WILSON V DARLING ISLAND STEVEDORING AND LIGHTERAGE CO

LTD ( 1956 ) 95 C.L.R 43

1) FACTS

a) An application under the Workers' Compensation Act 1926-1942 (N.S.W.)

was made on 13th February 1943 to the Workers' Compensation Commission
by Natalie Jacobsen, on behalf of herself and two infant dependants, for
compensation claimed to be payable by Darling Island Stevedoring &
Lighterage Co. Ltd. in respect of the death of her husband, Arthur Edward
Jacobsen, aged twenty-eight years, from injuries received by him whilst he
was on a daily journey l94o. between his place of abode and the place where
he was employed by a s a wharf labourer.

2) HELD

a) RIC H J. The main question arising in this case is whether the onus of proof
that the injury, resulting in his death, was received by the worker's own
default or wilful act. The fact is that the injury was received by him on a
daily journey between his place of abode and place of employment. The
answer to the question depends on the true construction of sub-s. 1 of s. 7 of
the Workers' Compensation Act 1926-1941 as amended by No. 13 of 1942.
The (1) (1945) 45 S.R. (N.S.W.) 264; 62 W.N. 154 638

b) That Act provides that a wrorker wh o has received an injury, which includes
a personal injury arising out of or in the course of the employment whether at
or away from his place of employment, and his dependants in case of his
death shall receive compensation from his employer, and that, where a
worker has received injury without his ow n default or wilful act on any daily
or other periodic journey mentioned in the Act and the injury be not received
during or after what ma y be shortly described as an interruption or break in
any such journey unconnected with his employment or reasonably incidental
to the journey, the worker or his dependants in case of his death shall receive
compensation from the employer.

c) In my opinion, the decision of the Supreme Court in Bagot v. Commissioner

for Railways (3), which the Supreme Court affirmed in the present case on
the question of the onus of proof, was right. In my opinion, the appeal should
be dismissed. WILLIAMS J. I have had the advantage of reading the
judgment of m y brother Dixon and concur in it. I am of opinion that the
appeal should be dismissed. Appeal dismissed with costs.
 KEPONG PROSPECTING LTD V SCHMIDT ( 1968 ) 1 MLJ 170

1) FACTS
a) These were two appeals from the judgment of the Federal Court of Malaysia
( [1964] MLJ 416 ) which allowed the appeal of one Schmidt from a
judgment of Hashim J.

b) The matters arose out of prospecting permits over certain State land in Johore.
In 1953 one Tan applied to the Government of the State of Johore for
a prospecting permit for iron ore.

c) He was assisted in the negotiations by Schmidt, a consulting engineer.

A prospecting permit No. 10/53 was granted to Tan in November 1953 and
in December 1953 Tan wrote to Schmidt stating that Schmidt was to be paid
1% of the selling price of all ore that might be sold from any portion of the
said land and this was in payment for the work Schmidt had done in assisting
to obtain the prospecting permit and for any work that Schmidt might do in
assisting to have mining operations started up.

d) Tan then executed a power of attorney in favour of Schmidt which conferred

upon Schmidt widely expressed powers to contract for the disposal of any of
Tan's mining properties on such consideration and subject to such conditions
as Schmidt thought proper.

e) The appellant company was incorporated on July 27, 1954 with a view to
taking over the benefit of Tan's prospecting permit – Schmidt and Tan being
the first directors of the company. On July 31, 1954 an agreement was
entered into between Tan and the company (hereinafter called the “1954
agreement”) and it was executed on behalf of Tan by his
attorney Schmidt acting under the aforesaid power of attorney.

f) The 1954 agreement provided that the company should prospect and work
the land included in the prospecting permit No. 10/53 and it was also
provided that the company should take over Tan's obligation to
pay Schmidt 1% of the selling price of all ore that might be sold from such
land.

g) The 1954 agreement was adopted on behalf of the company at a meeting of

its directors on July 31, 1954. Sometime in September, 1955, a further
agreement (hereinafter called the 1955 agreement) was made between the
company and Schmidt.
h) Under clause 1 of the agreement the company inter alia agreed to
pay Schmidt 1% of all ore that might be won from any land comprised in the
1954 agreement in “consideration of the services by the consulting engineer
for and on behalf of the company prior to its formation, after incorporation
and for future services”.

i) The 1955 agreement was signed by Schmidt and the seal of the company was
affixed to it.
2) HELD

a) The date appearing on the face of the 1955 agreement was prima
facie evidence that it was executed on that date. The onus of proof lay on
those who sought to establish that it was in fact executed on a different date
so to do and since there was ample evidence to show that the seal could have
been fixed only after October 1, the Federal Court was bound to reach a
conclusion different from that of the trial judge

b) Clause 1 of the 1955 agreement established a legally sufficient consideration

moving from Schmidt. Services prior to the company's formation could not
amount to consideration as they could not be rendered to a non-existent
company, nor could the company bind itself to pay for services claimed to
have been rendered before its incorporation. But the inclusion of that
ineffective element did not prevent the other two elements[1968] 1 MLJ 170
at 171or one of them, from constituting valid consideration. Services
rendered after incorporation but before the date of the agreement validly
amounted to consideration for an agreement to pay under section 2(d) of the
Contract (Malay States) Ordinance, 1950. There was no doubt that such
services were rendered

c) The 1955 agreement was not void for uncertainty because it stated that the
tribute of 1% should be calculated "on the selling price of the ore as shown in
the company's records" because this was clearly a case where an expression
on the face of it possibly lacking in definition can be attributed a certain
meaning by evidence as there was no difficulty in showing what price was
referred to in the clause

d) The 1955 agreement was not discharged by novation because Schmidt was
not a party to the consent order

e) The power of attorney from Tan to Schmidt was wide enough in its terms to
permit Schmidt to enter into the 1954 agreement on behalf of Tan. However
the 1954 agreement was not enforceable by Schmidt against the company, as
he was not a party to it in his personal capacity

f) Clause 10 of the consent order contemplated the existence of an obligation

from the company to Schmidt, and as a whole must be read as referring to the
1954 agreement as supplemented or superseded by the 1955 agreement, so as
to produce a direct obligation by the company to pay Schmidt the 1%.
Therefore the third parties were obliged to idemnify the company
against Schmidt's claim.
 BADIADDIN BIN MOHD MAHIDIN & ANOR v ARAB MALAYSIAN
FINANCE BHD [1998] 1 MLJ 393

1) FACTS

a) The appellants were the registered co-owners of a piece of Malay reservation

land (‘the land’). Their business associate, one Ismail bin Omar (‘Ismail’)
was in need of funds. The appellants agreed to assist Ismail and they charged
the land to the respondent to secure a loan advanced to Ismail.

b) Ismail committed a breach of the loan agreement whereupon the respondent

foreclosed the third party security and obtained an order of sale of the land.
The appellants applied to the High Court for a declaration that the charge as
well as the order of sale were invalid as being in contravention of the Malay
Reservations Enactment (FMS Cap 142) (‘the Enactment’).

