DAVIS V SYMONDS ( 1787 ) 1 COX EQ CAS 402

1) FACTS

a) Where the terms of the contract have been incorporated into an agreement,
the generalruleis that extrinsicevidencemay not be given to contradict, vary,
add to, or substract the said agreement. This generalrulewas expressed way
back inDavis v Symonds(1787) 1 Cox Eq Cas 402 at pp 404–405; and
inWilliams v Jones(1826) 5B & C 108.- Confined within four corners of the
document.
b) It limits what things can be taken into account when trying to interpret a
contract. Neither parties are allow to adduce extrinsic evidence (evidence not
contained in the document) to show that his intention has been misstated in
the document.“
c) It is firmly established as a rule of law that parol evidence cannot be admitted
to add to, vary or contradict a deed or other written instrument....” per P O
Lawrence J, 295 in Jacobs v Batavia and General Plantations Trust[1924] 1
Ch 287
 USAHATEK SDN BHD V ASIA INSURANCE ( M ) BHD ( PALANIAPPAN
A/L SINNAPAN) TRADING UNDER THE NAME AND STYLE OF INSURE
TRAINING CENTRE , THIRD PARTY [2011] 7 MLJ 1[2010] MLJU 658

1) FACTS

a) The plaintiff, an operator of a bonded warehouse, had purchased a burglary

and housebreaking policy (‘the policy’) from its agent
one Palaniappan a/l Sinnapan (‘the third party’).
b) The policy, which was for the period from 26 August 1996 to 25 August
1997, covered the goods stored in the plaintiff’s warehouse for the value of
RM200,000 and the customs duty payable on the goods for the sum of
RM260,000. When the policy was renewed for a further year, ie from the
period from 26 August 1997 to 25 August 1998 (‘the second policy’), the
sum insured was increased to RM220,000 for the value of the goods and
RM280,000 for the customs duty payable on the goods.
c) Then again the policy was renewed for a further year, ie the period from 26
August 1998 to 25 August 1999 (‘the third policy’), for the same
sum insured as the second policy.
d) On 21 December 1998, the plaintiff’s warehouse was burgled and the goods
were stolen.
e) The plaintiff lodged a claim on the policy for the sum of RM416,296.21 (‘the
first claim’) in respect of the stolen goods. While the plaintiff’s claim
was under review the plaintiff’s warehouse was burgled for the second time
on 20 January 1999.
f) The plaintiff made a second claim on the policy for the sum of
RM435,272.73 and the defendant’s adjusters investigated the second loss as
well. Upon completion of the investigations, the defendant paid the plaintiff
the sum of RM379,893.36 on the first claim and RM120,106.64 on the
second claim, ie a total sum of RM500,000 for both claims.
g) There was a difference of RM36,402.85 between the sum claimed by the
plaintiff and the sum paid out by the defendant on the first claim and a
difference of RM310,556.27 in the case of the second claim.
h) Dissatisfied with the sums received from the defendant, the plaintiff
instituted this action to recover the RM36,402.85 under the first claim and
the RM310,556.27 under the second claim.
i) The defendant contended that the policy was only limited to one single claim
wherein the maximum sum insured was RM500,000 as stipulated in the
policy schedule of the certificate of insurance read together with condition 8
of the policy jacket, which was annexed to the policy schedule. However the
plaintiff submitted that it had not received the policy jacket containing
condition 8 as referred to by the defendant
 KENG HUAT FILM CO V MAKHANLAL ( 1984 ) 1 MLJ 243

1) FACTS

a) In this case the respondent company and its predecessor company owned a

cinema in Ipoh and had entered into an agreement with one
Ong Keng Huat and his partners to lease the land for a period of five years
from September 1, 1956.
b) Under Clause 4(e) of the agreement the lessees had a right to renew the lease
for a further period of 5 years from the expiration of the period. The option to
renew was not exercised but the respondent company subsequently on
February 14, 1968 gave a lease for 5 years of the land to the
appellant company retrospectively from September 1, 1966.
c) Under Clause 4(e) of this lease the appellant was given an option to renew
the lease for a further 10 year period upon giving the respondent a written 6
months' notice of the intention to renew.
d) Under the said Clause it was also provided that the lessor would grant to the
lessee at the expiration of the lease a further term of 10 years at the same rent
and containing the like covenants and provisoes as were therein contained. In
1971 the appellant gave the necessary notice to ask for the renewal of the
lease and sent a draft of the second lease to the respondent.
e) The respondent returned the draft lease but with Clause 4(e) containing the
covenant for renewal deleted. Although the second lease was not executed
the appellant continued to remain in possession of the premises.
f) The respondents wrote to the appellant on January 18, 1981 asking for vacant
possession of the premises by August 31, 1981.
g) The appellant refused to vacate contending that it had the right to perpetual
renewal under the first lease if the option to renew was exercised on each
occasion, and such perpetual lease would be valid for 99 years under section
221(3)(a) of the National Land Code.
h) The appellant applied for specific performance of the renewed lease with the
covenant for perpetual renewal inserted as a term of the agreement.
i) The learned trial judge dismissed the claim and the appellants appealed.

