1. Loh Chan Yan (Luo Zhanyan)(No. Pasport Singapura : S7206933a)2. Eastern Medical And HealthcareGroup Sdn Bhd(Sebelum Ini Dikenali Sebagai Foreholdy (M) Sdn Bhd)(No. Syarikat: 663089-U) … Plaintif-PlaintifDanUnited Overseas Bank (Malaysia) Bhd(No. Syarikat: 271809-K) … Defendan

  

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DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR

 

(BAHAGIAN DAGANG)

 

GUAMAN NO: 22NCC-364-09/2014

 

Dalam perkara Hartanah dipegang di bawah PN 5334 Lot 187 Seksyen 4 Bandar Petaling Jaya, Daerah Petaling Negeri Selangor

 

Dan

 

Dalam perkara Resital E dalam Perjanjian Jual Beli bertarikh 29.4.2008

 

Dan

 

Dalam perkara Borang Permohonan Pinjaman Perumahan United Overseas Bank (M) Berhad bertarikh 26.5.2008

 

Dan

 

Dalam perkara Surat Tawaran United Overseas Bank (M) Berhad bertarikh 8.9.2008

 

Dan

 

Dalam perkara Perjanjian Pinjaman yang dimasuki antara Loh Chan Yan (Luo Zhanyan) (No Pasport Singapura: S7206933A) dan United Overseas Bank (M) Berhad

 

Dan

 

Dalam perkara Aturan-aturan 5 dan 3, Kaedah-Kaedah Mahkamah Tinggi 1980

 

1

 

Dan

 

Dalam perkara Seksyen 41 Akta Relief Spesifik 1950

 

Dan

 

Dalam perkara Seksyen-seksyen 74 dan 76 Akta Kontrak 1950

 

Dan

 

Dalam perkara Aturan 92 Kaedah 4 Kaedah-Kaedah Mahkamah Tinggi 1980

 

ANTARA

 

1. LOH CHAN YAN (LUO ZHANYAN)

 

(NO. PASPORT SINGAPURA : S7206933A)

 

2. EASTERN MEDICAL AND HEALTHCARE GROUP SDN BHD

 

(sebelum ini dikenali sebagai Foreholdy (M) Sdn Bhd)

 

(NO. SYARIKAT: 663089-U) … PLAINTIF-PLAINTIF

 

DAN

 

UNITED OVERSEAS BANK (MALAYSIA BHD

 

(NO. SYARIKAT: 271809-K) … DEFENDAN

 

JUDGMENT

 

(After trial)

 

A. Introduction

 

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1. In this case, the defendant bank (Defendant) has refused to disburse a loan (Loan) to the first plaintiff (1st Plaintiff) on the ground that the 1st Plaintiff has failed to fulfil certain conditions of the Loan. This case is peculiar because the Defendant not only alleges that its own solicitors have failed to comply with its instruction in respect of the Loan but its witnesses have even testified that its former sales manager (who is materially involved in the Loan), cannot be called to give evidence because he is 11 mentally ill”.

 

2. This case raises the following questions:

 

(a) whether the second plaintiff company (2nd Plaintiff) (which has purchased real property and has claimed that the purchase is to be financed by the Loan) has a cause of action for breach of the Loan contract against the Defendant. This judgment will refer to the 1st and 2nd Plaintiffs as the “Plaintiffs”;

 

(b) what is the effect of a blank application form for the Loan which has been signed by the 1st Plaintiff but is filled up subsequently by the Defendant’s officer?;

 

(c) whether the Defendant can deny letters sent by the Defendant’s own conveyancing solicitor (Defendant’s Solicitor);

 

(d) whether the Defendant has breached the Loan contract by failing to disburse the Loan sum to the 1st Plaintiff;

 

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(e) whether an adverse inference under s 114(g) of the Evidence Act 1950 (EA) should be drawn against the Defendant for failing to call the Defendant’s Solicitor and the bank manager involved in the Loan, to testify in this case. Related to this question is the rebuttable presumption that a person is of sound mind and is competent to testify as a witness under s 118 EA unless there is expert medical evidence under s 45(1) and (2) EA to rebut such a presumption;

 

(f) if the Defendant has breached the Loan agreement, has the 1st Plaintiff suffered any loss or damage which can be claimed under s 74(1) and (2) of the Contracts Act 1950 (CA)?;

 

(g) the legal and ethical duties of solicitors in preparing witness statements pursuant to Order 38 rule 2(1) Rules of Court 2012 (RC); and

 

(h) whether the court should allow questions to be asked regarding a person’s sanity under ss 151 and 152 EA when there is no expert medical evidence to prove otherwise.

 

B. Plaintiffs’ case

 

3. On 29.4.2008, the 2nd Plaintiff purchased a single storey semi-detached house (Property) from Puan Yuhanis binti Hassan and Puan Firdaus binti Hassan (Vendors) by way of a sale and purchase agreement

 

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(SPA). According to the 1st Plaintiff, the 2nd Plaintiff is a “family company’ and the Property has been purchased for the purpose of investment.

 

4. The 1st Plaintiff is a director of the 2nd Plaintiff.

 

5. In respect of the SPA, the 2nd Plaintiff was represented by an Advocate and Solicitor, Ms. Lim Swee Kim (SP1), from Messrs “SK Lim & Associates” (Messrs SKL).

 

6. To finance the 2nd Plaintiff’s purchase of the Property, in May 2008, the 1st Plaintiff applied for a housing loan from the Defendant. According to the 1st Plaintiff’s evidence –

 

(a) the 1st Plaintiff provided a copy of the SPA to the Defendant’s “Team Manager of the Alternative Sales Channel – Mortgage Division”, Ms. Rachel Chua Pooi Leng (SD1), for the purpose of the Loan application. The 1st Plaintiff knows SD1 earlier because a company (wherein the 1st Plaintiff is a director), has previously borrowed money from the Defendant and the 1st Plaintiff has dealt with SD1;

 

(b) SD1 and the Defendant’s sales manager at the time, Mr. James Sia Chong Wee (Mr. Sia), had knowledge that the Plaintiffs had purchased the Property for investment;

 

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(c) the 1st Plaintiff was given a blank copy of a “Home Loan Application Form” (Loan Application Form) by SD1. The 1st Plaintiff was asked by SD1 to sign the blank Loan Application Form and was informed by SD1 that SD1 would fill up the Loan Application Form for the 1st Plaintiff. The 1st Plaintiff had no knowledge of what SD1 had stated in the Loan Application Form;

 

(d) by way of a letter dated 8.9.2008, the Defendant offered a loan of RM600,000 (Loan Sum) to the 1st Plaintiff (Defendant’s Letter dated 8.9.2008). The 1st Plaintiff accepted the Defendant’s Letter dated 8.9.2008 on 28.10.2008;

 

(e) on 6.11.2008, the 1st Plaintiff went to the office of the Defendant’s Solicitors, Messrs Yeap & Yong (Messrs YY), to sign the following documents –

 

(i) the Loan agreement; and

 

(ii) the charge instrument over the Property in favour of the Bank (Form 16A).

 

In the Messrs YY’s office, the 1st Plaintiff was given a copy of Messrs YY’s letter dated 5.11.2008 (Messrs YY’s Letter dated 5.11.2008);

 

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(f) there was an exchange of letters between Messrs SK Lim and

 

Messrs YY as follows –

 

(i) Messrs YY sent a letter dated 14.11.2008 to Messrs SKL (Messrs YY’s Letter dated 14.11.2008);

 

(ii) Messrs SK Lim’s letter dated 3.12.2008 to Messrs YY (Messrs SKL’s Letter dated 3.12.2008) which enclosed a copy of the SPA;

 

(ii) Messrs YY sent a letter dated 9.12.2008 to the Defendant which had been copied to the 1st Plaintiff (Messrs YY’s Letter dated 9.12.2008) enclosing, among others, copies of Form 16A, forms to enter private caveat over the Property and the results of a land search regarding the Property;

 

(iii) Messrs SKL’s letters dated 15.12.2008, 17.12.2008 and 23.12.2008 to Messrs YY (Messrs SKL’ Letters dated 15.12.2008, 17.12.2008 and 23.12.2008) enclosing certain documents;

 

(iv) Messrs YY’s letter dated 24.12.2008 to Messrs SKL (Messrs YY’s Letter dated 24.12.2008); and

 

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(v) Messrs SKL’s letter dated 24.12.2008 to Messrs YY (Messrs SKL’s Letter dated 24.12.2008) enclosing a document requested by Messrs YY;

 

(g) the 1st Plaintiff claims that she has fulfilled all the terms and conditions of the Loan agreement. All the necessary documents and information have been provided by the 1st Plaintiff and Messrs SKL to Messrs YY;

 

(h) the 1st Plaintiff received a letter dated 30.12.2008 (Messrs YY’s Letter dated 30.12.2008) which stated as follows –

 

“We refer to the above matter and the telephone conversation between your Ms. Loh [1st Plaintiff] and our Ms. Lylian on 26/12/2008.

 

As spoken, please note that the Financier [Defendant] is unable to return the duly executed documents to us UNTIL AND UNLESS they are in receipt of your confirmation whether you are agreeable to the reduction on the margin of the Loan.

 

Kindly therefore confirm with the Financier as soon as possible.

 

Please note that we shall not be held responsible for any delay on the release of the Loan and/or any late payment interest/penalty incurred.”

 

(emphasis added);

 

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(i) the 1st Plaintiff received a letter dated 2.1.2009 from the Defendant (Defendant’s Letter dated 2.1.2009). The Defendant’s Letter dated

 

2.1.2009 had been signed by Mr. Sia as the Defendant’s “MortgageSales Manager’ and stated, among others, as follows (with grammatical errors) –

 

“Dear Ms. Loh [1st Plaintiff]

 

Subject: Application for Credit Facility for A/A: 382/071176 refinancing dean property case with loan amount RM 600k [sic]

 

As spoken, please take note that upon submission of the loan to UOB [Defendant], the property was claimed as free from encumbrance as claimed by the sales/customer (take note that as per Housing Loan Application Form signed by customer that it was declared as ‘free from encumbrance’) [sic].

 

In view of this we will remain the condition of CAS/LO and to treat this as a free from encumbrance [sic]. Therefore customer should settled [sic] the remaining purchase price on their own source before refinancing it with us under our existing terms and condition offered to them earlier as per LO dated 8/9/2008 [sic]. All the LOF other conditions will remain [sic].”

 

(emphasis added);

 

(j) the 1st Plaintiff received a “Short Message Service” (SMS) on

 

2.1.2009 from Mr. Sia (SMS dated 2.1.2009) which stated –

 

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“U have to go pudu branch to open flexi mortgage-loan a/c with RM200 set up fees, and pls bring lof go along. Pls action fast. Tx james uob”;

 

(k) after receiving SMS dated 2.1.2009, the 1st Plaintiff was “very confused” with the Defendant’s position. The 1st Plaintiff called Mr. Sia and asked him about the SMS dated 2.1.2009. Mr. Sia informed the 1st Plaintiff to wait for the Defendant’s reply;

 

(l) the 1st Plaintiff did not receive any response from the Defendant. The 1st Plaintiff instructed Messrs SKL to write a letter dated

 

9.1.2009 to Messrs YY to inquire about the disbursement of the Loan Sum as the extended completion date of the SPA was on

 

9.1.2009 (Messrs SKL’s Letter dated 9.1.2009). Messrs SKL’s Letter dated 9.1.2009 requested Messrs YY to revert on an urgent basis;

 

(m) Messrs YY replied to Messrs SKL’s Letter dated 9.1.2009 by way of a letter dated 12.1.2009 (Messrs YY’s Letter dated 12.1.2009). Messrs YY’s Letter dated 12.1.2009 stated that Messrs YY would reply to Messrs SKL’s Letter dated 9.1.2009 upon receipt of instruction from the Defendant “in due course”;

 

(n) on 13.1.2009, the 1st Plaintiff received a SMS from Mr. Sia (SMS dated 13.1.2009) which stated –

 

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“As spoken to ur father. Pis raise a cancellation letter for me to help u to do the loan cancel. Please fax to me at +7980-4533 james sia uob”

 

(emphasis added);

 

(o) due to the Defendant’s refusal to disburse the Loan Sum, the SPA could not be completed. The Plaintiffs claim that the Defendant’s refusal to disburse the Loan Sum constitutes a breach of the Loan agreement;

 

(p) the 2nd Plaintiff applied to Public Bank Bhd. (PBB) for a loan but this was rejected by way of PBB’s letter dated 22.6.2009 (PBB’s Letter). The Plaintiffs adduced a report by Bank Negara Malaysia’s Credit Bureau which showed that the 1st Plaintiff had a loan of RM600,000 from the Defendant (CCRIS Entry);

 

(q) the 1st Plaintiff denied the following suggestions by the Defendant’s learned counsel during cross-examination –

 

(i) on 30.12.2008, the 1st Plaintiff asked Mr. Sia to change the Loan agreement so as to finance the purchase of the Property; and

 

(ii) Mr. Sia requested a letter of cancellation of the Loan contract to enable the Defendant to “remove” the CCRIS Entry.

 

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The Defendant did not call Mr. Sia to testify in this case. I will discuss later the effect and appropriateness of the Defendant’s learned counsel’s cross-examination of the 1st Plaintiff regarding Mr. Sia’s role in this case;

 

(r) the 1st Plaintiff alleges that she has been deprived of her “legitimate expectation” under the Loan agreement. The Plaintiffs aver that the Plaintiffs have suffered the following loss and damage due to the Defendant’s breach of the Loan agreement –

 

(i) a deposit of RM55,000 paid to the Vendors under the SPA has been forfeited;

 

(ii) the Plaintiffs paid RM6,750 for Messrs SKL’s legal fees;

 

(iii) loss of value of the Property; and

 

(iv) loss of profit to be assessed by this court. This is because the Property was purchased for investment; and

 

(s) the Plaintiffs instructed their then solicitors to issue a letter of demand dated 13.4.2009 to the Defendant regarding the Defendant’s breach of the Loan Agreement (Plaintiffs’ Demand dated 13.4.2009).

 

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7. SP1 is called to the Malaysian Bar on 12.4.1997 and since then, SP1

 

has been practising as an Advocate and Solicitor (A&S). SP1 testified as

 

follows:

 

(a) SP1 has been practising conveyancing for the last 10 years;

 

(b) SP1 started her sole proprietorship, Messrs SKL, on 1.3.2000; and

 

(c) SP1 corroborated the 1st Plaintiff’s evidence.

 

8. Mr. Loh Yoon Fah (SP3) is the 1st Plaintiff’s father and a director of the

 

2nd Plaintiff. SP3 gave the following evidence:

 

(a) SP3’s testimony supports the 1st Plaintiff’s evidence;

 

(b) SP3 denied requesting a copy of the Defendant’s Letter dated

 

2.1.2009 so as to obtain funds from the Defendant to settle the balance purchase price of the Property (Balance Purchase Price);

 

(c) despite the contents of SMS dated 13.1.2009, Mr. Sia did not telephone SP3; and

 

(d) SP3 denied the following suggestions made by the Defendant’s learned counsel during cross-examination –

 

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(i) on 2.1.2009, SP3 “confirmed’ with Mr. Sia to proceed with the “existing Letter of Offer’;

 

(ii) SP3 spoke to Mr. Sia on 2.1.2009;

 

(iii) SP3 told Mr. Sia that SP3 would settle the Balance Purchase Price “within three days”; and

 

(iv) Mr. Sia had requested a letter from SP3 to “remove” the CCRIS Entry.

 

The effect and appropriateness of the Defendant’s learned counsel’s cross-examination of SP3 regarding Mr. Sia (who has not been called by the Defendant to testify in this case), will be discussed later in this judgment.

