [1964] A.C. 1129; [1964] 2 W.L.R. Halsbury's Laws of England, 4th ed., vol. 12 (1975),
269; [1964] 1 All E.R. 367, H.L.(E.). para. 1487. Extrinsic evidence is not admissible if it
Scotson v. Pegg (1861) 6 H. & N. 295. would produce a conflict but it follows that where a
stated consideration is past and, therefore no
Spence v. Crawford [1939] 3 All E.R. 271, H.L.(Sc.). consideration, there can be no question of conflict and a
Sundell (T. A.) & Sons Pty. Ltd. v. Emm Yannoulatos party would be free to prove consideration by extrinsic
(Overseas) Pty. Ltd. (1955) 56 S.R.(N.S.W.) 323. evidence: see Clifford v. Turrell (1845) 14 L.J. Ch. 390.

Wakefield v. Newbon (1844) 6 Q.B. 276.

A promise to perform a pre-existing contractual
obligation to a third party may amount to a valid
consideration. Motive is irrelevant to the existence of
APPEAL (No. 13 of 1977) by the plaintiffs, Pao On, Ho consideration. The issue of duress should not be
Mei Chun and Pao Lap Chung, from a judgment and confused with that of the consideration. It is undesirable
order (November 5, 1976) of the Court of Appeal of to introduce a public policy test in connection with the
Hong Kong (McMullin and Leonard JJ., Briggs C.J. adequacy of consideration: see Stilk v. Meyrick (1809) 6
dissenting) allowing the appeal of the first defendant, Esp. 129; 2 Camp. 317, 318, per Lord Ellenborough C.J.
Lau (Campbell's report is to be preferred). If there are
[*617] vitiating factors such as duress as recognised by
existing law, effect can be given to them by the
Yiu Long, and the second defendant, Benjamin Lau application of existing principles without recourse to an
Kam Ching, from a judgment (February 17, 1976) of Li attack on the consideration on the ground that it is
J. whereby he ordered the defendants to pay the contrary to public policy. Such an attack on the
plaintiffs $5,392,800 with interest of 6 per cent. from consideration if successful would result in the contract
May 1, 1974, to the date of judgment on the plaintiffs' being void whereas if it were shown to have been
claim for an indemnity under a contract of guarantee induced by duress it would be voidable. If the Board
made with the defendants dated May 4, 1973. accepts that the guarantee is voidable for duress then
before granting relief it should require the defendants to
The facts are stated in the judgment. restore any benefits received under it.

F. P. Neill Q.C., Marion Simmons and Andrew Li (of A promisor who contracts with the promisee to fulfil an
the Hong Kong Bar) for the plaintiffs. The guarantee existing obligation to a third party furnishes good
binds the defendants. The consideration stated in the consideration if the promisee will derive some benefit
guarantee is sufficient to support the defendants' from the performance of the pre-existing obligation:
promise of an indemnity. The guarantee must be Scotson v. Pegg (1861) 6 H. & N. 295 and New Zealand
construed in its context. Its form was taken from the Shipping Co. Ltd v. A. M. Satterthwaite & Co. Ltd. [1975]
Encyclopaedia of Forms and Precedents, 4th ed., vol. 9 A.C. 154. Compare
(1968), pp. 777-824 and founded on established law. [*618]
For the principles applicable to past consideration, see
Chitty on Contracts, 24th ed. (1977), paras 151-154; Chitty on Contracts, 23rd ed. (1968), para. 132 with the
Lampleigh v. Brathwait (1615) Hobart 105; Kennedy v. 24th ed. (1977), para. 177. It follows that (leaving aside
Broun (1863) 13 C.B.N.S 677 and In re Casey's Patents public policy) where A threatens a breach of his contract
[1892] 1 Ch. 104, 115-116. The doctrine of with B in which C has an interest and A then contracts
consideration was developed to differentiate the with C to withdraw his threat, C derives a benefit from
commercial obligation from the gratuitous promise. On his agreement with A and A has furnished good
the facts this guarantee belongs to the commercial field. consideration. There is only the possibility of its being
The consideration is not past. The three conditions contrary to public policy intervening. Stilk v. Meyrick, 2
outlined by Chitty on Contracts in paragraph 154 were Camp 317 takes public policy factors out of the cases

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concerning seamen. [Reference was made to Treitel, means of fulfilling an existing voluntary obligation is not
The Law of Contract, 4th ed. (1975), p. 65.] enough.

In the United States of America this branch of the law is It is accepted that the law is correctly stated in New
developing (see Corbin on Contracts, vol. 1 (1950), Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co.
para. 171) and at present it appears that each case is to Ltd. [1975] A.C. 154. There may be an exception to the
be decided on its merits. To adopt such an approach general rule as regards three party
here would be to invite litigation in every case. [*619]

If the guarantee is otherwise enforceable it is not void cases so that the court may test the consideration
on the ground of economic duress. If the contract of according to whether a benefit is conferred on the third
guarantee was voidable there must be restitutio in party but that is not this case.
integrum and the defendants are not entitled to keep the
benefit of the subsidiary agreement. As to duress and public policy, it is conceded that it is
anomalous that improper pressure short of duress
Andrew Leggatt Q.C. and Christopher Swift for the attacks the consideration and will avoid the contract
defendants. The court must impose some limit to the whereas if there is duress the contract will be merely
invention of consideration for an agreement. On the voidable. There is thus a need for relief on the ground of
facts the only consideration for the guarantee was the economic duress to be available.
plaintiffs' promise to fulfil the main agreement. That was
past consideration and the guarantee was accordingly A promisor may rely on public policy to avoid a contract
unenforceable. Alternatively, the guarantee was in any where improper pressure has been applied to him:
event voidable for duress because on the facts found by Harris v. Watson (1791) Peake 102. That principle is not
the trial judge it was exacted solely by the plaintiffs' confined to two party cases. The defendants adopt
threat to continue in breach of and to reject or repudiate Chitty on Contracts, 24th ed., para. 176. The examples
the main agreement. there given show that where there is a promise of
performance there is a fine distinction between non-
The line of authority based on Lampleigh v. Brathwait, gratuitous promises which ought to be enforced and
Hobart 105, does not establish a general rule that where those which ought not to be enforced by reason of some
three parties are involved, a promise to one to perform improper pressure which has been applied to the
an existing obligation to a third is always good promisor. For the factors involved in cases of this kind
consideration: see Chitty on Contracts, 24th ed., para. see: Halsbury's Laws of England, 4th ed., vol. 9, para.
154 and Halsbury's Laws of England, 4th ed., vol. 9 326-328; Corbin on Contracts, vol. 1, paras. 183, 184
(1974), para. 320. Such a promise may amount to good and Williston on Contracts, 3rd ed., vol. 13 (1970),
consideration but not invariably so. Where an section 1617. The removal of a detriment wrongly
agreement is subsisting that which is relied on as applied can never constitute good consideration. The
consideration must have been necessary to give threat must have some relation to the end sought to be
business efficacy to the main agreement and the test of induced: see Scotson v. Pegg, 6 H. & N. 295.
whether a promise amounts to good consideration is
whether the promisee could succeed on a claim for A person who takes advantage of his economic strength
quantum meruit. If the parties have agreed appropriate to exact a hard bargain from another is liable to have it
recompense (the subsidiary agreement) that negatives set aside if he has caused the other party to submit to
any quantum meruit. For the classical exposition of the his demands by duress. Duress is the commission or
law: see In re Casey's Patents [1892] 1 Ch. 104, 115- threatened commission of a wrongful act. It includes a
116, per Bowen L.J. A natural explanation of the threatened breach of contract. It may render the
precedents contained in the Encyclopaedia of Forms contract voidable: see Barton v. Armstrong [1976] A.C.
and Precedents is that in each case they represent the 104; Occidental Worldwide Investment Corporation v.
working out of a prior express agreement. That one Skibs A/S Avanti [1976] Lloyd's Rep. 293, 334-335 and
party gains two advantages from an agreement does North Ocean Shipping Co. Ltd. v. Hyundai Construction
not mean that the other party obtains a benefit and that Co. Ltd. [1979] Q.B. 705. A person who is compelled by
therefore there was consideration. On the facts there a threatened breach of contract to do some act whereby
must be a separate new bargain and an alternative loss accrues to him can sue the person who threatens

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him for damages for intimidation: Rookes v. Barnard to avoid a contract for duress only in a case of duress to
[1964] A.C. 1129, 1206, 1209. Money paid under a the person: Coke, Institutes of the Laws of England part
threat of breach of contract is recoverable by an action 2 (1797) c. 48 para. 483; Bracton, Laws and Customs of
for money had and received: Nixon v. Furphy (1925) 25 England Vol. 2 (1968 translation by Samuel Thorne,
S.R.(N.S.W.) 151; Knutson v. Bourkes Syndicate [1941] Harvard University Press) p. 64; Holdsworth, A History
3 D.L.R. 593 and In re Hooper & Grass' Contract [1949] of English Law, 2nd ed., vol. 8 (1937), p. 51;
V.L.R. 269. If it is wrong to impugn this kind of Blackstone's Commentaries on the Laws of England,
transaction by reference to the consideration (i.e., (1841 reprint), vol. 1, pp. 130-131; Skeate v. Beale
alleging that it is vitiated) then it can still be impugned by (1840) 11 Ad. & E. 983; Ashmole v. Wainwright (1842) 2
the application of the doctrine of duress: Chitty on Q.B. 837; Wakefield v. Newbon (1844) 6 Q.B. 276;
Contracts, 24th ed., para. 177. Maskell v. Horner [1915] 3 K.B. 106; Hardie and Lane
Ltd. v. Chilton [1928] 2 K.B. 306 and Halsbury's Laws of
On an action on a promise which has been exacted by England, 4th ed., vol. 9, paras. 296, 297. The family
the threat of a breach of a contract between promisor cases are cases of terror and are distinguishable from
and promisee a defendant may resist not only on the those concerning commercial contracts. Occidental
ground that the promise was unsupported by Worldwide Investment Corporation v. Skibs A/S Avanti
consideration but also on the ground that no person can [1976] 1 Lloyd's Rep. 293 and North Ocean Shipping
insist on a settlement procured by intimidation Co. Ltd. v. Hyundai Construction Co. Ltd. [1979] Q.B.
(compulsion): D. & C. Builders Ltd. v. Rees [1966] 2 705 are the only two authorities to the contrary and were
Q.B. 617, 625. Where a transaction has been freely wrongly decided. Approval of them would lead towards
entered into as a result of a threatened breach of the approach adopted in the United States of America
contract consent has not been freely given, it is vitiated and to its attendant difficulties.
by the threat and the transaction is voidable: Occidental
Worldwide Investment Corporation v. Skibs A/S Avanti A document which recites that a guarantee is given "at
[1976] Lloyd's Rep. 293; North Ocean Shipping Co. Ltd. the promisor's request" discloses a good consideration
v. for the guarantee where the transaction was still moving
[*620] at the time the guarantee was given. On the facts and
applying well-established principles of contract law the
Hyundai Construction Co. Ltd. [1979] Q.B. 705 and T. A. guarantee is a good contract. Alternatively, it is binding
Sundell & Sons Pty. Ltd. v. Emm Yannoulatos because of the recital that it was made at the promisor's
(Overseas) Pty. Ltd. (1955) 56 S.R. (N.S.W.) 323. This request. [Reference was made to Chitty on Contracts,
principle applies notwithstanding that the person 22nd ed. (1961), para. 130; 23rd ed. (1968), para. 129
threatened is not a party to the contract if the threat is to and Cheshire and Fifoot, Law of Contract, 9th ed.
cause injury to him by means of the breach. A (1976), pp. 98-101.] See Harris v. Carter (1854) 3 E1. &
promisor's urgent need of the performance of a contract, B. 559 for further light on Stilk v. Meyrick, 6 Esp. 129; 2
the making or failure to make a protest and the Camp. 317 and the sixth interim report of the Law
availability of other adequate legal remedies are only Revision Committee (1937) Cmd. 5449, on promises to
relevant in determining whether or not a promisor acted perform existing obligations.
voluntarily: Astley v. Reynolds (1731) 2 Str. 915;
Occidental Worldwide Investment Corporation v. Skibs Nixon v. Furphy, 25 S.R.(N.S.W.) 151; In re Hooper &
A/S Avanti [1976] 1 Lloyd's Rep. 293, 336 and Maskell Grass' Contract [1949] V.L.R. 269 and T. A. Sundell &
v. Horner [1915] 3 K.B. 106, 118, 123. A promisee must Sons Pty. Ltd. v. Emm Yannoulatos (Overseas) Pty.
normally make restitution of benefits received under a Ltd., 56 S.R.(N.S.W.) 323 were all money had and
cancelled transaction but not where there has been received cases. D. & C. Builders Ltd. v. Rees [1966] 2
mutual consideration for the cancellation or the Q.B.
cancellation has been at the promisor's behest. See [*621]
also Goff and Jones, The Law of Restitution, 2nd ed.
(1978), pp. 161-164, 176-185. 617 was not a case of duress. In Kaufman v. Gerson
[1904] 1 K.B. 591 the contract failed on the grounds of
Neill Q.C. in reply. The defendants' submissions on the public policy. Duress to goods has never been a ground
development of the doctrine of duress are contrary to for avoiding a contract and is entirely different from
authority. Since the 13th century a party has been able duress to the person notwithstanding that that may have

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been extended to include mental duress. by LORD SCARMAN.

The litigation
As to restitutio in integrum, see Chitty on Contracts,
24th ed., para. 299 and Spence v. Crawford [1939] 3 All By a judgment dated and entered February 17, 1976, Li
E.R. 271. J. ordered the defendants, Lau Yiu Long and his
younger brother Benjamin, to pay the plaintiffs, Pao On,
As to the doctrine of duress in the United States of his wife, and son $5,392,800 with interest as from May
America, see chapter 47 of Williston on Contracts, 3rd 1, 1974, to the date of judgment. The judge found the
ed. That shows that there has been a major money to be due under a written agreement dated May
development of duress which has been extended to 4, 1973. It is
cover economic duress. The decisions are conflicting [*622]
and the resemblance to the old law is slight but there
appears to be a three-fold test: that one side convenient to refer to this agreement as "the
involuntarily accepted the terms of another; that guarantee." It was, in fact, an indemnity. The defendants
circumstances permitted no other alternative; and that appealed. The Court of Appeal, by a majority (Briggs
such circumstances were the result of coercive acts of C.J. dissenting), allowed their appeal. The plaintiffs now
the opposite party. Any legal remedy which might have appeal to Her Majesty in Council.
been available must be shown to be "inadequate" or
"meaningless" in the circumstances in which the party Two issues are fundamental. Was there consideration
finds himself and there must be no other means of for the contract of guarantee? If there was, was the
immediate relief available; compare Astley v. Reynolds, consent of the defendants vitiated by duress? All the
2 Str. 915. The presence of a profit motive may show judges below regarded the consideration appearing on
that the agreement was voluntary. Absence of protest is the face of the document of May 4, 1973, as a past
relevant. Silence, he taking of the benefit of the consideration, which, by itself, could not in law support
agreement or delay may preclude the remedy. The the defendants' promise to indemnify the plaintiffs
threat of a lawful act can amount to duress. The doctrine against their loss. The trial judge, however, ruled that
may extend into the field of industrial disputes where a extrinsic oral evidence was admissible to prove an
strike is wrongful. additional, but not contradictory, consideration, found
that the evidence did establish the existence of good
Leggatt Q.C. Harris v. Carter, 3 E1. & B. 559 supports additional consideration, and rejected on the facts the
the defendants because it reinstates public policy as a defendants' case of duress.
factor in vitiation. As to Skeate v. Beale, 11 Ad. & E.
983, the defendants adopt Kerr J. in Occidental In the Court of Appeal McMullin J. was of the opinion
Worldwide Investment Corporation v. Skibs A/S Avanti that extrinsic evidence to prove the existence of an
[1976] 1 Lloyd's Rep. 293, 335. Ashmole v. Wainwright, additional consideration was in the circumstances of this
2 Q.B. 837and Wakefield v. Newbon, 6 Q.B. 276also case inadmissible, and so was for allowing the appeal.
support the defendants' view of Skeate v. Beale. Hardie He expressed the opinion that such consideration as the
and Lane Ltd. v. Chilton [1928] 2 K.B. 306 is not extrinsic evidence, if admitted, would reveal was bad in
relevant in the present context. In Kaufman v. Gerson law because it showed the plaintiffs to have obtained
[1904] 1 K.B. 591 there was a step towards an the guarantee by dishonest means. "The consideration,"
extension of the doctrine of duress to include economic he declared, "might be good in a technical or legalistic
duress. As to the plaintiffs' reliance on Halsbury's Laws sense and yet the bargain based upon it be found
of England, 4th ed., vol. 9, para. 296: see Goff and voidable." He also "inclined to the view that the doctrine
jones, The Law of Restitution, 2nd ed., pp. 168-170. It is [of economic duress] is not appropriate to the
necessary to consider both the recovery of the money circumstances of the parties in the present case."
and the setting aside of the contract. Compare Astley v. Leonard J. thought the extrinsic evidence admitted by
Reynolds, 2 Str. 915 with Skeate v. Beale, 11 Ad. & E. the trial judge was not contradictory of the written
983. instrument containing the guarantee, and was, therefore
admissible to prove an additional consideration. But he
Cur. adv. vult. held that to regard as valuable consideration the
promise given by the plaintiffs not to break their contract
April 9. The judgment of their Lordships was delivered with a third party was in the circumstances of this case

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"contrary to public policy and contrary to ordinary capital of the Tsuen Wan Shing On Estate Co. Ltd. (the
justice." Accordingly he also was for allowing the Shing On company), a private company incorporated in
appeal. He was "unconvinced" that there was any Hong Kong. The defendants were at that time the
evidence of economic duress. Briggs C.J. agreed that majority shareholders in the Fu Chip Investment Co.
there was no evidence of duress. He held that the Ltd. Fu Chip had been incorporated in January 1973
extrinsic evidence revealed an additional consideration and "went public" on February 9, 1973, when
consistent with that stated in the guarantee. He found permission to deal in its shares was granted by the Far
the additional consideration in the "whole arrangement" East Exchange. The principal asset of the Shing On
to which the parties came on May 4, 1973, the date of company was a 21 -storey building under construction -
the guarantee. He was for dismissing the appeal. the Wing On building. The plaintiffs were keen to realise
the value of the building by selling the shares of the
There are three significant features in these judgments. company. The defendants were keen to extend the
First, all four judges are agreed that the consideration property-holding of Fu Chip, an investment company.
expressed in the written guarantee of May 4, 1973, was There were discussions between the plaintiffs and the
a past consideration not, by itself, capable of supporting defendants on or about February 21. On Tuesday,
the defendants' promise of indemnity. This, being a February 27, all was settled and two written agreements
question of construction of a written contract, is a were signed. The first (known as "the main agreement")
decision upon a point of law. It is the subject of a was a contract for the sale by the plaintiffs of their
vigorous challenge mounted for the first time in the shares in the Shing On company to Fu Chip. The parties
appeal to this Board. Secondly, three of the four judges to the agreement were the plaintiffs as vendors, Fu Chip
held the extrinsic evidence admissible, expressing the as purchasers, and the Shing On company. whose total
opinion that the additional consideration revealed by it issued share capital was to be transferred to Fu Chip.
was not inconsistent with the terms of the written The price payable by Fu Chip was $10.5 m., and was to
guarantee. Two judges, however, held that it would be be met by the allotment to the plaintiffs of 4.2m. ordinary
contrary to public policy to recognise as valid the shares of $1 each in Fu Chip. It was provided that the
consideration market value of a Fu Chip share for the purpose of the
[*623] agreement was to be deemed to be $2.50 for each $1
share. Completion was to be on or before March 31,
revealed by the extrinsic evidence. Finally, all the judges 1973. It was stipulated that time should "in every respect
negatived on the facts the defendants' case of economic be the essence of this agreement." The parties did,
duress. however, agree on March 28, to defer the date for
The questions for the Board completion to April 30, 1973.

Three questions call for decision by their Lordships' These provisions had the effect that no cash was to
Board. (1) Does the guarantee upon its proper pass under the agreement. The whole of the price was
construction state a valid consideration for the to be satisfied by the issue of shares. The plaintiffs gave
defendants' promise of indemnity? (2) Does the extrinsic Fu Chip an undertaking as to the way they would deal
evidence as to the circumstances in which the with the shares to be allotted to them. They undertook,
guarantee was given establish the existence of a valid by clause 4 (k) of the agreement:
consideration additional to the consideration, if any, [*624]
stated in the agreement? (3) If there be consideration
for the promise of indemnity, is the guarantee "Each of the [plaintiffs] shall retain in his own right in Fu
nevertheless unenforceable, the consent of the Chip 60 per cent. of the shares allotted to him under this
defendants having been induced by duress? Upon the agreement and shall not sell or transfer the same on or
third question there are concurrent findings of fact. It before the end of April 1974."
would have to be shown, therefore, that the judges In other words, the plaintiffs gave an undertaking to Fu
below had misconceived the relevant law before the Chip that they would not sell or transfer before the end
Board could reverse their unanimous rejection of the of April 1974 2.5m. of the 4.2m. shares to be issued to
defendants' case based on economic duress. them in satisfaction of the price of $10.5m. The
The facts restriction was of great importance to the defendants, as
majority shareholders in Fu Chip. As the first defendant
In February 1973 the plaintiffs owned the issued share said in evidence, the plaintiffs must support the Fu Chip

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shares. He feared that heavy selling by the plaintiffs for the issued capital of the Shing On company because
could depress the market, and so the value of his shares could go up in value whereas cash could not,
shareholding in Fu Chip. Not unreasonably the plaintiffs and they expected - as everyone else (including the
wanted a measure of protection before agreeing to the defendants) did in February 1973 - that share values
restriction. They wanted from the man, for whose benefit would rise. Yet by the form of guarantee against a fall in
the undertaking was given, a guarantee "against a fall in the value of the shares which they accepted they
value of the shares during the year in which they could deprived themselves, so far as 60 per cent. of their
not sell." When the second plaintiff asked the first holding was concerned, of the very advantage which by
defendant "what happened if shares dropped below taking their price in shares they hoped to gain - and
$2.50," the first defendant offered to sign an agreement without receiving any other benefit for having to wait a
to buy back the shares at $2.50 after one year. The trial year before they could realise cash on 60 per cent. of
judge said he was their price. It is not surprising either that the first
"inclined to believe that the first defendant's account is defendant thought he had the better of the bargain or
accurate to the extent that in the course of the discussion that the second plaintiff became indignant when she
the plaintiffs did not object to the first defendant's offer to appreciated what she and her family had given away by
purchase their retained shares as a sufficient form of the subsidiary agreement. She and her husband,
guarantee" (emphasis supplied).
therefore, made up their minds that they would not
This finding is important because of the stress laid by complete the main agreement unless they could
McMullin and Leonard JJ. on the dishonesty of the substitute a guarantee by way of indemnity for the
second plaintiff who gave evidence that the parties had subsidiary agreement.
orally agreed upon a guarantee. The trial judge found
that she was genuinely seeking "a guarantee." While he
On April 25, 1973, solicitors, describing themselves as
rejected her evidence as to the nature of the agreement
acting for the Shing On company, wrote a letter to the
reached, he did find that the plaintiffs and the first
solicitors for Fu Chip asking them
defendant saw the first defendant's offer to buy back the "… to send us on behalf of our clients a guarantee from
shares as a form of guarantee. Indeed, when the first your clients that the intended allotment of 4.2 m. ordinary
defendant came to give evidence, he described his offer shares of your clients would be of the value of the sum
as "my guarantee." $10.5m."
The confusions of the letter are remarkable, but
Accordingly, the second agreement ("the subsidiary irrelevant. It was well understood that the solicitors who
agreement"), signed also on February 27, 1973, was a wrote the letter also acted for the plaintiffs, that the
contract under which the plaintiffs agreed to sell and the solicitors who received it also acted for the defendants
first defendant agreed to buy on or before April 30, and that the guarantee was sought in respect of 60 per
1974, at a price of $2.50 a share 2.5m. shares in Fu cent. only of the 4.2m. shares allotted in satisfaction of
Chip (being 60 per cent. of the total allotment made by the purchase price under the main agreement. The reply
Fu Chip in satisfaction of the price to be paid for its was a denial of any agreement of guarantee - correct,
acquisition from the plaintiffs of the issued share capital no doubt, according to the card but not really consistent
of the Shing On company). The commercial effect of with the first defendant's view of the subsidiary
these two agreements was remarkable. The first agreement as his guarantee of 60 per cent. of the price.
defendant had got very much the better bargain - as he
himself recognised. No cash was required of him or Fu The plaintiffs now made clear that they would not
Chip on completion. If Fu Chip shares fell below $2.50 complete the main agreement with Fu Chip unless the
on April 30, 1974, the plaintiffs would, however, be subsidiary agreement was cancelled and a true
protected by the obligation upon the first defendant to guarantee (by way of indemnity) substituted for it. The
buy back 60 per cent. of the shares at $2.50 a share. first plaintiff disappeared on a business trip to Taiwan,
They secured, therefore, their "guarantee" against a fall while the second plaintiff remained in Hong Kong,
in the share price. But if the rice on that date was saying there would be no completion until he had
higher, the plaintiffs still remained bound to sell back the returned and considered the position. The first plaintiff
shares at $2.50. The plaintiffs had elected shares as returned to Hong Kong on April 29 and immediately
their price made plain to the first defendant that, as Li J. put it:
[*625] "… unless a guarantee and indemnity for the price of the
2.5m. Fu Chip shares was given by the defendants the

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plaintiffs would not complete the main agreement with the defendants might have suffered a temporary paper loss
Fu Chip." of profit but would not have suffered a financial ruin. The
This was serious for the first defendant. Fu Chip had first defendant did threaten that the Fu Chip would sue
only recently gone public. A public announcement had the plaintiffs on the main agreement. However, in the end
been made of Fu Chip's acquisition of the Wing On he chose to avoid litigation and yielded to the plaintiffs'
building by its take-over of the share capital of the Shing demand. The first defendant must have considered the
matter thoroughly in the light of the then marketing
On company. If the deal fell through, the public would,
condition and formed the opinion that the risk in giving
the first defendant thought, lose confidence in Fu Chip
the guarantee was more apparent than real. As I have
shares. The first defendant had, therefore, to decide
said earlier on, neither party at the time could have
whether to yield to the plaintiffs' demand for the foreseen the stock market subsequently slumping in such
cancellation of the subsidiary agreement and manner. Had the plaintiffs realised that the prices in
[*626] general in the stock market would fall to the extent as we
now know then they would not even bother to demand for
for a guarantee in its place or to stand by the two the guarantee. They would be quite satisfied with the
agreements of February 27, and have Fu Chip sue for subsidiary agreement. Therefore I find as a fact that
specific performance of the main agreement. The first when the defendants agreed to sign the guarantee
course would enable completion to take place on or very neither they nor the plaintiffs envisaged
soon after April 30; the second course would entail the [*627]
delays of legal action, though the first defendant was
well aware that there was no defence. The first a drastic fall of the market and that the defendants never
expected that on the guarantee they might be required to
defendant's problem is best described in the words of
compensate the plaintiffs in terms of millions of dollars.
the trial judge. After quoting the first defendant's
This was an error of judgment in a business deal. The
evidence that he would lose a lot if Fu Chip failed to
defendants were reluctant to be deprived of a good
take over the Shing On company, the judge said: bargain - the subsidiary agreement. But I find that they
"These words reflect the optimism and hope of the first were quite prepared to take a calculated risk (which at
defendant when he yielded to the plaintiffs' demand for a the time appeared to be very little) in order to pacify the
guarantee. At the time the demand was made the first plaintiffs who were adamant. It was in such
defendant placed the matter in the hands of his solicitors. circumstances that the guarantee was given."
He had proper legal advice. He knew very well whether
In the light of these findings it is surprising that the trial
he gave the guarantee or not the main agreement
judge also found that the cancellation of the subsidiary
between the Fu Chip and the plaintiffs was still valid as a
agreement formed no part of the consideration for the
separate document. The Fu Chip could have sued the
plaintiffs for specific performance or for damages. Out of giving of the guarantee on May 4. The judge found - no
the original issued and paid up capital of 12,600,000 doubt, correctly - that the plaintiffs wanted the subsidiary
shares in the Fu Chip the first defendant owned agreement cancelled in any event. But the existence of
6,531,000 shares. In addition he had purchased more their desire is perfectly consistent with its cancellation
since the listing of such shares. His brother, the second and the substitution for it of a guarantee as part and
defendant, owned 1,500,000 shares. Between the two of parcel of a comprehensive settlement accepted by the
them they owned the controlling interests of the Fu Chip. first defendant as the best and most effective way of
By then the first defendant had already set himself about securing early completion of the main agreement -
in manipulating the price of the Fu Chip shares by buying which was his objective throughout the negotiations of
and selling. If the defendants refused to give the
May 4.
guarantee on the Fu Chip shares, then the Fu Chip
shares might drop a few 10 cents in price only if the
general condition of the market remained bullish. It would Their Lordships agree with Briggs C.J.'s analysis of
be possible for the first defendant to push the price up those negotiations. He said:
again with his manipulation. The Fu Chip, after all, is an "However, the cancellation was part of the agreement for
investment company. All its assets consist of landed the completion of the main agreement. It was cancelled
property. So long as the properties in the Fu Chip have by mutual agreement as part and parcel of this: it does
been quoted in their true value the success or failure in not stand alone. The consideration for the guarantee was
the taking over of the Shing On could not have affected the whole arrangement for the completion of the main
the true value of the Fu Chip shares. Whatever set back agreement of which the cancellation of the subsidiary
in the market price of the Fu Chip shares could not have agreement formed part. The judge found that the plaintiffs
sent them below their true value. Even if it did, the wanted the subsidiary agreement to be cancelled in any
event. But there is no evidence that this was what the

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defendants wanted. The defendants agreed to the therefore, having accepted a year's restriction on
cancellation only as part of the whole arrangement. The dealing in 60 per cent. of the shares allotted to them,
cancellation cannot be considered in vacuo." were left, according to his case, by the events of May 4
This analysis is supported by the evidence of the first without any safeguard against a fall in the market, the
defendant himself. When asked whether the subsidiary damaging effects of which they were powerless to
agreement was cancelled on the basis that a written forestall or diminish. If the law really compels such a
guarantee would be executed and would be effective he conclusion, one may be forgiven for thinking that the
replied "Yes," saying that he was "forced" to regard the time has come to re-consider it.
guarantee as a substitute for the subsidiary agreement. The first question
He went on to add the significant observation that once
he had signed the guarantee he regarded it as binding. The first question is whether upon its true construction
the written guarantee of May 4, 1973, states a
The events of May 4 can be very shortly stated. The first consideration sufficient in law to support the defendants'
defendant's legal advisers produced the first draft of a promise of indemnity against a fall in value of the Fu
contract of guarantee. It was revised by both parties, Chip shares. The instrument is, so far as relevant, in
and an option inserted to enable the first defendant to these terms:
buy back the shares, if they dropped below $2.50, and "Re: Tsuen Wan Shing On Estate Co. Ltd.
he chose to do so. According to the first defendant, the
cancellation of the subsidiary agreement was "In consideration of your having at our request agreed to
immediately followed by the signing of the guarantee. sell all of your shares of and in the above mentioned
The judge made no finding as to the sequence of company whose registered office is situate at 274 Sha
events, but was satisfied that the guarantee was signed Tsui Road Ground Floor, Tsuen Wan New Territories in
to induce the plaintiffs to complete the main agreement. the colony of Hong Kong for the consideration of
A somewhat angry discussion then $10,500,000: by the allotment of 4,200,000 ordinary
[*628] shares of $1.00 each in Fu Chip Investment Co. Ltd.
whose registered office is situate at no. 33 Wing Lok
Street Victoria in the said colony of Hong Kong and that
ensued in which the first defendant was seeking some
the market value for the said ordinary shares of the said
effective safeguard (e.g. retention of the scrip or share Fu Chip Investment Co. Ltd. shall be deemed as $2.50
certificates) against the plaintiffs defaulting on their for each of $1.00 share under an agreement for sale and
obligation (of great importance to the first defendant) not purchase made between the parties thereto and dated
to sell before April 30, 1974. The issue was settled by February 27, 1973, we Lau Yiu Long ( ) of no. 152 Tin
the plaintiffs giving the first defendant and his brother an Hau Temple Road, Flat C1, Summit Court, 14th floor in
indemnity in the event of any breach of their obligation the colony of Hong Kong merchant and Benjamin Lau
not to sell the shares. The parties then went to the Kam Ching ( ) of no. 31 Ming Yuen Street West,
offices of Fu Chip's accountants, where they completed basement in the
the transaction under the main agreement. There is no [*629]
suggestion that the first defendant signed the contract of
guarantee under protest. On the contrary, he had said colony of Hong Kong merchant the directors of the
said Fu Chip Investment Co. Ltd. hereby agree and
present his own legal advisers and, as the trial judge put
guarantee the closing market value for 2,520,000 shares
it, was "quite prepared to take a calculated risk (which at
(being 60 per cent. of the said 4,200,000 ordinary shares)
the time appeared to be very little) …" of the said Fu Chip Investment Co. Ltd. shall be at $2.50
per share and that the total value of 2,520,000 shares
During the period May 4, 1973, to April 30, 1974, share shall be of the sum of HK$6,300,000 on the following
prices slumped. By April 30 Fu Chip shares had fallen to marketing date immediately after April 30, 1974, and we
36 cents a share. Yet the first defendant allowed the further agree to indemnify and keep you indemnified
plaintiffs to continue in the belief that they had their price against any damages, losses and other expenses which
of $2.50 a share guaranteed by him. Nor has the first you may incur or sustain in the event of the closing
defendant at any time offered to restore the plaintiffs to market price for the shares of Fu Chip Investment Co.
the "status quo ante" - i.e. to their position under the Ltd. according to the Far East Exchange Ltd., shall fall
short of the sum of $2.50 during the said following
subsidiary agreement. Indeed it is his (remarkable)
marketing date immediately after April 30, 1974, provided
contention that neither the subsidiary agreement nor the
always that if we were called upon to indemnify you for
guarantee of May 4 has legal effect. The plaintiffs,
the discrepancy between the market value and the said

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total value of HK$6,300,000 we shall have the option of "First.... a meer voluntary courtesie will not have a
buying from you the said 2,520,000 shares of Fu Chip consideration to uphold an assumpsit. But if that
Investment Co. Ltd. at the price of HK$6,300,000 " courtesie were moved by a suit or request of the party
Mr. Neill, counsel for the plaintiffs before their Lordships' that gives the assumpsit, it will bind, for the promise,
Board D but not below, contends that the consideration though it follows, yet it is not naked, but couples it self
stated in the agreement is not in reality a past one. It is with the suit before, and the merits of the party procured
to be noted that the consideration was not on May 4, by that suit. which is the difference."
1973, a matter of history only. The instrument by its The modern statement of the law is in the judgment of
reference to the main agreement with Fu Chip Bowen L.J. in In re Casey's Patents [1892] 1 Ch. 104,
incorporates as part of the stated consideration the 115-116; Bowen L.J. said:
"Even if it were true, as some scientific students of law
plaintiffs' three promises to Fu Chip: to complete the
believe, that a past service cannot support a future
sale of Shing On, to accept shares as the price for the
promise, you must look at the document and see if the
sale, and not to sell 60 per cent. of the shares so
promise cannot receive a proper effect in some other
accepted before April 30, 1974. Thus, on May 4, 1973, way. Now, the fact of a past service raises an implication
the performance of the main agreement still lay in the that at the time it was rendered it was to be paid for, and,
future. Performance of these promises was of great if it was a service which was to be paid for, when you get
importance to the defendants, and it is undeniable that, in the subsequent document a promise to pay, that
as the instrument declares, the promises were made to promise may be treated either as an admission which
Fu Chip at the request of the defendants. It is equally evidences or as a positive bargain which fixes the
clear that the instrument also includes a promise by the amount of that reasonable remuneration on the faith of
plaintiffs to the defendants to fulfil their earlier promises which the service was originally rendered. So that here
given to Fu Chip. for past services there is ample justification for the
promise to give the third share."
Conferring a benefit is, of course, an equivalent to
The Board agrees with Mr. Neill's submission that the
payment: see Chitty on Contracts, 24th ed. (1977), vol.
consideration expressly stated in the written guarantee
1, para. 154.
is sufficient in law to support the defendants' promise of
indemnity. An act done before the giving of a promise to
Mr. Leggatt, for the defendants, does not dispute the
make a payment or to confer some other benefit can
existence of the rule but challenges its application to the
sometimes be consideration for the promise. The act
facts of this case. He submits that it is not a necessary
must have been done at the promisors' request: the
inference or implication from the terms of the written
parties must have understood that the act was to be
guarantee that any benefit or protection was to be given
remunerated either by a payment or the conferment of
to the plaintiffs for their acceptance of the restriction on
some other benefit: and payment, or the conferment of a
selling their shares. Their Lordships agree that the mere
benefit, must have been legally enforceable had it been
existence or recital of a prior request is not sufficient in
promised in advance. All three features are present in
itself to convert what is prima facie past consideration
this case. The promise given to Fu Chip under the main
into sufficient consideration in law to support a promise:
agreement not to sell the shares for a year was at the
as they have indicated, it is only the first of three
first defendant's request. The parties understood at the
necessary preconditions. As for the second of those
time of the main agreement that the restriction on selling
preconditions, whether the act done at the request of
must be compensated for by the benefit of a guarantee
the promisor raises an implication of promised
against a drop in price: and such a guarantee would be
remuneration or other return is simply one of the
legally enforceable. The agreed cancellation of the
construction of the words of the contract in the
subsidiary
[*630] circumstances of its making. Once it is recognised, as
the Board considers it inevitably must be, that the
expressed consideration includes a reference to the
agreement left, as the parties knew, the plaintiffs
plaintiffs' promise not to sell the shares before April 30,
unprotected in a respect in which at the time of the main
1974 - a promise to be performed in the future, though
agreement all were agreed they should be protected.
given in the past - it is not possible to treat the
defendants' promise of indemnity as independent of the
Mr. Neill's submission is based on Lampleigh v.
plaintiffs' antecedent promise,
Brathwait (1615) Hobart 105. In that case the judges
[*631]
said, at p. 106:

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Extrinsic evidence is also admissible to prove the

given at the first defendant's request, not to sell. The illegality of the consideration. In their Lordships' opinion
promise of indemnity was given because at the time of the law is correctly stated in Halsbury's Laws of
the main agreement the parties intended that the first England, 4th ed., vol. 12 (1975), para. 1487. The
defendant should confer upon the plaintiffs the benefit of extrinsic evidence in this case shows that the
his protection against a fall in price. When the subsidiary consideration for the promise of indemnity, while it
agreement was cancelled, all were well aware that the included the cancellation of the subsidiary agreement,
plaintiffs were still to have the benefit of his protection was primarily the promise given by the plaintiffs to the
as consideration for the restriction on selling. It matters defendants, to perform their contract with Fu Chip,
not whether the indemnity thus given be regarded as the which included the undertaking not to sell 60 per cent. of
best evidence of the benefit intended to be conferred in the shares allotted to them before April 30, 1974. Thus
return for the promise not to sell, or as the positive the real consideration for
bargain which fixes the benefit on the faith of which the [*632]
promise was given - though where, as here, the subject
is a written contract, the better analysis is probably that the indemnity was the promise to perform, or the
of the "positive bargain." Their Lordships, therefore, performance of, the plaintiffs' pre-existing contractual
accept the submission that the contract itself states a obligations to Fu Chip. This promise was perfectly
valid consideration for the promise of indemnity. consistent with the consideration stated in the
guarantee. Indeed, it reinforces it by imposing upon the
This being their Lordships' conclusion, it is necessary to plaintiffs an obligation now owed to the defendants to do
consider Mr. Neill's further submission (also raised for what, at the first defendant's request, they had agreed
the first time before the Board) that the option given the with Fu Chip to do.
defendants, if called upon to fulfil their indemnity, to buy
back the shares at $2.50 a share was itself a sufficient Their Lordships do not doubt that a promise to perform,
consideration for the promise of indemnity. But their or the performance of, a pre-existing contractual
Lordships see great force in the contention. The obligation to a third party can be valid consideration. In
defendants promised to indemnify he plaintiffs if the New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite &
market price of Fu Chip shares fell below $2.50. Co. Ltd. (The Eurymedon) [1975] A.C. 154, 168 the rule
However, in the event of the defendants being called on and the reason for the rule were stated:
to implement this promise they were given an option to "An agreement to do an act which the promisor is under
take up the shares themselves at $2.50. This on the an existing obligation to a third party to do, may quite well
face of it imposes on the plaintiffs in the circumstances amount to valid consideration … the promisee obtains the
benefit of a direct obligation.... This proposition is
envisaged an obligation to transfer the shares to the
illustrated and supported by Scotson v. Pegg (1861) 6 H.
defendants at the price of $2.50 if called on to do so.
& N. 295 which their Lordships consider to be good law."
The concomitant benefit to he defendants could be a
Unless, therefore, the guarantee was void as having
real one - for example, if they thought that the market,
been made for an illegal consideration or voidable on
after a temporary set-back, would recover to a price
the ground of economic duress, the extrinsic evidence
above $2.50. The fact that the option is stated in the
establishes that it was supported by valid consideration.
form of a proviso does not preclude it being a
contractual term or one under which consideration
Mr. Leggatt for the defendants submits that the
moves.
consideration is illegal as being against public policy. He
The second question
submits that to secure a party's promise by a threat of
repudiation of a pre-existing contractual obligation owed
There is no doubt - and it was not challenged - that
to another can be, and in the circumstances of this case
extrinsic evidence is admissible to prove the real
was, an abuse of a dominant bargaining position and so
consideration where (a) no consideration, or a nominal
contrary to public policy. This, he submits, is so even
consideration, is expressed in the instrument, or (b) the
though economic duress cannot be proved. This
expressed consideration is in general terms or
submission found favour with the majority in the Court of
ambiguously stated, or (c) a substantial consideration is
Appeal. Their Lordships, however, consider it
stated, but an additional consideration exists. The
misconceived. Reliance was placed on the old
additional consideration must not, however, be
"seaman" cases of Harris v. Watson (1791) Peake 102
inconsistent with the terms of the written instrument.

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and Stilk v. Meyrick (1809) 6 Esp. 129; 2 Camp. 317. consideration for a promise, one finds cases in which
Counsel also referred to certain developments in public policy has been held to invalidate the
American law, which are to be found described in two consideration. A promise to pay a sheriff in
leading works, Corbin on Contracts (1950) and Williston consideration of his performing his legal duty, a promise
on Contracts, 3rd ed. (1975). The relevant passages are to pay for discharge from illegal arrest, are to be found
Corbin, vol. 1, ch. 7 and Williston, vol. 1, ch. 47. Their in the books as promises which the law will not enforce:
Lordships would make one general observation on what see the cases cited in paragraph 326, footnote 2 of
is revealed by these two distinguished American works. Halsbury's Laws of England, 4th ed., vol. 9 (1974). Yet
Where some judges speak of public policy, others speak such cases are also explicable upon the ground that a
of economic duress. No clear line of distinction between person who promises to perform, or performs, a duty
the two concepts emerges as settled in the American imposed by law provides no consideration. In cases
law. where the discharge of a duty imposed by law has been
treated as valid consideration, the courts have usually
In the seaman cases there were only two parties - the (but not invariably) found an act over and above, but
seaman and the captain (representing the owner). In consistent with, the duty imposed by law: see Williams
Harris v. Watson, Peake 102, the captain during the v. Williams [1957] 1 W.L.R. 148. It must be conceded
voyage, for which the plaintiff had contracted to serve as that different judges have adopted differing approaches
a seaman, promised him five guineas over and above to such cases: contrast, for example, Denning L.J. at p.
his common wages if he would perform some extra 149 et seq. with the view of the majority in Williams's
work. Lord Kenyon thought (p. 103) that if the seaman's case. But, where the pre-existing obligation is a
claim to be paid five guineas was supported "it would contractual duty owed to a third party, some other
materially affect the navigation of this kingdom." He ground of public policy must be relied on to invalidate
feared the prospect of seamen in times of danger the consideration (if otherwise legal); the defendants
insisting "on an extra charge on such a promise," and submit that the ground can be extortion by the abuse of
non-suited the plaintiff. In Stilk v. a dominant bargaining position to threaten the
[*633] repudiation of a contractual obligation. It is this
application of public policy which Mr. Leggatt submits
Meyrick, 6 Esp. 129; 2 Camp. 317 Lord Ellenborough has been developed in the American cases. Beginning
C.J. also non-suited the seaman. According to the with the general rule that "neither the performance of
report in 2 Camp. 317. 319 he said: duty nor the promise to render a performance already
"I think Harris v. Watson was rightly decided; but I doubt required by duty is a sufficient consideration" the courts
whether the ground of public policy, upon which Lord have (according to Corbin on Contracts, vol. 1, s. 171)
Kenyon is stated to have proceeded, be the true principle advanced to the view
on which the decision is to be supported. Here, I say the "that the moral and economic elements in any case that
agreement is void for want of consideration." involves the rule should be weighed by the court, and that
Espinasse, who appeared as junior counsel for the the fact of preexisting legal duty should not be in itself
unsuccessful plaintiff in the case, reports the case decisive."
somewhat differently. He reports (6 Esp. 129, 130) Lord [*634]
Ellenborough C.J. as saying that " … he recognised the
principle of the case of Harris v. Watson as founded on The American Law Institute in its Restatement of the
just and proper policy." But the report continues: "When Law, Contracts, Chapter 3, section 84 (d), has declared
the defendant [sic - but surely the plaintiff is meant?] that performance (or promise of performance) of a
entered on board the ship, he stipulated to do all the contractual duty owed to a third person is sufficient
work his situation called upon him to do." These cases, consideration. This view (which accords with the
explicable as they are upon the basis of an absence of statement of our law in New Zealand Shipping Co. Ltd.
fresh consideration for the captain's promise, are an v. A. M. Satterthwaite & Co. Ltd. [1975] A.C. 154)
unsure foundation for a rule of public policy invalidating appears to be generally accepted but only in cases
contracts where, save for the rule, there would be valid where there is no suggestion of unfair economic
consideration. pressure exerted to induce the making of what Corbin
on Contracts calls "the return promise."
When one turns to consider cases where a pre-existing
duty imposed D by law is alleged to be valid Their Lordships' knowledge of this developing branch of

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American law is necessarily limited. In their judgment it [*635]

would be carrying audacity to the point of foolhardiness
for them to attempt to extract from the American case public policy. The law is not, in their Lordships'
law a principle to provide an answer to the question now judgment, reduced to countenancing such stark
under consideration. That question, their Lordships injustice: nor is it necessary, when one bears in mind
repeat is whether, in a case where duress is not the protection offered otherwise by the law to one who
established, public policy may nevertheless invalidate contracts in ignorance of what he is doing or under
the consideration if there has been a threat to repudiate duress. Accordingly, the submission that the additional
a pre-existing contractual obligation or an unfair use of a consideration established by the extrinsic evidence is
dominating bargaining position. Their Lordships' invalid on the ground of public policy is rejected.
conclusion is that where businessmen are negotiating at The third question
arm's length it is unnecessary for the achievement of
justice, and unhelpful in the development of the law, to Duress, whatever form it takes, is a coercion of the will
invoke such a rule of public policy. It would also create so as to vitiate consent. Their Lordships agree with the
unacceptable anomaly. It is unnecessary because observation of Kerr J. in Occidental Worldwide
justice requires that men, who have negotiated at arm's Investment Corporation v. Skibs A/S Avanti [1976] 1
length, be held to their bargains unless it can be shown Lloyd's Rep. 293, 336 that in a contractual situation
that their consent was vitiated by fraud, mistake or commercial pressure is not enough. There must be
duress. If a promise is induced by coercion of a man's present some factor "which could in law be regarded as
will, the doctrine of duress suffices to do justice. The a coercion of his will so as to vitiate his consent." This
party coerced, if he chooses and acts in time, can avoid conception is in line with what was said in this Board's
the contract. If there is no coercion, there can be no decision in Barton v. Armstrong [1976] A.C. 104, 121 by
reason for avoiding the contract where there is shown to Lord Wilberforce and Lord Simon of Glaisdale -
be a real consideration which is otherwise legal. observations with which the majority judgment appears
to be in agreement. In determining whether there was a
Such a rule of public policy as is now being considered coercion of will such that there was no true consent, it is
would be unhelpful because it would render the law material to inquire whether the person alleged to have
uncertain. It would become a question of fact and been coerced did or did not protest; whether, at the time
degree to determine in each case whether there had he was allegedly coerced into making the contract, he
been, short of duress, an unfair use of a strong did or did not have an alternative course open to him
bargaining position. It would create anomaly because, if such as an adequate legal remedy; whether he was
public policy invalidates the consideration, the effect is independently advised; and whether after entering the
to make the contract void. But unless the facts are such contract he took steps to avoid it. All these matters are,
as to support a plea of "non est factum," which is not as was recognised in Maskell v. Horner [1915] 3 K.B.
suggested in this case, duress does no more than 106, relevant in determining whether he acted
confer upon the victim the opportunity, if taken in time, voluntarily or not.
to avoid the contract. It would be strange if conduct less
than duress could render a contract void, whereas In the present case there is unanimity amongst the
duress does no more than render a contract voidable. judges below that there was no coercion of the first
Indeed, it is the defendants' case in this appeal that defendant's will. In the Court of Appeal the trial judge's
such an anomaly is the correct result. Their case is that finding (already quoted) that the first defendant
the plaintiffs, having lost by cancellation the safeguard considered the matter thoroughly, chose to avoid
of the subsidiary agreement, are without the safeguard litigation, and formed the opinion that the risk in giving
of the guarantee because its consideration is contrary to the guarantee was more apparent than real was upheld.
public policy, and that they are debarred from In short, there was commercial pressure, but no
restoration to their position under the subsidiary coercion. Even if this Board was disposed, which it is
agreement because the guarantee is void, not voidable. not, to take a different view, it would not substitute its
The logical consequence of Mr. Leggatt's submission is opinion for that of the judges below on this question of
that the safeguard which all were at all times agreed the fact.
plaintiffs should have - the safeguard against fall in
value of the shares - has been lost by the application of It is, therefore, unnecessary for the Board to embark
a rule of upon an inquiry into the question whether English law

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recognises a category of duress known as "economic

duress." But, since the question has been fully argued in Solicitors: Stephenson, Harwood Bower, Cotton &
this appeal, their Lordships will indicate very briefly the Bower.
view which they have formed. At common law money
paid under economic compulsion could be recovered in
T. J. M
an action for money had and received Astley v.
Reynolds (1731) 2 Str. 915. The compulsion had to be
such that the party was deprived of "his freedom of
End of Document
exercising his will" (see p. 916). It is doubtful, however,
whether at common law any duress other than duress to
the person sufficed to render a contract voidable: sec
Blackstone's Commentaries, Book 1, 12th ed. pp. 130-
131 and Skeate v. Beale (1841) 11 Ad. & E. 983.
American law (Williston on Contracts, 3rd ed.) now
recognises that a contract may be avoided on the
[*636]

ground of economic duress. The commercial pressure

alleged to constitute such duress must, however, be
such that the victim must have entered the contract
against his will, must have had no alternative course
open to him, and must have been confronted with
coercive acts by the party exerting the pressure:
Williston on Contracts, 3rd ed., vol. 13 (1970), section
1603. American judges pay great attention to such
evidential matters as the effectiveness of the alternative
remedy available, the fact or absence of protest, the
availability of independent advice, the benefit received,
and the speed with which the victim has sought to avoid
the contract. Recently two English judges have
recognised that commercial pressure may constitute
duress the pressure of which can render a contract
voidable: Kerr J. in Occidental Worldwide Investment
Corporation v. Skibs A/S Avanti [1976] 1 Lloyd's Rep.
293 and Mocatta J. in North Ocean Shipping Co. Ltd. v.
Hyundai Construction Co. Ltd. [1979] Q.B. 705. Both
stressed that the pressure must be such that the C
victim's consent to the contract was not a voluntary act
on his part. In their Lordships' view, there is nothing
contrary to principle in recognising economic duress as
a factor which may render a contract voidable, provided
always that the basis of such recognition is that it must
amount to a coercion of will, which vitiates consent. It
must be shown that the payment made or the contract
entered into was not a voluntary act.

For these reasons their Lordships will humbly advise

Her Majesty that the appeal be allowed and that the
judgment of the trial judge be restored with interest up to
date of Her Majesty's Order in Council disposing of this
appeal. The defendants must pay the plaintiffs' costs
here and below.

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TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN

BHD & ORS
CaseAnalysis
| [1996] 4 MLJ 331

TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN BHD
& ORS [1996] 4 MLJ 331
Malayan Law Journal Reports · 11 pages

HIGH COURT (KOTA KINABALU)

IAN CHIN J
SUIT K153 OF 1991
7 October 1995
Case Summary
Contract — Coercion — Whether party contending coercion had proven that an offence had been commited
under the Penal Code (FMS Cap 45) — Whether refusal to supply goods contracted to be sold amounted to
unlawful detention of property — Contracts Act 1950 s 15

Contract — Undue influence — Whether plaintiff in position to dominate will of defendants — Whether
transaction was in the ordinary course of business — Contracts Act 1950 s 16

Contract — Damages — Delivery — Late delivery — Whether failure to give notice of intention to claim
compensation when accepting late delivery amounted to waiver — Contracts Act 1950 s 56(3)

Contract — Guarantee — Guarantor's liability — Whether guarantors liable when notice of demand sent to
address different from that expressly stated in the guarantee — Interpretation of clause deeming service

Teck Guan Trading Sdn Bhd ('the plaintiff') agreed to sell round bars to Hydrotek Engineering (S) Sdn Bhd ('the
first defendant'), the payment for which was guaranteed by John Fong Nyuk Foh ('the second defendant') and
Christine Voo Heng Choong ('the third defendant').The dispute here mainly concerned the price of the round bars.
The defendants contend that the price was stated as RM1,180 in a document dated 27 July 1990. However, the
plaintiff alleged that there was a typing error as the actual price should be RM1,244. The plaintiff produced a letter
dated 18 September 1990 by the first defendant agreeing to pay RM1,244 for the round bars. The first defendant
stated that they initially resisted the demand but later agreed as the plaintiff persistently refused to supply; they
required the bar to produce the concrete they had committed themselves to supplying; and there was no time to
look for any other source of supply. The round bars were delivered on 19 September 1990 and the first defendant
accepted delivery. Due to the failure of the defendants to pay for the balance of payment for the bars sold, the
plaintiff sent a notice of demand to the second and third defendants at the address of the first defendant. As there
was no reply from the defendants, the plaintiff commenced action and on 18 February 1992 took out an application
for summary judgment and striking out of the defendants' counterclaim which was granted by the senior assistant
registrar. The defendants appealed against the decision as they alleged that on the facts of the case there was an
inference of undue influence and/or coercion with reference to 'economic [*332]
blackmail'. The second and third defendants also contended that they did not receive the letter of demand as it was
not sent to the address expressly set out in the guarantee.
Held, dismissing the appeal:

(1) There are two ways of committing 'coercion' as defined by s 15 of the Contracts Act 1950 ('the Act'), one of
which is the threatening of an act forbidden by the Penal Code (FMS Cap 45) ('the Code'), while the other
is the unlawful detention or the threatening of such to the prejudice of any person, with the intention of

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causing any person to enter into an agreement. The party contending that there was coercion must say
what offence had been committed under the Code before the court could decide whether such an offence
had been committed.However, this was not done here and, on the facts of the case, no offence under the
Code had been revealed. Further, the refusal of the plaintiff to supply the round bars at RM1,180 did not
amount to unlawful detention of property as the plaintiff was exercising its legal right over its own property.
Therefore, there was no question of coercion being committed by the plaintiff on the first defendant (see pp
337G–I, 338B–D).
(2) The contention of 'economic blackmail' has been variedly termed under the English law as 'commercial
pressure', 'economic duress' and 'unfair use of a dominant bargaining position'. However, the parties here
were dealing with each other at arms' length and in fact the first defendant had before agreeing to the new
price, threatened legal action. Given their pugilistic stance before the agreement, the plaintiff could not be
said to be in a position to dominate the will of the defendants within the ambit of s 16 of the Act. The
transaction in this case was a transaction in the ordinary course of business (see pp 338E–F, 340D–E; Pao
On v Lau Yiu Long [1980] AC 614 followed).
(3) In cases of late delivery, the failure of a party to give notice of their intention to claim compensation as
required under s 56(3) of the Act, would be regarded as waiver of that right (see p 340G–H).
(4) It is a matter of interpretation of a particular clause when attempting to ascertain its meaning. The wordings
of the clause of the guarantee in the present case deeming service made it clear that the receipt of the
demand was deemed to have taken place notwithstanding that the second and third defendants (the
guarantors) may not have received them and this was abundantly clear from the words 'despite evidence to
the contrary' in the clause. The words of the clause allowed the plaintiff to choose between sending to the
specific address mentioned in the guarantee or to the 'last known address' of the second and third
defendants. Therefore, considering that at the relevant time the second and third defendants were the
chairman and the general [*333]
manager respectively of the first defendant, the demand here had been properly served on the second and
third defendants when sent to the address of the first defendant (see pp 341G–I, 342A–B; Ng Hee Thoong
& Anor v Public Bank Bhd [1995] 1 MLJ 281 distinguished; Amanah Merchant Bank Bhd v Lim Tow Choon
[1994] 1 MLJ 413 followed).

