DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR DALAM WILAYAH PERSEKUTUAN, MALAYSIA
GUAMAN NO: D2-22-583-2003
CALTEX OIL MALAYSIA LIMITED … PLAINTIF
(No. Syarikat: 992309-U)
1. PPMS TECHNOLOGIES SDN BHD
(No. Syarikat: 466735-A)
2. REYAN FORTUNE … DEFENDAN-
3. SHAMSUDDIN BIN YOP AHMAD DEFENDAN
GROUNDS OF DECISION
1. The Plaintiff supplied asphalt, diesel and lubes to the 1st Defendant upon purchase requests by the 1st Defendant. These goods were delivered to various work sites identified by the 1st Defendant. This claim arises from outstanding bills amounting to RM276,466.24 which despite demands, the 1st Defendant has not settled. The 2nd and 3rd Defendants are sued as guarantors pursuant to a letter of guarantee dated 15.5.2002.
2. Before the matter came up for trial, the 1st Defendant was woundup on 27.9.2007. After filing proof of debt, the Plaintiff withdrew the
claim on the first day of trial and the claim was accordingly struck out against the 1st Defendant. The 2nd Defendant though represented and his counsel duly informed as to the hearing dates, failed to attend either in person or through his counsel. Pursuant to Order 35 Rule 1(2) of the Rules of the High Court 1980, the Court proceeded with the trial in his absence.
3. Several defences were canvassed on behalf of the 3rd Defendant, the principal defence being one of undue influence. The other defences on continuing liability of the 2nd Defendant, service of the letter of demand and deliveries to the subsidiaries of the 1st Defendant were abandoned. This is what the 3rd Defendant has offered as evidence of undue influence. The 3rd Defendant claimed that he signed the letter of guarantee because he was a director of the 1st Defendant and that he was influenced by the 2nd Defendant to do so. At Q&A 9 of his witness statement, he explained this further – “I was told by D2 that the offer from the Plaintiff was good for the Company and business. D2 had also said that if we are serious in our business, we have to sign the Letter of Guarantee, to show our commitment, thus being influence to the determination showed by D2; I signed the Letter of Guarantee, in hopes that this will be a smooth transaction and for the benefit of D1.”
4. The law on undue influence is set out in section 16 of the Contracts Act 1950 and the leading authority here is Tengku Abdullah Ibni Sultan Abu Bakar & Ors v Mohd Latiff bin Shah Mohd & Ors and Other Appeals  2 MLJ 265. Section 16 Contracts Act 1950 states:
16. (1) A contract is said to be induced by “undue influence”
where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another –
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity …
(3) (a) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that the contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.”
5. In Tengku Abdullah Ibni Sultan Abu Bakar & Ors v Mohd Latiff bin Shah Mohd & Ors and Other Appeals the Court of Appeal was of the view that “Undue influence, like all other equitable doctrines,
is an extremely flexible concept. Subject to policy considerations, the categories in which it may operate are therefore not closed. For this reason, it is important to apply the doctrine, housed in s 16 of the Contracts Act 1950, to varying fact patterns in a flexible manner. This is done by interpreting s 16 in a broad and liberal fashion. Being a remedial provision – in the sense that it is designed to relieve obligations – it should, in our judgment, be given a liberal interpretation.” At page 311, the Court of Appeal recognized that “The domination of the will of a person of which s 16 speaks may occur in a variety of fact patterns. It may occur even in commercial transactions. See Lloyds Bank Ltd v Bundy  1 QB 326 …” With the guidance of the Court of Appeal’s decision in Tengku Abdullah Ibni Sultan Abu Bakar and taking a liberal approach to the facts to see if the facts put forth by the 3rd Defendant amount to undue influence that may vitiate his free will of the 3rd Defendant such as to avoid the contract, I find myself not persuaded by the arguments of learned counsel for the 3rd Defendant.