 

C. Defendant’s case

 

9. SD1 gave the following evidence in her witness statement:

 

(a) the 1st Plaintiff initially requested for a loan of RM900,000 for the 2nd Plaintiff, a “family company’ of the 1st Plaintiff, to purchase a piece of property. According to the 1st Plaintiff, RM900,000 was 90% of the value of the property to be purchased by the 2nd Plaintiff;

 

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(b) the 1st Plaintiff then informed SD1 that the 2nd Plaintiff had purchased the Property at the agreed price of RM550,000. SD1 told the 1st Plaintiff that if the purpose of the loan was to finance the purchase of the Property, with a remaining lease of less than 60 years, the Defendant would only offer a loan up to 60% of the purchase price or the market value of the Property, whichever was lower. As the purchase price of the Property was RM550,000, the maximum loan which could be offered by the Defendant was RM330,000;

 

(c) SD1 suggested to the 1st Plaintiff that the 1st Plaintiff should settle the existing loan in respect of the Property and apply for a loan for her personal investment with a “clean title” over the Property as security for the loan. In such a case, the Defendant would “consider’ a loan for personal investment of 60% of the market value of the Property, namely RM600,000. The 1st Plaintiff agreed to this proposal, namely, the 1st Plaintiff would settle the purchase of the Property with other funds and to obtain a loan from the Defendant with the security of a third party charge on a “clean title” over the Property;

 

(d) based on the 1st Plaintiff’s representation that that the 1st Plaintiff would settle the Balance Purchase Price, a fixed Loan Sum of RM600,000 was approved by the Defendant for the 1st Plaintiff’s personal investment. The Defendant’s first letter of offer dated

 

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19.6.2008 (Defendant’s Letter dated 19.6.2008) was therefore issued to the 1st Plaintiff;

 

(e) the 1st Plaintiff requested for the fixed loan to be converted to a “flexi-mortgage facility’. Such a request was accepted by the Defendant which then issued a second letter of offer dated

 

22.7.2008 (Defendant’s Letter dated 22.7.2008);

 

(f) the 1st Plaintiff further requested for the loan tenure to be extended from 10 to 20 years. This request was also accepted by the Defendant and this led to the issuance of the Defendant’s Letter dated 8.9.2008. SD1 and Mr. See Chun Hong (SD2) explained the contents of the Defendant’s Letter dated 8.9.2008 to the 1st Plaintiff in a meeting with the 1st Plaintiff on 28.10.2008 (Meeting on 28.10.2008). At the Meeting on 28.10.2008, SD1 “emphasised” to the 1st Plaintiff that the 1st Plaintiff had to settle the Balance Purchase Price before the Loan Sum could be released to the 1st Plaintiff;

 

(g) by way of a letter dated 8.9.2008 by the 1st Plaintiff to the Defendant, the 1st Plaintiff agreed to the appointment of Messrs YY for the preparation of the loan documentation;

 

(h) SD1 had been informed by Messrs YY that Messrs YY had reminded the 1st Plaintiff to settle the Balance Purchase Price. SD1

 

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had also reminded the 1st Plaintiff to settle the Balance Purchase Price;

 

(i) the 1st Plaintiff could not settle the Balance Purchase Price because the 1st Plaintiff had informed SD1 that the 1st Plaintiff had “cash-flow problems”. The 1st Plaintiff then requested the Defendant to finance the purchase of the Property for RM600,000 against a purchase consideration of RM550,000. Such a request was contrary to the Defendant’s “policy’ and was not agreed by the Defendant; and

 

(j) SD1 informed the 1st Plaintiff that the Defendant could only offer RM330,000 for the financing of the purchase of the Property, namely 60% of the purchase price of the Property. The 1st Plaintiff “first indicated verbally’ that the 1st Plaintiff would accept this option but subsequently, the 1st Plaintiff “changed her mind’.

 

10. After tendering SDI’s witness statement, the Defendant’s learned counsel applied to question orally SD1. SD1 testified orally during examination-in-chief that SD1 heard Mr. Sia had allegedly suffered a depression. I then reminded the Defendant’s learned counsel that such evidence constituted oral hearsay. To the credit of the Defendant’s learned counsel, he did not pursue this matter regarding Mr. Sia’s mental health. Subsequently, to my surprise, the Plaintiffs’ learned counsel cross-examined SD1 in respect of Mr. Sia’s mental health and SD1 testified that SD1 “heard” Mr. Sia locked himself in his house or apartment for more than 1 week and the door to his house or apartment

 

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had to be broken into. I then “cautioned” the Plaintiffs’ learned counsel on his cross-examination in respect of Mr. Sia’s soundness of mind. I will explain later in this judgment why such a line of questioning by both learned counsel for the Plaintiffs and Defendant may not be proper.

 

11. During SDI’s cross-examination –

 

(a) SD1 “forgot’ whether the 1st Plaintiff signed a blank Loan Application Form. In fact, SD1 could not recall the 1st Plaintiff signing the Loan Application Form in SDI’s presence;

 

(b) SD1 testified that the Defendant did not obtain a valuation report regarding the Property. The Defendant only got a “verbal indication” of the value of the Property;

 

(c) SD1 agreed with the Plaintiffs’ learned counsel that from the SPA, the Defendant knew from the beginning that the Property had been charged to Malayan Banking Bhd. (MBB);

 

(d) after SD1 left the Defendant, Mr. Sia “took over this case” from SD1;

 

(e) the 1st Plaintiff and not the Defendant, appointed Messrs YY in this case; and

 

(f) SD1 surprisingly agreed with the Plaintiffs’ learned counsel that the Defendant had no “policy” as stated in SD1’s witness statement (the

 

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reason the Defendant allegedly rejected the 1st Plaintiff’s request to finance the purchase of the Property for RM600,000).

 

12. SD2 was the Defendant’s sales officer at the material time. According to SD2’s witness statement –

 

(a) SD2 handed the Defendant’s Letter dated 8.9.2008 to the 1st Plaintiff. The 1st Plaintiff informed SD2 that the 1st Plaintiff would “verify’ the terms of the Defendant’s Letter dated 8.9.2008 with the 1st Plaintiff’s lawyers;

 

(b) SD1 and SD2 met the 1st Plaintiff at the Meeting on 28.10.2008. During the Meeting on 28.10.2008 –

 

(i) SD1 explained the terms and conditions of the Defendant’s Letter dated 8.9.2008 to the 1st Plaintiff before the 1st Plaintiff accepted the same; and

 

(ii) SD1 emphasised that the 1st Plaintiff had to settle the Balance Purchase Price before the Defendant could release the Loan Sum to the 1st Plaintiff; and

 

(c) SD2 faxed the Defendant’s Letter dated 8.9.2008 to Messrs YY and informed a lady clerk in Messrs YY named “Jenny’, among others, that the 1st Plaintiff would “procure” the Balance Purchase Price “in order to create a third party legal charge over the Property’.

 

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13. The Defendant’s learned counsel orally questioned SD2 after tendering SD2’s witness statement. To the oral questions of the Defendant’s learned counsel, SD2 gave the following evidence:

 

(a) Mr. Sia is no longer working for the Defendant; and

 

(b) SD2 did not keep in touch with Mr. Sia. SD2 could not locate Mr. Sia as SD2 did not have Mr. Sia’s current address.

 

14. When SD2 was cross-examined by the Plaintiffs’ learned counsel, SD2 testified as follows:

 

(a) SD2 admitted that it was SD2’s handwriting on the Loan Application Form. SD2 could not remember whether SD2 filled up the Loan Application Form based on documents given by the 1st Plaintiff. SD2 could not even remember where SD2 filled up the Loan Application Form;

 

(b) after SD2 had filled up the Loan Application Form, SD2 passed it to SD1;

 

(c) the Defendant has tendered as evidence an internal document entitled “LOAN SUBMISSION FORM for Property Related Loans (PSFD)” purportedly dated 26.5.2008 (Defendant’s Internal Document dated 26.5.2008). The Defendant’s Internal Document

 

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dated 26.5.2008 stated that 2 valuers, “JS Valuer’ and “Stocker Robert’ (2 Valuers) had given a “Current Market Value” of RM1 million for the Property. SD2 however stated that no formal valuation of the Property was done by the 2 Valuers. SD2 verbally confirmed with the 2 Valuers regarding the value of the Property;

 

(d) the Defendant’s Internal Document dated 26.5.2008 stated that “client is buying sub-sales now but will direct paid full purchase price to vendor. And at the same time apply for our bank loan.” (with grammatical errors). SD2 testified that this was SDI’s handwriting; and

 

(e) after SD2 left the Defendant, Mr. Sia “took over this case” from SD2. SD2 admitted that SD2 did not look for Mr. Sia “recently’.

 

15. Ms. Heng Hui Fung is the Defendant’s Group Sales Manager (SD3). SD3

 

gave the following evidence:

 

(a) Mr. Sia resigned from the Defendant on 5.1.2010. SD3 did not keep in touch with Mr. Sia;

 

(b) during April and May 2015, SD3 tried unsuccessfully to call Mr. Sia on his mobile telephone number 017-3330622 [as provided by Mr. Sia to the Defendant’s Human Resource Department (HRD)]. All of SD3’s calls to the above mobile telephone number had been directed to “voice mails”. SD3 admitted during cross-examination –

 

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(i) as Mr. Sia has left the Defendant’s employment on 5.1.2010, there is a possibility that Mr. Sia may have changed his mobile telephone number; and

 

(ii) the Defendant did not check with the telecommunication company on whether Mr. Sia had a new mobile telephone number;

 

(c) SD3’s witness statement (WS-SD3) stated that on 16.5.2015, SD3 went to Mr. Sia’s apartment at the address [at Lot 03-22, City Height Apartment, Jalan Sri Sg. Chua, Kajang (Kajang Address)] provided by Mr. Sia to HRD. The door to the aforesaid apartment was locked. SD3 knocked on the said door for “quite some time” but there was no response. During cross-examination –

 

(i) SD3 agreed with the Plaintiffs’ learned counsel that there was a possibility that Mr. Sia might no longer be staying at the Kajang Address; and

 

(ii) SD3 admitted that SD3 did not go to the Kajang Address on 16.5.2015! According to SD3, Ms. Yeo Shea Yee, the Defendant’s Sales Manager (Ms. Yeo), went to the Kajang Address. Ms. Yeo has not been called by the Defendant to testify in this case;

 

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(d) SD3 contacted Mr. Sia’s former colleagues, namely SD1 and SD2. Both SD1 and SD2 could not locate Mr. Sia. According to SD1 and SD2, Mr. Sia had gone back to his hometown in Johore but none of them had Mr. Sia’s hometown address. SD3 was informed by SD1 and SD2 that Mr. Sia was “mentally ill”;

 

(e) SD3 admitted during cross-examination that –

 

(i) the Defendant has the name and National Registration Identity Card number (NRIC No.) of Mr. Sia;

 

(ii) SD3 did not think the Defendant had written a letter to Mr. Sia to make an appointment to visit Mr. Sia; and

 

(iii) the Defendant did not take out any advertisement in the local newspapers to ask Mr. Sia to contact the Defendant.

 

16. Mr. Wee Hock Kiong (SD4) is the Defendant’s “Executive Director, Country Head – Retail’. SD4’s witness statement states as follows:

 

(a) the Defendant’s Letter dated 8.9.2008 provided a Loan Sum of RM600,000 for the 1st Plaintiff’s personal investment. The Defendant did not and could not grant a loan of RM600,000 to the 1st Plaintiff to finance the purchase of the Property worth RM550,000. This is because no bank will grant a loan to finance the purchase of a property for a sum which exceeds the price of the property;

 

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(b) the SPA is not relevant to the Loan in this case except that the Property is to be the security for the Loan;

 

(c) before the issuance of the Defendant’s Letter dated 8.9.2008, the 1st Plaintiff represented to the Defendant that the 1st Plaintiff would settle the Balance Purchase Price but the 1st Plaintiff failed to do so;

 

(d) the 1st Plaintiff declared in the Loan Application Form that the Property was free from encumbrances. If the 1st Plaintiff had applied for a loan to finance the purchase of the Property, the Loan Application Form would have been completed differently and the purpose of the Defendant’s Letter dated 8.9.2008 would be stated differently;

 

(e) the Defendant’s policy is that if the loan is to finance the purchase of the Property worth RM550,000, the Defendant can only offer a loan of RM330,000 which is 60% of the price of the Property;

 

(f) the 1st Plaintiff has failed to satisfy one “precondition” of the Loan, namely, to procure the settlement of the Balance Purchase Price so as to enable the Defendant to create a third party legal charge over the Property;

 

(g) the Defendant could not locate Mr. Sia despite “numerous attempts”; and

 

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(h) the CCRIS Entry had merely reported that a loan had been granted by the Defendant to the 1st Plaintiff and such a statement was true. The CCRIS Entry did not show that the Loan Sum had been disbursed to the 1st Plaintiff. The CCRIS Entry had not been cancelled because the Loan had not been cancelled. All that the 1st Plaintiff had to do, was to issue a letter to cancel the Loan.

 

17. During SD4’s cross-examination –

 

(a) SD4 testified that SD4 was not involved in the negotiations of the terms and conditions of the Loan with the 1st Plaintiff. SD4’s knowledge of this case was based on the submission from the Defendant’s sales team. SD4 agreed with the Plaintiffs’ learned counsel that SD4 had no personal knowledge of this matter. SD4 admitted that SD4 did not know whether the 1st Plaintiff had made the representation to the Defendant that the 1st Plaintiff would settle the Balance Purchase Price;

 

(b) in the Defendant’s Internal Document dated 26.5.2008, the “Facility” was described as “IHL”. SD4 stated that “IHL” meant 11 Intelligent Housing Loan”. SD4 admitted that the 1st Plaintiff had applied for a housing loan from the Defendant. SD4 however disagreed that purchase of the Property amounted to a personal investment by the 1st Plaintiff;

 

(c) SD4 agreed with the Plaintiffs’ learned counsel that the Defendant’s policy had not been adduced as evidence in this court; and

 

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(d) SD4 admitted that there was no “black and white” that the Defendant

 

had indeed offered RM330,000 loan to the 1st Plaintiff.

 

18. The last witness for the Defendant is Ms. Ho Yip Chin, the Defendant’s “First Vice President’ (SD5). SD5’s evidence is startling. According to SD5 –

 

(a) Messrs YY’s Letter dated 14.11.2008 to Messrs SKL was not copied to the Defendant although Messrs YY’s Letter dated 14.11.2008 stated that such a letter was “c.c [Defendant]’. SD5 alleged that Messrs YY’s Letter dated 14.11.2008 was “not in accordance with” the Defendant’s “requirements/conditions” as stated in the Defendant’s Letter dated 8.9.2008. SD5 further averred that Messrs YY’s Letter dated 14.11.2008 had not been authorised by the Defendant!;

 

(b) the Defendant sent a letter dated 3.11.2008 to Messrs YY (Defendant’s Letter dated 3.11.2008) which enclosed a copy of the Defendant’s Letter dated 8.9.2008. SD5 testified that by way of the Defendant’s Letter dated 3.11.2008, Messrs YY had been “instructed to ensure that all conditions to be fulfilled under the [Defendant’s Letter dated 8.9.2008]’ were complied with before the Defendant is advised by Messrs YY to release the Loan Sum;

 

(c) the Defendant did not furnish the SPA to Messrs YY because the facility granted to the 1st Plaintiff was for the 1st Plaintiff’s personal investment and not to finance the purchase of the Property;

 

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(d) on 11.12.2008, the Defendant received a copy of Messrs YY’s Letter dated 9.12.2008 which enclosed, among others, Forms 16A (duly signed by the 1st Plaintiff), forms to enter private caveat over the Property, SPA, land search results regarding the Property. Messrs YY’s Letter dated 9.12.2008 requested the Defendant to provide an undertaking to the Vendors. SD5 alleged that such a request did not comply with the Defendant’s Letter dated 8.9.2008 and was not in accordance with the purpose of the Loan as stated in the Defendant’s Letter dated 8.9.2008;

 

(e) SD5 highlighted to Mr. Sia the inconsistency between the Defendant’s Letter dated 8.9.2008 and Messrs YY’s Letter dated 9.12.2008. On 30.12.2008, Mr. Sia informed SD5 that the 1st Plaintiff requested the Defendant to finance the purchase of the Property as the 1st Plaintiff was unable to settle the Balance Purchase Price. Mr. Sia informed the 1st Plaintiff that the Defendant could only offer financing of 60% of the purchase price of the Property, namely RM330,000 (Defendant’s Option). The 1st Plaintiff initially indicated verbally that the 1st Plaintiff would accept the Defendant’s Option but subsequently, the 1st Plaintiff changed her mind;

 

(f) on 2.1.2009, Mr. Sia informed SD5 that Mr. Sia spoke to the 1st Plaintiff and SP3. Both the 1st Plaintiff and SP3 informed Mr. Sia that they would settle the Balance Purchase Price using their own funds and the Loan Sum would remain at RM600,000 for personal investment as per the Defendant’s Letter dated 8.9.2008;

 

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(g) Messrs YY’s Letter dated 30.12.2008 was issued pursuant to the Defendant’s Option given by the Defendant to the 1st Plaintiff. The 1st Plaintiff did not respond to Messrs YY’s Letter dated 30.12.2008;

 

(h) the Defendant replied to Messrs YY’s Letter dated 30.12.2008 by way of a letter dated 2.1.2009 (Defendant’s Letter dated 2.1.2009 to Messrs YY). According to the Defendant’s Letter dated 2.1.2009 to Messrs YY, the Defendant had amended Form 16A. The Defendant did not execute the form to enter private caveat over the Property. Nor did the Defendant provide an undertaking to the Vendors;

 

(i) the Defendant could not release any part of the Loan Sum because the 1st Plaintiff could not procure an unencumbered title to the Property which would enable the Defendant to secure a first legal charge over the Property in the Defendant’s favour;

 

(j) Messrs YY’s Letter dated 14.11.2008 (to Messrs SKL) was not in accordance with the Defendant’s Letter dated 8.9.2008. SD5 alleged that MBB did not provide any “redemption statement’ cum undertaking. The 1st Plaintiff only furnished a “redemption statement’ cum undertaking from Resolution Alliance Sdn. Bhd. (RASB) which did not comply with Messrs YY’s Letter dated 14.11.2008. Messrs YY’s Letter dated 24.11.2008 (to Messrs SKL) requested again for a “redemption statement’ cum undertaking from MBB; and

 

(k) as the 1st Plaintiff had failed to comply with the terms and conditions of the Loan, the Loan Sum could not be disbursed by the Defendant.

 

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19. SD5 admitted the following during cross-examination:

 

(a) SD5 was not involved in any negotiations regarding this case.

 

(b) SD5 was not involved in the issuance of the following letters –

 

(i) Defendant’s Letter dated 8.9.2008 (to the 1st Plaintiff);

 

(ii) Defendant’s Letter dated 3.11.2008 (to Messrs YY);

 

(iii) Defendant’s Letter dated 2.1.2009 (to the 1st Plaintiff); and

 

(iv) Defendant’s Letter dated 2.1.2009 to Messrs YY.