[ Bahasa Malaysia summary

Teck Guan Trading Sdn Bhd ('plaintif') bersetuju untuk menjual batang rod kepada Hydrotek Engineering (S) Sdn
Bhd ('defendan pertama'), pembayaran untuknya digerenti oleh John Fong Nyuk Foh ('defendan kedua') dan
Christine Voo Heng Choong ('defendan ketiga'). Pertikaian di sini berkenaan dengan harga batang rod itu.
Defendan mendakwa bahawa harga yang dinyatakan adalah RM1,180 seperti yang terdapat dalam suatu dokumen
bertarikh 27 Julai 1990. Walau bagaimanapun, plaintif mengatakan bahawa terdapat satu kesilapan menaip kerana
harga sebenarnya adalah RM1,244. Pihak plaintif mengemukakan sepucuk surat bertarikh 18 September 1990
daripada defendan pertama di mana ia bersetuju membayar RM1,244 untuk batang rod tersebut. Defendan
pertama berkata bahawa pada mulanya ia tidak mahu menerima tuntutan itu tetapi akhirnya telah bersetuju kerana
plaintif tetap enggan memberikan bekalan; ia memerlukan bekalan itu untuk menghasilkan konkrit yang telah
dijanjikan; dan tidak ada masa untuk ia mendapatkan bekalan dari tempat lain. Batang rod itu telah dihantar pada
19 September 1990 dan defendan pertama menerima penghantaran itu. Di atas kegagalan defendan untuk
membayar baki bayaran untuk rod yang dijual itu, plaintif telah menghantar notis tuntutan kepada defendan kedua
dan ketiga di alamat defendan pertama. Oleh kerana tidak terdapat sebarang balasan daripada pihak defendan,
plaintif telah memulakan tindakan dan pada 18 Februari 1992 membuat permohonan untuk penghakiman terus dan
untuk membatalkan tuntutan balas defendan yang telah diberikan oleh penolong kanan pendaftar.Defendan
merayu terhadap keputusan itu kerana mereka mengatakan bahawa di atas fakta kes terdapat inferens pengaruh
tak wajar dan/atau paksaan dengan rujukan kepada 'peras ugut ekonomik'. Defendan kedua dan ketiga juga
berhujah bahawa mereka tidak menerima surat tuntutan itu kerana ianya tidak dihantar kepada alamat yang
dinyatakan di dalam gerenti itu.

Diputuskan, menolak rayuan itu:

(1) Terdapat dua cara untuk melakukan paksaan (coercion) seperti yang ditakrifkan oleh s 15 Akta Kontrak
1950 ('Akta itu'), salah satunya ialah mengugut untuk melakukan sesuatu tindakan yang dilarang oleh
Kanun Keseksaan (NMB Bab 45) ('Kanun itu'), sementara yang satu lagi ialah tahanan yang menyalahi
undang-undang atau mengugut sebegitu yang akan menyebabkan prejudis terhadap seseorang, dengan
niat mengakibatkan seseorang memasuki sesuatu perjanjian. Pihak yang mendakwa bahawa [*334]

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TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN BHD & ORS, [1996] 4 MLJ 331

terdapat paksaan mesti menyatakan kesalahan yang dilakukan di bawah Kanun itu sebelum mahkamah
dapat memutuskan sama ada kesalahan itu telah dilakukan. Walau bagaimanapun, ini tidak dibuat di sini
dan, atas fakta kes, tiada kesalahan di bawah Kanun itu ditunjukkan. Leagipun, keengganan plaintif untuk
membekalkan batang rod pada harga RM1,180 bukanlah tahanan yang menyalahi undang-undang kerana
plaintif menggunakan haknya di sisi undang-undang ke atas hartanya sendiri. Maka, paksaan tidak
dilakukan oleh plaintif ke atas defendan pertama (lihat ms 337G–I, 338B–D).
(2) Pertikaian 'peras ugut ekonomik' telah ditermakan dalam berbagai-bagai cara di bawah undang-undang
Inggeris iaitu seperti 'tekanan perdagangan', 'dures ekonomik' dan 'penggunaan kuasa tawar-menawar
dominan yang tidak adil'. Walau bagaimanapun, pihak-pihak di sini telah berunding secara berwaspada,
malah defendan pertama telah mengugut hendak membawa tindakan undang-undang sebelum bersetuju
dengan harga baru itu. Dengan pendirian mereka yang sentiasa berlawanan itu sebelum persetujuan
dicapai, plaintif tidak boleh dikatakan berada dalam keadaan dominan sehinggakan dapat mengawal
kehendak defendan seperti dalam s 16 Akta itu. Transaksi dalam kes ini adalah transaksi dalam aliran
perniagaan biasa (lihat ms 338E–F, 340D–E; Pao On v Lau Yiu Long [1980] AC 614 diikut).
(3) Dalam kes hantar-serah yang lewat, kegagalan sesuatu pihak untuk memberikan notis mengenai niat
mereka menuntut pampasan sebagaimana yang dikehendaki oleh s 56(3) Akta itu, akan disifatkan sebagai
penepian hak itu (lihat ms 340G–H).
(4) Adalah menjadi perkara pentafsiran sesuatu fasal apabila cuba menentukan maknanya. Perkataan dalam
fasal dalam gerenti di dalam kes ini yang mensifatkan penyampaian jelasnya menyatakan bahawa
penerima notis tuntutan disifatkan telah berlaku walaupun defendan kedua dan ketiga (penggerenti)
mungkin tidak menerimanya dan ini adalah sangat jelas daripada perkataan 'walaupun terdapat
keterangan yang menunjukkan sebaliknya' dalam fasal itu. Perkataan dalam fasal itu membenarkan plaintif
memilih antara menghantar ke alamat spesifik yang dinyatakan di dalam gerenti itu atau ke alamat terakhir
defendan kedua dan ketiga yang diketahui. Maka, memandangkan yang pada masa yang relevan
defendan kedua dan ketiga merupakan pengerusi dan pengurus besar masing-masing di dalam defendan
pertama, tuntutan di sini teleh disampaikan dengan cara yang betul ke atas defendan kedua dan ketiga
apabila ianya dihantar ke alamat defendan pertama (lihat ms 341G–I, 342A–B; Ng Hee Thoong & Anor v
Public Bank Bhd [1995] 1 MLJ 281 dibeza; Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 1 MLJ
413 diikut).]
[ Editorial note: The appellants have appealed to the Court of Appeal vide Civil Appeal No S–02–703 of
1995.] [*335]

Notes

For a case on coercion, see 3 Mallal's Digest (4th Ed, 1994 Reissue) para 1349.

For a case on the domination of the will of other party, see 3Mallal's Digest (4th Ed, 1994 Reissue) para 2289.

For cases on late delivery, see 3 Mallal's Digest (4th Ed, 1994 Reissue) paras 1458–1460.

For cases on guarantor's liability, see 3 Mallal's Digest(4th Ed, 1994 Reissue) paras 1679–1693.
Cases referred to

Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 1 MLJ 413

Ng Hee Thoong & Anor v Public Bank Bhd [1995] 1 MLJ 281

Pao On v Lau Yiu Long [1980] AC 614

Legislation referred to

Contracts Act 1950 ss 15, 16, 56(3)

PK Lim (PK Lim & Co) for the appellants.

Norbert Yapp (Jayasuriya Kah& Co) for the respondents.

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TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN BHD & ORS, [1996] 4 MLJ 331

IAN CHIN J
Teck Guan Trading Sdn Bhd ('the plaintiff') sued Hydrotek Engineering (S) Sdn Bhd ('the first defendant'), John
Fong Nyuk Foh ('the second defendant') and Christine Voo Heng Choong ('the third defendant') for RM332,966.84
being the balance payable for round bars sold and delivered to the first defendant and which payment was
guaranteed by the second and third defendants. The plaintiff on 18 February 1992 took out an application for
summary judgment and for striking out of the counterclaim which was heard on 13 October 1994 and granted by the
learned senior assistant registrar on 20 October 1994. An appeal was filed by all the defendants and I heard the
same in chambers on 19 September 1995.

That the goods were delivered is not disputed. The defendants dispute the price of the 10mm x 12m MS bar ('the
bars'). Briefly stated, the agreement which sets out the price of the bars, among others, is the document dated
27 July 1990, and the price is stated to be RM1,180. This document was drawn out as a result of the previous
discussion between the parties and on account of a confirmed order for the goods by the first defendant as
contained in the first defendant's letter dated 25 July 1990, where the price was stated to be RM1,244 and this was
the letter that the plaintiff said supported their contention that there was an error in typing the price in the latter
document dated 27 July 1995. But the first defendant produced another letter, this one dated 26 July 1990, which
stated the price to be RM1,180 and this letter was signed by the plaintiff. The plaintiff, without condescending to the
letter of 26 July 1990, then said the price was finally resolved amicably when the first defendant by their letter dated
18 September 1990, agreed to pay the price of RM1,244. This letter reads: [*336]

Hydrotek Engineering (S) Sdn Bhd

18 September 1990

Teck Guan Trading Sdn Bhd

Kota Kinabalu

Attn: Mr Winston Tai

Dear Sirs

Re: 10mm x 12m MS Round Bar

We refer to our meeting with you this afternoon in my office with the presence of your Mr Ho and our Ms Christine Voo.

It is hereby confirmed that we have mutually agreed as follows:

1 The CIF KK price for 10mm x 12m MS Round Bar to be revised from RM1,180/mt to RM1,244/mt including delivery
to our site in Kolombuong.

2 You will arrange to deliver the above MS Round Bar totalling 61.20mt to our site in Kolombuong by 19 September
1990 with no additional charge.

3 Should any of your materials for whatsoever reason fail to reach us within 30 days period as specified in our Sales
Contract No 00/90 dated 27 July 1990, you shall arrange immediately to deliver materials from your stock or anywhere
for us to use temporarily upon our request until the materials per contract arrive.

4 Should there be any price revision due to the Federal Price Control Policy, you are to substantiate the price revision
by furnishing us with full documentation is support.

5 All other terms and conditions remain unchanged in our Sales Contract No 00/90 dated 27 July 1990.

Please find enclosed herein, our 45 days (from 12 September 1990) post-dated TOB cheque No 974955 for the sum of
RM65,289.78 being the balance of payment for the 61.20mt of 10mm X 12m MS Round Bar as per B/L No PGKK 2.

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Kindly acknowledge acceptance by signing and returning the duplicate copy of this letter.

Thank you.

Yours faithfully

Hydrotek Engineering (S) Sdn Bhd

—Sgd—

John Fong

Chairman
Before this letter, there had been exchange of letters in which the plaintiff maintained that there was an error in the
price while the first defendant insisted that the plaintiffs were bound by the price of RM1,180. The first defendant
had on 28 July 1990, paid a 15% deposit for the various orders pursuant to the agreement of 27 July 1990, but the
plaintiff refused to supply the 10mm x 12m MS bar unless the first defendant agreed to the [*337]
price of RM1,244. The first defendant initially resisted the demand but later, through the letter dated 18 September
1990, agreed because according to the defendants: (1) the plaintiff persistently refused to supply; (2) they, the first
defendant, had committed themselves to producing and supplying concrete requiring the bar; and (3) there was no
time to look for other source of supply. As a result, the bars were delivered on 19 September 1990 as the delivery
order signed on behalf of the first defendant clearly acknowledged.

Whether there was coercion or undue influence

It was upon the facts that I have set out that Mr PK Lim ('Mr Lim'), learned counsel for the defendants, submitted
that 'an inference of undue influence and/or coercion (by reference to economic blackmail) within the meaning of s
14 of the Contracts Act 1950' ('the Act') which, according to Mr Lim, 'nullify and/or invalidate' the agreement to the
price of RM1,244, arose. The increase in price resulted in the first defendant having to pay RM8,558.72 more,
which the first defendant claims to be entitled to set off against the plaintiffs' claim. Could it then be argued that
there was 'coercion' or 'undue influence'? The definitions of 'coercion' and 'undue influence' are supplied,
respectively, by ss 15 and 16 of the Act, viz:
(15) 'Coercion' is 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.

(16) (1) A contract is said to be induced by 'undue influence' where the relations subsisting between the parties are
such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair
advantage over the other.

What is clear is that a dispute had arisen between the parties as to whether there was a mutual mistake when the
document dated 27 July 1990, states the price to be RM1,180 and this dispute, to my mind, was resolved when the
first defendant finally on 18 September 1990, agreed to the price of RM1,244. There are two ways of
committing'coercion' as defined by s 15, one of which is the threatening of an act forbidden by the Penal Code,
while the other is the unlawful detention or the threatening of such to the prejudice of any person, with the intention
of causing any person to enter into an agreement. Mr Lim did not submit whether any or which of the acts of the
plaintiff can be considered as a threat to commit an act forbidden by the Penal Code and which section of the Penal
Act as forbidding the threatened act. Mr Lim must say what offence the plaintiff had committed under the Penal
Code before the court can decide whether such an offence had been committed (see Pollock & Mulla on Indian
Contract and Specific Relief Acts (9th Ed) at p 133). Learned counsel had not done so. This was no surprise
because the facts of this case do not reveal any offence under the Penal Code. The contention of coercion is rarely
heard nowadays as pointed out by Visu Sinnadurai on Law of Contract (2nd Ed) at p 256, where he said: [*338]

(6) The various definitions of 'coercion' under s 15 of the Contracts Act 1950 limit the wrong or threatened wrong to
crimes under the Penal Code alone and not to include tortious wrongs. Acts which are offences other than under the
Penal Code or which are merely a civil wrong will not amount to 'coercion' within the ambit of s 15. To a very large
extent, this limited definition in the Contracts Act renders the scope of coercion obsolete.

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TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN BHD & ORS, [1996] 4 MLJ 331

This brings me to the second method of committing coercion which is the retention of property. I assume that Mr
Lim is arguing, but in any event that is the only possible way it can be argued, that the refusal of the plaintiff to
supply the bars at the price of RM1,180 amounted to an unlawful detention of property in order to get the first
defendant to agree to the price of RM1,244. I am unable to agree that such act can come within the meaning of s
15 because the plaintiff was exercising their legal right over their own property not to deliver because they
maintained the first defendant did not agree to pay the price of RM1,244 and this came about because the first
defendant did not agree there was a mutual mistake in stating the price in the said document. Support for my view
can be found also in Pollock & Mulla, at p 135 where it is said:
Unlawful detaining of property — A refusal on the part of a mortgagee to convey the equity of redemption except on certain
terms is not an unlawful detaining or threatening to detain any property within the meaning of this section.
Therefore, there is no question of coercion being committed by the plaintiff on the first defendant. Mr Lim also
submitted that the facts of this case showed the plaintiff to have resorted to 'economic blackmail' which, according
to him, constituted another category of coercion. Learned counsel did not refer to any authorities. The existence of
such a category under the English law, which has been variedly termed 'commercial pressure', 'economic duress'
and 'unfair use of a dominant bargaining position', was commented on in Pao On v Lau Yiu Long [1980] AC 614
(PC) per Lord Scarman, at pp 635-636, in this way:
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 Skibs 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 Horner [1915] 3 KB 106, relevant in determining
whether he acted voluntarily or not. [*339]

In the present case, there is unanimity amongst the judges below that there was no coercion of the first defendant's
will. In the Court of Appeal, the trial judge's finding (already quoted) that the first defendant considered the matter
thoroughly, chose to avoid litigation, and formed the opinion that the risk in giving the guarantee was more apparent
than real was upheld. In short, there was commercial pressure, but no coercion … Recently two English judges have
recognized that commercial pressure may constitute duress the pressure of which can render a contract voidable: Kerr
J in Occidental Worldwide Investment Corporation v Skibs A/S Avanti [1976] 1 Lloyd's Rep 293 and Mocatta J in North
Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705. Both stressed that the pressure must be such
that the victim's consent to the contract was not a voluntary act on his part. I n their Lordships' view, there is nothing
contrary to principle in recognizing economic duress as a factor which may render a contract voidable, provided
always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be
shown that the payment made or the contract entered into was not a voluntary act.

The facts of that case were these. In February 1973, the plaintiffs sold shares of their company to a public company
in return for the shares of the public company. At the request of the defendants, the plaintiffs agreed to retain 60%
of their newly acquired shares until 30 April 1974, so as not to depress the market of the shares of the public
company. To protect the fall of the prices of the shares happening in the meantime, the plaintiffs and the defendants
entered into a subsidiary agreement where the defendants agreed to buy the 60% shares from the plaintiffs on or
before 30 April 1974 at RM2.50 a share. In April 1973, the plaintiffs realized the subsidiary agreement also had the
effect of the plaintiffs foregoing any profit from a possible rise in the market in respect of the 60% shares. As a
result, the plaintiffs refused to complete the main agreement with the public company unless the defendants agreed
to a cancellation of the subsidiary agreement and its replacement by the defendants' entering into a guarantee by
way of indemnity. The defendants, fearing the delays of litigation and that if completion did not take place forthwith
the public would lose confidence in the public company, decided to accede to the plaintiffs' demands and signed a
guarantee indemnifying the plaintiffs against loss resulting from the price falling below RM2.50 per share on 30 April
1974. The sale under the main agreement was thereafter completed. There was a drop in the price and the plaintiffs
sued on the guarantee. The court there held, inter alia, at p 615:
(3) That, although the defendants had been subjected to commercial pressure, the facts disclosed that they had not
been coerced into the contract of guarantee and, therefore, the contract was not voidable on the ground of duress;
that, in the absence of duress, public policy did not require a contract negotiated at arm's length to be invalidated
because a party had either threatened to repudiate an existing contractual obligation or had unfairly used his dominant

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bargaining position in negotiating the agreement and that, therefore, the defendants, having failed to show that the
contract of guarantee was either invalid or voidable, were bound by its terms. [*340]

It was also the case here, that the first defendant was subjected to commercial pressure, which Mr Lim termed
'economic blackmail', when the first defendant, faced with the prospect of not getting supply of the bars and in order
to avoid that, agreed to the new price. It does not amount to coercion because the agreement to the price was an
exercise of free will. As for undue influence that was alleged to be exerted by the plaintiffs on the defendant, Mr Lim
appeared to be of the conclusion that the said facts, which he argued support coercion, also support the inference
of undue influence. He did not elaborate. How this issue ought to be approached was stated by Pollock & Mulla, at
p 146 in the following manner:
In Raghunath Prasad v Sarju Prasad & Ors AIR (1924) PC 60, the Privy Council indicated the following three stages for
consideration of a case of undue influence:

(i) whether the relations between the parties to each other are such that one is in a position to dominate the will of
another;

(ii) whether the contract has been adduced by undue influence; and

(iii) onus probandi.

The parties here were dealing with each other at arms' length and in fact the first defendant had before agreeing to
the new price, threatened legal action. Given their pugilistic stance before the agreement, I do not see how the
plaintiff can be said to be in a position to dominate the will of another within the ambit of s 16. The transaction in this
case is a transaction in the ordinary course of business not unlike illustration (d) of s 16, viz:
(d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to
make the loan except at an unusually high rate of interest.A accepts the loan on these terms. This is a transaction in
the ordinary course of business, and the contract is not induced by undue influence.

There is no triable issue here.

Whether there was late delivery

I am in entire agreement with the learned senior assistant registrar that the first defendant had by their letter dated
18 September 1990, agreed to accept delivery on 19 September 1990, and this was in fact done as adverted to
earlier. In any event, the first defendant did not, as required by s 56(3), give notice at the time when they accepted
delivery of the round bars of their intention to claim compensation for late delivery.

Whether the third defendant was liable under guarantee

The letters of demand were posted to the second and third defendant guarantors to PO Box 12200, 88824 Kota
Kinabalu which were not the express address of the guarantee but was the address of the first defendant. The
provision in the guarantee deeming service is cl 10 which says:
Any notice or demand made by you hereunder may be served on me/us personally or sent to me/us by post to my/our
address stated overleaf or my/our last known address and if sent by post shall be conclusively deemed to [*341]
have been received by me/us within 48 hours after the time of posting despite any evidence to the contrary.
Mr Lim argued that 'the learned registrar erred in law and in fact by not accepting the second and third defendants'
defence that they did not receive the notice of demand which was a condition precedent to be satisfied by the
plaintiffs before they could sue the said defendants'. Mr Lim then referred to Ng Hee Thoong & Anor v Public Bank
Bhd [1995] 1 MLJ 281, which considered the following provision at p 284:
As to each of us any notice may be served on each of us or on the legal personal representative of each of us either
personally or by sending the same through the post in an envelope addressed to the above-mentioned address or the last
known place of address of the person to be served, and a notice so sent shall be deemed to be served on the say following
that on which it was posted.
In that case, just as in this case, no explanation was given why the demand was posted to another address other
than the specific address mentioned in the guarantee and the guarantor denied receiving the said demand. The
Court of Appeal there held that since there was no explanation why the demand was sent to another address other
than the specific address and since the denial of receipt of the demand was not controverted by affidavit evidence,
the issue of demand becomes triable. This is what the Court of Appeal said, at p 286:

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 Page 8 of 8 121
TECK GUAN TRADING SDN BHD v HYDROTEK ENGINEERING (S) SDN BHD & ORS, [1996] 4 MLJ 331

The respondent bank may well have had a good reason for selecting the addresses appearing on the letters of demand. If it
did, then, it must have come out and said so and proffered an explanation. In the absence of any explanation, the
affirmative statement made by the appellants upon this critical issue remained unchallenged. It is axiomatic that had the
respondent either used the addresses stated in the guarantees or had given a credible explanation as to why those
addresses were not used, then it may have been entitled to rely on the deeming effect of cl 8: Amanah Merchant Bank Bhd
v Lim Tow Choon [1994] 1 MLJ 413.
I am unable to agree that Ng Hee Thoong & Anor v Public Bank Bhdcan apply to the present case because the
clause of that case is different from that of our present case. It is a matter of interpretation of a particular clause
when attempting to ascertain its meaning. The wordings of the clause of the present case make it clear that the
receipt of the demand is deemed to have taken place notwithstanding that the second and third defendants may not
have received them and this is abundantly clear from the words 'despite evidence to the contrary' in the clause. The
words of the clause allow the plaintiff to choose between sending to the specific address mentioned in the
guarantee or to the 'last known address'. I am unable to agree and I do not see how the plain words in the clause
can be stretched to require the plaintiff to explain why they have chosen not to send to the specific address rather
than to the last known address. The words do not so require. What is required of the plaintiff is that they must have
sent by post the demand to the last known address of the second and third defendants. The postal receipt had been
exhibited. That the address was the last known address was asserted to in the affidavit filed on behalf of the [*342]
plaintiff and this assertion, Mr Norbert Yapp, learned counsel for the plaintiff, correctly submitted, was never
controverted. Not only that, the second defendant was at the relevant time, the chairman, and the third defendant,
the general manager, of the first defendant company whose postal address was the address to which the demand
on the second and third defendants was sent. Therefore, it is not only that the assertion was not controverted but
the evidence also bore out that the address to which the demand was posted was the last known address of the
said two defendants. As was in Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 1 MLJ 413 (SC), I am also of
the view that the demand had been properly served on the two defendants.

I, therefore, uphold the decision of the learned senior assistant registrar and dismiss the appeal of all the
defendants with costs.
Appeal dismissed.
Reported by Ng Kian Pin

End of Document

See Yi Vonne
 122

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 8:04:00PM MYT
Job Number: 209346290

Document (1)

1. OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH
SECURITIES SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110
Client/Matter: -None-
Search Terms: ocbc securities (melaka) sdn bhd (formerly known as sykt tan, chow & loh securities sdn bhd)
v koh kee huat - [2004] 2 mlj 110
Search Type: Natural Language
Narrowed by:
Content Type Narrowed by
MY Cases -None-

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See Yi Vonne
 123

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]
(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).

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 Page 2 of 7 124
OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110

[ 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)

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)

See Yi Vonne
 Page 3 of 7 125
OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110

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
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.

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 Page 4 of 7 126
OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110

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
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

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 Page 5 of 7 127
OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110

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
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

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 Page 6 of 7 128
OCBC SECURITIES (MELAKA) SDN BHD (FORMERLY KNOWN AS SYKT TAN, CHOW & LOH SECURITIES
SDN BHD) v KOH KEE HUAT, [2004] 2 MLJ 110

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
(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.

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

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

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 130

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 8:07:00PM MYT
Job Number: 209347057

Document (1)

1. Bergamo Development (M) Sdn Bhd v Eck Development Sdn Bhd & Anor
[2018] MLJU 555
Client/Matter: -None-
Search Terms: bergamo
Search Type: Natural Language
Narrowed by:
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BERGAMO DEVELOPMENT (M) SDN BHD v ECK DEVELOPMENT SDN

BHD & ANOR
CaseAnalysis
| [2018] MLJU 555

Bergamo Development (M) Sdn Bhd v Eck Development Sdn Bhd & Anor
[2018] MLJU 555
Malayan Law Journal Unreported

HIGH COURT (GEORGETOWN)

LIM CHONG FONG J
CIVIL SUIT NO PA-22C-7-12 OF 2016
27 April 2018

Arumugam Ganapathy (Moses Mathew George with him) (Ghazi & Lim) for the plaintiff.
Saravanesh Supramaniam (Allen Chee Ram) for the defendants.

Lim Chong Fong J:

GROUNDS OF JUDGMENTIntroduction

[1] This is a suit by the rescue contractor suing the developer and its affiliated original contractor for final payment in
respect of a housing development project.

[2] The Plaintiff is a private limited company incorporated under the Companies Act 1965.

[3] The First Defendant is a private limited company incorporated under the Companies Act 1965 involved in the
property development business and the developer of the Taman Desa Ku Phase 1 project (“Project”) in Kulim,
Kedah Darul Aman.

[4] The Second Defendant is a private limited company incorporated under the Companies Act 1965 involved in the
construction business. It is affiliated to the First Defendant and they share the same business address.
Preliminary

[5] This Suit was filed on 22 December 2016 and the Plaintiff claimed against both the First Defendant and Second
Defendant (collectively “Defendants”) for the following:
(ai) A declaration that the Plaintiff has completed its Job Scope under the Construction Agreement dated 7
November 2013;
(aii) A declaration that Plaintiff is entitled to the consideration provided under clause 2.1 of the Construction
Agreement dated 7 November 2013;
(aiii) An order that the Defendants pay to the Plaintiff the sum of RM3.1 million;
(aiv)In the alternative to sub-paragraph (iii) above, for an order for specific performance of the Construction
Agreement dated 7 November 2013 and the following consequential orders:
(1) That the Defendants specifically perform clause 2.3 of the Construction Agreement dated 7 November
2013 by issuing and receiving the progressive claims in accordance with the Fifth Schedule of the
Building Contract from the Purchasers or their Financiers, as the case may be;

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(2) That the Defendants specifically perform clause 2.1(b) of the Construction Agreement dated 7
November 2013 by paying to the Plaintiff within 14 days from the date of service of this order the sum
of RM3.1 million.
(av) In the alternative to sub paragraph (iii) and/or (iv), for an order that the Defendants pay to the Plaintiff the
sum of RM3.1 million less the amount assessed or found by this Honourable Court to be the actual costs
incurred by the Defendants to complete the uncompleted Job Scope and to rectify the defects, if any which
the Plaintiff was obliged to rectify under the terms of the Construction Agreement;
(bi) A declaration that the 22 May 2015 Agreement and/or the Supplementary Agreement dated 6 July 2015
have been validly avoided by the Plaintiff and are not enforceable or binding on the Plaintiff;
(bii) That the Defendants pay the Plaintiff the sum of RM6.08 million (or the actual market value of the Plaintiff’s
Units as found by this Honourable Court) less the sum of RM3.3 million paid by the Defendants to the
Plaintiff;
(c) In the alternative, that the Defendants pay to the Plaintiff the sum of RM6.08 million (or the amount found
by this Honourable Court to be the costs incurred by the Plaintiff to carry out the works pursuant to the
Construction Agreement) less the sum of RM3.3 million paid by the Defendants to the Plaintiff;
(d) In the alternative, damages to be assessed;
(e) Costs.

[6] The Defendants in defence counterclaimed for the following:

(a) A declaration that the Supplementary Agreement dated 6 July 2015 is valid and the terms therein
enforceable and binding upon the Plaintiff;
(b) A declaration that the Plaintiff:
(i) refused, failed and/or neglected to complete the Job Scope under the Construction Agreement and/or;
(ii) breached and contravened the express and implied terms of the Construction Agreement and
Supplementary Agreement and is not entitled to received any consideration under the Construction
Agreement and Supplementary Agreement;
(c) An order that the Plaintiff gives effect and transfer or cause the transfer of the whole equity share capital
(free from liabilities) and ownership of Bergamo Development (M) Sdn Bhd free from any encumbrances
and whatsoever accrued or outstanding liabilities owing to the First Defendant or its nominee within
fourteen (14) days from the service of this order;
(d) In the alternative to the above paragraph (c), for an order of specific performance of the Supplementary
Agreement and the consequential order that the Plaintiff specifically execute clause 2.1.3 of the
Supplementary Agreement to give effect and transfer or cause to be transferred;
(i) the whole of equity share capital; and
(ii) ownership rights of Bergamo Development (M) Sdn Bhd;
(e) In the alternative to the above paragraphs (c) and (d), for an order that the Plaintiff pay to the Defendants
damages in the sum equivalent to the whole worth of the equity share capital of Bergamo Development
(M) Sdn Bhd (assessed as at 6 July 2015) to the First Defendant or its nominee within fourteen (14) days
from the service of this order;
(f) The sum of RM4,225,466.50 as damages to the Defendants;
(g) In the alternative to the above paragraph (f), for an order that the Plaintiff pays to the Defendants the sum
stipulated in the above paragraph (f) less the balance of the progressive claim amounting to RM3.1 million;
(h) In the alternative to the above paragraphs (f) and (g), for an order that the Plaintiff pays to the Defendants
the sum in the above paragraph (f) or (g) less the amount of the bank guarantee or deposit that has been
returned to the Defendants till the date of filing of the Counterclaim (if any);
(i) in the alternative, for an order that the damages as claimed in paragraph (f) or (g) or (h) to be assessed by
the Court;

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(j) Damages for breach of the Construction Agreement and Supplementary Agreement to be assessed by the
Court;
(k) Interests at the rate of 5% on the sums in (e) and/or (f) and/or (g) and/or (h) and/or (i) and/or (j) from the
date of filing of the counter claim till full realization;
(l) General damages, aggravated and exemplary damages; and
(m) Costs in indemnity basis.

[7] The trial of this Suit took 8 days on 12 to 14 September 2017, 11 to 13 December 2017 and 5 and 7 February
2018. The trial documents were marked as bundles A to O with the documentary evidence collated in bundles B to
K (save for those in bundle D pages 33 to 55) that carried status B by consent. In the course of the trial, exhibits P1
to D4 were also admitted in evidence.

[8] Nonetheless, the Plaintiff also sought to admit in evidence various WhatsApp mobile phone conversation
messages that are compiled in bundle D pages 33 to 55 but objected upon by the Defendants. These messages
comprised those between the director of the Plaintiff and director of the First Defendant and amongst the Desaku
Kulim Authorities chat group and Desaku Road to CF chat group.

On my review of these messages, I find that the contents are relevant as they relate to the facts in issue as pleaded
in this Suit including the Defendants’ conduct in encouraging the Plaintiff to continue working on the Project after 6
November 2014 as well as the conduct of the project consultants on the quality of work done by the Plaintiff in the
Project. In this respect, ss. 3 and 5 of the Evidence Act 1950 provide as follows:

“3. Interpretation

“fact in issue” means any fact from which, either by itself or in connection with other fact, the existence, non-existence,
nature or extent of any right, liability or disability asserted or denied in any suit or proceeding necessarily follows.

5. Evidence may be given of facts in issue and relevant facts

Evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and of such other
facts as are hereinafter declared to be relevant, and of no others.”

As to the admissibility of these WhatsApp messages, the law has been succinctly set out by Wong Kian Keong JC
in Mok Yii Chek v Sovo Sdn Bhd [2015] 1 LNS 448 as follows:

“24. Even if a party disputes the genuineness of a print-out of an email and “WhatsApp ” message (Disputed Print-out),
namely that party insists on the Disputed Print-out to be marked as a “Part C” document (Part C Document) under Order
34 rule 2(2)(e)(ii) RC, the Disputed Print-out may be admitted as evidence if the following criteria are met:

(a) the party adducing the Disputed Print-out has the onus to prove that the Disputed Print-out fulfils either one of the
2 requirements in s. 5 EA, namely -
(i) (i) the Disputed Print-out concerns the existence or non-existence of “fact in issue ”. Section 3 EA defines a
“fact in issue ”as “any fact from which, either by itself or in connection with other facts, the existence, non-
existence, nature or extent of any right, liability or disability asserted or denied in any suit or proceeding
necessarily follows ”. The phrase of “fact in issue” has been explained by Ong Hock Thye FJ (as his Lordship
then was) in the Federal Court case of How Paik Too v. Mohideen [1967] 1 LNS 57;; [1968] 1 MLJ 51, at 52;
or

(ii) (i) the Disputed Print-out concerns the existence or non-existence of “fact in issue ”. Section 3 EA defines a
“fact in issue ”as “any fact from which, either by itself or in connection with other facts, the existence, non-
existence, nature or extent of any right, liability or disability asserted or denied in any suit or proceeding
necessarily follows ”. The phrase of “fact in issue” has been explained by Ong Hock Thye FJ (as his Lordship
then was) in the Federal Court case of How Paik Too v. Mohideen [1967] 1 LNS 57;; [1968] 1 MLJ 51, at 52;
or

(iii) the Disputed Print-out is relevant under ss 6 to 55 (contained in Chapter 2 EA which is entitled “Relevancy of
facts ”). Section 3 EA explains that a fact is relevant when ”one fact is said to be relevant to another when the

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one is connected with the other in any of the ways referred to in the provisions of [EA] relating to the
relevancy of facts”; and

(b) the Disputed Print-out is a document produced by a “computer ” (defined widely in s 3 EA). Explanation 3 to s 62
EA provides that a document produced by a computer is primary evidence and such primary evidence may be
adduced pursuant to s 64 EA. As the Disputed Print-out is a document produced by a computer, the party
adducing such a document must fulfil one of these 3 alternative conditions -
(i) (i) there is oral evidence that the Disputed Print-out is produced by the computer in the course of the ordinary
use of the computer - please see the judgment of Shaik Daud JCA in the Court of Appeal case of
Gnanasegaran a/l Perarajasingam v. Public Prosecutor [1997] 4 CLJ 6;; [1997] 3 AMR 2841, at 2852-2853,
which has been affirmed by the Federal Court’s judgment given by Zulkefli Makinudin FCJ (as his Lordship
then was) in Ahmad Najib" party2="Public Prosecutor" procphrase="v">Ahmad Najib v. Public Prosecutor
[2009] 2 CLJ 800, at 823-826 and 830;
(ii) there is a certificate given under s 90A(2) EA (Section 90A Certificate) by a person responsible for -

(1) the management of the operation of the computer; or

(2) the conduct of the activities for which the computer is used

- that the Disputed Print-out is produced by the computer in the course of the ordinary use of the computer

According to s 90A(3)(a) EA, the Section 90A Certificate may state a matter to the best of the knowledge and
belief of the person stating it. Where a Section 90A Certificate is given, s 90A(4) EA presumes that the
computer in question ”was in good working order and was operating properly in all respects throughout the
material part of the period during which the document was produced”; or

(c) if the Disputed Print-out is not produced by a computer in the course of its ordinary use, s 90A(6) EA deems such
a document “to be produced by the computer in the course of its ordinary use ” if a party adducing the Disputed
Print-out can prove the following 2 cumulative conditions -

(i) the computer in question was in good working order; and

(ii) the computer was operating properly in all respects throughout the material part of the period during which the
document was produced

- please see the Federal Court case of Ahmad Najib, at 826-830, which has approved Augustine Paul
JCA’s (as his Lordship then was) judgment in the Court of Appeal case of Hanafi Mat Hassan, at p. 306.
It is to be noted that according to s 90C EA, s 90A EA”shall prevail and have full force and effect
notwithstanding anything inconsistent therewith, or contrary thereto, contained in any other provision of
[EA], or in the Bankers’ Books (Evidence) Act 1949, or in any provision of any written law relating to
certification, production or extraction of documents or in any rule of law or practice relating to production,
admission, or proof, of evidence in any criminal or civil proceeding ”.”

Consequently and in my opinion, the Plaintiff herein has satisfied the pre-requisites by the tendering of a certificate
made pursuant to s. 90A(2) Evidence Act 1950 by the director of the Plaintiff who is responsible for the care and
management of the usage of the Samsung Galaxy S6 mobile phone (serial no. R58G3246MHV) and Hewlett-
Packard laptop computer (serial no. CNF1042YS7). The messages were extracted and printed therefrom. He has
certified that the WhatsApp messages were generated from his personal WhatsApp account that was registered
using his mobile phone Maxis number 013-3360600 as well as extracted and printed from his mobile phone and
laptop computer in the course of their ordinary use.

I am mindful that the Defendants referred to the case of Nazaruddin Mohd Shariff @ Masari & Ors v. Samsyem
Saam & Ors [2016] 1 LNS 1434 to challenge the admissibility of the WhatsApp messages because such messages
were found not to be conclusive evidence. The case is however distinguishable because it was determined
pursuant to an interlocutory striking out application.

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In the premises, I therefore admit Document ID 5 and bundle D pages 33 to 55 in evidence as exhibits P5 and P6
respectively.

[9] In addition, the following witnesses testified at the trial:

(i) Balasubramaniam a/l Alagusundaram (“PW1”), a shareholder and director of the Plaintiff;
(ii) Yap King Keong (“PW2”), a registered quantity surveyor and director of Perunding Kos Bersatu Sdn Bhd;
(iii) Tan Ah Keat (‘PW3”), a registered valuer and director of JS Valuers Property Consultants (Penang) Sdn
Bhd;
(iv) Razif Ahmad bin Zubeir Ahmad Khan (“DW1”), the project coordinator of the First Defendant;
(v) Chan Chuan Ka (“DW2”), the quantity surveyor of the First Defendant;
(vi) Rohana binti Shariff (“DW3”), a shareholder and director of the First Defendant;
(vii) Lau Hean Hooi (“DW4”), a registered architect and sole proprietor of H.H. Lau Architect;
(viii) Ng Chong Sit (“DW5”), a professional electrical engineer and partner in Perkhidmatan Perunding Utara;
and
(ix) Tan Eng Hock (“DW6”), a professional civil engineer and partner in Lumbini Consultancy.

[10] After the close of trial, the parties simultaneously submitted their respective written submissions in chief and
followed by submissions in reply. I thereafter heard oral arguments and clarification from counsel on 3 April 2018.
Background Facts

[11] The following background facts are derived from the statement of agreed facts as well as those found by me
based on all the evidence adduced before me.

[12] The First Defendant was the registered and beneficial owner of the land known as PT no. 1523, Mukim Padang
Meha, Daerah Kulim, Kedah held under HS(D) 3058/95 (“Land”).

[13] On or around 2005, the First Defendant commenced development of the Project by getting the Land sub-
divided into 230 individual plots and sold them to purchasers (“Purchasers”). These Purchasers appointed the
Second Defendant as contractor to construct and complete bungalow houses on the sub-divided plots.

[14] The Second Defendant however did not complete the construction of the bungalow houses and the Project was
abandoned sometime in 2008.

[15] Between 2008 and 2013, there were several failed attempts made by the National Housing Department of the
Ministry of Housing and Local Government (“Ministry”) to get the First Defendant to revive the Project. In
consequence, the First Defendant was blacklisted by the Ministry.

[16] In 2013, the Plaintiff was approached by officials of the Ministry to submit a proposal to revive the Project as
rescue contractor.

[17] Following discussions between the Plaintiff represented by PW1 and the Defendants represented by Dato’ Dr
Khor Eng Chuen (“KEC”), DW3 and a Mr. Khoo, the parties then executed a Construction Agreement dated 7
November 2013 (“Construction Agreement”). The Construction Agreement was drafted by the Plaintiff’s solicitor but
there were one to two meetings and telephone conversations between the parties to settle on the terms.

[18] The material terms of the Construction Agreement wherein the Plaintiff, First Defendant and Second Defendant
were designated as the Contractor, Land Owner and Building Contractor respectively are reproduced as follows:

1. CONSTRUCTION AGREEMENT

1.1 In consideration of an subject to the respective agreements undertakings covenants and obligations of the
parties hereto as hereinafter set out, the Land Owner and the Building Contractor hereby agrees to appoint

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the Contractor to complete the Project and the Contractor hereby agrees to complete the Project within the
job scope, the details of which are more specifically provided in the First Schedule hereto (hereinafter
referred to as “the Job Scope”) in accordance with the existing approval by Appropriate Authority of the
building plans and specifications (hereinafter referred to as “the said Building Plans and Specifications”)
including plans for roads, drainage, sewerage, sanitary, electrical and water supplies and subject to terms
and conditions hereinafter contained.
1.2 The contractor hereby agrees to undertake, carry out and successfully complete the Project together with the
infrastructure and amenities thereof in accordance with the Job Scope and the approved building plans by the
Appropriate Authority.

1.3 It is hereby expressly agreed and declared that the type, specifications and all matters and things relating to
the Project may be varied or amended by the Contractor pursuant to the Upgrade and Improvement
Agreement or the Variation Agreement to be entered between the Land Owner, Building Contractor, the
contractor and the respective purchasers of the Project, as the case may be without any extra costs on the
Building Contractor.

2. CONSIDERATION
2.1 In consideration of the Contractor completing the Project in accordance with the Job Scope, it is hereby
expressly agreed that the Contractor shall be entitled to all of the followings:-
(a) Nineteen (19) unsold units of the Project (hereinafter referred to as “the Constructor’s Units”) which shall
be transferred to THSB free from any encumbrances whatsoever upon execution of this Agreement, the
PT numbers of which are as follows:-
1) 634

2) 657

3) 661

4) 681

5) 692

6) 694

7) 700

8) 704

9) 743

10) 753

11) 757

12) 775

13) 776

14) 779

15) 781

16) 783

17) 787

18) 802

19) 809

AND

(b) All the remaining progressive claims on the Purchasers (hereinafter referred to as “the Progressive
Claims”) but in any event not less than Ringgit Malaysia Three Million One Hundred Thousand (RM

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3,100,000.00) only. Subject to all the Progressive Claims have been made and that the Progressive
Claims received shall be less than RM 3,100,100.00, the Land Owner and/or the Building Contractor
shall immediately pay the difference to the Contractor within (14) days upon issuance of Certificate of
Fitness for Occupation for the Project. Any excessive amount from the Progressive Claims (if any) shall
be refunded to the Building Contractor;

AND

(c) Ringgit Malaysia One Hundred Fifty Thousand (RM 150,000.00) only to be paid by the Land
Owner/Building Contractor to the Contractor’s Solicitors as stakeholders within three (3) months from the
date of this Agreement who are hereby authorised to release the same to the Contractor upon issuance
of the Certificate of Fitness for Occupation for the Project.

2.2 To facilitate the provision of Clause 2.1(a) above, The Land Owner shall upon its execution of this Agreement
deposit the Contractor’s Units’ Original Issue Document of Title together with valid and registrable
Memorandum of Transfer and Discharge of Charge (if any) and the latest quit rent and assessment receipts
of the Contractor’s Units with the Contractor for the Contractor or its solicitors to present the same at the
relevant land office to effect the transfer of the Contractor’s Units to THSB.
2.3 To facilitate the provision of Clause 2.1(b) above, the Building Contractor shall upon issuance of Certificate of
Fitness for Occupation for the Project assist the Contractor to issue and receive the Progressive Claims in
accordance with Variation Agreement or the Fifth (5 th) Schedule of the Building Contract, as the case may be,
from the Purchasers or their financiers, as the case may be. The Building Contractor shall upon its execution
of this Agreement, serve a written notice to Public Bank Berhad to irrevocably appoint the three (3)
representatives of the Contractor, namely BALASUBRAMANIAM A/L ALAGUSUNDRAM (NRIC No. 790508-
02-5081) and VIJAYENDREN A/L KUPPUSAMY (NRIC No. 790815-14-5227) and R RAGU A/L RAJOO M
RETHINAM (NRIC No. 800428-08-5697) to be its signatories (with all three to sign) for its Public Bank
Berhad’s Account No.3134086116 (hereinafter referred to as “the said Account”) only to enable the
Contractor to receive the Progressive Claims from the Purchasers or their financiers and to operate the said
Account in the Contractor’s sole and absolute discretion. For the avoidance of doubt, all the Progressive
Claims shall be credited into the said Account only but not any other bank account and all Progressive Claims
received in the said Account shall only be credited to the Contractor’s Public Bank Berhad’s Account No.
3811260309. The signatories appointed by the Building Contractor for the purpose of the said Account hereof
shall withdraw themselves from being the signatories from the said Account instantly from the date of this
Agreement. Upon full receipt of the Progressive Claims by the Contractor, the said three (3) representatives
of the Contractor shall withdraw themselves from being the signatories of the Building Contractor and shall
cease to have any rights on the said Account.

3. CONDITIONS PRECEDENT

It is hereby agreed that this Agreement is expressly conditional upon the following conditions precedent to be
fulfilled by the Land Owner and/or Building Contractor within the time period stipulated hereinafter subject to
any further extensions to be deemed fit and necessary by the Contractor.

3.1 Delivery of Vacant Possession of the Project Land

(a) The Land Owner and/or the Building Contractor shall within fourteen (14) days from the date of
this Agreement deliver vacant possession of the Project Land limited to the area of 230 units of
bungalow lots, water tank and STP area to the Contractor for completion of the Job Scope in
accordance with the provisions of this Agreement.

3.2 Deposit of Documents

(a) The Land Owner and the Building Contractor hall upon their execution of this Agreement furnish
and deposit with the Contractor the originals of the following documents:-

(i) The Director’s Resolution authorising the appointment and withdrawal signatories for the said Account
pursuant to Clause 2.3 hereof;

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(ii) the approval by Appropriate Authority of the building plans and specifications (hereinafter referred to as
“the said Building Plans and Specifications”) including plans for roads, drainage, sewerage , sanitary,
electrical and water supplies;

(iii) the statement of accounts by consultants of the Project for the sums payable for balance job until
Certificate of Fitness for Occupation for 230 units of bungalow lots;

(iv) the details of the 202 Purchasers and their end-financiers;

(v) the PT numbers of the eighty (80) Upgrading Purchasers;

(vi) the original Discharge of Charge Form (Form 16N) (if any) in relation to the Contractor’s Units;

(vii) one (1) certified true copies each of the land Owner’s memorandum and Articles of Association, Form
24,44,49 and its Director’s and Member’s resolution authorising the transfer of each of the Contractor’s
Units to THSB in accordance with this Agreement;

(viii) any other documents in the possession of the Land Owner and the Building Contractor necessarily
required for the Contractor to complete the Job Scope and to transfer the Contractor’s Units to the
THSB, free from any encumbrances whatsoever;

(hereinafter collectively referred to as “the said Documents”)

4. CONTRACTOR’S DUTY

4.1 The Contractor shall complete the Job Scope in a good and workmanlike manner and in compliance with
generally recognised building standards and practices and in accordance with the said existing Buildings
Plans and Specifications within six (6) months from the date of this Agreement and subject to an automatic
extension for six (6) months.

4.7 For the avoidance of doubt and subject to Clause 6.2 herein, any works not stated expressly in the Job Scope
shall remain the duty and obligation of the Land Owner and/or the Building Contractor, as the case may be. In
the event that the Contractor shall assist (but not obligated) to complete any works not stated in the Job
Scope, the Land Owner and the Building Contractor hereby expressly agree that the Contractor shall be
entitled to additional payments provided that the Contractor shall, before commencement of the additional
works, serve a seven (7) days’ prior written notice to the Land Owner and/or the Building Contractor
specifying the details of the additional works required together with a quotation. The Land Owner and/or the
Building Contractor shall be entitled to reject the Contractors’ quotation in writing before expiry of the seven
(7) days’ notice and to complete the said additional works at its own costs and expense within thirty (30) days
from the date of its rejection, failing which the time stipulated in Clause 4.1 hereof shall be extended
accordingly. If the Land Owner and/or the Building Contractor shall accept the Contractor’s quotation, the
Land Owner and/or the Building Contractor shall deposit the full payment of the quotation with the
Contractor’s Solicitors within seven (7) days from the date of its receipt of the said notice from the Contractor
before the Contractor commences the said additional works. The full payment of the quotation shall only be
released by the Contractor’s Solicitors to the Contractor upon issuance of Certificate of Fitness for
Occupation.

4.8 Notwithstanding anything contained herein, the Land Owner and the Building Contractor hereby declare
represent and warrant that all the existing building works are in accordance with the said Building Plans and
Specifications and there shall be no changes or deviations required by the Appropriate Authority and it shall
be the sole responsibility of the Land Owner and/or the Building Contractor for such deviations and to deal
with the Appropriate Authority and to waive or comply with the said requirement within thirty (30) days from
the notice of the Appropriate Authority in the event that there is such requirement by the Appropriate
Authority. In the event that the Land Owner or Building Contractor take more than thirty (30) days to waive or
comply with the said requirement, the time period stated in Clause 41. hereof shall be extended accordingly.
5. THE LAND OWNER’S DUTY

5.1 The Land Owner shall upon its execution of this Agreement, execute a valid and registrable Memorandum of
Transfer (hereinafter referred as “MOT”) under the National Land Code in favour THSB and deposit the same

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with the Contractor for the purpose of the transferring the said Contractor’s Units in the name of THSB, free
from any encumbrance whatsoever.

5.5 The Land Owner shall not further sell or deal with the Contractor’s Units of the Project in any manner
whatsoever save and in accordance with the Agreement.
6. BUILDING CONTRACTOR’S DUTY

6.1 The Building Contractor shall at its own costs and expense construct and complete any other works not stated
expressly in the Job Scope in a good and workmanlike manner and in compliance with generally recognised
building standards and practices and in accordance with the said Buildings Plans and Specifications (as
approved together with all amendments thereto if any) within Six (6) months from the date hereof to facilitate
the issuance of Certificate of Fitness for Occupation for the Project.

6.2 In addition to Clause 6.1 hereof, the Building Contractor shall at its own costs and expense attend to the
defects on the Sewerage Piping and Water Reticulation Piping and the structural defects of the Project with
diligence and in a good and workmanlike manner.
6.3 Upon delivery of vacant possession of the units to the Purchasers, the Building Contractor shall at its own
costs and expense provide Six (6) months defect liability period to the Purchasers in accordance with the
Building Contract. For the avoidance of doubt, the Contractor shall provide six (6) months defect liability
period to the Building Contractor for the painting works, all electrical works done by the contractor and water
piping from the water tank to the main tapping point for the 230 bungalow lots only.

7. CONTRACTOR’S LIBERTY TO SELL

9.1 Upon issuance of Certificate of Fitness for Occupation for the Project, the Contractor shall be entitled to
and be at full and complete liberty to enter into sale agreements with any intended purchasers in respect of
the Contractor’s Units or any one thereof upon such terms and conditions and at such prices as the
Contractor shall in its absolute discretion think fit and proper.

10. SPECIFIC PERFORMANCE

10.1 In the event that the Land Owner or the Building Contractor or the Contractor shall default in the performance
of its duties or breach any of the terms and condition in this Agreement, obligations and covenants herein, the
other party/ies shall be entitled to the remedy of specific performance against the default party and it is
hereby expressly agreed that an alternative remedy of monetary compensation shall not be regarded as
compensation or sufficient compensation for the party’s default in the performance of the terms and
conditions herein. The default party, as the case may be, shall pay all costs disbursements and whatever
expenses legal or otherwise and whether judicial, legal or extra-judicial and as between solicitor and client
paid or payable by the other party to specifically enforce this Agreement.

10.2 Notwithstanding anything contained herein, in the event the Contractor shall fail to complete the Job Scope in
accordance with this Agreement (not due to any fault on the Land Owner or the Building Contractor), the
Contractor shall not be entitled to any considerations provided in Clause 2 hereof and the Contractor shall not
be entitled to make any claims against the Land Owner and/or the Building Contractor. However, in the event
that the Land Owner and/or the Building Contractor shall default in the performance of its duties or breach
any of the terms and conditions in this Agreement, obligations and covenants herein, without prejudice to the
Contractor’s rights pursuant to Clause 10.1 herein, the Contractor shall be entitled to claim from the Land
Owner and/or the Building Contractor for the total works carried out on the said Project.

11. TERMINATION

11.1 It is hereby agreed by the parties that in the absence of any defaults on the part of the Contractor, the
Land Owner and/or the Building Contractor shall not be entitled to terminate this Agreement in any manner
whatsoever, failing which clause 10 hereof shall apply.
13. THE CONTRACTOR’S RELIANCE

13.1 The Land Owner acknowledges that the Contractor has agreed to enter into this Agreement on the basis

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of and in full reliance upon the aforesaid representations, covenants, warranties and declarations which is
true and correct in all respects. It is hereby agreed that in the event that there is a breach of the
representations, covenants or warranties contained herein, the Land Owner shall rectify the said breach
within fourteen (14) days from the date of the Contractor’s Solicitors’ request requiring such rectification,
failing which the Land Owner is deemed to have defaulted and Clause 10 shall apply. The Land Owner
further agrees to indemnify the Contractor and keep the Contractor fully indemnified against all damages
losses proceedings actions expenses and/or claims whatsoever which the Contractor may suffer by reason of
or arising out of any breach of the declarations and representations herein.

FIRST SCHEDULE

JOB SCOPE

1. Design and build of water tank (with minimum capacity for 230 units) and the piping from water tank to main
tapping point for 230 units of bungalow houses

2. Contribution fees to authorities (excluding TNB)

3. Balance payments to consultants of the Project

4. Subject to clause 4.7

5. To check and rectify defects and carry out and complete all necessary and required works according to
existing approved plans which certified by all consultants (if applicable) in order to obtain Certificate of
Occupation for the said 230 units.”

[19] Thus based on clause 4.1 of the Construction Agreement, the Plaintiff is obliged to complete the Job Scope
specified therein (“Works”) within 12 months from 7 November 2013, to wit: 6 November 2014.

[20] The Plaintiff could not commence the Works upon the execution of the Construction Agreement by reason that
the Defendants failed to furnish and deposit to the Plaintiff the original approved building plans. These plans were
delivered to the Plaintiff late and piecemeal, to wit: the building plan in December 2013, TNB sub-station and
Telekom plans in April 2014, landscape plan in May 2014 and the street lighting plans in June 2014. In addition, the
water reticulation details plans and traffic light plans were then not yet submitted. They were finally submitted,
approved and furnished to the Plaintiff in September 2014 and June 2014 respectively. The road and drainage
plans were then also not yet approved. They were finally approved and furnished to the Plaintiff only in June 2014.
The approved sewerage treatment plant (“STP”) plans had expired. The re-submitted STP plans had to be re-
submitted, approved and finally furnished to the Plaintiff in February 2015.

[21] The Plaintiff nonetheless utilized its best endeavours to proceed with the carrying out of the Works wherever
possible as seen from the Project site meeting minutes and the Plaintiff completed the Works in December 2014
save for the STP and the water reservoir and pump house. Consequently, the appropriate authorities such as TNB,
Telekoms, JKR, etc. were notified on the completion of the relevant works for inspections to be carried out to obtain
clearance for the issuance of the certificate of fitness for occupation (“CFO”) of the Project.

[22] By that time, the First Defendant secured a new foreign investor MBI International and was therefore desirous
to commence the Taman Desa Ku Phase 2 project urgently. However the First Defendant had to get itself removed
from the Ministry’s blacklisting. Thus for the STP, the First Defendant made an arrangement with Indah Water
Konsortium (“IWK”) for the First Defendant to give an undertaking to complete the STP and provide a bank
guarantee of RM500,000.00 to IWK in consideration of IWK issuing its letter of clearance for the CFO. As for the
water reservoir and pump house, the Plaintiff discussed with the First Defendant and filed an appeal to the Syarikat
Air Darul Aman Sdn Bhd (“SADA”) for waiver of the construction of the water reservoir and pump house in
consideration of payment of contribution to SADA. The Plaintiff’s appeal was allowed and the Plaintiff paid the
contribution of RM459,733.60 to SADA.

[23] On 29 April 2015, the Majlis Perbandaran Kulim (“MPK”) issued the CFO to the First Defendant. Subsequently,

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the Plaintiff also wrote to the Ministry on 4 May 2015 in support of the First Defendant’s removal from the blacklist
and to re-obtain its housing developer license.

[24] Notwithstanding the issuance of the CFO, the Defendants failed to issue or cause the issuance of the
progressive payment claim to the Purchasers to enable the Plaintiff to be paid as required under clause 2.3 of the
Construction Agreement despite the Plaintiff having requested the Defendants to do so. As the result, there was a
meeting held on 6 May 2015 wherein the Plaintiff was represented by PW1 and the Defendants by KEC, DW3 and
a Mr. Khoo. At that meeting, the Defendants claimed that the Plaintiff defaulted on the Construction Agreement by
not obtaining the CFO before 7 November 2014 and thus the Plaintiff is disentitled to the proceeds of the
progressive claim receivable from the Purchasers as well as the 19 Contractor’s Units of bungalow houses under
clause 2.1 (a) of the Construction Agreement. The Defendants also informed the Plaintiff that the First Defendant
had in February 2015 lodged private caveats on the aforesaid 19 units of bungalow houses which had been
transferred to Tijuana Homes Sdn Bhd in August 2014. As the result and notwithstanding the Plaintiff’s protest, the
Defendants insisted that they would not proceed to issue the progressive claims to the Purchasers unless the
Plaintiff agreed to sell back the 19 units of bungalow to the First Defendant for the sum of RM3.3 million.

Hence on 14 May 2015, the parties met again and it was agreed that the RM3.3 million payment would be paid in a
lump sum on or before 23 May 2015 and the Plaintiff would accordingly cause Tijuana Homes Sdn Bhd to transfer
the aforesaid 19 units of bungalow houses to the First Defendant or its nominees. The Defendants would waive the
Plaintiff’s non compliance of its time obligation under clause 4.1 of the Construction Agreement. As the result there
was a meeting held on 19 May 2015 to confirm the agreement held amongst the Plaintiff, Defendant and officials
from the Ministry. As evidenced by the Ministry’s letter dated 19 June 2015 and minutes appended thereto, it was
noted that the Defendants would hand over the keys to the Purchasers on 26 May 2015. The RM3.3 million would
be paid by the Defendants to the Plaintiff at the end of the week after the transfer forms 14A in respect of the 19
units bungalow houses are submitted to the First Defendant and that the Defendants would issue the progressive
claim to the Purchasers on 25 May 2015.

Subsequently the Plaintiff also obtained the First Defendant’s acknowledgment of the same in the Plaintiff’s letter
dated 22 May 2015 (collectively “May Agreement”).

[25] The Plaintiff handed over the transfer forms of the 19 units of bungalow houses to the First Defendant on 23
May 2015 but the Defendants did not pay the Plaintiff the RM3.3 million on that day in exchange as agreed.

[26] On 25 May 2015, the First Defendant wrote to the Plaintiff alleging that the Plaintiff was in default of the
Construction Agreement for not completing the Works within the stipulated time as well as that the workmanship of
the Works is of bad quality. In addition, the First Defendant had given a bank guarantee of RM500,000.00 to IWK
for the STP that was pending completion. Consequently, the Defendants exercised clause 10.2 of the Construction
Agreement to deny the Plaintiff of any of its consideration thereunder.