c) On 21 March 1988, the High Court granted the declaration sought and upon
the respondent’s summons filed in the same proceedings in which s 66 of the
Contracts Act 1950 was invoked, the judge also made an order directing the
appellants to repay all monies lent to Ismail (‘the first order’). On 8 October
1990, the judge made another order declaring that the appellants had received
an advantage or benefit directly from the respondent and it was also ordered
that the land be sold and the proceeds of sale be utilized to pay the balance
outstanding on the loan made to Ismail (‘the second order’).

d) The appellants then commenced proceedings afresh to have the second order
declared null and void and to have it set aside on the ground that it
contravened s 13 of the Enactment. The appellants argued that they were
entitled to the remedy ex debito justitiae without the need to comply with
appeal procedure.

e) The respondent argued that res judicata and estoppel precluded the appellants
from questioning the validity of the second order. The judge held that it
would be unjust to estop the appellants from challenging the second order by
reference to res judicata or any other branch of the doctrine of estoppel
because the second order was plainly invalid, it having been made in
contravention of an express provision of written law (‘the third order’).

f) The respondent then appealed to the Court of Appeal , which allowed the
appeal on the sole ground that the High Court was functus officio and had no
jurisdiction whatsoever to set aside the second order irrespective of any
illegality in the order. The appellants appealed.

2) HELD

a) Held, allowing the appeal:

i. (Per Mohd Azmi FCJ) setting aside the third order, the Court of Appeal
missed completely to appreciate the central argument on the availability
of the inherent jurisdiction of the High Court to exercise its discretion to
 set aside what was obviously an illegal attempt by the respondent to
subvert and effectively reverse the original March 1988 final and
perfectly legitimate order as a special exception to the doctrine
governing the finality of court orders notwithstanding the absence of any
appeal.

1. It is settled law that one High Court cannot set aside a final order
regularly obtained from another High Court of concurrent
jurisdiction.
2. But one special exception to this rule is where the final judgment of
the High Court could be proved to be null and void on ground of
illegality or lack of jurisdiction.
3. Apart from breach of rules of natural justice, in any attempt to widen
the door of the inherent and discretionary jurisdiction of the superior
courts to set aside an order of court ex debito justitiae to a category
of cases involving orders which contravened 'any written law', the
contravention should be one which defies a substantive statutory
prohibition so as to render the defective order null and void on
ground of illegality or lack of jurisdiction.
4. The discretion to invoke the inherent jurisdiction should also be
exercised judicially in exceptional cases where the defect is of such
a serious nature that there is a real need to set aside the defective
order to enable the court to do justice.
5. In all cases, the normal appeal procedure should be adopted to set
aside a defective order, unless the aggrieved party could bring
himself within the special exception. [*395] In allowing the
respondent's appeal, it was obvious from the judgment of the Court
of Appeal that the learned judges had failed to direct their minds
sufficiently or at all to the fundamental issue of whether the
appellants' application before the High Court came within the
category of cases that attracts ex debito justitiae. Clearly, the second
order which had the effect of an attachment in execution of a
judgment was null and void being in violation of the prohibition
imposed by s 13 of the Enactment.
6. Therefore, it must necessarily follow that the High Court should
have the necessary inherent jurisdiction to set aside the second order
on the basis of the ex debito justitiae principle (see pp 408F-H,
409A-B, H-I and 410A-D, F); Isaacs v Robertson [1985] AC 97 and
Eu Finance Bhd v Lim Yoke Foo [1982] 2 MLJ 37 followed. (2)

ii. (Per Mohd Azmi FCJ) the appellants were not party to the loan
agreement, s 66 could not be invoked against them.

1. Under that section, the party who is bound to restore any advantage
received or to make compensation for such advantage should be
construed as 'any person' who is a party to the agreement and has
received any advantage pursuant to the terms or conditions of the
invalid contract, but not otherwise.
2. To extend the meaning of 'any person' in s 66 to strangers to the
agreement would be in violation of the elementary principle of
 contract. Since the loan agreement was strictly between the
respondent and Ismail, the court had no jurisdiction to order the
appellants to pay under s 66 merely because he had received a
fraction of the loan money from Ismail.
3. The fact that Ismail had used the loan money received from the
respondent to pay other people, including the appellants, could not
make them parties or privies to the contract so as to enable the court
to bring them within the ambit of s 66.
4. The appellants were not a party to the loan agreement and as such
there was no question of repayment by them either by way of
restitution of benefit or compensation.
5. Moreover, the appellants as third party chargors did not receive any
'benefit' within the meaning of s 66, either under the charge or the
loan agreement. In the circumstances, the remedy ordered in the
second order was invalid as it was made without or in excess of
jurisdiction.
6. Since the judgment under s 66 was invalid, it followed that the order
of sale of the land to satisfy the said judgment must equally fall to
the ground, apart from being in violation of the prohibition imposed
by s 13 of the Enactment (see pp 411E-I and 412B-C).
 NEW ZEALAND SHIPPING V SATTERTHWAITE ( 1975 ) AC 154

1) FACTS

a) The appellants were stevedores engaged as independent contractors to unload

machinery from a ship.
b) The contract between the respondent machinery owners and the carriers
contained a limitation clause.
c) This said that no servant or agent of the carrier would be liable for any
damage unless an action was brought within one year.
d) The stevedores negligently damaged the machinery while unloading it.
e) The respondents brought an action outside the one year limitation period.
f) The appellants claimed the clause prevented the respondents from suing
them.

2) ISSUE

a) The issue was whether the stevedores could take the benefit of the time limit
specified in the clause in the agreement between the carrier and the owners.
b) Against this it was argued that under Midland Silicones Ltd v Scruttons Ltd
[1962] AC 446 a contract between two parties cannot be sued on by a third
person even though the contract is for the third party’s benefit.

3) HELD

a) The Privy Council held that the stevedores could rely on the clause.
b) The bill of lading was initially a contract between the owner and the carrier.
However, the clause’s wording was designed to cover all the parties involved
in the carriage of the goods, including the stevedores.
c) The respondents obtained the benefit of a directly enforceable action against
the stevedores.
d) The stevedores gained the benefit of the time limit. The stevedores had done
the work in reliance upon this.
e) Therefore, they had supplied sufficient consideration, even though they were
only doing what they had already contracted to do with a third party.
 SCRUTTONS LTD V MIDLAND SILICONES LTD ( 1962 ) AC 446

1) FACTS

a) A drum filled with chemicals was shipped from the United States to the
United Kingdom, as agreed by a bill of lading which included a clause
which referenced the United States Carriage of Goods by Sea Act 1936.
b) This clause limited the liability of the carrier to $500 for any damage that
was caused to the goods.
c) The carrier engaged stevedores to deal with the unloading of the cargo
on arrival and unfortunately, while lowering the chemical drum onto a
lorry, they negligently dropped the drum, causing almost $600 worth of
damage.
d) The respondents sued for the loss but the stevedores counter-claimed that
their liability should be limited as per the clause stated in the contract.

2) ISSUE

a) The overriding issue for the court to consider, in this case, was whether
the clause in the contract, which was inserted by the United States
Carriage of Goods by Sea Act 1936, could be relied upon by the
stevedores who had damaged the bottle.
b) It was particularly important for the court to consider whether the
stevedores were party to the contract between the buyer and seller.