 

SD5 did not issue any letter on the Defendant’s behalf in this case;

 

(c) SD5 had no personal knowledge whether the Defendant had received the following letters –

 

(i) Messrs YY’s Letter dated 5.11.2008 (to the 1st Plaintiff);

 

(ii) Messrs YY’s Letter dated 14.11.2008 (to Messrs SKL); and

 

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(iii) Messrs YY’s Letter dated 30.12.2008 (to the 1st Plaintiff);

 

(d) SD5 had no personal knowledge whether the SPA had been furnished to Messrs YY;

 

(e) SD5 did not personally check the documents provided to the Defendant by Messrs YY;

 

(f) Mr. Sia did not inform SD5 personally;

 

(f) SD5 had no personal knowledge whether the Defendant’s Option had been offered to the 1st Plaintiff; and

 

(g) SD5 did not have personal knowledge that the “redemption statement’ cum undertaking from RASB did not comply with Messrs YY’s Letter dated 14.11.2008. SD5 was not even aware of Messrs SKL’s Letter dated 24.12.2008 which enclosed a copy of the High Court order dated 17.4.2008 which, among others, vested certain assets of MBB in RASB (Vesting Order)

 

D. Legal proceedings

 

20. The Plaintiffs filed this suit by way of an originating summons (OS). The Plaintiffs then obtained leave of court to amend the OS (Amended OS).

 

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21. The Amended OS prayed for, among others, the following orders:

 

(a) a declaration that the loan agreement entered into between the 1st Plaintiff and/or 2nd Plaintiff with the Defendant had been wrongfully repudiated by the Defendant;

 

(b) a declaration that the Defendant has breached –

 

(i) the loan agreement entered into between the 1st Plaintiff and/or 2nd Plaintiff with the Defendant; and

 

(ii) the Defendant’s Letter dated 8.9.2008;

 

(c) the Defendant to pay to the 2nd Plaintiff RM55,000 which has been forfeited under the SPA [Prayer (c)];

 

(d) the Defendant to pay to the 2nd Plaintiff the difference between the purchase price of the Property of RM550,000 and the market value of the Property on the extended completion date of the SPA, 9.1.2009 [Prayer (d)];

 

(e) loss of profits arising from the breach of the loan agreement by the Defendant (whereby the 2nd Plaintiff could not purchase and own the Property) which will be assessed by the court [Prayer (e)];

 

(f) general damages to be assessed [Prayer (f)];

 

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(g) exemplary damages [Prayer (g)];

 

(h) interest at the rate of 8% per annum on Prayers (c) to (g) from the date of filing of the OS until date of full payment; and

 

(i) costs.

 

22. On 12.5.2010, the High Court allowed the Amended OS (High Court’s Decision) but on appeal by the Defendant to the Court of Appeal, the High Court’s Decision was reversed by the Court of Appeal on 2.10.2012 (Court of Appeal’s Decision).

 

23. According to the Court of Appeal’s Decision, this case was remitted to the High Court and the OS “converted” to a writ. Hence, the trial of this case before this court.

 

E. 2nd Plaintiff has no cause of action for breach of Loan contract against Defendant

 

24. It is clear that the Loan is solely between the 1st Plaintiff and Defendant. The 2nd Plaintiff is neither party nor privy to the Loan contract. As such, the 2nd Plaintiff has no cause of action for breach of the Loan agreement against the Defendant based on the doctrine of privity of contract.

 

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25. The doctrine of privity of contract has been affirmed by the 3 following decisions of our apex courts:

 

(a) the Privy Council’s decision delivered by Lord Wilberforce in Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 170, at 174;

 

(b) the judgment of Gopal Sri Ram JCA (as he then was) in the Federal Court case of Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393, at 431; and

 

(c) the Federal Court’s judgment delivered by Ahmad Fairuz CJ in Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 MLJ 743, at 751-752.

 

26. In Pancaran Gayabina Sdn Bhd v Chew Yong See [2015] 3 AMR 480, at paragraph 20, I followed Kepong Prospecting Ltd and Badiaddin as

 

follows:

 

“20. I am of the considered view that the 2nd Defendant’s receipt of the Service Fee does not mean that the 2nd Defendant is party or privy to the Facility Agreement concluded between the Plaintiff and the 1st Defendant. My view is premised on the following reasons:

 

(a) as explained in the above Part I(2) –

 

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(i) the SOC had pleaded a concluded Facility Agreement between the Plaintiff and the 1st Defendant only; and

 

(ii) there could not be any contract between the Plaintiff and the 2nd Defendant because there was no offer from the 2nd Defendant. Nor was there any consideration by the 2nd Defendant;

 

(b) paragraph 4(v) SOC has expressly pleaded that the 2nd Defendant has received the Service Fee not for the 2nd Defendant himself but “on behalf of the 1st Defendant”;

 

(c) I rely on the Privy Council’s decision in Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 170, an appeal from Malaysia. The material facts in Kepong Prospecting Ltd, at 171-173, in so far as they are relevant to This Appeal, are as follows –

 

(i) the first respondent, Mr. A.E. Schmidt (Schmidt), a consulting engineer, assisted one Mr. Tan Chew Seah (Tan) to obtain a permit to prospect iron ore (Permit). Tan wrote a letter dated 25.11.1953 which agreed to pay Schmidt 1% of the selling price of all iron ore that might be sold (Tan’s Obligation);

 

(ii) the appellant company was subsequently incorporated to take over the Permit. Schmidt and Tan were among the first directors of the appellant company;

 

(iii) the appellant company and Tan entered into an agreement on 31.7.1954 (1954 Agreement) wherein the appellant company took over Tan’s Obligation to pay Schmidt;

 

34

 

(iv) on 26.9.1955, the appellant company concluded a contract with Schmidt (1955 Agreement). The 1955 Agreement provided for the appellant company to pay Schmidt 1% of all iron ore won from any land comprised in the 1954 Agreement;

 

(v) Schmidt was dismissed as the appellant company’s managing director on 19.5.1957 and ceased to be a director of the appellant company on 2.8.1959;

 

(vi) Schmidt filed a suit in the High Court to claim from the appellant company, an account of all monies payable to Schmidt under the 1954 Agreement, 1955 Agreement or one or other of the 2 agreements;

 

(vii) the High Court dismissed Schmidt’s suit but this was reversed by the Federal Court. The Privy Council affirmed the Federal Court’s decision to allow Schmidt’s claim based on the 1955 Agreement (concluded between the appellant company and Schmidt);

 

(viii) the Privy Council rejected the appellant company’s contention that Schmidt did not provide consideration for the 1955 Agreement by deciding that Schmidt’s consulting services constituted valid consideration under s 2(d) CA; and

 

(ix) the appellant company had claimed an indemnity in respect of Schmidt’s suit from certain third parties

 

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(Indemnity Proceedings). To succeed in the Indemnity Proceedings, the appellant company contended that the appellant company was liable to Schmidt under the 1954 Agreement [executed by the appellant company and Tan (not by Schmidt)]. Lord Wilberforce delivered the Privy Council’s opinion, at p. 174, as follows:

 

“The real question which arises as to this agreement is whether it could be enforced by Schmidt who in his personal capacity was not a party to it. In the first place there can, in their Lordships’ view, be no doubt that if the agreement were governed by English Law, Schmidt would be unable to enforce it. Their Lordships need, on this point, do no more than state their agreement with the judgment of the Federal Court which correctly stated the law from well-known passages in the opinions of the House of Lords in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 at p 853 and Scruttons Ltd Midland Silicones Ltd [1962] AC 446 at p 468. But it was suggested that in this respect the law of Malaysia differed from the law of England in admitting the principle of jus quaesitum tertio. Their Lordships are of opinion that the appellant company failed to make good this contention. Their Lordships were not referred to any statutory provision by virtue of which it could be said that the Malaysian law as to contracts differs in so important a respect from English law. It is true that section 2(d) of the [CA] gives a wider definition of “consideration” than that which applies in England particularly in that it enables consideration to move from another person than the promisee, but the appellant was unable to show how this affected the law as to enforcement of contracts by third parties, and it was not possible to point to any other provision having this effect. On the contrary paragraphs 36

 

(a), (b), (c) and (e) [of s 2 CA] support the English conception of a contract as an agreement on which only the parties to it

 

can sue. Reference was made to certain Indian decisions on the Indian Contract Act on which the [CA] is based. These were Subbu Chetti Arunachazam Chettiar (1930) ILR 53 Madras 270 (where however it was said that the balance of authority is in favour of the view that a stranger to the contract cannot without more sue to enforce it) and Khirod Behari v Dutt Man Gobinda AIR 1934 Cal 682. But other decisions in a contrary sense were cited which appeared to their Lordships to be more authoritative: their Lordships refer to decisions cited in Subbu Chetti v Arunachazam Chettiar and in Pollock and Mullaon the Indian Contract Act, 6th Edition, pp. 21 ff. and to two decisions so recent as 1957 (Protapmull Rameswar State of West Bengal 1957 61 CWN 78 and Babu Ram v Dhan Singh AIR 1957 Punjab 169). These, in their Lordships’ view, confirm that the law was correctly stated by Sir John Beaumont C.J. in the Bombay case of National Petroleum Co Ltd Popatlal AIR 1936 Bom 344. In a passage, which though strictly obiter, was based on a full argument and consideration of the cases, the learned Chief Justice expressed the view that Khirod Behari Dutt v Man Gobinda was opposed to established principle and authority. An argument on this legal issue was, so their Lordships were informed, submitted to the Federal Court: no reference to it appears in their judgment and their Lordships must assume that they did not accept it. The appellants failed to persuade their Lordships that they were wrong.

 

The 1954 agreement was therefore, in their Lordships’ opinion, not enforceable by Schmidt against the appellant company, …”

 

37

 

(emphasis added).

 

Kepong Prospecting Ltd affirms the doctrine of privity of contract in CA. According to Kepong Prospecting Ltd, a person who has provided a valid consideration under s 2(d) CA cannot enforce a contract if the person is not a party to the contract. It is to be noted that the following countries have passed legislation which confers a right on a person who is not a party to a contract (Third Party) to enforce the contract if the contract expressly provides that the Third Party may do so or if the contract confers a benefit on the Third Party –

 

(1) the New Zealand Parliament has passed the Contracts (Privity) Act 1982 (CPA); and

 

(2) the United Kingdom (UK) Parliament has legislated the Contracts (Rights of Third Parties) Act 1999 (CRTPA). It is to be noted that the CRTPA applies to England, Wales and Northern Ireland only.

 

Malaysia has no legislation equivalent to CPA and CRTPA which constitute statutory exceptions to the doctrine of privity of contract in New Zealand and UK respectively.

 

Kepong Prospecting Ltd applies, a fortiori (with an even stronger reason) to This Appeal. As explained above, in this case the 2nd Defendant has not provided any consideration within the meaning of s 2(d) CA. The 2nd Defendant merely received the Service Fee from the Plaintiff. Such a receipt of the Service Fee by the 2nd Defendant from the Plaintiff, cannot exclude the application of doctrine of privity of contract which bars the Plaintiff from suing the 2nd Defendant on the ground

 

38

 

that the 2nd Defendant was neither party nor privy to the Facility Agreement;

 

(d) Kepong Prospecting Ltd has been followed by Gopal Sri Ram JCA (as his Lordship then was) in the Federal Court case of Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393, at 431, as follows –

 

“The notion that s 2(d) [CA)] had the effect of abolishing doctrine of privity of contract was exploded by the decision of the Privy Council in Kepong Prospecting Ltd & Ors v Schmidt

 

[1968] 1 MLJ 170. The Board there held that our law does not recognize a jus quaesitum tertio arising by way of contract. The concatenation of Indian cases giving rise to a conflict of opinion on the subject was referred to in the advice of the Board, which on that occasion was delivered by Lord Wilberforce. …:

 

Kepong Prospecting is therefore authority for the proposition that the words ‘or any other person’ appearing in s 2(d) [CA] are not to be wide enough to exclude the doctrine of privity of contract.”

 

(emphasis added); and

 

(e) I am bound by the decisions of our apex courts in Kepong Prospecting Ltd and Badiaddin to hold that the Plaintiff is barred by the doctrine of privity of contract from –

 

(i) enforcing the Facility Agreement against the 2nd Defendant; and

 

39

 

(ii) claiming for the refund of the Service Fee from the 2nd Defendant.”

 

(emphasis added).

 

27. As the 2nd Plaintiff has no cause of action for breach of the Loan agreement against the Defendant –

 

(a) the 2nd Plaintiff cannot claim for the deposit of RM55,000 forfeited under the SPA and any other relief in this case. As such, the following prayers by the 2nd Plaintiff are refused –

 

(i) Prayer (c) (the Defendant to pay the 2nd Plaintiff RM55,000 which has been forfeited by the Vendors under the SPA); and

 

(ii) Prayer (d) (the Defendant to pay the 2nd Plaintiff the difference between the purchase price of the Property of RM550,000 and the market value of the Property on the extended completion date of the SPA, 9.1.2009); and

 

(b) this action by the 2nd Plaintiff against the Defendant has to be dismissed with costs to be paid by the 2nd Plaintiff to the Defendant.

 

F. Principles applicable in a claim for breach of contract

 

40

 

28. In this case, the Defendant does not dispute the existence of the Loan agreement between the 1st Plaintiff and the Defendant. The 1st Plaintiff and Defendant however differed on the following 2 main issues (2 Main Issues):

 

(a) what are the terms and conditions of the Loan contract; and

 

(b) whether the Defendant has breached the Loan agreement by not disbursing the Loan Sum to the 1st Plaintiff. This question depends on whether the Defendant is entitled not to disburse the Loan Sum due to the 1st Plaintiff’s non-compliance with the terms and conditions of the Loan contract.

 

29. The 2 Main Issues concern solely the interpretation of the Loan agreement to which the following principles are applicable:

 

(a) ss 91 and 92 EA provide that no evidence, oral and documentary, can be adduced by the 1st Plaintiff and Defendant to contradict, vary, add to or subtract from the terms and conditions of the Loan contract – please see Chang Min Tat FJ’s judgment in the Federal Court case of Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, at 227-228; and

 

(b) the interpretation of a contract is a question of law to be decided by the court and not by –

 

41

 

(i) witnesses (through their oral evidence); and

 

(ii) documentary evidence.

 

This is clear from the following 2 Court of Appeal cases –

 

(1) Gopal Sri Ram’s (as he then was) judgment in NVJ Menon v The Great Eastern Life Assurance Company Ltd [2004] 3 CLJ 96, at 103-104; and

 

(2) the decision of Abdul Kadir Sulaiman JCA (as he then was) (the majority decision of the Court of Appeal) in Silver Concept Sdn Bhd v Brisdale Rasa Development Sdn Bhd (formerly known as Ekspidisi Ria Sdn Bhd [2005] 4 MLJ 101, at 112113.

 

30. In view of the 2 Main issues which depends on the construction of the Loan contract, the state of mind of the 1st Plaintiff and Defendant is neither a “fact in issue” nor a “relevant fact’ within the meaning of s 3 EA as follows:

 

“ “fact in issue” means 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;

 

42

 

“relevant”: one fact is said to be relevant to another when the one is connected with the other in any of the ways referred to in the provisions of this Act relating to the relevancy of facts ”

 

(emphasis added).

 

In deciding the 2 Main Issues in this case, the state of mind of both the 1st Plaintiff and Defendant is therefore not relevant.

 

G. Oral hearsay evidence tendered by Defendant

 

31. Before I proceed to decide the 1st Plaintiff’s claim against the Defendant, I will address certain parts of the evidence of the Defendant’s witnesses, namely SD1, SD3 and SD5, who have given evidence on what they have heard from persons who have not been called by the Defendant to testify in this case.

 

32. Firstly, the EA does not provide for, let alone define, hearsay. My understanding of hearsay and the relevant provisions in EA as interpreted by case law, is as follows:

 

(a) the Evidence Act of Singapore [EA (Singapore)] is substantially similar to our EA. The Singapore Court of Appeal in a judgment given by Murray-Aynsley CJ in Lim Ah Oh & Anor v Rex [1950] 1 MLJ 269, at 270, held that the rule against hearsay is found in s 60

 

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EA (Singapore) which is in pari materia with our s 60 EA. Section 60(1) EA provides as follows –

 

“Oral evidence must be direct

 

60(1) Oral evidence shall in all cases whatever be direct,

 

that is to say –

 

(a) if it refers to a fact which could be seen, it must be the evidence of a witness who says he saw it;

 

(b) if it refers to a fact which could be heard, it must be the evidence of a witness who says he heard it;

 

(c) if it refers to a fact which could be perceived by any other sense or in any other manner, it must be the evidence of a witness who says he perceived it by that sense or in that manner;

 

(d) if it refers to an opinion or to the grounds on which that opinion is held, it must be the evidence of the person who holds that opinion on those grounds ”

 

(emphasis added);

 

(b) in Wong Thin Yit v Mohamed Ali [1971] 2 MLJ 175, at 180, Ali FJ (as he then was) in the majority decision of the Federal Court, adopted the following definition of the rule against hearsay as stated

 

44

 

by the learned authors of “Phipson on Evidence”, 10th Edition (1963), at p. 280 –

 

“ The rule against hearsay excludes, in general, all statements oral or written, the probative force of which depends either wholly or in part on the credit of an unexamined person notwithstanding that such statements may possess an independent evidentiary value derived from the circumstances under which they were made and notwithstanding that no better evidence of the facts stated is to be obtained.”;

 

(c) the reasons for excluding hearsay evidence have been explained by Seah FJ (as he then was) in the Federal Court case of Leong Hong Khie v Public Prosecutor & another appeal [1986] 2 MLJ 206, at 208, as follows –

 

“ The general rule is that hearsay evidence is not admissible as proof of a fact which has been stated by a third person. This rule has been long established as a fundamental principle of the law of evidence. To quote Lord Normand in Teper v R [1952] AC 480 486:

 

“The rule against the admission of hearsay evidence is fundamental. It is not the best evidence, and it is not delivered on oath. The truthfulness and accuracy of the person whose words are spoken by another witness cannot be tested by cross-examination and the light which his demeanour would throw on his testimony is lost.”