[27] Thereafter on 1 June 2015 the First Defendant wrote again to the Plaintiff complaining that tens of scores of the
Purchasers had filed their complaints on uncompleted work for the building and finishing upon receiving their keys
during hand over of vacant possession of their houses. Thus due to impending pressure from them, the First
Defendant was forced to attend to the complaints and immediately carry out work to complete the uncompleted
work. As the result, the Defendants would not be making the progressive claims to the Purchasers until they are all
satisfied with their houses. The Plaintiff would be held accountable and liable for all costs and expenses incurred.
The total costs for completing all the uncompleted work and defective work would be deducted from the monies
payable to the Plaintiff from the progressive claims to the Purchasers.

[28] In consequence, the Defendants only paid the Plaintiff RM500,000.00 on 15 June 2015 and another
RM500,000.00 on 22 June 2015 out of the RM3.3 million that was agreed to have been paid in full in a single lump
sum on 25 May 2015. The Plaintiff continued to pursue the Defendants for the balance of the payment but the
Defendants refused to do so unless and until a further supplementary agreement drawn up by the Defendants is
executed by the Plaintiff.

[29] The Plaintiff thus agreed to execute the supplementary agreement although the Plaintiff knew what the
Defendants were doing was wrong and in breach of the Construction Agreement. Hence the supplementary
agreement was executed on 6 July 2015 (“Supplementary Agreement”). The material terms of the Supplementary
Agreement where the Plaintiff, First Defendant and Second Defendant were again designated as the Contractor,
Land Owner and Building Contractor respectively are reproduced as follows:

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1. COMPLETION OF UNCOMPLETED WORKS AND RECTIFICATION OF DEFECT WORKS ON BUILDINGS

1.1 The Contractor hereby request and the Land Owner hereby agreed to complete all the uncompleted Job
Scope failed to carry out by the Contractor and to rectify the all defects works for the said Projects, as
provided in the Construction Agreement to the satisfaction of the Consultants for the Project.

1.2 The contractor agreed to be solely responsible for all the cost and expenses to complete all the uncompleted
Job Scope and all the cost and expenses for the rectification of defects works for the Project to the
satisfaction of the Consultants for the Project.

1.3 The parties hereby agree that the Land Owner shall be entitle to offset and contra the cost and expenses
incurred by the Land Owner for the completion all the uncompleted Job Scope and for the rectification of
defects works for the Project as provided in the Construction Agreement with the remaining progressive
claims to the Purchasers of the Project.

1.4 Both parties hereby further agreed that any surplus remaining progressive claims after offset and contra with
the cost and expenses incurred by the Land Owner for the completion all the uncompleted Job Scope and for
the rectification of defects works for the Project to be refunded to the Contractor. Likewise any shortfall of the
remaining progressive claims must be settled by the Contractor to the Land Owner.

2.0 TRANSFER OF 19 UNSOLD UNITS OF THE PROJECT AND TAKE OVER OF THE ENTIRE EQUITY SHARE
AND OWNERSHIP OF BERGAMO DEVELOPMENT (M) SDN. BHD.

2.1 In consideration of the Land Owner agree to assist and complete the Job Scope and rectify all the defect
works for the project as provided in Clause 1 above, the Contractor hereby agree to the Land Owner as
follows:
2.1.1The contractor shall execute and effect the registration of transfer in favour of the Land Owner or it
nominee/s Nineteen (19) unsold units of the Project (hereinafter called the “Nineteen (19) unsold units”)
free from any encumbrances whatsoever upon execution of this Agreement. The PT numbers are as
follows :-
Item Plot No. HS. (D) PT.No

1 657 62493 3410

2 634 62470 3387

3 661 62497 3414

4 681 62517 3434

5 688 62524 3441

6 692 62528 3445

7 694 62530 3447

8 700 62536 3453

9 704 62540 3457

10 743 62579 3496

11 753 62589 3506

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Item Plot No. HS. (D) PT.No

12 757 62593 3510

13 775 62611 3528

14 779 62615 3532

15 781 62617 3534

16 783 62619 3536

17 787 62623 3540

18 802 62638 3555

19 803 62645 3562

2.1.2The Land Owner shall be at liberty at its own cost and expenses to lodge a Private Caveat as from the
date hereof provided that Land Owner shall at its own cost and expenses withdraw the said Private
Caveat if the Land Owner shall fail to settle the balance purchase consideration within the time stipulated
in clause 2.2 hereof.

2.1.3The Contractor shall all effect and execute transfer of the entire equity share capital and ownership of
Bergamo Development (M) Sdn Bhd free of encumbrances of whatsoever to the Land Owner or its
nominee/s. The Contractor has to settle all the liabilities owing and outstanding as at the date of
executing transfer.

2.2 In consideration of the Contractor agree to execute and effect registration of transfer of Nineteen (19) unsold
units to the Land Owner or its nominee/s free from any encumbrances whatsoever and effect and execute a
transfer of the entire equity share capital (net of liabilities) and ownership of Bergamo Development (M) Sdn
Bhd free of encumbrances of whatsoever to the Land Owner or its nominee/s, the Land Owner hereby agrees
to pay to the Contractor a sum of RM 3,300,000.00 (hereinafter call the “Consideration”) in the following
manner :-

On or before 22 June 2015 RM 1,050,000.00

On or before 22 July 2015 RM 1,000,000.00

On or before 22 August 2015 RM 1,000,000.00

On or before 22 September 2015 RM 250,000.00

The Contractor hereby acknowledge that he has received a total sum of RM 1,050,000.00 upon execution of
this agreement.
2.4 Should the registration of transfer in favour of the Land Owner or its nominee/s for the Nineteen (19) unsold
units cannot be perfected or effected, the Contractor shall refund in full all the said Consideration to the Land
Owner upon notification.

Should the transfer of the entire equity share capital (net of liabilities) and ownership of Bergamo
Development (M) Sdn Bhd free of encumbrances of whatsoever to the Land Owner or its nominee/s can
not be affected, the Contractor shall refund in full all the said Consideration to the Land Owner upon
notification.”

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[30] That notwithstanding, the Defendants still failed to pay the Plaintiff in accordance with clause 2.2 of the
Supplementary Agreement. The Plaintiff was paid RM500,000.00 on 7 August 2015, RM500,000.00 on 8
September 2015, RM250,000.00 on 5 October 2015, RM200,000.00 on 3 November 2015, RM200,000.00 on 25
November 2015, RM200,000.00 on 31 January 2016 and finally RM400,000.00 on 25 April 2016. Furthermore, the
Defendant did not pay the Plaintiff the sum of RM3.1 million payable from the progressive claims to the Purchasers
even though the defects liability period of the Project was over. The Plaintiff was informed by the Defendants that
the progressive claims were not made to the Purchasers because the Purchasers were claiming late delivery
compensation of their bungalow houses from the Defendants. Furthermore, the defect rectification works in the
Project were being undertaken and are in fact still ongoing presently.

[31] As the result the Plaintiff on 15 August 2016 wrote a letter of demand for payment to the Defendants. They
replied on 17 August 2016 justifying their refusal to do so. The Plaintiff responded with its rebuttal on 9 September
2016. The Defendants again replied on 20 September 2016 with their counter rebuttal.

[32] The Plaintiff thereafter through its solicitors Messrs. Ghazi & Lim by letter dated 16 December 2016 made a
formal demand against the Defendants and the Defendants replied on 28 December 2016 through their solicitors
Messrs. Allen Chee Ram by letter dated 28 December 2016.

[33] In view of the disputes and differences that have arisen, the Plaintiff hence filed this Suit.
Issues for Determination

[34] From the pleadings, statement of issues to be tried and the closing submissions of the parties, I distil the
following broad six issues that require determination together with the rest of the associated sub issues parked
thereunder:
(i) Time for completion of the Works;
(ii) Completion of the Works and Defects therein;
(iii) Validity of the May Agreement and Supplementary Agreement;
(iv) Plaintiff’s Claims;
(v) Defendants’ Counter-Claims; and
(vi) Illegality of Construction Agreement

Findings of the Court

[35] Before dealing with the afore-listed issues seriatim, it is worthwhile that I start off discussing the surrounding
circumstances that led to the execution of the initial Construction Agreement. The genesis to every contract is
always relevant to help to understand the nature of the relationship between the contracting parties. It is common
ground that the Project which comprised of the sale of land and construction of bungalow houses were undertaken
by the Defendants for numerous Purchasers since 2005. The Project was however abandoned in 2008 and I find
that it was due to the Defendants’ impecuniosities as the developer and contractor respectively to finance the
carrying out of the Project till completion. As the result, the Project remained abandoned from 2008-2013 despite
several attempts to revive it because no contractor was willing to be associated with the Defendants in the Project
because of the high financial risks involved. By reason of the abandonment of the Project, the First Defendant was
also blacklisted by the Ministry as a licensed housing developer.

[36] PW1 had been involved in several housing development projects successfully and sometime in 2013, he was
invited by officials of the Ministry particularly Mr. Gunasegaran Naidu to consider resuscitating the Project. After
discussion with his business partner Mr. Vijayendran Kuppusamy, they decided to use the Plaintiff being their new
corporate vehicle to undertake the challenge to revive and complete the Project. Accordingly they went to the
Project site and carried out a visual inspection on every bungalow house. They found that many of the houses were
already built and there was however finishing work pending such as ceiling and painting. They also visited the STP
and the other infrastructural portions of the Project. At that time, there was no approved building plans provided to
them except for working drawings. Based on their experience, the estimated costs to complete the Works was
roughly RM6 million. Thus based on the consideration of balance progressive payment from the Purchasers and

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acquisition of 19 units of bungalow houses that were valued at RM8 million in total, they thought it was viable to
take up the challenge. According to PW1, even in case there was an under calculation and budgeted cost overrun,
they still had sufficient buffer of RM2 million to make some profit in the Project.

[37] Consequently the official from the Ministry, Mr. Gunasekaran Naidu introduced the Defendants representatives
to them. After several discussions, the Construction Agreement was finally executed on 7 November 2013 that
formed the contractual document which governed their relationship. The Plaintiff’s payment terms in clause 2.1 of
the Construction Agreement is unique in that the Plaintiff would only be able to convert as well as receive its
consideration in cash after the completion of the Project. In other words, the interim financing from commencement
until completion of the Project was entirely on the Plaintiff.
(i) Time for Completion of the Works

[38] Based on clause 4.1 of the Construction Agreement, the Plaintiff was obliged to complete the Works by 6
November 2014 including after taking into consideration the automatic extension of 6 months.

[39] However and as set out in paragraph 20 above, I find and hold that the Defendants had breached clause
3.2(a)(ii) of the Construction Agreement by having failed to furnish to the Plaintiff the approved said Building Plans
and Specifications timeously upon the execution of the Construction Agreement as stipulated. I am aware that DW1
felt otherwise but he did not produce any cogent documentary record evidencing the issuance of drawings to the
Plaintiff which is common in the construction industry. For constructional purposes, there is the maxim that the
contractor must not only complete the works within the time but he must also be afforded the time to have the works
completed. It is axiomatic that the Plaintiff must undertake the Works based on approved drawings and
specifications. Based on clause 3.2 (a)(ii) of the Construction Agreement, it is implicit the responsibility of getting all
design of the Works done and approved laid upon the Defendants. Consequently by the Defendants’ lackadaisical
failure to furnish the approved said Building Plans and Specifications within the agreed time, the Plaintiff could not
progress with the execution of the Works as planned or envisaged to achieve completion by 6 November 2014 and
I so find and hold accordingly. That notwithstanding, there were also additional works to be undertaken by the
Plaintiff in deviation of the original Works based on the existing approved said Building Plans and Specification as
stipulated in clauses 1.1 and 4.1 of the Construction Agreement. These additional works comprised of changes in
the design and construction of the traffic lights, M&E system and pump house as well as the STP.

[40] In the Supreme Court case of Thamesa Designs Sdn Bhd v. Kuching Hotels Sdn Bhd [1993] 3 MLJ 25,
Mohamed Dzaiddin SCJ (later CJ) held as follows with emphasis added by me:

“On the question of delay in delivery of site, the court observed at p 155 that it was also the appellant’s case that the delay
was caused by the respondent having delivered the site rather late, thus leaving little time for the appellant to complete the
work. The court considered and applied the principle in Dodd v Churton 3 , and stated at p 156:

At the risk of repetition we restate the principle in that where one party to a contract is prevented from performing it by the
act of the other, he is not liable in law for the default.

On the same page, the court reiterated that:

Only in circumstances in which the employer or his agent is in no way to blame for the delay would the court be willing to
allow damages. If the employer contributes to the delay by ordering extra work or is guilty of the delay in delivering
possession of the site, or of any other cause no damages could be claimed. (See Hudson at pp 624-628.)

To recapitulate, in the present case, it is not disputed that under the said contract, the date for completion of the works was
18 April 1985. Yet, by such date, most floors of the hotel were still not handed over to the judgment debtor. It is also
common ground that there is no provision in the said contract, particularly cll 21 and 23 for any extension of time to
complete the works on account of delay in handing-over of the site. In fact, the evidence of Patrick William Bone (GW1), the
design consultant (at p 53 of the appeal record), confirmed that there was no extension of time given for the late handing-
over. He agreed that all the areas were handed over late. Thus, if the employer handed over the site late which led to
the delay on the part of the contractor to complete the works, it is patently clear, based on the principles cited
above, that the employer should not be entitled to claim for liquidated damages under the said contract because,
by his omission to give possession of the site on time, the time for completion becomes ‘at large’ and there was
no date from which the damages could be assessed.”

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[41] Likewise there were acts of prevention on the part of the Defendants because of their critical failure to furnish
the said Building Plans and Specifications to the Plaintiff timeously as well as the ordering of the additional work.
The time or date for completion under the Construction Agreement was hence set at large. In consequence, the
Plaintiff was only obliged to complete the Works within reasonable time subject to the resolution of the ongoing
constraints encountered by virtue of the breach by the Defendants.

[42]I further find and hold that the Defendants were fully aware of it and had in fact encouraged the Plaintiff to carry
on to complete the Works post 6 November 2014 as seen from the WhatsApp messages exchanged between PW1
and DW3 who are both directors of their respective companies. If the Defendants had considered that the late
completion was indeed due to the fault of the Plaintiff, I have no doubt that the Defendants would have sent a stern
warning notice to the Plaintiff followed by termination as allowed for pursuant to clause 11 of the Construction
Agreement. There isn’t a shred of evidence that the Plaintiff had been so warned by the Defendants but rather the
Plaintiff was instead encouraged by the Defendants to carry on to complete the Works soonest possible. Put simply,
the Defendants had acquiesced to the actions of the Plaintiff.

[43] The legal consequence is that as seen in the Federal Court case of Sim Chio Huat v. Wong Ted Fui [1993] 1
MLJ 151 where Salleh Abas FJ (later LP) held as follows with emphasis added by me:

“In modern law of contract prima faciea stipulation as to time is not of the essence of a contract, unless the parties agree
that it be so. (See Lord Simon of Glaisdale in United Scientific v Burnley Council [1978] AC 904 940 and 944. In this case
as time was provided to be of the essence of the agreement, the stipulated periods within which these four houses had to
be delivered to the respondent became an essential condition of the agreement. Failure by the appellant to fulfill this
condition would entitle the respondent to have an option of treating the agreement either (a) as having been repudiated and
dismissing the appellant; or (b) as still continuing. (See 9 Halsbury’sLaws of England, 4th ed. para 538, page 370).

In this case obviously he did not choose to treat the agreement as having been repudiated. By allowing the delivery
dates to pass and by acquiescing in the work continuing under the agreement and indeed by ordering extra work
to be done for each of these houses, for which the agreement made no provision, the appellant must be held to
have waived his right to rescind the agreement on account of repudiation and also the right to treat himself as
discharged therefrom. He must be deemed to have elected the agreement as still continuing.”

(ii) Completion of the Works and Defects therein

[44] Notwithstanding the aforesaid prevention or impediment caused by the Defendants on the Plaintiff and as set
out in paragraph 39 above, I find and hold that the Plaintiff had nonetheless carried out the Works with reasonable
diligence and substantially completed the building and external infrastructure works in December 2014 as testified
by PW1. The remaining major outstanding works then were the water reservoir and pump house as well as the
STP.

[45] In respect of the water reservoir and pump house, it is not in doubt or dispute that it was part of the Plaintiff’s
Works in the Construction Agreement. However by virtue of the oral consensual arrangement between the parties
to allow the Plaintiff to appeal to SADA to waive the requirement to construct the water reservoir and pump house,
the Defendants could not later revert and insist that they were not constructed by the Plaintiff. In other words, the
parties cannot approbate and reprobate, see Usima Sdn Bhd v. Lee Hor Fong (trading under the name and style of
Pembinaan LH Fong) [2017] 5 MLJ 273. Since the appeal to SADA was allowed and the Plaintiff in lieu paid
contribution compensation amounting to RM459,733.60 to SADA, I find and hold that the work is deem omitted from
the Works required in the Construction Agreement.

[46] As for the STP, I find that it was within the Plaintiff’s responsibility pursuant to clauses 1.2 and 3.1(a) of the
Construction Agreement read together. The Plaintiff was however only able to commence constructing the STP
when the requisite plans were approved on 1 February 2015. However and again by virtue of another oral
consensual agreement between the parties to have the construction and completion of the STP deferred provided
the First Defendant was able to secure IWK’s approval of the CFO to be issued in consideration of a secured
undertaking given to IWK to defer the carrying out of the STP, the Defendants could similarly not later revert and
insist that the STP work was not done by the Plaintiff at all material times. As a matter of fact, the First Defendant
managed to obtain the approval from IWK by furnishing a bank guarantee of RM500,000.00 to IWK to have the STP
constructed later in time. As the result, IWK notified the MDK that it had no objection to the issuance of the CFO for

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the Project. In the premises, I find and hold that the STP work has been postponed to be constructed by the Plaintiff
on a future date.

[47] In the premises, I find and hold that the Plaintiff completed its Works required under the Construction
Agreement (save for the STP that is to be completed by a future agreed date) within reasonable time on 29 April
2015 when the CFO was issued by the MDK.

[48]I have carefully reviewed the CFO and hold that it is an unconditional and unqualified CFO issued pursuant to
by-law 25 of the Uniform Building By-laws 1984 that reads:

“25. Certificate of fitness for occupation

(1) Certificate of fitness for occupation of a building shall be given when-

(a) the qualified persons during the course of the work have certified in form E as set out in the Second Schedule
to these By-laws that they have supervised the erection of the building, that to the best of their knowledge
and belief the building has been constructed in accordance with these By-laws and any conditions imposed
by the local authority and that they accept full responsibility for those portions which they are respectively
concerned with and the local authority or an officer authorised by it in writing for the purpose has inspected
the building.

(b) all essential services, including access roads, landscape, car parks, drains, sanitary, water and electricity
installation, fire lifts, fire hydrant and other where required, sewerage and refuse disposal requirements have
been provided.

(c) upon satisfaction of the requirements under subparagraphs (a) and (b) the local authority shall issue the
certificate of fitness for occupation to the qualified person within 14 days from the date of the submission of
Form E.

(d) if the qualified person does not receive the certificate of fitness from the local authority within the prescribed
period, the application for the certificate of fitness for occupation shall be deemed to have been approved.
(e) the local authority then shall issue the certificate of fitness for occupation to the owner of the building.

(2) Nothing contained in this by-law shall prevent the local authority or any officer authorised by it in writing for the
purpose from inspecting any building works at any stage thereof and calling attention to any deviation from the
approved plan or non-compliance with any of these By-laws which he may observe and from giving notice in
writing ordering such deviation to be rectified.”

There is also no evidence of any subsequent inspection and directive by the MDK after the issuance of the CFO to
rectify any deviation or non compliance in the Project.

[49] As far as the status of the CFO is concerned in this Suit, I refer to s. 94 of the Evidence Act 1950 which reads:

“94. Exclusion of evidence against application of document ton existing facts

When language used in a document is plain in itself and when it applies accurately to existing facts, evidence may not be
given to show that it was not meant to apply to such facts.

Illustration

A conveys to B by memorandum of transfer “my estate at Kranji containing 100 acres.” A has an estate at Kranji containing
100 acres. Evidence may not be given of the fact that the estate meant was one situated at a different place and of a
different size.”

This is in my view sufficient to repel the Defendants’ subsequent contentions that the Works could not be
considered completed because the Works were manifestly fraught with defects. In Perbandanan Kemajuan Negeri
Selangor v. Selangor Country Club Sdn Bhd [2016] 8 MLJ 211, Vernon Ong Lam Kiat JCA held as follows:

“[33] As a general rule, the words of an instrument must be construed according to their natural meaning. Where the

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language of a document is plain and unambiguous and applies accurately to existing facts then the intention of the parties
to the document should be gathered from the language of the document itself. No amount of acting by the parties can alter
or qualify words which are plain and unambiguous: see s. 94 of the Evidence Act 1950; North Eastern Railway Company v.
Hastings [1900] AC 260 (PC).”

[50] However according to the Defendants, the quality of the Works achieved was so deplorable that the Project
should not be considered completed at that point in time. They relied particularly on the letters of the architect, H.H.
Lau Architect dated 30 March 2015 and the civil & structural engineer Lumbini Consultancy dated 3 April 2015
written to the First Defendant. In those letters, the architect and the civil & structural engineer apparently instructed
the First Defendant to issue to them an undertaking letter and personal guarantee by the First Defendant’s directors
to undertake all rectification of defects to their satisfaction in view of the unsatisfactory and bad workmanship quality
in the building and finishing work. It seemed that they needed the comfort for them to apply to the MDK to issue the
CFO even though the other related authorities have issued their clearance letters in support of the same. The First
Defendant gave the required undertaking and guarantee to them on 4 April 2015.

[51]I have carefully read these letters and reviewed the testimony of DW3, DW4 and DW6 on this respect and I find
that they were all written in collusion amongst the Defendants, architect and civil & structural engineer. In this
respect, I find the contents of the letters unbelievable. A constructional professional would normally never certify
something that is patently false and misrepresent to others particularly to the local authority. Yet here, the architect
made the application to the MDK for issuance of CFO which was supported by the civil & structural engineer that
the Works were completed as per by-law 25 but in the same breath notified the First Defendant that the Works were
fraught with defects. The letters were also never written to the Plaintiff at the material time although it was meant as
a complaint against the Plaintiff’s work.

I sensed from the style and language of the letters including the First Defendant’s reply that these letters were all
crafted by a sole legally qualified person. In the circumstances, I have my doubts on the veracity of the contents of
the letters. The answers given by both the architect and civil & structural engineers at trial were neither satisfactory
nor convincing too as seen from the excerpts of the notes of proceedings. The architect testified as follows:

“Q: Did you apart from the Defendant, did you send a copy of this letter to anyone else?

A: Can’t recall.

Q: Can’t recall. Did you send it for example to the other consultants in the project?

A: I can’t recall.

Q: You can’t recall. Did you discuss with any other consultants about issuing the letter?

A: I can’t recall.

...

Q: Now, looking at this letter at page 270, do you agree this letter does not set out any particulars or details of the bad
quality of workmanship of the building and finishing works?

A: You mean, not detail?

Q: Yes. It doesn’t say what is actually wrong. Doesn’t set out what is wrong.

A: Too many things.

Q: Too many things. But, it doesn’t set out, do you agree?

A: Yes.

...

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Q: I ‘m putting it to you that the Plaintiff, the rescue contractor should be notified of the defects that you say was found in
the work carried out by them. The defects, shortcomings, bad finishing, et cetera. The Plaintiff should be notified.

A: Difficult to answer. Not. Not. Too many things. It’s considered uncompleted works. How to -.”

Subsequently, the civil & structural engineer testified as follows:

“Q: Yes, now could you refer then to page 270, this is the letter 30.03.2015 issued by HH Lau Architect. Now could you
focus on the body of the letter, the content of the letter on page 270 it is there are paragraph numberings there 1.0, 2.0, 3.0,
4.0 and compare that to your letter at page 271 beginning the word, there are four paragraphs not numbered but the first
paragraph begins with the word, we have referred to the above matter. No.2 there refer to related authorities, paragraph 3
and paragraph 4. Do you see those four paragraphs?

A: Yes.

...

Q: Ok, Mr Tan, do you agree that these two letters are materially similar, the content is materially similar?

A: Actually they cc to me this Architect HH Lau.

...

Q: So now your evidence is, is it still the same? Did you draft the letter page 271 yourself?

A: Normally I write a lot of Facebook, in the Facebook. I read of history, I quote this, quote that, doesn’t mean that I go and
ask HH Lau, can you teach me how to write. Just now you questioned me I refer to this type referring to anyone.

Q: So now your answer if I ask you the same thing did you draft this letter yourself, the letter at page 271, what is your
answer?

A: I draft myself.

...

Q: So did you put HH Lau’s letter in front of you and copy it in this case?

A: You mean I copy?

Q: Yes.

A: Totally copied?

YA: Did you substantially copy?

A: No I quote the good wording, take. I quote the good sentence.”

[52] Moreover I also noted from the contemporaneous documents such as the minutes of the project site meeting
and the WhatsApp group chats between the Plaintiff and the professional consultants that none of them including
H.H. Lau Architect and Lumbini Consultancy ever queried or complained to the Plaintiff about the workmanship or
quality of the Works other than certain minor defects. In addition, it is seen that both the architect and civil &
structural engineer were unable to particularise the defective works as alleged by them when challenged at the trial.
The veracity of their allegations thus becomes questionable when they cannot be identified and substantiated in
detail. They are at best fanciful conjectures that are useless evidentially.

[53] Be that as it may, the acceptability of quality of the Works is a question of fact. The Plaintiff has relied on the

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CFO to support its contention that the Works as built were fine and accepted. It is to me prima facie justified. Thus
the evidential burden is displaced onto the Defendants who contended otherwise. I have held as follows in Oakwell
Engineering International Pte Ltd v. PCM Feam (M) Sdn Bhd [2014] 11 MLJ 175:

“[12] The quality of the evidence required to prove allegations is still subject to the antiquated “best evidence” rule. In the
textbook Phipson on Evidence 17th edition, it is stated in paragraph 7-40 to 7-43 that: “The maxim that “the best evidence
must be given of which the nature of the case permits” was once treated as expressing the great fundamental principle
upon which the law of evidence depends. Thus, Lord Hardwicke went so far to say that “the judges and sages of the law
have laid it down that there is but one general rule of evidence, the best that the nature of the case will permit”...In the
present day, then, it is not true that the best evidence must, or may always be given, though its non-production may be a
matter for comment, or affect the weight of that which is produced...”. Further it is stated at paragraph 42-10 to 42-11 that:
“Extrinsic evidence is sometimes admissible to prove the existence as distinguished from the terms of some transaction or
relationship which has been reduced to writing...On the other hand, strict proof of a transaction of the document is
sometimes required, though the terms thereof may not be in dispute. Thus, on a charge of perjury committed in
proceedings before justices for refusing to leave licensed premises, the license must be produced, and oral testimony by
the proprietor that he is licensed is inadmissible. So, the fact, that a person is rated to the relief of the poor can only be
proved by the rate-book, or secondary evidence thereof and not by parol.”

[13] Consequently in civil litigation particularly construction type litigation, I am of the view that relevant documents that
substantiate or support the oral allegations must be adduced at the trial where such documentary evidence is expected to
be available in the ordinary course of business and commerce. Otherwise a reasonable explanation must be tendered to
justify their non production. In the absence of these documents or explanation of their absence, mere oral testimony is not
weighty enough to overcome the burden of proving the allegations on a balance of probabilities... ”

[54] In this regard, I find that the Defendants have failed to produce before me cogent documentary evidence such
as contemporaneous correspondences, non compliance reports (commonly known as NCRs), architect/engineers’
rectification instructions, etc. to corroborate their allegations that the Works were incomplete and fraught with
defects. Most importantly, the Defendants failed to produce to me photographic evidence of the Works as it then
stood as at 29 April 2015 when the CFO was issued. In this modern technology age, the photographic evidence
may be produced by way of digital photographs or even video recording of all the alleged defects seen in the
bungalow houses and infra structure works. They must be captured systematically in detail for the Court to
objectively assess whether the Works were in fact incomplete and/or defective as alleged. In the absence of such
cogent evidence, I find and hold that the Defendants have failed to discharge their evidential onus of proof and their
bare and bald allegations must accordingly be rejected.

[55] Consequently, I find and hold that the Plaintiff satisfactorily completed the Works on 29 April 2015 except for
the STP that has been deferred by the consent of the parties. If there were any defects in the Works, I find them to
be only minimal and minor as would invariably be the case in all constructional works. This is admitted by the
Defendants themselves as confirmed at the meeting with the Ministry on 19 May 2015. In that meeting, the First
Defendant’s comments were minuted as follows:

“Wakil Pemaju memaklumkan pada masa sekarang, mereka sedang membuat kerja-kerja pembaikan kecil pada projek
tersebut bagi menyiapkan kerja-kerja yang tidak disiapkan sepenuhnya oleh pihak kontraktor penyelamat.”

DW1 also testified as follows as seen from the excerpts of the notes of proceedings:

“Q: Ok. En. Razif, saya katakan tidak mungkin kontrak untuk RM2.97 juta ini adalah kontrak untuk rektifikasi kerja Fasa 1
yang sepatutnya dibuat oleh Plaintif. Tak mungkin, mustahil sebab Defendan hanya menyedari terdapat kerja-kerja
pembaikan major pada bulan Julai 2015?

A: Ok.

Q: Tak mungkin Defendan boleh tiga bulan sebelum itu, memasuki kontrak sebanyak RM2.97 juta untuk membaiki,
membuat kerja rektifikasi major. Setuju?

A: Basically ...

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YA: Jawapan?

A: Ya, setuju.”

Nonetheless the defect rectification of these minor defects which were within the realm of responsibility of the
Plaintiff ought to undertaken during the defects liability period as provided in clause 6.3 of the Construction
Agreement.
(iii) Validity of the May Agreement and Supplemental Agreement

[56] Upon the completion of the Works, the Plaintiff must be paid its consideration as provided in the Construction
Agreement. As set out in paragraph 24 above, the Defendants in breach of clause 2.3 of the Construction
Agreement did not issue or cause the issuance of the progressive claims to the Purchasers. In addition, the Plaintiff
also realized that the First Defendants had neither with just cause nor consent of the Plaintiff already in February
2015 lodged private caveats on the 19 units of bungalow houses received by the Plaintiff as consideration under the
Construction Agreement and transferred to Tijuana Homes Sdn Bhd. I further find as testified by PW1 that the
Plaintiff repeatedly requested the Defendants to issue the progressive claims to the Purchasers. Without receiving
the payment from the progressive claims, the Plaintiff faced serious cash flow problem because the Plaintiff had to
make payments to various sub contractors and suppliers who were involved in completing the Works. The Plaintiff
was dependent on these sub contractors’ and suppliers’ credit and the Plaintiff knew that they expected to be paid
by the Plaintiff after the CFO has been obtained. It was for this purpose that the Ministry had as early as on 22 July
2014 wrote to the Purchasers’ bank financiers to seek their co-operation in releasing the final progressive claims
immediately upon the issuance of the CFO to ease the case flow in completing the Project. Furthermore, the
Ministry on 16 October 2014 again convened a joint meeting with the Purchasers’ bank financiers, Plaintiff and the
First Defendant to ascertain the requirements in order to release the payment of the progressive claims and how
soon the payments would be made. In the premises, I find and hold that the Plaintiff being a small and newly set up
corporate vehicle was desperate for money to fund its cash flow at that point in time.

[57] The Defendants responded to the Plaintiff by convening a meeting on 6 May 2015 principally involving PW1
and KEC. The Defendants took the stance that the Plaintiff was in breach of the Construction Agreement for not
completing the Project before 7 November 2014. As the result, the Defendants made it clear that the Plaintiff was
not entitled to the payment from the progressive claims of the Purchasers. The Defendants further insisted that they
would not proceed to issue the progressive claims to the Purchasers unless the Plaintiff agreed to sell back the 19
units of bungalow houses to the Defendants for the sum of RM3.3 million. I pause to note at this juncture that the
Defendants did not make any assertion on incomplete or unacceptable defective work done by the Plaintiff at this
meeting.

[58] As testified by PW1, I find that the Plaintiff was very reluctant to agree to the Defendants’ demand on the
transfer back of the 19 units of bungalow houses to the First Defendant at RM3.3 million because that valuation of
RM3.3 million was based on the value estimated by the government’s valuer for stamp duty purposes when the
units were transferred to the Plaintiff’s nominee, Tijuana Homes Sdn Bhd based predominantly on land value only
by reason that the buildings were then uncompleted without CFO. The Plaintiff was convinced that the then current
market value of the 19 units of bungalow houses were much higher. The Plaintiff protested but the Plaintiff
nonetheless had no practical choice except to agree to sell the 19 units of bungalow houses to the First Defendant
at RM3.3 million because the Plaintiff was already cash trapped due to the Defendants’ refusal to issue the
progressive claims to the Purchasers. The Plaintiff was facing immense cash flow problem to pay its subcontractors
and suppliers. In addition, the Defendants had wrongfully caveated the 19 units bungalow houses and the Plaintiff
was thus unable to generate cash flow by selling these units in the open market which the Plaintiff is entitled to do
so pursuant to clause 9.1 of the Construction Agreement. There was another meeting held on 14 May 2015 again
principally between PW1 and KEC and it was affirmed that the Defendants would pay the sum of RM3.3 million on
or before 23 May 2015 for the sale of the 19 units bungalow houses in consideration of the Defendants waiving its
claim for late completion of the Project. This agreement was re-confirmed in the subsequent meeting together with
the Ministry on 19 May 2015.

[59] Pursuant to this aforesaid May Agreement, I find that the Plaintiff on 22 May 2015 duly brought and handed the
land titles and the executed transfer forms of the 19 units of bungalow houses to the First Defendant. The First
Defendant however again reneged on its promise to pay the lump sum RM3.3 million by 25 May 2015. The
Defendants instead by letter dated 25 May 2015 wrote to the Plaintiff that they would be exercising their rights
under clause 10.2 of the Construction Agreement that disentitled the Plaintiff to any consideration because the

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Plaintiff failed to complete the Works by 6 November 2014. Subsequently the Defendants again by letter dated 1
June 2015 wrote to the Plaintiff that the First Defendant maintained the buy back of the 19 units of bungalow
houses for RM3.3 million but in view that the Plaintiff failed to comply with the Construction Agreement, the
Defendants would set off the total costs for completing all the uncompleted and/or defective work from the payment
payable to the Plaintiff derived from the progressive claims to the Purchasers.

[60] As the result, I find that there was only two part payments of RM500,000.00 paid to the Plaintiff on 15 June
2015 and 22 June 2015 for the sale of the 19 units of bungalow houses. These payments were obviously
inadequate to pay the Plaintiff’s sub contractors and suppliers as testified by PW1. By that time, the Plaintiff had
already borrowed money from third parties to make some payment to the sub contractors and suppliers and the
RM1,000,000.00 received from the First Defendant was just enough to pay of the third party lenders.

[61] Despite the Plaintiff through PW1 continued to chase for the balance of RM2.3 million that was overdue, I find
that the Defendants refused to pay the same. Eventually, the Defendants presented a non negotiable pre-prepared
Supplementary Agreement for execution by the Plaintiff. According to PW1, the contents of the Supplementary
Agreement were unfair but the Plaintiff had no choice at the time but to execute it. The recitals of the
Supplementary Agreement were also untrue in that it was recited that the Plaintiff failed to complete the Job Scope
in the Construction Agreement whereas in actual fact there was no such failure on the part of the Plaintiff. It further
recited that the Plaintiff had requested the First Defendant for assistance to complete the uncompleted Job Scope
and to rectify defects in the Works to the satisfaction of the Project consultants and that the First Defendant shall be
entitled to off set and contra the costs thereof against the progressive claims whereas in actual fact the Plaintiff had
satisfactorily completed the Works with CFO obtained and also did not request the First Defendant for assistance to
complete any of the allegedly uncompleted Works. It also recited that the First Defendant shall be at liberty to lodge
private caveats on the Plaintiff’s 19 units of bungalow houses as from the date of the Supplementary Agreement
whereas the First Defendant had in fact already lodged the private caveats in February 2015. The Defendants
expressly told the Plaintiff that if the Supplementary Agreement wasn’t executed, the Plaintiff would not receive any
money at all.

[62] For completeness and despite that the Plaintiff was constrained to execute the Supplementary Agreement, I
find that the Defendants reneged on the Supplementary Agreement as well by again having failed later to pay the
Plaintiff in accordance with clause 2.2 of the Supplementary Agreement. As a matter of fact, the balance of the
RM2.3 million was dragged for another 9 months with each part payment being made after PW1 had to plead and
beseech KEC for payment. Furthermore on each payment received, the Plaintiff was constrained to sign on the
First Defendant’s payment voucher that had the following pre-printed phrase:

“Being payment for full and final settlement of all costs for work done incurred by Bergamo Development (M) Sdn Bhd, in
lieu of all considerations payable by ECK Sdn Bhd and Foo Yee Construction Sdn Bhd to Bergamo Sdn Bhd pursuant to
the Construction Agreement dated 7 November 2013 entered into between ECK Development Sdn Bhd and Foo Yee
Construction Sdn Bhd and Bergamo Development Sdn Bhd and subjected to the Notice of Default and Failure dated 30
March 2015 by H.H. Lau Architect dated 2 April 2015 by Lumbini Consultancy and undertaking by ECK Development Sdn
Bhd to Indah Water Konsortium Sdn Bhd dated 7 April 2015.”

That notwithstanding, there was payment also continuingly owing by the Defendants to the Plaintiff supposedly to
be paid from the proceeds of the progressive claim to the Purchasers.

[63] The Plaintiff therefore in the circumstances contended that the Plaintiff’s consent to the May Agreement as well
as the Supplementary Agreement was induced or procured through economic duress.

[64] In the Privy Council case of Pao On v. Lau Yiu Long [1980] A.C. 614, Lord Scarman held as follows:

“Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the
observations of Kerr J. in Occidental Worldwide Investment Corporation v. Skibs A/S Avanti [1976] 1 Lloyd’s Rep.
293, 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] A.C. 104, 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, at the time he was allegedly coerced did or did not
protest; whether, at the time he was allegedly coerced into making the contract, he did or he did not have an alternative

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course open to him such as 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 recognised in Maskell v. Horner [195] 3 K.B. 106, relevant
in determining whether he acted voluntarily or not.”

Subsequently in the English House of Lords case of Universe Tankships Inc. of Monrovia v. International Transport
Workers Federation and Others [1983] 1 A.C. 366, Lord Scarman further held as follows:

“It is, I think, already established law that economic pressure can in law amount to duress; and that duress, if proved, not
only renders voidable a transaction into which a person has entered under its compulsion but is actionable as a tort, if it
causes damage or loss: Barton v. Armstrong [1976] A.C. 104 and Pao On v. Lau Yiu Long [1980] A.C. 614. The
authorities upon which these two cases were based reveal two elements in the wrong of duress: (1) pressure amounting to
compulsion of the will of the victim; and (2) the illegitimacy of the pressure exerted. There must be pressure, the practical
effect of which is compulsion or the absence of choice. Compulsion is variously described in the authorities as coercion or
vitiation of consent. The classic case of duress is, however, not the lack of will to submit but the victim’s intentional
submission arising from the realisation that there is no other practical choice open to him. This is the thread of principle
which links the early law of duress (threat to life or limb) with later developments when the law came also to recognise as
duress first the threat to property and now the threat to a man’s business or trade. The development is well traced in Goff
and Jones, The Law of Restitution, 2nd ed. (1978), chapter 9.

The absence of choice can be proved in various ways, e.g. by protest, by the absence of independent legal advice, or by a
declaration to go to law to recover the money paid or the property transferred: see Maskell v. Horner [1915] 3 K.B. 106. But
none of these evidential goes to the essence of duress. The victim’s silence will not assist the bully, if the lack of any
practicable choice but to submit is proved.”

[65] Generally the Malaysian position is set out in ss. 14 and 15 of the Contracts Act 1950 that read:

“14. Free Consent

Consent is said to be free when it is not caused by-

(a) coercion, as defined in section 15;

(b) undue influence, as defined in section 16;

(c) fraud, as defined in section 17;

(d) misrepresentation, as defined in section 18; or

(e) mistake, subject to sections 21, 22 and 23.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence,
fraud, misrepresentation, or mistake.

15. Coercion

“Coercion” is 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.

Explanation - It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed.

ILLUSTRATION

A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal
intimidation under the Penal Code.

A afterwards sues B for breach of contract at Taiping.

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A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the
Penal Code was not in force at the time when or place where the act was done.”

Thus in OCBC Securities (Melaka) Sdn Bhd (Formerly known as Sykt Tan, Chiow & Loh Securities Sdn Bhd) v. Koh
Kee Huat [2004] 2 MLJ 110, Low Hop Bing J (later JCA) held as follows with emphasis added by me:

“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 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 73requires a person to whom money has been paid under coercion to repay or return it.”

It can be discerned His Lordship was of the opinion that actionable duress isn’t confined to coercion alone as
prescribed in s.15 of the Contracts Act 1950.

Earlier in Mohd Fariq Subramaniam v Naza Molar Trading Sdn Bhd [1998] 6 MLJ 193, James Foong J (later FCJ)
equated actionable duress to vitiate a contract generally with coercion of will which vitiated consent adopted from
the Singapore case of Third World Development & Anor v Atang Latief & Anor [1990] 1 SCR 533. This definition is
wider than coercion defined in s.15 of the Contracts Act 1950. I am mindful here that the Contracts Act 1950 as
stated in the preamble thereto is not a codifying statute but a statute relating to contracts. The Courts are therefore
free to accept common law development as seen in the Federal Court case of Asia Television Ltd v Viwa Video Sdn
Bhd [1984] 2 MLJ 304 and the Supreme Court case of Co-operative Central Bank Ltd (in receivership) v Feyan
Development Sdn Bhd [1995] 3 ML 313.

I thus share and adopt the views of both Low Hop Bing J and James Foong in both aforesaid cases.

[66] Obviously the question as to whether there was coercion or duress operating during the formation of the
contract is fact sensitive depending on the unique circumstances of each case. From the trend of Malaysian cases
that were decided on coercion or duress, mostly many of them failed including the cases of Mayland Lending Sdn

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Bhd v. Rossmaizati Mohamad & Anor [2015] 7 MLJ 216, Zainol @ Zainol Abidin bin Mohamed v. Lee Lim Huat
[2015] 11 MLJ 395 and Wie Hock Beng v. Choy Teong Fui & Anor [2014] 1 LNS 1525 that all came before me.

Nonetheless it is my opinion that the defence of economic duress is available to vitiate the agreement in an
appropriate circumstance notwithstanding that the usual incidents of coercion such as committing or threatening to
commit any act forbidden by the Penal Code or unlawful detaining or threatening to detain any property with the
intention of causing any person to enter into an agreement are absent.

[67] Cash flow is particularly critical in the construction industry because of its inherent multi tiered operational
nature that is significantly dependent upon the payment financing of work operation by the immediate upper tier.
This is one of the unique features of the construction industry that is distinctive from the other manufacturing
industries. The criticality of cash flow has already been recognised by the Malaysian Courts way back in the 1970s
where Ong Hock Sim FJ held as follows in the Federal Court case of Bandar Raya Developments Bhd v. Wong Hoe
Kan & Sons Sdn Bhd [1972] 1 MLJ 75:

“We would also refer to the recent Court of Appeal decision in England reported in the Times of the 21st October, 1971 in
the case of Frederick Mark Ltd v Schild (London) Times October 21 1971. The Court of Appeal in that case referred to
Dawnay’s case and categorically stated that the court agreed with every word Lord Denning said. This was to the effect that
the purpose of interim certificates was to see that payments made under them were without any correlative right to set off or
counterclaim as that would run counter to the very purpose of interim certificates - to provide cash for the contractor or sub-
contractor to get on with the work. A debt due under an interim certificate was a debt of a class which ought not to be
allowed to be made the subject of a set off or counterclaim.”

[68] The issue before me in gist here is basically that the Plaintiff had been induced to agree and accept the May
Agreement and the Supplementary Agreement under commercial pressure of suffocation of its cash flow by the
Defendants. Hence, did that constitute economic duress sufficient to vitiate both the aforesaid agreements?

[69] As alluded to by Low Hop Bing J (later JCA) in OCBC Securities (Melaka) Sdn Bhd (Formerly known as Sykt
Tan, Chiow & Loh Securities Sdn Bhd) v. Koh Kee Huat (supra), the Pao On guidelines are instructive in
determining the operationality of economic duress or otherwise. In Visu Sinnadurai’s leading Malaysian treatise Law
of Contract (2011) 4 ed. 363, the relevant principles involved as distilled from the recent English decision of Kolmar
Group AG v. Traxpo Enterprises PVT Ltd [2010] EWHC 113 (Comm) can be summarized as follows:
(i) Imposition of illegitimate economic pressure inducing the entry of the relevant contract;
(ii) Presence of absence of protest by the victim;
(iii) Availability of practical alternatives to the victim; and
(iv) Steps taken by the victim to avoid the contract after the pressure ceased.

[70] Firstly as to the imposition or exertion of illegitimate pressure, I find from the Malaysian Companies
Commission’s corporate information record that the Plaintiff company is a small outfit having a paid capital of
RM100.00 only. There are 2 shareholders and directors including PW1 who is a professional engineer experienced
in housing development. It is obvious and the Defendant knew that the Plaintiff would hence have carried out the
Works financed by sub contractors and suppliers’ credit pending ultimate payment by the Defendants. In spite of its
limited financial capacity, the Plaintiff nonetheless completed the Works and very importantly obtained the CFO for
the Project which had already been abandoned for 5 years. As the result, the First Defendant was by the efforts of
the Plaintiff relieved from the dilemma it faced from Purchasers and the Ministry over the Project. The blacklisting of
the First Defendant was also removed by the Ministry with the support of the Plaintiff which enabled the First
Defendant to launch its Taman Desa Ku Phase 2 project. It is therefore natural that the Plaintiff expected to be paid
its corresponding consideration by the Defendants in accordance with the Construction Agreement. I am however
appalled to find that the Defendants were not only ungrateful but also unscrupulous in not honouring their bargain
under the Construction Agreement.

Traditionally the illegitimacy of the pressure has often been understood and applied in the manner as prescribed in
s. 15 of the Contracts Act 1950. There must hence have been the commitment of an act or threat to commit an act
forbidden by the Penal Code. However I noted that The Concise Oxford English Dictionary 11 ed. 709 defined
illegitimate as not in accordance with the law or accepted standards (emphasis is mine). It is broader than
unlawfulness. I am therefore of the opinion that illegitimate pressure also encompasses the commitment of an act or

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threat to commit an act that is objectively malicious. In other words, it must have been calculated by one to secure
an unjustified advantage by harming another including infliction of financial harm. However, there isn’t the need for
physical threat to have occasioned.

[71] As for the May Agreement, the Defendants in essence threatened the Plaintiff that it would receive nothing
unless the Plaintiff agreed to sell its 19 units of bungalow houses back to the First Defendant at its dictated
valuation price of only RM3.3 million. As found by me in paragraph 58 above, the Plaintiff was under tremendous
financial predicament and stress at that point in time. The only excuse advanced by the Defendants in not wanting
to issue the progressive payment claims to the Purchasers to pay the Plaintiff is due to the purported Plaintiff’s late
completion of the Works. This excuse is however absolutely unfounded as held by me in paragraphs 44 to 48
above. I find that the Defendants were in fact aware of their untenable stance but it was in any event pursued
tactically in bad faith to pressurize the Plaintiff in view of its desperate and precarious financial standing to secure a
better deal for themselves. Consequently I find and hold that the Defendants in such circumstances illegitimately
exerted pressure upon the Plaintiff against its will to induce the making of the May Agreement.

[72] In respect of the Supplementary Agreement, I find that the Defendants again threatened not to pay the Plaintiff
the balance of the RM2.3 million from the RM3.3 million agreed payment pursuant to the May Agreement unless the
Plaintiff executed the non negotiable Supplementary Agreement. As also found by me in paragraphs 59 and 60
above, the Plaintiff was still under serious financial predicament and stress at that time. The new and main excuse
advanced by the Defendants then is that the Plaintiff’s Works were fraught with defects that required rectification at
massive costs. The other excuses brought up were already addressed in the May Agreement and were by then
therefore irrelevant in my view. The new excuse is again absolutely unfounded as held by me in paragraphs 53 to
55 above. The Defendants purported requirement to take over the alleged uncompleted work and defect
rectification is a sham. Consequently I find not only that the Defendants were similarly aware of their untenable
stance as was the case for the May Agreement but they had in fact earlier in bad faith colluded with the architect
and the civil & structural engineer to procure the letters alluded to in paragraphs 50 to 52 above in attempt to bolster
the Defendants’ position evidentially. These are to me acts done in bad faith bordering on fraud. Just as for the May
Agreement, I find that the Defendants also took advantage and pressurized the Plaintiff in view of its continuing
desperate and precarious financial standing to secure a better deal for themselves as elaborately set out in their
bespoke crafted Supplementary Agreement. It is plain to me that the Defendants were essentially getting the
Plaintiff to forfeit its entitlement to the minimum sum of RM3.1 million that was forthcoming from the Purchasers. In
the circumstances, I again find and hold that the Defendants illegitimately exerted pressure upon the Plaintiff
against its will to induce the making of the Supplementary Agreement.

Contrary to the Defendants’ assertion, they were certainly not ‘arms length’ agreements. The bargaining position
was lopsided favouring the Defendants.

[73] It is plain that the Plaintiff was induced into the making of both the May Agreement and Supplementary
Agreement because if not for the Defendants’ ultimatum, the Plaintiff would not have agreed to sell its 19 units of
bungalow houses which the Plaintiff knew was at gross undervalue as well as agree to all the terms of the
Supplementary Agreement which the Plaintiff knew were unfairly tilted in favour of the Defendants. I noticed that the
settlement agreement was set aside in Utiriam a/l Sebestian Pillai v. Stevenson Erutyanathan a/l Leo [2009] 5 AMR
846 when it was blatantly unfair and forced upon the plaintiff to execute it.

[74] Secondly and as testified by PW1, I find that that Plaintiff indeed protested to the Defendants’ ultimatum at all
material times before the making of the May Agreement and Supplementary Agreement. However the Defendants’
conduct showed that any further protest would be futile and of no avail. On the other side, the Defendants’ alter ego
KEC who issued the ultimatum neither even bothered nor saw it fit to appear in Court to defend it in rebuttal and be
subjected to scrutiny.

[75] Thirdly and again as testified by PW1, I find that the Plaintiff had no practical alternative remedy but to give in to
the Defendants’ ultimatum and agree to the making of both the May Agreement and Supplementary Agreement. It
is plain that the Plaintiff needed immediate cash flow to pay its sub contractors and suppliers after having already
exhausted its capacity to borrow from third parties. Otherwise, the Plaintiff could never stay afloat. In addition, the
Plaintiff’s 19 units of bungalow houses were wrongfully caveated by the First Defendant and could not be sold to
generate cash flow. Bank financing was unavailable in view of the corporate size of the Plaintiff as well as the
predicament it faced. It was impractical to commence civil litigation or even statutory adjudication to obtain the
necessary reliefs by reason that the former would take at least a year and the latter at least several months if not
also arguably lacking in power to declare a contract vitiated. Based on the unique circumstances encountered by

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the Plaintiff, I am satisfied that the Plaintiff had no other option but to succumb and give in to the Defendants’
ultimatum.

[76] Fourthly I find and hold that the pressure or duress that arose and resulted in the May Agreement followed by
the Supplementary Agreement continued since the Plaintiff remains unpaid todate for the payment from the
proceeds of the Purchasers. In other words, the pressure or duress has not yet ceased. The continuing bad faith of
the Defendants is further evidenced by the purported ongoing defect rectification of the Works that remained
unfinished by the Defendants till this day. All the Defendants witnesses DW1, DW2, DW3 and DW4 who were
involved could not satisfactorily explain to me why the defect rectification could be not completed earlier within
reasonable time. It seems to me that the non completion is the excuse to continue to withhold the Plaintiff’s
payment. In any event, I find and hold that the Plaintiff finally took steps to avoid the contract, to wit: both the May
Agreement and Supplementary Agreement as notified to the Defendants vide the Plaintiff’s solicitor’s letter dated 16
December 2016 followed by the filing of this Suit.

[77] In the premises, I therefore find and hold that the Plaintiff has successfully invoked the defence of economic
duress to vitiate or avoid the May Agreement as well as the Supplementary Agreement.
(iv) Plaintiff’s Claims

[78] In consequence of my finding that the May Agreement and Supplementary Agreement have been vitiated or
avoided, the resultant legal position is that as set out in ss. 65 and 66 of the Contracts Act 1950 that reads:

“65. Consequences of rescission of voidable contract

When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise
therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit
thereunder from another party to such contract, restore the benefit, so far as may be, to the person from whom it was
received.

66. Obligation of person who has received advantage under void agreement, or contract that becomes void

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any
advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom
he received it.

Illustrations

(a) A pays B RM1,000 in consideration of B’s promising to marry C, A’s daughter. C is dead at the time of the
promise. The agreement is void, but B must repay Athe RM1,000.

(b) A contracts with B to deliver to him 250 gantangs of rice before the 1st of May. A delivers 130 gantangs only
before that day, and none later. B retains the 130 gantangs after the 1st of May. He is bound to pay A for them.
(c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during
the next two months, and B engages to pay her RM100 for each night’s performance. On the sixth night A wilfully
absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on
which she had sung.

(d) A contracts to sing for B at a concert for RM1,000, which are paid in advance. A is too ill to sing. A is not bound to
make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must
refund to B the RM1,000 paid in advance.”

In the Federal Court case of Berjaya Time Square Sdn Bhd v. M-Concept Sdn Bhd [2010] 1 CLJ 219, Gopal Sri
Ram FCJ held as follows:

“[29] In Linggi Plantations Ltd v. Jagatheesan [1971] 1 LNS 66, Lord Hailsham said that Muralidhar Chatterjee :

is simply authority for the proposition that in section 65, where the words ‘voidable’ or ‘rescind’ are used, they can be
applicable not merely to cases when a contract is brought to an end ab initio for fraud or undue influence or some similar

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cause, but also to cases where one party elects to terminate a contract repudiated by the other party through anticipatory
breach or rejection of its fundamental terms.

[30] In VK Kumaraswami Chettiar v. PASV Karuppuswami Mooppanar AIR [1953] Mad 380 an unusually strong Bench of
the Madras High Court comprising Rajamannar, CJ and Venkatarama Aiyar J explained the decision in Muralidhar
Chatterjee as follows:

There the appellant had entered into a contract with the respondents for distributing films in various areas and had paid a
sum of Rs. 4000 as advance. On 1-12-1933 the appellant wrote a letter complaining that the defendants had committed
several breaches of the contract and that he would have no more business dealings with them. After some correspondence
the respondents accepted the repudiation by letter dated 31-1-1937. Then the plaintiff filed an action for damages for
breach of contract and also for the return of the advance. It was found that the defendants had not broken the contract and
on that finding the claim for damages was dismissed. With reference to the claim for return of advance it was contended by
the defendants that the plaintiff who was in default could not recover the same; while the plaintiff contended that as the
contract had been rescinded by the respondents on 21-1-1937 he was entitled to its return under Section 64, Contract Act.
The Privy Council accepted this contention and held that the plaintiff was entitled to recover the advance amount and that
the right of the defendants was to make a cross claim for damages against the appellants for breach of contract. The
decision as such has no bearing on the point now under discussion but it is argued that the case was dealt with as one
falling under section 39, Contract Act; that the repudiation by the appellant contained in his letter dated 1-12-1936 was held
to give a right to the respondents to avoid the contract and the letter dated 31-1-1937 was treated as an acceptance of the
repudiation by them. In the same manner, contends Mr. N. Rajagopala Aiyangar, the failure of the respondent to take
delivery of the goods on 2-8-1943 gave the appellants only a right to avoid the contract and they not having done that, the
contract stood. But the agreement which the Privy Council had to consider in Muralidhar Chatterjee v. International Film
Ltd. , was a continuing contract involving mutual obligations and is similar to the one which came before the House of Lords
in Heyman v. Darwins [1942] AC 356. For the reasons already given, this decision cannot be taken as an authority for the
contention that section 39 applies even when there is a refusal to perform the contract after the time for performance has
arrived.

[31] In Rama Rao v. Bashu Khan Saheb [1998] 2 CTC 363, K Sampath J, after discussing the case of Shree Hanuman
Cotton Mills v. Tata Air Craft Ltd [1970] AIR SC 1986 said this:

While dealing with that case, the Supreme Court referred to the decision in Muralidhar Chatterjee v. International Film Co.,
Ltd., [1943] AIR PC 34 and held that restoration of benefit under section 64 of the Contract Act (section 65 of the Act)
would arise only when there was no breach on the part of the person seeking such restoration. The situation here is also
similar. In my view, the decision of the Supreme Court relied upon by the learned counsel for the appellants does not help
the appellants at all.

[32] In my view, the decision in Muralidhar Chatterjee v. International Film Co Ltd is readily explainable on the basis of the
doctrine of restitution. There the plaintiff had paid moneys to the defendants but had received nothing in return. It would be
an unjust enrichment to have permitted the defendants to keep the money when they had put an end to the contract.
However, the defendants had a valid counterclaim for damages for breach of contract against the plaintiff. And they would,
in recovering those damages, be obliged to give the plaintiff credit for the monies he had already paid. The true principle is
this. A contract breaker must pay damages to the innocent party. However, if he has made any payment under the contract
(not being a true deposit for the purchase of movable or immovable property) the contract breaker is entitled to have that
payment set off against the damages he has to pay. However, he cannot seek to recover any benefit he may have
conferred upon the innocent party where he is himself guilty of a breach of contract. Were it otherwise, a contract breaker
will be in a position to take advantage of his own wrong…”

[79] As the result, I find and hold the Plaintiff must be put in the position as provided by the Construction Agreement
in the absence of the May Agreement and Supplementary Agreement. Since the Plaintiff has completed the Works
as found, the Plaintiff must be paid subject to any contractual or otherwise equitable set off of the Defendants as
well as any previous payment made by them to the Plaintiff.