3) HELD

a) The court held that the clause could not be relied upon by the plaintiffs
as the United States Carriage of Goods by Sea Act 1936 did not apply to
stevedores.
b) Moreover, the stevedores were not a party to the contract, by either
express or implied terms, between the parties.
c) They were, therefore, a stranger to the contract and the court relied upon
the fundamental principle that a stranger cannot rely upon a contract they
are not a party to.
THE GOLD CHEQUE BOOK SDN BHD V NILAI SPRINGS BHD ( 2006 )
1 MLJ 554

1) FACTS

a) The defendant company owned a golf course. It had contracted

supposedly with the first plaintiff by way of a letter dated 30 October
1999 written on a letterhead of ‘The Golf Cheque Book’ (‘the first
plaintiff’).
b) However, no such entity as ‘The Golf Cheque Book’ existed at the date
of the contract. It was also in evidence that the first plaintiff made
payments to the defendant from time to time. The defendant’s case was
that it was not aware that the first plaintiff was not in existence at the
time the contract was made.
c) After it discovered this fact, it returned the payments made by the
plaintiff. A resolution of the first plaintiff’s board of directors was
passed on 3 March 2000 whereby it was resolved that the plaintiff takes
over the product known as ‘The Golf Cheque Book’ business.
d) The plaintiffs brought an action against the defendant for breach of
contract.
e) The High Court struck out the plaintiff’s statement of claim. Dissatisfied,
the plaintiffs appealed to this court.
f) The issue was the effect in law where a contract was made on behalf of a
company that was non-existent when the contract was made.

2) HELD

a) Held, allowing the appeal

b) An application to strike out an action under O 18 r 19 should not descend
into a trial on affidavits. What the court is really concerned with is to
determine whether the pleading disclosed facts which merit a trial of the
action
c) Learned counsel for the plaintiffs argued that the payments made by the
first plaintiff after its incorporation to the defendant was evidence of
conduct amounting to ratification. This was certainly a matter that must
be looked into in some greater detail by the High Court at trial. So, here,
even on the defendant’s own case the requirements of s 35(1) of the
Companies Act 1965 appeared prima facie to be satisfied. Hence, both
on the facts and the law, the first plaintiff’s claim for breach of contract
appeared to be far from frivolous or vexatious. In fact it appeared quite
strong
d) The issue of unilateral mistake was a very serious point in this case and
one that must be thoroughly investigated at the trial. If the trial judge
finds that the identity of the person with whom the defendant was
seeking to contract with was, objectively speaking, of importance to the
defendant, then the contract would, as a matter of law be void for
unilateral mistake.
e) But, if there was no mistake from an objective standpoint then the
returning of the monies by the defendant, as pointed out to counsel in the
course of argument, was a clear breach of contract. These were other
reasons why the plaintiffs’ claim could not be struck out and why there
must be a trial of the action
 GREGORY AND PARKER V WILLIAMS ( 1817 ) 3 MER 582

1) FACTS

a) Sir William Grant held that, Parker must be regarded as a trustee for Gregory
and that the latter, “derived an equitable right through the mediation of
Parker’s agreement”
LES AFFRETEURS REUNIS SA V WALFORD ( LONDON ) LTD ( 1919 ) AC
801

1) FACTS

a) Leopold Walford (Walford) acted as brokers for a charterparty. Les

Affreteurs were owners of a ship.
b) A time charterparty was effected between the shipowners and the Lubricating
and Fuel Oils Company as charters.
c) Walford charged a 3% commission which was specified in the charterparty
contract which was agreed to in 1916 and was a continuation of an early
agreement on similar terms.
d) In 1917, after Les Affreteurs’ ship was recommissioned, the charterparty
expired.
e) Les Affreteurs refused to pay Walford’s commission, holding that
commission was only payable in respect of hire duly earned under the
charterparty.

2) ISSUE

a) Whether Walford could claim commission from the contract which had
expired and after the ship was recommissioned ?

3) HELD

a) The appeal by Les Affreteurs was dismissed. Les Affreteurs were found have
been relying on custom, in that the brokerage was payable only out of the
hire as earned.
b) The French agreement was held to be incorporated in the charterparty and
thus, the agreements were not separate and to be read and interpreted as one.
c) The charterparty contract between the owners and the charters was relevant
to the brokers (which had also long been custom).
d) The case of Harley & Co v Nagata (1917) 23 Com Cas 121, was applied.
Charters were entitled to bring action as trustees of the brokers where they
were directly party to the contract.
e) Therefore, allowing a third party to sue for an entitled commission.
 TRIDENT GENERAL INSURANCE CO LTD V MCNIECE BROS PTY LTD
( 1988 ) 165 CLR 107

1) FACTS

a) McNiece was the main construction contractor for work being carried out at a
limestone plant named Blue Circle. Blue Circle entered into a contract with
Trident, an insurer. The policy covered work defects and public liability
amongst other things.
b) Under the insurance contract, Blue Circle, “the assured” was defined as
including “all related companies, contractors and sub-contractors”. Insurance
for public liability did not include “any claim arising under any Workmen's
Compensation Law”.
c) A worker, contracted to McNiece by an employment company, was seriously
injured while driving a crane on sight. McNiece commenced action against
Trident for indemnity.

2) ISSUE

a) Whether McNiece was one of the “assured” parties under the insurance
contract between Blue Circle and Trident ?

3) HELD

a) The appeal by Trident was dismissed. It was found that even though
McNiece was a third party, the wording of the contract it expressly referred
to coverage of contractors and sub-contractors under the policy.
b) Further, as a matter of business efficacy the policy was intended to cover any
contractor working for Blue Circle at the time of any claim.
c) The fact that Blue Circle were the only party to the contract and the only
party liable for the insurance premium did not negate cover.
d) Even though McNiece was a third party, they were determined to be entitled
to indemnity in respect of a claim of negligence by their injured
sub-contractor.
e) The court effectively created an exception to the doctrine of privity of
contract and the requirement that consideration should move from the
promisee.
 DARLINGTON BOROUGH COUNCIL V WILTSHIRE NORTHERN LTD
( 1995 ) 3 ALL ER 895

1) FACTS

a) Wiltshier Northern Ltd (WNL) were hired to build a recreational centre for
Darlington Borough Council (DBC) and entered into two contracts with a
finance company.
b) The agreement between WNL and the finance company stipulated that all
rights and causes of action against WNL were assigned to DBC.
c) DBC brought action against WNL for breaches of contract where no
entitlement to damages was initially found to exist. DBC appealed.

2) ISSUE

a) Whether DBC as assignee to the contract was entitled to substantial damages

for breach of contract?