 

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In our opinion, another reason is the danger that hearsay evidence may be concocted, fabricated and tailored to suit the witness’s testimony .”

 

(emphasis added).

 

It is to be noted that the Federal Court decided Leong Hong Khie as our apex court because by then, appeals to the Privy Council in respect of constitutional and criminal matters had already been abolished by the Courts of Judicature (Amendment) Act 1976 (Act A328);

 

(d) in Subramaniam v Public Prosecutor [1956] 1 MLJ 220, at 222, an appeal from the Federation of Malaya, LMD De Silva delivered the following opinion of the Privy Council –

 

“Evidence of a statement made to a witness by a person who is not himself called as a witness may or may not be hearsay. It is hearsay and inadmissible when the object of the evidence is to establish the truth of what is contained in the statement. It 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. The fact that the statement was made, quite apart from its truth, is frequently relevant in considering the mental state and conduct thereafter of the witness or of some other person in whose presence the statement was made. In the case before their Lordships statements could have been made to the appellant by the terrorists, which, whether true or not, if they had been believed by the appellant, might reasonably have induced in him an apprehension of instant death if he failed to conform to their wishes.”

 

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(emphasis added).

 

The above judgment in Subramaniam has been explained in the following cases –

 

(i) Seah FJ held as follows in Leong Hong Khie, at p. 208 and 209 –

 

“However, hearsay evidence may in certain very limited circumstances be admitted within the general proposition expounded by the Privy Council in the case

 

of Subramaniam …

 

The learned Deputy Public Prosecutor appeared to have conceded that all the statements allegedly made by the informers to P.W.1 (which we have underlined) were to be regarded as hearsay but he argued before the learned judge and repeated the same argument before us that he sought to have these statements admitted although both these informers were not called as prosecution witnesses, not to prove the truth of their contents but the fact that they were made. The learned Deputy Public Prosecutor purported to rely on

 

the Subramaniam case (supra). In our opinion, the general proposition laid down by the Privy Council in that case must be read subject to this condition, viz. that the statement must be directly relevant in considering the state of mind of the witness to whom it had been made. In other words, the proposition could only apply when the mental

 

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state of the witness evidenced by the statement was itself directly in issue at the trial. …

 

Now, what was the purpose of introducing these statements allegedly made by the informers to P.W.1 on April 15, 1981, April 16, 1981 and April 18, 1981? The learned Deputy Public Prosecutor had given his reasons for doing so and we need not repeat them. Suffice for us to say that in our opinion, the learned Deputy Public Prosecutor had failed to satisfy this strict test laid down in Subramaniam case (supra). Since the mental state of both the appellants was not in issue at the trial, this condition had not been satisfied. Having failed to comply with this requirement, in our judgment, all the statements allegedly made by the informers to P.W.1 (which we have conveniently emphasised) are to be treated as hearsay evidence and therefore inadmissible in law .”

 

(emphasis added); and

 

(ii) in Public Prosecutor v Dato’ Seri Anwar bin Ibrahim (No 3)

 

[1999] 2 MLJ 1, at 168, Augustine Paul J (as he then was) decided as follows in the High Court –

 

“The reference to a statement made to a witness by a person who is not himself called as a witness means that the rule applies to what can be described as firsthand hearsay. To that extent, learned counsel’s submission that the rule applies only to double hearsay cannot be

 

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sustained. When learned counsel said that the statement is sought to be admitted to show that it was made and not to establish its truth, I asked him the purpose for such admission. He said that it is admissible merely to show that it was made. In my opinion, the fact that a statement was made does not on its own make it admissible. It must be shown to be relevant to a fact in issue as the fact that a statement has been made may be admissible for many purposes. It becomes relevant only when it is desired, for instance, to show the state of mind of the person to whom it is made and that the mental state of the witness evidenced by the statement is itself directly in issue at the trial. It is to ascertain this purpose that I asked learned counsel the reason for which he wanted the answer of Nor Azman to be admitted. If the purpose is not shown, the court would be in no position to rule on the relevancy of the statement with regard to the facts in issue, and, if it is not relevant at all, the statement would amount to hearsay and thereby become inadmissible.”

 

(emphasis added).

 

Augustine Paul J’s aforesaid decision has been affirmed by the Court of Appeal [2000] 2 MLJ 486 and the Federal Court [2002] 3 MLJ 193;

 

(e) there are numerous statutory exceptions to hearsay (Exceptions To Hearsay Rule). In KTL Sdn Bhd & Anor v Leong Oow Lai & 2

 

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other cases [2014] AMEJ 1458, [2014] 1 LNS 427, at subparagraph 34(a), I have referred to Exceptions To Hearsay Rule as provided in the EA –

 

“34. If a document is classified as a Part C Document, the party adducing that document bears the evidential burden to satisfy the court on a balance of probabilities the following 2 conditions of admissibility of that document (2 Conditions of Admissibility):

 

(a) in accordance with the rule against documentary hearsay, the maker of the Part C Document has to be called as a witness – the Federal Court’s judgment in Capital Insurance Bhd v Cheong Heng Loong Goldsmiths (KL)

 

Sdn Bhd [2005] 4 CLJ 1, at 20, 21-25 and 28. If the maker of a Part C Document cannot be called as a witness, the party adducing that document has to satisfy the court regarding the application of any one of the exceptions to the hearsay rule such as ss 32(1)(a) to (h) [s 32(1)(i) and (j) EA only apply to criminal proceedings according to s 32(2) EA], 33 to 37, 73A(1), (2) and/or 90A(1) EA [s 90C EA provides that s 90A EA shall prevail over, among others, any other provision of EA relating to the proof of evidence]’

 

(emphasis added); and

 

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(f) even if hearsay evidence is admitted, either pursuant to Subramaniam or one of the Exceptions To Hearsay Rule, the court still has to assess its weight. In Tenaga Nasional Bhd v Api-api Aquaculture Sdn Bhd [2015] 3 AMR 811, at paragraphs 25-27 (Api-api Aquaculture Sdn Bhd), I admitted oral hearsay evidence pursuant to Subramaniam but did not attach any weight to such evidence for the following reasons –

 

1125. Despite the fact that the Chinese gentleman and Encik Yusof had not been called as witnesses, SPI’s conversations with them did not constitute oral hearsay evidence and such conversations were admissible to show that such conversations had indeed taken place. This is in accordance with the Privy Council’s decision on appeal from the Federation of Malaya in Subramaniam …

 

26. SPI’s conversations with the Chinese gentleman and Encik Yusof are relevant as direct oral evidence regarding matters which have been seen, heard and perceived by SP1 under s 60(1)(a), (b) and (c) EA.

 

27. Despite admitting as evidence SPI’s conversations with the Chinese gentleman at the Premises and Encik Yusof, I attach no weight to such evidence because the gentleman and Encik Yusof have not been called as witnesses and more importantly, the Defendant has no opportunity to cross-examine them so as to ascertain the truth of such

 

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conversations. Furthermore, Encik Yusof is an employee of the Plaintiff and no evidence has been adduced by the Plaintiff on why Encik Yusof cannot be called to testify in This Suit.”

 

(emphasis added)

 

33. As explained in the aforesaid paragraph 30, the state of mind of 1st Plaintiff and Defendant is not relevant in this case. Accordingly, what is heard by the 1st Plaintiff and Defendant, is not relevant and admissible pursuant to Subramaniam. There is also no room to apply any of the Exceptions To Hearsay Rule in this case for the simple reason that this case depends on an interpretation of the Loan agreement.

 

34. In this case, to expedite the disposal of a trial, I inform parties before the commencement of trial that there is no need to object to inadmissible evidence during the trial. After the trial of this case, both parties are at liberty to submit on the admissibility and weight of evidence in their written and oral submission. It is trite law that failure of a party to object to inadmissible evidence, does not admit such inadmissible evidence -the Federal Court’s judgment delivered by Edgar Joseph Jr FCJ in Alcontara a/l Ambross Anthony v Public Prosecutor [1996] 1 MLJ 209, at 221. In any event, the trial court has a duty to weigh all evidence adduced at the trial. In Ng Chooi Kor v Isyoda (M) Sdn Bhd [2010] 3 MLJ 492, at 498 and 499-505, the Court of Appeal in a judgment given by Ahmad Maarop JCA (as he then was), did not give any weight to a

 

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statutory declaration and affidavit, both affirmed by the same person who had not been called as a witness to testify in that case.

 

35. After considering the submission of all parties, the trial court may expunge any oral hearsay evidence or attach no weight to such evidence (as was decided in Api-api Aquaculture Sdn Bhd, at paragraph 27).

 

36. As Subramaniam and the Exceptions To Hearsay Rule do not apply in this case, the following evidence constitutes oral hearsay:

 

(a) SD1 heard from Messrs YY that Messrs YY had reminded the 1st Plaintiff to settle the Balance Purchase Price;

 

(b) SD1 heard that Mr. Sia had suffered depression and had locked himself in his house or apartment for more than 1 week. SD1 also heard that the door to Mr. Sia’s house or apartment had to be broken into;

 

(c) SD3 heard from Ms. Yeo that Ms. Yeo had gone to the Kajang Address to look for Mr. Sia; and

 

(d) SD5 had been informed by Mr. Sia that –

 

(i) the 1st Plaintiff requested the Defendant to finance the purchase of the Property because the 1st Plaintiff was unable to pay the Balance Purchase Price;

 

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(ii) Mr. Sia informed the 1st Plaintiff of the Defendant’s Option (the Defendant could only offer financing of 60% of the purchase price of the Property);

 

(iii) the 1st Plaintiff initially indicated verbally that the 1st Plaintiff would accept the Defendant’s Option but subsequently, the 1st Plaintiff changed her mind; and

 

(iv) Mr. Sia had spoken to the 1st Plaintiff and SP3 whereby both the 1st Plaintiff and SP3 agreed to settle the Balance Purchase Price with their own funds and the Loan Sum would remain at RM600,000 as per the Defendant’s Letter dated 8.9.2008;

 

37. In this case, I have decided not to expunge the above oral hearsay so that the notes of proceedings remain unaltered and can be perused without any difficulty by the Court of Appeal in the exercise of its appellate jurisdiction. Despite not expunging the above oral hearsay, I attach no weight to such evidence (as held in Api-api Aquaculture Sdn Bhd, at paragraph 27) for the following reasons:

 

(a) whatever heard by SD1, SD3 and SD5 is not relevant to the 2 Main Issues. Regarding why Mr. Sia is not called by the Defendant to testify in this case, I will elaborate later in this judgment that there should be expert medical evidence under s 45(1) and (2) EA

 

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concerning Mr. Sia’s soundness of mind within the meaning of the Explanation to s 118 EA;

 

(b) the 1st Plaintiff has no opportunity to test the truth of what is heard by SD1, SD3 and SD5 by cross-examining the persons who allegedly informed SD1, SD3 and SD5. In Public Prosecutor v Wong Yee Sen & Ors [1990] 1 MLJ 187, at 189, Faiza Tamby Chik JC (as he then was) explained the importance of cross-examination as follows –

 

“ What is the aim of cross-examination? Really there is one aim only. It is to assist in the administration of justice by revealing the truth to the court. The function of cross-examination is to eliminate or reduce the danger that a false conclusion will be reached. Wigmore has declared that cross-examination is beyond doubt the greatest engine ever invented for the discovery of truth.

 

The powers of a cross-examiner generally are:

 

(1) to ask leading questions (s 143 of the Evidence Act 1950);

 

(2) to impeach a witness for making a previous inconsistent statement (s 145 of the Evidence Act 1950);

 

(3) to test a witness’s accuracy, veracity and credibility (s 146(a) of the Evidence Act 1950); and

 

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(4) to shake the credit of a witness by injuring his character (s 146(c) of the Evidence Act 1950).”

 

(emphasis added);

 

(c) SD1, SD3 and SD5 have only heard unsworn statements whereby there is no penal sanction if the unsworn statements are false; and

 

(d) oral statements which were allegedly heard by SD1, SD3 and SD5 had not been reduced to writing by SD1, SD3 and SD5 in any contemporaneous record. I am doubtful whether SD1, SD3 and SD5 can credibly remember such oral statements which have been made way before they testify in this case.

 

H. Terms and conditions of Loan contract

 

38. As agreed by 1st Plaintiff and Defendant, the Loan agreement has been concluded when the 1st Plaintiff accepted the Defendant’s Letter dated

 

8.9.2008 on 28.10.2008. At page 4 of the Defendant’s Letter dated 8.9.2008, the 1st Plaintiff confirmed that she had read, understood and agreed to be bound by the following documents:

 

(a) the terms and conditions of the Defendant’s Letter dated 8.9.2008;

 

(b) the Defendant’s “Standard Terms and Conditions Governing Banking Facilities” (STC);

 

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(c) the “FM Package Terms and Conditions” (FMPTC); and

 

(d) the Schedule attached to the Defendant’s Letter dated 8.9.2008 (Schedule).

 

39. I am of the view that all the terms and conditions of the Loan contract are encapsulated in the Defendant’s Letter dated 8.9.2008, STC, FMPTC and the Schedule. Accordingly, by virtue of ss 91 and 92 EA, the Defendant cannot rely on the following to form part of the terms and conditions of the Loan agreement:

 

(a) the Defendant’s Internal Document dated 26.5.2008;

 

(b) whatever transpired at the Meeting dated 28.10.2008 (between the 1st Plaintiff on one part with SD1 and SD2 on the other part); and

 

(c) the Defendant’s policy. Furthermore, the Defendant has not adduced any evidence regarding its policy.

 

I. Whether contents of Loan Application Form constitute part of terms and conditions of Loan contract

 

40. I am of the view that the contents of the Loan Application Form filled in by SD2, do not form part of the terms and conditions of the Loan agreement. My reasons are as follows:

 

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(a) sections 91 and 92 EA prohibit the contents of the Loan Application Form from being “added” to the Loan agreement;

 

(b) paragraph 8 of the Defendant’s Letter dated 8.9.2008 (Paragraph 8) only referred to STC, FMPTC and the Schedule as forming “an integral part’ of the Defendant’s Letter dated 8.9.2008. The fact that Paragraph 8 omitted the Loan Application Form, evinces a manifest intention of the 1st Plaintiff and Defendant to exclude the Loan Application Form as the terms and conditions of the Loan agreement.

 

In view of the express incorporation of STC, FMPTC and the Schedule into the Loan contract by virtue of Paragraph 8, the maxim of interpretation “expressio unius est exclusio alterius” applies in this case, namely the express mention of one thing implies the exclusion of others (Expressio Unius Interpretation). The Federal Court in Jamaluddin bin Mohd. Radzi & Ors v Sivakumar a/l Varatharaju Naidu (claimed as Yang Dipertua Dewan Negeri Perak Darul Ridzuan), Election Commission, intervener [2009] 4 MLJ 593, at 605-606, in a judgment delivered by Nik Hashim FCJ, has applied the Expressio Unius Interpretation.

 

The Expressio Unius Interpretation applies in respect of Paragraph 8 to exclude the contents of the Loan Application Form as the terms and conditions of the Loan contract;

 

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(c) the STC, FMPTC and the Schedule did not refer to the Loan Application Form;

 

(d) the Loan Application Form was dated 28.5.2008, 5 months before

 

28.10.2008 (when the 1st Plaintiff accepted the Defendant’s Letter dated 8.9.2008). There were 2 letters of offer dated 19.6.2008 and

 

22.7.2008 by the Defendant which were subsequently cancelled by the Defendant. In such circumstances, it is inconceivable in law for the contents of the Loan Application Form to form part of the terms and conditions of the Loan contract; and

 

(e) on a balance of probabilities, I find as a fact that the 1st Plaintiff has signed a blank Loan Application Form. This finding of fact is premised on the following reasons –

 

(i) the 1st Plaintiff had given clear evidence that she had signed a blank Loan Application Form. SD1 ‘‘forgot’ whether the 1st Plaintiff had signed a blank Loan Application Form. SD2 who filled in the contents of the Loan Application Form with SD2’s own handwriting, could not remember whether SD2 had filled up the Loan Application Form based on documents given by the 1st Plaintiff. SD2 could not even remember where SD2 filled up the Loan Application Form. I find the 1st Plaintiff’s evidence (that the 1st Plaintiff had signed a blank Loan Application Form) to be more probable than the testimony of SD1 and SD2;

 

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(ii) the “current market value” of the Property was stated in the Loan Application Form as RM1,000,000. SD2 admitted during cross-examination that SD2 verbally confirmed with 2 Valuers regarding the value of the Property. Hence, the “current market value” of the Property in the Loan Application Form, could not have been filled in by the 1st Plaintiff when she signed the Loan Application Form. It was therefore probable that the 1st Plaintiff had signed a blank Loan Application Form and the “current market value” of the Property was only filled in the Loan Application Form after the 1st Plaintiff had signed the blank Loan Application Form and after SD2 had discussed with 2 Valuers; and

 

(iii) the Loan Application Form contained details of the Property (such as the land area, built-up area, expiry date of lease and lot number) which the 1st Plaintiff would not know. It was probable that SD2 had filled up such details regarding the Property in the Loan Application Form after the 1st Plaintiff had signed the blank Loan Application Form and after SD2 has been given a copy of the SPA.