[80] Consequently the Plaintiff’s claim may conveniently be divided into two portions, to wit the loss arising from the
sale of the 19 units of bungalow houses to the First Defendant as well as the payment from the final progressive
claim to the Purchasers. These are the Plaintiff’s consideration under clauses 2.1(a) and (b) of the Construction
Agreement respectively.

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[81] In respect of the former, I find and hold that the appropriate measure of compensation would be the difference
between the market value of the units at the material time and the sum of RM3.3 million paid by the First Defendant
since the transfer of the 19 units of bungalow houses has already been perfected in 2015 and possibly further
changed hands.

[82] The Plaintiff appointed PW3, a registered valuer to opine on the fair market value of the 19 units of bungalow
houses at the material time in mid 2015. I have carefully reviewed the expert report and opinion of PW3 and find
that his valuation of RM5,590,000.00 is fair and reasonable for these houses. On the other hand, I observed that
the value of RM3.3 million forced upon the Plaintiff by the Defendants through KEC is arbitrary. The Defendants
neither appointed a registered valuer to corroborate their valuation nor procured the attendance of KEC in Court to
justify the valuation. In addition, the case of Sukiran bin Sarman v. Petronas Dagangan Bhd [2014] 7 MLJ 222
relied upon by the Defendants is thus distinguishable on the facts.

[83] In the premises, I find and hold that the fair compensation payable to the Plaintiff is the difference between
RM5,590,000.00 and RM3,300,000.00 which amounted to RM2,290,000.00.

[84] As to the payment derivable from the progressive claims to the Purchasers, it is plainly provided in clause 2.1(b)
of the Construction Agreement that the Plaintiff is entitled to the Defendants’ remaining payment claims receivable
from the Purchasers subject to the minimum of RM3,100,000.00. The Defendants did not tender any cogent
evidence at the trial as to the remaining amount truly payable by the Purchasers. In any event, it is evident that the
Defendants in breach of the Construction Agreement failed, refused or neglected to issue their remaining
progressive claims to the Purchasers notwithstanding that the CFO had been issued. As the result, the Plaintiff was
deprived of its payment accordingly.

[85] In the circumstances, I find and hold that in breach of contract by the Defendants, the Plaintiff should forthwith
be compensated the minimum sum of RM3.1 million as claimed as damages.

[86] Consequently, I hereby assess the amount of the Plaintiff’s claim payable by the Defendants totals to RM
5,390,000.00 being RM2,290,000.00 + RM3,100,000.00. This sum of RM5,390,000.00 is of course subject to such
counterclaim of the Defendants as proved and found below.

For completeness, I am mindful that the Defendants have relied on clause 10.2 of the Construction Agreement in
attempt to deny the Plaintiff of its whole consideration thereunder, thus defeating the Plaintiff’s claims. The provision
in clause 10.2 is however clearly unavailable to both the Defendants because they were jointly at fault in breach of
contract for not complying with clause 3.2 (a) (ii) to furnish the Plaintiff with all the said Building Plans and
Specifications as prescribed and I so find and hold accordingly. In any event, I further hold that clause 10.2 is a
penalty and hence unenforceable following Selva Kumar a/l Murugiah v. Thiagarajah a/l Retnasamy [1995] 1 MLJ
817 that had a similarly harsh contractual provision.
(v) Defendants’ Counterclaim

[87] Although the Defendants pleaded for RM4,225,466.50, they eventually submitted a counterclaim of
RM4,042,477.87 after trial comprising of four heads of claim, to wit:
(i) cost of rectification of defects amounting to RM2,980,661.97 as at 5 July 2016;
(ii) bank guarantees, deposits and bank charges amounting to RM945,092.38;
(iii) consultants fees and utilities payment amounting to RM114,875.15; and
(iv) costs of completing STP amounting to RM184,837.00.

[88] Firstly as to the costs of rectification of defects, I have held as follows in KC Leong Holdings Sdn Bhd v. Datin
Moh Bee Ling [2015] 7 MLJ 10 which has been shared and followed by Lee Swee Seng J in Poratha Corporation
Sdn Bhd v. Technofit Sdn Bhd [2018] AMEJ 0214 with emphasis added:

“[63] The defendant’s cross-claim is massive comprising of essentially three heads of claim. Firstly there is special
damages amounting to RM1,065,370.92 for remedying and rectifying multiple, gross and latent defects as submitted. In this
respect, the defendant has in substantiation produced the invoices of her rectification contractors such as Walk & Turn
Builders, Shin Tat Construction Trading Sdn Bhd, DJ Deconway Furniture, Itex Power Enterprises, Kim Soon Electrical

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Engineering, etc that accumulated to that amount. There is no serious dispute that the defendant has paid against these
invoices.

[64] On scrutiny of the invoices, I find that the items therein comprise of purported remedial work beyond those dealt under
the third issue herein. In other words, there is a lot of other unexplained work.The defendant has merely collated all her
payments made to the rectification contractors and held them entirely to the account of the plaintiff. This is plainly
unsatisfactory and does not meet the requirement of proof of damages as held by the court of appeal in Sony
Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 2 MLJ 229;; [2007] 2 AMR 229. In building contract litigation,I
have expected the complainant to carefully sieve through and tabulate each and every relevant defect and the
costs of remedying them systematically preferably also in a Scott schedule. The tabulation must cross-refer to the
defect as substantiated preferably by photographic records or other cogent mode of proof together with the
corresponding item of expenses or costs incurred to remedy the defect as substantiated by the work invoices. The
complainant must in honesty disregard those works that constituted improvement or addition/modification rather than
rectification. In short, the complainant cannot ‘throw the whole kitchen sink’ of alleged unprocessed defects and expenses
to the court to have them sorted out as presented by the defendant here.”

[89] The Defendants called DW2 who is not a registered quantity surveyor to testify on the defect rectification costs.
He is an employee of the First Defendant who joined the company only in April 2016. Hence he has vested interest
and not truly an independent witness. In addition, he had no personal knowledge of the defects that subsisted and
rectified prior thereto. I have scrutinised his testimony and noticed that he has ventured to give expert opinion
instead of merely collating the factual evidence of the defects and the corresponding rectification costs. I find his
explanation on the assessment of the defect rectification costing of RM30,000.00/unit for 99 units and RM6,000/unit
for 63 units overly general and theoretical divorced from the realities of the actual Project conditions. It was merely
a guesstimate. In any event, I find and hold that the Defendants failed to prove the defect rectification costs
systematically as per the guidelines outlined by me above. The failure is fatal to the Defendants’ claim for several
reasons. Firstly the Plaintiff’s obligation in respect of defect rectification is set out in clause 6.3 of the Construction
Agreement seems limited to painting works and electrical works only. The rest of the defect rectification is under the
purview of the Second Defendant and not claimable against the Plaintiff. Secondly and more pertinently, the
Defendants have failed to satisfy me that there were indeed defects that required rectification to the extent as
claimed by them. I reiterate my findings in paragraphs 58 to 60 above. I noticed that certain photographs tendered
by them were those produced by Purchasers but not by the architect or civil & structural engineer at the material
time on completion of the Works. The cogency of these photographs is questionable by reason that it is unknown as
to when these photographs were taken especially to ascertain if they were indeed due to wear and tear subsequent
to vacant possession afforded to the Purchasers. Thirdly, I have nonetheless reviewed the Defendants’
documentary evidence produced in bundles E and I and find that they were no different from that produced in KC
Leong Holdings Sdn Bhd v. Datin Moh Bee Ling (supra) where the ‘whole kitchen sink’ of unprocessed vouchers
were thrown to the Court. I noticed that certain vouchers were produced in bad faith for defect rectification
supposedly done in 2014. I further noticed that they included payment vouchers for erection of workers’ quarters in
end 2015 as well as show house for the Desa Ku Phase 2 that has nothing to do with the Plaintiff whatsoever.
Fourthly, the Defendants have purportedly entered into a contract for major repairs amounting to RM2.97 million as
early as in April 2015 in further attempt to support their claim, that is about 2 months before the Defendants for the
first time made hue and cry over their alleged defective work with the Plaintiff that led to the execution of the
Supplementary Agreement. As acknowledged by DW1, this contract is fishy and likely concocted for purposes of
trial purposes. This is to me yet another indicia of bad faith if not fraud that destroyed the credibility of their claim.
Fifthly and finally, the Defendants were unable to satisfactorily explain to me as to why the defect rectification is still
uncompleted todate after almost 3 years. This again smacks of bad faith and goes to show that either the defects
do not exist as alleged and/or that it is merely a ploy to justify the continuing withholding of the Plaintiff’s money.

[90] The Plaintiff has in rebuttal appointed PW2, an independent registered quantity surveyor to opine on the
Defendants’ alleged defect rectification costs. It is seen from his analysis that the estimated costs that would be
incurred (if any) is significantly lower than that claimed by the Defendants. However PW2 was only able to
methodically estimate the fair costs of defect rectification on per unit of bungalow basis that ranged between
RM4,369.78 and RM5,627.19 for the whole building depending on the type of unit involved. If it is only for painting
works, then the equivalent fair costs on per unit of bungalow basis only ranged from RM350.34 and RM556.95
respectively. The total amount of estimated fair costs involved could not however be established because there is
no cogent evidence adduced by the Defendants as to specifically which units were affected.

[91] Nonetheless since there is some evidence of minor defects subsisting in the completed Works as

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acknowledged by the Plaintiff and the Defendants’ at the meeting with the Ministry on 19 May 2015, I find that the
Plaintiff should compensate a fair global sum of RM150,000.00 to the Defendants just as in Ke Seng Enterprise Sdn
Bhd v. Lembaga Pembangunan Perumahan Dan Bandar [2011] 2 CLJ 228 where a fair global sum was awarded
on the circumstances of the case.

[92] Secondly as to the claim for bank guarantee, deposit and bank charges, I find that the bank guarantee of
RM500,000.00 given by the Defendants to IWK was only for security for completion of the STP. There is no
evidence that the guarantee was called and forfeited by IWK. Consequently, this sum of RM500,000.00 cannot be
recovered from the Plaintiff. I am of the view and so find and hold that the Plaintiff ought to only to pay for the
expenses to procure the bank guarantee that amounted to only RM5,451.60.

[93] In respect of the other guarantees and deposits, it is provided in clauses 6.1 and 6.2 read together of the
Construction Agreement that the bank guarantee for the sewerage piping is under the purview of the Second
Defendant’s responsibility. Similarly the deposits payable to SADA, JKR and MPK are under the purview of the
Defendants because the Plaintiff was only required to pay contributions but not deposits as per clause 4.1 of the
Construction Agreement. Moreover DW2 has conceded at the trial that the deposits would be refunded to the
Defendants.

[94] Thirdly as for consultant’s fees payment, the Plaintiff admitted to RM63,000.00 that has been by paid the
Defendants to H.H. Lau Architect for RM31,800.00, Lumbini Consultancy for RM21,200.00 and Perkhidmatan
Perunding Utara for RM10,000.00 respectively. This claim is thus deem conceded.

[95] However I find and hold that the Plaintiff is not liable to the further consultant fee payment of RM13,409.00 that
was paid to H.H. Lau Architect because it was for the other phases of the Desa Taman Ku development beyond the
203 units of bungalow houses.

[96] Fourthly the Defendants claimed the sum of RM184,837.00 for the construction and completion of the STP
comprising of payment to Kejuruteraan Aditeknik (M) Sdn Bhd amounting to RM44,037.00, Aspes Builders Sdn Bhd
amounting to RM137,800.00 and for painting and repair of the door amounting to RM3,000.00.

[97] As found by me in paragraph 51 above, the construction of the STP was deferred. It was budgeted for by the
Plaintiff within its Job Scope and ought to be carried out by the Plaintiff. However the Defendants within their
purported rights provided in the Supplementary Agreement deprived the right of the Plaintiff to carry out the STP
works by appointing others to do so instead. In this connection, I find that the Defendants initially appointed
Kejuruteraan Aditeknik (M) Sdn Bhd to carry out and complete the STP works at the contract sum of RM63,400.00.
However the work was subsequently suspended for more than a year in October 2016 and later resumed to
completion by Aspes Builders Sdn Bhd.

[98] In the premises, I find and hold that the Plaintiff should fairly compensate the sum of RM63,400.00 only and the
balance of the claim of the Defendants to be recovered by them from Kejuruteraan Aditeknik (M) Sdn Bhd.

[99] Consequently, I hereby assess the amount of the Defendants’ counter claim payable by the Plaintiff totals to
RM281,851.60 being RM150,000.00 + RM5,451.60 + RM63,000.00 + RM63,400.00 pursuant to paragraphs 91, 92,
94 and 98 above respectively.
(vi) Illegality of Construction Agreement

[100] Although unpleaded in the Defendants’ statement of defence and counterclaim and statement of issues to be
tried, the Defendants raised for the first time in its closing submission that the Construction Agreement was tainted
with illegality. According to the Defendants, illegality can be raised at any time following Keng Soon Finance Bhd v.
MK Retnam Holdings Sdn Bhd & Anor [1989] 1 MLJ 457.

[101] In this regard, the Defendants referred to clause 2.1(a) and (b) of the Construction Agreement that the 19 units
of the Plaintiff’s bungalow houses were to be immediately transferred to Tijuana Homes Sdn Bhd which was neither
involved in any capacity nor contributed to the Project in any way. According to the Defendants, the owner of
Tijuana Homes Sdn Bhd is a friend of Gunasegaran Naidu who was the official from the Ministry that introduced the
rescue contract to both the Plaintiff and the Defendants.

Further according to the Defendants, the transfer of the 19 units of bungalow houses was presumably for
gratification for bringing in the Plaintiff as rescue contractor and the Ministry apply pressure upon the Defendants

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and their consultants to ensure that the CFO was issued as well as threat not to remove the First Defendant from
the Ministry’s black listing.

In addition, the Defendants alleged that PW1 had instructed that all documents relating to the transfer of the units
were to be sent directly to Gunasegaran Naidu for signatures by the signatories of Tijuana Homes Sdn Bhd.

[102] In the premises, the Defendants contended that Tijuana Homes Sdn Bhd was in reality under the control of
Gunasegaran Naidu and was simply used as a conduit to facilitate the transfer of the 19 units of bungalow houses
as consideration. In support of their contention of illegality, the Defendants relied upon ss. 24 and 25 of the
Contracts Act 1950 that provide:

“24. What considerations and objects are lawful, and what are not

The consideration or object of an agreement is lawful, unless-

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the person or property of another; or

(e) the court regards it as immoral, or opposed to public policy.

In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which
the object or consideration is unlawful is void.

Illustrations

(a) A agrees to sell his house to B for RM10,000. Here, B’s promise to pay the sum of RM10,000 is the consideration
for A’s promise to sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay the
RM10,000. These are lawful considerations.

(b) A promises to pay B RM1,000 at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to
grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party,
and they are lawful considerations.

(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain
voyage. Here A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s
promise, and these are lawful considerations.

(d) A promises to maintain B’s child, and B promises to pay A RM1,000 yearly for the purpose. Here the promise of
each party is the consideration for the promise of the other party. They are lawful considerations.

(e) A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by
fraud. The agreement is void, as its object is unlawful.

(f) A promises to obtain for B an employment in the public service, and B promises to pay RM1,000 to A. The
agreement is void, as the consideration for it is unlawful.

(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a
lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by
concealment, by A, on his principal.
(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the
value of the things taken. The agreement is void, as its object is unlawful.

(i) A’s estate is sold for arrears of revenue under a written law, by which the defaulter is prohibited from purchasing
the estate. B, upon an understanding withA, becomes the purchaser, and agrees to convey the estate to A upon
receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a
purchase by the defaulter, and would so defeat the object of the law.

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(j) A, who is B’s advocate, promises to exercise his influence, as such, with B in favour of C, and C promises to pay
RM1,000 to A. The agreement is void, because it is immoral.

(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though
the letting may not be punishable under the Penal Code.

25. Agreement void if consideration and objects are unlawful in part

If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for
a single object, is unlawful, the agreement is void.

Illustration

A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to
pay to A a salary of RM10,000 a year. The agreement in void, the object of A’s promise and the consideration for B’s
promise, being in part unlawful.”

The Defendants also refer to the recent Court of Appeal case of John Amborse v. Peter Anthony & Anor [2017] 4
MLJ 374 where Tengku Maimun JCA held as follows:

“[40]The principles that can be gleaned from Merong Mahawangsa are as follows:

(a) no court ought to enforce an illegal contract where the contract is ex facie illegal, even if illegality was not pleaded;

(b) where the contract is not ex facie illegal and illegality was not pleaded, the court can still take judicial notice of
illegality when facts which have not been pleaded emerge in evidence in the course of the trial showing clearly the
illegality;
(c) the court is bound to intervene if illegality is brought to its notice; and

(d) such judicial notice can be taken at any stage, either at the court of first instance or at the appellate stage.

[41]In our view, the most pertinent principle encapsulated in Merong Mahawangsa is that the courts are bound at all stages
to take notice of illegality, whether ex facie or which later appears, even though not pleaded, and that it was contrary to
public policy that a person should be hired for money or valuable consideration, to use his position and interest to procure a
benefit from the government.”

Earlier in the Federal court case of Merong Mahawangsa Sdn Bhd & Anor v. Dato Sharzryl Eskay bin Abdullah
[2015] 5 MLJ 619, Jeffrey Tan FCJ held as follows:

“[77]There could be no mistake about it, the RM20m was intended as payment for service rendered by the Respondent to
secure the bridge project for the Consortium. But what sort of service was rendered by the respondent? In the instant case,
the answer was provided by the respondent. The respondent pleaded that he ‘used his influence and good relationship with
the Government of Malaysia to procure the original bridge project (‘SIG project’) for the benefit and interest of the (first
appellant)’. In his amended statement of claim at 164-166 AR, the respondent particularised his close relationship with
named Federal Ministers and his dealings with Federal Ministers with respect to the bridge project. But it was not in
pleadings alone that influence peddling was admitted by the respondent. In his witness statement (see 564-580AR), the
respondent affirmed his pleaded facts and even provided further details of his influence and the manner in which he exerted
his influence and convinced those Federal Ministers (in particular, see 569-571AR. ‘An agreement, the object of which is to
use the influence with the ministers of government to obtain a favourable decision, is destructive of sound and good
administration. It showed a tendency to corrupt or influence public servants to give favourable decisions otherwise than on
their own merits. Such an agreement is contrary to public policy. It is immaterial, if the persons intended to be influenced
are not amenable to such recommendations’ (Mulla Indian Contract and Specific Relief Acts (13th Ed Vol 1) at 702-703).
On the facts and on the face of it, it was so plain and obvious that the consideration was unlawful, and that the letter of
undertaking was void. On that ground, the claim should have been dismissed.”

[103] The Defendants concluded by submitting that although the inserting of Tijuana Homes Sdn Bhd on the face of
it seemed lawful and innocuous, yet the exercise was actually carried out in order to achieve an unlawful end
following Hasmah Bee Abdul Rahman v. Kenny Chua Kien Lam [2006] 5 MLJ 236. The Plaintiff has come to Court

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to seek relief pursuant to the Construction Agreement with unclean hands and must consequently be denied any
relief whatsoever following Nyan Hon & Bros Sdn Bhd v. Metro Charm Sdn Bhd [2009] 6 MLJ 450.

[104] The Plaintiff in response strenuously contended it is trite law that the parties are bound by the pleadings. In the
case of illegality, Ismail Khan CJ (Borneo) held as follows in the Federal Court case of Lo Su Tsoon Timber Depot
v. Southern Estate Sdn Bhd [1971] 2 MLJ 161:

“The point whether the court can take cognizance of a point of illegality, whether pleaded or not, has been the subject of
numerous decisions. I need only refer to the case of Snell v Unity Finance Limited [1963] 3 All ER 50 at p 55 where most of
the authorities were dealt with. In that case Willmer L.J. referred with approval to the propositions set out by Devlin J. in
Edler v Auerbach [1949] 2 All ER 692 who, following the reference to North-Western Salt Company Limited v Electrolytic
Alkali Company Limited [1914-15] All ER Rep 752, said:

“That case authorises, I think, four propositions: first, that where a contract is ex facie illegal, the court will not enforce
it, whether the illegality is pleaded or not; secondly, that where, as here, the contract is not ex facie illegal, evidence of
extraneous circumstances tending to show that it has an illegal object should not be admitted unless the
circumstances relied on are pleaded; thirdly, that where unpleaded facts, which, taken by themselves show an illegal
object, have got in evidence (because, perhaps, no objection was raised or because they were adduced for some
other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are
before it; but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from
them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not.”“

[105] The Plaintiff contended that the Construction Agreement plainly isn’t of the first category of being ex facie
illegal. The nature of the Defendants’ contention fell under the second category that required the circumstances
relied upon to be pleaded. In this connection, the Defendants didn’t plead the owner of Tijuani Homes Sdn Bhd as
well as that Tijuani Homes Sdn Bhd wasn’t the Plaintiff’s nominee. The Defendants ran foul of Order 18 rule 8(1)(b)
of the Rules of Court 2012 that provides:

“8. Matters which shall be specifically pleaded (O. 18 r. 8)

(1) A party shall in any pleading subsequent to a statement of claim plead specifically any matter, for example,
performance, release, any relevant statute of limitation, fraud or any fact showing illegality-
(a) which he alleges makes any claim or defence of the opposite party not maintainable;

(b) which, if not specifically pleaded, might take the opposite party by surprise; or

(c) which raises issues of fact not arising out of the preceding pleading.”

[106] The Plaintiff further contended that even if the nature of the Defendants’ contention fell under the third
category where the unpleaded facts by themselves show an illegal object, the Court should not act on them unless
it is satisfied that the whole of the relevant circumstances are before it. In this respect, the whole of the relevant
circumstances were not put before the Court, viz:
(i) Who is the owner of Tijuana Homes Sdn Bhd?;
(ii) What exactly is the connection between Gunasegaran Naidu and Tijuana Homes Sdn Bhd?;
(iii) What is the nominee arrangement between the Plaintiff and Tijuana Homes Sdn Bhd?;
(iv) Is Tijuana Homes Sdn Bhd the Plaintiff’s nominee?; and
(v) Was it the Plaintiff or the Defendants who requested Tijuana Homes Sdn Bhd to be the Plaintiff’s nominee?

In the Supreme Court case of Lim Kar Bee v. Duofortis Properties (M) Sdn Bhd [1992] 2 MLJ 281 Peh Swee Chin
FCJ held as follows:

“Courts have always set their face against illegality in any contract. It is very well settled that the courts take judicial notice
of such illegality and refuse to enforce the contract, and such judicial notice may be taken at any stage, either at the court of

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first instance or at the appellate stage irrespective of whether illegality is pleaded or not where the contract is ex facie
illegal.

When the contract is not ex facie illegal, then on the question of pleadings, there is only one situation where illegality need
not be pleaded when the court can still take judicial notice of illegality and refuse to enforce it. The situation is when facts
which have not been pleaded emerge in evidence in the course of the trial showing clearly the illegality, eg the illegal
purpose of the contract, or its illegal consideration, with the presence of all relevant circumstances, see eg Palaniappa
Chettiar v Arunasalam Chettiar 1, Leong Poh Chin v Chin Thin Sin 2, and North Western Salt Co Ltd v Electrolytic Alkali
Ltd 3 just to mention a few.”

[107] Finally the Plaintiff submitted that the Defendants failed to discharge their burden of proof by adducing
sufficient cogent evidence that the transfer of the 19 units of bungalow houses was not as a stakeholding.
Consequently, this illegality argument by the Defendants ought to be rejected outright.

[108]I am perplexed to observe that the Defendants whom I found have not conducted themselves honourably and
come to Court with clean hands as far as the performance of the Construction Agreement as well as the entry of the
May Agreement and Supplementary Agreement are concerned are now cross contending that the Plaintiff too has
not come to Court with clean hands by having indulged in illegality in the making of the Construction Agreement. It
seems to me to be a desperate last minute counter attack made in afterthought to save themselves.

[109] First and foremost, I am with the Plaintiff that the Construction Agreement is not ex-facie illegal. As to the
illegal object as alleged by the Defendants, it must be specifically pleaded but that wasn’t done by them.
Furthermore, it wasn’t also specifically put to the Plaintiff’s key witness PW1 at the trial in breach of the Browne v
Dunn principle as required in by the Court of Appeal in Aik Ming (M) Sdn Bhd & Anor v. Chang Ching Chuen & Ors
and Another Appeal [1995] 2 MLJ 770. The Plaintiff was therefore caught by surprise and would severely be
prejudiced if the Defendants’ allegations are entertained at this juncture.

[110] In any event I hold that both the legal and evidential burden of proof lie upon the Defendants to prove the
illegal object as so alleged by them and put forth the whole circumstances before me. I am satisfied from PW1’s
testimony that the 19 units of bungalow houses were transferred to Tijuana Homes Sdn Bhd as stakeholding at the
request of KEC during the negotiations that led to the making of the Construction Agreement. This is because KEC
was worried that the Plaintiff may not finish the Works. Hence both parties agreed to transfer the 19 units to a
nominee company and Gunasekaran Naidu being the middle person who brought the parties together suggested to
utilize his friend’s company and both parties agreed thereto. Consequently Tijuana Homes Sdn Bhd was meant to
hold the 19 units as both nominee and stakeholder and later transfer the 19 units back to the Plaintiff upon the
completion of the Project with CFO.

If it was otherwise as alleged by the Defendants, it is for them to adduce cogent evidence to rebut PW1 by calling
KEC if not also Gunasekaran Naidu and the owner of Tijuana Homes Sdn Bhd as witnesses. This was not done. In
addition, I would have expected the Defendants to ‘put the money where the mouth is’ by making a report to the
Malaysian Anti Corruption Commission and risk the hazards of having made a false report or face a malicious
prosecution suit. This was not done too. It is convenient but ridiculous to suggest that adverse inference ought to be
drawn against the Plaintiff for not calling them instead. Hence, the Defendants have failed to meet their requisite
burden of proof accordingly.

More pertinently as it turned out, I noted that the 19 units of bungalow houses were in fact re-transferred back by
Tijuana Holdings Sdn Bhd to the Defendants because of the May Agreement and Supplementary Agreement. This
transfer back would not have happened if the 19 units was the illegal object or consideration that had already
accrued to and owned by someone else.

[111] Finally the Defendants also unfairly in my view painted that there was something sinister on the part of the
Ministry putting pressure for the Project to be completed fast as testified by DW6. There is nothing sinister about the
Ministry putting pressure here in my opinion because the Project had been abandoned for a long time leaving a few
hundred unhappy and disgruntled Purchasers.

[112]I therefore find that there is neither illegality nor illegal object disclosed in this case.
Conclusion

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[113] This is a classic construction contract case which highlighted the plight of the contractor that was bullied by the
developer. But it is also a rare case where the plea of economic duress succeeded on its own peculiar special facts.
Ordinarily, the common recourse is now to resort to statutory adjudication under the Construction Industry Payment
and Adjudication Act 2012 to address cash flow problems. Nonetheless common law remedies including that
premised on economic duress always remain an option particularly in appropriate acute cash flow hardship
scenarios inflicted upon by the non paying party.

[114] For the foregoing reasons, I find and hold that the Plaintiff succeeded in its claim amounting to
RM5,390,000.00 subject to the Defendants’ equitable set off of their counterclaim amounting to RM281,851.60 only.
The nett amount due and payable by the Defendants to the Plaintiff is therefore RM5,108,148.40. Accordingly I
enter judgment for the Plaintiff in the following overall terms against the Defendants:
(i.) a declaration that the 22 May 2015 agreement and the Supplementary Agreement dated 6 July 2015 are
set aside;
(ii.) payment of RM5,108,148.40 with interest thereon at 5% per annum from the date of the writ till full
realization; and
(iii.) costs of RM125,000.00.

End of Document

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 167

User Name: See Yi Vonne

Date and Time: Tuesday, 31 October 2023 8:18:00PM MYT
Job Number: 209347743

Document (1)

1. COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215
Client/Matter: -None-
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See Yi Vonne
 168

Combe v Combe

Overview | [1951] 2 KB 215, | [1951] 1 All ER 767, | 95 Sol Jo 317, | [1951] 1 TLR 811

COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215

[COURT OF APPEAL]
[*216]
Asquith, Denning and Birkett, L.JJ.
1951 Mar. 5, 6.

Divorce — Promise by husband in 1943 to pay wife

Held, that there was no consideration for the
100l. a year free of income tax — Promise made
husband's promise, since (1.) the wife had not
after decree nisi but before decree absolute —
promised not to apply for maintenance to the Divorce
Wife's forbearance to apply to Divorce Court for
Court, and (2.) even if she had so promised, she
maintenance — No request, express or implied, by
could not have deprived herself of that right (see
husband for forbearance — Action in 1950 in King's
Hyman v. Hyman [1929] A. C. 601, as explained in
Bench Division by wife on husband's promise —
Gaisberg v. Storr [1950] 1 K. B. 107); and also (3.)
Absence of consideration.
the wife's actual forbearance to make such an
application was not made at the request of her
The principle stated in Central London. Property Trust
husband, express or implied.
Ld. v. High Trees House Ld. [1947] K. B. 130 and
Robertson v. Minister of Pensions [1949] 1 K. B. 227, is Held, further, that in these circumstances, the
that, where one party has, by his words or conduct, principle stated in Central London Property Trust Ld.
made to the other a promise or assurance which was v. High Trees House Ld. (supra) and Robertson v.
intended to affect the legal relations between them and The Minister of Pensions (supra) afforded the wife no
to be acted on accordingly, then, once the other party cause of action.
has taken him at his word and acted on it, the party who
Per Asquith, L.J. It was unnecessary to express any
gave the promise or assurance cannot afterwards be
views on the correctness of the decision in Central
allowed to revert to the previous legal relationship as if
London Property Trust Ld. v. High Trees House Ld.
no such promise or assurance had been made by him,
(supra), though he, certainly, must not be taken as
but he must accept their legal relations subject to the
questioning it. The decision of the House of Lords in
qualification which he himself has so introduced, even
Hyman v. Hyman (supra) was not to be construed as
though it is not supported in point of law by any
applying only to agreements made before the date of
consideration, but only by his word.
decree absolute.

But this principle does not create any new cause of Per Denning, L.J. He had always understood that no
action where none existed before; so that, where a agreement for maintenance, which was made in the
promise is made which is not supported by any course of proceedings for divorce before the date of
consideration, the promisee cannot bring an action. decree absolute, was valid, unless it should be
sanctioned by the Divorce Court. Indeed, he had said
Between the dates of decree nisi and decree absolute so in Emanuel v. Emanuel [1946] P. 115, 117. He
on a petition for divorce a husband promised his wife to knew that such agreements were often made, but
allow her 100l. a year free of tax. The wife forbore to their only valid purpose was to serve as a basis for a
apply to the Divorce Court for maintenance, but not on consent application to the Divorce Court. The reason
any request by the husband, express or implied, that why such agreements, unless approved by the court,
she should so forbear. The husband did not pay to his were invalid, was because they were so apt to be
wife the payments he had promised, and, after the lapse collusive.
of seven years, the wife brought an action in the King's Decision of Byrne, J., approved on the issue of
Bench Division on her husband's promise to make those consideration, disapproved on the applicability of the
payments to her.

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COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

principle stated in Central London Property Trust Ld. not apply for maintenance to the Divorce Court, and,
v. High Trees House Ld. (supra). indeed, had she made such a promise there would have
been no consideration for it, since no agreement by her
with her husband could deprive her of this right: see
APPEAL from Byrne, J. Hyman v. Hyman (4), as interpreted in the Court of
Appeal in Gaisberg v. Storr (5). Though in fact the wife
The parties, a husband and wife, were married in 1915, did forbear from applying to the Divorce Court for
but separated in 1939. On February 1, 1943, on the maintenance, there was no request by the husband,
wife's petition, a decree nisi of divorce was pronounced. express or implied, that she should do so, and if the wife
On February 9, 1943, the wife's solicitor wrote to the now made that application she would have to explain
husband's solicitor: "With regard to permanent the long delay in making the application.
maintenance, we understand that your client is prepared
to make her an allowance of 100l. per year, free of But Byrne, J., held that the husband's promise was
income tax". On February 19, 1943, the husband's enforceable on the principle stated by Denning, J., in
solicitor replied that the husband had "agreed to allow Central London Property Trust Ld. v. High Trees House
your client 100l. per annum, free of tax". On August 11, Ld. (6) and Robertson v. Minister of Pensions (7). But
1943, the decree was made absolute. The wife's the principle stated by his Lordship in those cases
solicitor wrote for the first instalment of 25l. on August cannot of itself give a cause of action. Where
26, and asking that future instalments should be paid on consideration is an essential part of the cause of action,
November 11, February 11, May 11, and August 11. the doctrine stated in the High Trees case(6), in the
The husband, himself, replied that he could not be absence of consideration, cannot take its place. The
expected to pay in advance. In fact, he never made any doctrine does not decide that a promisee can sue on a
payment. The wife pressed for payment but made no promise. In neither of the two cases
application to the Divorce Court for maintenance. She
had an income of (1) [1950] 1 K. B. 107.
[*217]
(2) [1947] K. B. 130.
between 700l. and 800l. a year. Her husband had only (3) [1949] 1 K. B. 227.
650l. a year.
(4) [1929] A. C. 601.
On July 28, 1950, the wife brought an action in the (5) [1950] 1 K. B. 107.
King's Bench Division claiming from her husband 675l.,
(6) [1947] K. B. 130.
being arrears of payment at the rate of 100l. per year for
six and three-quarter years. Byrne, J., held that the first (7) [1949] 1 K. B. 227.
three quarterly instalments of 25l. were barred by the [*218]
Limitation Act, 1939, but gave judgment for the wife for
600l. He held on the authority of Gaisberg v. Storr (1) cited was the action brought by the promisee on a
that there was no consideration for the husband's promise. This doctrine, it has been said, may be used
promise to pay his wife 100l., but nevertheless he held as a shield and not as a sword; it does not decide that a
that the promise was enforceable on the principle stated promisee can sue on such a promise.
in Central London Property Trust Ld. v. High Trees Finally, no agreement for maintenance made in the
House Ld. (2) and Robertson v. Minister of Pensions course of divorce proceedings before the date of decree
absolute between husband and wife is valid, unless it is
(3), because it was an unequivocal acceptance of
sanctioned by the court: see the observations of
liability, intended to be binding, intended to be acted on Denning, J., in Emanuel v. Emanuel (8).
and, in fact, acted on. Peter Rawlinson for the wife. Where a promise is given
which (a) is intended to create legal relations, and (b) is
The husband appealed. intended to be acted on by the promisee, and (c) is, in
fact, acted on, the promisor cannot bring an action
against the promisee which involves the repudiation of
Kee for the husband. The trial judge was right in holding his promise or is inconsistent with it: see the High Trees
that there was no consideration for this promise by the case(6) and Robertson v. Minister of Pensions (7). Such
husband to pay his wife 100l. per annum free of income a promise acts as an estoppel or quasi-estoppel. It is
tax. There was no promise by the wife that she would just and equitable that if such a promise with those

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COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

conditions can be used as a shield by the promisee, he he has deliberately agreed to waive, if the debtor has
can also use it as a sword and sue upon it, and in such carried on business or in some other way changed his
case the promisor should not be allowed to plead that position in reliance on the waiver: In re William Porter &
his promise is not binding on him: the promisor is Co. Ld. (13); Buttery v. Pickard (14); the High Trees
estopped from denying his promise. The reasoning case(10); and Ledingham and Others v. Bermejo
which it has been established affords the promisee in Estancia Co. Ld. (15). A landlord, who has told his
such a case a defence, is good to afford him also the tenant that he can live in his cottage rent free for the
weapon of a cause of action. Consideration is not rest of his life, is not allowed to go back on it, if the
necessary in such a case, where such a promise has tenant stays in the house on that footing: Foster v.
been acted on to the detriment of the promisee. Robinson (16). On other occasions it is a defendant who
[Counsel then contended that from the correspondence is not allowed to insist on his strict legal rights. His
it appeared that the agreement of the husband to pay conduct may be such as to debar him from relying on
the wife 100l. a year free of income tax was made after some condition, denying some allegation, or taking
the date of decree absolute.] some other point in answer to the claim. Thus a
The agreement having been made after the date of government department, which had accepted a disease
decree absolute, there was no agreement not to invoke as due to war service, were not allowed afterwards to
the jurisdiction of the court or to control the process of say it was not, seeing that the soldier, in reliance on the
the court when its jurisdiction had been invoked: see the assurance, had abstained from getting further evidence
speech of Lord Hailsham, L.C., in Hyman v. Hyman (9). about it: Robertson v. Minister of Pensions (17). A buyer
Such an agreement was not open to objection and was who had waived the contract
made for valid consideration. (10) [1947] K. B. 130.
Further, in any case, there was consideration for the (11) (1877) 2 App. Cas. 439, 448.
promise: the wife forbore from doing what she was (12) (1888) 40 Ch. D. 268, 286.
entitled to do - to apply to the Divorce Court for (13) [1937] 2 All E.R. 361.
maintenance. This she did in consequence of her (14) [1946] W. N. 25.
husband's promise. And thus a forbearance was to her (15) [1947] 1 All E. R. 749.
detriment, in that at the present time she must apply to (16) [1951] 1 K. B. 149, 156.
the court for leave to make the application, with the (17) [1949] 1 K. B. 227.
probability [*220]
(8) [1946] P. 115, 117.
(9) [1929] A. C. 601, 609, 614. date for delivery was not allowed afterwards to set up
[*219] the stipulated time as an answer to the seller: Charles
Rickards Ld. v. Oppenhaim (18). A tenant who had
that permanent maintenance would not be granted from encroached on an adjoining building, asserting that it
the date of decree absolute - some seven years ago. was comprised in the lease, was not allowed afterwards
Such forbearance was good consideration for the to say that it was not included in the lease: J. F. Perrott
promise and a request for such forbearance, if & Co. Ld. v. Cohen (19). A tenant who had lived in a
necessary, will be implied on the part of the husband. house rent-free by permission of his landlord, thereby
Kee replied. asserting that his original tenancy had ended, was not
DENNING, L.J. [after stating the facts:] Much as I am afterwards allowed to say that his original tenancy
inclined to favour the principle stated in the High Trees continued: Foster v. Robinson (16). In none of these
case(10), it is important that it should not be stretched cases was the defendant sued on the promise,
too far, lest it should be endangered. That principle does assurance, or assertion as a cause of action in itself: he
not create new causes of action where none existed was sued for some other cause, for example, a pension
before. It only prevents a party from insisting upon his or a breach of contract, and the promise, assurance or
strict legal rights, when it would be unjust to allow him to assertion only played a supplementary rôle - an
enforce them, having regard to the dealings which have important rôle, no doubt, but still a supplementary role.
taken place between the parties. That is the way it was That is, I think, its true function. It may be part of a
put in Hughes v. Metropolitan Railway (11), the case in cause of action, but not a cause of action in itself.
the House of Lords in which the principle was first The principle, as I understand it, is that, where one party
stated, and in Birmingham, etc., Land Company v. has, by his words or conduct, made to the other a
London and North-Western Railway Co. (12), the case promise or assurance which was intended to affect the
in the Court of Appeal where the principle was enlarged. legal relations between them and to be acted on
It is also implicit in all the modern cases in which the accordingly, then, once the other party has taken him at
principle has been developed. Sometimes it is a plaintiff his word and acted on it, the one who gave the promise
who is not allowed to insist on his strict legal rights. or assurance cannot afterwards be allowed to revert to
Thus, a creditor is not allowed to enforce a debt which the previous legal relations as if no such promise or

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 Page 4 of 7 171
COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

assurance had been made by him, but he must accept same thing expressed in different words: see Oliver v.
their legal relations subject to the qualification which he Davis (23). But my difficulty is to accept the finding of
himself has so introduced, even though it is not Byrne, J., that the promise was "intended to be acted
supported in point of law by any consideration but only upon". I cannot find any evidence of any intention by the
by his word. husband that the wife should forbear from applying to
Seeing that the principle never stands alone as giving a the court for maintenance, or, in other words, any
cause of action in itself, it can never do away with the request by the husband, express or implied, that the
necessity of consideration when that is an essential part wife should so forbear. He left her to apply if she wished
of the cause of action. The doctrine of consideration is to do so. She did not do so, and I am not surprised,
too firmly fixed to be overthrown by a side-wind. Its ill- because it is very unlikely that the Divorce Court would
effects have been largely mitigated of late, but it still have then made any order in her favour, seeing that she
remains a cardinal necessity of the formation of a had a bigger income than her husband. Her forbearance
contract, though not of its modification or discharge. I was not intended by him, nor was it done at his request.
fear that it was my failure to make this clear which It was therefore no consideration.
misled Byrne, J., in the present case. He held that the (20) [1929] A. C. 601.
wife could sue on the husband's promise as a separate (21) [1950] 1 K. B. 107.
and independent cause of action by itself, although, as (22) [1909] 1 Ch. 291, 298.
he held, there was no consideration for it. That is not (23) [1949] 2 K. B. 727.
correct. The wife can only enforce it if there was [*222]
(16) [1951] 1 K. B. 149, 156.
(18) [1950] 1 K. B. 616, 621-3. It may be that the wife has suffered some detriment
(19) [1951] 1 K. B. 705. because, after forbearing to apply to the court for seven
[*221] years, she might not now be given leave to apply: Scott
v. Scott (24). The court is, however, nowadays much
consideration for it. That is, therefore, the real question more ready to give leave than it used to be (see Fisher
in the case: was there sufficient consideration to support v. Fisher (25) and Hasting v. Hasting (26)), and I should
the promise? have thought that, if she fell on hard times, she would
If it were suggested that, in return for the husband's still obtain leave. Assuming, however, that she has
promise, the wife expressly or impliedly promised to suffered some detriment by her forbearance,
forbear from applying to the court for maintenance - that nevertheless, as the forbearance was not at the
is, a promise in return for a promise - there would clearly husband's request, it is no consideration. In Scott v.
be no consideration, because the wife's promise was Scott, where a maintenance agreement was made
not binding on her and was therefore worth nothing. during divorce proceedings, Scrutton, L.J., did say that
Notwithstanding her promise, she could always apply to he had no doubt about there being consideration for
the Divorce Court for maintenance - maybe only with it(27), but this must now be taken to be erroneous,
leave - and no agreement by her could take away that having regard to Hyman v. Hyman (28) and Gaisberg v.
right: Hyman v. Hyman (20), as interpreted by this court Storr (29).
in Gaisberg v. Storr (21). The doctrine of consideration is sometimes said to work
There was, however, clearly no promise by the wife, injustice, but I see none in this case, nor was there any
express or implied, to forbear from applying to the court. in Oliver v. Davis (30) or Gaisberg v. Storr (29). I do not
All that happened was that she did in fact forbear - that think it would be right for this wife, who is better off than
is, she did an act in return for a promise. Is that her husband, to take no action for six or seven years
sufficient consideration? Unilateral promises of this kind and then come down on him for the whole 600l.
have long been enforced, so long as the act or The truth is that in these maintenance cases the real
forbearance is done on the faith of the promise and at remedy of the wife is, not by action in the King's Bench
the request of the promisor, express or implied. The act Division, but by application in the Divorce Court. I have
done is then in itself sufficient consideration for the always understood that no agreement for maintenance,
promise, even though it arises ex post facto, as Parker, which is made in the course of divorce proceedings prior
J., pointed out in Wigan v. English and Scottish Law Life to decree absolute, is valid unless it is sanctioned by the
Assurance Association (22). If the findings of Byrne, J., court. Indeed, I said so in Emanuel v. Emanuel (31). I
were accepted, they would be sufficient to bring this know that such agreements are often made, but their
principle into play. His finding that the husband's only valid purpose is to serve as a basis for a consent
promise was intended to be binding, intended to be application to the court. The reason why such
acted upon, and was, in fact, acted on - although agreements are invalid, unless approved, is because
expressed to be a finding on the High Trees principle - they are so apt to be collusive. Some wives are tempted
is equivalent to a finding that there was consideration to stipulate for extortionate maintenance as the price of
within this long settled rule, because it comes to the giving the husband his freedom. It is to remove this

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 Page 5 of 7 172
COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

temptation that the sanction of the court is required. It the court, or any matter of that kind. It appears simply to
would be a great pity if this salutary requirement could have been that after some little talk in February, 1943,
be evaded by taking action in the King's Bench Division. there was an agreement come to that the husband
The Divorce Court can order the husband to pay would pay 100l. a year; and then the wife amended it to
whatever maintenance is just. Moreover, if justice so 100l. a year free of tax;
requires, it can make the order retrospective to decree (32) [1950] 1 K. B. 107.
absolute. That is the proper [*224]
(24) [1921] P. 107.
(25) [1942] P. 101. and then by March 5 that was recorded in a letter. It
(26) [1948] P. 68. seems on the first point, therefore, that there was no
(27) [1921] P. 107, 127. consideration for this agreement. If I may be permitted
(28) [1929] A. C. 601. to do so, I will quote the words of Asquith, L.J., in
(29) [1950] 1 K. B. 107. Gaisberg v. Storr (33): "The only consideration which
(30) [1949] 2 K. B. 727. could be deduced by inference from the circumstances
(31) [1946] P. 115. would be an undertaking by the wife, in exchange for
[*223] the husband's undertaking, not to apply to the court for
alimony pendente lite or permanent maintenance; but
remedy of the wife here, and I do not think she has a any promise given by her to refrain from so applying
right to any other. would have been void and unenforceable on the
For these reasons I think the appeal should be allowed. principle laid down in Hyman v. Hyman (34). In those
BIRKETT, L.J. I agree. There were two points before the circumstances I think that there is no evidence at all of
judge, both clearly stated and both clearly argued. The any consideration moving from the wife to the husband,
first, whether there was consideration for this agreement and that the agreement in the document is not a binding
to pay 100l. a year free of tax, was disposed of by the contract". The judge, as I said, dismissed this matter in
judge almost in a sentence. He said in fact that on the a sentence by saying that the law was so clear that it
authority of Gaisberg v. Storr (32) there could be no was not possible for the case to be argued on that
doubt that the decision in that case applied to the facts ground.
of the case before him. After reciting Gaisberg v. Storr With regard to the second point, I think that the
(32), he said: "In that case it was held that the only description given by Mr. Kee of the doctrine enunciated
consideration moving from the wife for the husband's in the two cases to which Denning, L.J., has referred, as
undertaking, which could be deduced by inference from one to be used as a shield and not as a sword, is very
the circumstances, would be an undertaking by the wife vivid. Denning, J., in Central London Property Trust Ld.
not to apply to the court for alimony pendente lite or for v. High Trees House Ld., concluded his judgment with
permanent maintenance, but that any promise by the these words(35): "I prefer to apply the principle that a
wife to refrain from so applying was void and promise intended to be binding, intended to be acted
unenforceable, and the learned Lords Justices all gave upon, and in fact acted upon, is binding so far as its
judgment to that effect. … At first sight that would terms properly apply". If a husband who admittedly had
appear to be conclusive, but Mr. Rawlinson, on behalf of entered into an agreement of this kind were in some
the plaintiff, pointed out that the whole of the argument way to try and take advantage of it, the doctrine would
in the case of Gaisberg v. Storr (32), and, therefore, the apply. So far as the wife is concerned, it would appear
whole matter to which the court was directing its to be plain that her rights of applying to the court for
attention, was concerned with the question whether maintenance are still theoretically in full force, for in
forbearance to apply for permanent maintenance was Fisher v. Fisher Lord Greene, M.R., discussing Scott v.
good consideration, and from an examination of the Scott (36), said(37): "Scrutton, L.J., expressed his
judgments in that case, and of the arguments, it plainly conclusion where he said: 'Without going through the
appears that that was the matter, and the only matter, other cases, seven or eight of which I have referred to
which was being considered in that case". Then he while counsel have been arguing this case, I think in this
continued: "But Mr. Rawlinson says: 'In this case it is not particular case the application ought to have been made
suggested that there was consideration'". within a reasonable time after the decree for dissolution,
I have been looking at the evidence which was given in and I see nothing whatever in the circumstances of this
the court below; and the agreement, about which all this case to justify an application being made seven years
subsequent trouble has arisen, was made as early as after
February in 1943, the decree absolute in the case not (33) Ibid. 114.
being made until August 11. But there does not appear, (34) [1929] A. C. 601.
as I read it, anywhere in the evidence a request by the (35) [1947] K. B. 130, 136.
husband that the wife should refrain from going to the (36) [1921] P. 107.
court, or a promise by the wife that she would not go to (37) [1942] P. 101, 106.

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COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

[*225] brought by the promisee, was brought upon a cause of

action which was not the promise, but was an alleged
the decree'". Then Lord Greene, M.R., continued: "He statutory right.
carefully refrained from saying that in any circumstances Then it is said for the wife that the husband's agreement
seven years would have been too long. Warrington, L.J., to pay 100l. a year was supported by good
is equally cautious in the language which he used. It consideration, which consisted either of an implied
seems to me that that authority does not in any way undertaking by the wife not to apply to the court for an
preclude us from saying that, on the facts of any order for permanent maintenance, or of an actual
particular case, a reasonable time may be as much as forbearance so to apply. As to the first of these, if the
seven years or even longer". agreement was made before the decree absolute
Mr. Kee argued that if an application were made to the Hyman v. Hyman (40), beyond question, decided that
court at this date for maintenance, it would be such agreement to abstain from resorting to the court is
necessary to explain the long delay in the making of the not valid consideration.
application. As one of the material circumstances for the It is said, however, first that the material agreement was
court to consider, I cannot conceive of a better one than not made before the decree absolute, but was made
that the wife mistakenly relied upon an agreement after, and that such an agreement made after the
which, much to her surprise, when it came before the decree absolute is not open to objection and is made for
court was held to be invalid. valid consideration. Alternatively, it is argued that even if
In all those circumstances I agree with the judgment such an agreement is not good consideration, an actual
which has been given. The trial judge was certainly right forbearance to apply to the court, is.
in saying that there was no consideration for the As to the first of these points, in my judgment the
agreement; and I think that he misunderstood and material agreement was made shortly after the decree
misapplied the principle laid down in the two cases nisi and long before the decree absolute. The
which have been cited. correspondence after the decree absolute contained
ASQUITH, L.J. I agree with my Lords and would add merely a request by the wife that an agreement
nothing but for the fact that we are disagreeing with the assumed to have been validly made in the previous
judgment of Byrne, J. February should be carried out by means of quarterly
The judge has decided that, while the husband's payments, followed in the October letters, by a consent
promise was unsupported by any valid consideration, by the husband to pay quarterly with a suggestion of
yet the principle in Central London Property Trust Ld. v. different quarter days. This cannot, in my view,
High Trees House Ld. (38) entitles the wife to succeed. constitute a contract - a contract made after the decree
It is unnecessary to express any view as to the absolute; but if it were so, I consider on the whole that
correctness of that decision, though I certainly must not Hyman v. Hyman (40), a decision of the House of Lords,
be taken to be questioning it; and I would remark, in is not to be construed as applying only to agreements
passing, that it seems to me a complete misconception made before decree absolute. I think that its application
to suppose that it struck at the roots of the doctrine of is perfectly general. It contains no such limitation in time
consideration. But assuming, without deciding, that it is as has been suggested. I am of opinion, further, that
good law, I do not think, however, that it helps the Hyman v. Hyman (40) is incidentally inconsistent with
plaintiff at all. What that case decides is that when a the dicta of Scrutton, L.J., in Scott v. Scott (41). Finally, I
promise is given which (1.) is intended to create legal do not think an actual forbearance, as opposed to an
relations, (2.) is intended to be acted upon by the agreement to forbear to approach the court, is a good
promisee, and (3.) is in fact so acted upon, the promisor consideration unless it proceeds from a request,
cannot bring an action against the promisee which express or
involves the repudiation of his promise or is inconsistent (40) [1929] A. C. 601.
with it. It does not, as I read it, decide that a promisee (41) [1921] P. 107, 127.
can sue on the promise. On the contrary, Denning, J., [*227]
expressly stated the contrary. Neither in the High Trees
case(38) nor in Minister of Pensions v. Robertson (39) implied, on the part of the promisor. If not moved by
(38) [1947] 1 K. B. 130. such request, the forbearance is not in respect of the
(39) [1949] 1 K. B. 227. promise.
[*226] For these reasons, and for the others given by my
Lords, I agree that the appeal should be allowed.
(another decision of my Lord which is relied upon by the Appeal allowed.
plaintiff) was an action brought by the promisee on the
promise. In the first of those two cases the plaintiff was
C. G. M.
in effect the promisor or a person standing in the shoes
of the promisor, while in the second the claim, though

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COMBE v. COMBE. [1950 C. 3344] [1951] 2 K.B. 215, [1951] 2 K.B. 215

End of Document

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 175

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1. CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352
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 176

CHENG HANG GUAN & 2 ORS v PERUMAHAN FARLIM (PENANG) SDN

BHD & 3 ORS
CaseAnalysis
| [1993] 3 MLJ 352

CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD
& ORS [1993] 3 MLJ 352
Malayan Law Journal Reports · 76 pages

HIGH COURT (PULAU PINANG)

EDGAR JOSEPH JR SCJ
CIVIL SUIT NO 311 OF 1982
20 March 1993
Case Summary
Civil Procedure — Amendment of pleadings — Joinder of defendants after issue of writ — Whether effect of
amendment was to introduce new cause of action

Civil Procedure — Amendment of pleadings — Time limit to file amended statement of claim — Whether
amended statement of claim served within 14-day time limit — Rules of the High Court 1980 O 20 r 9

Civil Procedure — Estoppel — Res judicata — Interlocutory judgment — Dissolution of interlocutory

injunction — Whether dissolution meant plaintiffs had no interest in land and claim was barred by res
judicata and issue estoppel

Civil Procedure — Locus standi — Joint claim for losses sustained — Non-joinder of party — Whether fatal
to plaintiff's claim — Rules of the High Court 1980 O 15 r 6(1)

Civil Procedure — Locus standi — Whether plaintiffs had title to land to be able to maintain suit — Whether
gift of land valid — Whether assignment required writing — Whether Statute of Frauds applicable

Contract — Agency — Apparent or ostensible authority — Doctrine of 'holding out' — Question of fact —
Onus of proof rests on person dealing with agent

Contract — Damages — Exemplary damages — Principles applicable in awarding such damages

Contract — Damages — Quantum of compensatory damages — Proof of special damages necessary —

Remoteness — Method of proving market price

Contract — Promissory estoppel — Promises and assurances made to plaintiffs — Whether availability of
promissory estoppel depended on availability of specific performance

Contract — Proprietary estoppel — Detrimental acts done in reliance on belief that interest would be
obtained — Principles applicable akin to constructive trusts

Contract — Proprietary estoppel — Where representee builds and improves land of another — Arises
where representor's conduct would render it unconscionable for him to insist on his strict legal rights

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

Contract — Terms of contract — Conditions on receipts — Effect of receipts containing conditions

incorporated subsequent to contract — Conditions in English and not understood by plaintiffs — Whether
plaintiffs had accepted conditions — Onus of proving contractual force of the conditions

Evidence — Admissions — Admissibility of admissions by non-party — Evidence Act 1950 s 18(3) [*353]
Evidence — Adverse inference — Plaintiffs' failure to adduce evidence of old receipts — Whether adverse
inference could be drawn — Evidence Act 1950 s 114(g)

Evidence — Burden of proof — Allegation of particular facts — Onus of proving contractual force of
conditions on receipts — Onus of proving apparent or ostensible authority

Evidence — Hearsay — Admissibility — Evidence of promises and assurances which had induced plaintiffs
to act to their detriment — Whether hearsay evidence

Land Law — Estoppel — Promises and assurances made to plaintiffs — Plaintiffs invested money and
incurred expenditure based on assurances — Whether there was equity or equitable estoppel protecting
plaintiffs' occupation of land

Land Law — Proprietary estoppel — Unregistered interest in land — Whether interest binding on registered
lessee — National Land Code 1965 s 206(3)

Landlord and Tenant — Oral agreement — No written tenancy agreement — Subsequent conditions
incorporated in rent receipts issued to tenants — Tenants did not understand conditions in English —
Whether condition as to notice to quit effective

Landlord and Tenant — Termination of tenancy — Notice to quit — Relevant factors in determining
sufficiency of notice to quit — Reasonable period of notice to quit

Tort — Trespass to land — Intentional act — Mistake no defence — Damages

The plaintiffs' family had been staying on part of holding Nos 3532 and 2497, Mukim 13, NED, Penang ('the plot
concerned') for more than 100 years, on which were situated their two dwelling houses ('the two dwelling houses')
No 258K and No 259H respectively, and their vegetable farm ('the farm'). The registered proprietor of holding No
3532 ('Thean Teik Estate') were and are the trustees of the Khoo Kongsi. P2's grandfather's (Cheong's) family had
converted what was once swampy jungle land into a productive farm. On Cheong's death, P2 took over
management of the farm, which was worked on by the family members. House No 258K had been on the plot
concerned before December 1938 and, in 1972, P1 and P2 were registered as tenants in place of Cheong. House
No 259H was built by Cheong in 1963 with the consent of the Khoo Kongsi and registered in the name of P2. After
Cheong's death, P2 spent RM1,500 in providing a ceiling for the house. No conditions were printed on the rent
receipts issued to Cheong and P2 until late 1981. Conditions, which were in English, were endorsed on receipts for
the farm after 1976 and for the two dwelling houses in 1981. The plaintiffs were illiterate farmers and could not
understand these conditions which included a condition that a period of one month's notice would be sufficient to
terminate the tenancy. Some time in 1972, P2 was informed by the visiting trustee of the Khoo Kongsi that it was
not necessary to change the tenancy into her name and that she could continue planting vegetables as long as she
wished provided she paid rent. Cheong had also told P2 [*354]
that the Khoo Kongsi had assured him that so long as he continued to pay ground rent, he could stay and cultivate
the farm and, upon his death, the tenancy was to continue for the benefit of his family, so long as the family
continued to pay the rent and cultivate the farm. After the assurance given by the visiting trustee, the plaintiffs inve
sted RM12,000 in installing a sprinkler system. For more than 50 years, neither the Khoo Kongsi nor anyone else
had interfered with the farming activities of the plaintiffs' family. The interference only commenced after the Khoo
Kongsi had entered into a joint-venture agreement with the defendants, whereupon the Khoo Kongsi gave one
month's notice of termination to the plaintiffs.