3) HELD

a) Appeal by DBC was allowed as when the building contracts were entered
into, both parties knew that any foreseeable damage would cause loss to
DBC and therefore the benefit of signing the contract in the first instance was
to DBC.
b) Thus, DBC was entitled to substantial damages for the loss caused by WNL,
although they were to be assessed on a normal basis, as if DBC had been
party to the contracts.
c) Johnson v Agnew [1980] A.C. 367 was applied in that the general principle
for the assessment of damages for a breach of contract is to compensate the
plaintiff for any loss or damage arising from the contract.
d) Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] A.C. 847 was
distinguished in that, even though generally speaking, a third party cannot
sue for damages on a contract they are not party to, DBC were entitled to
recover loss as the rights were not only assigned, but the recreational centre
was built for them specifically which made them entitled in consideration of
the factual context of the case.
WOOLLEY DEVELOPMENT SDN BHD V MIKIEN SDN BHD ( 2008 ) 1 MLJ
585

1) FACTS

a) The first defendant was the registered and beneficial owner of certain lands
and intended to develop a commercial-cum-office project on the said lands.
b) The plaintiff through 12 sale and purchase agreements ('SPA') purchased
several units in the said project.
c) The plaintiff paid in full to the first defendant the purchase price amounting
to some RM2.3m for the units.
d) The SPA inter alia provided for the first defendant to hand over vacant
possession of the units to the plaintiff within 36 calendar months from the
date of the SPA. Upon a failure by the first defendant to deliver the units
timeously, the plaintiff was to be paid liquidated damages, calculated on a
daily basis, at the rate of 11% per annum of the total purchase price of the
units. Further, time was to be of essence and the SPA was to bind all the first
defendant's successors in title and permitted assigns.
e) The first defendant failed to deliver the units in time and in fact abandoned
the project. On 20 September 2000, in an attempt to rehabilitate the project,
the first and second defendants entered into a transfer agreement ('the TA'),
wherein the first defendant transferred the said lands to the second defendant,
subject to existing charges, without any monetary consideration.
f) The TA acknowledged that the first defendant had entered into SPAs with
individual purchasers. Details of such purchasers were described in
Annexure H of the TA. The TA also envisaged the execution of novation
agreements, between the defendants and the individual purchasers.
g) The plaintiff's details were however not acknowledged in Annexure H.
h) The plaintiff lodged caveats to protect its interest, which the second
defendant became aware of. On 16 January 2006 the plaintiff filed an action
against the first and second defendants, by which it sought for an order for
specific performance of the 12 SPAs, and liquidated damages at the rate of
11% of the total purchase price. Alternatively, it sought for rescission of the
12 SPAs, and restitution of the total purchase price including interest at the
rate of 11% on the total purchase price. On 24 April 2006, the plaintiff
applied for summary judgment under O 81 of the Rules of the High Court
1980 ('the RHC') against the defendants.
i) The plaintiff elected to seek rescission, rather than specific performance, and
other consequential orders. At first instance, the High Court allowed the
application.
j) The second defendant appealed to the Court of Appeal.
k) On appeal, counsel for the second defendant submitted:
(i) there was no contractual relationship between the plaintiff and the
second defendant — the purchase price was paid to the first defendant
and not to the second defendant;
(ii) since the plaintiff was not listed as a purchaser in Annexure H to the
TA, the second defendant had not been put to notice of the plaintiff's
alleged interest in the said lands;
(iii) a novation agreement had not been executed between the defendants
and the plaintiff.
2) HELD

a) Held, dismissing the appeal by majority decision:

b) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
The principles to guide a judge in deciding whether or not to grant a
summary judgment were succinctly summarized by the Supreme Court
in Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 MLJ 400 (folld)
which accepted and applied the principle as enunciated by the Privy Council
in Eng Mee Yong & Ors v Letchumanan [1979] 2 MLJ 212 (refd)
c) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
When an issue of fact is raised in an affidavit opposing an application for a
summary judgment the trial judge thus is duty bound not to merely accept it
superficially and in a cursory manner. He is not bound to accept any
allegation uncritically. In exercising his judicial discretion the judge is
obliged to critically examine any assertion of fact to determine if it were a
bona fide factual dispute worthy of determination at a full trial (see para 42).
d) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
The summary judgment procedure under O 14 of the RHC is not intended to
shut out a defendant and should only be exercised in clear cases. This
principle should be applicable in the instant case under O 81 of the RHC. The
philosophy behind the summary judgment procedure is that a plaintiff should
not be put through the long-drawn and costly process of a full trial in an
action against a defendant who is without a bona fide defence (see para
44); Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1987] 2 MLJ
183 (folld) followed.
e) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
The plaintiff in a summary judgment application under O 81 of the RHC first
needs to establish a prima facie case that 'he is entitled to judgment'. The
burden then shifts to the defendant to satisfy the court why judgment should
not be given against him. The word 'ought' in O 81 r 3 of the RHC, is an
expression of a strong probability. In other words, the issue in dispute must
be critically investigated and be determined as genuine. This is what the
defendant needs to prove to be entitled to a trial of that disputed issue. A
judge in allowing summary judgment under O.81 of the RHC, does so in the
exercise of his discretionary jurisdiction. If an appellate court finds that this
discretion had been judicially exercised, in the sense that he had properly
evaluated the facts to find no arguable case, and had not been wrong in law
or erred in principle, then the judge's decision should not be disturbed (see
paras 46-47); National Company For Foreign Trade v Kayu
Raya Sdn Bhd [1984] 2 MLJ 302 (refd); Wee Choo Keong v MBf
Holdings Bhd & Anor and another appeal [1993] 2 MLJ 217 (refd); Eng Mee
Yong & Ors v Letchumanan and Doshi v Yeoh Thiong Lay [1975] 1 MLJ
85 (refd) referred.
f) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
In the instant appeal, the judicial commissioner in the High Court had
correctly approached the application by minutely considering and evaluating
all the relevant documents and facts in coming to her decision. The judicial
commissioner had properly exercised her discretion in allowing the plaintiff's
application and her finding should not be disturbed 6)(per Abdul Hamid
Embong JCA, Tengku Baharudin Shah JCA concurring) In the instant case,
 the second defendant had never disputed it was the successor in title and the
permitted assign of the first defendant. The second defendant was thus bound
by the terms of the SPA. It did not also matter that the plaintiff's name was
not listed in Annexure H to the TA. The plaintiff had paid the full purchase
price for the units and was merely exercising its remedies in respect of the
non-delivery of its purchased units. To say that there was no privity of
contract between the plaintiff and the second defendant was untenable
g) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
The novation point was one of fact and not of law. The second defendant had
failed to fulfill its obligation under the TA to prepare the novation agreement
within 30 days of signing it with the first defendant. In any event, this was a
fact not argued before the High Court and it should not be raised on appeal
(see para 52); Maharlal Bhaichand Gathani v Perwira Habib Bank
Malaysia Bhd [2002] 1 CLJ 449 (refd) referred.
h) (per Abdul Hamid Embong JCA, Tengku Baharudin Shah JCA concurring)
The plaintiff's private caveats under the NLC constituted notice to the whole
world that it had a claim or an interest in the lands. The second defendant
was aware of those caveats and could not now plead ignorance (see para
53); United Malayan Banking Corporation Bhd v Goh Tuan Laye &
i) (per Zaleha Zahari JCA dissenting) There were clearly issues to be tried in
the instant case. Liability of the second defendant towards the purchasers of
properties from the original developer, to which the second defendant was
not a party of, could not totally be ignored, especially when read in the
context of the plaintiff not being listed as one of the purchasers of the first
defendant in Annexure H to the TA
j) (per Zaleha Zahari JCA dissenting) The mere fact that the TA had been
executed between the first defendant and the second defendant did not per se
make the second defendant jointly and severally liable towards the plaintiff
for breaches committed by the first defendant in the first instance. The TA
must be read in context of terms agreed upon, as between the original
developer, the rehabilitating developer, as well as the particular purchaser
concerned. The non listing of the plaintiff in Annexure H, as well as the fact
that there had been no novation of the agreement as envisaged by the TA,
clearly had an impact on the issue of whether the second defendant was liable
towards an unfortunate purchaser caught in such situation
 TROPICAL PROFILE SDN BHD V KERAJAAN MALAYSIA JABATAN
KERJA RAYA MALAYSIA & ORS ( 2007 ) 8 MLJ 419