2) HELD

a) The words "containing the like covenants and provisoes as are herein
contained" constitute a general covenant and such words without more are
far from clear and fall short of the legal requirement to confer what in effect
would amount to a perpetual lease by means of perpetual renewals. In the
light of the words used the learned trial judge was correct in holding on the
true construction of Clause 4(e) of the lease that it does not confer on the
appellant the right to perpetual covenant for renewals;
b) The 1957 lease was part of the Agreed Bundle of documents and its existence
and contents were not in dispute. It should be classified as factual
background of the case known to the parties at or before the first lease was
executed and therefore admissible in evidence and the trial judge was entitled
to use it not for the purpose of construing the first lease but for showing
inconsistency between the factual background and the claim of the appellant
to perpetual renewal of the first lease.
 QUALITY CONCRETE HOLDINGS BHD V CLASSIC GYPSUM
MANUFACTURING SDN BHD & ORS ( 2012 ) 5 CLJ 33

1) FACTS

a) The first defendant employed the plaintiff as main contractor pursuant to an

earth filling agreement ('the agreement'). The plaintiff subcontracted the
work to the second defendant.
b) The plaintiff contended that prior to the execution of the agreement between
the plaintiff and the first defendant and issuance of a letter of award by the
plaintiff to the second defendant, there existed an oral agreement between the
plaintiff, the first and second defendants where the first defendant would
engage plaintiff as their contractor to clear, earth fill and level lands
belonging to the first defendant, on condition that the plaintiff engaged the
first defendant's nominated subcontractor ie, the second defendant as the
plaintiff's subcontractor to carry out the work. Payment to the plaintiff by the
first defendant would be made back to back immediately upon the second
defendant receiving its payment from the plaintiff.
c) On 18 November 1997 the second defendant submitted their first interim
payment of RM900,000 to the plaintiff for part of the said work done and the
plaintiff paid the second defendant RM700,000. On 20 November 1997, the
plaintiff submitted their progress claim No 1 to the first defendant for a value
of work done as at 15 November 1997 of RM1m and the first defendant
refused to pay the plaintiff.
d) The plaintiff contended that there was fraudulent misrepresentation in that
the second defendant through the third defendant had induced the plaintiff to
pay the second defendant a sum of RM700,000 while at all material times the
second defendant knew that the first defendant would not pay the plaintiff at
all.
e) The plaintiff also contended that they were entitled to claim a pre-liquidated
damages of RM50,000 from the second defendant for non-completion of the
said work on the ground that the second defendant should have undertaken
and completed the said work on 18 January 1998. The second defendant had
abandoned the work after receiving the payment of RM700,000 from the
plaintiff.
f) The defendants denied the said oral agreement, the liability and quantum as
alleged by the plaintiff. The learned judicial commissioner ('JC') dismissed
the plaintiff's claim and the first defendant's counterclaim. The plaintiff filed
this appeal and the first defendant cross-appealed.
g) The following issues arose for determination:
i. Whether the JC was right in holding that prayer (1) of the plaintiff's
statement of claim was ambiguous and cannot be entertained and,
consequently dismissing the plaintiff's claim entirely;
ii. Whether the JC was right in dismissing the plaintiff's claim against
the first defendant notwithstanding the fact that there was evidence
that the first defendant had failed to pay the plaintiff's first payment
claim of RM1m and thereby breaching the agreement;
iii. Whether the JC was right in holding that the oral agreement
infringed s 92 of the Evidence Act 1950 ('Act');
iv. Whether the JC was right in holding that there was no fraudulent
 misrepresentation by the defendants and/or the third defendant; and
v. Whether the second defendant ought to pay the pre-liquidated
damages of RM50,000 per month from 18 January 1998 onwards for
failing to complete the said work.