The plaintiffs (P1, P2 and P3) claimed that at all material times, they were and are lawful and protected tenants and
that they were entitled in law and equity to possession of the plot concerned. The plaintiffs' claim against the
defendants was founded on trespass and nuisance allegedly committed by the defendants. The reliefs prayed for
by the plaintiffs were for: (i) aggravated and exemplary damages for trespass and nuisance, with interest thereon;
(ii) a permanent injunction restraining the defendants, themselves or their servants and/or agents or otherwise
howsoever from entering, trespassing and/or carrying out works on the plot concerned; and (iii) costs.

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

The defendants raised various issues, including certain preliminary issues, namely: (i) the effect of the joinder of D3
and D4 after the issue of the writ was an attempt to raise a new cause of action; (ii) the plaintiffs ought not to have
been given leave to re-amend the statement of claim to include a claim for trespass against D3 and D4; (iii) there
was non-compliance with O 20 r 9 of the Rules of the High Court 1980 ('the RHC'); (iv) the suit was bad for non-
joinder and lack of locus standi; and (v) the plaintiffs' claim was barred by res judicata and issue estoppel. The
substantive issues raised were: (i) what the area of the plot concerned was and whether the plaintiffs had
possession of the plot concerned, the two dwelling houses and the farm; (ii) what notice to quit was necessary to
determine the plaintiffs' tenancies of the farm and the two dwelling houses; (iii) whether, as the tenancies were not
registered and operated as monthly tenancies, a month's notice was sufficient to terminate the plaintiffs' tenancies;
(iv) whether service of the notice to quit was effective; (v) whether house No 258K was subject to the Control of
Rent Act 1966; (vi) whether an equity or equitable estoppel protected the plaintiffs' occupation of the plot
concerned; (vii) whether the availability of equity depended on the availability of specific performance; (viii) whether
the plaintiffs' tenancies were binding on D1 and/or D3; (ix) whether a promissory estoppel arose; (x) whether a
proprietary estoppel arose and the extent of the plaintiffs' equity; and (xi) the measure of damages to be awarded.
Held, allowing the plaintiffs' claims:

(1) Based on the evidence before the court, it was obvious that the cause of action against D3 and D4 arose
from the alleged wrongdoing committed by them before they were joined as [*355]
defendants and the plaintiffs were not introducing any fresh cause of action. At the hearing of the
application for joinder of D3 and D4, counsel for the defendants had raised no objection thereto and the
objection now had been raised at a very late stage when perhaps any cause of action against D3 and D4
would be barred by limitation. Therefore, it would be neither right nor fair to entertain the objection now.
Moreover, if the objection had been taken on the hearing of the application for leave to amend, the plaintiffs
could have issued a fresh writ citing D3 and D4 as defendants and then applied for consolidation of the two
actions.
(2) Given the chronology of events in respect of the application to re-amend the statement of claim to include
trespass by D3 and D4, and there being no objection for to the application, leave was properly given.
(3) The plaintiffs' solicitors had properly filed the re-amended statement of claim in the registry of the court
within the time limited for doing so, although the registry had yet to return the document at the date of the
trial. The plaintiffs could not have done anything more and such lack of diligence as there was must be
ascribed to the registry and not the plaintiffs' solicitors. There was no breach of O 20 r 9 of the RHC.
(4) The term locus standi or standing in a court of law means entitlement to judicial relief apart from questions
of the substantive merits and the legal capacity of a plaintiff. There are two principles to bear in mind: first,
the court is bound to proceed on the basis that everything alleged in the statement of claim and in the
documents relied on is true; and secondly, the jurisdiction to uphold a plea of no locus standi should only
be exercised where there is no possibility of doubt. The objection to non-joinder was only taken at a very
late stage in the submissions of the defendants' counsel and O 15 r 6(1) of the RHC states that no action
shall be defeated by reason of non-joinder of any party.
(5) It is true that if several persons are joint owners of any land or premises affected by trespass, they should
all, as a rule, be joined as co-plaintiffs. However, it could reasonably be inferred from the evidence that P2
was in the position of a constructive trustee of the farm for the benefit of herself, the other plaintiffs and
PW1 and consequently, P2 alone could maintain the suit to protect trust property. There was therefore,
locus standi.
(6) The gift of the farm to the plaintiffs and PW1 had been perfected by their possession and cultivation of the
farm during Cheong's lifetime and thereafter, and therefore the Statute of Frauds 1677 had no application.
This was not an action based on any contract for the sale or other disposition of land, or any interest in
land.
(7) Dissolution of an interlocutory injunction does not constitute res judicata or issue estoppel in determining
the issues finally. [*356]
The legal effect of the refusal of the interlocutory injunction was simply, that at the interlocutory stage,
based on the limited material then available, the plaintiffs were not entitled to the injunctive relief claimed.
(8) The area in the possession of the plaintiffs was at all material times to this suit, 2.8 acres or approximately
121,619sq ft.

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

(9) A receipt is in law only evidence of the payment of a sum of money; it does not constitute a contract nor
can it have the effect of an estoppel. The true intention of the parties must be established by evidence at
the trial. There was no evidence that the conditions appearing in the rent receipts in respect of the farm or
the two dwelling houses had been introduced from the inception of the tenancies nor was there anything to
show that the plaintiffs, or their ancestors, who had no knowledge of the English language, could be said to
have accepted the 'conditions'. The onus of proving that the conditions on the receipt had contractual force
was upon the defendants who were relying on the same and not upon the plaintiffs to prove the converse.
No adverse inference could therefore be drawn against the plaintiffs for this omission. That the plaintiffs
themselves had used the rent receipts bearing the conditions aforesaid as evidence, does not in any way
debar them from contending at the final hearing that those conditions were invalid in law. The conditions
appearing in the rent receipts were devoid of legal effect and must be disregarded in considering the
question of the sufficiency of the notice to quit.
(10) Whilst the mode of payment of rent was an important factor in determining the question of the sufficiency of
the period of a notice to quit it, was not necessarily a decisive factor. Therefore, although rent had been
paid on a monthly basis, it did not necessarily follow that the tenancy could be determined by a month's
notice. Where there was no written tenancy agreement to construe the nature of the tenancies, factors to
be taken into account included not just mode of payment of rent but also the conduct and intention of the
parties, the contemplated user of the subject matter of the tenancies and other relevant circumstances of
the case as a whole. On the facts, three months' notice would be reasonable for the determination of the
tenancies of the farm and the two houses as this would afford the plaintiffs sufficient time within which to
harvest their crops and to yield vacant possession of the plot concerned.
(11) Notices to quit are validly served if left at the premises.
(12) As the requirements of s 16(1) of the Control of Rent Act 1966 were not satisfied, the court had no
jurisdiction to make an order for possession in favour of the defendants in respect of dwelling house No
258K.
(13) On the evidence, promises and assurances had been made by the Khoo Kongsi first to Cheong that so
long as he or his family continued to pay ground rent he could stay and cultivate the [*357]
farm as long as he wanted and relying on the same he and his family had converted what was once a
swampy land into a productive farm. He had also built the two dwelling houses with the consent of the Khoo
Kongsi. The plaintiffs had invested money and incurred substantial expenditure based on the assurances.
On the evidence, the tenancies held by Cheong were not just for his benefit but also for the benefit of his
family and these tenancies were not merely monthly tenancies.
(14) In respect of evidence relating to promises or assurances made by the visiting trustee, it was well
established that such evidence was not hearsay and was admissible as it was proposed to establish not
the truth of the statement, but the fact that it was made. Such a statement is frequently relevant in
considering the mental state and conduct thereafter of the witness. Evidence of statements made to P2 by
Cheong or assurances made by the Khoo Kongsi had been adduced for the purpose of showing that those
promises or assurances had induced Cheong and the plaintiffs to act in a manner to their detriment.
(15) Statements which are admissions made by a non-party to the suit are admissible by virtue of s 18(3) of the
Evidence Act 1950.
(16) The doctrine of 'holding out' sometimes called apparent or ostensible authority has been said to be based
upon estoppel. Agency by estoppel arises where one person has acted by allowing the agent to hold
himself out as having authority, so as to lead another to believe that he had authorized a third person to act
on his behalf, and that other in such belief, enters into transactions with the third persons within the scope
of his ostensible authority. The onus rests on the person dealing with the agent to establish real or
ostensible authority and the conduct said to amount to holding out must be proved affirmatively. It was a
question of fact in a particular case whether ostensible authority existed for the particular act in respect of
which liability was sought to be imposed upon the principal. Having regard to the evidence, the plaintiffs
had succeeded in proving, on the balance of probabilities, that the visiting trustee was held out as having
power to deal with the tenants on behalf of the Khoo Kongsi, including the power to make the promises and
assurances aforesaid, upon which the plaintiffs had relied and incurred substantial expenditure.
(17)(17)
The doctrine of promissory estoppel provides a defence to an action on the original contract for a
defendant relying on a voluntary variation. It does not provide a cause of action for a plaintiff relying on a
gratuitous promise. Yet, its effect may be to enable a party to enforce a cause of action which, without the
estoppel, would not exist. On the facts, the plaintiffs and their forbears had been in possession of the plot

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concerned for decades and they had commenced these proceedings relying on equity or equitable
estoppel. The plaintiffs' claim to the alleged equity [*358]
did not depend on the availability of the remedy of specific performance.
(18) Pursuant to the joint-venture agreement, D3 became the registered lessee of Lot 3523 and held the lease
on trust for and was the alter ego of the Khoo Kongsi. It follows that D3 would be in no better position to
resist the plaintiffs' claim to be entitled to be in possession in law and equity than would the Khoo Kongsi
itself. Moreover, as successors-in-title with notice of the plaintiffs' interest in the plot concerned, D3 would
have to take its lease subject to that interest. The validity of contracts relating to land or any interest therein
is declared in s 206(3) of the National Land Code 1965 ('the Code') and are not defeasible. The court was
therefore unable to accede to the submissions of counsel for the defendants that the protection of
indefeasibility guaranteed under s 340(1) of the Code enabled D3 to take its lease free of the plaintiffs'
interest in the plot concerned.
(19) Proprietary estoppel is one of the exceptions to the general rule that a person who spends money on
improving the property of another has no right to claim reimbursement or any proprietary interest in
property. Unlike promissory estoppel, proprietary estoppel, when it operates, is permanent in its effect and
it is also capable of operating positively so as to give a cause of action. Independent consideration is not
an essential requirement for the operation of proprietary estoppel and it is not essential that the
representator must have knowledge that his property is being improved. The representator's conduct and
the subsequent action and belief of the representee may render it unconscionable for the representator to
insist on his strict legal rights. If such a person builds or improves the land of another knowing he was
doing so on land belonging to another, there would still arise an equity in him if the landowner led such
person to expect to be allowed to stay there.
(20) The principles which apply to constructive trusts are closely akin to those underlying the doctrine of
proprietary estoppel. In both, the claimant must have acted to his detriment in reliance on the belief that he
would obtain an interest, and equity acts on the conscience of the legal owner to prevent him from
defeating the common intention. In some cases, like this one, proprietary estoppel is a form of constructive
trust.
(21) The person making the expenditure or the improvement on another's land should be to protected against
interference for as long as he would be prejudiced thereby. Having regard to the fact that the plaintiffs and
their ancestors had been living on the plot concerned, cultivating the farm and the substantial sums of
money which must have accrued to them and their ancestors by way of profit thereby over a period of
several decades, and the further fact that the plaintiffs had enjoyed rent-free occupation for the last decade
or so, the plaintiffs had had 'sufficient [*359]
satisfaction' for their labour and expenditure on the plot concerned or, in other words, the prejudice
suffered by them had been fully satisfied, and so, they were entitled to no relief.
(22) The defendants had committed acts of trespass and nuisance on the plaintiffs' land, of which they
(plaintiffs) had lawful possession.
(23) The general rule as to the measure of damages is that sum of money which will put the party who has
been injured or who has suffered, in the same position as he would have been if he had not sustained the
wrong for which he is now getting his compensation or reparation. When a plaintiff claims damages from a
defendant, he has to show that the loss in respect of which he claims damages was caused by the
defendant's wrong and also that the damages are not too remote to be recoverable. Where precise
evidence is obtainable, the court naturally expects to have it, where it is not, the court must do the best it
can.
(24) The normal way or method of proving market value in the case of a resale of goods in bulk would be to call
the customers or at the least, where the parties agree to documentary evidence, to tender documents
showing the existence of and a dealing with customers. A plaintiff's unsupported assertion that he would
receive such and such a price for his fruits or vegetables does not prove market value, much less that he
had a market. To allow this would dispense with proof of quantum altogether.
(25) Exemplary damages could only be awarded in three categories of cases, namely, oppressive action of
officers of the Crown; secondly, cases where a defendant with a cynical disregard for a plaintiff's rights has
calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk; and
thirdly, where statute expressly authorized it.

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(26) Trespass is normally associated with intentional acts even though committed by mistake, for mistake is no
defence and is no answer to the claims for exemplary damages, having regard to the particular
circumstances of this case.
(27) Awards of exemplary damages should be moderate and the resources of the parties was a relevant
consideration. The other factors which must be taken into consideration are the quantum of the
compensatory award as well as the conduct of the parties right down to the time of the judgment. Any sum
which the court awards by way of exemplary damages for the acts of trespass must reflect the gravity of
the wrongdoing.

[Bahasa Malaysia summary

Keluarga plaintif telah menduduki sebahagian daripada pegangan No 3532 dan No 2497, Mukim 13, NED, Pulau
Pinang ('petak berkenaan') selama lebih daripada 100 tahun, di atas mana terletak dua rumah kediaman mereka
('dua rumah kediaman itu'), iaitu No 258K dan No 259H masing-masing, dan ladang sayur mereka ('ladang [*360]
sayur itu'). Tuanpunya berdaftar pegangan No 3532 ('Estet Thean Teik') merupakan pemegang amanah Khoo
Kongsi. Keluarga datuk P2 ('Cheong') telah mengubahkan apa yang dahulunya merupakan sebidang tanah hutan
yang berpaya kepada satu ladang yang produktif. Atas kematian Cheong, P2 telah mengambil alih pengurusan
ladang yang dikerjakan oleh anggota-anggota keluarga itu. Rumah No 258K telah didirikan atas petak berkenaan
sebelum Disember 1938 dan dalam tahun 1972, P1 dan P2 telah didaftarkan sebagai penyewa, menggantikan
Cheong. Rumah No 259H telah didirikan oleh Cheong dalam tahun 1963 dengan persetujuan Khoo Kongsi dan
telah didaftarkan dalam nama P2. Selepas kematian Cheong, P2 telah membelanjakan sebanyak RM1,500 untuk
menyediakan sebuah bumbung untuk rumah tersebut. Tidak ada syarat yang telah dicetakkan di atas resit-resit
sewa yang dikeluarkan kepada Cheong dan P2 sehingga akhir 1981. Syarat-syarat, dalam bahasa Inggeris, telah
diindorskan pada resit-resit yang berhubung dengan ladang itu selepas tahun 1976 dan untuk kedua-dua rumah
kediaman dalam tahun 1981. Plaintif adalah peladang yang buta huruf dan tidak memahami syarat-syarat tersebut
yang termasuk satu syarat bahawa tempoh notis sebulan adalah mencukupi untuk menamatkan penyewaan itu.
Dalam tahun 1972, P2 telah diberitahu oleh pemegang amanah melawat Khoo Kongsi bahawa beliau (P2) tidak
perlu menukar nama penyewaan kepada namanya dan bahawa beliau boleh terus menanam sayur-sayuran untuk
seberapa lama yang beliau inginkan selagi beliau membayar sewa. Cheong juga telah memberitahu P2 bahawa
Khoo Kongsi telah menjamin kepadanya bahawa selagi beliau membayar sewa tanah, beliau bole h tinggal di situ
dan mengerjakan ladang itu dan atas kematian beliau, penyewaan akan berterusan untuk faedah keluarganya,
selagi keluarga beliau terus membayar sewa dan mengerjakan ladang itu. Selepas jaminan itu diberi oleh
pemegang amanah melawat, plaintif telah melabur sebanyak RM12,000 untuk memasangkan satu system renjisan
air (sprinkler system). Selama lebih 50 tahun, Khoo Kongsi atau orang lain tidak menggangu kegiatan perladangan
keluarga plaintif. Gangguan hanya bermula setelah Khoo Kongsi mengikat suatu perjanjian usaha sama dengan
defendan, lalu Khoo Kongsi telah memberi plaintif notis penamatan penyewaan selama satu bulan.

Plaintif-plaintif (P1, P2 dan P3) menuntut bahawa pada semua masa yang penting, mereka merupakan penyewa
sah dan terlindung dan bahawa mereka berhak di sisi undang-undang dan ekuiti kepada milikan petak berkenaan.
Tuntutan-tuntutan plaintif terhadap defendan berdasarkan pencerobohan dan kacau ganggu yang dikatakan
dilakukan oleh defendan. Relif-relif yang dipohon oleh plaintif adalah untuk: (i) ganti rugi teruk dan ganti rugi
teladan untuk pencerobohan dan kacau ganggu, bersama bunga ke atasnya; (ii) injunksi kekal menghalang
kesemua defendan-defendan secara sendiri, atau melalui pengkhidmat dan/atau agen mereka atau secara lain,
dari memasuki, mencerobohi dan/atau menjalankan kerja-kerja ke atas petak berkenaan; dan (iii) kos. [*361]

Defendan telah membangkitkan beberapa isu, termasuk beberapa isu permulaan, iaitu: (i) kesan pencantuman D3
dan D4 setelah writ dikeluarkan merupakan suatu percubaan untuk membangkitkan suatu kausa tindakan yang
baru; (ii) plaintif tidak harus diberi kebenaran untuk meminda semula pernyataan tuntutan untuk memasuki suatu
tuntutan untuk pencerobohan terhadap D3 dan D4; (iii) terdapat ketakpatuhan A 20 k 9 Kaedah-Kaedah Mahkamah
Tinggi 1980 ('Kaedah itu'); (iv) tindakan ini adalah tidak betul kerana ketakcantuman dan ketiadaan locus standi;
dan (v) tuntutan plaintif dihalang oleh res judicata dan estopel isu. Isu-isu substantif yang dibangkitkan adalah: (i)
apakah keluasan petak berkenaan dan sama ada plaintif mempunyai milikan ke atas petak berkenaan, dua rumah
kediaman itu dan ladang sayur itu; (ii) apakah notis penamatan yang perlu untuk menamatkan penyewaan plaintif
ke atas ladang sayur dan dua rumah kediaman itu; (iii) sama ada, memandangkan bahawa penyewaan itu tidak
didaftarkan dan berfungsi sebagai penyewaan bulanan, notis selama sebulan itu mencukupi untuk menamatkan
penyewaan plaintif; (iv) sama ada penyerahan notis keluar itu adalah efektif; (v) sama ada rumah No 258K tertakluk
kepada Akta Kawalan Penyewaan 1966; (vi) sama ada terdapat equiti ataupun estopel berasaskan equiti yang
melindungi pendudukan plaintif atas petak berkenaan; (vii) sama ada terdapatnya ekuiti bergantung kepada
terdapatnya pelaksanaan spesifik; (viii) sama ada penyewaan plaintif mengikat D1 dan/atau D3; (ix)sama ada satu

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estopel bersifat janji (promissory estopel) bangkit; (x) sama ada satu estopel keempunyaan bangkit dan takat ekuiti
plaintif; dan (xi) sukatan gantirugi yang patut diawardkan.

Diputuskan, membenarkan tuntutan plaintif:

(1) Berdasarkan keterangan di hadapan mahkamah, adalah jelas bahawa kausa tindakan terhadap D3 dan D4
timbul daripada tindakan salah yang dikatakan telah dilakukan oleh mereka sebelum mereka dicantumkan
sebagai defendan dan plaintif tidak memperkenalkan sebarang kausa tindakan yang baru. Semasa
pendengaran permohonan untuk percantuman D3 dan D4, peguambela defendan tidak membangkitkan
bantahan terhadapnya dan bantahan sekarang dibangkitkan pada peringkat yang sangat lewat, dan
apabila sebarang kausa tindakan terhadap D3 dan D4 mungkin dihalang oleh had masa. Oleh itu, adalah
tidak betul ataupun adil untuk melayan bantahan tersebut sekarang. Lagipun, jika bantahan dibuat pada
pendengaran permohonan untuk kebenaran meminda, plaintif boleh mengeluarkan writ baru dengan
menamakan D3 dan D4 sebagai defendan dan kemudiannya memohon supaya kedua-dua tindakan itu
disatukan.
(2) Memandangkan kronologi kejadian-kejadian berkaitan dengan permohonan untuk meminda semula
pernyataan tuntutan untuk menyertakan pencerobohan oleh D3 dan D4, dan oleh kerana [*362]
tiada bantahan terhadap permohonan tersebut, kebenaran itu telah diberi secara betul.
(3) Peguamcara plaintif telah memfailkan dengan sempurna pernyataan tuntutan yang dipinda semula itu di
pejabat pendaftaran mahkamah dalam had masa yang ditetapkan untuk berbuat demikian, walaupun
pejabat pendaftaran masih belum mengembalikan dokumen tersebut pada tarikh perbicaraan. Plaintif tidak
boleh membuat apa-apa lagi dan kekurangan ketelitian yang timbul mesti dianggap berpunca daripada
pejabat pendaftaran dan bukannya dari peguam plaintif. Tidak terdapat keingkaran A 20 K 9 Kaedah itu.
(4) Terma locus standi ataupun pendirian di mahkamah undang-undang bermakna hak untuk menuntut relief
kehakiman selain daripada soalan-soalan berkenaan dengan merit substantif dan keupayaan undang-
undang plaintif. Terdapat dua prinsip yang harus diingati: pertama, mahkamah terikat untuk bertindak atas
dasar bahawa segala yang dinyatakan dalam pernyataan tuntutan dan dalam dokumen-dokumen yang
disandarkan adalah benar; dan kedua, bidangkuasa untuk menampung sesuatu hujah ketiadaan locus
standi hanya harus dilakukan di mana tiada kemungkinan keraguan. Bantahan terhadap ketakcantuman
hanya dibuat pada peringkat yang lewat di dalam hujah-hujah peguambela defendan dan A 15 k 6(1)
Kaedah itu menyatakan bahawa tindakan tidak harus digagalkan oleh ketidakcantuman sebarang pihak.
(5) Adalah benar bahawa jika beberapa orang adalah tuanpunya bersesama tanah atau premis yang
dijejaskan oleh pencerobohan, sebagai peraturan am, mereka kesemuanya patut dicantumkan sebagai
plaintif bersesama. Walau bagaimanapun, boleh disimpulkan daripada keterangan bahawa P2 adalah
bagaikan seorang pemegang amanah konstruktif ladang sayur itu untuk faedahnya sendiri, faedah plaintif
yang lain dan PW1 dan dengan demikian, P2 sendiri boleh membawa tindakan untuk melindungi harta
amanah. Oleh itu, terdapat locus standi.
(6) Pemberian ladang sayur itu kepada plaintif and PW1 telah disempurnakan oleh milikan dan pengusaahaan
mereka atas ladang sayur itu semasa dan selepas hayat Cheong, dan oleh itu Statute of Frauds 1677 tidak
terpakai. Ini tidak merupakan suatu tindakan yang berasaskan kontrak penjualan atau sebarang pelupusan
tanah, ataupun sebarang kepentingan dalam tanah.
(7) Pembubaran sesuatu sebarang injunksi interlokutori tidak merupakan res judicata atau estopel isu semasa
memutuskan isu-isu secara muktamad. Kesan penolakan injunksi interlokutori dari segi undang-undang
adalah semata-mata bahawa, pada peringkat interlokutori, berdasarkan material terhad yang ada pada
masa itu, plaintif tidak layak untuk menerima relief injunktif yang dituntut.
(8) Keluasan tanah di bawah milikan plaintif adalah pada setiap masa yang penting kepada tindakan ini, 2.8
ekar atau lebih [*363]
kurang 121,619 kaki persegi.
(9) Sekeping resit dari segi undang-undang hanya merupakan bukti bahawa sejumlah wang telah dibayar; ia
tidak merupakan kontrak ataupun mempunyai kesan sebagai satu estopel. Hasrat benar pihak-pihak mesti
ditunjukkan melalui keterangan semasa pembicaraan. Tidak ada bukti yang menunjukkan bahawa syarat-
syarat yang dinyatakan dalam resit-resit sewa berkenaan dengan ladang atau dua rumah kediaman itu
telah diperkenalkan dari permulaan penyewaan dan juga tidak ada apa-apa yang menunjukkan bahawa
plaintif atau nenek moyang mereka, yang tidak mempunyai sebarang pengetahuan bahasa Inggeris, boleh
dikatakan telah menerima 'syarat-syarat' tersebut. Beban membukti bahawa syarat-syarat dalam resit

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mempunyai kuasa kontrak terletak pada defendan yang bergantung padanya dan bukan terletak pada
plaintif untuk menunjukkan sebaliknya. Oleh itu, tidak ada sebarang inferens menentang boleh ditimbulkan
terhadap plaintif disebabkan peninggalan ini. Hakikat bahawa plaintif sendiri telah menggunakan resit
sewa yang mengandungi syarat tersebut sebagai keterangan tidak menghalang mereka daripada
menegaskan pada penghujung pendengaran itu bahawa syarat itu tidak sah dari segi undang-undang.
Syarat-syarat yang dinyatakan dalam resit sewa tersebut tidak mempunyai sebarang kesan undang-
undang dan mesti diabaikan apabila menimbangkan soalan sama ada notis keluar itu mencukupi atau
tidak.
(10) Manakala cara pembayaran sewa adalah satu faktor yang penting dalam memutuskan soalan sama ada
tempoh sesuatu notis keluar adalah mencukupi, ianya bukan semestinya suatu faktor penentuan. Oleh itu,
walaupun sewa dibayar setiap bulan, ini tidak semestinya bermakna bahawa penyewaan itu boleh
ditamatkan dengan notis sebulan. Di mana tiada perjanjian penyewaan yang bertulis untuk mentafsirkan
sifat penyewaan, faktor-faktor yang patut diambil kira termasuk bukan sahaja cara membayar sewa, tetapi
juga kelakuan dan niat pihak-pihak, kegunaan yang dimaksudkan untuk perkara yang menjadi subjek
penyewaan dan lain-lain keadaan relevan kes itu secara keseluruhan. Atas fakta-fakta yang berkenaan,
notis selama tiga bulan adalah sesuai untuk penamatan penyewaan ladang sayur serta dua rumah
kediaman itu kerana ini akan memberikan plaintif masa yang mencukupi untuk menuai tanamannya dan
memberi milikan kosong petak berkenaan.
(11) Notis keluar diserahkan secara sah apabila ditinggalkan di premis berkenaan.
(12) Oleh kerana keperluan s 16(1) Akta Kawalan Penyewaan 1966 tidak dipenuhi, mahkamah tidak
mempunyai bidangkuasa untuk membuat suatu perintah milikan memihak kepada defendan berkenaan
dengan rumah No 258K.
(13) Atas keterangan, janji serta jaminan yang telah diberikan oleh Khoo Kongsi pada mulanya kepada Cheong
bahawa selagi [*364]
beliau atau keluarganya terus membayar sewa tanah, beliau boleh tinggal dan mengerjakan ladang itu
seberapa lama yang beliau inginkan dan berdasarkan ini, beliau dan keluarganya telah mengubahkan apa
yang dahulunya tanah berpaya kepada satu ladang yang produktif. Beliau juga telah membina dua rumah
kediaman itu dengan persetujuan Khoo Kongsi. Plaintif-plaintif telah melaburkan wang dan mengeluarkan
belanja yang banyak berdasarkan jaminan tersebut. Atas keterangan ini, penyewaan yang dipegang oleh
Cheong bukan hanya untuk faedah beliau tetapi juga untuk faedah keluarga beliau dan penyewaan
tersebut bukan hanya penyewaan bulanan.
(14) Berkenaan dengan keterangan mengenai janji atau jaminan yang dibuat oleh pemegang amanah melawat,
adalah mantap bahawa keterangan sedemikian bukanlah dengar cakap dan boleh diterima kerana ia
digunakan untuk menunjukkan fakta bahawa kenyataan itu telah dibuat dan bukan kebenaran kenyataan
itu. Kenyataan sedemikian selalunya relevan apabila mempertimbangkan keadaan mental dan kelakuan
selanjutnya seseorang saksi. Keterangan mengenai kenyataan yang dibuat kepada P2 oleh Cheong atau
jaminan yang dibuat oleh Khoo Kongsi telah dikemukakan untuk menunjukkan bahawa janji atau jaminan
itu telah mendorong Cheong dan plaintif-plaintif untuk bertindak dalam cara yang memudaratkan mereka.
(15) Kenyataan yang merupakan pengakuan yang telah dibuat oleh seseorang yang bukan pihak kepada
tindakan itu boleh diterima di bawah s 18(3) Akta Keterangan 1950.
(16) Doktrin 'holding out' yang kadangkalanya dipanggil kuasa zahir (apparent or ostensible authority) telah
dikatakan berdasarkan estopel. Agensi secara estopel bangkit apabila seseorang membenarkan agen itu
mengemukakan dirinya sebagai mempunyai kuasa, dan ini membuatkan seseorang lain mempercayai
bahawa beliau telah memberikuasa kepada pihak ketiga untuk bertindak bagi pihaknya, dan orang yang
lain itu kerana kepercayaan itu, telah mengadakan transaksi dengan pihak ketiga dalam lingkungan kuasa
zahirnya. Beban terletak pada orang yang berurus dengan agen itu untuk menunjukkan kuasa yang
sebenarnya atau yang zahir dan kelakuan yang dikatakan sebagai 'holding out' mesti dibuktikan secara
afirmatif. Adalah merupakan suatu soalan fakta dalam setiap kes sama ada kuasa zahir wujud untuk
sesuatu tindakan tertentu berkenaan dengan liabiliti yang ingin dikenakan ke atas prinsipal.
Memandangkan keterangan yang wujud, plaintif telah berjaya membuktikan, atas imbangan
kebarangkalian, bahawa pemegang amanah melawat telah dikemukakan sebagai mempunyai kuasa untuk
berurus dengan penyewa bagi pihak Khoo Kongsi, termasuk kuasa untuk membuat janji dan jaminan
tersebut, atas mana plaintif telah berharap dan menanggung perbelanjaan besar. [*365]
(17) Doktrin estopel bersifat janji membekalkan satu pembelaan kepada satu tindakan berdasarkan kontrak
asal di mana defendan bergantung kepada variasi sukarela. Ia tidak membekalkan satu kausa tindakan

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untuk seseorang plaintif yang bergantung kepada janji yang percuma (gratuitous promise). Namun
demikian, kesannya mungkin membolehkan satu pihak menguatkuasakan satu kausa tindakan, yang
mana tanpa estopel, tidak akan wujud. Atas fakta-fakta kes ini, plaintif dan nenek-moyang mereka telah
mempunyai milikan petak berkenaan selama berdekad-dekad dan mereka telah memulakan prosiding ini
bersandarkan ekuiti atau estopel berdasarkan ekuiti. Tuntutan plaintif kepada ekuiti yang dikatakan wujud
itu tidak bergantung kepada terdapatnya remedi pelaksanaan spesifik.
(18) Berikutan perjanjian usaha sama itu, D3 telah menjadi penyewa berdaftar Lot 3523 dan memegang
sewaan itu sebagai pemegang amanah dan alter ego Khoo Kongsi. Ini bermakna bahawa D3 tidak berada
dalam kedudukan yang lebih baik daripada Khoo Kongsi dalam menentang tuntutan plaintif bahawa
mereka (plaintif) berhak memiliki petak berkenaan di sisi undang-undang dan ekuiti. Lagipun, sebagai
waris hakmilik dengan notis (successors-in-title with notice) kepentingan plaintif di dalam petak berkenaan,
D3 terpaksa mengambil penyewaannya tertakluk kepada kepentingan itu. Keesahan kontrak yang
berkaitan dengan tanah atau sebarang kepentingan dalamnya adalah diisytiharkan di dalam s 206(3)
Kanun Tanah Negara 1965 ('Kanun itu') dan tidak boleh disangkal. Oleh itu, mahkamah tidak bersetuju
dengan hujah peguambela defendan bahawa perlindungan tidak boleh disangkal yang dijamin di bawah s
340(1) Kanun itu membolehkan D3 mengambil penyewaannya bebas dari kepentingan plaintif di dalam
petak berkenaan.
(19) Estopel keempunyaan (proprietory estoppel) merupakan salah satu pengecualian kepada peraturan am
bahawa seseorang yang membelanjakan wang untuk memperbaiki harta seseorang yang lain tidak
mempunyai hak untuk menuntut pembayaran ganti atau sebarang kepentingan keempunyaan dalam harta
itu. Tidak seperti estopel bersifat janji, estopel keempunyaan, di mana ianya beroperasi, adalah kekal
dalam kesannya dan juga berupaya beroperasi secara positif untuk memberi satu kausa tindakan. Balasan
yang bebas tidak merupakan satu keperluan yang penting untuk operasi estopel keempunyaan dan
pembuat representasi itu tidak semestinya mengetahui bahawa hartanahnya sedang diperbaiki. Kelakuan
pembuat representasi dan tindakan selanjutnya serta kepercayaan penerima representasi itu mungkin
menyebabkannya tidak patut (unconscionable) bagi pembuat representasi untuk mendesak hak undang-
undangnya secara tegas. Jika seseorang itu membina atau memperbaiki tanah kepunyaan seorang lain,
masih akan timbul suatu ekuiti jika [*366]
tuanpunya tanah itu telah mendorong orang itu untuk menjangka bahawa dia boleh tinggal di sana.
(20) Prinsip-prinsip yang berkait guna dengan amanah konstruktif (constructive trusts) amat serupa dengan
prinsip yang mendasari doktrin estopel keempunyaan. Dalam kedua-duanya, penuntut mesti bertindak
mudaratkannya dirinya sendiri bersandar kepada kepercayaan bahawa beliau akan memperolehi sesuatu
kepentingan, dan ekuiti bertindak ke atas kesedaran tuanpunya sah untuk menghalang beliau daripada
menewaskan tujuan yang sesama. Dalam kes-kes tertentu, seperti yang ini, estopel keempunyaan adalah
salah satu jenis amanah konstruktif.
(21) Seorang yang mengeluarkan perbelanjaan atau melakukan pembaikan ke atas hartanah seorang lain patut
dilindungi daripada gangguan selagi beliau akan dimudaratkan. Memandangkan fakta bahawa plaintif dan
nenek-moyang mereka telah menduduki petak berkenaan, mengerjakan ladang sayur itu dan jumlah wang
yang banyak yang tentu sudah berakru kepada mereka dan nenek-moyang mereka dalam bentuk
keuntungan selama tempoh beberapa dekad, dan fakta lanjutan bahawa mereka telah menikmati
pendiaman tanpa sewa dalam dekad yang lalu, plaintif telah memperolehi kepuasan yang mencukupi
untuk kerja dan perbelanjaan mereka atas petak berkenaan, ataupun dalam kata lain, mudarat yang
dialami oleh mereka telah dipuaskan sepenuhnya, dan oleh itu, mereka tidak layak mendapat sebarang
relif.
(22) Defendan telah melakukan tindakan pencerobohan dan kacau ganggu ke atas tanah plaintif, atas mana
mereka (plaintif) mempunyai milikan yang sah.
(23) Peraturan am mengenai sukatan gantirugi adalah jumlah wang yang akan meletakkan pihak yang telah
dicedera atau disusahkan, dalam kedudukan seperti yang beliau akan berada sekiranya beliau tidak
menanggung kesalahan untuk mana beliau kini menerima pampasan atau ganti rugi. Apabila seorang
plaintif menuntut ganti rugi daripada seseorang defendan, beliau harus menunjukkan bahawa kehilangan
berkenaan, untuk mana beliau menuntut ganti rugi, telah disebabkan oleh kesalahan defendan dan juga
bahawa ganti rugi itu tidak terlalu di luar dugaan untuk didapati. Di mana keterangan yang tepat boleh
didapati, mahkamah dengan wajarnya akan menjangka mendapatnya, tetapi di mana ianya tidak boleh
didapati, mahkamah mesti bertindak sedapat mungkin.
(24) Cara biasa untuk membuktikan nilai pasaran dalam sesuatu kes jualan semula barang-barang secara
pukal adalah dengan memanggil pelanggan-pelanggan atau sekurang-kurangnya, di mana pihak-pihak

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

bersetuju dengan keterangan dokumentari, untuk mengemukakan dokumen-dokumen yang menunjukkan

kewujudan serta pengurusan dengan pelanggan-pelanggan. Ketegasan plaintif yang tidak disokong
bahawa beliau boleh [*367]
mendapat sekian sekian harga untuk buah-buahan atau sayur-sayurannya, tidak membuktikan harga
pasaran, apa lagi bahawa beliau mempunyai pasaran. Jika ini dibenarkan, keperluan membukti kuantum
akan diketepikan sama sekali.
(25) Ganti rugi teladan hanya boleh diberi dalam tiga kategori kes, iaitu, tindakan menindas oleh pegawai-
pegawai kerajaan; keduanya, kes-kes di mana seorang defendan melalui pengabaian yang sinis terhadap
hak-hak plaintif, telah mengira bahawa wang yang boleh diperolehinya melalui kesalahan beliau akan
melampaui risiko ganti rugi; dan ketiganya, di mana statut dengan nyata membenarkannya.
(26) Pencerobohan biasanya dikaitkan dengan tindakan yang sengaja walaupun telah dilakukan secara silap,
kerana kesilapan tidak merupakan suatu pembelaan dan bukanlah jawapan kepada tuntutan untuk
mendapat ganti rugi teladan, memandangkan keadaan-keadaan tertentu kes ini.
(27) Award ganti rugi teladan patutlah sederhana dan sumber pendapatan pihak adalah satu pertimbangan
yang relevan. Faktor lain yang patut dipertimbangkan adalah kuantum award pampasan serta tingkah laku
pihak sehingga masa penghakiman. Sebarang jumlah yang diberi oleh mahkamah sebagai ganti rugi
teladan untuk tindakan pencerobohan mestilah mencerminkan betapa seriusnya kesalahan itu.]

[Editorial Note:

The defendants have appealed to the Supreme Court vide Civil Appeal No 02-176-93.
Notes

For cases on amendment of pleadings, see 2 Mallal's Digest (4th Ed) paras 131-136 and 1696.

For cases on estoppel, see 2 Mallal's Digest (4th Ed) para 869; 3 Mallal's Digest (4th Ed) paras 993 and 1537; 9
Mallal's Digest (4th Ed) paras 924, 962-970, 972, 975 and 1176.

For cases on recovery of possession of controlled premises, see 9 Mallal's Digest (4th Ed) paras 115-117, 267-628.

For cases on sufficiency of notices to determine tenancies, see 8 Mallal's Digest (4th Ed) para 1488; 9 Mallal's
Digest (4th Ed) paras 813, 870-877, 900, 906, 909-911 and 913.

For cases on damages for trespass to land, see 8 Mallal's Digest (4th Ed) para 2136; 9 Mallal's Digest (4th Ed)
paras 820, 925-929; 12 Mallal's Digest (4th Ed) para 677.

For cases on the validity of service of notices of termination, see 9 Mallal's Digest (4th Ed) paras 889-894.

For cases on assignments of tenancies, see 9 Mallal's Digest (4th Ed) paras 943 and 945.

For cases on the effect of non-registration of tenancies, see 8 Mallal's Digest (4th Ed) paras 1464-1478; 9 Mallal's
Digest (4th Ed) paras 971, 978, 1025-1031, 1033-1037. [*368]

For a case on the terms of a tenancy, see 9 Mallal's Digest (4th Ed) para 1272.

For cases on adverse inference, see 7 Mallal's Digest (4th Ed) paras 66-72.

For cases on the burden of proof for allegations of fact, see 7 Mallal's Digest (4th Ed) paras 142-143.

For a case on the measure of damages, see 3 Mallal's Digest (4th Ed) para 1045.
Cases referred to

Chuan Chow Maritime SA Panama v K/S A/S Bulk Sea Transport The Times, 25 February 1984

Cheng Hang Guan & Ors v Perumahan Farlim (Penang) Sdn Bhd & Ors [1988] 3 MLJ 90 (refd)

Drane v Evangelou & Ors [1978] 2 All ER 437; [1978] 1 WLR 499 (refd)

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

Hayes v Bristol Plant Hire Ltd & Ors [1957] 1 All ER 685; [1957] 1 WLR 499 (folld)

Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 (refd)

Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 1 All ER 843; [1955] 2 QB 584; [1955] 2 WLR 919 (refd)

Kok Ek Chooi v Cheah Soon Neoh & Anor [1982] 1 MLJ 219 (refd)

VM Peer Mohamed v Great Eastern Life Assurance Co Ltd [1982] 2 MLJ 298 (refd)

Strong v Bird [1874] Eq LR 18 (refd) 315

Trustees of Leong San Tong Khoo Kongsi (Penang) Registered & Ors v Poh Swee Siang [1987] 2 MLJ 611
(folld)

Cheng Hang Guan & Ors v Perumahan Farlim (Pg) Sdn Bhd & Anor [1983] 1 MLJ 348 (refd)

Government of Malaysia v Dato Chong Kok Lim [1973] 2 MLJ 74 (distd)

Mohd Ismail v Lim Sok Cheng [1988] 1 CLJ 335 (refd)

Lee v Lancashire Yorkshire Railway Co [1871] LR 6 Ch App 534 (folld)

Hockle v London County Council [1910] 26 TLR 580 (folld)

Oliver v Nautilus Steam Shipping Co Ltd [1903] 2 KB 639 (folld)

Loke Yung Hong v Shanghai Furniture Co & Anor [1948] MLJ 136 (refd)

Balwant Singh v Tong Lam & Co [1963] MLJ 33 (folld)

Lee Ah Low v Cheong Lep Keen [1970] 1 MLJ 7 (distd)

Syed Mohd Alsagoff v Max Behr [1883] 1 Kyshe 637 (refd)

Tay Boon Huat v Kulsam Bee [1914] SSLR 51 (refd)

ALMM Muthukaruppan Chettiar v Haji Ibrahim [1941] MLJ 150 (refd)

Yong Tong Hong v Siew Soon Wah & Ors [1971] 2 MLJ 105 (refd)

Adler v Blackman [1953] 1 QB 146; [1952] 2 TLR 809; [1952] 2 All ER 945 (folld)
[*369]

Doe d Martin v Watts [1789] 7 TR 83 (refd)

Lim Kien Mok v BH Kevan [1963] MLJ 284 (folld)

Teck Seng & Co v William Eu Keng Yuet [1980] 2 MLJ 115 (refd)

Lai Seng Fook v Tang Kong Low [1978] 1 MLJ 158 (refd)

Mok Deng Chee v Yap See Hoi [1981] 2 MLJ 321 (not-folld)

Muniandy & Anor v Muhammad Abdul Kader & Ors [1989] 2 MLJ 416 (not-folld)

Nair v Chidambaram [1961] MLJ 264 (folld)

Subramaniam v PP [1956] MLJ 220 (folld)

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 Page 12 of 54 187
CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 (folld)

Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; [1964] 2 WLR 618;
[1964] 1 All ER 630 (folld)

Re Henry Bentley & Co and Yorkshire Breweries Ltd, ex p Harrison (1893) 69 LT 204 (folld)

Council of the Shire of Ashford v Dependable Motors Pty Ltd [1961] AC 336; [1960] 3 WLR 999; [1961] 1 All ER
96 (folld)

Pole v Leask (1863) 33 LJ Ch 155 (folld)

Bailey & Whites Ltd v House [1915] 31 TLR 583 (folld)

Brazier v Camp [1894] 63 LJQB 257 (folld)

Crabb v Arun District Council [1975] 3 All ER 865; [1976] Ch 179; [1975] 3 WLR 847 (folld)

Karuppan Chetty v Suan Thian [1916] 1 FMSLR 300 (folld)

Prudential Assurance Co Ltd v London Residuary Body & Ors [1992] 3 WLR 279 (folld)

Siew Soon Wah & Ors v Yong Tong Hong [1973] 1 MLJ 133; [1973] AC 836 (refd)

Central London Property Trust v High Trees House Ltd [1947] KB 130; [1956] 1 All ER 256; [1947] LJR 77; 175
LT 333; 62 TLR 557 (refd)

Evenden v Guildford City Association Football Club Ltd [1975] QB 917; [1975] 3 WLR 251; [1975] 3 All ER 269
(refd)

Combe v Combe [1951] 2 KB 215; [1951] 1 All ER 767; [1951] 1 TLR 811 (folld)

Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 (refd)

Ajayi v RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326; [1964] 3 All ER 556 (refd)

Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839; [1968] 3 WLR 225; [1968] 2
All ER 987 (refd)

Errington v Errington and Woods [1952] 1 KB 290; [1952] 1 All ER 149 (refd)

Ashburn Anstalt v Arnold [1988] 2 All ER 147; [1988] Ch 1 (refd)

Lyus v Prowsa Developments Ltd [1982] 2 All ER 953; [1982] 1 WLR 1044 (refd)

Goh Hooi Yin v Lim Teong Ghee & Ors [1990] 3 MLJ 23 (refd)

Devi v Francis [1969] 2 MLJ 169 (folld)

Ahmad Yar Khan v Secretary of State for India in Council [1901] 28 LR Ind App 211 (folld)
[*370]

Denny v Jensen [1977] 1 NZLR 635 (folld)

Ramsden v Dyson (1866) 1 LR HL 129 (refd)

Brinnard v Ewens [1987] 2 Ch EGLR 67; [1987] 19 HLR 415; [1987] 284 EG 1052 (refd)

Inwards v Baker [1965] 2 QB 29; [1965] 2 WLR 212; [1965] 1 All ER 446 (folld)

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

AG of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114; [1987] 2 WLR 343; [1987] 2 All
ER 387 (folld)

Haslemere Estates Ltd v Baker [1982] 1 WLR 1109; [1982] 3 All ER 525 (folld)

Dann v Spurier [1802] 7 Ves 231 (folld)

Khew Ah Bah v Hong Ah Mye [1971] 2 MLJ 86 (refd)

Taylor Fashions Ltd v Liverpool Victoria Trustees Co [1981] 1 All ER 897; [1981] QB 133; [1981] 2 WLR 576
(folld)

Shaw v Applegate [1977] 1 WLR 970; [1978] 1 All ER 123 (refd)

Grant v Edwards [1986] Ch 638; [1986] 3 WLR 114; [1986] 2 All ER 426 (refd)

Gillies v Keogh [1989] 21 NZLR 327 (refd)

Lloyds Bank Plc v Rosset [1990] 2 WLR 867; [1991] 1 AC 107 (refd)

Maharaj v Chand [1986] AC 898 (folld)

Re Basham (decd) [1986] 1 WLR 1498; [1987] 1 All ER 405 (folld)

Re Basham (decd) [1986] 1 WLR 1498; [1987] 1 All ER 405 (refd)

Griffiths v Williams [1977] 248 EG 947 (refd)

Jones (AE) v Jones (FW) [1977] 1 WLR 438 (refd)

Dodsworth v Dodsworth [1973] 228 EG 1115 (refd)

Plimmer v Wellington Corporation (1884) 9 App Cas 669 (refd)

ER Ives Investment Ltd v High [1967] 2 QB 379; [1967] 2 WLR 789; [1967] 1 All ER 504 (refd)

Bank Negara Indonesia v Philip Hoalim [1973] 2 MLJ 3 (refd)

Raffaele v Raffaele [1962] WLR 238 (refd)

Neesom v Clarkson [1845] 4 Hare 97 (refd)

AG v Baliol College, Oxford [1774] 9 Mod 407 (folld)

Kalimuthu v S Kandiah [1976] 2 MLJ 217 (refd)

Ward v Kirkland [1967] Ch 194; [1966] 1 WLR 601; [1966] 1 All ER 609 (distd)

Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 (folld)

Munnelly v Calco [1978] IR 387 (refd)

Bonham-Carter v Hyde Park Hotel Ltd [1984] 64 TLR 177 (folld)

Biggin & Co v Permanite [1951] 1 KB 422; [1950] 2 All ER 859 (folld)

Aerial Advertising Co v Batchelors Peas (Manchester) [1938] 2 All ER 788 (folld)

Ashcroft v Curtin [1971] 1 WLR 1731; [1971] 3 All ER 1208 (folld)

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

Rookes v Barnard [1964] AC 1129; [1964] 2 WLR 269; [1964] 1 All ER 367 (folld)

Cassell & Co Ltd v Broome [1972] 1 All ER 801; [1972] AC 1027; [1972] 2 WLR 645 (refd)
[*371]

Basely v Clarkson 83 ER 565 (refd)

Praed v Graham (1889) 24 QBD 53 (refd)

Legislation referred to

Rules of the High Court 1980O 15 r 6(1)

Evidence Act 1950s 18(3)(a), (b)

Mohideen Abdul Kader (Meenakshi Raman with him) (Meena, Thayalan & Partners) for the plaintiffs.

RR Sethu (Rajasingam with him) (RR Sethu) for the defendants.

EDGAR JOSEPH JR SCJ

Broadly stated, in this suit the plaintiffs claimed that at all material times, they were and are lawful and protected
tenants and that they are entitled in law and equity to possession of that portion of the land forming part of the
holding No 3532, Mukim 13, NED, Penang, Lot 2497, Mukim 13, NED, Penang, in area 121,619sq ft (or 2.8 acres)
delienated in the plan P16 ('the plot concerned') on which are situated their two dwelling houses, bearing numbers
258K and 259H ('the two dwelling houses') and their vegetable farm ('the farm').

At all material times to this suit, the registered proprietors of holding No 3532 (popularly known as 'Thean Teik
Estate') were and are the trustees of the Khoo Kongsi.

More particularly, the plaintiffs' claim against the defendants is founded on trespass and nuisance, allegedly
committed by the first defendant, Perumahan Farlim (Penang) Sdn Bhd, and by their servants or agents, the
second defendant, Sriwata Sdn Bhd, as developers and contractors, respectively, on 18 June 1982 on a portion of
the plot concerned etched in black on the plan P14, and by the third defendant, Perumahan Farlim (Malaysia) Sdn
Bhd, and their servants or agents, the fourth defendant, Thean Tatt Construction Sdn Bhd, as developers and
contractors respectively, on 17 March 1988, on a portion of the plot concerned etched in orange on the plan P14
and their unlawful occupation of the portion etched in black in exh P14.

The reliefs prayed for by the plaintiffs are for aggravated and exemplary damages for trespass and nuisance, with
interest thereon, a permanent injunction restraining all the defendants whether by themselves or their servants
and/or agents or otherwise howsoever from entering, trespassing and/or carrying out works on the plot concerned
on which are situated the dwelling houses and the vegetable farm, and costs.

On the other hand, broadly stated, the defence has raised objections based on points of procedure relating to
amendments of pleadings, the law as to locus standi and, so far as the merits are concerned, the defence denies
the averments aforesaid by the plaintiffs and counterclaims for possession, damages and mesne profits.

In this judgment, unless the context otherwise requires, I shall refer to the first, the second, and the third plaintiffs as
P1, P2 and P3, respectively, and to the first, the second, the third and the fourth defendants as D1, D2, D3 and D4,
respectively. [*372]

The essential facts said to underlie the plaintiffs' case may be conveniently taken from the written submission of
counsel for the plaintiffs and are as follows:
(1).11 The plaintiffs' family has been staying on the plot concerned since the time of P2's great-grandfather, which
would be in the later part of the 19th century or early part of the 20th century, ie more than 100 years ago. P2's
grandfather, Cheong Au Pit, was 84 years of age at the time of his death in 1969.

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

(1).12 Cheong Au Pit's family, by their own efforts, had converted what was once a swampy jungle land into a
productive farm. They levelled the land and constructed drains to drain away the water. They had also built pigsties,
chicken coops, wells and other structures.

(1).13 Cheong Au Pit, who managed the farm during his lifetime, was the head of an extended Chinese family,
consisting of his children, grandchildren, sons-in-law, daughters-in-law and his adopted daughter Cheng Lye Hiang
(PW1). After Cheong Au Pit's death, P2 took over the role of Cheong Au Pit and managed the farm.

The family members worked on the farm and the income was used to pay for their expenses, while the balance was
shared among the family members who worked on the farm.

(1).14 House No 258K, has been standing on the plot concerned since before the birth of P2 on 15 December 1938. In
1972, after Cheong Au Pit's death, P1 and P2 were registered as tenants of this house in place of Cheong Au Pit.

House No 259H was built by Cheong Au Pit in 1963 with the consent of the Khoo Kongsi and registered in the name of
P2. After Cheong Au Pit's death, P2 spent RM1,500 in providing a ceiling for the house.

(1).15 Separate rent receipts were issued in respect of the two dwelling houses and the vegetable plot standing on the
plot concerned. No conditions were printed on the rent receipts issued to Cheong Au Pit and P2 until late 1981.

There is no record of any decision by the board of trustees of the Khoo Kongsi on the alleged conditions of the
tenancy of the vegetable plot. Conditions were endorsed on the receipts for vegetable lands only after 1976 because
the Khoo Kongsi had, by then, entered into a joint-venture agreement to develop a portion of Thean Teik Estate, but
on the receipts issued to P2, the conditions were endorsed only in 1981.

(1).16 Some time in 1972, the visiting trustee of the Khoo Kongsi had told P2 that it was not necessary to change the
tenancy of the vegetable plot to her name and that she could continue planting vegetables as long as she wished,
provided she paid the rent.

Cheong Au Pit had also told P2 that Khoo Kongsi had assured him that so long as he continued to pay ground rent, he
could stay and cultivate the vegetable plot for as long as he wanted.

Upon the death of a tenant of a vegetable plot, his tenancy continued for the benefit of his family. So long as his family
members continued to pay the rent, they could continue farming. [*373]

(1).17 After the assurance given by the visiting trustee, the plaintiffs invested RM12,000 in installing a sprinkler
system.

(1).18 P2's testimony regarding the assurance given to her by the visiting trustee in 1972 wascorroborated by the
testimony of a trustee of the Khoo Kongsi, Khoo Kah Seng (DW3), who testified:

Q: When a tenant of vegetable farm dies, what does the Khoo Kongsi do?

A: The tenancy still continues for the benefit of the family of the deceased.

Q: So long as they continue to pay rents, they can continue farming?

A: Yes.

Thus, the assurance given to P2 is consistent with the practice of the Khoo Kongsi before the developers, Farlim,
came on the scene in the late 70s. DW3's evidence also shows that the tenancy was for the benefit of the family and
not just the person registered as tenant. The trustees of the Khoo Kongsi must have been fully aware of the social and
cultural context on which their legal relationship with Cheong Au Pit was based. They must have known that Cheong
Au Pit was the head of an extended Chinese family and that farming activities were by and for the benefit of this
extended family.

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

(1).19 For more than 50 years, neither the Khoo Kongsi nor anyone else had interfered with the farming activities of
the plaintiffs' family.

Only after the Khoo Kongsi had entered into a joint-venture agreement was there any interference with the plaintiffs'
possession of the plot concerned.

As for the facts said to underlie the defendants' case, these can, for the sake of brevity and convenience, be dealt
with when the substantive issues fall to be considered.

Before embarking upon a consideration of the issues, both of fact and law, which arise upon the merits, I must
direct my attention to a number of objections based upon points of law and procedure advanced by counsel for the
defendants.

What was the effect of the joinder of D3 and D4 after the issue of the writ?

The point taken by counsel for the defendants was that a plaintiff cannot, by an amendment, introduce a cause of
action which arose after the issue of the writ. (See Odger's Principles of Pleading & Practice (22nd Ed) at pp 162-
163.)This was because any amendment relates back to the date of the writ and therefore, any amendment to
include a subsequent cause of action cannot relate back. (See 1 The Supreme Court Practice 1991 at p 363.) The
case of Chuan Chow Maritime SA Panama v K/S A/S Bulk Sea Transport, 1 was cited for the proposition that any
inclusion of the subsequent cause of action required the consent of the defendant. Without such consent, an
amendment to include a subsequent cause of action cannot be allowed.

When the application for joinder by summons-in-chambers (encl 62) was made by the plaintiffs, to add D3 and D4,
on the ground that it was they, and not Dl and D2, who, as developers and contractors, were working [*374]
on the plot concerned at the material time, that is to say, on 18 March 1988, counsel for Dl and D2 did not object
and an order was made accordingly.

It was because of this that I had, at the outset of the application to discharge the ex parte interlocutory injunction
restraining Dl and D2, their servants or agents as developers and contractors,from entering the plot concerned,
substituted D3 and D4 for Dl and D2, respectively, in the order granting the interlocutory injunction, though only
after I had given counsel on both sides the opportunity of being heard on the point. All that counsel for the
defendants then said was, 'The third and fourth defendants have complied with the order', which I took to be an
unqualified admission that it was D3 and D4, their servants or agents, who were working on the plot concerned at
the material time.

There is another matter I must refer to. Some three days before, I gave my judgment (reported as Cheng Hang
Guan & Ors v Perumahan Farlim (Penang) Sdn Bhd & Ors 2) dismissing the application for discharge of the
interlocutory injunction, I had enquired from counsel for the defendants when was it that D3 and D4 had replaced Dl
and D2 as developers and contractors, respectively, as had been contended by counsel for the plaintiffs. Counsel
for the defendants replied that they required the case to be stood down to seek instructions. Upon resumption, the
court was informed by Mr Yeoh, counsel for the defendants, that, 'the third defendants took over the rights and
liabilities of the first defendant with effect from April 1982. The third defendants have been registered lessees since
August 1983. The second and fourth defendants were appointed earthcontractors and they remain so up to today.
The second defendants were appointed by the first defendants in December 1981. The fourth defendants were
appointed in April 1982.' Whereupon counsel for the plaintiffs enquired as to 'who was working on the plaintiffs' plot
at the time of the alleged wrongful acts complained about and which occurred on 18 March 1988'. In answer,
counsel for the defendants replied that it was 'the third and fourth defendants who were working there then'.

Based upon the material aforesaid, it is obvious that the cause of action against D3 and D4 arose from the alleged
wrongful acts committed by them on 17 March 1988, that is to say, before they were joined as defendants pursuant
to the order of court dated 21 March 1988, and so the plaintiffs were not introducing a fresh cause of action against
D1 and D2. It is not surprising, therefore, that when application had been made to join D3 and D4 as defendants
and the consequential amendments made to the amended statement of claim, counsel for the defendants raised no
objection thereto.