 

41. As a consequence of my finding of fact that the 1st Plaintiff has signed a blank Loan Application Form, the 1st Plaintiff has not been given a right to check the accuracy and to confirm the truth of the contents of the Loan Application Form filled up by SD2. Accordingly, the 1st Plaintiff is not

 

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legally bound by the contents of the Loan Application Form. The Defendant cannot therefore rely on the contents of the Loan Application Form, including the statement at page 1 of the Loan Application Form (“Property Free From Encumbrance”), as part of the terms and conditions of the Loan contract.

 

42. Before proceeding to the next matter for deliberation, it should be noted that –

 

(a) applicant borrowers need not fill up themselves loan application forms;

 

(b) bank officers may fill up loan application forms for applicant borrowers. Loan application forms need not necessarily be filled up by bank officers in the presence of the applicant borrowers;

 

(c) no matter who fills up a loan application form, the applicant borrower should be given a right to peruse and to amend whatever is stated in the loan application form before the applicant borrower signs and submits the loan application form to the bank. Once an applicant borrower has been given a right to peruse and to amend the contents of a loan application form before the applicant borrower signs and submits it to the bank, the applicant borrower is clearly bound by the truth or otherwise of the contents of the loan application form; and

 

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(d) even if an applicant borrower has been given a right to peruse and to amend the contents of a loan application form before the applicant borrower signs and submits it to the bank, whether the contents of a loan application form constitute part of the terms and conditions of the loan agreement, is a question of construction of the loan agreement.

 

J. What are terms and conditions of Loan agreement?

 

43. The Defendant has contended that paragraph 4.1 of the Defendant’s Letter dated 8.9.2008 (Paragraph 4.1) imposes a condition to be fulfilled by the 1st Plaintiff, namely –

 

(a) the 1st Plaintiff is required to provide a security for the Loan in the form of a third party first legal charge over the Property in favour of the Defendant (3rd Party 1st Legal Charge);

 

(b) the 3rd Party 1st Legal Charge can only be “available” if the 2nd Plaintiff becomes the registered owner of the Property and MBB’s charge over the Property (MBB’s Charge) is discharged. Such events are only possible if the Plaintiffs first settle the Balance Purchase Price; and

 

(c) until the Balance Purchase Price is settled by the Plaintiffs, MBB’s Charge is discharged and the 2nd Plaintiff is registered as owner of

 

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the Property, the Defendant is not obliged under Paragraph 4.1 to disburse the Loan Sum

 

(Alleged Condition).

 

44. Paragraph 4.1 provides as follows:

 

“A third party first legal charge for RM600,000.00 is to be created over [the Property]’.

 

45. I am not able to accept the submission by the Defendant’s learned counsel that Paragraph 4.1 imposes the Alleged Condition. My reasons are as follows:

 

(a) clause 1 STC provides that the “obligation of the [Defendant] to make available and continuing to make available the facilities is conditional upon” specific circumstances enumerated in sub-clauses 1.1 to 1.15 STC. Sub-clauses 2.1 to 2.7 STC provide for very detailed “General Conditions Precedent For Facilities To Purchase Property And Facilities Secured Against Property’. It is to be emphasized that sub-clauses 1.1 to 1.15 and 2.1 to 2.7 STC do not impose the Alleged Condition. The specific and detailed conditions listed in sub-clauses 1.1 to 1.15 and 2.1 to 2.7 STC, will attract the application of the Expressio Unius Interpretation. Once again, applying the Expressio Unius Interpretation, the manifest intention of

 

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the 1st Plaintiff and Defendant in sub-clauses 1.1 to 1.15 and 2.1 to 2.7 STC, is to exclude the Alleged Condition;

 

(b) Paragraph 4.1 only requires a 3rd Party 1st Legal Charge over the Property to be one of the securities for the repayment of the Loan. This interpretation is fortified by the heading “Securities” above Paragraph 4.1. Paragraph 4.1 does not therefore impose the Alleged Condition, either expressly or by necessary implication; and

 

(c) all the terms and conditions of the Loan, namely the Defendant’s Letter dated 8.9.2008, STC, FMPTC and the Schedule, have been drafted solely by the Defendant. In such a circumstance, the court can apply the contra proferentem rule of construction (Contra Proferentem Rule). According to the Contra Proferentem Rule, if there are 2 or more interpretations regarding the Defendant’s Letter dated 8.9.2008, STC, FMPTC and the Schedule, an interpretation of these provisions which is favourable to the 1st Plaintiff (who did not draft the contract), should be adopted. An example of the application of the Contra Proferentem Rule is the High Court’s judgment of Zulkefli Makinuddin J (as he then was) in American International Assurance Co Ltd v Koay Fong Eng (Administrator of the Estate of Ho Moh Koay, deceased) [1996] 5 MLJ 268, at 274.

 

Based on the Contra Proferentem Rule, if there is any ambiguity in the construction of the Defendant’s Letter dated 8.9.2008, STC, FMPTC and the Schedule in the sense that there are 2 or more

 

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interpretations, the interpretation favourable to the 1st Plaintiff should be adopted. Consequently, if there is any ambiguity in respect of Paragraph 4.1, sub-clauses 1.1 to 1.15 and 2.1 to 2.7 STC, such an ambiguity should be resolved in favour of the 1st Plaintiff in accordance with the Contra Proferentem Rule, namely, the Defendant’s Letter dated 8.9.2008, STC, FMPTC and the Schedule do not impose the Alleged Condition.

 

K. Defendant is bound by Messrs YY’s acts and letters

 

46. It is clear from the Defendant’s Letter dated 3.11.2008 (to Messrs YY) that the Defendant has appointed Messrs YY to act for the Defendant in respect of the Loan. Accordingly, the Defendant is bound by Messrs YY’s acts and letters. I highlight the following paragraphs in the Defendant’s Letter dated 3.11.2008:

 

“1. We are pleased to appoint your Firm to attend to the security documentation in connection with banking facility(ies) granted by us to the Borrower(s).

 

3. It is important that the release of the banking facility(ies) be effected speedily and without undue delay. In this respect, it is imperative that your advice to us to release is complete. You are to ensure that all conditions required to be fulfilled under the Letter of Offer are complied with before the [Defendant] is advised to release the banking facilities. If there should be any

 

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outstanding action to be taken by the [Defendant] under the Letter of Offer, the same should be highlighted accordingly.

 

4. We require all standard security documents to be prepared and executed within two (2) weeks from the date you receive our instruction letter .”

 

(emphasis added).

 

It is clear from paragraphs 3 and 4 of the Defendant’s Letter dated

 

3.11.2008 that Messrs YY are required to complete the “security documentation” speedily within 2 weeks from the date of Messrs YY’s receipt of the Defendant’s Letter dated 3.11.2008.

 

47. I refer to Gill CJ (Malaya)’s judgment in the Federal Court case of Doshi v Yeoh Tiong Lay [1975] 1 MLJ 85, at 88, as follows:

 

“Now the general rule is that the knowledge of a solicitor is the knowledge of the client, so that it is not open to the client to say that the solicitor did not disclose the true facts to him. Thus in Rolland v Hart (1870) Ch App 678 681, which was followed by the High Court of Australia in Stuart v Kingston (1923) 32 CLR 309, Lord Hatherley L.C. said:

 

“Then the only question is, what is actual notice? It has been held over and over again that notice to a solicitor of a transaction, and about a matter as to which it is part of his duty to inform himself, is actual notice to the client. Mankind would not be safe if it were held that, under such circumstances, a man has not notice of that which his agent has actual notice of. The purchaser of an estate has

 

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in ordinary cases, no personal knowledge of the title, but employs a solicitor, and can never be allowed to say that he knew nothing of some prior incumbrance because he was not told of it by his solicitor.”

 

In Bradley v Riches (1878) 9 Ch D 189 it was held that the presumption that a solicitor has communicated to his client facts which he ought to have made known cannot be rebutted by proof that it was the solicitor’s interest to conceal the facts.

 

There is, however, an important exception to the above rule in cases of fraud, which is stated in Halsbury’s Laws of England (3rd Ed.) Vol. 14, paragraph 1019 at page 543) as follows:-

 

“Under the head of actual notice is included notice to an agent employed in the transaction. The notice is imputed to the principal, and it affects him whether communicated to him or not; but an exception is admitted where there has been fraud on the part of the agent in the matter. Although actual communication to the principal is not required, yet fraud excludes in practice all probability of communication, and hence the knowledge of the fraudulent agent is not imputed to the principal.” ”

 

(emphasis added).

 

48. As a matter of stare decisis, I am bound by the Federal Court’s judgment in Doshi. In this case, the Defendant did not allege or adduce evidence that fraud has been committed by the 1st Plaintiff and/or Messrs YY. As such, based on Doshi, the knowledge of Messrs YY in this case is imputed to the Defendant.

 

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49. I am of the view that the Defendant’s averment that Messrs YY has acted contrary to or in excess of authority given by the Defendant (Allegation Against Messrs YY), is not probable and is an afterthought to defeat the 1st Plaintiff’s suit against the Defendant. Such a finding of fact is based on the following reasons:

 

(a) no letter had ever been sent by the Defendant to the 1st Plaintiff to substantiate the Allegation Against Messrs YY. Nor did the Defendant send any letter to Messrs YY regarding the Allegation Against Messrs YY;

 

(b) RASB sent a letter dated 18.12.2008 to the Defendant regarding the “redemption sum” for the discharge of MBB’s Charge (RASB’s Letter dated 18.12.2008). The Defendant did not reply to RASB’s Letter dated 18.12.2008 and inform RASB that based on the Alleged Condition, there was no obligation on the part of the Defendant to disburse part of the Loan Sum to discharge MBB’s Charge;

 

(c) in reply to the Plaintiff’s Demand dated 13.4.2009, the Defendant’s solicitors had sent a lengthy nine-paragraph reply in a letter dated 3.6.2009 (Reply By Defendant’s Solicitors). The Defendant did not even refer to, let alone rely on, the Allegation Against Messrs YY in the Reply By Defendant’s Solicitors. If there is any credence to be given to the Allegation Against Messrs YY, the Reply By Defendant’s Solicitors should have at least referred to the Allegation Against Messrs YY; and

 

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(d) there is no evidence that the Defendant has taken any action or “sanction” against Messrs YY regarding the Allegation Against Messrs YY. This supports the inference that the Allegation Against Messrs YY has been contrived. If the Allegation Against Messrs YY were true, after this suit had been filed by the Plaintiffs against the Defendant –

 

(i) the Defendant should have issued a demand against Messrs YY in respect of the Allegation Against Messrs YY and claim an indemnity from Messrs YY based on the professional negligence of Messrs YY;

 

(ii) in this action, the Defendant should have –

 

(1) commenced third party proceedings against Messrs YY for an indemnity under Order 16 rule 1(1)(a) RC; or

 

(2) filed a counterclaim against Messrs YY under Order 15 rule 3(1) RC (counterclaim against a person who is not a party to the original action).

 

Messrs YY’s Letter dated 9.12.2008 is important as this letter is addressed by Messrs YY to the Defendant itself. Messrs YY’s Letter dated 9.12.2008 stated, among others (with a grammatical error) –

 

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((

 

We hereby confirmed that the documents are in order and completed for your PA [sic] execution and should you as the financier suffer any loss or damage by reason due to our acts of negligence, error or mistake or omission and or by reason of the aforesaid security documentation not being in order, we as the solicitor responsible for the preparation of the said legal documentation shall be responsible to make good to you in full such loss or damage. ”

 

(emphasis added).

 

If the Allegation Against Messrs YY were true, the Defendant would have a good cause of action for professional negligence against Messrs YY based on, among others, Messrs YY’s Letter dated 9.12.2008. However, the Defendant has not taken any legal action against Messrs YY in respect of the Allegation Against Messrs YY. The Defendant is now time-barred under s 6(1)(a) of the Limitation Act 1953 from filing any suit against Messrs YY based on the tort of negligence concerning the Allegation Against Messrs YY; and

 

(iii) the Defendant could have easily removed Messrs YY from its panel of solicitors (solicitors who are available to do legal work for the Defendant) due to Messrs YY’s professional negligence

 

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in this case. No such evidence has been adduced by the Defendant.

 

50. Even if it is assumed that the Allegation Against Messrs YY is true, the Allegation Against Messrs YY does not concern the 1st Plaintiff as this matter is solely between the Defendant and Messrs YY.

 

51. In view of Doshi and the fact that there is no evidential basis to prove the Allegation Against Messrs YY, the Defendant is bound by all letters sent by Messrs YY to the 1st Plaintiff and/or Messrs SKL. In the absence of fraud, it is neither just nor desirable, for any party to deny letters from his or her own lawyer.

 

52. The following letters by Messrs YY (in chronological order) did not require, let alone refer to, the Alleged Condition:

 

(a) Messrs YY’s Letter dated 5.11.2008;

 

(b) Messrs YY’s Letter dated 14.11.2008. This letter is significant for 2 reasons. Firstly, Messrs YY’s Letter dated 14.11.2008 stated, among others –

 

“Subject to compliance by the [1st Plaintiff] of our client’s [Defendant] condition of release, our clients [Defendant] are agreeable to release the redemption sum to the [Vendors] from the loan sum PROVIDED THAT[15 conditions are listed] …

 

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Please be advised that save for the redemption sum (if any) our client [Defendant] shall release the above Facility only upon the fulfilment of all terms and conditions relating to the above Facility and upon completion and presentation of the security documents for registration.”

 

(emphasis added).

 

Messrs YY’s Letter dated 14.11.2008 clearly stated to Messrs SKL that the Defendant agreed to “release the redemption sum” (to discharge MBB’s Charge) to the Vendors from the Loan sum subject to 15 stipulated conditions (15 Conditions). The 15 Conditions did not provide for the Alleged Condition.

 

I will refer later in this judgment to another significance of Messrs YY’s Letter dated 14.11.2008 in respect of the application of the estoppel doctrine;

 

(c) Messrs YY’s Letter dated 9.12.2008 to the Defendant did not contain the Alleged Condition. Yet, the Defendant did not reply to Messrs YY to correct Messrs YY’s Letter dated 9.12.2008; and

 

(d) Messrs YY’s Letter dated 24.12.2008.

 

The above letters from Messrs YY show that it is probable that the Alleged Condition is contrived merely to defeat the 1st Plaintiff’s suit.

 

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L. Defendant is estopped from denying Messrs YY’s Letter dated

 

14.11.2008 and 24.12.2008

 

53. The doctrine of estoppel has a wide application in this country. The width of the application of the estoppel doctrine has been explained in the following judgment by Gopal Sri Ram JCA (as he then was) in the Federal Court case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283, at 294 and 295 –

 

“ The time has come for this Court to recognise that the doctrine of estoppel is a flexible principle by which justice is done according to the circumstances of the case. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. Indeed, the circumstances in which the doctrine may operate are endless.

 

The doctrine may be applied to enlarge or to reduce the rights or obligations of a party under a contract: Sarat Chunder Dey v. Gopal Chunder Laha LR 19 IA. 203; Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] QB 84. …

 

It may operate to bind parties as to the meaning or legal effect of a document or a clause in a contract which they have settled upon (see the Amalgamated case (supra)) or which one party to the contract has represented or encouraged the other to believe as the true legal effect or meaning: The American Surety Co. of New York v. The Calgary Milling Co. Ltd. [1919] 48 DLR 295; De Tchihatchef v. The Salerni Coupling Ltd. [1932] 1 Ch. 330; Taylor Fashions (supra).

 

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We would add that it is wrong to apply the maxim “estoppel may be used as a shield but not a sword” as limiting the availability of the doctrine to defendants alone. Plaintiffs too may have recourse to it.”

 

(emphasis added).

 

54. According to Boustead Trading (1985) Sdn Bhd –

 

(a) a party may be estopped from denying the legal meaning and effect of a contract based on what that party has represented to or encouraged the other contracting party to believe as the true legal meaning and effect of the contract; and

 

(b) a plaintiff may rely on the estoppel doctrine in a suit for breach of contract based on the legal meaning and effect of a contract as represented or encouraged by the defendant.

 

55. In this case, Messrs YY’s Letter dated 14.11.2008 constituted a clear representation to the 1st Plaintiff that the Defendant had agreed to “release the redemption sum” (to discharge MBB’s Charge) to the Vendors from the Loan Sum subject to 15 Conditions (Defendant’s Representation). The 1st Plaintiff had relied on the Defendant’s Representation as evidenced in Messrs SKL’s Letters dated 15.12.2008,

 

17.12.2008 and 23.12.2008 which enclosed certain documents requested in Messrs YY’s Letter dated 14.11.2008.

 

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56. The Defendant’s Representation was repeated in Messrs YY’s Letter dated 24.12.2008 which stated, among others, as follows:

 

We note that the above Property has been charged to [MBB] by the Vendor(s) and not [RASB].