2) HELD

a) Held, allowing the plaintiff’s appeal and dismissing the first defendant’s
cross-appeal:
b) The JC erred in holding that the amendment to prayer (1) was ambiguous and
cannot be entertained. The JC failed to appreciate the basis of the plaintiff’s
claim
c) It was wrong for the JC to dismiss the whole of the plaintiff’s claim when
there was ample evidence adduced that blatantly pointed to the breach
committed by the first and second defendants under the agreement and the
award letter
d) Where the terms of the contract have been incorporated into an agreement,
the general rule is that extrinsic evidence may not be given to contradict,
vary, add to, or substract the said agreement. However, extrinsic evidence
may be introduced to show to the world at large, so to speak, that the written
agreement did not represent the whole bargain between the parties. In order
to show whether there is a valid written agreement, parol evidence may be
admissible in order to show that the written agreement is not a valid contract
because there was never any agreement between the parties
e) There was no inconsistency between the oral agreement alluded to by Anne
Kung (’PW1’), the CEO (chief executive officer) of the plaintiff with cl 6 of
the agreement. Clause 6(b) of the six agreement merely stated that the said
sum to be paid progressively within six months from the date of the
agreement. But, it is silent as to ‘when and how’ the first defendant ought to
make its progressive payment to the plaintiff and this gap was filled in by the
oral agreement. Hence, the oral agreement fell squarely within the ambit of
proviso (b) to s 92 of the Act. It did not add or contradict cl 6(b) of the
agreement but on the contrary, complemented the agreement by proving the
‘back to back’ payment arrangement between the parties
f) The JC erred in holding that the plaintiff failed to plead the ‘full particulars’
of the fraudulent misrepresentation as envisaged under O 18 r 12 of the Rules
of the High Court 1980 . According to O 18 r 12(1), only the ‘necessary
particulars’ need be pleaded and not the ‘full particulars’ as required by the
JC (see paras 71 & 73).
g) The third defendant was the common director and shareholder of both the
first and the second defendants. By virtue of the false representation by the
third defendant, the plaintiff was defrauded (see paras 74 & 77).
h) The plaintiff’s claim against the second defendant for pre-liquidated damages
of RM50,000 ought to be allowed because there was evidence that the second
defendant abandoned the work after receiving RM700,000 from the plaintiff.
The plaintiff had not committed any repudiatory breach and had not
instructed the second defendant to stop work (see paras 78–79).
i) In the context of the cross-appeal, the first defendant had failed to prove or
show that the first defendant had suffered damages. At all material times, the
first defendant was the ‘wrong doer’ for refusing to pay the plaintiff the first
 progressive claim despite the evidence that showed that 30% of the said work
had been completed by the second defendant and that the plaintiff had even
paid the second defendant the sum of RM700,000 as partial payment 

JAMIN TRADING SDN BHD & ANOR V SHELL MALAYSIA TRADING

 SDN BHD ( 2011 ) 4 MLJ 662

1) FACTS

a) Pursuant to a sale and purchase agreement (‘SPA’), the second plaintiff sold
a piece of land to the defendant on which a petrol filling and service station
was erected.
b) The agreement gave the second plaintiff first option to operate the station but
at the second plaintiff’s request its associate company, the first plaintiff, was
appointed as the operator. In the course of their business relationship the first
plaintiff and the defendant entered into two successive five-year penjual
licence agreements.
c) Before the second penjual licence agreement (the ‘second agreement’)
expired the defendant issued the first plaintiff a show cause letter, alleging it
had breached the second agreement, and proceeded to terminate the
agreement.
d) The first plaintiff refused to hand over vacant possession of the station to the
defendant. The defendant subsequently acquired same through court
proceedings.
e) The show cause letter charged that the first plaintiff had breached cl 31.1 of
the second agreement by changing its business constitution without the
defendant’s prior written consent, to wit, that a director of the first plaintiff
had sold 100,000 of his shares in the company and resigned as director.
f) The plaintiffs denied shares in the first plaintiff were sold and said the
termination was bad in law; that they had a legitimate expectation the second
agreement would be renewed to maintain the first plaintiff as operator of the
station so long as it obtained the Petroleum Development Act (‘PDA’)
Licence to operate and that the defendant’s obligation under the SPA to offer
the second plaintiff first choice to operate the station was a continuing one.
g) The defendant counter-claimed for damages in trespass caused by the first
plaintiff’s refusal to hand over vacant possession of the station and also
claimed aggravated damages for loss of business and reputation. It denied it
had breached the SPA as the obligations of the parties thereunder had been
fully performed and the contract had come to an end. The defendant also said
the second agreement was lawfully terminated.