1) FACTS

a) The plaintiff filed an appeal against the decision of the learned registrar in
allowing the first defendant's application in encl 40 to strike out the plaintiffs
amended originating summons in encl 34 with costs under O 18 r 19(1) of
the Rules of the High Court 1980.
b) The affidavit supporting the first defendant's application stated, inter alia,
that the plaintiff had no reasonable cause of action against the first defendant
as there was no privity of contract between the plaintiff and the first
defendant.
c) At the hearing of the application, learned senior federal counsel for the first
defendant submitted that there was no privity of contract between the
plaintiff and the first defendant and so the plaintiff had no locus standi.
d) In reply, learned counsel for the plaintiff submitted that the plaintiff had a
reasonable cause of action against the first defendant and the plaintiff's
amended originating summons should not be struck out.

2) HELD

a) Held,allowing the appeal with costs

b) The plaintiff’s averments in the amended originating summons cannot be
said to be lacking in the creation of a legal and/or equitable relationship
between the plaintiff and the first defendant. While generally no privity of
contract may have existed between the plaintiff and the first defendant, the
averments by the first defendant would certainly attract the application of the
doctrine of estoppel, and the alleged existence of a trust for the benefit of the
plaintiff ( Government of Malaysia v Lim Kit Siang & Anor [1988] 2 MLJ
12 and Mahkota Technologies Sdn Bhd v Bina Jati Sdn Bhd & Anor [2001]
MLJU 749, distinguished)
c) The plaintiffs averment of estoppel in the amended originating summons is
capable of giving rise to a reasonable cause of action ( Boustead Trading
(1985) Sdn Bhd v Arab-Malaysian Merchant Bank Berhad [1995] 3 MLJ 331,
referred) ]
d) The plaintiff herein has averred the existence of trust in the amended
originating summons, thereby revealing a reasonable cause of action as an
exception to the doctrine of privity of contract. By analogy, the averment of
trust in the plaintiffs amended originating summons would merit a full
hearing instead of a disposal by way of a summary procedure under O 18 r
19(1)(a) ( Hospital Pantai Ayer Keroh Sdn Bhd v Lu Wei Hong [2005] 4
MLJ 153; Kepong Prospecting Ltd & Ors. v Schmidt [1968] 1 MLJ 170 and
Seremban Gold Resort Bhd v Amerfab Sdn Bhd [2006] 2 MLJ 571, referred)
e) The learned registrar had erred in dismissing the plaintiffs amended
originating summons against the first defendant (see para 32) ( Bandar
Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993]
3 MLJ 36 and Stamford Holdings Sdn Bhd v Kerajaan Negeri Johor
& Ors [1998] 1 MLJ 607 referred).
 BOUSTEAD TRADING ( 1985 ) SDN BHD V ARAB-MALAYSIAN
MERCHANT BANK BHD ( 1995 ) 3 MLJ 331

1) FACTS

a) The appellant bought goods on credit from

Chemitrade Sdn Bhd ([lsquo ]Chemitrade[rsquo ]). Chemitrade then entered
into a factoring agreement with the respondent under which the respondent
agreed to factor Chemitrade[rsquo ]s book debts, ie the debts owed by the
appellant to Chemitrade were assigned to the respondent. Notice of the
assignment was given to the respondent.
b) Chemitrade gave the respondent copies of the invoices in respect of each sale
and delivery of goods to the appellant. The respondent then stamped the
invoices with the indorsement that any objection was to be reported to the
respondent within 14 days of its receipt, ([lsquo ]the indorsement[rsquo ])
and sent them to the appellant.
c) The appellant did not complain about any of the invoices within the 14-day
period nor challenge the respondent[rsquo ]s right to impose the 14-day
period by way of the indorsement. The appellant paid the respondent on
several of the invoices but later refused to make payment on 20 invoices
([lsquo ]the invoices[rsquo ]). The appellant argued that nothing was payable
on the invoices due to a statement on the appellant[rsquo ]s purchase orders
that the amounts stated were to be offset against the cost of stocks returned to
Chemitrade ([lsquo ]the statement[rsquo ]).
d) The respondent denied knowledge of the statement and argued that since the
appellant had not protested about the validity of the indorsement, it was
entitled to assume the appellant had accepted it. The trial judge found for the
respondent.
e) The appellant appealed to the Federal Court on the grounds that the
respondent, as assignee, could not unilaterally impose the 14-day limit, and
that the agreement was not a valid assignment. The appellant also argued that
the respondent[rsquo ]s argument was in essence an estoppel, but since it was
not pleaded, the trial judge erred in relying on it. On the other hand, the
respondent cross-appealed against the refusal of the trial judge to enter
judgment in its favour on two other items claimed for, which amounted to
RM95,000.

2) HELD

a) Held, dismissing the appeal and cross-appeal:

b) A reasonable man in the respondent's position would be entitled to assume
that the appellant had agreed to the imposition of the 14-day period as it did
not merely remain silent by not objecting to it but had in fact made payment
on some invoices. The appellant should not be allowed to question the
validity of the indorsement after seven months as it would be unconscionable
and inequitable for it to do so.
c) The doctrine of estoppel is a flexible principle by which justice is done
according to the circumstances. It is a doctrine of wide utility and has been
resorted to in varying fact patterns to achieve justice. The maxim 'estoppel
may be used as a shield but not a sword' does not limit the doctrine of
 estoppel to defendants alone. Plaintiffs too may have recourse to it. Estoppel
may assist a plaintiff in enforcing a cause of action by preventing a defendant
from denying the existence of some fact which would destroy the cause of
action.
d) There was no evidence to suggest that the respondent had knowledge of the
statement and therefore, it was entitled to assume that the invoices were good
for payment because the appellant had not informed it otherwise. It was
unjust for the appellant to suggest that the respondent ought not to have paid
Chemitrade on the invoices and the respondent should therefore be estopped
from asserting that nothing was due on the invoices.
e) There were documents to suggest that the appellant, Chemitrade and the
respondent had proceeded upon the assumption that the factoring agreement
was a valid assignment. It would be unjust and unconscionable to permit the
appellant to now challenge the meaning which the parties gave to the
document.
f) Even though estoppel was not pleaded as required under O18 rr 7(1) and 8(1)
of the Rules of the High Court 1980, the material facts giving rise to the
estoppel were sufficiently pleaded without actually using the term 'estopped'.
Furthermore, considerable evidence on the point was led at the trial by the
respondent without objection from the appellant.
g) A court may permit a litigant to argue an unpleaded estoppel if it is in the
interests of justice to do so. It is a matter within the discretion of the judge
who must have due regard to all the circumstances of the case, including any
prejudice that may be caused by the affected party being taken by surprise.
Nevertheless, such departures should rarely be permitted, for otherwise, the
rule that a party is bound by its pleadings will be rendered meaningless.
h) The respondent as assignee could not place itself in a better position than the
assignor. The respondent took the assignment subject to all rights of set off
which the appellant as debtor had against the assignor. Therefore, the two
sums claimed by the respondent, which the appellant was entitled to set off
against moneys due from the appellant to Chemitrade, were not allowed.
 TULK V MOXHAY ( 1848 )

1) FACTS

a) The claimant, Tulk, owned several properties in Leicester Square, London,

and sold one such property to another, making the purchaser promise to not
build on the property so as to help keep Leicester Square ‘uncovered with
buildings’ and creating an equitable covenant.
b) The purchaser subsequently sold the land and it underwent multiple
transactions, and was eventually purchased by the defendant, Moxhay.
c) Whilst Moxhay was aware of the covenant attached to the land at the time of
the transaction, he claimed it was unenforceable as he had not been a party to
the original transaction in which the covenant had been made.