 

Kindly therefore let us have the redemption statement cum undertaking from [MBB] addressed to the Financier [Defendant] for our further action.”

 

(emphasis added).

 

The 1st Plaintiff replied to Messrs YY’s Letter dated 24.12.2008 by way of Messrs SKL’s Letter dated 24.12.2008 which enclosed a copy of the Vesting Order (which obviated the need for a “redemption statement’ from MBB).

 

57. The estoppel doctrine is also provided by s 115 EA which reads as follows:

 

“When one person has by his declaration, act or omission intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, otherwise than but for that belief he would have acted, neither he nor his representative in interest shall be allowed in any suit or proceeding between himself and that

 

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person or his representative in interest to deny the truth of that thing.’

 

(emphasis added).

 

58. The Defendant’s Representation constituted a “declaration” and/or ‘‘act’ by the Defendant which had “intentionally caused or permitted [the 1st Plaintiff] to believe a thing to be true and to act upon such belief, otherwise than but for that belief [the 1st Plaintiff] would have acted” within the meaning of s 115 EA.

 

59. Based on s 115 EA and Boustead Trading (1985) Sdn Bhd, the

 

Defendant is estopped from denying the Defendant’s Representation in this case.

 

M. Has Defendant breached Loan agreement?

 

60. I am of the view that the Defendant has breached the Loan in the following manner:

 

(a) out of the blue, Messrs YY’s Letter dated 30.12.2008 requested the 1st Plaintiff’s confirmation that the 1st Plaintiff would agree to a reduction of the Loan Sum (Defendant’s Request For Reduction Of Loan Sum)! The Defendant’s Request For Reduction Of Loan Sum is clearly contrary to the Loan Sum of RM600,000 which has

 

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been agreed between the 1st Plaintiff and the Defendant (Defendant’s 1st Breach) as follows –

 

(i) paragraph 1 of the Defendant’s Letter dated 8.9.2008 has clearly provided for the Loan Sum; and

 

(ii) Paragraph 4.1 requires as a security for the Loan, a 3rd Party 1st Legal Charge over the Property for the Loan Sum of RM600,000.

 

Before I discuss further in respect of this topic, I must refer to rule 42 of the Legal Profession (Practice and Etiquette) Rules 1978 (LPR) which provides that an A&S should not communicate with a person who is represented by another A&S. In this case, Messrs YY had already communicated with Messrs SKL (who represented the 1st Plaintiff). As provided in r 42 LPR –

 

(1) Ms. Lylian from Messrs YY should not have telephoned the 1st Plaintiff; and

 

(2) Messrs YY’s Letter dated 30.12.2008 should have been sent to Messrs SKL and not to the 1st Plaintiff;

 

(b) Messrs YY’s Letters dated 14.11.2008 and 9.12.2008 clearly stated the Loan Sum as RM600,000. As explained above, the Defendant is

 

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estopped from denying the Loan Sum as stipulated in Messrs YY’s Letters dated 14.11.2008 and 9.12.2008;

 

(c) the Defendant’s Letter dated 2.1.2009 stated, among others, that “upon submission” of the Loan Application Form, the 1st Plaintiff had “claimed” that the Property was free from encumbrance. The Defendant’s Letter dated 2.1.2009 also required the 1st Plaintiff to settle the Balance Purchase Price. The Defendant’s Letter dated

 

2.1.2009 has breached the Loan agreement (Defendant’s 2nd Breach) in 2 ways –

 

(i) as explained in the above Part I, the contents of the Loan Application Form could not form part of the terms and conditions of the Loan contract. As such, the Defendant’s Letter dated 2.1.2009 could not rely on the statement in the Loan Application Form written by SD2 (Property Free From Encumbrance) when the 1st Plaintiff was deprived of her right to peruse and correct the contents of the Loan Application Form; and

 

(ii) the Defendant’s Letter dated 2.1.2009 could not require the 1st Plaintiff to settle the Balance Purchase Price in view of the Defendant’s Representation contained in Messrs YY’s Letters dated 14.11.2008 and 24.12.2008 (Defendant agreed to release part of the Loan Sum to discharge MBB’s Charge). As

 

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elaborated above, the Defendant is estopped from denying the Defendant’s Representation.

 

It is to be noted that contrary to the Defendant’s 1st Breach, the Defendant’s Letter dated 2.1.2009 was entitled RM600,000 (Loan Sum) and stated that “All the LOF other conditions will remain [sic]”. In other words, the Defendant’s Letter dated 2.1.2009 provided further proof of the Defendant’s 1st Breach;

 

(d) Messrs SKL’s Letter dated 9.1.2009 had inquired on an urgent basis about the Defendant’s disbursement of the Loan Sum as the extended completion date of the SPA was on 9.1.2009. In reply to Messrs SKL’s Letter dated 9.1.2009, Messrs YY’s Letter dated

 

12.1.2009 stated that Messrs YY would reply “in due course” upon receipt of instruction from the Defendant. There was however no further reply from Messrs YY. More importantly, contrary to the Defendant’s Representation (contained in Messrs YY’s Letters dated

 

14.11.2008 and 24.12.2008), the Defendant did not disburse part of the Loan Sum to discharge MBB’s Charge (Defendant’s 3rd Breach); and

 

(e) the Defendant committed a third breach of the Loan contract when Mr. Sia sent SMS dated 13.1.2009 to the 1st Plaintiff to request a letter from the 1st Plaintiff to cancel the Loan (Defendant’s 4th Breach). There is no term and condition of the Loan agreement which has been breached by the 1st Plaintiff whereby the Defendant

 

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is entitled to cancel the Loan. It is to be noted that all parties have agreed for the SMS dated 13.1.2009 to be a “Part B Document’. Hence, the SMS dated 13.1.2009 is admissible as evidence according to Order 34 rule 2(2)(e)(i) RC read with s 58(1) EA -please see KTL Sdn Bhd, at paragraphs 32(b) and 33.

 

61. The Defendant’s 1st to 4th Breaches (collectively referred to as the “Defendant’s Breaches”) amounted to a refusal by the Defendant to perform the Loan contract “in its entirety’ (by the Defendant’s refusal to disburse any part of the Loan Sum) within the meaning of s 40 CA. I rely on Gopal Sri Ram FCJ’s judgment in the Federal Court case of Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2010] 1 CLJ 269, at 285-286, as follows:

 

“Section 40 [CA] is a re-statement of the English common law position. It provides as follows:

 

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

 

Special attention should be paid to the phrase “his promise in its entiretyUnder the section the right in a non-defaulter to repudiate a contract only accrues when the defaulter has refused to perform or has disabled himself or herself from performing the whole of his

 

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promise. If there is part performance by the defaulting party, the innocent party may not put an end to the contract ”

 

(emphasis added).

 

62. The above judgment by Gopal Sri Ram FCJ in Berjaya Times Square Sdn Bhd, has been concurred by Zulkefli Makinudin FCJ (as he then was) (at p. 276) and Mohd. Ghazali Yusoff FCJ (at p. 299).

 

63. The 1st Plaintiff did not, by words or conduct, acquiesced to the Defendant’s Breaches. In fact, the 1st Plaintiff has “put an end’ to the Loan contract by way of the Plaintiff’s Demand dated 13.4.2009.

 

64. Before I proceed to the next issue, I must reject the 1st Plaintiff’s contention that she has been deprived of her “legitimate expectation” under the Loan contract. The 1st Plaintiff’s sole cause of action in this case is breach of the Loan agreement. “Legitimate expectation” is not a cause of action in a private commercial dispute. I refer to my earlier judgment in Orix Credit Malaysia Sdn Bhd v Raub Australian Gold Mining Sdn Bhd [2015] MLRHU 982, at paragraphs 32-34, as follows:

 

“32. This court cannot help but notice that there is a growing trend in

 

private commercial cases for parties to raise the public law concept of “legitimate expectation”. I am of the view that “legitimate expectation” does not constitute a “cause of action” as explained by Salleh Abas LP (in the majority

 

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decision of the Supreme Court) in Government of Malaysia v Lim Kit Siang, United Engineers (M) Bhd v Lim Kit Siang

 

[1988] 2 MLJ 12, at 19, as follows:

 

“What then is the meaning of “a cause of action”? “A cause of action” is a statement of facts alleging that a plaintiff’s right, either at law or by statute, has, in some way or another, been adversely affected or prejudiced by the act of a defendant in an action. Lord Diplock in Letang v Cooper [1965] 1 QB 232 at p 242 defined “a cause of action” to mean “a factual situation, the existence of which entitles one person to obtain from the court a remedy against another person”. In my view the factual situation spoken of by Lord Diplock must consist of a statement alleging that, first, the respondent/plaintiff has a right either at law or by statute and that, secondly, such right has been affected or prejudicated by the appellant/defendant’s act ”

 

(emphasis added).

 

33. In the following cases, I have rejected the application of the

 

public law concept of “legitimate expectation” in the sphere of private commercial matters:

 

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(a) in Universal Trustee (Malaysia) Berhad v Lambang Pertama Sdn Bhd & Anor [2014] 5 AMR 57, at 83, I have decided as follows –

 

“65. Public law has recognised the concept of legitimate expectations. Having said that, such a concept is not applicable in the realm of private law which is governed by contracts and Common Law duty of care (not raised in the Counterclaim). It is clear that the Defendants could not rely on the Alleged Legitimate Expectations as a legal concept in this case, much less to sustain the Counterclaim.”

 

(emphasis added); and

 

(b) the following has been held in WTWT Sdn Bhd v Chew Bros (M) Sdn Bhd & Ors [2015] 5 CLJ 426, [2015] 2 MLRH 248, at paragraphs 46 and 47 –

 

“ 46. As explained above, the Plaintiff cannot rely on the invalid 3rd Defendant’s 1st Offer by way of the Plaintiff’s Letter dated 4.3.2013 to raise any “legitimate expectation” in the Plaintiff’s favour. In Universal Trustee (M) Bhd v Lambang Pertama Sdn Bhd & Anor [2014] 5 AMR

 

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57, at 82, I have expressed doubt on whether a public law concept of “legitimate expectation” can apply in the context of “private law” disputes –

 

47. In addition to the non-application of the public law concept of “legitimate expectation” in private law matters, the following reasons militate against the application of the “legitimate expectation” concept in this case:

 

(a) the application of the public law concept of “legitimate expectation” is not provided for in s 33(1) CA or any other provision in the CA;

 

(b) to consider “legitimate expectation” as a relevant factor in interpreting the AA is to resort to extrinsic circumstances which is not permitted according to Bratton Seymour Service Co Ltd. There is no case in Malaysia or countries with similar company legislation as ours which has applied the public law concept of “legitimate expectation” to interpret the AA; and

 

(c) the AA binds the company and all its shareholders. If one party may rely on a “legitimate expectation” caused by another party to construe the AA,

 

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this may not be just to the other shareholders of the company who are neither responsible nor involved in the “creation” of the “legitimate expectation”. ”

 

(emphasis added).

 

34. In view of the above reasons, I cannot accept “legitimate

 

expectation” to constitute a triable issue in this case so as to defeat This Application.”

 

(emphasis added).

 

N. Whether adverse inference should be made against Defendant N(1). Court’s discretion under s 114(g) EA

 

65. Section 114(g) EA provides as follows:

 

“ Court may presume existence of certain fact

 

114. The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the particular case.

 

ILLUSTRATIONS

 

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The court may presume –

 

(g) that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it;”

 

(emphasis added).

 

66. I refer to the following judgment of the Supreme Court delivered by Mohd. Azmi SCJ in Munusamy v Public Prosecutor [1987] 1 MLJ 492, at 494,:

 

“It is essential to appreciate the scope of section 114(g) lest it be carried too far outside its limit. Adverse inference under that illustration can only be drawn if there is withholding or suppression of evidence and not merely on account of failure to obtain evidence.

 

It may be drawn from withholding not just any document, but material document by a party in his possession, or for non-production of not just any witness but an important and material witness to the case.”

 

(emphasis added).

 

67. Munusamy is a criminal case but I am of the view that Munusamy should also apply in civil matters. This is because s 114(g) EA is applicable to all cases, both criminal and civil.

 

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68. I acknowledge that in civil cases, generally, a defendant has no legal burden to prove his or her defence. Nonetheless, the court has a discretion to draw an adverse inference against a defendant under s 114(g) EA for his or her failure to call a material witness to support the defence. This is clear from the following cases:

 

(a) the Supreme Court’s judgment given by Hashim Yeop Sani CJ (Malaya) in Guthrie Sdn Bhd v Trans-Malaysian Leasing Corp

 

Bhd [1991] 1 MLJ 33, at 34-35;

 

(b) Haidar JCA’s (as he then was) judgment in the Court of Appeal case of Chan Yoke Lain v Pacific & Orient Insurance Co Sdn Bhd

 

[1999] 1 MLJ 303, at 308-309; and

 

(c) Gopal Sri Ram’s (as he then was) judgment in the Court of Appeal in Subry bin Hamid v Husaini bin Tan Sri Ikhwan [2006] 5 AMR 644, at 652-653.

 

N(2). Should court draw adverse inference against Defendant for not calling Defendant’s Solicitor to testify in this case?

 

69. It is clear that the Defendant’s Solicitor is a material witness for the following reasons:

 

(a) Messrs YY’s Letters dated 14.11.2008 and 9.12.2008 clearly provided for the Loan Sum of RM600,000;

 

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(b) the Defendant’s Representation is contained in Messrs YY’s Letters dated 14.11.2008 and 24.12.2008;

 

(c) Messrs YY’s Letter dated 30.12.2008 constituted the Defendant’s 1st Breach; and

 

(d) SD5 gave oral evidence Messrs YY’s Letter dated 14.11.2008 was contrary to the Defendant’s “requirements/conditions” as stated in the Defendant’s Letter dated 8.9.2008. Hence, it is material, if not crucial, for the Defendant’s Solicitor to shed light on the Allegation Against Messrs YY.

 

70. This court is constrained to find that there is suppression of material evidence by the Defendant in not calling the Defendant’s Solicitor to testify in this case. Such a suppression in turn attracts an adverse inference against the Defendant under s 114(g) EA. This finding is premised on the following reasons:

 

(a) no evidence has been adduced by the Defendant to show that the Defendant’s Solicitor is not available to give evidence in this case;

 

(b) the Defendant and/or its solicitors has not sent any letter to the Defendant’s Solicitor to request –

 

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(i) for an interview with the Defendant’s Solicitor in respect of this suit; and/or

 

(ii) the Defendant’s Solicitor to give evidence in this case; and

 

(c) the Defendant has not applied for a subpoena under Order 38 rule 14 RC to be issued to the Defendant’s Solicitor so as to compel the Defendant’s Solicitor to attend court as a witness in this case.

 

N(3). Should an adverse inference be made against Defendant for not calling Mr. Sia as a witness in this case?

 

71. It cannot be denied that Mr. Sia is a material witness in this case due to the following reasons:

 

(a) according to SD1 and SD2, Mr. Sia was the then sales manager of the Defendant who handled the Loan in this case;

 

(b) Mr. Sia sent the Defendant’s Letter dated 2.1.2009 which constituted the Defendant’s 2nd Breach;

 

(c) the SMS dated 13.1.2009 (which constituted the Defendant’s 4th Breach) was sent by Mr. Sia; and

 

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(d) SD1 and SD2 gave oral evidence that Mr. Sia took over this case after SD1 and SD2 left the employment of the Defendant.

 

72. According to the following cases, there is a rebuttable presumption of sanity:

 

(a) in the Court of Appeal case of Ibrahim bin Mohd v Public Prosecutor [2013] 1 MLJ 768, at 771, Low Hop Bing JCA held that the “court shall presume the absence of unsoundness of mind” which is consistent with the Common Law presumption of sanity; and

 

(b) Jeffrey Tan J (as he then was) held in the High Court case of Khaw Cheng Bok & Ors v Khaw Cheng Poon & Ors [1998] 3 MLJ 457, at 576, that sanity is presumed until the contrary is shown.

 

73. I refer to ss 45 and 118 EA which provide as follows:

 

“Opinions of experts

 

45(1) When the court has to form an opinion upon a point of foreign law or of science or art, or as to identity or genuineness of handwriting or finger impressions, the opinions upon that point of persons specially skilled in that foreign law, science or art, or in questions as to identity or genuineness of handwriting or finger impressions, are relevant facts.

 

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(2)

 

Such persons are called experts.

 

Who may testify

 

118. All persons shall be competent to testify unless the court considers that they are prevented from understanding the questions put to them or from giving rational answers to those questions by tender years, extreme old age, disease, whether of body or mind, or any other cause of the same kind.

 

Explanation – A mentally disordered person or a lunatic is not incompetent to testify unless he is prevented by his condition from understanding the questions put to him and giving rational answers to them ”

 

(emphasis added).

 

74. There is a rebuttable presumption that Mr. Sia is sane and competent to testify in this case pursuant to s 118 EA. Such a presumption of sanity can only be rebutted by expert medical evidence [within the meaning of s 45(1) and (2) EA] to prove that Mr. Sia –

 

(a) is not of sound mind; and

 

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(b) lacks the competence to testify under s 118 EA and in particular, Mr. Sia is prevented by his unsoundness of mind from understanding questions and giving rational answers (as understood in the Explanation to s 118 EA).