But, if counsel for the defendants is correct in his contention, and objection had been taken in limine, that is to say,
on the hearing of the application for leave to amend, as undoubtedly it should have been, and the objection upheld,
the plaintiffs could have issued a fresh writ citing D3 and D4 as defendants and then applied for consolidation of the

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two actions. This, however, was not done but, instead, counsel for the defendants raised no objection to the
application for leave to amend by joining D3 and D4 as co-defendants. The question therefore arises whether,
assuming counsel for the defendants is correct in his contention that the joinder of D3 and D4 [*375]
was legally impermissible, the objection should be entertained at all, at this very late stage, when perhaps, any
cause of action the plaintiffs might have against D3 and D4 would be barred by limitation. Clearly, it would be
neither right nor fair to entertain the objection now, and so I must rule that assuming there was an irregularity in the
order for the joinder of D3 and D4, the same had been waived by reason of counsel for the defendants having
raised no objection on the hearing of the application for leave to amend.

The first preliminary objection is accordingly overruled.

Was the order for re-amendment of the summons-in-chambers dated 21 August 1991 valid?

The second preliminary objection taken by counsel for the defendants was that the re-amendment of the statement
of claim to raise the alleged trespass on 21 August 1988 ought not to have been allowed for the same reasons as
had been advanced in support of the first preliminary objection.

In reply, counsel for the plaintiffs contended that the conduct of the defendants right up to the time of judgment was
relevant to the question whether exemplary damages ought to be awarded and, in support, the case of Drane v
Evangelou & Ors 3 (where non-compliance with an injunction was taken into account in awarding exemplary
damages) was cited.

I also note that the statement of claim as amended, did distinguish between the conduct of D1 and D2 on 18 June
1982, which, it was said, constituted a trespass and resulted in loss to the plaintiffs, and the conduct of D3 and D4
on 17 March 1988, which it was said also constituted a trespass and resulted in loss to the plaintiffs.

My attention was also drawn to the following timetable of events:

(1).4 The cause of action against D3 and D4 were included in the statement of claim with the consent of the solicitors
of all the defendants. The sequence of events relating to this was as follows:

(a) On 21 March 1988, by a summon-in-chambers dated the same day (encl 62), the plaintiffs had applied: (i) to add
D3 and D4 as parties; and (ii) for an order that the plaintiffs be at liberty to amend the writ and the statement of claim
to include D3 and D4.

(b) There being no objection to the application by the solicitors for the defendants represented by their counsel Mr
Yeoh Jin Aik and Mr R Rajasingam, an order in terms of the application was granted and the matter proceeded as if
the amendments had been effected.

(c) Pursuant to this order, the solicitors for the plaintiffs then proceeded to make amendments to the writ and
statement of claim on 25 March 1988. This amended writ and statementof claim, marked as encl 73, was reissued by
the High Court registry but, only on 11 February 1989.

(d) The amended writ and statement of claim was then served on the solicitors for the defendants on 13 February
1989.

(e) When the defendant's solicitors did not file their defence, the solicitors for the plaintiffs, by a letter dated 6 April
1989, asked them to file their defence within 48 hours. [*376]

(f) By a letter dated 8 April 1989, the defendants' solicitors replied that they did not recall any application having been
made for the amendments in the terms set out in the amended statement of claim.

(g) Consequently, the solicitors for the plaintiffs made an application by a summons-in-chambers dated 26 May 1989
(encl 76) for the statement of claim to be amended accordingly.

(h) The application was heard on 21 August 1989, and was not opposed by the solicitors for the defendants.

(i) Consequently, the amended writ and statement of claim was issued out of this court on 23 August 1989 (encl 78)
and served on the defendants' solicitors on 30 August 1989 and the matter proceeded to trial.

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In the circumstances, I consider that leave to amend was quite properly given and so the second objection is
overruled.

If the order dated 21 August 1991 giving the plaintiffs leave to re-amend the summons-in-chambers was valid, were
the requirements of O 20 r 9 of the Rules of the High Court 1980 with regard thereto complied with?

It was further argued by way of alternative – and this was the third objection – that the order granting leave to
amend by adding D3 and D4 as defendants, with consequential amendments to the amended statement of claim (to
raise the alleged trespass by D3 and D4 on 21 August 1988), was granted on 21 August 1991 but the requirements
of O 20 r 9 of the Rules of the High Court 1980 ('the RHC') for the implementation of the order had not been
complied with within the 14-day period stipulated therein, with the result that the order had lapsed and so the re-
amended defence and counterclaim issued by the court on 23 August 1989 and served upon the solicitors for the
defendants on 30 August 1989 should be ignored.

In reply, counsel for the plaintiffs had drawn my attention to these facts:

Leave to re-amend the amended statement of claim was granted by the court on 21 August 1991 so as to allow the
plaintiffs to raise the allegation of trespass by D3 and D4 on 21 August 1988, and the re-amended statement of
claim had been filed in the registry of this court on 29 August 1991, that is to say, well within the time limited for
doing so, the trial duly proceeded on the basis that the amended statement of claim had been duly amended but the
registry had yet to return the re-amended statement of claim with the required endorsement of the senior assistant
registrar thereon. The solicitors for the plaintiffs did, however, serve upon the solicitors for the defendants, an
unindorsed copy of the re-amended statement of claim on 29 August 1991. Clearly, the plaintiffs could not have
done anything more and such lack of diligence as there was, must be ascribed to the registry and not the plaintiff's
solicitors and so I do not consider that there has been any breach of O 20 r 9 of the RHC.

Accordingly, the alternative objection raised to the joinder of D3 and D4 is also overruled. [*377]

The locus standi points

It was contended by counsel for the defendants that, upon the evidence led by the plaintiffs, the suit was bad for
non-joinder; in that Cheng Lye Hiang

(PW1) ought to have been joined as a plaintiff. In particular, it was contended that since this was a joint claim for
loss allegedly caused to joint property in which it was said that P1, P3 and PW1 had a vested interest, no award
could be made by the court in respect of the claim for losses sustained as a result of the events of 1988 without
joining all three of them as co-plaintiffs.

The term locus standi or standing in a court of law means entitlement to judicial relief apart from questions of the
substantive merits and the legal capacity of a plaintiff.

In considering the locus standi objection, there are two principles I have to keep in the forefront of my mind. First, I
am bound to proceed on the basis that everything alleged in the statement of claim and in the documents relied
upon by the plaintiffs is true. Secondly, the jurisdiction to uphold a plea of no locus standi should only be exercised
very carefully in circumstances where there is no possibility of doubt.

The authority which I should like to cite in support of the two principles aforesaid is the case of Hayes v Bristol Plant
Hire Ltd & Ors 4, an action by the director of a company for a declaration that he had been wrongfully excluded
from the board, and where a preliminary point had been taken that the action was misconceived so that the court
had no jurisdiction to entertain it further. The following passages in the judgment of Wynn-Parry J would appear to
be in point:
… I am bound to proceed on the basis that every statement in the statement of claim and every assertion in the documents
therein referred to are true … (at p 686E).

Now again I pause to remind myself that I am dealing with a preliminary point going to jurisdiction. It is open to the court to
stop an action such as this in limine if, on a point being properly taken, it thinks right to do so, and generally speaking, if a
point as to jurisdiction is taken, it is the duty of a court to bring the proceedings to as early an end as possible. At the same
time, it is quite clearly established that it is a jurisdiction which should only be used very carefully and in circumstances
where there is no possibility of doubt as to the lack of jurisdiction (at p 688E-F).

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It is with the above principles in mind that I ask myself the question: 'Was the non-joinder of PW1 as a co-plaintiff
fatal to the plaintiffs' claim?'

It is true that if several persons are joint owners of any land or premises affected by trespass, they should all, as a
rule, be joined as co-plaintiffs, in the action.

But, in the present case, no objection was taken to the non-joinder of PW1 at the trial and it was only at a very late
stage that counsel for the defendants had in his final written submission taken the point. Order 15 r 6(1) [of the
RHC] provides that 'no cause or matter shall be defeated by reason of the misjoinder or non-joinder of any party;
and the court may in any cause or matter determine the issues and questions in dispute so far as they affect the
rights and interests of the persons who are parties to the cause or [*378]
matter'. It is true to say, however, that this rule does not alter the legal principles with regard to actions, and it is still
necessary to have before the court the proper parties necessary for determining the point at issue. (See, eg
Performing Right Society Ltd v London Theatre of Varieties Ltd;5 Walter & Sullivan Ltd v J Murphy & Sons Ltd. 6)

Now, according to the evidence adduced on behalf of the plaintiffs, at all material times:
(a) after the death of Cheong Au Pit, the plaintiffs and PW1 continued to live on the farm, to cultivate vegetables and to
rear livestock thereon and to enjoy the income as aforesaid; and

(b) during the lifetime of Cheong Au Pit, the plaintiffs and PW1 jointly worked on the farm, the income derived
therefrom being divided amongst themselves.

If true, it could be reasonably inferred from the evidence aforesaid, that P2, who had been paying the rent and
managing the farm for the plaintiffs and PW1, was in the position of a constructive trustee of the farm for the benefit
of herself, the other plaintiffs and of PW1. Consequently, P2 alone could maintain the suit to protect trust property
and recover damages and obtain other reliefs in respect of injury done to trust property.

I would therefore dismiss this branch of the locus standi objection.

Another branch of the locus standi objections was that the plaintiffs have no title to the plot concerned and so could
not maintain this suit.

The submissions advanced by counsel for the defendants in support of this plea may conveniently be taken from
his written submission and are as follows:
(6).1 It is not in dispute that:

(a) Cheong Au Pit died intestate in 1969; and

(b) the tenancy of the vegetable farm was not transferred to P1 and P2, unlike the dwelling house No 258K.

(6).2 It is however alleged that Cheong Au Pit, just before he died, made a gift of the vegetable farm to P1, P2, P3 and
PW1 orally. The further and better particulars alleges that the plot concerned 'was transferred' (see p 31 of exh BP).
P2 did not testify to this fact. If a party does not testify to it, then ordinarily the court should ignore it. It is for a party to
allege and prove its claim: secundum allegata ad probata.

(6).3 It was PW1 who said so – see her evidence on 20 August 1991 (in the morning). She was cross-examined:
house No 258K given to P1 and P2 only but the vegetable plot was given to four persons, P1, P2, P3 and PW1.
Before his death, no steps taken to effect the gift (see her evidence on 24 August 1991 in the morning). There is
nothing to show that the Khoo Kongsi were aware of the death of Cheong Au Pit until September 1972 when a written
request was made to transfer dwelling house No 258K (see exh AB2 at p 99).

(6).4 We submit that the alleged gift was invalid and ineffective because:

(a) it was a gift which involved the gift of an interest in land and, as such required writing, as the law then stood in
Penang; the Statute [*379]
of Frauds applied in Penang until the application of the Contracts Act 1950 to Penang on 1 June 1974.

See Arulanandom J's judgment that the Statute of Frauds applied in Penang; Kok Ek Chooi v Cheah Soon Neoh &
Anor;7

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(b) even if the transaction were one of assignment, the lack of writing rendered the assignment invalid; s 4(3) of the
Civil Law act 1956 requires writing; see also the position that prevails in Singapore where an assignment of a tenancy
was held to require a deed: VM Peer Mohamed v Great Eastern Life Assurance Co Ltd 8 which was approved by the
Privy Council ( [1985] 1 MLJ 329 at p 332, per Lord Templeman);

(c) equity would not perfect an imperfect gift: the rule in Strong v Bird, 9 as to which see Snell, Equity (29th Ed, 1990)
at pp 124-25. None of the conditions to make an imperfect gift effective exists in this case; and

(d) the property would still remain in the estate of Cheong Au Pit and in the absence of letters of administration, the
present plaintiffs would have no standing to maintain any action. The point was previously made in the interlocutory
proceedings before Mustapha J in exh AB2 at p 5B (last sentence).

The submissions advanced by counsel for the plaintiffs in reply may also be conveniently taken from his written
submission and are as follows:
(i) Before he died, Cheong Au Pit gave his vegetable plot which included the assets on the plot and the tenancy
coupled with equity of the plot, to P1, P2, P3 and PW1.

Pursuant to this, the plaintiffs and PW1 worked the vegetable plot, used the income to support themselves and their
families, and shared the remaining profit among themselves. There was no condition against subletting or assigning
the tenancy of the vegetable plots. The only requirement of the Khoo Kongsi appears to be that the assignee of a
tenancy, if he wanted to have himself registered as the tenant, had to appear before the board and agree on the
terms. Cheong Au Pit's gift of the vegetable plot to the plaintiffs and PW1 had been perfected by their possession and
cultivation of the vegetable plot during Cheong Au Pit's lifetime and thereafter.

(ii) The Statute of Frauds had no application to the gift of the vegetable plots to the plaintiffs and PW1, which had been
perfected while Cheong Au Pit was still alive. This is not an action based on any contract for the sale, or other
disposition of land, or any interest in land. Failing to see this distinction would, in the words of Arulanandom J in Kok
Ek Chooi v Cheah Soon Neoh 7, be 'to indulge in ostrichism'.

In my view, provided always that the plaintiffs are able to establish the essential facts relied upon by counsel on
their behalf – and this is a question I shall have to consider later – I agree with counsel as to the legal
consequences which flow from those facts and so would overrule this branch of the locus standi objection. [*380]

Self-help

I accept the proposition, as indeed I am bound to, by reason of the judgment of the Supreme Court in Trustees of
Leong San Tong Khoo Kongsi (Penang) Registered & Ors v Poh Swee Siang 10, that if, but only if, the plaintiffs are
held by the court to be trespassers in law – an issue which I shall have to consider later in this judgment – then the
remedy of self-help would be available to D1 and D3.

Res judicata and issue estoppel

It was contended by counsel for the defendants that the plaintiffs' claim to the portion of the plot concerned, etched
in black in exh P14 was barred by reason of the judgment of Mustapha J reported under the name of Cheng Hang
Guan & Ors v Perumahan Farlim (Pg) Sdn Bhd & Anor 11.

The material facts so far as this part of the case is concerned were these:

The plaintiffs had obtained an injunction to restrain D1 and D2 from trespassing upon the two dwelling houses and
the farm. That injunction was later dissolved upon the application of the defendants therein (see the judgment of
Mustapha J) and there was no appeal from that decision.

Accordingly, it was contended that the dissolution of the injunction meant that the plaintiffs had no interest in the
portion of the plot concerned, etched in black in exh P14, and so the plaintiffs' claims to that portion were barred by
res judicata and issue estoppel. In support, the case of Government of Malaysia v Dato Chong Kok Lim 12 was
cited, wherein the well-known proposition that a decision at one stage of the proceedings was binding on the
parties, not only in subsequent proceedings between the same parties, but also at a later stage in the same
proceedings, was stated.

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I regret that I am unable to accede to this branch of the submissions of counsel for the defendants.

In Cheng Hang Guan & Ors v Perumahan Farlim (Penang) Sdn Bhd & Ors 2, I had occasion to consider the effect
of the judgment of Mustapha J. What I said at p 93 was this:
In my opinion, the order of Mustapha J refusing the plaintiffs the interlocutory injunction in so far as the vegetable plot was
concerned, on the ground that damages would be an adequate remedy, was merely a prima facie view and lacked the
essential element of finality since it is always open to the High Court, at the final hearing, to review the question involved
and to arrive at an opposite conclusion in the light of all the evidence, both oral and documentary, should the circumstances
so require. Accordingly, the legal effect of the refusal of the interlocutory injunction was simply, that at the interlocutory
stage, based on the limited material then available, the plaintiffs were not entitled to the injuctive relief claimed.
I can think of no reason for departing from anything I had then said and I would add, that in any event, Mustapha J
did not decide that the plaintiffs had no interest in the portion of the plot concerned, etched in black in P14.

Accordingly, I would overrule the pleas of res judicata and issue estoppel.

Having disposed of the preliminary objections, I must now embark upon a consideration of the merits. The issues
which arise as regards this part of case, may be stated thuswise. [*381]

(1) What was the area of the plot concerned of which the plaintiffs had possession? More particularly, whether, at all
material times, the plaintiffs have been in possession of the plot concerned comprised in Lot 2532, Mk 13, DTL, Pulau
Pinang, having an area of approximately 121,619sq ft (or 2.8 acres) which is shown and delienated in orange in the
survey plan, exh P16 ?

(2) (a) Whether, at all material times, the plaintiffs were, both in law and in equity, entitled to possession of the plot
concerned including the houses, pigsties and structures erected thereon?

(b) Were the notices to quit served upon the plaintiffs valid in law ?

(3) (a) Whether D1 and D2 had on 18 June 1982 committed trespass and created nuisance on the portion of the plot
concerned, etched in black on exh P14 ?

(b) Whether D3 and D4 had on 17 March 1988 committed trespass and created nuisance on the portion etched
orange on exh P14 and have been in unlawful occupation of the portion etched black on exh P14?

(4) (a) If the plaintiffs succeed in establishing liability against D1, D2, D3 and D4, then what is the appropriate sum to
award by way of damages?

(b) Whether the plaintiffs are entitled to aggravated damages and/or exemplary damages ?

(c) Whether the plaintiffs are entitled to an injunction ?

(d) Whether the plaintiffs are entitled to any other, and if so, what remedies?

As to issue one – what was the area of the land concerned in the possession of the plaintiffs?

There was an acute conflict of evidence on this question if the versions of the plaintiffs and the defendants were
compared, the plaintiffs' contention being that the area in their possession was 2.8 acres or approximately
121,619sq ft, while the defendants' version was that the area was as little as 9,000sq ft.

Broadly stated, the evidence relied upon by the plaintiffs and the contentions advanced by their counsel were as
follows:
(1) the evidence of P2 who, under cross-examination, stated that the area of her vegetable plot was 2.8 acres;

(2) the evidence of PW1 who stated that at the time of Cheong Au Pit's death in 1969, the area in their possession was
the area delienated in orange on exh P16, ie approximately 2.8 acres;

(3) exhibit P16 was a survey plan prepared by a qualified and competent surveyor on 10 September 1982 for use in

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the interlocutory proceedings in this case and although nine years had elapsed since P16 was first used as an exhibit
in this case, the defendants had not produced any plan drawn by their surveyor contradicting or qualifying the
accuracy of exh P16; and

(4) Khalid bin Abdul Aziz (PW9) had visited the farm on 9 September 1982, carried out the survey and produced exhs
P37A and 37B which show the measurements and other particulars such as houses, pig sties, [*382]
vegetable farm, etc. These documents produced by a competent surveyor corroborated P2 and PW1's evidence that
the plaintiffs had been in possession of nearly 2.8 acres of land.

On the other hand, the evidence relied upon by the defendants and the contentions of their counsel were as follows:
(1) the plaintiffs admitted, as a fact in the proceedings before Mustapha J, that the area let was 9,000sq ft and the
rental paid was 90 sen at 10 sen per 1,000sq ft per month. See exh AB2 at p 2C (notes of proceedings on 21 July
1982). These notes of proceedings (at pp 1-7 of exh AB2) were admitted as to the truth of its contents in this trial on
19 August 1991;

(2) independent (and unchallenged) evidence of Khoo Peng Tee (the trustee), by his affidavit (at pp 64-68 of exh
BA(1)), and Khoo Gin Pye, by his affidavit (at pp 74-77 of exh BA(1)), as to the policy of the Khoo Kongsi to charge 10
sen per 1000sq ft of vegetable land and, as Cheong Au Pit was paying 90 sen for his vegetable plot, the area let, with
reference to the rent, was only 9,000sq ft (neither was called as a witness at the trial, the later having died before the
hearing); and

(3) further, the evidence showed that the vegetable plot let to Cheong Au Pit was the plot adjoining house No 258K.
Since that area, as claimed by the plaintiffs, exceeded 9,000sq ft, it was clear that the area etched in black in exh P14
could not be part of the land let to Cheong Au Pit. Consequently, none of the plaintiffs or the estate of Cheong Au Pit
could lay any claim to this area.

Counsel for the defendants attacked the evidence relied upon by the plaintiffs in these terms:
(1) The admission of fact, before Mustapha J, referred to in para 5.2 (supra), is binding on the plaintiffs and no attempt
had been made, at anytime, to withdraw or correct this admission. It is therefore too late to contend otherwise now.

(2) An admission once made is binding on the parties and their privies and the fact admitted need not be proved for
the admission dispenses with the proof.

Note s 17 of the Evidence Act 1950; Field, 2 Law of Evidence (11th Ed, 1990) at p 1245 para 29, 'Admission of
Adverse Party' – 'it is the best piece of evidence'; and Cross' Evidence (6th Ed, 1985) at p 517, 'Admissions' ('A party's
statement …'); at p 521, 'Vicarious Admissions' ('Admissions by those in privity …').

(3) In accordance with this, [there was a] judicial admission in open court that the plaintiffs were required, and they
undertook, to produce a surveyor's plan showing the area of 9,000sq ft of the vegetable land (see exh AB2 at p 2C).

(4) The plaintiffs delivered exh P16 to D1 and D2's solicitors in purported compliance with the undertaking; contrary to
the admission and undertaking, P16 showed the area to be 121,000sq ft! [*383]

The defendants challenge the accuracy and admissibility of P16 as follows:

(a) The plaintiffs placed great reliance on P16 and P14. The former came from PW8 and PW9, whilst the latter came
from PW2. The common source of information as to both is PW1. The veracity of PW1, including her own evidence on
this, is very much in doubt.

(b) There is also a challenge to the manner in which the measurements shown in P16 were taken. These
measurements were, as stated earlier, carried out to show that 9,000sq ft were occupied. For this reason, DW6's
assistance was sought to verify the actual area of 9,000sq ft but DW6, for the reasons set out in para 7 of his affidavit
(at pp 69-73 of exh BA(1)), was unable to point out the area occupied. The lack of compass points was admitted by
PW8 who also confirmed para 7 (at p 71 of exh BA(1)).

(c) Despite the fact that pp 69-73 of exh BA(1) were filed well in advance, the plaintiffs took no steps to verify the
situation. The plaintiffs only looked for PW8 in September 1991 (in the middle of the trial).

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(d) The data in P16, as well as in D38 (the field diagram), were said to originate from the field book. It was also based
on the traverse done by Syarikat KT Wah. The accuracy of the latter's traverse was not verified. All PW8 could say
was that it was the practice not to query the traverse of another surveyor. This may be professional courtesy but it is
certainly not a guarantee of correctness. There is no supporting evidence. DW6's report (exh D56) is otherwise.

(e) PW8's own evidence states that without the field book, there was insufficient material to justify the accuracy of the
survey. Further, in his own conclusion to P37 (the report), he states that there was insufficient data to render the
measurements accurate. That conclusion was repudiated by PW9, the field technician. He said that there was a
sufficient number of 'ocm' points. If that be so, then it is not borne out.

(f) There is another matter of importance: that PW9 used a CP (ie certified plan), which was not even mentioned in exh
P37 – a material omission. Further, the CP number was not referred to in the diagram (exh D38) or even in exh P16.
The omission is unusual.

(g) The field book is missing. PW8 was never told that his plan was being challenged from the very inception, that is to
say, September 1982, some two weeks after the alleged survey. Had PW8 been so told, the field book, on which the
data depends, would have been preserved. The fault for the loss or unavailability of the field book must rest squarely
with the plaintiffs.

(h) The plan contains no certification or authentication by PW8 except to bear his signature. There are no
contemporary records of what the instructions were, what information was provided to PW8 and his staff. In the
absence of these and the field book, the evidence of PW8 and PW9 as well as the plan, exh P16, is highly suspect.

(i) Exhibit P14 was drawn by PW2 in his office after a visit to the site in March 1988, on the instructions of the solicitors
for the plaintiffs. He had no personal knowledge of the contents. All the information therein was provided by PW1, the
source of whose knowledge is yet to be proved by admissible evidence. [*384]

(j) There is also a conflict in the evidence of PW1 and PW2 as to the circumstances under which and the place where
and the time when exh P14 was drawn. According to PW1, exh P14 was drawn by PW2 independently and shown to
her. Exhibit P16 was made available to PW1 without being told that the accuracy of P16 had been challenged.

(k) PW2 was unable to answer as to how and when he observed the stream, which was not in existence in March
1988. He was forced to fall back on exh P16. Further, he had no other records of the contents in exh P14.

(l) PW2 had not visited the site before and he was unable to say of his own personal knowedge the extent of, or the
kind of cultivation on, and the items destroyed either in 1982 or for that matter even in 1988.

It was also said that there appear to be several inconsistent versions of the area as claimed by the plaintiffs, for
example:
(a) An earlier map extracted by the defendants' surveyor, Anthony Chai Wee Siong, a director of D3 in charge of
building work (DW6) (see p 5 of exh DAB of the defendants), on which he and Ng Bock Tye (DW4), were cross-
examined, shows the area occupied to be far less than shown in exh P16.

(b) The measurements done at the request of the Tripartite Committee in the presence of the representatives of the
residents' association, assisted by PW1 (as admited by her in cross-examination) show a lesser area; see the plan
D40 and the minutes of the Tripartite Committee meeting (exhs D41 and D42), the contents of which were proved by
DW2 and DW4. This measurement is far less than 100,000sq ft.

(c) The measurements done in 1969 by the Khoo Kongsi show that the area was again less than the area now
claimed; the book of measurements was tendered as exh ID45; it emanated from the Khoo Kongsi; it was handed to
DW1; it was produced by DW1; being a document of more than 20 years, its genuineness is presumed by s 90 of the
Evidence Act 1950; the documents should now be marked as exh D45.

It was submitted that when the measurements were done in 1969, there was no reason for the Khoo Kongsi to
misstate the true position and none was suggested by the plaintiffs; this went to show how uncertain and
unrealiable the plaintiffs' own case was on the question of the area let to Cheong Au Pit.

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Counsel for the defendants also contended for the following conclusions on the law:
(1) By occupying a larger area than was let, the said Cheong Au Pit was already a trespasser which trespass was
continued by the plaintiffs.

(2) There was no question of waiver by the Khoo Kongsi as to the area occupied; the failure to take action cannot
amount to a grant of the tenancy of the larger area occupied. Khoo Peng Tee (the trustee), had explained in his
affidavit the reasons why action was or could not be taken. There was no plea of any waiver in the pleadings. The
plaintiffs had filed no reply to the defence of D1 which squarely raised this issue.

(3) The evidence of PW1 as to the area let to Cheong Au Pit was wholly hearsay and inadmissible; she had no
personal knowledge whatever. [*385]

In reply, counsel for the plaintiffs submitted as follows:

(a) The defendants had not produced any evidence of the alleged policy of the Khoo Kongsi to charge 10 sen per
1,000sq ft of vegetable land. DW3, secretary of the Khoo Kongsi, could not produce any records to substantiate this
claim, although he had looked at all the minutes of the Khoo Kongsi, either by himself or with the assistance of another
person. All he could produce was a notice issued in 1941. He had heard of this policy from old trustees only in 1984
during Poh Swee Siang's case.10 He did not know of even one farm in Thean Teik Estate where rent is collected at
the rate of 10 sen per 1,000sq ft.

(b) Exhibit D48, the minutes of the Khoo Kongsi, clearly shows that there was no such policy. Each application for
renting vegetable land was considered on its own merits by the board, who then fixed the rental and other terms of the
tenancy. Cheong Au Pit's tenancy must have commenced well before 1938 and that could explain the low rental paid
by him.

(c) If the area rented to Cheong Au Pit was 9,000sq ft, as alleged by the plaintiffs, then the Khoo Kongsi would have
taken action against him for occupying 121,000sq ft but no such action was ever taken, although, according to exh
ID45 (said to be the Khoo Kongsi's book of survey, which has not been proved), Cheong Au Pit was alleged to be
occupying 49,000sq ft in 1969. Until D1 came into the picture and the alleged notices of termination were issued, the
Khoo Kongsi had been accepting rent from P2 for the area in the possession of the plaintiffs. The Khoo Kongsi would
not tolerate even the chopping of a branch of a cempedak tree. Would they permit a tenant to occupy an area 13 times
the size rented by him? The only reasonable inference from the Khoo Kongsi's conduct is that Cheong Au Pit was in
possession of 121,000sq ft of land with their consent, paying a rental of 90 sen.

As regards the contention of counsel for the defendants that the area occupied by the plaintiffs was only 49,238sq ft
having regard to the measurements taken by David Tan Yok Seng (DW2), recorded in exh D40, and not 2.8 acres
as claimed by the plaintiffs, counsel for the plaintiff submitted as follows:
(a) Exhibit D40 was drawn by David Tan, an employee of the defendants, who had no training experience or
competence in survey work. The area was calculated byDW1, a highly interested party, in the absence of the plaintiffs.
DW1 also has no training experience or competence in survey work. The plaintiffs, as soon as they came to know of
the alleged results of the 'survey', objected to the figures (exh D7), but D3 did not take any steps to get an accurate
survey done by a qualified surveyor.

(b) The area in the possession of the plaintiffs had been hotly disputed since July 1982. Therefore, why was it that
neither D1 nor D3, who are big developers, carried out an independent survey so as to ascertain the area, instead of
asking DW6, a qualified surveyor, to draw squares and rectangles on the survey plan prepared by Datuk Ayob, exh
P16? They had an opportunity to verify the truth of the plaintiffs' claim and the [*386]
accuracy of exh P16 but they chose not to take advantage of it. Why? The only reasonable inference was that they
did not want their own surveyor to confirm the claim of the plaintiffs and the accuracy of exh P16.

As regards the contention of counsel for the defendants that the plaintiffs admitted before Mustapha J that the area
let was only 9,000sq ft and that the rental was 10 sen per 1,000sq ft, counsel for the plaintiffs submitted as follows:
(a) The notes of Mustapha J were brief and incomplete. In his submission on 29 September 1982 (exh AB2 para 2F),
the plaintiffs' counsel, Mr Tan, relied on the affidavit of P1 and P2 which clearly stated that they were occupying about
three acres of land (exh BA1 at p 47 para 4). If he had admitted that the area occupied by the plaintiffs was only
9,000sq ft, why did he submit otherwise at the hearing of his application?

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(b) The application for the injunction proceeded on the basis that there was a dispute as to the area rented by the
plaintiffs and the defendants' counsel submitted that the Khoo Kongsi could not have rented out the area claimed by
the plaintiffs because of the alleged policy of the Khoo Kongsi and the byelaws of the local authority on this. Therefore,
where was the judicial admission of the plaintiffs as submitted by the defendants' counsel? (See exh BA1 at p 17,
paras 15-16; exh BA1 at p 71, paras 5 and 13-16; exh AB2 at p 4F; and exh AB2 at p 5F.)

(c) If there was such an admission, then why did the defendants call witnesses to testify on the area in the possession
of the plaintiffs?

As regards the contention of counsel for the defendants that the area etched black on exh P14 could not be part of
the land let to Cheong Au Pit, counsel for the plaintiffs submitted that this contention was open to the following
criticisms:
(a) exh D40 clearly showed the area etched black on exh P14 to be part of the plaintiffs' farm;

(b) David Tan (DW2), testified that the said area was part of the plaintiffs' farm; and

(c) if the said area was not part of the plaintiffs' farm, then why negotiate (as claimed by the defendants but denied by
the plaintiffs) with PW1 as an agent of the plaintiffs?

After careful consideration, I uphold the submissions of counsel for the plaintiffs because, with respect, I did not
consider that counsel for the defendants had any real answer to the reply of counsel for the plaintiffs, so far as this
part of the case was concerned.

It follows that I find, as a fact, that the area in the possession of the plaintiffs was at all material times to this suit, 2.8
acres or approximately 121,619sq ft.

As to issue two – w hat notice to quit was necessary to determine the plaintiffs' tenancies of the farm and the two
dwelling houses, assuming such tenancies were not coupled with an equity ? [*387]

The Khoo Kongsi gave one month's notice to quit in respect of the two dwelling houses and the farm after the acts
of alleged trespass on 18 June 1982.

The arguments advanced by counsel for the plaintiffs in respect of these notices to quit were twofold, [namely]:
(a) that the period of the notice to quit was insufficient; and

(b) that Khoo Kah Seng (DW3), a trustee of the Khoo Kongsi, had no authority to instruct the Khoo Kongsi's solicitors,
Ms Shearn Delamore & Co, to issue the notices to quit.

As to (a), namely, the sufficiency or otherwise of the notice to quit, the rival submissions of the parties must now be
considered.

The gist of the submissions of counsel for the defendants regarding this part of the case was that the period of one
month's notice was sufficient to terminate the tenancy of both the farm and the two dwelling houses because:
(i) the conditions appearing in the rent receipts provided for one month's notice, and a few of these receipts had been
produced by the plaintiffs themselves when applying for interlocutory injunctions before Mustapha J; and

(ii) the surrounding circumstances, especially the fact that rent was paid by reference to the month, and the general
notice by the trustees of the Khoo Kongsi dated 1 March 1941, in Chinese, with an English translation which said this:

NOTICE

Notice is hereby given that owners of houses built in Sin Kang Plantation are not allowed to charge, mortgage, transfer,
buy, sell, exchange, remove, and make repairs, alterations or additions to their houses, whether new or old, without the
previous consent of the Kongsi in writing.

Should they be found to infringe any of the above conditions, the Kongsi shall have the right, after three months' notice

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shall have been given to the owners, to proceed with the demolition of the said house at the expense of the owners and no
compensation, damages or claims whatsoever will be entertained or paid by the Kongsi.

The Trustees

Leong San Tong Khoo Kongsi

Penang

1 March 1941
showed the temporary nature of the tenancies and some of these were produced at the trial of Poh Swee Siang on
30 June 1982 which went to confirm their genuineness and authenticity.

As to (i), the gist of the submissions of counsel for the plaintiffs was that 'the conditions' had been introduced for the
first time on receipts issued to P2 on 31 October 1981, that is less than a year before the tenancies were terminated
and decades after the plaintiffs and their ancestors had been staying on the plot concerned, and so had no
contractual force. [*388]

It was also argued that 'the conditions' were in English, which the plaintiffs, who were illiterate farmers, did not
understand and so it would be wrong to infer that the plaintiffs had, by conduct, accepted them as such.
Accordingly, it was said that there was no material upon which it could be said that the plaintiffs had, by their
conduct, accepted the conditions in accordance with the principles enunciated by Lim Beng Choon J in Mohd Ismail
v Lim Sok Cheng 13.

Now, a receipt is, of course, in law, only evidence of the payment of a sum of money. It does not consitute a
contract, nor can it have the effect of an estoppel. The true intention of the parties must be established by evidence
at the trial. It is not difficult to cite an anthology of cases for these principles. My choice is Lee v Lancashire
Yorkshire Railway Co 14; Hockle v London County Council 15; and Oliver v Nautilus Steam Shipping Co Ltd16.

Having said that, I accept that the inclusion of the inscription in the receipt stating that the period of one month's
notice would be sufficient to terminate the tenancy might, in certain circumstances, amount to a stipulation imposed
by a landlord upon his tenant; see for example, Loke Yung Hong v Shanghai Furniture Co & Anor 17, where
Pretheroe Ag CJ said this [at p 140]:
Now, what was the legal effect of including those words in the receipt? I do not think that they can be regarded as being a
clause in the contract to which the tenant agreed: rather I think they were a stipulation imposed by the landlord upon the
tenant. It is true that neither the word 'condition' nor the word 'stipulation' appears, but this fact, of itself, will not prevent the
prohibition from being a condition (Henniker v Watt (1828) 8 B & C 308). Evidence was given at the trial that the appellant
has those words printed on every receipt he gives for rent or for any deposit made by a prospective tenant: that this is the
common practice of landlords in Kuala Lumpur and finally, as I have already stated, that the first respondents knew that the
effect of the words was to prohibit any assignment by them. In my opinion, therefore, these words define an event which
was intended to end a state of things which, but for its happening, would have continued, and therefore they constitute a
condition.
First of all, it would be convenient to reproduce the conditions appearing on the reverse of the rent receipts dated
31 October 1981 (at pp 9-12 of exh AB1) in respect of the farm and the two dwelling houses.

In respect of the farm, the conditions were as follows:

(1) This lease is optional to both parties, ie the landowners and vegetable gardeners (serving as ground tenant),
carrying one month's notice from either side for its termination.

(2) Upon termination of lease, the vegetable gardeners hold the privilege to extend the lease up to the time when the
last cultivated crops are harvested.

(3) No party is bound to pay any claim/compensation in kind for the termination of the lease.

(4) The vegetable gardeners will maintain the land in vacant condition at all times and will refrain from making
construction of any erections altogether on the land.

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(5) If no cultivation of vegetables is made within a one month period and weeds are allowed to grow in place, the
landowners hold the right to cancel the lease forthwith without any written warning to the vegetable gardeners. [*389]

In respect of the two dwelling houses, the conditions were as follows:

(1) Rent collected is for site of house only.

(2) No ex gratia payment will be made when site is required by our Kongsi.

(3) Notice is hereby given that all owners of houses, buildings, sheds, etc, erected in Sin Kang Estate are not
permitted to repair or make alterations, extensions, enclosures, transfer ownership, change attap roof, corrugated iron
roof, asbestos roof, pigsties, poultry pens, including the building of new houses, etc, unless prior permission in writing
has been obtained from the trustees of the Khoo Kongsi.

Should any ground tenant be found to have infringed any of the above conditions, the Kongsi shall have the right to
demolish any building, etc at the expense of the owners and no compensation or claims will be entertained by the
Kongsi.

In the present case, however, apart from the testimony of Khoo Kah Seng (DW3), a trustee of the Khoo Kongsi,
there is no evidence that the conditions appearing in the rent receipts, whether in respect of vegetable lands or the
dwelling houses, had been introduced from the inception of the tenancies, nor is there anything to show that the
plaintiffs or their ancestors, who had no knowledge of the English language, could be said to have accepted the
'conditions'. (See, eg Balwant Singh v Tong Lam & Co 18, per Rose CJ at p 34 col 1G.)

Counsel for the defendants did point out that this witness had testified that the receipts produced in court, bearing
the condition concerned, 'formed part of receipts previously used, omitted for a while by mistake and then
reinstated'. It was suggested that if DW3's testimony on this point were untrue, the plaintiffs would have been
expected to adduce evidence of past receipts by way of rebuttal.

On the other hand, counsel for the plaintiffs drew my attention to the fact that DW3 had admitted, under cross-
examination, that the conditions on the receipt were endorsed thereon only after 1976, but later qualified that by
saying that the conditions were not new and had been endorsed on earlier receipts but that when challenged to
produce duplicates or counterfoils of receipts issued prior to 31 October 1981 to P2, with the conditions endorsed
thereon to support his assertion, was unable to produce even a single one. Upon then being reminded about his
testimony in Poh Swee Siang's case 10, D3 finally admitted that the conditions were indorsed on receipts only after
1976. And, in the case of the plaintiffs, DW3 admitted that the conditions had been endorsed on the receipts issued
to them only since 31 October 1981 (see exh AB1 at p 9).

It was emphasized that although the defendants had produced the old Khoo Kongsi notice dated 1 March 1941
(exh DAB at p 26), they had studiously refrained from producing even a single duplicate or counterfoil of a receipt
bearing the condition issued to the plaintiffs before 31 October 1981. Similarly, it was emphasized that although the
defendant had produced documents (exhs D11 and D12) containing a condition relating to the tenancies of houses,
they had not produced even a single document (whether board minutes or notices) where the alleged conditions of
tenancy of vegetable lands were recorded. [*390]

Even if counsel for the defendants' evaluation of DW3's testimony were accepted, it is not at all clear as to what
DW3's source of knowledge was as to when the conditions appearing in the receipts were first introduced. It was
not at all clear whether he had personal knowledge of these matters or even whether these alleged events occurred
while he was a trustee. It looks very much as though his testimony regarding these alleged events was derived from
information provided to him by others, in which case, it would be worthless as evidence, being purely hearsay.
Certainly, if what he said were true, I would have expected the defendants to have adduced in evidence counterfoils
or duplicates of earlier receipts by way of corroboration. The Khoo Kongsi was an association with many members
and I would have expected it to have kept such records. It is true that neither did the plaintiffs produced rent
receipts issued by the Khoo Kongsi prior to 1981, but it must be recognized, that in contrast to the Khoo Kongsi,
they are illiterate farmers who might not have appreciated the importance of keeping old receipts.

But, more importantly, the onus of proving that the conditions on the receipt had contractual force was upon the
defendants who were relying upon that condition and not upon the plaintiffs to prove the converse. No adverse

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inference may therefore be drawn against the plaintiffs for this omission, even assuming, for the sake of argument,
such old receipts were available.

I must also add that the mere fact that on the hearing of their application for an interlocutory injunction before
Mustapha J, the plaintiffs had themselves used the rent receipts bearing the conditions aforesaid as evidence, does
not in any way debar them from contending at the final hearing that those conditions are invalid in law. The plaintiffs
never relied upon the conditions on the rent receipts and, indeed, during the interlocutory proceedings, the plaintiffs'
contention was that their tenancies were coupled with an equity while the defendants' contention was that the
plaintiffs' tenancy was a mere monthly tenancy which had been determined by one month's notice to quit, and that
thereafter they continued in occupation as trespassers.

Before this court, the parties have persisted in those contentions. I, therefore, fail to see how it could be said that
whereas at the interlocutory stage the plaintiffs had accepted the validity of the alleged conditions, they had, at the
final hearing, changed their tune. The plaintiffs have been consistent in the legal position they have taken, both at
the interlocutory stage and at the final hearing. I regret, therefore, that I cannot agree with the submission of
counsel for the defendants regarding this part of the case.

In the circumstances, I find that the conditions appearing in the rent receipts are devoid of legal effect and must
therefore be disregarded in considering the question of the sufficiency or otherwise of the notice to quit.

As to (ii), the gist of the submission of counsel for the defendants was that any tenancy which is void for want of
registration, would only take effect as a monthly tenancy where, as here, rent is paid by reference to the month. In
support, the Federal Court decision in Lee Ah Low v Cheong Lep Keen, 19 (Ali and Suffian FJJ; Ong CJ dissenting)
was cited. He also relied on [*391]
the minutes of the Khoo Kongsi (exh P48 at p 5) which indicated that even tenancies of Khoo clansmen were
terminable on one month's notice as well as the testimony of a trustee of the Khoo Kongsi, Khoo Kah Seng (DW3),
that land could be repossessed by the Khoo Kongsi at any time.

On the other hand, the gist of the submission of counsel for the plaintiffs was that although rent had been paid on a
monthly basis, it did not necessarily follow that the tenancies could be determined by a month's notice. In order to
determine the appropriate period of the notice to quit – and this was a question of fact – regard had to be had to the
surrounding circumstances of each case and not just the mode of payment of rent. In support, the cases of Syed
Mohd Alsagoff v Max Behr 20, Tay Boon Huat v Kulsam Bee 21, and ALMM Muthukaruppan Chettiar v Haji Ibrahim
22 were cited.

In Syed Mohd Alsagoff v Max Behr 20, the court held:

Whether a tenant, who holds for a term of years, and after the expiration of the lease continues to do so, paying rent for his
holding, is a tenant from year to year or otherwise, is a question of fact to be gathered from the circumstances; but ought to
be such a tenant (sic) as is just and fair between the parties. The leaning of authorities is, however, in favour of the
presumption of the tenancy being from year to year; and the reason for this, is founded mainly on common sense and
justice. Neither the practice in this Colony to let from month to month, nor the fact that by the former lease rent is reserved
not by the year, but by the month, rebuts the presumption.
In Tay Boon Huat v Kulsam Bee 21, the court held that four months' notice would be reasonable for the
determination of the tenancy of a market garden. The tenant had been in occupation of the land for about three
years and was paying rent on a monthly basis.

In ALMM Muthukaruppan Chettiar v Haji Ibrahim 22, McElwaine CJ said this at p 152:
The principle of the English law in such cases as monthly tenancies is that apart from agreement as to notice, the notice
must reasonable in all the circumstances and the same principle should be applied here.
Counsel for the plaintiffs contended that having regard to the above authorities and the circumstances of the case,
one year's notice would be reasonable to determine the tenancies. Counsel suggested that no distinction should be
made between the period required for determining the tenancies of the dwelling houses and the tenancies of the
farm because, on the facts, the two tenancies were interlinked and for a common purpose, that is, for the livelihood
of Cheong Au Pit and his family.

I note that the majority judgment in Lee Ah Low v Cheong Lep Keen 19, was considerably watered down by the
Federal Court in Yong Tong Hong v Siew Soon Wah & O rs 23 (Ong CJ, Suffian and Gill FJJ). At p 107 col 1C-E,
Ong CJ, speaking for the Federal Court, said:

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Every case must, of course, be decided according to its peculiar facts. The distinction must be drawn between cases where
the tenant can resist his landlord's claim on equitable grounds and others where he has no such grounds. An example is
Lee Ah Low v Cheong Lep Keen, a recent decision of this court. There the tenant was given a tenancy for 80 years during
which period the landlord [*392]
agreed not to increase the rent unless the assessment rate was raised by the municipality and the tenant was at liberty to
use the premises for carrying on any type of business. The monthly rent was #100 and the tenant was given a month's
notice to quit. No equity had been created in his favour, as in Inwards v Baker [1965] 2 QB 29, by his going into possession.
Accordingly the sole question to be determined was whether the premises were held under a yearly or monthly tenancy by
reason of the lease being void for non-registration. That case was not as fully argued as it might have been, nor were the
cases cited which have been brought now to our attention and carefully distinguished. The ratio decidendi, therefore,
should not, in my view, be regarded as a binding precedent for all cases where premises are let for a term of years at a
monthly rent under a lease void for non-registration.
It will be recalled that Suffian FJ (as he then was), was a party to the decision in both Lee Ah Low 19 and Yong
Tong Hong, 23 and must therefore be taken to have concurred in the watering down of the majority judgment in Lee
Ah Low 19.

In Adler v Blackman 24, two principles emerge, namely, first, as pointed out by Sommerville LJ at p 148, the
presumption as to the nature of the tenancy on holding over is a rebuttable presumption; and secondly, as pointed
out by Jenkins LJ at p 152:
… what one is seeking here is the intention to be imputed to the parties from the facts that the tenant has remained in
occupation with the consent of the landlord and has paid rent, after the expiration of the term of the original letting. As I
have said, I think at highest in favour of the tenant the implication here, so far as it is based simply on those bare facts, is
equivocal owing to the absence of any reservation of rent expressed as an annual sum. It follows, in my view, that other
evidence may be resorted to for the purpose of ascertaining what their true intention was.
Clearly, while the mode of payment of rent is an important factor in determining the question of the sufficiency of the
period of a notice to quit, it is not necessarily a decisive factor; other evidence (if available) must therefore also be
thrown into the scales and weighed.

To return to the case of Lee Ah Low 19, it appears to me that that case is distinguishable from the present case on
the ground that there, unlike here, the crucial issue revolved around a question of construction of a written tenancy
agreement. As Ali FJ, who delivered the majority judgment of the Federal Court, pointed out at p 11 col 1F et seq:
The answer to the first ground of appeal is that so far as the main question before the trial court was concerned with the
validity or otherwise of the notice to quit it was clearly a question of law which fell to be decided in accordance with
established legal principles acceptable to the courts in this country. The manner of payment of rent has always been the
basis of consideration in the formulation of the principle stated in the English cases which, undoubtedly led the learned trial
judge to come to the conclusion as he did in this case. If the trial court had any discretion in the matter, there might be
ground for saying that the factors referred to by the appellant would be relevant for consideration. But this is not a case in
which the court has to exercise a discretionary power but to construe the effect of the relevant term of the written
agreement. [*393]

It follows that in the present case, there being no written tenancy agreement to construe, in considering the
question what was the nature of the tenancies of the farm and the two dwelling houses which the plaintiffs held of
the Khoo Kongsi and, more particularly, what notice to quit was necessary to determine those tenancies, assuming
such tenancies were not coupled with an equity, I had to take into account not just the mode of payment of the rent
but also other material factors, for example, the conduct and intention of the parties, the contemplated user of the
subject matter of the tenancies and other relevant circumstances of the case as a whole. In other words, I have a
discretion which, of course, has to be exercised judicially.

According to counsel for the plaintiffs, the material circumstances which I have to take into consideration are these
– and here I would quote from his written submission at p 31 para 3.13 to p 32 para 1:
(a) Cheong Au Pit and his family members were pioneer settlers who, through their own industry and initiative, have
transformed a swampy jungle into a productive vegetable farm. Three generations have lived and worked the plot for
their subsistence. This fact alone leads to the inevitable inference that the intention of the parties was that Cheong Au
Pit's tenancy was not a monthly tenancy. If it was a monthly tenancy, it was highly unlikely that Cheong Au Pit would
have invested so much labour and money in developing the land and building his home there.

Cheong Au Pit's position cannot be compared with vegetable farmers who cultivate vegetable on the land of another
with licence for a period of years. To Cheong Au Pit and his family, the farm has been their home and their source of

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livelihood for generations. Compare Alsagoff's case, where a tenant holding over after the expiry of the lease for a
mere term of years was held to be a tenant from year to year.

(b) Cheong Au Pit or the plaintiffs did not breach any of the regulations of the Khoo Kongsi.

(c) The Khoo Kongsi practice was to allow the family of deceased tenants to continue farming on condition they paid
rent.

(d) There was no condition for determination of both the house and vegetable tenancy by a month's notice. The
unilateral introduction [of the condition] by the Khoo Kongsi only after 1976 clearly shows that the tenancy of the
plaintiffs was not monthly tenancy.

According to counsel for the defendants, apart from the fact that rent was paid by reference to the month – and this
was a matter of prime importance – the minutes of the Khoo Kongsi (exh P48 at p 5) indicated that even the
tenancies of Khoo clansmen could be determined by one month's notice and there was also the testimony of a
trustee of the Khoo Kongsi, Khoo Kah Seng (DW3), that land could be repossessed by the Khoo Kongsi at any
time.

There is, in my view, neither law nor custom which assists me in deciding what is a sufficient notice for the
determination of the tenancies of the farm and the two dwelling houses. So I must, in the exercise of my discretion,
decide what is a reasonable notice, regard being had to the particular circumstances of this case. This calls for a
balancing exercise. In Doe d Martin v Watts, 25 Lord Kenyon said that: [*394]

… it would be extremely unjust that a tenant who occupies land should after he has sown it, be turned out of possession by
an ejectment without any notice. And it was in order to avoid so unjust a measure that so long ago as the time of the Year
Books it was held that a general occupation was an occupation from year to year, and that the tenant could not be turned
out of possession without reasonable notice.
Adopting that approach to the circumstances of the present case, I do not consider that one month's notice would
be either right or just as constituting reasonable notice, whether in respect of the vegetable land (the farm) or the
dwelling houses. In this context, I agree with the submission of counsel for the plaintiffs that there is no distinction in
principle between the farm and the two dwelling houses, in so far as the period of the notice to quit is concerned
because the two tenancies were interlinked and had a common purpose, namely, the livelihood of Cheong Au Pit
and his family.

Having said that however, I am not prepared to go all the way with counsel for the plaintiffs that the appropriate
period of the notice to quit in this case should be one year. I say so because, as was rightly pointed out by
Earnshaw J in Tay Boon Huat v Kulsam, 21 at p 54 paras 6-7, whilst in England there is for most crops only one
period of growth, that is to say, during the spring and the summer, in this part of the world, we have a perpetual
summer and, so far as market gardens are concerned, it is possible that many vegetables and some fruits can be
grown more than once a year, if not all year round. Even if the tenancies were regarded as tenancies from year to
year, six months' notice would be sufficient to terminate a tenancy of that sort. Upon the evidence, however, I do
not consider that I can infer a tenancy from year to year.

It will be recalled that the general notice by the Khoo Kongsi dated 1 March 1941 (reproduced above), provides for
the giving of three months' notice in the event of a breach of the conditions specified therein by the owners of
houses. Even if there were evidence that such a notice had been duly sent and received by the owners of the
houses concerned (and there was no such evidence), I fail to see how this assists the defendants, bearing in mind
that Cheong Au Pit and his ancestors had been in occupation of the plot concerned long before that. In any event,
the stipulation of three months' notice does not assist the defendants.

I might as well interpolate to add that I have not overlooked the submission of counsel for the defendants based on
the minutes (exh P48 at p 5). These minutes purport to confirm events at a meeting of the Khoo Kongsi's board
held on 18 April 1950 and show that it was the policy of the Khoo Kongsi to treat tenancies of farmland as
transferable, subject to the intending transferee appearing before the Kongsi to confirm the rental payable. Exh D9
– a translation of excerpts from the minutes of board meetings of the Khoo Kongsi (1959) – appears to reinforce
that view.

It is true that the minutes (exh P48 at p 5) indicated that the tenancies of Khoo clansmen were terminable on one
month's notice, but these minutes related to a meeting held on 18 April 1950, and would therefore be evidence of

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the general practice of the Khoo Kongsi at that time only. In other words, it could not have the effect of taking away
rights acquired by Cheong Au Pit long before such date. [*395]

I had visited the locus in quo accompanied by counsel on both sides and bearing in mind the purpose of the lettings
in this case and, having given the fullest consideration to the submissions advanced by counsel, I consider that
three months' notice would be reasonable for the determination of the tenancies of the farm and the two houses, as
this would afford the plaintiffs sufficient time within which to harvest their crops and to yield vacant possession of
the plot concerned. In this respect, I see no reason to distinguish between the farm and the houses for the reasons
stated.

It follows, therefore, that the notices to quit of one month's duration issued by the solicitors for the Khoo Kongsi
hereinbefore referred to, were not valid and therefore ineffective in law to determine the tenancies of the vegetable
land (the farm) and the two dwelling houses.

On this ground alone, the plaintiffs are entitled to remain in possession of the two dwelling houses and the farm and
so D3's counterclaim for possession thereof must be dismissed with costs.

As to (b), was DW3 authorized to instruct solicitors to issue the notice to quit?

The gist of the submission of counsel for the plaintiff was that DW3, in instructing the solicitors of the Khoo Kongsi
to issue the notice to quit, had exceeded his authority and that therefore, the notices to quit were invalid. In support,
my attention was drawn to the following matters:
(1) DW3 had himself testified that it was the board of the Khoo Kongsi who had the authority to decide to grant or to
terminate tenancies and that when this happened, a record would be made of it in the form of a minute in the
appropriate minute book.

(2) The evidence disclosed that the board had not made a decision to terminate the tenancies of the plaintiff but that
DW3 had, off his own bat, so to speak, instructed solicitors to issue the notices to quit to the plaintiffs in respect of the
two dwelling houses and the farm.

(3) There was no provision in the joint-venture agreement (exh AB1 at pp 31-48) empowering DW3 to terminate the
tenancies of tenants of the Khoo Kongsi.

The submissions of counsel for the plaintiffs regarding this part of the case are attractive, but it overlooks the cogent
fact that, assuming for the sake of argument, that DW3 had exceeded his authority as alleged, there was ample
evidence that the Khoo Kongsi had ratified the act of DW3 in instructing solicitors to issue the notice to quit. This
branch of counsel for the plaintiffs' objections therefore fails.

Was service of the notice to quit effective in law?

It was anticipated by counsel for the defendants that a separate objection might be taken by counsel for the
plaintiffs that the notice to quit dated 20 July 1982, having been addressed to the deceased Cheong Au Pit, was for
that reason invalid. In the event, however, counsel for the plaintiff did not take the point.

However, as the point might be taken as a new point should there be an appeal from my decision, I think I should
deal with it.

There is no dispute that the notices to quit had been received by the children of Cheong Au Pit who were in
occupation of the farm and there is [*396]
authority for saying that notices to quit are validly served if left at the premises. (See Lim Kien Mok v BH Kevan
26.) When, therefore, the notice to quit was received by the occupants, it was received as agents for and on behalf
of the Official Administrator. (See Teck Seng & Co v William Eu Keng Yuet; 27 Lai Seng Fook v Tang Kong Low
28.)

In any event, I agree with the submission of counsel for the defendants that any defect with regard to the notice to
quit dated 20 July 1982 was repaired by the second notice to quit dated 28 August 1982 which was addressed to
P1 and P2 as the representatives of the estate of Cheong Au Pit.

Was dwelling house No 258K subject to the Control of Rent Act 1966?

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It was contended by counsel for the plaintiffs that, as dwelling house No 258K had been completed by Cheong Au
Pit prior to 31 January 1948, it was subject to the Control of Rent Act 1966.

But can a ground tenant be a protected tenant having regard to Mok Deng Chee v Yap See Hooi 29 and Muniandy
& Anor v Muhammad Abdul Kader?30

I agree with counsel for the plaintiff that the passages relied on by counsel for the defendants in the above
mentioned cases, are obiter dicta and contrary to the ratio decidendi of Ong J (as he then was) in Nair v
Chidambaram 31, which was not cited to or by the court in Mok Deng Chee 29 and Muniandy30.

The defendants did not attempt to satisfy the requirements of s 16(1) of the Control of Rent Act 1966 and so, this
court has no jurisdiction to make an order for possession in respect of dwelling house No 258K.

In any event, therefore, the defendants' claim for possession of the dwelling house No 258K must, on this ground
alone, be dismissed.

As to issue three – did there arise in the plaintiffs' favour an equity or equitable estoppel protecting their
occupation of the plot concerned?

If I am wrong in the view I take regarding issue two, the next question I have to consider is whether the plaintiffs'
occupation of the plot concerned is protected by an equity or equitable estoppel.

It will be recalled that the case for the plaintiffs regarding this issue had already been outlined earlier on in this
judgment; any repetition would be tedious and unnecessary. So, without further ado, I shall proceed to make certain
essential findings pertinent to this part of the case.

I am satisfied, upon the evidence before me, that the alleged promises or assurances had been made by the Khoo
Kongsi, first, to Cheong Au Pit, these promises or assurances being that, so long as he continued to pay ground
rent, he could stay and cultivate the farm as long as he wanted, that Cheong Au Pit told his daughter P2 of the
same and, relying on the same, he and his family had converted what was once a swampy jungle land into a
productive farm. He had also built dwelling house No 258K on the farm and this, I accept, was in existence even
before 15 December 1938 – that being the date of birth of P2. In addition, in 1963, Cheong Au Pit also built dwelling
house 258H on the farm with the consent of the Khoo [*397]
Kongsi and had it registered in the records of the Khoo Kongsi in the name of P2.

In my opinion, Cheong Au Pit would hardly have done these acts which involved unusual exertion and considerable
expense unless those promises and assurances had in fact been made. Similarly, I accept the testimony of P2 that,
after the death of Cheong Au Pit in 1963, she spent RM1,500 in providing a ceiling for dwelling house No 259H.