2) ISSUE

a) Whether an equitable covenant limiting the use of a property could ‘run with
the land’ and bind a future owner of the property ?

3) HELD

a) The High Court, consisting of Lord Cottenham, found for Tulk, and passed
an injunction to prevent Moxhay from building on the land. The covenant
had been intended to run with the land at the time it was made, and all
subsequent purchasers had been informed of its existence.
b) Moreover, as a covenant amounts to a contract between a vendor and vendee,
it is enforceable against a purchaser for value with either constructive or
actual notice. As Moxhay had actual notice of the covenant, he was obligated
to abide by it.
c) Notably, the relevance of this decision decreased with the introduction of the
1925 Land Registration Act which made such covenants a registrable
interest.
 TARN KAM CHEONG V STEPHEN LEONG KON SANG ( 1980 ) 1 MLJ 36

1) FACTS

a) In this case the vendors, the owners of a piece of land held on a 999 year
lease in Sandakan, built a seven storey commercial building on it and sold
the ground and the first floor to the respondents.
b) The oral agreement and subsequently the purchase agreement gave the
respondents access to the roof top of the building where the water tanks were
sited. The vendors sold the other five floors to the appellant.
c) The appellant used the floors for a hotel business and applied for permission
to make alterations to the building, to seal the staircase and convert the space
into rooms.
d) The respondents claimed that they had been deprived of their right of access
to the roof top and brought an action against the appellants.
e) The learned trial judge upheld the respondents' claim and awarded a
mandatory injunction and a sum of $10,000 by way of damages.
f) The appellants appealed.
 SHANKLIN PIER V DETEL PRODUCTS ( 1951 ) 2 ALL ER 471

1) FACTS

a) The Plaintiffs were owners of a pier in Shanklin on the Isle of Wight.

b) They entered into a contract with contractors to have the pier repaired and
painted. Under the contract the plaintiff had the express right to alter the
contract.
c) The Defendant company director approached the Plaintiffs with a new
painting product for the pier.
d) After much persuasion, the Plaintiffs amended their contract with the
Contractors to allow for the paint in the renovation.
e) After several months, the paint flaked off and did not last.
f) The Plaintiffs brought a claim for damages.

2) ISSUE

a) Whether the Plaintiff was entitled to bring a claim against the Defendant
company, who was not party to the contract to undertake renovations ?

3) HELD

a) The Defendant was found to be liable given he had provided an express

warranty over the paint to the Plaintiffs, who in consideration of the warranty
caused the contractor to buy the paint from the Defendant also and suffer the
same damage, by reason of a breach of warranty.
b) It was held that if the contract for the direct sale and purchase had been made
between the Plaintiff and the Defendant (with no involvement of a
contractor), then the same warranty for the paint would be intended to exist
and be implied.
c) The Judge saw no reason as to why the same warranty should not be
enforceable and extend between the Plaintiff and the Defendant.
d) The Plaintiff was entitled to recover damages.
 GOV OF MALAYSIA V GURCHARAN SINGH & ORS ( 1971 ) 1 MLJ 211

1) FACTS

a) The government sued the first defendant as the promisor and the second and
third defendants as sureties for breach of agreement in writing entered into
by them with the plaintiff for providing a course of training at a Malayan
Teacher’s Training Institution.
b) The claim was for [dollar]11,500 alleged to be actually spent by the
government for educating the first defendant.
c) At the time of the contract being entered into, the first defendant was an
infant and the defence was essentially that the contract entered into by the
first defendant was void and that consequently the second and third
defendants were not liable.
d) Alternatively it was pleaded that as the first defendant had served the
government for three years and ten months out of the contractual period of
five years, the claim for [dollar]11,500 was excessive and not reasonable
compensation.
e) The statement of claim was amended at the hearing to include an alternative
claim for the repayment of the sum claimed as having been expended on the
infant for necessaries.

2) HELD

a) The contract entered into by the first defendant was void as he was an infant
at the relevant time
b) As the second and third defendants were sureties, their liability was
co-extensive with that of the principal debtor, and as the principal debtor was
not liable, the sureties also were not liable
c) The word ‘necessaries’ must be construed broadly and in the circumstances
of this case, the provision of professional or vocational training for the first
defendant in a Teacher’s Training Institution to enable him to qualify for and
accept appointment as a teacher was a provision for necessaries
d) The first defendant was therefore liable for the repayment of the sum
expended for his education and training as being expended on necessaries
e) The provisions for repayment for breach in the contract was a penalty clause
and therefore not enforceable
f) The amount of damages payable in this case must be based on the repayment
of the proportion of the actual sum expended based on the completed months
of service and in the circumstances judgment would be given for the plaintiff
against the defendants for [dollar]2,683.
 LOW CHIN MENG V CIMB ISLAMIC BANK BHD ( 2014 ) MLJU 1862