 

75. Regrettably, I find that the Defendant has suppressed material evidence by not calling Mr. Sia to testify in this case. As such, an adverse inference under s 114(g) EA should be made against the Defendant for not calling Mr. Sia to give evidence in this case. This adverse inference is based on the following reasons:

 

(a) no medical evidence has been adduced by the Defendant to prove Mr. Sia’s unsoundness of mind and incompetence to testify in this case;

 

(b) regulation 3(1) of the National Registration Regulations 1990 (NRR) requires all persons within Malaysia on the date of enforcement of NRR to register in accordance with NRR. Regulation 4(cc)(iii) NRR requires “full address of residence within Malaysia” to be given to the “registration officer’ (defined in reg. 2 NRR as any person appointed under ss 3, 3A or 3B of the National Registration Act 1959). According to reg. 15(1) NRR, any person registered under NRR who changes his place of residence to a place where he or she may reside for a period of 90 days or more, shall within 14 days of such change, report the fact to the nearest “registration office” (defined in reg. 2 NRR) and shall apply for a replacement identity

 

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card. A breach of reg. 15(1) constitutes an offence under reg. 25(1)(fa) NRR which is punishable with imprisonment up to 3 years and/or a fine up to RM20,000.

 

It is clear that Mr. Sia is required to be registered under reg. 3(1) NRR in accordance with NRR. If there is any change in Mr. Sia’s residential address, reg. 4(cc)(iii) NRR requires Mr. Sia to report such a change to the National Registration Department (NRD) and to apply for a replacement identity card. The Defendant had Mr. Sia’s NRIC No. and yet, the Defendant did not conduct a search of NRD’s records to ascertain Mr. Sia’s residential address (NRD Search). There is also no evidence that the Kajang Address is Mr. Sia’s current residential address;

 

(c) the Defendant could have advertised in local newspapers that the Defendant sought Mr. Sia’s assistance as a witness in this case. The expense for such an advertisement forms part of the Defendant’s costs which can be recovered from the Plaintiffs if the Defendant is successful in this suit. I will discuss the question of costs later in this judgment;

 

(d) the Defendant had Mr. Sia’s mobile phone number. The Defendant did not write to the mobile phone service provider to obtain Mr. Sia’s contact details;

 

(e) the Defendant did not apply for a subpoena for Mr. Sia; and

 

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(f) even if it is assumed that the Kajang Address is correct, the Defendant and/or its solicitors should have prepared a letter to request –

 

(i) for an interview with Mr. Sia concerning this case; and/or

 

(ii) Mr. Sia to give evidence in this case.

 

O. Has 1st Plaintiff suffered any claimable loss or damage?

 

O(1). Prayer (g) for exemplary damages

 

76. Learned counsel for the Plaintiffs withdrew Prayer (g) before I gave my order on 23.9.2015 in respect of the relief in this case. Such a withdrawal is correctly made in view of the Court of Appeal’s judgment in Nurasmira Maulat bt Abd Jaffar & Ors v Ketua Polis Negara & Ors [2015] 3 MLJ 105 regarding when the court may award exemplary damages. In Nurasmira Maulat, at paragraph 15, Hamid Sultan JCA decided as follows:

 

“ Jurisprudence relating to exemplary damages and the Federal Constitution:

 

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(i) The House of Lords as early as 1964 in Rookes v Barnard [1964] 1 All ER 367; [1964] AC 1129 has held that English courts have recognised the awarding of exemplary damages, that is, damages whose object was to punish or deter and which were distinct from aggravated damages (whereby the motives and conduct of the defendant aggravating the injury to the plaintiff would be taken into account in assessing compensatory damages), and there were two categories in which an award of exemplary damages could serve as a useful purpose, viz, in the case of oppressive, arbitrary or unconstitutional action by the servants of the government, in the case where the defendant’s conduct had been calculated by him to make a profit for himself, which might well exceed the compensation payable to the plaintiff (see Sakshi Sharma w/o Rajesh Sharma and others v State of Himachal Pradesh and others [2012] Indlaw HP 1474). The Indian courts have been cautious in granting exemplary damages in ordinary tort claims. In Common Cause, a Registered Society v Union of India (1999) 6 SCC 667 it was stated:

 

In an action for tort where the plaintiff is found entitled to damages, the matter should not be stretched too far to punish the defendant by awarding exemplary damages except when their conduct, specially those of the government and its officers, is found to be oppressive, obnoxious and arbitrary and is, sometimes coupled with malice If we were to apply the rule in Rookes v Barnard [1964] 1 All ER 367 invariably and unhesitatingly and were to award exemplary damages in every case involving government officers or government servants, the result would be appalling.

 

(j) The reason for awarding exemplary damages was addressed in Rookes v Barnard as follows:

 

There are certain categories of cases in which the award of exemplary damages can serve useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into civil law a principle which ought logically to belong to criminal.

 

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(k) In essence, English and Indian case laws recognises that courts on extraordinary facts and circumstances to maintain social discipline and rule of law must take punitive measures by awarding damages for unlawful act. The English courts in the recent case of Ashley v Chief Constable of Sussex Police [2008] 2 WLR 975 (HL) have gone to say that exemplary damages which is statutorily barred in tortuous claim by virtue of the English Law Reform (Miscellaneous Provisions) Act 1934, is maintainable if the claim is premised on breach of fundamental guarantees enshrined in the Federal Constitution. This part of the jurisprudence is well captured and articulated by His Lordship David Wong Dak Wah in the case of Datuk Seri Khalid bin Abu Bakar & Ors v N Indra a/p P Nallathamby (the administrator of the estate and dependent of Kugan a/l Ananthan, deceased) and another appeal [2015] 1 MLJ 353, often referred to Kugan’s case High Court citation [2014] 8 MLJ 625; [2013] 6 CLJ 272.

 

(l) The Indian Supreme Court even before Ashley’s case have made it clear that a breach of fundamental guarantees under the Constitution will attract exemplary damages as of right, independent of tortuous claim (see K Elango and others v Secretary of State of Tamil Nadu and others [2013] Indlaw Mad 1425).

 

(m) In DK Basu v State of West Bengal (1997) 1 SCC 416, the Supreme Court of India in dealing with their art 21 (which is similar to our art 5 of the Federal Constitution) and s 330 of the Penal Code (which is similar to our s 331 of the Penal Code) had this to say:

 

Custodial death is perhaps one of the worst crimes in a civilised society governed by the Rules of law. The rights inherent in Arts 21 and 22(1) of the Constitution require to be jealously and scrupulously protected. Court cannot wish away the problem. Any form of torture or cruel, inhuman or degrading treatment would fall within the inhibition of Art 21 of the Constitution, whether it occurs, during investigation, interrogation or otherwise. If the functionaries of the Government become law breakers, it

 

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is bound to breed contempt for law and would encourage lawlessness and every man would have the tendency to become law unto himself thereby leading to anarchanism. No civilised nation can permit that to happen. Does a citizen she off his fundamental right to life, the moment a policeman arrests him? Can the right to life of a citizen be put in abeyance on his arrest? These questions touch the spinal cord of human rights jurisprudence. The answer, indeed, has to be an emphatic ‘No1. The precious right guaranteed by Art 21 of the Constitution of India cannot be denied to convicts, under trials, detainers and other prisoners in custody, except according to the procedure established by law by placing such reasonable restrictions as are permitted by law.

 

Further the court on s 330 and its relevance to damages stated:

 

… S 330 of Penal Code, directly makes torture during interrogation and investigation punishable under the Indian Penal Code. It is however, inadequate to repair the wrong done to the citizen. Prosecution of the offender is a obligation of the State in case of every crime but the victim of crime needs to be compensated monetarily also. The Court, where the infringement of the fundamental right is established, therefore, cannot stop by giving a mere declaration. It must proceed further and give compensatory relief not by way of damages as in a civil action but by way of compensation under the public law jurisdiction for wrong done, due to breach of public duty by the State of not protection the fundamental right to life of the citizen. To repair the wrong done and give judicial redress for legal injury is a compulsion of judicial conscience.

 

(n) In Nilabati Behera @ Lalitha v State of Orissa and others AIR

 

1993 SC 1960, the Indian Supreme Court went to say that court can evolve new tools and mould remedy to provide redressal in case of deprivation of fundamental right guaranteed under art 21 (Malaysia -art 5). The court held:

 

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15 … Convicts, prisoners or under-trials are not denuded of their fundamental rights under Art 21 and it is only such restrictions as are permitted by law, which can be imposed on the enjoyment of the fundamental rights by such persons. It is an obligation of the State to ensure that there is no infringement of the indefeasible rights of a citizen to life, except in accordance with law, while the citizen is in its custody. The public law proceedings serve a different purpose than the private law proceedings. The relief of monetary compensation as exemplary damages, in proceedings u/art 32 by the Supreme Court or u/art 226 by the High courts, for established infringement of the indefeasible right guaranteed under Art 21 is a remedy available in public law and is based on the strict liability for contravention of the guaranteed basic and indefeasible rights of the citizen. The purpose of public law is not only to civilize public power but also to assure the citizen that they live under a legal system which aims to protect their interests and preserve their rights. Therefore, when the Court moulds the relief by granting ‘compensation’ in proceedings u/art 32 or 226 seeking enforcement or protection of fundamental rights. It does so under the public law by way of penalizing the wrongdoer and fixing the liability for the public wrong on the State which has failed in its public duty to protect the fundamental rights of the citizen. The payment of compensation in such cases is not to be understood, as it is generally understood in a civil action for damages under the private law but in the broader sense of providing relief by an order of making ‘monetary amends’ under the public law for the wrong done due to breach of public duty of not protecting the fundamental rights of the citizen. The compensation is in the nature of ‘exemplary damages’ awarded against the wrongdoer for the breach of its public law duty and is independent of the rights available to the aggrieved party to claim compensation under the private law in an action based on tort, through a suit instituted in a Court of competent jurisdiction or/and prosecute the offender under the penal law. (Emphasis added.)

 

(o) From the reading of Indian Supreme Court decision as well as the House of Lords (PC) decision in Ashley’s, it is trite that courts as

 

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guardian of the Constitution are bound to arrest any form of breach of fundamental guarantees by providing exemplary damages as a tool for relief which has been extracted and extended from the decision in Rookes v Barnard. In consequence, a bar to claim exemplary damages under Civil Law Act in private law remedy will not apply in the arena of public law relief as well as remedy.”

 

(emphasis added).

 

O(2). Prayers (e) and (f)

 

77. The 1st Plaintiff prays for the following relief:

 

(a) Prayer (e) [loss of profits arising from the Defendant’s Breaches (Alleged Loss of Profits)]; and/or

 

(b) Prayer (f) (general damages).

 

78. Section 74(1) and (2) CA provide as follows:

 

“Compensation for loss or damage caused by breach of contract 74(1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

 

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(2) Such compensation is not to be given for any remote and

 

indirect loss or damage sustained by reason of the breach”

 

(emphasis added).

 

79. It is trite law that the 1st Plaintiff bears the legal burden to prove Alleged Loss of Profits as a result of the Defendant’s Breaches on a balance of probabilities. In Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 MLJ 569, at 575 and 576, Mohd. Dzaiddin SCJ (as he then was) decided as follows in the Supreme Court:

 

“Therefore, the basic question for our decision here is whether the learned judge was correct in his assessment of damages for loss of profits. That raises the question whether he applied the correct principles of law or the amount was based on an entirely erroneous estimate of the damage. (Flint v Lovell [1934] 1 KB 354 at p 360.)

 

In considering the above question, it is important to bear in mind that the normal measure of damages for breach of contract in this country is prescribed by s 74(1) of the Contracts Act 1950, which is the statutory enunciation of Hadley v Baxendale (1854) 9 Ex 341 (Teoh Kee Keong v Tambun Mining Co Ltd [1968] 1 MLJ 39; Bank Bumiputra Malaysia Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd & Ors [1993] 2 MLJ 76, SC). In essence, the section states that the party may recover any loss or damage for any breach which: (a) naturally arose in the usual course of things; or (b) which the parties knew, when they made the contract, to be likely to result from the breach of it. For the sake of completeness, it should be mentioned that our courts have treated the position under the second limb of the section to be similar to the second limb of Hadley v Baxendale, which is, the party may recover damages which may ‘reasonably be supposed to have been in contemplation of both the parties, at the time they made the contract1.

 

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See Associated Metal Smelters Ltd v Tham Cheow Toh [1971] 1 MLJ 271. …

 

It is trite that the plaintiff must prove the loss although the standard imposed on it is not a high one .”

 

(emphasis added).

 

80. Based on s 74(1) CA and Malaysian Rubber Development Corp Bhd,

 

the 1st Plaintiff has the legal onus to prove on a balance of probabilities:

 

(a) the Alleged Loss of Profits “naturally arose in the usual course of things” from the Defendant’s Breaches within the meaning of the first limb of s 74(1) CA; and/or

 

(b) both the 1st Plaintiff and Defendant “knew, when they made the [Loan] contract’ that the Alleged Loss of Profits was “likely to result from the breach” of the Defendant’s Breaches as understood in the second limb of s 74(1) CA.

 

81. The Plaintiffs’ learned counsel relied on the following cases to support

 

Prayers (e) and (f):

 

(a) the Supreme Court’s judgment in Bank Bumiputra Malaysia Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd & Ors [1993] 2 MLJ 76 (Mae Perkayuan Sdn Bhd);

 

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(b) the Court of Appeal case of Bumiputra-Commerce Bank Bhd, Kuala Terengganu v Chendering Development Sdn Bhd & Ors [2004] 1 MLJ 657 (Chendering Development Sdn Bhd);

 

(c) the High Court of Australia’s decision in Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 104 ALR 1 (Amann Aviation Pty Ltd). The High Court is the apex court in Australia; and

 

(d) the High Court of Australia case of Marks (in a representative capacity) & Ors v Gio Australia Holdings Ltd & Ors (1998) 158 ALR 333 (Gio Australia Holdings Ltd).

 

82. In this case, the Property was purchased by the 2nd Plaintiff and not the 1st Plaintiff. No evidence had been adduced by the 1st Plaintiff to show that after the termination of the SPA, the 1st Plaintiff had entered into any agreement to purchase property (1st Plaintiff’s Acquisition) and had not been able to obtain any financing for 1st Plaintiff’s Acquisition. PBB’s Letter could not support Prayers (e) and (f) because PBB had rejected an application for credit facilities from the 2nd Plaintiff and not the 1st Plaintiff. Accordingly, the 1st Plaintiff has not adduced any evidence to prove that –

 

(a) the Alleged Loss of Profits “naturally arose in the usual course of things” from the Defendant’s Breaches within the meaning of the first limb of s 74(1) CA; and

 

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(b) the Defendant “knew, when they made the [Loan] contract’ that the Alleged Loss of Profits was “likely to result from the breach” of the Defendant’s Breaches as understood in the second limb of s 74(1) CA.

 

In the circumstances, I find that the 1st Plaintiff has failed to discharge the legal burden to prove on a balance of probabilities that the Alleged Loss of Profits falls within both limbs of s 74(1) CA. Additionally or alternatively, I am of the view that the Alleged Loss of Profits is too remote or indirect to be claimed by the 1st Plaintiff within the meaning of s 74(2) CA.

 

83. The cases relied on by the 1st Plaintiff may be distinguished from this case as follows:

 

(a) in Mae Perkayuan Sdn Bhd, the Supreme Court affirmed the High Court’s finding of fact that both limbs of s 74(1) CA had been proven by the first respondent developer company. Abdul Hamid Omar LP decided as follows in Mae Perkayuan Sdn Bhd, at p. 87-89 –

 

“ The first respondent’s claim for loss of profits in respect of the Dungun project

 

We note that before the bank approved the bridging finance in the form of an overdraft for a fixed period, the first respondent had submitted its project papers and feasibility study (exh D20) prepared by Mohd Anuar & Co, who were financial and land consultants, housing developers and first class appraisers.

 

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These papers gave the details of the works to be carried out for purposes of the project, including construction costs, management costs, consultant’s fees, legal fees, contractors’ profits, and interest to be paid to the bank, etc and the sale price of each type of houses to be sold. The lands on which the houses were to be built were not Malay reservation lands. The 15 units of shop houses were of double storey type, while the dwelling houses were to consist of 16 units of bungalows, 20 units of semi-detached houses and 42 units of terrace houses, all of single storey type. Besides Malays, there was a nonMalay population of about 60,000 in the neighbourhood of the housing projects, so that it could reasonably be presumed that there would have been a significant market for the dwelling houses. The evidence of the second respondent as director of the first respondent shows that he had received a large number of inquiries from potential buyers but could not enter into any sale and purchase agreements with them because the first respondent had not obtained the necessary advertisement and sale permit from the housing ministry. This witness had discussed the details of the project papers and feasibility study with the bank according to which the anticipated total development costs of the project would have been RM6,030,920 while the anticipated proceeds of sales of the dwelling houses were said to amount to RM12,250,000 in which case, it was anticipated that the first respondent would make a projected profit of RM6,219,080.

 

The evidence of the chief general manager of the bank’s head office shows that the bank would not have approved the bridging finance unless it was satisfied that the projects would be viable and profitable. The bank was fully aware and knew that if for any reason the projects could not be completed, the first respondent could incur a heavy loss in terms of loss of profit, and consequently, the bank too might incur losses as the first respondent might not be in a position to repay the sums advanced to it.