6. In my judgment, the case put forth by the 3rd Defendant fails on several counts. First of all, for there to be undue influence, the unequal position of the parties has first to be shown. And, it is the relative positions of the parties to the contract upon which the claim is made which is relevant for consideration. Not the position of one of the parties with some other non-contracting party or between the parties on the same side. What the 3rd Defendant has attempted to show are circumstances which in his mind amount to a position of dominance and thereby giving one party the opportunity to assert undue influence. He
does this by comparing himself with the 2nd Defendant, the person who is said to have unduly influenced him to becoming a guarantor. According to the 3rd Defendant, the 2nd Defendant joined and was a director of the 1st Defendant Company long before the 3rd Defendant became a director. Further, the 2nd Defendant remained a director even after he, the 3rd Defendant had left the 1st Defendant Company. It was also the 2nd Defendant who conducted the businesses of the 1st Defendant Company and who traded with the Plaintiff. The 3rd Defendant did neither and this was confirmed by the Plaintiff’s witnesses.
7. While this evidence may seem to suggest dominance, it is irrelevant. It is dominance exerted by the Plaintiff over the 3rd Defendant that comes within the purview of section 16, not that by the 2nd Defendant over the 3rd Defendant. In any case, the evidence tendered does not suggest any dominance on the part of the 2nd Defendant. In fact, I see this as evidence of a person taking charge as a director should. More so, where there are only two directors as was the case with the 1st Defendant Company. From the 3rd Defendant’s own evidence, the circumstances under which the 3rd Defendant agreed and signed the letter of guarantee are proof of that assessment. The 3rd Defendant has said it well, that he was “influenced to the determination showed by D2”. This clearly means he was influenced or persuaded to do what was for the benefit of the 1st Defendant Company. Such influence is good in both business and common sense. But, in the context of a defence of undue influence, for that influence to vitiate the consent given, it has to be one that is colourable in that free will would
not have been given but for to give an unfair advantage to the recipient. There is no such advantage here, be it to the 2nd Defendant or the Plaintiff. In the circumstances, the burden of proof which lies with the 3rd Defendant who has made the charge in the first place has not been discharged. This defence must therefore fail.
8. The Plaintiff nevertheless bears the burden of proving its claim. From the evidence tendered I am satisfied that the goods ordered have been duly delivered to the 1st Defendant: see Pernas Trading  2 MLJ 124. In the mode of doing business between the parties in this case, which is not challenged by the 3rd Defendant, any complaint including complaints of discrepancies between invoices and purchase orders have to be filed in written form to the Complaints Office of the Plaintiff accompanied by a weighbridge report. The Defendants have never filed any such complaints. As far as the accounts are concerned, satisfactory explanations accounting for the figures and the records have been given by the witnesses called by the Plaintiff. Although these witnesses did not have personal knowledge of the transactions in that they may not have seen or met representatives of the 1st Defendant, these witnesses, being persons in charge and in possession of the records are competent to give the evidence required. In any event, their competency was never seriously challenged and I accept their testimonies.
9. With the accounts satisfactorily explained, I find that the Plaintiff has proved its case on a balance of probabilities. The 3rd Defendant as well as the 2nd Defendant as guarantors are liable to pay on demand. In
view of their failure to pay, these Defendants are liable to the sum stipulated in the letter of guarantee, that is a sum of RM200,000.00.
10. I therefore allow the claim against the 2nd and 3rd Defendants as set out in paragraph 10 (c) of the Statement of Claim together with interest at 4% from the date of filing of this action to the date of realization. I further order a sum of RM20,000.00 as reasonable costs.
Dated: 26th January 2010
(DATO’ MARY LIM THIAM SUAN)
JUDICIAL COMMISSIONER HIGH COURT KUALA LUMPUR (COMMERCIAL DIVISION)
Roszimah binti Jamrus for the Plaintiff Messrs. Kam Woon Wah & Co
Siti Sarah binti Husain for the 3rd Defendant Messrs. Ram Reza & Muhammad