1) FACTS

a) LCL Corporation Bhd. (the company) was at the material time a public listed
company whose shares were traded on the open market at the Bursa Malaysia
Berhad. Low Chin Meng, the appellant in this appeal was the company’s
major shareholder, managing director and executive chairman. Both the
company and the appellant were parties in this civil suit before the High
Court as the first defendant and the second defendant respectively.
b) On or about 2007, the company through its subsidiaries secured fit out
contracts from it overseas ventures in the Middle East. To secure funds for its
Middle East project and on the advice of CIMB Investment Bank Berhad, its
corporate adviser, the company implemented a private placement and rights
issue exercises. The corporate exercises as the evidence has revealed, would
require sometime to complete. In the event, as an interim measure, the
company secured a short term funding from CIMB Bank Berhad in the sum
of RM50 million (the Conventional Loan Facility). Eventually the private
placement exercise had successfully raised funds of approximately RM35.95
million when it was completed on 5 November 2007. As for the rights issue
exercise however, the exercise was expected to be completed by June 2008.
It was intended that the proceeds from the rights issue exercise would be the
principal source of fund to repay the Conventional Loan Facility.
c) However, nothing turned out the way it was expected. The implementation of
the rights issue exercise was delayed. The company therefore was unable to
repay the Conventional Loan Facility. What followed thereafter was that the
company secured an Islamic finance facility known as ‘Al Bai Bithaman
Ajil’ Facility (the first BBA Facility) from the respondent in the sum of
RM62.250 million to repay the Conventional Loan Facility.
d) The company and the respondent, under the terms and conditions of the first
BBA Facility, had to enter into an asset purchase agreements with respect to
which the company would sell to the respondent assets up to the value of
RM50 million. In addition, by way of an asset sale agreement, the company
would repurchase those assets from the respondent at a purchase price of
RM62.250 million to be paid on a deferred basis over a period of 24 months.
But as an alternative, the relevant terms and conditions of the first BBA
Facility provided that the company could pay the purchase price by way of
the proceeds from the rights issue exercise.
e) To this end, a series of transactions were undertaken by the appellant, the
company and the respondent beginning with a Letter of Hibah dated
28.8.2008 executed by the appellant purportedly conveying to the company
by way of a gift 16,000,000 shares with value of RM35,520,000.00 owned by
the appellant in the company. It was next followed with an Asset Purchase
Agreement between the company and the respondent dated 28.8.2008 to
which the respondent purportedly purchased the said 16,000,000 shares from
the company for the sum of RM25 million. The respondent and the company
subsequently executed an Asset Sale Agreement dated 28.8.2008 to which
the respondent purportedly sold the 16,000,000 shares to the company for the
sum of RM31.125 million. Finally, a Letter of Hibah dated 28.8.2008 was
 executed by the company in respect of the 16,000,000 shares in favour of the
appellant.
f) These series of transactions were repeated a second time using the said
16,000,000 shares. Upon completion of these series of transactions, the
16,000,000 shares were deposited by the appellant with the respondent as a
security by a Memorandum Of Deposit Of Securities dated 23 September
2008.
g) However, by the end of 2008, the implementation and completion of the
rights issue exercise were once again delayed. As a result, the company was
without the financial means to comply with the repayment schedules under
the first BBA Facility.
h) Subsequently by a letter of offer dated 17 April 2009, the respondent granted
a second facility based on the same Islamic finance concept of “Al Bai
Bithaman Ajil” (the second BBA Facility) of RM48.5 million to the
company for the purpose of repaying the first BBA Facility.
i) On 24 April 2009 the appellant executed a Letter of Hibah purportedly
conveying to the company by way of a gift involving the same 16,000,000
shares (the Shares) used in the first BBA Facility with value of
RM9,440,000.00 owned by him in the company. With the execution of the
Letter of Hibah, the company entered into an Asset Purchase Agreement with
the respondent to which the respondent purportedly purchased the Shares
from the company for the sum of RM12,125,000.00 and followed
immediately with the repurchase of the Shares by the company for the sum of
RM16,087,500.00 from the respondent by way of an Asset Sale Agreement
entered into between the company and the appellant. The company in turn
re-conveyed the Shares by way of a gift to the appellant by executing a Letter
of Hibah.
j) The transactions were next repeated three times by the parties thereto
involving the Shares so that at the end of the whole exercise the aggregate
sums of the purchase price and the sale price under the four Asset Purchase
Agreements and four Asset Sale Agreements would ultimately stand at
RM48,500,000.00 and RM64,350,000.00 respectively. It is to be observed
that the Letters of Hibah, the Asset Purchase Agreements and the Asset Sale
Agreements were executed on 24 April 2009. The second BBA Facility
according to the Letter of Offer dated 17 April 2009 would expire on 30
November 2011.
k) Upon the conveyance of the Shares by the company to the appellant, a
Memorandum Of Deposit Of Securities (the Memorandum) was executed by
the appellant on 24 April 2009 pledging the Shares to the respondent. The
Memorandum would serve as a security for the payment of the amount under
the second BBA Facility. The company, as it turned out, had defaulted in the
payment of the monthly instalments and consequently the respondent in
exercising its rights under the Memorandum sold the Shares on 11 February
2007 at the price of RM3,666,822.80. Obviously the proceeds from the
disposal of the Shares was not sufficient to recover the outstanding sum. In
the event, the respondent commenced the present suit against the company
and the appellant seeking the payment for the shortfall pursuant to the
Memorandum amounting to RM54,442,744.78 as at 18 November 2010. The
appellant counter-claimed against the respondent the sum
ofRM35,520,000.00 as damages suffered by him for unlawful disposal of the
 Shares by the respondent which he alleged had resulted in the company to
collapse. He also sought a declaration that the transactions entered into were
null and void.
l) The respondent, by way of an Order 14 application, obtained a summary
judgment from the High Court on 9 February 2011 against the company and
the appellant. The appellant’s appeal to the Court of Appeal was
unanimously dismissed on 6 October 2011, however on further appeal to the
Federal Court, the appellant’s appeal was allowed. The case was remitted to
the High Court for trial on the merits.
m) We pause to observe that after the summary judgment was entered against
the company and the appellant, the company was wound up on 17 June 2011.
The company did not obtain leave to proceed with the appeal against the
summary judgment therefore in law the said summary judgment as against
the company still stands. That being the case, the trial of this case before the
High Court proceeded without the company as a party. So was the appeal
before this Court.
n) After a full hearing and upon assessing the evidence adduced by the parties
the learned Judge accordingly at the conclusion of the trial allowed the
respondent’s claim against the appellant and dismissed the appellant’s
counter-claim with costs. The appellant appeals against the decision to this
Court.
o) In summary, the learned Judge had decided amongst others, that the
Memorandum executed by the appellant was not only a charge but also
provided a personal guarantee pursuant to Clause 6 thereof, that the second
BBA Facility had also conformed with the advice given by Syariah Advisory
Council of Bank Negara Malaysia (the Council) and that there was no
evidence to show that sections 67 and 67A of the Companies Act 1965 had
been contravened in the course of carrying out the BBA transactions leading
to the granting of the second BBA Facility by the respondent to the company.

2) HELD

a) The appellant’s case in this appeal, in substance, is premised on the illegality

of the second BBA Facility, the liability of the appellant was to be limited to
the Shares only, the liability of the party for the shortfall was the company
and the breach of sections 67 and 67A of Act 125.
b) It is obviously on these issues we think this appeal ought to be decided and
our judgment goes on the basis that the second BBA Facility was valid and
enforceable, the appellant was liable to pay for the deficiency and
that sections 67 and 67A of Act 125 had not been breached.
c) We have considered the evidence and the law very carefully. We do not
detect any error as regards the learned Judge’s broad rendition of the facts of,
and law applicable to, this case.
d) The learned Judge was quite right in allowing the respondent’s claim and
dismissing the appellant’s counter- claim.
e) We agree with Her Ladyship’s judgment. Under the circumstances, we affirm
the judgment of the learned Judge in the Court below and dismiss the appeal
with costs of RM25,000.00 to the respondent.
f) The deposit shall be accounted for costs.
 RAZSHAH ENTERPRISE SDN BHD V ARAB MALAYSIAN FINANCE
BERHAD [2009] 2 MLJ 102