 

The notes of evidence show that although the bank had closed its case as plaintiff, in the interest of justice, the trial court had allowed the bank to reopen its case by calling the bank’s manager at Kuala Terengganu, Encik Mohd Bustamin, to give

 

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his comments on the exh D20. This witness said that the project papers and feasibility study showed that the project was a profitable one, and the bank had acknowledged that it was a profitable and viable project before agreeing to give the bridging finance.

 

The fourth witness for the respondents was a quantity surveyor, Mohd Rasid bin Hainin, with Akitek Indahreka of 13 years’ standing. Prior to joining Akitek Indahreka he had been in government service for five and a half years. While in government service, his duties included preparing bills of quantities, tender agreements and he was also in charge of school, road and water works projects, until he joined Akitek Indahreka in 1983. He was involved in about 20 housing projects in Terengganu. He said more than 90% of housing projects in Terengganu had been completed.

 

Mohd Anuar & Co had engaged Mohd Rasid to prepare the layout and building plans for the first respondent’s housing projects. Mohd Rasid had prepared the most economical costs for the project by which he meant that having regard to the progress and the developments of the surrounding areas, the houses to be constructed must be of the types which would be the most saleable. His calculations showed that the total development cost would amount to RM5,821,878. The houses when completed and sold would fetch RM11,216,600 and consequently the project would bring a profit of around RM5.3m.

 

The law in England with regard to measure of damages for breach of contract to lend money is stated in the treaties on damages in 12 Halsbury’s Laws of England (4th Ed) at p 465 para 1179:

 

Damages for breach of a contract to lend money may be nominal or substantial according to the circumstances which will in each case determine the reasonable contemplation as to the loss which is liable to result from the breach. Thus the cost of raising the money elsewhere may be recoverable as a natural result and where the defendant had knowledge

 

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of other probable consequences of his breach, he may have to render full compensation for the loss thereby inflicted upon the plaintiff. Whether the damages claimed are damages arising naturally from the breach or damages for which the contract breaker is liable because of his special knowledge at the time of the contract depends also on all the circumstances of the case.

 

It will be seen that the law in this country as to the measure of damages for breach of contract as provided under s 74 of the Contracts Act 1950 is the same as in England, and requires that the damage or loss suffered must be within the contemplation of both parties. In this case, the bank had full knowledge from the very beginning that the project, if successfully and duly completed, would bring in a profit of about RM5.3m to the first respondent. The bank had studied every aspect of the project and had decided what amount was required by the first respondent as bridging finance before the first respondent could be expected to derive a profit from sales of dwelling houses. Once the first respondent commenced to derive such profit, it could be expected to apply the same towards reduction of its overdraft with the bank and completion of the project. It is public and common knowledge that where a financial institution withdraws its financial facility from a developer engaged in housing project, it becomes virtually impossible for the developer to obtain financial facilities from alternative sources.

 

We are, therefore, of the view that the loss of profits on the housing project which the first respondent would suffer was the natural and probable result of the breach of agreement by the bank, and when the bank agreed to provide the bridging finance to the first respondent, the bank well knew of the loss that the first respondent would incur should the bank break the contract”

 

(emphasis added);

 

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(b) Rahmah Hussein JCA (as she then was) held in Chendering Development Sdn Bhd, at p. 661 and 668, that the overdraft facility granted by the appellant bank to the first respondent company was for 3 specific purposes within the knowledge of the appellant bank and the consequence of its breach was within the contemplation of the parties –

 

“3. … By an agreement dated 11 March 1982 (‘the Agreement’) the

 

Bank (appellant) granted to Chendering (first respondent) a conditional overdraft facility for a sum, not exceeding RM5m.

 

The facility is expressed to be for three specific purposes.

 

They are, firstly to enable Chendering to complete the purchase of two parcels of adjoining agricultural land held under title Nos 1489 and 1490, Lot Nos 2199 and 2200, Mukim of Kijal, in the District of Kemaman, in the State of Terengganu (the subject land) respectively; secondly, to provide fees for Chendering to convert the land use from agricultural to residential and then to sub-divide the land into lots for building houses for sale to the public at a profit; thirdly, to help finance the construction, infrastructure and management cost.

 

37 Learned counsel for the Bank submitted that the proper measure of damages in this case should be the normal measure of damages under s 74(1) [CA], that is the difference between cost of substitute loan in the market -hence, nominal damages. With respect, we do not agree.

 

We say that this was not a simple contract to lend money, but a contract for a definite purpose. Furthermore, that

 

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purpose was clearly within the knowledge of the parties at the time of entering into the Agreement and the consequence of its breach must have been within the contemplation of the parties. Thus, all losses claimed by Chendering which arise out of the transaction between the parties arose naturally from the breach by the Bank, and were also within the contemplation of the parties as likely to arise from such a breach within the requirements of s 74 [CA] and the rule in Hadley v Baxendale at p 151”

 

(emphasis added);

 

(c) the 6 to 1 majority decision of the Australian High Court in Amann Aviation Pty Ltd, does not concern a provision in an Australian statute which is similar to our s 74(1) and (2) CA; and

 

(d) Gio Australia Holdings Ltd involves the application of ss 82(1) and 87 of the Australian Trade Practices Act 1974 (which does not apply in Malaysia).

 

84. The Defendant’s learned counsel has cited English cases to resist Prayers (e) and (f). I am contented to rest my refusal of Prayers (e) and

 

(f) on the 1st Plaintiff’s failure to prove the application of both limbs of s 74(1) CA.

 

P. A&S’s duties in preparation of witness statements

 

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85. A reading of WS-SD3 leaves no doubt that SD3 has personally gone to the Kajang Address to look for Mr. Sia. According to WS-SD3, SD3 found the door to Mr. Sia’s apartment to be locked and SD3 knocked on the door for “quite some time” but there was no response. It was subsequently revealed in cross-examination by the Plaintiffs’ learned counsel that SD3 did not personally go to the Kajang Address and actually, it was Ms. Yeo who went to the Kajang Address. Ms. Yeo was not called by the Defendant to testify in this case. Regrettably, I find the contents of WS-SD3 regarding SD3’s “visit to the Kajang Address –

 

(a) to be false [which amounts to an offence of giving false evidence under s 193 of the Penal Code (PC)]; and

 

(b) to have misled this court.

 

86. Under Order 38 rule 2(1) RC, generally, evidence-in-chief of a witness “shall be given by way of a witness statement”. In preparing a witness statement, it is essential for an A&S to ensure that the following legal and ethical duties are fulfilled:

 

(a) the witness should be expressly informed that if the witness statement is false, the witness may be prosecuted for giving false evidence under s 193 PC; and

 

(b) the A&S has the following ethical duties –

 

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(i) the A&S shall uphold fearlessly the interest of justice and dignity of the legal profession without regard to any unpleasant consequences either to himself or to any other person (rule 16 LPR);

 

(ii) the A&S shall not practice any deception on the court (rule 17 LPR);

 

(iii) the A&S’s conduct before the court and in relation to other A&S shall be characterised by, among others, candour (rule 18 LPR);

 

(iv) the A&S shall at all times uphold the dignity and high standing of the legal profession (rule 31 LPR); and

 

(v) the A&S shall use his best efforts to prevent his client from doing things which the A&S himself or herself ought not to do, particularly with reference to his conduct towards Court and where a client persists in such wrong doing, the A&S shall terminate the relationship. (rule 36 LPR).

 

87. In view of the above contents of WS-SD3, I refer to the following English Court of Appeal case of Meek v Fleming [1961] 3 All ER 148 –

 

(a) Holroyd Pearce LJ (as he then was) decided as follows, at p. 154 –

 

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“Where a party deliberately misleads the court in a material matter, and that deception has probably tipped the scale in his favour (or even, as I think, where it may reasonably have done so) it would be wrong to allow him to retain the judgment thus unfairly procured. Finis litium is a desirable object, but it must not be sought by so great a sacrifice of justice which is and must remain the supreme object. Moreover, to allow the victor to keep the spoils so unworthily obtained would be an encouragement to such behaviour, and do even greater harm than the multiplication of trials. In every case it must be a question of degree, weighing one principle against the other. In this case it is clear that the judge and jury were misled on an important matter. I appreciate that it is very hard at times for the advocate to see his path. clearly between failure in his duty to the court, and failure in his duty to his client.”

 

(emphasis added); and

 

(b) Willmer LJ held as follows, at p. 156 –

 

“I would venture to follow the example of Singleton LJ in Tombling’s case in quoting from Lord Macmillan on The Ethics Of Advocacy, at p 17. This is what Lord Macmillan said:

 

“In the discharge of his office the advocate has a duty to his client, a duty to his opponent, a duty to the court, a duty to the state and a duty to himself/’

 

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It seems to me that the decision which was taken involved insufficient regard being paid to the duty owed to the court and to the plaintiff and his advisers.

 

The result of the decision that was taken was that the trial proceeded in a way that it should not have done. Where the court has been thus deceived in relation to what I conceive to be a matter of vital significance, I think that it would be a miscarriage of justice to allow a verdict obtained in this way to stand”

 

(emphasis added).

 

88. If the court has been misled on a material issue and a miscarriage of justice has been caused in respect of the court’s earlier decision, I am of the view that such a decision may be set aside subsequently under s 44 EA on the ground of fraud and/or collusion. Section 44 EA provides as follows:

 

“Any party to a suit or other proceeding may show that any judgment, order or decree which is relevant under section 40, 41 or 42, and which has been proved by the adverse party, was delivered by a court not competent to deliver it or was obtained by fraud or collusion. ”

 

(emphasis added).

 

89. In Pacific & Orient Insurance Co Bhd v Mazlan bin Ahmad & Ors

 

[2015] 6 AMR 543, at 573, I have decided as follows:

 

“43. I am of the view that according to the cases discussed in Adon, in particular Badiaddin and Selvam Holdings (Malaysia) Sdn Bhd,

 

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the High Court has inherent jurisdiction to set aside an earlier sealed order or judgment of a High Court in rare and exceptional circumstances (Vitiating Circumstances). I am of the further view that the High Court’s jurisdiction to set aside an earlier perfected order or judgment based on lack of jurisdiction and/or fraud, is statutory and is based on s 44 [EA].’’

 

(emphasis added).

 

Q. Court’s duty to disallow irrelevant and scandalous questioning

 

90. As explained in the above Part N(3), the Defendant has not adduced any expert medical evidence to prove that Mr. Sia is not of sound mind. Hence, the Defendant should not have adduced oral hearsay regarding Mr. Sia’s unsoundness of mind through SD1 and SD3 (please see the above Part G). I will now explain why I stopped learned counsel for Plaintiffs and Defendant from questioning SD1 regarding Mr. Sia’s mental health.

 

91. Sections 151 and 152 EA read as follows:

 

“Indecent and scandalous questions

 

151. The court may forbid any questions or inquiries which it regards as indecent or scandalous, although they may have some bearing on the questions before the court, unless they relate to facts in issue or to matters necessary

 

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to be known in order to determine whether or not the facts in issue existed.

 

Questions intended to insult or annoy

 

152. The court shall forbid any question which appears to it to be intended to insult or annoy, or which, though proper in itself, appears to the court needlessly offensive in form .”

 

(emphasis added).

 

92. In the Singapore High Court case of R v Chhoa Mui Sui [1937] MLJ 236, at 237, Terrel Ag CJ held that the learned District Judge should have exercised his discretion under the then s 152 Evidence Ordinance of Singapore to disallow certain questions from being asked during trial.

 

93. If a question concerning Mr. Sia’s mental health is not relevant (in the absence of expert medical evidence), the court should not allow such a question to be posed to SD1 and SD3. Such a questioning is disallowed for the following reasons:

 

(a) Mr. Sia is not a party in this case. Mr. Sia has not been informed by the Defendant regarding this suit and consequently, Mr. Sia cannot appoint a counsel to hold a watching brief to safeguard Mr. Sia’s interest in this case. Evidence which has been adduced in a trial,

 

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forms part of the permanent record of the case. The only exception is when the court exercises its discretion to expunge evidence from the court record. In these circumstances, it is not just for questions to be asked regarding Mr. Sia’s mental health which may cause irreparable prejudice to Mr. Sia’s reputation; and

 

(b) questions regarding a person’s unsoundness of mind are –

 

(i) “indecent or scandalous” within the meaning of s 151 EA; and/or

 

(ii) “offensive” under s 152 EA.

 

94. Our ss 151 and 152 EA are identical to ss 151 and 152 of the Indian Evidence Act 1872 [EA (India)]. As such, Indian cases on ss 151 and 152 EA (India) are persuasive. In Mohammad Sultan v Saraj-ud-Din AIR 1936 Lahore 183, at 185, Agha Haidar J in the Lahore High Court decided as follows:

 

“The trial Judge is not a mere automaton, but is supposed intelligently to control the conduct of the cases in his Court and it is one of his important functions to see that scandalous matters are not introduced into the record unless they are relevant for the proper decision of the case .”

 

(emphasis added).

 

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95. Rule 13 LPR provides that an A&S “shall guard against being made the channel for questions which are only intended to insult or annoy, and to exercise his own judgment as to the substance and form of the questions put’.

 

96. I must make clear that if a question is relevant to a case under s 5 EA, such a question should be allowed by the court no matter how indecent, scandalous or offensive it may be. The court should allow all relevant questions to be asked so as to assist the court to decide the case justly. If the subject matter of questioning is relevant and yet may be indecent, scandalous or offensive, the court may consider to hold such a questioning in camera pursuant to the proviso to s 15(1) of the Courts of Judicature Act 1964 (CJA). Section 15(1) CJA provides as follows:

 

“ Courts to be open and public

 

15(1) The place in which any Court is held for the purpose of trying any cause or matter, civil or criminal, shall be deemed an open and public court to which the public generally may have access:

 

Provided that the Court shall have power to hear any cause or matter or any part thereof in camera if the Court is satisfied that it is expedient in the interests of justice, public safety, public security or propriety, or for other sufficient reason so to do.’

 

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(emphasis added).

 

R. Assessment of costs

 

97. Order 59 rule 19 RC reads as follows:

 

“ Costs payable for trial in the High Court

 

19(1) The amount of costs (excluding disbursement) that are payable shall be at the discretion of the Court and shall be determined upon the conclusion of the trial.

 

(2) In fixing the costs payable, the Court shall have regard to

 

the relevant circumstances including but not limited to the factors set out in the rule 16.”

 

(emphasis added).

 

98. It is clear that under Order 59 rule 19(1) and (2) RC, the court has a wide discretion to fix the amount of costs in respect of the trial of this case.

 

99. I fix a sum of RM10,000 as costs (excluding disbursements) to be paid by the 2nd Plaintiff to the Defendant (for the dismissal of the 2nd Plaintiff’s suit against the Defendant) because –

 

(a) the 2nd Plaintiff’s suit is dismissed on a trite principle of law, namely the doctrine of privity of contract; and

 

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(b) the Defendant’s time, effort and costs has not been expended solely to defend this action by the 2nd Plaintiff but more importantly, has been expended to resist the suit by the 1st Plaintiff.

 

100. I exercise my discretion under Order 59 rule 19(1) and (2) RC to award costs amounting to RM100,000 (excluding disbursements) to be paid by the Defendant to the 1st Plaintiff. This is because of the Defendant has conducted this case in an “improper’ manner as follows:

 

(a) the Defendant has suppressed material evidence in this case by not calling the Defendant’s Solicitor and Mr. Sia (please see the above Part N);

 

(b) SD3 tried to deceive this court in respect of her WS-SD3 (please see the above Part P);

 

(c) the Defendant has adduced oral hearsay evidence which is irrelevant to this action (please see the above Part G); and

 

(d) the irrelevant oral hearsay evidence of SD1 and SD3 tarnishes Mr. Sia’s reputation. At the sake of repetition, the Defendant has made no reasonable attempt to trace Mr. Sia (please see the above paragraph 75).

 

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101. Order 59 rule 8(b) RC allows the court to consider a party’s conduct before and during proceedings, in respect of the question of costs -Pacific & Orient Insurance Co Bhd, at paragraph 116.

 

S. Court’s decision

 

102. The upshot is –

 

(a) the 2nd Plaintiff’s suit against the Defendant is dismissed with costs (Defendant’s Costs) and interest at the rate of 5% per annum on the amount of the Defendant’s Costs from 23.9.2015 until the date of full payment of the Defendant’s Costs by the 2nd Plaintiff; and

 

(b) the 1st Plaintiff’s action against the Defendant is allowed with –

 

(i) a declaration that the Loan agreement had been wrongfully repudiated by the Defendant;

 

(ii) a declaration that the Loan contract had been breached by the Defendant;

 

(iii) no order for damages to be paid by the Defendant to the 1st Plaintiff;

 

(iv) costs of this suit to be paid by the Defendant to the 1st Plaintiff (1st Plaintiff’s Costs); and

 

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(v) interest at the rate of 5% per annum on the amount of the 1st Plaintiff’s Costs from 23.9.2015 until the date of full payment of the 1st Plaintiff’s Costs by the Defendant.

 

WONG KIAN KHEONG

 

Judicial Commissioner High Court (Commercial Division) Kuala Lumpur

 

DATE: 10 DECEMBER 2015

 

Counsel for Plaintiffs: Mr. Bryan Ernest Cumming, Mr. Chew Choon Leong and Mr. Neo Chi Chyn

 

(Messrs C L Chew & Co.)

 

Counsel for Defendant: Mr. Jimmy SY Liew & Ms. Hee Hui Ting (Messrs Shearn Delamore & Co.)

 

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