I also accept the testimony of P2 that sometime in 1972, the visiting trustee of the Khoo Kongsi had told P2 that it
was not necessary to change the tenancy of the farm into her name and that she could continue planting
vegetables as long as she wished, provided she paid rent and, that relying upon this assurance, the plaintiffs had
invested money in installing a sprinkler system. In my opinion, the plaintiffs would hardly have incurred such
substantial expenditure unless the visiting trustee had given the promise or assurance. Certainly, they would not
have done so if they thought that all they had was a monthly tenancy terminable on just one month's notice.

Quite apart from the conduct of Cheong Au Pit and the plaintiffs following the promises and assurances given by
the Khoo Kongsi to which I have just adverted, there was also other evidence whch was wholly consistent with
these promises or assurances having been made. I refer to the testimony of Khoo Kah Seng (DW3), a trustee of the
Khoo Kongsi, who, when asked what the Khoo Kongsi would do when a tenant of vegetable land died, replied, 'The
tenancy will continue for the benefit of the family'. And when the matter was probed further, and he was asked, 'So
long as they continued to pay rents, they could continue farming?', he replied, 'Yes'.

Having regard to the evidence of Khoo Kah Seng himself, regarding the practice of the Khoo Kongsi when a tenant
of vegetable land died, there is thus no escape from the conclusion that the tenancies held by Cheong Au Pit of the
Khoo Kongsi was not just for his benefit but also for the benefit of his family, and that these tenancies could not
have been mere monthly tenancies.

I therefore have no hesitation in agreeing with the submission of counsel for the plaintiffs that the trustees of the

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Khoo Kongsi must have been fully aware of the social-cultural context upon which their legal relationship with
Cheong Au Pit was based. In other words, they must have known that Cheong Au Pit was the head of an extended
Chinese family and the farming activities carried on were for the benefit of this extended family.

In arriving at my conclusion regarding this part of the case, I have given the fullest consideration to the careful
submissions of counsel for the defendants but I regret that I am unable to accede to them for reasons I shall now
state.

First of all, it was submitted by counsel for the defendants that the evidence of P2 of statements made to her by
Cheong Au Pit regarding the promises or assurances made by the Khoo Kongsi, was hearsay and inadmissible.

Similarly, it was contended that the evidence of P2 regarding the promises or assurances made to her by the
visiting trustee suffered from the same defect. [*398]

I regret I cannot agree. It is well established that such evidence is not hearsay and is admissible when it is
proposed to establish by the evidence, not the truth of the statement but the fact that it was made. (See
Subramaniam v PP 32.)

As the Privy Council pointed out in Subramaniam's case,32 the fact that a statement was made, quite apart from its
truth, is frequently relevant in considering the mental state and conduct thereafter of the witness.

In the present case, the plaintiffs' case was that it was because Cheong Au Pit believed the promises or assurances
(whether genuine or not) by the Khoo Kongsi, that he was induced to engage in his farming and construction
activities. And, similarly, it was because P2 believed the promises or assurances (whether genuine or not) of the
visiting trustee, that she and the other plaintiffs were induced to continue with the farming activities and to expend a
substantial sum of money in the installation of a sprinkler system. Therefore, evidence of the promises or
assurances concerned had been adduced not to prove that those promises or assurances were true in the sense
that the Khoo Kongsi intended to keep those promises or to live up to those assurances, but for the purpose of
showing that it was by reason of those promises or assurances that Cheong Au Pit and the plaintiffs had been
induced to act in the manner aforesaid to their detriment.

Secondly, it was submitted by counsel for the defendants that the evidence of P2 as to the promises or assurances
by an unidentified person said to be the visiting trustee or supervisor of the Khoo Kongsi in 1972 was, in any event,
inadmissible because the Khoo Kongsi was not a party to these proceedings.

I think that this submission overlooks ss 18(3)(a) and (b) of the Evidence Act 1950 which read as follows:
Statements made by–

(a) persons who have any proprietary or pecuniary interest in the subject-matter of the proceeding, and who make the
statement in their character of persons so interested; or

(b) persons from whom the parties to the suit have derived their interest in the subject-matter of the suit,

are admissions if they are made during the continuance of the interest of the persons making the statements.
The facts relevant to this part of the case show clearly that the developer, D3, had become the registered lessee of
Lot 2523 ('the said lot') whereon the plot concerned is situated. That lease was executed by the trustees of the
Khoo Kongsi as registered proprietors in favour of D3, pursuant to cl 16 of the joint-venture agreement (exh AB1 at
p 40) to which they were parties, for the purpose of proceeding with the development on the said lot. By the joint-
venture agreement, D3 had undertaken to complete the entire scheme within eight years from the date of approval
of the building plans whilst the trustees of the Khoo Kongsi had also undertaken to execute a 99-year lease in
favour of purchasers of plots of land with buildings thereon in the housing scheme upon issue of separate titles
thereto. [*399]

In these circumstances, it was unmistakably clear that D3's lease was held in trust and for the benefit of the Khoo
Kongsi and itself for the purpose of proceeding with the development.

It follows that D3 derive their interest in the subject matter of the suit from the trustees of the Khoo Kongsi and so,
statements made by the visiting trustees or supervisors of the Khoo Kongsi, which are admissions during the
continuance of that interest, are admissible under s 18(3)(a) and (b), even though technically, the trustees of the
Khoo Kongsi are not parties to this suit.

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I further find that in all probability, the person who made the promises or assurances was in fact the visiting trustee
and supervisor of the Khoo Kongsi. There is no reason to suppose that that person did not hold the office he
purported to hold, for who else would be making such promises or assurances? And, it is significant that the
defendants did not call whoever it was who held the office of visiting trustee at the material time, to contradict the
testimony of P2 and PW1.

Thirdly, it was submitted that promises or assurances made by a visiting trustee would not be binding on the Khoo
Kongsi because, according to the affidavit evidence of a trustee, Khoo Peng Tee (at pp 64-68 of exh BA1), and
DW3, he had no power to make the same.

In answer to this submission, counsel for the plaintiffs relied on the doctrine of apparent (sometimes called
ostensible) authority, under which a principal may be bound by the acts of an agent which he has not authorized
and has even forbidden.

In particular, he pointed out that the Khoo Kongsi had held out the visiting trustee as having power to deal with their
tenants on their behalf.

It will be recalled that both P2 and PW1 had testified that they had made a request to the visiting trustee for the
transfer of the tenancy of dwelling house No 258K and the farm to P1 and P2 and that as a result, on his next visit,
he had brought a letter for P1 and P2 to sign. This was done and later, that dwelling house was registered in the
name of P1 and P2.

The doctrine of 'holding out', sometimes called apparent or ostensible authority, has been said to be based upon
estoppel. (See Rama Corp Ltd v Proved Tin and General Investments Ltd 33; Freeman & Lockyer (a firm) v
Buckhurst Park Properties (Mangal) Ltd 34.) Agency by estoppel arises where one person has so acted – and this
he may do by allowing the agent to hold himself out as having authority (see, eg Re Henry Bentley & Co and
Yorkshire Breweries Ltd, ex p Harrison

;35 Re Henry Bentley & Co and Yorkshire Breweries Ltd, ex p Harrison

;35 Council of the Shire of Ashford v Dependable Motors Pty Ltd 36) – as to lead another to believe that he has
authorized a third person to act on his behalf, and that other, in such belief, enters into transactions with third
persons within the scope of his ostensible authority. The onus rests on the person dealing with the agent to
establish real or ostensible authority (see Pole v Leask 37). The conduct said to amount to holding out must be
proved affirmatively (see Bailey & Whites Ltd v House

38). It is a question of fact in a particular case whether ostensible authority existed for the particular act in respect of
which liability is sought to be imposed upon the principal (see Brazier v Camp 39). [*400]

In Crabb v Arun District Council 40, Lord Scarman dealt with the approach of equity when the question of the
authority of an agent to bind his principal arose for consideration. What he said was this [at p 875]:
Nor do I think it necessary in a case such as this to enquire minutely into the law of agency. These defendants could, of
course, only act through agents, but, as I have already made clear, from the very nature of the case, there would be no
question of grant, no question of legally enforceable contract. We are in the realm of equity; and within that realm we find
that equity, to its eternal credit, has developed an immensely flexible, yet perfectly clear, doctrine: see ER Ives Investments
Ltd v High [1967] 2 QB 379 per Danckwerts LJ. The approach of equity, when there is a question of agency in a field such
as this, must I think be a very simple one. It will merely be that, within reasonable limits, those to whom a defendant
entrusts the conduct of negotiations must be treated as having the authority, which, within the course of the negotiations,
they purport to exercise it.
Applying the principles enunciated in the above authorities, I am satisfied, having regard to the evidence, that the
plaintiffs have succeeded in proving, on the balance of probabilities, that the visiting trustee was held out as having
power to deal with the tenants on its behalf, including the power to make the promises and assurances aforesaid
upon which the plaintiffs had relied and incurred substantial expenditure by the installation of a sprinkler system on
the farm. They would hardly have done so if they were liable to be turned out by a mere one month's notice to quit.

Fourthly, I should like to consider the submission of counsel for the defendants that the alleged promises or
assurances relied upon by the plaintiffs that they could continue and stay on the plot concerned as long as they
liked or forever, so long as they paid rent, even if true, would invalidate the tenancy because, as he put it, 'A
tenancy like all contracts requires certainty of terms. The term alleged by the plaintiffs renders the duration of the

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tenancy uncertain and therefore invalid.' (See Karuppan Chetty v Suan Thian 41 and Prudential Assurance Co Ltd v
London Residuary Body & Ors 42.)

This branch of counsel's submission is directly related to another branch of his submissions which raises the
question whether the availability of the alleged equity depends upon the availability of the remedy of specific
performance, and so, for the sake clarity and convenience, I propose to deal with it under that subheading which
follows immediately hereunder.
(i) Does the availability of the alleged equity depend on the availability of the remedy of specific performance?

'Yes,' said counsel for the defendants and he relied on the following passage in the judgment of Ong CJ in Yong
Tong Hong v Siew Soon Wah & Ors 23, at 107 col 1F:
In the instant case the landlord's claim to re-possession is met by a counterclaim for specific performance. As Vaughan
Williams LJ said in Zimbler v Abrahams [1903] 1 KB 577 : 'If the defendant is entitled to specific performance, it follows he
is not liable to be ejected'.
Similarly, he pointed out that when Yong Tong Hong's case 43 went on appeal to the Privy Council, Viscount
Dilhorne posed the question (at p 135 col 2I [*401]
last sentence), 'Is the respondent (the tenant) entitled to specific performance of that agreement?'

Counsel rounded off this part of his submissions, stressing that here the plaintiffs were not entitled to specific
performance, presumably because the oral agreement relied upon by them, following the promises or assurances
aforesaid, was bad for uncertainty, and moreover, that the plaintiffs had not even counterclaimed for specific
performance.

In their excellent work on Equity Doctrines and Remedies (3rd Ed, 1992) at p 433 para 1728, Meagher, Gummow
and Lehane, have an interesting commentary on the case of Siew Soon Wah & Ors v Yong Tong Hong 43. What
they say is this:
As the law stands, even within the rubric of estoppel, there is scope for considerable confusion.

The Privy Council decision in Siew Soon Wah v Yong Tong Hong is a striking example. There the father of the plaintiffs
alledgedly agreed to let certain premises to the defendant in consideration not only of rent but also of a lump sum payment.
The reversion was then transferred to the plaintiffs (whether for value and with notice does not appear clearly from the
report on appeal or below [1971] 2 MLJ 105 at p 108) and they sought to eject the defendant; he counterclaimed for
specific performance. The first issue was to determine whether there was any lease and whether it had properly been
determined. The Privy Council, in finding for the defendant, held (a) the arrangement was not so vague and uncertain as to
be void for uncertainty; (b) although there was no registrable instrument as required by the relevant legislation, the
defendant had a counterclaim for specific performance which was a good answer to the claim of the plaintiffs: Zimbler v
Abrahams [1903] 1 KB 577. That would appear quite sufficient to dispose of the case. But, Viscount Dilhorne for the Privy
Council then went on ([1973] AC 836 at p 845) to cite Inwards v Baker [1965] 2 QB 29, and to restate his conclusion as that
'there rose in the (defendant's) favour an equity or equitable estoppel protecting his occupation...' because the defendant
had paid the lump sum and rent thereafter in accordance with his alleged lease. This holding, as appears from the above,
was unnecessary for the conclusion, and productive of confusion. For it has always been assumed that performance of
contractual obligations cannot amount to self-detrimental conduct induced by the other party and thus raising an estoppel
against him. The truth of the matter is that estoppel would have been relevant in this case only if their Lordships had held
the arrangement void at law for uncertainty so that there was no agreement of which specific performance might be
decreed. Granted there was such agreement, to add estoppel as a ground for decision is to supply a third wheel to the
chariot.
It is difficult to find fault with the learned author's comments and I would respectfully concur in their view that the
Privy Council, having found that the arrangement relied on by the tenant was not so vague and uncertain as to be
void for uncertainty, and although there was no registrable instrument for the purposes of the National Land Code
1965 ('the Code') or its predecessor, the Land Code (Cap 138), the tenant had conterclaimed and so this was a
sufficient answer to the landlords' claim for possession. Obviously, these findings were all that was required for the
decision in favour of the tenant. Therefore, in going further and adding estoppel as a further ground for the decision,
their Lordships, and in the court below, the Federal Court, were really supplying 'a third wheel to the chariot'.
This [*402]
would appear to have been unnecessary and so, whatever was said on estoppel, would be obiter.

Be that as it may, counsel for the plaintiffs has pointed out that unlike Siew Soon Wah's case 43, where the court
was asked to consider the validity of an agreement which was not registrable under the Code, in the present case,
the court is not being asked to consider the validity of any agreement but the validity of a promise made by the

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visiting trustee of the Khoo Kongsi which led to the detrimental reliance on it by the plaintiffs. In other words, it was
said that the defendants had failed to distinguish between the principles governing promissory estoppel and the law
of landlord and tenant.

With these submissions of counsel for the plaintiff, I agree.

The argument that the principle of promissory estoppel enunciated in Central London Property Trust v High Trees
House Ltd 44 should be confined to cases where the parties are contractually bound to one another, recieved short
shrift in Evenden v Guildford City Association Football Club Ltd 45. In that case, a groundsman was employed at
the football ground at Guildford. For some years, he was employed by the supporters' club. Then he was
transferred to the football club itself. The football club promised him that he would not suffer by the transfer. The
question for decision was whether that promise was binding so as to entitle him to redundancy pay for the whole
period? It was held that it was binding. Lord Denning said this [at p 924]:
... [P]romissory estoppel. applies whenever a representation is made, whether of fact or law, present or future, which is
intended to be binding, intended to induce a person to act upon it and he does act upon it. That is the case here. Mr
Evenden entered into his employment with the football club on the faith of the representation that he would not be
prejudiced and that his employment should be regarded as a continuous employment. Acting upon it, he has lost any rights
against the supporters' club. The football club cannot be allowed to go back on it. His employment is to be treated as
continuous for the whole 19 years. He is entitled to the full redundancy payment of 459.
I recognize, however, that the doctrine of promissory estoppel provides a defence to an action on the original
contract for a defendant relying on a voluntary variation. It does not provide a cause of action for a plaintiff relying
on a gratuitous promise (see Combe v Combe 46).

Yet, its effect may be to enable a party to enforce a cause of action which, without the estoppel, would not exist
(see Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd 47 at p 105 in CA and
at pp 131-132]; for example, by giving rise to a binding obligation where none existed before (ibid at p 107).
However, a promissory estoppel is not permanent in its effect. The case of Ajayi v RT Briscoe (Nigeria) Ltd48
shows that a promissor may resile from his position upon giving the promisee notice – not necessarily formal notice
– thus affording the latter a reasonable opportunity of resuming his previous position; and only if that is impossible
does the promise become final and irrevocable. (See Ajayi's case 48 at p 1330.) Donaldson J (as he then was)
applied the principle of promissory estoppel in Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd 49
when he said at p 847: [*403]

Lord Cairns LC in his enunciation of the principle [in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 ] assumed a
pre-existing contractual relationship between the parties, but this does not seem to me to be essential, provided that there
is a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties.
Evershed MR, in an article entitled 'Equity after Fusion: Federal or Confederate' (1948) 1 Journal of the Society of
Public Teachers of Law

171 at p 176, observed of the High Treescase 44 that, 'It would appear to have established a right to the extent, but
only to the extent, of a right to a specific remedy; namely, the remedy of an injunction to prevent the other party
recalling his promise'.

In the present case, D3 had counterclaimed for possession of the plot concerned, to which the plaintiffs replied,
alleging that their possession was protected by an equity or equittable estoppel, and they have also prayed for an
injunction restraining the defendants from carrying out work thereon.

The present case is really one where the plaintiffs and their forbears have been in possession of the plot concerned
for decades and they have commenced these proceedings to protect their rights to remain in possession relying on
equity or equitable estoppel. If they succeed in their plea, then what the court will have to consider is the extent of
the equity and how best to satisfy it.

In the circumstances, the answer to the question posed above regarding this part of the case is that the plaintiffs'
claim to the alleged equity does not depend on the availability of the remedy of specific performance.
(ii) Were the plaintiffs' tenancies binding on D1 and/or D3?

It was submitted by counsel for the defendants that the tenancies were not binding upon D1 and/or D3 on three
separate grounds, namely:
(1) neither D1 nor D3 took over the tenancies;

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(2) there was no attornment either by the demand or the acceptance of the rent from the plaintiffs; and

(3) the concept of privity of estate does not apply in this country by reason of s 6 of the Civil Law Act 1956, as privity of
estate is part of land tenure.

It was argued that the rule in Errington v Errington and Woods 50 that 'neither the licensor nor anyone who claims
through him can disregard the contract except a purchaser for value without notice' had since been repudiated in
England in Ashburn Anstalt v Arnold. 51

Similarly, it was pointed out that Lyus v Prowsa Developments Ltd 52 was disapproved.

It was further argued that in the case of D3, a further consideration was its position as registered lessee under the
lease dated 10 August 1983 (AB2). It was emphasized that the protection as to indefeasibility applied also to
registered lessees under s 340(1) of the Code and that the plaintiffs had not brought themselves within any of the
exceptions to the indefeasibility rule, such as fraud within the meaning of the authorities discussed by me in the
case of Goh Hooi Yin v Lim Teong Ghee & Ors 53; in particular, the [*404]
following passage in my judgment in that case was cited: '… there is no fraud on the part of the registered
proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with
knowledge that its registration will defeat such an interest' (at p 32).

It was next submitted that, although fraud had not been alleged in the pleadings, P2 had, in her affidavit dated 7
June 1990 (exh BA1 at pp 161-173) filed in opposition to D3's summons to vary the injunction, made allegations of
fraud and dishonesty, but that these allegations, even if true, did not constitute fraud in the sense sufficient to upset
the title of a registered proprietor. More particularly, the allegations were these:
(f) The third defendant and the Khoo Kongsi are partners in a joint-venture agreement and it would be fraudulent,
dishonest and reprehensible on the part of the third defendant to attempt to use the principle of indefeasible interests
under the National Land Code 1965 to defeat the vested rights of the plaintiffs.

(g) Hence by reason of the aforesaid, at all material times, when the third defendant embarked on their joint-venture
housing development, they had full knowledge of the plaintiffs' legal and equitable rights to the said land and cannot
therefore pray in aid the doctrine of the bona fide purchaser for value without notice (at p 165 of exh BA1).

Furthermore, my attention was drawn to the plaintiffs' defence to D3's counterclaim and, in particular, that it had not
alleged fraud but had by para 4 thereof, instead alleged that D3 was not a bona fide purchaser for value without
notice. This, it was said, fell far short of the requirements for upsetting the title of a registered proprietor and this
would include a registered lessee like D3.

In order to determine whether the submissions of counsel for the defendants regarding this part of the case are
tenable, it is necessary to keep in the forefront of our minds, the background facts as to how the defendants in this
case came into the picture. These facts, as to which there is no dispute, may for convenience, be taken in
substance, from the written submissions of counsel for the plaintiffs and are as follows:

It was pursuant to cl 16 of the joint-venture agreement (exh AB1 at p 40) that D3 became the registered lessee of
the said lot on 24 August 1983, whereon the plot concerned is located. The object of this exercise, according to a
director of D3 in charge of the building work on the scheme, Ng Bock Tye (DW4), was to facilitate the development
works thereon. This was understandable since the Khoo Kongsi was contractually bound to execute a 99-year
lease in favour of purchasers of plots of land whereon dwelling houses were to be erected and similarly, D3 was, by
cl 12, also contractually bound to complete the entire building scheme within eight years from the date of approval
thereof.

In these circumstances, the irresistible inference is that D3's lease was held in trust for the benefit of the Khoo
Kongsi and D3, for the purpose of facilitating development of the project.

By the same token, it may be said that D3 is, for purposes of the development, the alter ego of the Khoo Kongsi. It
follows that D3 would be in no better position to resist the plaintiffs' claim to be entitled to be in possession in law
and equity than would the Khoo Kongsi itself. [*405]

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On a further ground also, the plaintiffs' equity would bind D1 and D3. D1 and D3 are admittedly sister companies of
the Farlim Group, directly concerned in the development of the Thean Teik Estate, the property of the Khoo Kongsi
and, it is not insignificant, that a trustee of the Khoo Kongsi, Khoo Kah Seng (DW3), is a director of both D1 and D3.
Since the institution of this suit in 1982 and the plaintiffs' application for interlocutory injunctive relief, D1 and D3
have had notice of the plaintiffs' interest as this received considerable treatment in the pleadings and the affidavits.
As successors-in-title with notice of the plaintiffs' interest in the plot concerned, D3 would have to take its lease
subject to that interest. (See Mok Deng Chee v Yap See Hooi & Ors 29; Devi v Francis 54.) The validity of contracts
relating to land or any interest therein is explicitly declared in s 206(3) of the Code. (Per Ong CJ in Yong Tong Hong
v Siew Soon Wah Ors 23 at p 108 col 1G.) The position would be a fortiori having regard to my finding that D3 held
the registered lease as the alter ego of the Khoo Kongsi.

I regret, therefore, that I am unable to accede to the interesting submissions of counsel for the defendants that the
protection of indefeasibility guaranteed under s 340(1) of the Code enables D3 to take its lease free of the plaintiffs'
interest in the plot concerned.
(iii) Proprietary estoppel

This brings me to a consideration of the submission advanced on behalf of the plaintiffs that they are entitled to rely
upon the plea of proprietary estoppel.

Proprietary estoppel is one of the exceptions to the general rule that a person who spends money on improving the
property of another has no right to claim reimbursement or any proprietary interest in property. (See, eg Ahmad Yar
Khan v Secretary of State for India in Council 55.) Unlike promissory estoppel, proprietary estoppel, when it
operates, is permanent in its effect and it is also capable of operating positively so as to give a cause of action.
(See Denny v Jensen 56.)

In Ramsden v Dyson 57, estoppel by representation was considered in relation to cases in which a person builds on
the land of another, the landowner standing by without asserting his rights. In his dissenting judgment, which is still
considered the locus classicus on the subject, Lord Kingsdown said this:
If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under
an expectation created or encouraged by the landlord that he shall have a certain interest, takes possession of such land
with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord and
without objection by him, lays out money upon the land, the court of equity will compel the landlord to give effect to such
promise or expectation.
It was argued by counsel for the defendants on the authority of Brinnard v Ewens 58, that for this sort of estoppel,
four conditions have to be met:
(1) the claimant must have incurred expenditure or otherwise acted to his detriment; [*406]

(2) the claimants must have acted in the belief that they either owned or would obtain a sufficient interest in the
property to justify the expenditure;

(3) the claimants' belief must have been encouraged by the landlord; and

(4) there must be no bar to the equity such as the contravention of any statute.

It will be recalled that the plaintiffs' claim to a proprietary estoppel is based on the expenditure of money by Cheong
Au Pit on the Khoo Kongsi's land in the expectation or belief, encouraged by the Khoo Kongsi, that they could stay
on the land and carry out their farming activities as long as they wished, provided that they paid the rent.

Having regard to the facts relied upon by the plaintiffs, upon which they based their claim to proprietary estoppel,
counsel for the defendants contended that such a claim was untenable because, to quote his written submission:
… there is no basis for a proprietary estoppel or equity since:

(a) the plaintiffs had made no mistake as to the title of the land; the deceased was a ground tenant and the plaintiffs
were aware of the ownership of the land in the Khoo Kongsi; a mistake by the representee (known to the owner) and
acquiescence in that mistake by the owner are essential; these are lacking in the present case; the promise must be
supported by independent consideration apart from the obligation to pay rent; there is no evidence in this case of any
such independent consideration, the decisive factor in the other cases in which the doctrine had been applied (usually
by the payment of premium or 'tea money');

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See Tan Khien Toong & Ors v Hoong Bee & Co [1987] 1 MLJ 387; Siew Soon Wah v Yong Tong Hong [1973] 1 MLJ
133 (PC) affirming Yong Tong Hong v Siew Soon Wah [1971] 2 MLJ 105 (FC) : Lee Lum Soh v Low Ngah [1973] 1
MLJ 97.

In Siew Soon Wah, Viscount Dilhorne adverted to this fact, with reference to the payment of the sum of #8,000 in that
case (at p 135):

'In this case the respondent occupied the ground floor since February 1958 and paid rent therefor. In February 1958
he paid the sum of #8,000 to his landlord. He cannot have done that for a tenancy of short duration. It must have been
paid in consideration of the tenancy described in the agreement of June 1964.' (Ibid 135 Right C-D).

(b) The allegation of estoppel is not founded on what the deceased did but on what the plaintiffs did after the death of
Cheong Au Pit; there must be reliance and detriment based on an inducement or encouragement by the Khoo Kongsi:
Imperial Bank of Canada v Mary Victoria AIR 1936 PC 193.

As to encouragement and expenditure, see Siew Soon Wah v Yong Tong Hong at pp 134-135 and Khew Ah Bah v
Hong Ah Mye [1971] 2 MLJ 86; Mok Deng Chee v Yap See Hooi [1981] 2 MLJ 321.

I regret that I cannot agree with the submission of counsel for the defendants that to establish proprietary estoppel,
in cases where a person builds on or improves the land of another, the landowner standing by without asserting his
rights while this was going on, it is essential to prove that such a person mistakenly thought that the land was his
own when he did those acts, though I accept that in such a case, equity will treat the true owner's [*407]
conduct as estopping him from subsequently asserting his title to the detriment of such person. I say so because
even if such a person builds or improves the land of another knowing he was doing so on land belonging to another,
there will still arise an equity in him if the landowner led such person to expect to be allowed to stay there. The case
usually cited for this proposition is Inwards v Baker59 at pp 36-37, where a father owned land and invited his son to
build a bungalow on it. This was done partly at the son's expense, and the son lived in the bungalow. When the
father died, the title to the land passed, under a will made before the land was bought or the bungalow built, to the
father's mistress and other children.

The Court of Appeal held that the son had a right to remain. Lord Denning MR, speaking for the court, said [at p 36]:
… if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation
created or encouraged by the landlord that he will be able to remain there, that raises an equity in the licensee such as to
entitle him to stay. He has a licence coupled with an equity … even though there is no binding contract to grant any
particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity
arising out of the expenditure of money. All that is necessary is that the licensee should, at the request or with the
encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will
not allow that expectation to be defeated where it would be inequitable to do so … I think that any purchaser who took with
notice would clearly be bound by the equity.
Inwards v Baker 59 was a case of active encouragement since the father there had persuaded his son to build the
bungalow on the father's land but an equity would also arise where the landowner merely encouraged the builder's
belief passively, as where the mortgagee stood silently by while a purchaser, in ignorance of the mortgage, built on
the land. (See AG of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd;60 Haslemere Estates Ltd v Baker.
61) 'The circumstances of looking on is in many cases as strong as using terms of encouragement' (per Lord Eldon
in Dann v Spurier 62).

I note that in both Mok Deng Chee v Yap See Hoi & Ors, 29 Salleh Abas FJ (as he then was), speaking for the
Federal Court, and Choor Singh J in the Singapore case of Khew Ah Bah v Hong Ah Mye 63, applied the principle
in Inwards v Baker 59 although in neither case was there any question of mistake. And, in Siew Soon Wah v Yong
Tong Hong, 43 Viscount Dilhorne quoted with approval the following passage in the judgment of Lord Denning in
Inwards v Baker, 59 'All that is necessary is that the licensee should, at the request or with the encouragement of
the landlord, have spent the money in the expectation of having been allowed to stay there'.

Nor, for that matter, am I persuaded by counsel for the defendants that an independent consideration, for example,
the payment of 'tea money' over and above the rent is an essential requirement for the operation of the doctrine of
proprietary estoppel. The case to which I should like to refer here is Crabb v Arun District Council 40 at p 871 where
Lord Denning, speaking for the Court of Appeal, said this:

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Short of a binding contract, if he makes a promise that he will not insist on his strict legal rights – even though that promise
may be unenforceable in point of law for [*408]
want of consideration or want of writing – and if he makes the promise knowing or intending that the other will act on it, and
he does act on it, then again a court of equity will not allow him to go back on that promise … Short of an actual promise, if
he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights –
knowing or intending that the other will act on that belief – and he does so act, that again will raise an equity in favour of the
other, and it is for a court of equity to say in what way the equity may be satisfied. The cases show that this equity does not
depend on agreement but on words or conduct. (Emphasis added.)
Similarly, I am not persuaded that to raise an equity, it is essential that the representator must have knowledge that
his property was being improved. The representator's conduct and the subsequent action and belief of the
representee may render it unconscionable for the representator to insist on his strict legal rights. I am supported in
this by the following passage in the judgment of Oliver J in Taylor Fashions Ltd v Liverpool Victoria Trustees Co64
at p 915:
Furthermore, the more recent cases indicate, in my judgment, that the application of the Ramsden v Dyson principle
(whether you call it proprietary estoppel, estoppel by acquiescence or estoppel by encouragement is really immaterial)
requires a very much broader approach which is directed to ascertaining whether, in particular individual circumstances, it
would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or
encouraged another to assume to his detriment rather than to inquiring whether the circumstances can be fitted within the
confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.
In this context, the case of Shaw v Applegate 65 at pp 970 or 977-978 merits reading.

(iv) Proprietary estoppel compared with constructive trusts

I might as well add that the principles of estoppel have, on various occasions, been compounded with those
governing constructive trusts. (See, eg Grant v Edwards 66 at p 657; Gillies v Keogh 67 at p 330; Lloyds Bank Plc v
Rosset 68 at p 132.)

Indeed, the principles which apply to constructive trusts are closely akin to those underlying the doctrine of
proprietary estoppel. In both, the claimant must have acted to his detriment in reliance on the belief that he would
obtain an interest. (See Grant v Edwards, 66 Lloyds Bank v Rosset68 at p 877.) In both, equity acts on the
conscience of the legal owner to prevent him from defeating the common intention. (See Grant v Edwards 66 at p
656; Maharaj v Chand69 at pp 907-908; Re Basham (decd) 70 at p 1504.)

I therefore hold that in some cases – and the plaintiffs' case is such a case – proprietary estoppel is a form of
constructive trust. (See Re Basham (decd) 70 at p 410.)

This is yet another ground for not acceding to the submission of counsel for the defendants regarding this part of
the case. [*409]

(v) What is the extent of the equity which arises in favour of the plaintiffs?

Having found that the plaintiffs' occupation of the plot concerned is protected by an equity, the next question for
decision is, what is the extent of that equity?

The cases of Griffiths v Williams 71 and Jones (AE) v Jones (FW) 72 at p 443, indicate that the extent of the equity
is to have made good, so far as may fairly be done between the parties, the expectations of A which O has
encouraged. The maximum extent of the equity being A's expectation or belief. (See Dodsworth v Dodsworth 73 at
pp 1115 and 1117.)

In the present case, the interests of third party purchasers must be taken into account. As Denning MR put it in
Crabb v Arun District Council, 40 at p 189, in its search for the 'minimum equity to do justice' to A and shaping it to
the facts of the case, 'equity is displayed at its most flexible'. Or, as the Privy Council put it in Plimmer v Wellington
Corporation, 74 '… the court must look at the circumstances in each case to decide in what way the equity can be
satisfied'.
(vi) How is the equity to be satisfied or, in other words, what are the remedies available?

The reports show a wide variety of solutions reached in cases in which a person has expended money on the
property of another.

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In Inwards v Baker 59 it will be recalled that the Court of Appeal held that despite the legal title being in the
plaintiffs, the son had an equity to remain in the bungalow 'as long as he desired to use it as his home'. Dankwerts
LJ observed, 'equity protects him so that an injustice may not be perpetrated'. In ER Ives Investment Ltd v High 75,
the court held that Mr High and his successors had an equity which could only be satisfied by allowing him to have
a right of access over the yard, 'so long as the block of flats had its foundations on his land'. Accordingly, the
plaintiffs were refused an injunction to restrain the defendant from exercising a right of way across the former's
land.

In Siew Soon Wah & Ors v Yong Tong Hong 43, the Privy Council held that there was an equity or an equitable
estoppel protecting the defendant in his occupation for 30 years.

In Bank Negara Indonesia v Philip Hoalim 76, we see the Privy Council holding that, notwithstanding the fact that
the defendant had no protection under the Control of Rent Ordinance 1953, he had an equity to remain 'so long as
he continued to practise his profession'.

In other cases, the court may give relief to the person who has incurred the expenditure on another's land by giving
him an equitable lien on the property for his expenditure (see Raffaele v Raffaele, 77 discussed by EE Allan (1963)
79 LQR 238) or for the value of his improvements (see Neesom v Clarkson78), in which event he will be treated as
a mortgagee in possession. (See Neesom v Clarkson 78.)

However, the court has been known to make an order for possession against the person who has made the
improvements conditional upon the [*410]
landowner repaying the cost of those improvements. (See Dodsworth v Dodsworth 73.)

On the other hand, if the evidence showed that the prejudice suffered by the person who made the improvements
had been fully satisfied or, in otherwords, that he already had 'sufficient satisfaction' for his expenditure, he will
obtain no further relief. (See AG v Balliol College Oxford 79 at p 412 – expenditure by lessees.)

In the present case, on the extent of the equity, counsel for the plaintiffs refocussed the attention of this court on the
following:

During his lifetime, and just before his death, Cheong Au Pit had given house No 258K to P1 and P2 and the
vegetable land to the plaintiffs and PW1. Thus, Cheong Au Pit's equity in house No 258K devolved upon P1 and P2
and his equity in the vegetable land upon the plaintiffs and PW1. Subsequently, in 1972, the Khoo Kongsi had
represented to P2 that she could stay on the plot concerned and continue farming as long as she wished, provided
she paid rent. It was said that this representation amounted to a tenancy for as long as the law would permit.

This last point has no doubt been inspired by the judgment of Ong CJ, speaking for the Federal Court, in Yong
Tong Hong v Siew Soon Wah 23 at p 108, where a question arose as to what effect should be given to a clause in a
tenancy agreement – not a proper instrument for registration as a lease under the Code – the clause being 'the
tenancy shall be permanent' or, in the words which fell to be decided by the trial judge, 'for so long as the tenant
wished to occupy', no distinction being drawn between these words and the clause concerned, Ong CJ then
concluded (at p 108 col 1F-G) that no strain would be imposed upon the powers of the court to give effect to the
expressed intention of the parties by holding that the agreement was one for the grant of as long a lease as the law
allowed, which by s 221(3)(b) of the Code, in the case of a lease of part only of alienated land, was 30 years. His
judgment was affirmed by the Privy Council on identical grounds.

Counsel therefore suggested that the appropriate remedies for the plaintiffs were these:

Since the plaintiffs were occupying the plot concerned and this comprised only a portion of the land, the extent of
their equity was a lease for 30 years commencing in 1972 when the representation was made by the visiting trustee
of the Khoo Kongsi. Accordingly, an injunction should be granted to restrain the defendants from trespassing on the
plot concerned.

Alternatively, if the court were of the view that D3's counterclaim for possession should be allowed and that the
plaintiffs must yield vacant possession of the plot concerned to D3, then this should be made subject to the
payment of compensation to the plaintiffs on the basis of their entitlement to a 30-year lease. This award being
quite separate and apart from what may be awarded to the plaintiffs for damages for trespass and nuisance.

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On the other hand, counsel for the defendants contended that, if contrary to his primary submission, the court holds
that D3 was bound to satisfy the plaintiffs' alleged equity, then having regard to the facts, the plaintiffs were not
entitled to make any claim because the court would have to take into consideration the length of the plaintiffs'
occupation of the plot concerned, [*411]
the rate of rental, the period in respect of which rents were not collected; no rents having been collected since the
expiry of the notice to quit dated 30 June 1982 in respect of the two dwelling houses and since 20 July 1982 in
respect of the vegetable land and, finally, the fact that the entire families of the plaintiffs and their ancestors had
been living on the plot concerned for decades.

On the question of the quantum of compensation to be awarded, my attention was directed by counsel to the
following passage in the judgment of the Federal Court in Kalimuthu v S Kandiah 80, at pp 221-222, which he
considered most apposite:
Assuming that the defendant is entitled to compensation, what should be the amont of such compensation? The defendant
stated in evidence that on moving into the house he had it renovated and did minor repairs to it which cost him #6,000. He
produced no other evidence to support this assertion. The plaintiff's evidence was that when she first saw the house it had
zinc roof and plank walls and that apart form minor repairs the structure remained the same. The defendant has lived in the
house since 1962. Since 1965, that is for more than 11 years now, he has not paid any ground rent or assessment. This
works out at a total of more than #3,500. I do not think the house itself together with minor repairs would have cost the
defendant or his father anything more than that. I believe the ends of justice will be met if he is not required to pay arrears
of ground rent and assessment and not awarded any compensation, but think he must be given a bit of time to give up
vacant possession.
Counsel pointed out that the plaintiffs had not adduced any evidence or, for that matter, even alleged what the cost
of construction of the two dwelling houses was when they were erected. He suggested that the relevant date for
assessing damages under this head would be not the present date but the date of construction. He added that if the
present date were adopted as the relevant date for the assessment of damages, then there was an acute conflict of
evidence as to the value of the dwelling houses and, furthermore, there was no evidence that the plaintiffs could not
reuse the materials after the dwelling houses are dismantled.

In my view, generally speaking, a solution which says that the person making the expenditure or the improvement
on another's land is to have everything or nothing may rightly be described neither right nor fair and would also be
clumsy and unsuitable. The correct approach should therefore be to protect that person against interference for
long as he would be prejudiced thereby. The reports contain many examples where such an approach was adopted
and I need no more than refer to a few.

In Inwards v Baker 59, for instance, the son was protected in his occupation and could remain in the bungalow 'as
long as he desired to use it as his home', despite the legal title being in the plaintiffs. In Ward v Kirkland 81, Ungoed
Thomas J granted an injunction to restrain interference with the exercise of a right of way in preference to granting
an easement and in ER Ives Investment Ltd v High 75, a right of way exercised in circumstances giving rise to an
estoppel, was held not to be an easement at law or in equity but enforceable, without registration, against a
purchaser with notice.

In the present case, having regard to its history, not forgetting the acrimony generated by the dispute and which still
persists in plenty, I do [*412]
not consider that the negative protection illustrated by the cases cited in the preceding paragraph would be
appropriate; a final solution of the parties' rights according to the justice of the case would be needed.

More particularly, having regard to the fact that the plaintiffs and their ancestors have been living on the plot
concerned and cultivating the vegetable land for the planting of vegetables and fruit trees on which they had also
reared pigs and poultry for commercial purposes, and the substantial sums of money which must have accrued to
them and their ancestors by way of profit thereby over a period of several decades, and the further fact that the
plaintiffs have enjoyed rent-free occupation for the last decade or so, I consider that the plaintiffs have had
'sufficient satisfaction' for their labour and expenditure on the plot concerned or, in other words, the prejudice
suffered by them has been fully satisfied, and so, they are entitled to no relief. (See AG v Baliol College, Oxford, 79
per Lord Hardwicke.)

This means that if, but only if, I am wrong in my conclusion regarding issue two which, it will be recalled, raised the
question: 'What notice to quit was necessary to determine the plaintiffs' tenancies of the farm and the two dwelling
houses, assuming such tenancies were not coupled with an equity?', so that the notices to quit, each of one

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month's duration, given by the solicitors of the Khoo Kongsi, were, contrary to my primary view, sufficient to
determine the tenancies of the two dwelling houses and the farm, then the plaintiffs and all those claiming
possession or in occupation under or through them must quit, vacate and yield vacant possession of the plot
concerned, dwelling house No 259H and the farm (but not dwelling house No 258K which I have held is subject to
the Control of Rent Act 1966), to D3 without the payment of any compensation by D3, and I consider that a
reasonable period for them to do so would be three months and I so order.

For the avoidance of doubt, I hasten to add that the question of the plaintiffs' entitlement to compensatory and
exemplary damages for trespass are separate issues which are dealt with later in this judgment.

However, D3 is not entitled to claim any damages, whether general or special, from the plaintiffs in respect of their
occupation of the plot concerned because, their occupation having been protected by an equity or equitable
estoppel, they could in no way be regarded trespassers. Moreover, D3's claims for liquidated damages for late
delivery of houses sold to third parties and for increased costs were all losses which were self-induced. It follows,
that prayers (b) and (c) of D3's counterclaim are dismissed.

Again, for the avoidance of doubt, I hasten to add, that in the event of there being no appeal to the Supreme Court
from my judgment, then this part of my judgment, all of which relates to issue three and concerns the questions of
equity or equitable estoppel, the extent of the equity and how it should be satisfied, concluding with the possession
order made against the plaintiffs in favour of D3 (except for dwelling house No 258K which I have held is subject to
the Control of Rent Act 1966), is really an alternative judgment and will not arise for consideration and, indeed, must
be disregarded altogether, having regard to my conclusion on issue two which relates to the question of the
sufficiency of the notice to quit, which I had determined in favour of the plaintiffs. [*413]

It follows that this part of my judgment which relates to issue three, will only operate and require consideration in the
event of an appeal to the Supreme Court by the defendants, and I am found to be wrong regarding issue two and,
in so far as dwelling house No 258K is concerned, I am also wrong that it is subject to the Control of Rent Act 1966.

Issue four – trespass and nuisance

I have already decided the issue herein as to the area of the plot concerned, being issue one, in favour of the
plaintiffs. Similarly, I have already found in favour of the plaintiffs as regards the locus standi objections; namely, the
title of the plaintiffs to maintain the present suit, including the claim for damages for alleged trespass arising out of
the acts of D1 and D2 on 18 June 1982 and D3 and D4 on 17 March 1988.<
(i) Did PW1 consent to D1 taking possession of the area etched black in P14 and levelling it in consideration of the
payment of RM1,000?

I must next consider the question whether Cheng Lye Hiang (PW1) had agreed to accept RM1,000 to allow D1 to
take possession and level the area etched black in P14 whereon were vegetable beds planted by the plaintiffs.

It was the case for the defendants that PW1 had in fact so agreed. The only witness called by the defendants in this
regard, was the testimony of the development officer of D1 and D3, Goh Huay Guan (DW1). He testified that he
had, on 18 June 1988, negotiated with Cheng Lye Hiang (PW1), who, it will be recalled, is the sister-in-law of P1
and P2, and that as a result, PW1 had agreed to accept RM1,000 to allow D1 to take possession and level the area
etched black in P14. There was also an affidavit by the predecessor of DW1, a certain Chern Eng Hock (not called
at the trial), generally alleging such a settlement.

At this point, I might as well interpose to make my finding regarding the accuracy of P14 which purports to show the
extent of the damage caused by the alleged trespass by D3 and D4 on 17 March 1988.

It was contended by counsel for the defendants that P14 was virtually worthless as evidence, as its author, Lim Yee
Juan (PW2), a research officer of the Consumers' Association of Penang, had been to the site only once and that
was on the date of the alleged second trespass, to wit, 17 March 1988, that P14 was prepared by him based on
information provided by PW1 whose source of knowledge was itself questionable.

I regret I find this attack on the reliability of P14 unacceptable. I accept the testimony of PW1 as to the
circumstances under which he prepared P14 and that it reflects what he saw at the vegetable land on the morning
of 17 March 1988 when bulldozers of D3 and D4 were engaged in levelling work thereon. In other words, I believe
him when he says that he saw the demolition of some structures and the levelling of the plaintiffs' vegetable land

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and that he had taken photographs of these events. It was but natural for him to be assisted by PW1, who was on
the site at the time, in the preparation of a rough sketch of the structures and the vegetable land. [*414]

It follows, therefore, – and I so find – that P14 accurately reflects the extent of the damage caused by the bulldozers
of D3 and D4 on 18 March 1988.

I must now return to consider the question whether, in fact, PW1 had agreed to accept RM1,000 to allow D1 to take
possession and level the area etched black in P14, as alleged by the development officer of D1, Goh Huay Guan
(DW1), and his predecessor, Chern Eng Hock, in his affidavit.

Counsel for the plaintiffs has painstakingly set forth particulars of the inherent improbabilities and infirmities in the
testimony of DW1, as well as the inconsistencies which appear upon a comparison being made between the
testimony of this witness and the affidavit of Chern Eng Hock at pp 62 and 63 of his written submissions. I have
given careful consideration to these criticisms, not forgetting what had been alleged by counsel for the defendants
in this regard.

It would be tedious and unnecessary for me to recapitulate these rival contentions and I need no more than say that
I would uphold the contentions of counsel for the plaintiffs and adopt, as my own, his reasons therefor.

I therefore find as a fact, that PW1 never agreed to accept RM1,000 or any other sum, as consideration for allowing
D1 to take possession and level the area etched black in P14, whereon were the vegetable beds planted by the
plaintiffs and so I find that the testimony of the development officer, Goh Huay Guan (DW1), and the affidavit of
Cheng Lye Hiang on this point are unacceptable.
(ii) Did D3 and/or D4 by their servants or agents cause the damage on the plaintiffs' vegetable land on 21 August 1988
?

I must next consider Goh Huay Guan's denial that on 21 August 1988, neither D3 nor D4 had levelled the plaintiffs'
vegetable land or destroyed the plaintiffs' vegetable beds thereon and his claim that D3 and D4 had instead been
working on one Khoo Bak Chun's land on that day.

Counsel for the plaintiffs has castigated this part of Goh Huay Guan's testimony as a blatant lie for reasons he has
set forth at paras 1 and 2, at p 65 of his written submission.

After considering these criticisms levelled against Goh Huay Guan's testimony, again not forgetting the submissions
of counsel for the defendants, I agree with counsel for the plaintiffs that the testimony of this witness has left too
many questions unanswered (enumerated at p 65 para 2 of the plaintiffs' written submission) and the answers to
these questions are supplied by the comment that most probably, DW3's testimony here is really an afterthought to
justify violation of the interlocutory injunction granted by this court in favour of the plaintiffs to preserve the status
quo pending the final determination of this suit, and I so find.

I therefore have no hesitation in finding as a fact that it was the servants or agents of D3 and D4 who, on 21 August
1988, had levelled the plaintiffs' vegetable land and destroyed their vegetable beds thereon. [*415]

(iii) The conflicting photographic evidence

My attention was also drawn to the conflicting photographic evidence adduced by both sides which I should like
now to touch on briefly.

According to the testimony of the development officer of D1 and D3, Goh Huay Guan (DW1), as at 18 June 1982,
there were only five beds with vegetables growing on the plaintiffs' vegetable land and he produced the photograph
D22 in support. But, D22 evidently shows only a portion of the plaintiffs' farm and so is misleading.

On the other hand, the photographs produced by the plaintiffs, namely, DB(P) 2(a), 2(b), 2(c), 3(a), 3(b) and 3(c),
which I find as a fact were taken by the sister-in-law of P1 and P2, Cheng Lye Hiang (PW1), and do show the whole
of the vegetable lands on the plaintiffs' farm just before the trepass on 18 June 1982, present a very different
aspect. I was reminded by counsel for the plaintiffs that these photographs had in fact been exhibited to the affidavit
of P1 and P2 filed on 21 June 1982 during interlocutory proceedings, and yet neither D1 nor D2 had, at that time,
disputed their authenticity or accuracy, nor did they then produce D22 by way of contradiction. These are
considerations which, by themselves, certainly give rise to a suspicion regarding the testimony of DW1 and went

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further to undermine his credibility. That suspicion has been confirmed at the end of the day, when I had to assess
his credibility and reliability.

Looking back, so far as this part of the case is concerned, I am amply satisfied that the plaintiffs have proved on the
balance of probabilities that:
(1) at all material times to this suit, the plaintiffs were and are in lawful possession of the plot concerned being the
portion etched yellow in exh P16 and having an area of approximately 121,000sq ft (or 2.8 acres) and including the
farm, the two dwelling houses and the structures erected thereon;

(2) on 18 June 1982, both D1 and D2 had, by their servants or agents, committed acts of trespass and nuisance on
the portion of the plot concerned, being the area etched black in exh P14;

(3) on 17 March 1988, D3 and D4 had, by their servants or agents, committed acts of trespass and created a nuisance
on the portion of the plot concerned, being the area etched orange in exh P14, and have been in unlawful occupation
of the portion of the plot concerned being the area etched black inP14; and

(4) on 21 August 1988, both D3 and D4 had, by their servants or agents, committed further acts of trespass and
nuisance on the plot concerned by levelling the plaintiffs' vegetable land and destroying the vegetable beds thereon.

(iv) The quantum of compensatory damages

Now, those being my findings of fact on the issue of liability, and they are findings in favour of the plaintiffs in
respect of both trespass and nuisance, I must now address the question of the quantum of damages. [*416]

The general rule as to the measure of damages, a rule equally applicable to tort as to contract, was defined by Lord
Blackburn in Livingstone v Rawyards Coal Co 82, at p 39 in these terms: 'that sum of money which will put the party
who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the
wrong for which he is now getting his compensation or reparation'.In Munnelly v Calco 83, HenchyJ said, at p 399:
… the particular measure of damages allowed should be objectively chosen by the court as being that of the particular
case, to put the plaintiff fairly and reasonably in the position in which he was before the damage occurred, so far as
pecuniary awards can do so.
Before I proceed to assess the quantum of damages, I would remind myself of certain other well-established
principles which I should keep in the forefront of my mind in considering this part of the case.

First, when a plaintiff claims damages from a defendant, he has to show that the loss in respect of which he claims
damages was caused by the defendant's wrong and also that the damages are not too remote to be recoverable.

Secondly, I would refer to what Lord Goddard said in Bonham-Carter v Hyde Park Hotel Ltd 84, at p 178:
Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to
write down the particulars, and, so to speak, throw them at the head of the court, saying: 'This is what I have lost; I ask you
to give me these damages.' They have to prove it.
Thirdly, on the quality of evidence expected of a plaintiff, it is necessary to remember what Devlin J (as he then
was) said in Biggin & Co v Permanite 85, at p 438, namely, that where precise evidence is obtainable, the court
naturally expects to have it; where it is not, the court must do the best it can. Nevertheless, it remains true to say
that that generally, difficulty of proof does not dispense with the necessity for proof. (See Aerial Advertising Co v
Batchelors Peas (Manchester) 86 at p 796 per AtkinsonJ.) The case of Ashcroft v Curtin 87 illustrates this point, for
there the plaintiff, claiming for diminution of profits of his one-man business, failed in his claim despite the evidence
pointing to a decrease in the company's profitability due to the injury, the records relied on being too rudimentary
and the accounts too unreliable to quantify the loss.
(v) Claims for compensatory damages arising from trespass on 18 June 1982

I must now consider the plaintiffs' claims arising out of the trespass committed by D1 and D2 on 18 June 1982. The
sister-in-law of P1 and P2, Cheng Lye Hiang (PW1), has testified on the loss suffered by the plaintiffs as a
consequence of this trespass as follows: RM
(1) Loss of vegetable and fruit trees 4,900

(2) Loss of water piping system and motor pump 3,500 [*417]

(3) Loss of income for area etched black in

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exh P14 at the rate of RM1,500 per month

from July 1982 to February 1988 102,000

As to item (1), counsel for the defendants has submitted that 'there is no evidence of the vegetable and fruit trees
grown on the main vegetable plot …'.

But this submission overlooks the defendants' own photographic evidence, being D26, which indicates a thriving
farm. There is also the testimony of the sister-in-law of P1 and P2, Cheng Lye Hiang (PW1), on this point which I
accept in preference to that of the development officer of D1 and D3, Goh Huay Guan (DW1), who testified that
there were only a few rows of planted vegetables whilst the rest were empty. The impression made upon me by
DW1 was that he was not a witness of truth.

In my view, so far as this branch of the plaintiffs is concerned, the court should not expect precise evidence and it
must do the best it can. I do not consider this claim in any way unreasonable or excessive and I therefore hold that
the plaintiffs are clearly entitled to the sum of RM4,900 in respect of the loss of the vegetables and fruits trees
caused by D1 and D2's trespass on 18 June 1982.

As to item (2), the plaintiffs have claimed RM3,500 for the loss of the water piping system and motor pump. It is true
that no receipt was produced in support but the plaintiffs had no cause to keep a receipt of this sort. On the
evidence, I do not consider this claim in any way excessive, and so I hold that the plaintiffs are also clearly entitled
to the sum of RM3,500.

As to item (3), being the plaintiffs' claim for loss of income derived from the farm in respect of the area etched black
in P14 at the rate of RM1,500 per month from July 1982 to February 1988 amounting to RM102,000, the evidence
relied upon by the plaintiffs to prove this branch of their claim came from Cheng Lye Hiang (PW1), who, it was said,
had been working on the farm since she was ten years of age. I accept that she was and I also accept that by
reason thereof, it could be reasonably presumed that she was familiar with the farming practices and the prices of
the vegetables, pigs, chicken and fruits concerned.

She testified under cross-examination that her estimate of the loss of income was based on rates provided by the
Thean Teik Residents' Association.

It was contended by counsel for the plaintiffs' that her testimony was supported by that of an agronomist attached to
the University Science Malaysia, Dr Kam Suan Peng (PW3), who was called as an expert witness to prove the
extent of the loss of their income.

There can be no room for a shadow of doubt that PW3 was an agronomist of high repute and integrity. I accept that
her whole purpose in testifying was to assist the court in doing justice in this case.

But, having said that, it is necessary to probe the basis of her conclusions regarding the plaintiffs' claim for loss of
income from the farm.

It was clear that Dr Kam's testimony was based upon data obtained from her own study of 12 farms in Thean Teik
Estate, not including the plaintiffs' farm, but similar to it. She had also considered a study of Thean Teik farms made
by the Penang Development Corporation and found that the results [*418]
of her own study corresponded with those of the Penang Development Corporation study which she admitted was
more comprehensive than her own.

Having said that, it must be recognized that in making their claims for damages for loss of income, the plaintiffs
were making three assumptions or impliedly relying on three propositions, namely:
(a) that they had a market for the fruits and vegetables concerned;

(b) that this market had been properly proved; and

(c) that this market value of the fruits and vegetables concerned was the proper basis for an award of damages under
this head.

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In my view, propositions or assumptions (a) and (b) were mistaken because they were never proved.

The normal way or method of proving market value in the case of a resale of goods in bulk would be to call the
customers, or at the least, where the parties agree to documentary evidence, to tender documents showing the
existence of and a dealing with customers. In the case of a (say wholesale) distribution to several customers, a
plaintiff would be expected to adduce in evidence, books or documents showing that he had a business in the
course of which he might reasonably have distributed these goods and the price he would have obtained. The
plaintiffs in this case, did none of these things; they produced no business books or accounts or documents
showing the existence of and a dealing with customers. Nor, for that matter, did they produce any income tax
returns but I do not place undue stress on this point because persons in the position of the plaintiffs may prefer not
to do so even though their earnings may attract income tax.

In other words, what I am saying is that a plaintiff's unsupported assertion that he would receive such and such a
price for his fruits or vegetables does not prove market value, much less that he had a market. It must be proved
aliunde, that is to say, in order to prove that a plaintiff would have got such and such a price for the fruits or
vegetables, the natural thing to do would be to call the man who would have paid the price.

To say that it would be sufficient for a plaintiff to prove market value and that he had a market by merely just saying
that 'I could have sold my fruits and vegetables at such and such a price', would, at least in a case where a
substantial claim is being made, as in the present case, dispense with proof of quantum altogether.

That being so, I do not consider that the expert testimony of Dr Kam can redeem the weakness in the proof offered
by the plaintiffs of the alleged loss of income, since her testimony, which is really theoretical, cannot serve as a
substitute for the proof required to establish that there was a market for the fruits and vegetables and that the
plaintiffs had a market along the lines I have indicated.

It follows, therefore, that while I am satisfied that the plaintiffs have demonstrated the fact of damages in regard to
their claim for loss of income, I do not consider that they have adduced sufficient evidence as to its amount.

That, however, does conclude the issue, because the defendants had themselves adduced evidence of the results
of a socio-economic survey [*419]
conducted by the district office of the North East District, Penang, on behalf of the Tripartite Committee, whose
members were representatives of the State Government of Penang, the developers and the Thean Teik Estate
Residents' Association, contained in the report (exh D53), which counsel for the defendants himself urged could not
be ignored as it came from an independent source (see para 23.7 at p 50 of his written submission). I would treat
this as an admissionon the part of the defendants that the plaintiffs' monthly family income from the farm at all
material times to this suit, was correctly reflected therein and was as follows:

RM per month
P1 450

P2 450

P3 420

PW1's children: Cheng Choon Leng 280

Cheng Choon Hok 430

In the absence of sufficient evidence adduced by the plaintiffs as to the extent of the loss of their income by reason
of what the defendants did, I consider that I am entitled to rely on D53, put in by the defendants, which counsel for
the defendants had urged could not be ignored, and which I would treat as a document, the contents of which are
admitted by the defendants at least impliedly, if not expressly.

I do not consider that the plaintiffs are entitled to sue for the recovery of loss of income suffered by PW1 or her
children. Nor, for that matter, would PW1 or her children be entitled to any such award as they are not parties to this
suit. The plaintiffs' claim, so far as this part of the case is concerned, must be confined to loss of income suffered by
P1 and P2 only, they being the two surviving plaintiffs.

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Accordingly, I would award in favour of P1 and P2 and against D1 and D2, in respect of loss of income for the area
etched black in P14, for the period from July 1982 to February 1988, at the rate of RM900 per month, the sum of
RM60,300 to be apportioned between P1 and P2 having regard to their respective incomes aforesaid.
(v) Claims for compensatory damages arising from trespass on 17 March 1988

I next turn to consider the plaintiffs' claim arising out of the trespass committed by D3 and D4, by their servants or
agents, on 17 March 1988.