1) FACTS

a) The plaintiff was a licensed finance company and the defendant was a duly
incorporated company. The defendant guaranteed a loan extended by the
plaintiff to one of its (defendant’s) directors (‘the borrower’) by executing a
first legal charge over its lands in the plaintiff’s favour.
b) The borrower defaulted and despite loan restructuring attempts and
repayments made in pursuance thereof, the borrower remained in default.
c) The plaintiff called on the defendant as guarantor to fully settle the
outstanding amount on the loan, and when it failed to realise the outstanding
amount the plaintiff moved to foreclose the defendant’s lands. The plaintiff
filed a charge action in the High Court at Ipoh on 9 July 1988.
d) On 14 December 1992, Mohtar J, inter alia, refused to grant the plaintiff an
order-for-sale on the basis that there was ‘cause to the contrary’. On 26
September 1994, the parties entered into a consent order to convert the action
into a writ action.
e) The plaintiff’s originating summons and various affidavits in support were
accordingly converted into a statement of claim and related pleadings. The
defendant’s affidavits were converted into a statement of defence and
counterclaim.
f) The defendant’s counterclaim was based on two letters from the plaintiff to
the borrower. On 29 July 1997, the matter came before PS Gill J who held
that the matter was res judicata and dismissed the plaintiff’s action and the
defendant’s counterclaim.
g) Both parties appealed to the Court of Appeal which remitted the matter to the
High Court with directions for both parties to file and serve their pleadings.
The parties thus filed and served their pleadings.
h) On 17 December 2003, the plaintiff applied under O 18 r 19 of the Rules of
the High Court 1980 (‘RHC’) to strike out the defendant’s counterclaim filed
on 21 October 2003. T
i) he High Court judge allowed the plaintiff’s application on the basis that:
(i) the defendant was not a party to the loan agreement and
(ii) the defendant had no locus standi to file the counterclaim.
j) The defendant thus appealed to the Court of Appeal.

2) HELD

a) Held, allowing the defendant’s appeal with costs:

b) The plaintiff’s application was flawed since it failed to specify under what
limb of O 18 r 19 of the RHC, the application was made (see para 47);
Sambu (M) Sdn Bhd v Stone World Sdn Bhd & Anor [1996] MLJU
510followed; Monatech (M) Sdn Bhd v Jasa Keramat Sdn Bhd & Anor
[1999] 4 MLJ 629referred and Malayan United Finance Bhd lwn Cheung
Kong Plantation Sdn Bhd dan lain-lain [2000] 2 MLJ 38referred.
c) The plaintiff was 9 years, 2 months, 21 days late in making its application.
The delay was reckoned by reference to the time between 26 September 1994
[mdash ] when the consent order was made to convert the charge action and
 affidavits into the writ action and related pleadings, to 17 December 2003
[mdash ] when the plaintiff filed its striking out application. Even assuming
that the delay was 1 month and 26 days as alleged by the plaintiff, reckoned
from 21 October 2003 [mdash ] the date the defendant filed its counterclaim
to 17 December 2003 [mdash ] the date the plaintiff filed its application, such
delay could not be condoned. The delay of 9 years, 2 months and 21 days in
the instant case was inordinately long (see paras 48 & 51).
d) The doctrine of privity of contract is a creature of the common law. Although
the Contracts Act 1950 does not expressly provide for the doctrine,
nevertheless the doctrine applies in Malaysia (see para 59); Fima Palmbulk
Services Sdn Bhd v Suruhanjaya Pelabuhan Pulau Pinang & Anor [1988] 1
MLJ 269, followed and Kepong Prospecting Ltd & Ors v Schmidt [1968] 1
MLJ 170, PC referred.
e) In the instant case, the loan agreement was a contract of guarantee.
f) In order to ascertain whether a contract was one of guarantee or otherwise,
one had to look at:
(i) the natural meaning to be attached to the words employed in the
contract;
(ii) the substantial character of the contract itself and
(iii) the nature of the transaction between the parties
g) The loan agreement clearly evinced a tripartite relationship between the
parties. The defendant created a legal charge over its lands in favour of the
plaintiff to secure the loan facility extended to the borrower. The defendant
thus had the locus standi to file the counterclaim against the plaintiff. If the
defendant had no locus standi, there was no reason for the plaintiff to sue the
defendant. The borrower could not exist without the defendant and the
defendant was not a stranger to the loan agreement.
h) The counterclaim was not plainly or evidently unsustainable in law and
should not have been struck out
 GINLON ( M ) SDN BHD V MBF FINANCE BHD ( 2004 ) 2 CLJ 169

1) FACTS

a) This was an appeal to determine whether the charge was null and void in
consequence of the operation of s 86 of the Contracts Act 1950 (‘the Act’);
and whether there was a variance in the loan agreement as there was a waiver
of the assignment.
b) The facts were that by a letter of offer, the respondent, a
licensed finance company, agreed to grant a loan of RM300,000 to a
company called Pembinaan Ikhlas-Jae Sdn Bhd (‘the borrower’). Among the
securities specified in the letter of offer were a charge on the appellant’s land
and an assignment to the respondent of payments due to the borrower from a
project by one MBf Construction Sdn Bhd. Subsequently, the loan agreement
was duly executed between the borrower and the respondent for a loan of
RM250,000, not RM300,000.
c) The loan agreement did not specify the assignment as one of the securities
for the loan. The borrower sought from the respondent a waiver of the
assignment as security on the ground that MBf Construction Sdn Bhd refused
consent to the assignment.
d) The respondent agreed to the said waiver and that the loan amount was
reduced from RM300,000 to RM250,000 due to insufficient security
coverage.
e) Subsequently, the loan sum of RM250,000 was disbursed. Upon default of
the loan, the respondent sought to enforce the charge by applying to the Land
Office for an order for sale.
f) The appellant then commenced an action in the High Court for a declaration
that the charge was null and void by virtue of s 86 of the Act. The appellant
submitted that there was a variance in the loan agreement as there was a
waiver of the assignment.
g) The learned judge dismissed the action. Hence, the appellant’s appeal.

2) HELD

a) Held, dismissing the appeal

b) There was no variance in the terms of the contract, ie the loan agreement as
regards the assignment for the term as to the assignment was never in the
contract in the first place. The question of s 86 of the Act could not even
begin to arise. Even if the loan agreement had contained the term as to the
assignment and subsequently the term was removed without the consent of
the appellants, s 86 would still not apply in this case. It was not intended to
operate so as to effect a charge. The consequence of s 86 was the discharge
of the surety and not the invalidation of a charge
c) For there to be a surety, under s 79 of the Act, there must be a contract of
guarantee, in which the surety undertakes to perform the promise, or
discharge the liability, of a third person in case of the third person’s default.
The remedy of the person to whom the guarantee is given is therefore to sue
the surety on his undertaking in the contract of guarantee if the third person
defaults. The remedy is against the person of the surety
d) By the charge, the chargor does not guarantee to perform the promise or
discharge the liability of a third person in case of his default. The remedy
under the charge is not against the person of the chargor but against the
property charged, ie the remedy of sale or taking possession of the property.
A charge is not a contract of guarantee and the chargor is not a surety.
Therefore, a charge is a statutory instrument, a dealing that the Code
authorizes.
e) Thus, even if there had been a variance of the loan agreement in this case by
the waiver of the assignment and the variance was made without the
appellant’s consent, s 86 did not apply to render the charge void in
consequence (see paras 10–11); Co-operative Central Bank Ltd v Y & W
Development Sdn Bhd [1997] 3 MLJ 373 followed.