PW1 had also testified on the loss suffered as a consequence of this trespass as follows:
RM

(1) Loss of vegetables 3,000

(2) Loss of fruit trees 18,000

(3) Loss of pigsties, chicken coops, well, utensils

and structures 40,050

(4) Loss of sprinkler system 12,000

(5) Loss of farm income at the rate of

RM5,100 per month from April 1988

and still continuing (44 x RM5,100) 224,400 [*420]

As to item (1), being the claim for loss of vegetables amounting to RM3,000, the court should not, I think, expect
precise evidence and it must do the best it can. I do not consider this claim in any way unreasonable or excessive
and I therefore hold that the plaintiffs are clearly entitled to this sum of RM3,000.

As to item (2), being the claim for loss of fruit trees amounting to RM18,000, for the same reasons I have given for
allowing the claim in respect of item (1), I would also hold that the plaintiffs are clearly entitled to this sum of
RM18,000.

As to item (3), being the claim for loss of pigsties, chicken coops, well, utensils and structures, amounting to
RM40,050, here again I do not think the court should expect precise evidence and it must therefore do the best it
can.

It was contended by counsel for the defendants that the chicken coops, pigsties, and other structures were in a
ruinous state and should not therefore be compensated. In support of the contention that the structures were in a
ruinous state, my attention was directed to certain photographs taken in 1990 by representatives of the defendants
(see exh DAB at p 6; photographs at pp 7A, 7B and 15A; exh AB2 at pp 96N and 96O, D25A, D25C and D25D,
which depict abandoned pigsties and exh DAB photographs at pp 8A and 8B; and exh AB2 at pp 95L, 96M and
96O which depict three dilapidated and abandoned chicken coops).

On the other hand, it was contended by counsel for the plaintiffs that the plaintiffs had discontinued their livestock
rearing sometime in 1985 as a direct consequence of the defendants' acts of trespass, and so, it was but natural for
the structures concerned to have become dilapidated due to disuse. With this submission I agree.

It is necessary to examine the conflicting evidence adduced by the parties regarding this particular claim.

For the plaintiffs, there was the testimony of PW1 as to the value of the items concerned, meaning their present
value. Her testimony on this point was, to some extent, supported by the testimony of a contractor cum carpenter,
Song Ah Bah (PW4).

It was pointed out by counsel for the plaintiffs that this witness had as much as 30 years' experience in the

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construction field, in particular, in building houses, chicken coops and pigsties, and that he had visited the plaintiffs'
farm and had personal knowledge of the structures and building thereon. His estimates were based on what he
considered were current costs of material and labour.

Song Ah Bah had estimated the current cost of construction of the three chicken coops to be RM12psf. PW1 had
testified that one of the chicken coops was 8ft x 16ft, so the cost of reconstruction of this one at that rate, would be
RM1,536 whilst the other two were, she said, each 8ft x 12ft, so that the cost of reconstruction of these two would
be RM2,304. So the aggregate cost of construction of these two chicken coops would be RM3,800.

Song Ah Bah had also estimated the current cost of construction of the two pigsties at RM12 psf. PW1 had testified
that each pigsty was 25ft x 75ft. So, at this rate, the aggregate cost of construction of these two pigsties would be
RM22,500. [*421]

Song Ah Bah had further estimated the current cost of construction of the storehouse shown in photograph 6(a) in
exh DAB, with a cement floor, zinc walls and zinc roof at RM10psf whilst the cost of construction of the other
storehouse shown in photograph 6(b) in exh DAB with the asbestos roof but with no walls and just an earth floor
would be RM7psf.

PW1 had testified thatthe first mentioned storehouse was 12ft x 8ft, so that the cost of construction at that rate
would be RM960 (10 x 12 x 8) whilst the other storehouse was, she said, 15ft x 24ft, so that the cost of construction
of this one would be RM2,520 (7 x 15 x 24).

For the defendants, there was the testimony of a chartered quantity surveyor, Saw Soon Kooi (DW5), who gave his
own opinion as to the replacement costs of the structures and buildings concerned. He tendered his report exh D54
(paras 4.3-4.5) which said this:
(4).3 I was shown photographs of a pigsty, identified by the defendants' solicitors to me as exh DAB, photographs at
pp 7A, 7B and 15A; exh AB2 at pp 96N and 96O and D25A, D25C and D25D. These photographs depict an
abandoned pigsty. In my professional opinion, the cost of building a new pigsty, as shown in these photographs with
its floor, troughs and partitions being made of concrete and the roof made of asbestos sheet, would cost about
RM6.50psf.

(4).4 I was shown photographs, identified by thedefendants' solicitors as exh DAB at p 8B and exh A2 at p 95K, which
depict what appears to be a storehouse. In my professional opinion, the cost of erecting a similar storehouse with an
earthen floor would be RM5psf.

(4).5 I was shown photographs, identified by thedefendants' solicitors as exh DAB at pp 8A, 8B and exh AB2 at pp
95L, 96M and 96O, which depict three dilapidated and abandoned chicken coops. In my professional opinion, the cost
of building a similar chicken coop would not exceed RM4.50psf.

I must now choose between the conflicting expert opinion evidence adduced by the parties regarding this part of the
case.

It is true that in terms of qualifications, there is obviously no comparison to be made between Song Ah Bah and
Saw Soon Kooi. The former is a small time contractor cum carpenter in the position of a mere petty trader who has
made no special study of the subject he was testifying about, whilst the latter is a quantity surveyor, and therefore,
in the position of a professional man. But must I, on account of that alone, look askance, at the testimony of Song
Ah Bah? I think not.

It must be recognised that the valuations being made here by these two witnessess, concern the replacement costs
of chicken coops, pigsties, and storehouses. In this field, Song Ah Bah claimed, without challenge, that he had
some 30 years' experience whilst Saw Soon Kooi made no claim to having any experience relevant thereto. With
respect, it does appear to me, therefore, that there is substance in counsel for the plaintiffs' criticism of Saw Soon
Kooi's opinion as being impressionistic.

Having seen them both testify, I prefer the testimony of Song Ah Bah to that of Saw Soon Kooi, regarding this part
of the case. However, I am not prepared to go all the way and accept the testimony of Song Ah Bah in toto, as I
think, that some allowance must be made for errors in estimated costs, which estimates were, after all, only rough
estimates. I would therefore, reduce his estimated costs by 1/3 to allow for contingencies. [*422]

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As to item (3) therefore, I would hold that the plaintiffs are clearly entitled to the sum of RM26,700 (RM40,050 x 2/3)
and I award that sum accordingly.

As to item (4), being the claim for the loss of the sprinkler system amounting to RM12,000, this was based on the
unsupported testimony of PW1 who claimed that her sprinkler was imported from Italy. The person who installed the
sprinkler system was not called to testify.

Counsel for the defendants quite correctly drew my attention to the fact that, under cross-examination, PW1 had
admitted that it was P2 who paid for the installation of the sprinkler system, but P2 had earlier testified that she did
not know anything about this.

I do not, therefore, consider that theplaintiffs' claim under this head has been properly substantiated. In my view, on
the evidence, I do not think that the plaintiffs would be entitled to any sum in excess of RM6,000 as replacement
costs of the sprinkler system, and I award that sum accordingly.

As to item (5), being the plaintiffs' claim for loss of farm income (including loss of income for the area etched black
in exh P14 at the rate of RM5,100 per month from April 1988 and still continuing, amounting to RM224,400
(RM5,100 x 44), my observations regarding the infirmities in the plaintiffs' claim for loss of income arising out of the
trespass committed by D1 and D2 on 18 June 1982 would apply equally to it, but mutatis mutandis.

Similarly, my observations regarding the value and worth of exh D53, being the report containing the results of the
socio-economic survey conducted by the district office of the North East District, Penang, on behalf of the Tripartite
Committee, whose members were representatives of the State Government of Penang, the developers of Thean
Teik Estate, and the Thean Teik Estate Residents' Association, would also apply equally to this part of the plaintiffs'
claims, but mutatis mutandis.

I also consider that the period of 44 months' loss of income claimed in respect of past loss of farm income is a fair
period to adopt in assessing damages under this head.

Accordingly, I would award in favour of P1 and P2, and against D3 and D4, in respect of loss of farm income
(including loss of income for the area etched black in P14) for the period of 44 months with effect from April 1988,
that being the specific period claimed, at the rate of RM900 per month, the sum of RM39,600 to be apportioned
between P1 and P2, having regard to their respective incomes aforesaid.

I have not overlooked the plaintiffs' claim for loss of future profits under this head. But, having carefully considered
it, I do not consider that the plaintiffs' have substatiated it sufficiently, or at all. Upon the evidence, I do not consider
that it has been proved that the plaintiffs would have continued their farming activities indefinitely had D3 and D4
not committed the act of trespass complained of.
(vi) Claim for exemplary damages

I next turn to consider the plaintiffs' claim for exemplary damages.

In a famous passage in his judgment in Rookes v Barnard 88, Lord Devlin, withthe unanimous approval of all his
brethren, reviewed the law and laid [*423]
down that exemplary damages could only be awarded in three categories of cases; namely, oppressive action by
officers of the Crown; secondly, cases where 'a defendant with a cynical disregard for a plaintiff's rights has
calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk'; and thirdly,
where statute expressly authorized it.

In addition, Lord Devlin went further and spelt out three 'considerations' applicable to all cases of exemplary
damages: first, that the plaintiff cannot recover such damages unless he is himself the victim of such 'punishable
behaviour'; secondly, 'exemplary' damages can be used both for and against liberty, and are a punishment without
the safeguard of the criminal law, so that the weapon must be used with restraint, and the House might have 'to
place some arbitrary limit on such awards' despite the respect due to assessment of damages by juries; and thirdly,
the financial means of the parties, though irrelevant to compensatory damages are relevant to exemplary damages.

The fact that exemplary and compensatory damages must thus be presented differently to the jury, Lord Devlin also
indicated, did not necessarily mean that the jury must make two separate awards. It should, however, be directed
that exemplary damages should only come into play if it regards the amount which it has fixed for compensation as
inadequate in the circumstances to punish and deter the defendant and mark its disapproval for his conduct.

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In Cassell & Co Ltd v Broome 89, LordMorris explained the ambit of the expression 'calculated to make a profit'
used by Lord Devlinin Rookes v Barnard. 88 This was how he put it at p 843:
There may be exemplary damages if a defendant has formed and been guided by the view that though he may have to pay
some damages or compensation because of what he intends to do yet he will in some way gain (for the category is not
confined to money-making in the strict sense) or may make money out of it, to an extent which he hopes and expects will
be worth his while. I do not think that the word 'calculated' was used to denote some precise balancing process. The
situation contemplated is where someone faces up to the possibility of having to pay damages for doing something which
may be held to have been wrong but where nevertheless he deliberately carries out his plan because he thinks that it will
work out satisfactorily for him.
The particular facts upon which counsel for the plaintiffs relied as justifying an award of exemplary damages, may
conveniently be taken from his written submission, were these:
(1) In 1982, D1 and D3 required the portion etched black in P14 for their development but took no steps to obtain
possession by lawful means. The tenancies had not been determined and the plaintiffs' equity satisfied. No legal
proceedings were commenced to recover posssession, although one month before the trespass, P1 and P2, by their
solicitors, had warned D1 not to enter the portion. They took the law into their own hands and levelled the portion.

(2) The earthwork carried out by D1 and D3 was illegal since there were no approved earthworks plans. (See the
evidence of DW4 under cross-examination.) [*424]
There were no approved plans then for the construction of the sewage treatment plant and the LLN substation. The
object of the exercise was to harass and intimidate the farmers, including the plaintiffs, into settling with D1 on D1's
terms.

(3) Instead of admitting and being sorry for their unlawful act, the defendants have fabricated the incredible story that
PW1 consented to their levelling the said portion.

(4) Because the plaintiffs instituted legal proceedings against D1 and D2, D1 induced the Khoo Kongsi to issue notices
purportedly terminating the tenancies.

(5) In 1988, although there was a case pending in court in which the issue was whether the plaintiffs' possession of the
portion of land occupied by their farm and houses was protected by equity and law, D3 and D4, with impunity and
without any regard for the pending case and without waiting for a judical decision on the rights of the plaintiffs with
regard to the said portion, entered the plaintiffs' farm by force and demolished the chicken coops, pigsties and
structures and levelled the vegetable farm.

(6) In breach of the injunction dated 7 April 1988, D3 and D4 have committed the following unlawful acts:

(i) on 21 August 1988, they levelled a part of the vegetable farm subject to the injunction. The defendants disputed this
and contended that on that day they were working on Khoo Bak Chun's farm. PW1 testified that the defendants were
working on her farm. She produced photographs in support of her story. Why did the defendants not call Khoo Bak
Chun to testify to their story? An adverse inference should be drawn against the defendants for failing to call Khoo Bak
Chun;

(ii) DW4 have admitted that D3 and D4 constructed an LLN substation and sewage plant on the portionetched black in
P14 after 7 April 1988, ie the date of the injunction order;

(iii) D3 and D4 have destroyed the drainage system of the farm and raised the ground level of the adjoining land,
causing the flooding of the farm;

(iv) in breach of the injunction, D3 and D4 have been extracting water from the pond in the farm; and

(v) D3 and D4 caused dangerous objects to drop on the roof of house No 259H during their building operations.

In summing up this part of his claim, counsel for the plaintiffs said this:
It is clear from the above that D3 and D4 were using harrassing tactics, including the destruction of the plaintiffs' source of
livelihood, to recover possession of the portion of land in the plaintiffs' possession. They did not institute any legal
proceedings against the plaintiffs to recover possession of the land. Although the plaintiffs commenced legal proceedings
against D1 and D2 in 1982, D3 filed a counterclaim for possession only in 1990, that is eight years later. If there is to be any

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

respect for the law, the court should show its unqualified disapproval of the defendants' arrogant display of power and
influence and contemptuous disregard for the law by the award of exemplary damages. [*425]

The following comment by Lord Denning in Drane v Evangelou & Ors 3 [at p 441] would equally apply to this case:
As this case unfolded before us, the circumstances in which this young couple were forced out of the house, the in-laws
being pushed in, the landlord … not complying with the injunction … it did seem to me a case in which, in Lord Devlin's
words, it was necessary 'to teach the landlord a lesson'.
In reply, counsel for the defendants submitted that the plaintiffs were not entitled to exemplary damages because:
(a) D1 and D3 were entitled to develop the land under the agreements with the consent of the Khoo Kongsi;

(b) the plaintiffs could not claim to be fee simple owners of the lands and, after the expiry of the notices to quit, they
were trespassers; and

(c) D1 and D3 carried out the demolition works in the honest belief that they were entitled to do; D1 in the belief that it
had the consent of PW1 and D3 after the failure of the negotiations, and in the belief that it was entitled to following the
decision of Mustapha J dissolving the injunction and the decision of the Supreme Court in Poh Swee Siang's case 10
that the remedy of self-help was available in this country.

It would be more convenient if I now considered the submissions of counsel for the defendants.

As to (a), I do not consider that the fact that D1 and D3 were entitled to develop the land under the joint-venture
agreement with the Khoo Kongsi would also provide them with a license to act in disregard of the plaintiffs' rights in
the plot concerned. I have already made my finding as to why I consider that D1 and D3 had committed the acts of
trespass concerned and so I need say nothing more about this point.

As to (b), I have already given my reasons for finding that after the expiry of the notices to quit, the plaintiffs
continued to be in lawful occupation of the farm and the two dwelling houses, and I need say nothing more about
this point.

As to (c), counsel for the defendants had argued that the plaintiffs were not entitled to claim exemplary damages on
three separate grounds, namely:
(1) that D1 and D3 were entitled under the joint-venture agreement with the trustees of the Khoo Kongsi to develop the
lands therein described, including the plot concerned;

(2) that upon expiry of the notices to quit, the plaintiffs continued in occupation of the farm and the two dwelling houses
No 258K and No 259H as tresspassers and that having regard to the decision of MustaphaJ dissolving the injunction
hereinbefore mentioned, and the decision of the Supreme Court in Poh Siew Siang'scase,10 D1 and D3 were entitled
to invoke the common law remedy of self-help by using reasonable force to eject the plaintiffs; and

(3) that in any event, D1 and D3 had carried out the demolition works with the consent of PW1.

I regret that I cannot accede to any of these submissions, for they fail to take into account or give proper weight to
the following facts: [*426]

In the present suit, the primary issues were: what was the area of the land of which the plaintiffs were in
possession? Whether their tenancy thereof and their tenancies of the two dwelling houses thereon, had been duly
determined by the notices to quit served upon them, assuming the plaintiffs' occupation were not protected by an
equity or equitable estoppel and, alternatively, if it were not so protected? In the case of dwelling house No 258K, a
further issue was whether the plaintiffs were entitled to invoke the protection of the Control of Rent Act 1966.

For the defendants, it was contended that the tenancies of the farm and the two dwelling houses were mere
monthly tenancies, which, upon termination by notice to quit, rendered the plaintiffs' continued occupation thereof,
unlawful and that they were therefore mere trespassers.

But with indecent haste, and without waiting for the determination of the issues aforesaid by thecourt, D3 and D4
entered the plaintiffs' farm by force of arms, levelling it and, in the process, demolishing the chicken coops, pigsties,
storehouses and other structures thereon.

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

Not content with these acts of wanton destruction, D3 and D4 went even further and violated an injunction of this
court granted on 17 April 1988 in the following way:
(a) on 21 August 1988, they levelled a part of the plaintiffs' farm and then claimed that they were working not on the
plot concerned but on Khoo Bak Chun's land. However, Khoo Bak Chun was not called to testify and I have already
found, having regard to the testimony of PW1 which I believe, supported by the photographs she produced, that D3
and D4 were, at the material time, indeed working on the plaintiffs' farm;

(b) it was freely admitted by DW4 that D3 and D4 had constructed an LLN substation and sewage plant on the area
etched black in P14 subsequent to the date of the injunction dated 7 April 1988;

(c) D3 and D4 had, subsequent to the grant of the injunction, destroyed the drainage system on the plaintiffs'
vegetable land and raised the ground level of the adjoining land, thereby causing the farm to become flooded;

(d) D3 and D4 had also, subsequent to the grant of the injunction, extracted water from the pond situated on the
plaintiffs' farm; and

(e) D3 and D4 had finally, in the course of their construction work on neighbouring land, caused objects to drop upon
the roof of dwelling house No 259H, causing damage, distress and anxiety to its occupants.

I have already found upon the facts that there is no truth in the allegation that D3 and D4 had carried out the
demolition works with the consent of the plaintiffs' sister-in-law, Cheng Lye Hiang (PW1).

Trespass is normally associated with intentional acts even though committed by mistake; for mistake is no defence.
(See Basely v Clarkson. 90) It follows, therefore, that the story of D1 and D3 that they carried out the demolition
works concerned in the honest belief that they were entitled to do so (even if true, and this I cannot accept) is no
defence. Their mistaken view of the law, in particular the effect of the decision of MustaphaJ in dissolving the
injunction and the decision of the Supreme Court in Poh Siew Siang'scase 10 as to the availability of self-help, is
therefore no defence to an [*427]
action for trespass. It is, also in my view, no answer to the claims for exemplary damages having regard to the
particular circumstances of this case.

I would go further and find, on the facts, that the probabilities are that the defendants, who, at all material times,
were represented by solicitors, must have known that their rights to develop the lands under the joint-venture
agreement entered into with the trustees of the Khoo Kongsi, could provide them with no defence to an action in
trespass by occupiers thereof in the event of their notices to quit being held in a court of law to be ineffective to
terminate the tenancies of those occupiers. If therefore, the defendants chose to take the risk in case the issue of
validity of the notices to quit should be answered against them, they have only themselves to blame.

Turning to the submissions of counsel for the plaintiffs on the question of exemplary damages, I have recapitulated
these submissions and it is my considered view that there is substance in them.

The evidence amply justifies the conclusions, both of fact and law, for which he is contending and accordingly
uphold them.
(vii) Assessment of the quantum of exemplary damages

The next question which requires consideration is what is the appropriate sum to award the plaintiffs by way of
exemplary damages.

In Rookes v Barnard 88, Lord Devlin expressed the view that awards of exemplary damages should be moderate
and that the resources of the parties was a relevant consideration. It follows from this that a modest award would
make no impact on a defendant who is well-off, while conversely, even a modest award could work a great hardship
on a defendant of modest means.

The other factors which must be taken into consideration is the quantum of the compensatory award (per Lord
Devlin in Rookes' case 88 at p 1218) as well as the conduct of the parties right down to the time of the judgment.
(See Praed v Graham 91.)

In the circumstances, in so far as the claims arising from the trespass on 18 June 1982 are concerned, I would

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CHENG HANG GUAN & ORS v PERUMAHAN FARLIM (PENANG) SDN BHD & ORS, [1993] 3 MLJ 352

award in favour of the plaintiffs, against D1 and D2, the sum of RM20,000 by way of exemplary damages, which
would be a little more than 25% of the compensatory damages amounting to RM68,700 I had awarded them in
respect of the losses suffered by them arising from that trespass.

Turning to the claim for exemplary damages arising from the acts of trespass on 17 March 1988, committed by D3
and D4, it is self-evident that these acts were considerably more serious than those attributable to D1 and D2,
bearing in mind the damage caused which had been highlighted in the submissions of counsel for the plaintiffs.
Moreover, it must also be self-evident that D3's and D4's conduct has been more reprehensible than that of D1 and
D2, bearing in mind the violations of the injunction granted by this court. I am satisfied, for the reason stated, that
these violations were deliberate and in utter disregard of the plaintiffs' rights and the authority of this court. [*428]

It follows that any sum which this court awards byway of exemplary damages for these acts of trespass, must
reflect the gravity of that wrongdoing. In the circumstances, I would award in favour of the plaintiffs and against D3
and D4, the sum of RM40,000 byway of exemplary damages in respect of the acts of trespass committed on 17
March 1988 and on 21 August 1988.

I would add that, in making the two awards of exemplary damages, I have kept in the forefront of my mind the
principles and the considerations enunciated by Lord Devlin in Rookes v Barnard, 88 to which I have referred.

I further award in favour of the plaintiffs, interest at the rate of 6%pa on all compensatory damages awarded for the
period from the date of service of the writ until the date of judgment under s 11 of the Civil Law Act 1956 and
thereafter, at the rate of 8%pa until satisfaction under O 42 r 12 of the RHC.

Finally, I award in favour of the plaintiffs the costs of the action to be taxed by the senior assistant registrar in
default of agreement between the parties.
Order accordingly
Reported by Premala Pathmanathan

End of Document

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 230

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Date and Time: Tuesday, 31 October 2023 8:24:00PM MYT
Job Number: 209348020

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1. D. & C. BUILDERS LTD. v. REES [1966] 2 Q.B. 617, [1966] 2 Q.B. 617
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 231

D & C Builders Ltd v Rees

Overview | [1966] 2 QB 617, | [1965] 3 All ER 837, | [1966] 2 WLR 288, | 109 Sol Jo 971, | 196 EG
893

D. & C. BUILDERS LTD. v. REES [1966] 2 Q.B. 617

[COURT OF APPEAL] receipt stating that the sum was received "in completion
of the account." On the plaintiff's claim for the balance,
LORD DENNING M.R., DANCKWERTS and WINN the defendant set up a defence of bad workmanship and
L.JJ. also that there was a binding settlement, a question
1965 Oct. 28; Nov. 12 which was tried as a preliminary issue. Judge Trapnell
held that there was no consideration to support the
Accord and Satisfaction — Accord — Intimidation — agreement of November 13 and 14 and decided the
Acceptance of cheque in settlement for lesser sum preliminary issue in favour of the plaintiffs. On appeal by
than amount due — Debtor's threat to pay nothing the defendant:
— Whether valid accord and satisfaction — Whether
inequitable to enforce payment of balance.
Held, dismissing the appeal, (1) that payment by a
Contract — Consideration — Debtor and creditor —
debtor, whether in cash or by cheque, of a lesser sum
Acceptance of cheque in settlement for lesser sum
than the amount of the debt was not a settlement of
than amount due — Whether settlement binding.
the debt which was binding at law on the creditor
(post, pp. 623G - 624A, 626A, D, 632G - 633A).
Equity — Clean hands — Equitable estoppel —
Acceptance of cheque in settlement for lesser sum Pinnel's Case (1602) 5 Co.Rep. 117a, Cumber v.
than amount due — Debtor's threat to pay nothing Wane (1718) 1 Stra. 426 and Foakes v. Beer (1884)
— Whether inequitable to enforce payment of 9 App.Cas. 605 applied.
balance.
Sibree v. Tripp (1846) 15 M. & W. 23 distinguished.
Intimidation — Threat to break a contract — Debt — Goddard v. O'Brien (1882) 9 Q.B.D. 37 not followed.
Threat by debtor not to pay — Receipt of lesser sum
Per Winn L.J. It is an essential element of a valid
by creditor — Whether an accord (post, p. 625E).
accord and satisfaction that the agreement which
constitutes the accord should itself be binding in law
and no such agreement can be so binding unless it is
[*618]
either made under seal or supported by
consideration. Satisfaction, viz., performance of an
The plaintiffs, jobbing builders, claimed £182 13s. 1d.
agreement of accord does not provide retroactive
from the defendant as the balance due for work and
validity to the accord, but depends for its effect upon
labour done and goods and materials supplied in
the legal validity of the accord as a binding contract at
respect of alterations and repairs to the defendant's
the time when it is made (post, p. 632E-F).
shop in May and June, 1964. In July, 1964, when there
was no dispute as to the work done, the sum of £482 (2) (Winn L.J. expressing no opinion on the point.)
13s. 1d. had been owing to the plaintiffs; but the That in view of the threat to pay nothing unless the
defendant had not paid. On November 13, 1964, when cheque for £300 was accepted in settlement, there
the plaintiffs were in desperate financial straits, the was no true accord between the parties, and no
defendant, through his wife, offered to pay the plaintiffs equity in the defendant to prevent the plaintiffs from
£300 if they would accept it in settlement, stating in recovering the full amount of the debt (post, pp. 625E,
effect that if the plaintiffs did not accept it they would get 626F).
nothing. The plaintiffs told the defendant's wife that they Per Lord Denning M.R. Where there is a true accord,
had no choice but to accept and on November 14, 1964, under which the creditor voluntarily agrees to accept
they received a cheque for £300 in exchange for a a lesser sum in satisfaction, and the debtor acts upon

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D. & C. BUILDERS LTD. v. REES [1966] 2 Q.B. 617, [1966] 2 Q.B. 617

that accord by paying the lesser sum and the creditor agreed to accept £300 in settlement of the debt and
accepts it, then it is inequitable for satisfaction when they accepted the cheque for £300 in
settlement of the account and it was honoured. Reliance
[*619]
is placed on Sibree v. Tripp1 and Goddard v. O'Brien2
the creditor afterwards to insist on the balance. But and see also Bidder v. Bridges3 [Reference was made
he is not bound unless there has been truly an accord to Cumber v. Wane4 and Foakes v. Beer.5] The
between them (post, p. 625A - B). defendant relies
Hughes v. Metropolitan Railway Co. (1877) 2
App.Cas. 439 and Central London Property Trust Ltd. 1 (1846) 15 M. & W. 23.
v. High Trees House Ltd. [1947] K.B. 130; 62 T.L.R.
2 (1882) 9 Q.B.D. 37.
557; [1956] 1 All E.R. 256 considered.
3 (1888) 37 Ch.D. 406, C.A.

4 (1718) 1 Stra. 426.

APPEAL from Judge Trapnell, sitting at Shoreditch
County Court. 5 (1884) 9 App.Cas. 605.
[*620]
The plaintiffs, D. & C. Builders Ltd., claimed £182 13s.
1d. in the Shoreditch County Court against the on the technical rule of law in Goddard v. O'Brien6 that
defendant, Sidney Rees, carrying on business as B. payment of a lesser sum by cheque is good accord and
satisfaction and also on the decision in Day v. McLea.7
Saunders & Son, for the balance due for work and
S. C. Isaacs for the plaintiffs. There are two separate
labour done and goods and materials supplied by them
questions: first, was there an accord?; secondly, was
in respect of certain alterations and repairs at the there satisfaction? There was a finding here of a
defendant's premises, 218, Brick Lane, London, E.1, in payment of a smaller amount in discharge of a larger
May and June, 1964. According to their particulars of amount. The payment by cheque was merely incidental,
claim, the plaintiffs' account amounted to £746 13s. 1d. "to suit the plaintiffs' convenience." Cumber v. Wane8
and credits were given for payments on account of shows that giving a note for a smaller sum cannot be
£200, £50, £300 and a credit of £14. By his defence, the pleaded as a satisfaction for a larger sum: see Smith's
defendant contended that on November 14, 1964, the Leading Cases, 13th ed. (1929), Vol. 1, p. 373, and the
plaintiffs accepted from the defendant the sum of £300 note on Sibree v. Tripp9 at p. 380. Sibree v. Tripp9 and
in completion and in satisfaction of the account Goddard v. O'Brien10 proceed on a view of Cumber v.
Wane11 which was not approved in Foakes v. Beer.12
mentioned in the particulars of claim as evidenced in
The cases where a cheque in settlement has been
writing by a receipt dated November 14, 1964.
found to be a good satisfaction for a larger sum due are
Alternatively it was contended that the work was done cases where the cheque has originated from a third
so negligently and the materials were so inferior in party. No case has been found where a cheque by a
quality that they were of little, if any, value or use to the party has been found to be good satisfaction in
defendant. settlement of a larger sum. Goddard v. O'Brien13 was
questioned by Fletcher Moulton L.J. in Hirachand
On May 5, 1965, Judge Trapnell gave judgment for the Punamchand v. Temple.14 Foakes v. Beer15 shows
plaintiffs on the preliminary issue as to whether there that the principles of Pinnel's Case16 and Cumber v.
was a binding settlement. The defendant appealed on Wane17 are still intact: see per Lord Selborne L.C.18
the ground that upon the facts found he was entitled to and Lord Blackburn.19 Since Foakes v. Beer,20
Goddard v. O'Brien21 should no longer be regarded as
have the preliminary issue decided in his favour and that
good law. In Sibree v. Tripp,22 the settlement put an
the judge misdirected himself in holding that a
end to the litigation; the consideration was the
negotiable instrument, namely, a cheque for £300, was settlement of the litigation. The statement in Halsbury's
not good consideration to support an accord and Laws of England, 3rd ed., Vol. 8 (1954), p. 207, that "a
satisfaction to discharge a debt for £482 13s. 1d. cheque or other negotiable instrument may be taken in
satisfaction of a debt for a larger amount than that of the
The facts are fully set out in the judgments. bill or note" is too broad. It can be argued that there was
a new cause of action on the negotiable instrument. In
Day v. McLea,23 the cheque was clearly taken on
Martin Reynolds for the defendant. Here there was account and there was no accord. The county court
accord and satisfaction. Accord when the plaintiffs judge was right.

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D. & C. BUILDERS LTD. v. REES [1966] 2 Q.B. 617, [1966] 2 Q.B. 617

Reynolds in reply. Sibree v. Tripp24 shows that the fact with Donaldson. The two of them talked it over. Their
that company was in desperate financial straits. If they did
6 9 Q.B.D. 37. not have the £300, they would be in a state of
7 (1889) 22 Q.B.D. 610; 5 T.L.R. 379, C.A. bankruptcy. So they decided to accept the £300 and see
8 1 Stra. 426. what they could do about the rest afterwards.
9 15 M. & W. 23. Thereupon Donaldson telephoned to the defendant's
10 9 Q.B.D. 37. wife. He said to her: "£300 Will not even clear our
11 1 Stra. 426. commitments on the job. We will accept £300 and give
12 9 App.Cas. 605. you a year to find the balance." She said: "No, we will
13 9 Q.B.D. 37. never have enough money to pay the balance. £300 is
14 [1911] 2 K.B. 330, 339, 340. better than nothing." He said: "We have no choice but to
15 9 App.Cas. 605. accept." She said: "Would you like the money by
16 (1602) 5 Co.Rep. 117a. 25 9 App.Cas. 605.
17 1 Stra. 426. 26 15 M. & W. 23.
18 9 App.Cas. 605, 612. 27 37 Ch.D. 406, C.A.
19 Ibid. 617. [*622]
20 9 App.Cas. 605.
21 9 Q.B.D. 37. cash or by cheque. If it is cash, you can have it on
22 15 M. & W. 23. Monday. If by cheque, you can have it tomorrow
23 22 Q.B.D. 610. (Saturday)."
24 15 M. & W. 23. On Saturday, November 14, 1964, Casey went to collect
[*621] the money. He took with him a receipt prepared on the
company's paper with the simple words: "Received the
the payment was conditional is immaterial. In Foakes v. sum of £300 from Mr. Rees." She gave him a cheque for
Beer,25 Sibree v. Tripp26 was distinguished and not £300 and asked for a receipt. She insisted that the
overruled. There is a valid line of cases starting with words "in completion of the account" be added. Casey
Sibree v. Tripp26 showing that a cheque or other did as she asked. He added the words to the receipt. So
negotiable instrument may be taken in satisfaction of a she had the clean receipt: "Received the sum of £300
debt for a larger amount. These cases have never been from Mr. Rees in completion of the account. Paid, M.
overruled and are enhanced by Bidder v. Bridges.27 Casey." Casey gave in evidence his reason for giving it:
Cur. adv. vult. "If I did not have the £300 the company would have
LORD DENNING M.R. The plaintiffs are a little gone bankrupt. The only reason we took it was to save
company. "D" stands for Donaldson, a decorator, "C" for the company. She knew the position we were in."
Casey, a plumber. They are jobbing builders. The The plaintiffs were so worried about their position that
defendant has a shop where he sells builders' they went to their solicitors. Within a few days, on
materials. November 23, 1964, the solicitors wrote complaining
In the spring of 1964 the defendant employed the that the defendant had "extricated a receipt of some sort
plaintiffs to do work at his premises, 218. Brick Lane. or other" from them. They said they were treating the
The plaintiffs did the work and rendered accounts in £300 as a payment on account. On November 28, 1964,
May and June, which came to £746 13s. 1d. altogether. the defendant replied alleging bad workmanship. He
The defendant paid £250 on account. In addition the also set up the receipt which Casey gave to his wife,
plaintiffs made an allowance of £14 off the bill. So in adding: "I assure you she had no gun on her." The
July, 1964, there was owing to the plaintiffs the sum of plaintiffs brought this action for the balance. The
£482 13s. 1d. At this stage there was no dispute as to defendant set up a defence of bad workmanship and
the work done. But the defendant did not pay. also that there was a binding settlement. The question
On August 31, 1964, the plaintiffs wrote asking the of settlement was tried as a preliminary issue.
defendant to pay the remainder of the bill. He did not The judge made these findings:
reply. On October 19, 1964, they wrote again, pointing "I concluded that by the middle of August the sum due to
out that the "outstanding account of £480 is well the plaintiffs was ascertained and not then in dispute. I
overdue." Still the defendant did not reply. He did not also concluded that there was no consideration to
write or telephone for more than three weeks. Then on support the agreement of November 13 and 14. It was a
Friday, November 13, 1964, the defendant was ill with case of agreeing to take a lesser sum when a larger sum
influenza. His wife telephoned the plaintiffs. She spoke was already due to the plaintiffs. It was not a case of
to Casey. She began to make complaints about the agreeing to take a cheque for a smaller amount instead
work: and then said: "My husband will offer you £300 in of receiving cash for a larger amount. The payment by
settlement. That is all you'll get. It is to be in cheque was an incidental arrangement."
satisfaction." Casey said he would have to discuss it He decided, therefore, the preliminary issue in favour of

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D. & C. BUILDERS LTD. v. REES [1966] 2 Q.B. 617, [1966] 2 Q.B. 617

the plaintiffs. The defendant appeals to this court. He of Smith's Leading Cases, 13th ed. (1929), Vol. 1,
says that there was here an accord and satisfaction - an 3 (1602) 5 Co.Rep. 117a.
accord when the plaintiffs agreed, however reluctantly, 4 (1884) 9 App.Cas. 605.
to accept £300 in settlement of the account - and 5 (1721) 1 Stra. 426.
satisfaction when they accepted the cheque for £300 6 15 M. & W. 23.
and it was duly honoured. The defendant relies on 7 9 Q.B.D. 37.
Sibree v. Tripp1 and Goddard v. O'Brien2 as authorities 8 [1911] 2 K.B. 330, 340; 27 T.L.R. 430.
in his favour. [*624]
1 (1846) 15 M. & W. 23.
2 (1882) 9 Q.B.D. 37. p. 380. It was, I think, wrongly decided. In point of law
[*623] payment of a lesser sum, whether by cash or by
cheque, is no discharge of a greater sum.
This case is of some consequence: for it is a daily This doctrine of the common law has come under heavy
occurrence that a merchant or tradesman, who is owed fire. It was ridiculed by Sir George Jessel in Couldery v.
a sum of money, is asked to take less. The debtor says Bartram.9 It was said to be mistaken by Lord Blackburn
he is in difficulties. He offers a lesser sum in settlement, in Foakes v. Beer.10 It was condemned by the Law
cash down. He says he cannot pay more. The creditor is Revision Committee (1945 Cmd. 5449), paras. 20 and
considerate. He accepts the proffered sum and forgives 21. But a remedy has been found. The harshness of the
him the rest of the debt. The question arises: Is the common law has been relieved. Equity has stretched
settlement binding on the creditor? The answer is that, out a merciful hand to help the debtor. The courts have
in point of law, the creditor is not bound by the invoked the broad principle stated by Lord Cairns in
settlement. He can the next day sue the debtor for the Hughes v. Metropolitan Railway Co.11
balance: and get judgment. The law was so stated in "It is the first principle upon which all courts of equity
1602 by Lord Coke in Pinnel's Case3 - and accepted in proceed, that if parties, who have entered into definite
1889 by the House of Lords in Foakes v. Beer.4 and distinct terms involving certain legal results,
Now, suppose that the debtor, instead of paying the afterwards by their own act or with their own consent
lesser sum in cash, pays it by cheque. He makes out a enter upon a course of negotiation which has the effect of
cheque for the amount. The creditor accepts the cheque leading one of the parties to suppose that the strict rights
and cashes it. Is the position any different? I think not. arising under the contract will not be enforced, or will be
No sensible distinction can be taken between payment kept in suspense, or held in abeyance, the person who
of a lesser sum by cash and payment of it by cheque. otherwise might have enforced those rights will not be
The cheque, when given, is conditional payment. When allowed to enforce them when it would be inequitable
honoured, it is actual payment. It is then just the same having regard to the dealings which have taken place
as cash. If a creditor is not bound when he receives between the parties."
payment by cash, he should not be bound when he It is worth noticing that the principle may be applied, not
receives payment by cheque. This view is supported by only so as to suspend strict legal rights, but also so as
the leading case of Cumber v. Wane,5 which has to preclude the enforcement of them.
suffered many vicissitudes but was, I think, rightly This principle has been applied to cases where a
decided in point of law. creditor agrees to accept a lesser sum in discharge of a
Sibree v. Tripp6 is easily distinguishable. There the greater. So much so that we can now say that, when a
plaintiffs brought an action for £500. It was settled by creditor and a debtor enter upon a course of negotiation,
the defendant giving three promissory notes amounting which leads the debtor to suppose that, on payment of
in all to £250. Those promissory notes were given upon the lesser sum, the creditor will not enforce payment of
a new contract, in substitution for the debt sued for, and the balance, and on the faith thereof the debtor pays the
not as conditional payment. The plaintiff's only remedy lesser sum and the creditor accepts it as satisfaction:
thenceforward was on the notes and not on the debt. then the creditor will not be allowed to enforce payment
Goddard v. O'Brien7 is not so easily distinguishable. of the balance when it would be inequitable to do so.
There a creditor was owed £125 for some slates. He This was well illustrated during the last war. Tenants
met the debtor and agreed to accept £100 in discharge went away to escape the bombs and left their houses
of it. The debtor gave a cheque for £100. The creditor unoccupied. The landlords accepted a reduced rent for
gave a written receipt "in settlement on the said cheque the time they were empty. It was held that the landlords
being honoured." The cheque was clearly given by way could not afterwards turn round and sue for the balance,
of conditional payment. It was honoured. The creditor see Central London Property Trust Ltd. v. High Trees
sued the debtor for the balance of £25. He lost because House Ltd.12 This caused at the time some eyebrows to
the £100 was paid by cheque and not by cash. The be raised in high places. But they have
decision was criticised by Fletcher Moulton L.J. in 9 (1881) 19 Ch.D. 394, 399.
Hirachand Punamchand v. Temple,8 and by the editors 10 9 App.Cas. 605, 622.

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11 (1877) 2 App.Cas. 439, 448. Pinnel's Case,17 settled definitely the rule of law that
12 [1947] 1 K.B. 130; 62 T.L.R. 559; [1956] 1 All E.R. 256. payment of a lesser sum than the amount of a debt due
[*625] cannot be a satisfaction of the debt, unless there is
some benefit to the creditor added so that there is an
been lowered since. The solution was so obviously just accord and satisfaction.
that no one could well gainsay it. In Foakes v. Beer,18 Lord Selborne, while approving19
In applying this principle, however, we must note the Cumber v. Wane,20 did not overrule the cases which
qualification: The creditor is only barred from his legal appear to differ from Cumber v. Wane,20 saying21:
rights when it would be inequitable for him to insist upon "All the authorities subsequent to Cumber v. Wane,22
them. Where there has been a true accord, under which which were relied upon by the appellant at your
the creditor voluntarily agrees to accept a lesser sum in Lordships' Bar (such as Sibree v. Tripp,23 Curlewis v.
satisfaction, and the debtor acts upon that accord by Clark24 and Goddard v. O'Brien25 have proceeded upon
paying the lesser sum and the creditor accepts it, then it the distinction, that, by giving negotiable paper or
is inequitable for the creditor afterwards to insist on the otherwise there had been some new consideration for a
balance. But he is not bound unless there has been truly new agreement, distinct from mere money payments in or
an accord between them. towards discharge of the original liability."
In the present case, on the facts as found by the judge, Lord Selborne was distinguishing26 those cases from
it seems to me that there was no true accord. The the case before the House.
debtor's wife held the creditor to ransom. The creditor But the giving of a cheque of the debtor for a smaller
was in need of money to meet his own commitments, amount than the sum due is very different from "the gift
and she knew it. When the creditor asked for payment of a horse, hawk, or robe, etc." mentioned in Pinnel's
of the £480 due to him, she said to him in effect: "We Case.27 I accept that the cheque of some other person
cannot pay you the £480. But we will pay you £300 if than the debtor, in appropriate circumstances, may be
you will accept it in settlement. If you do not accept it on the basis of an accord and satisfaction, but I cannot see
those terms, you will get nothing. £300 is better than how in the year 1965 the debtor's own cheque for a
nothing." She had no right to say any such thing. She smaller sum can be better than payment of the whole
could properly have said: "We cannot pay you more amount of the debt in cash. The cheque is only
than £300. Please accept it on account." But she had no conditional payment, it may be difficult to cash, or it may
right to insist on his taking it in settlement. When she be returned by the bank with the letters "R.D." upon it,
said: "We will pay you nothing unless you accept £300 unpaid. I think that Goddard v. O'Brien,28 either was
in settlement," she was putting undue pressure on the wrongly decided or should not be followed in the
creditor. She was making a threat to break the contract circumstances of today.
(by paying nothing) and she was doing it so as to I agree also that, in the circumstances of the present
compel the creditor to do what he was unwilling to do (to case, there was no true accord. The Rees really
accept £300 in settlement): and she succeeded. He behaved very badly. They knew of the plaintiffs' financial
complied with her demand. That was on recent authority difficulties and used their awkward situation to intimidate
a case of intimidation: see Rookes v. Barnard13 and them. The plaintiffs did not wish to accept the sum of
Stratford (J. T.) & Son Ltd. v. Lindley.14 In these £300 in discharge of the debt of £482, but were
circumstances there was no true accord so as to found desperate to get some money. It would appear also that
a defence of accord and satisfaction: see Day v. the defendant and his wife misled the plaintiffs as to
McLea.15 There is also no equity in the defendant to their own financial position. Rees, in his evidence, said:
warrant any departure from the due course of law. No "In June (1964) I could have paid £700 odd. I could
person can insist on a settlement procured by have settled the whole bill." There is no
intimidation. 16 9 App.Cas. 605.
In my opinion there is no reason in law or equity why the 17 5 Co.Rep. 117a.
creditor should not enforce the full amount of the debt 18 9 App.Cas. 605.
due to him. I would, therefore, dismiss this appeal. 19 Ibid. 613.
DANCKWERTS L.J. I agree with the judgment of the 20 1 Stra. 426.
Master 21 9 App.Cas. 605, 613.
13 [1964] A.C. 1129; [1964] 2 W.L.R. 269; [1964] 1 All E.R. 22 1 Stra. 426.
367, H.L.(E.). 23 15 M. & W. 23.
14 [1964] 2 W.L.R. 1002, 1015, 1016; [1964] 2 All E.R. 209, 24 (1849) 3 Exch. 375.
C.A. 25 9 Q.B.D. 37.
15 (1889) 22 Q.B.D. 610; 5 T.L.R. 379, C.A. 26 9 App.Cas. 605, 613.
[*626] 27 5 Co.Rep. 117a.
28 9 Q.B.D. 37.
of the Rolls. Foakes v. Beer,16 applying the decision in [*627]

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£482 and the plaintiff's agreement to accept it in full

evidence that by August, or even by November, their payment of that debt, followed by delivery and due
financial situation had deteriorated so that they could payment of such a cheque, constitute a valid accord and
not pay the £482. satisfaction discharging the debt in law?
Nor does it appear that their position was altered to their Apart altogether from any decided cases bearing upon
detriment by reason of the receipt given by the plaintiffs. the matter, there might be a good deal to be said, as a
The receipt was given on November 14, 1964. On matter of policy, in favour of holding any creditor bound
November 23, 1964, the plaintiffs' solicitors wrote a by his promise to discharge a debtor on his paying
letter making it clear that the payment of £300 was some amount less than the debt due: some judges no
being treated as a payment on account. I cannot see doubt so thought when they held readily that
any ground in this case for treating the payment as a acceptance by the creditor of something of a different
satisfaction on equitable principles. nature from that to which he was entitled was a
In my view the county court judge was right in applying satisfaction of the liability, cf. Pinners Case,30 Smith v.
the rule in Foakes v. Beer,29 and I would dismiss the Trowsdale,31 Cooper v. Parker.32 A like approach
appeal. might at some time in the past have been adopted by
WINN L.J. The judge found the following relevant facts: the courts to all serious assurances of agreement, but
1. When the plaintiff builders ceased work on the as English law developed, it does not now permit in
defendant's house there was no dispute as to the general of such treatment of mere promises. In the more
amount, in terms of money, of the work they had done. specific field of discharge of monetary debt there has
2. After allowing due credits, the defendant in August, been some conflict of judicial opinion.
1964 owed the plaintiffs £482 13s. 1d. 3. The plaintiffs Where a cheque for a smaller sum than the amount due
submitted accounts and by letters of August 31 and is drawn by a person other than the debtor and
October 19 requested payment: the defendant ignored delivered in satisfaction of his debt, it is clear that the
the letters: he did not put any complaint into writing debt is discharged if the cheque be accepted on that
before November 28. 4. On November 13, the basis and duly paid; cf. Hirachand Punamchand v.
defendant's wife, on his behalf, telephoned to plaintiffs, Temple.33
offered to pay £300 in satisfaction of their account and In the instant case the debtor's own cheque was
said that this was all they would get: she did not base accepted, though not stipulated for by the creditor, as
her offer of a lesser amount on any dispute about the equivalent of cash, conditionally of course upon its
workmanship or any items charged: she said her being duly paid on presentation: such is the modern
husband could not pay more. The judge thought that he usage in respect of payments of money due, common,
could have paid the whole amount in the previous June though not yet universal, in domestic no less than
or July but was unable to say whether he could have commercial transactions. This court must now decide
done so in November. 5. The plaintiffs were hard the effect of that transaction.
pressed for money and therefore agreed through one Had this case arisen in 1883 it would have fallen to be
Donaldson to accept £300 in settlement of their account. determined in favour of the defendant by force of the
6. After Donaldson had agreed to take £300 he was decision of a Divisional Court of two judges, Grove J.
given the choice of taking it in cash or by a cheque and Huddleston B. in Goddard v. O'Brien,34 in which
drawn by the defendant: he was content to take a Cumber v. Wane,35 was distinguished and not followed.
cheque. 7. When a cheque for £300 was collected the Goddard's case36 came to be decided upon a case
next day a receipt was given, at the insistence of the stated by the
defendant's wife, including the words "in completion of 30 5 Co.Rep. 117a.
account." 8. The arrangement to pay by cheque was 31 (1854) 3 E. & B. 83.
merely incidental to the settlement agreement: it was 32 (1855) 15 C.B. 822.
arranged "to suit the plaintiffs' convenience." 33 [1911] 2 K.B. 330.
The judge summed up his conclusion in law upon those 34 9 Q.B.D. 37.
facts in the succinct phrase "this case did not fall under 35 1 Stra. 426.
the cheque 36 9 Q.B.D. 37.
29 9 App.Cas. 605. [*629]
[*628]
judge of the Southwark county court in which it was set
cases." He also said in his judgment that he had found out that the defendant in the action was indebted to the
the issue difficult in law: of that I am myself also plaintiffs in the sum of £125 odd for billiard table slates
conscious. sold and delivered by them to him. A representative of
The question to be decided may be stated thus: Did the the plaintiffs agreed with the defendant to accept the
defendant's agreement to give his own cheque for £300 sum of £100 in discharge of the debt of £125 odd and
in full settlement of his existing debt to the plaintiffs of thereupon the defendant gave to the plaintiffs a cheque

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for £100 payable on demand and the plaintiffs gave him after payment of the whole debt and costs from
a receipt stating that the cheque was taken "in proceeding to enforce payment of interest upon the
settlement of account of £127 7s. 9d. on said cheque judgment. Pinnel's Case47 and Cumber v. Wane48
being honoured." The cheque was duly honoured. No were expressly followed. Lord Selborne L.C. said49:
other consideration was given by the defendant or "The question, therefore, is nakedly raised by this appeal
received by the plaintiffs in satisfaction of the debt. The whether your Lordships are now prepared, not only to
county court judge held that there had been a good overrule, as contrary to law, the doctrine stated by Sir
accord and satisfaction by reason of the cheque being a Edward Coke to have been laid down by all the judges of
negotiable security. The question for the opinion of the the Common Pleas in Pinnel's Case50 in 1602, and
court was whether he was right in so ruling. Grove J. repeated in his note to Littleton, section 344 (2),51 but to
and Huddleston B. were of the opinion that he was right. treat a prospective agreement, not under seal, for
Grove J. said37: satisfaction of a debt, by a series of payments on account
"The difficulty arose from the rule laid down in Cumber v. to a total amount less than the whole debt, as binding in
Wane.38 But that doctrine has been much qualified, and I law, provided those payments are regularly made; the
am not sure that it has not been overruled." case not being one of a composition with a common
He referred to Sibree v. Tripp39 and treated it as "a debtor, agreed to, inter se, by several creditors."
direct authority that the giving of a negotiable security is Pausing there, it may be observed that the Lord
not within the rule of Cumber v. Wane."40 Huddleston Chancellor was considering in this passage the nature
B. was also of the opinion41 that "the doctrine of and effect of such an agreement rather than the effect of
Cumber v. Wane,42 if not actually overruled, has been its performance as a satisfaction. He went on to say52:
very much qualified." He approved43 the terms of a note "It may well be that distinctions, which in later cases have
in Smith's Leading Cases, 8th ed., p. 366, which was in been held sufficient to exclude the application of that
the following terms: doctrine (of Cumber v. Wane53 existed and were
"The general doctrine in Cumber v. Wane,44 and the improperly disregarded in Cumber v. Wane53; and yet
reason of all the exceptions and distinctions which have that the doctrine itself may be law, rightly recognised in
been engrafted on it, may perhaps be summed up as Cumber v. Wane,53 and not really contradicted by any
follows, viz., that a creditor cannot bind himself by a later authorities. And this appears to me to be the true
simple agreement to accept a smaller sum in lieu of an state of the case."
ascertained debt of a larger amount, such an agreement The Lord Chancellor then stated54 his understanding of
being nudum pactum. But, if there be any benefit, or even the doctrine to which he was referring, as stated in
any legal possibility of benefit, to the creditor thrown in, Pinners Case,55 to be
that additional weight would turn the scale and render the "that payment of a lesser sum on the day (it would of
consideration sufficient to support the agreement." course be the same after the day) in satisfaction of a
I interpose the comment that I find it impossible in the greater, cannot be any satisfaction for the whole,
instant case to visualise any benefit or legal possibility because it appears to the
of benefit to the builders which might derive from the 45 9 Q.B.D. 37.
receipt of the defendant's cheque for £300 instead of the 46 9 App.Cas. 605.
same amount of cash. 47 5 Co.Rep. 117a.
37 9 Q.B.D. 37, 39. 48 1 Stra. 426.
38 1 Stra. 426. 49 9 App.Cas. 605, 611.
39 15 M. & W. 23. 50 5 Co.Rep. 117a.
40 1 Stra. 426. 51 Co.Litt. 212b.
41 9 Q.B.D. 37, 40. 52 9 App.Cas. 605, 612.
42 1 Stra. 426. 53 1 Stra. 426.
43 9 Q.B.D. 37, 40. 54 9 App.Cas. 605, 612.
44 1 Stra. 426. 55 5 Co.Rep. 117a.
[*630] [*631]

Only two years after the decision in Goddard's case45 judges, that by no possibility a lesser sum can be a
the House of Lords in Foakes v. Beer46 had to consider satisfaction to the plaintiff for a greater sum."
the effect of an agreement between a judgment debtor He further said56:
and a judgment creditor that in consideration of the "If the question be … whether consideration is, or is not,
debtor paying down part of the judgment debt and costs given in a case of this kind, by the debtor who pays down
of paying the residue by instalments, the creditor would part of the debt presently due from him, for a promise by
not take any proceedings on the judgment. The House the creditor to relinquish, after certain further payments
held this to be a nudum pactum, being without on account, the residue of the debt, I cannot say I think
consideration, and that it did not prevent the creditor consideration is given, in the sense in which I have

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always understood that word as used in our law. It might In 1911, in the case already referred to of
be (and indeed I think it would be) an improvement in our Punamchand,67 Fletcher Moulton L.J. said68:
law, if a release or acquittance of the whole debt, on "I have grave doubts whether Goddard v. O'Brien69 was
payment of any sum which the creditor might be content rightly decided, because, when the facts are looked at, it
to receive by way of accord and satisfaction (though less appears that the cheque was there given, not in
than the whole) were held to be, generally, binding, substitution for the debt, but only as conditional payment
though not under seal … but I think it impossible … to of the amount, so that the case really stood on the same
treat such a release or acquittance as supported by any footing as payment of a less amount in discharge of a
new consideration proceeding from the debtor. All the greater."
authorities subsequent to Cumber v. Wane57 … such as Farwell L.J. in the same case said,70 referring to the
Sibree v. Tripp,58 Curlewis v. Clark59 and Goddard v. case of Day v. McLea71:
O'Brien,60 have proceeded upon the distinction, that, by "In that case, there being no consideration for the
giving negotiable paper or otherwise, there had been discharge of the balance of the debt, it was held that the
some new consideration for a new agreement, distinct creditor could retain the money, and sue for the balance."
from mere money payments in or towards discharge of In my judgment it is an essential element of a valid
the original liability." accord and satisfaction that the agreement which
It is clear that this speech did not deal with the effect of constitutes the accord should itself be binding in law,
the giving of any cheque or negotiable instrument in and I do not think that any such agreement can be so
respect of part of the debt due since it left any case binding unless it is either made under seal or supported
involving such an element upon one side: on the other by consideration. Satisfaction, viz., performance, of an
hand, it did go a long way to restore the authority of agreement of accord, does not provide retroactive
Pinnel's Case61 and Cumber v. Wane.62 validity to the accord, but depends for its effect upon the
It is further to be noted that the Lord Chancellor in the legal validity of the accord as a binding contract at the
last passage quoted emphasised the need for time when it is made: this I think is apparent when it is
consideration to support the accord and he said63: remembered that, albeit rarely, existing obligations of
"What is called 'any benefit, or even any legal possibility debt may be replaced effectively by a contractually
of benefit' in Mr. Smith's notes to Cumber v. Wane64, binding substitution of a new obligation.
(8th ed., p. 366) is not (as I conceive) that sort of benefit In my judgment this court should now decline to follow
which a creditor may derive from getting payment of part the decision in Goddard v. O'Brien72 and should hold
of the money due to him from a debtor who might that where a debtor's own cheque for a lesser amount
otherwise keep him at arm's length or possibly become than he indisputably owes to his creditor is accepted by
insolvent, but is some independent benefit, actual or the creditor in full satisfaction
contingent, of a kind which might in law be a good and 65 9 App.Cas. 607, 622.
valuable consideration for any other sort of agreement 66 Ibid. 615.
not under seal." 67 [1911] 2 K.B. 330.
56 9 App.Cas. 605, 613. 68 Ibid. 340.
57 1 Stra. 426. 69 9 Q.B.D. 37.
58 15 M. & W. 23. 70 [1911] 2 K.B. 330, 342.
59 3 Exch. 375. 71 22 Q.B.D. 610.
60 9 Q.B.D. 37. 72 9 Q.B.D. 37.
61 5 Co.Rep. 117a. [*633]
62 1 Stra. 426.
63 9 App.Cas. 607, 613. of the debt, the creditor is to be regarded, in any case
64 1 Stra. 426. where he has not required the payment to be made by
[*632] cheque rather than in cash, as having received the
cheque merely as conditional payment of part of what
Lord Blackburn made it clear in his speech that he had he was entitled to receive: he is free in law, if not in
felt hesitation in concurring as he did in the decision good commercial conscience, to insist upon payment of
because he felt convinced65 that the balance of the amount due to him from the debtor.
"all men of business, whether merchants or tradesmen, I would dismiss this appeal.
do every day recognise and act on the ground that Appeal dismissed with costs.
prompt payment of a part of their demand may be more
beneficial to them than it would be to insist on their rights
and enforce payment of the whole." A. H. B.
He remarked obiter66 that "if it had been a promissory
note the authorities are that it would have been a good
satisfaction." End of Document

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