2) HELD

a) Held, dismissing the plaintiffs’ claim with costs, and allowing the
defendants’ counterclaim in prayers (b), (c), (d) and (e) with costs
b) The respective obligations of the parties to the SPA had been fully performed
when the purchase price was settled, the title in the land was transferred to
the defendant and the first plaintiff was appointed to operate the petrol
station (see para 13).
c) Nothing in cl 13 of the SPA intimated that the defendant’s obligation to offer
the second plaintiff first choice to operate the petrol station was a continuing
offer or that the option was indefinite. The defendant’s obligations under the
SPA were performed when it appointed the first plaintiff as operator of the
station. Thereafter the obligation no longer subsisted. The question whether
the defendant breached that obligation was a non-issue (see paras 18 & 19).
 d) The allegation in the defendant’s show cause letter that the first plaintiff’s
constitution had changed due to its director’s disposal of 100,000 shares was
unfounded. The disposal of the shares was in Mega
Equity Sdn Bhd (‘MESB’) which did not tantamount to disposal of shares of
the first plaintiff. Only the shareholding of MESB changed with the disposal
of the shares. There was no change to the shareholding of the first plaintiff as
MESB remained as its shareholder
e) The resignation of the first plaintiff’s director without the defendant’s prior
written consent thereto was a breach of cl 31.1 of the second agreement
which entitled the defendant to terminate the agreement
f) There was no basis upon which the first plaintiff could claim legitimate
expectation that the defendant would renew the second agreement to
continue the first plaintiff as operator of the petrol station so long as the first
plaintiff renewed the PDA licence.
g) None of the cases cited by the plaintiffs showed that the doctrine of
legitimate expectation applied to a party’s rights under a private contract

CITIBANK BHD V PEMBANGUNAN CAHAYA TULIN SDN BHD

( RECEIVERS AND MANAGERS APPOINTED ) & ORS ( 2012 ) 9 MLJ 181
1) FACTS

a) The plaintiff sued the first defendant (‘D1’) as borrower, the second
defendant (‘D2’) as corporate guarantor and the third and fourth defendants
as personal guarantors to recover sums owing in respect of credit facilities
granted to D1. The defendants contended that D1 was not liable because the
plaintiff had breached a collateral contract and certain oral representations it
had made in relation to the grant of the facilities.
b) The defendants said there was a collateral oral agreement that D1 was to use
the facilities granted to
i. Acquire land, construct and furnish a 12 storey building (‘Wisma CY’)
for the plaintiff to lease for 40 years and
ii. Acquire another piece of land adjacent toWisma CY for the construction
of an 18 storey building, also to be used by the plaintiff(‘the second
building’).
c) The rental the plaintiff would pay to occupyWisma CY was to be set off
against the loan repayments under the credit facilities. The defendants
claimed the plaintiff breached several oral representations it had made,
among which was that it would leaseWisma CY for 40 years or at least until
the credit facilities were fully repaid. As the plaintiff terminated its lease of
the building after nine years, the anticipated income from lease rentals did
not happen and D1 found it difficult to service its loan repayments to the
plaintiff such that D1’s four associated companies (‘the associated
companies’) had to assist by making substantial advances to D1.
d) The associated companies filed related suits against the plaintiff for losses
incurred as a result of their having to make advances to D1. Those suits were
heard together with the instant mainsuit. In their counterclaim, the
defendants, inter alia, sought a declaration that the plaintiff was estopped
from asserting any rights under the credit facilities against D1 and that D1’s
acceptance to restructure the facilities, because of its difficulty in repayment,
was procured through economic duress.
e) The defendants also claimed for depreciation in the value of the land
acquired for the second building on account of the building not being built.
f) The four oral representations the defendants alleged the plaintiff had
breached were:
i. The plaintiff would remain a tenant of D1 at Wisma CY until all credit
facilities repayable by D1 were settled (‘the lease duration
representation’);
ii. The plaintiff would pay for the increase in utilities, assessments, quit
rent and sewerage charges (‘the outgoings representation’)
iii. The plaintiff would not take action against the associated companies in
respect of facilities granted to them pending restructuring of those
facilities (‘the restructuring representation’) and
iv. The plaintiff would lease the second building and the lease rental would
be used to off-set repayment of facilities granted to acquire the land on
which the building was built (‘the second building representation’).
g) The plaintiff contended that, unlike in the case of Wisma CY, it had only
agreed to fund the acquisition of the land for the second building; that the
building itself was the defendants’ own project and there was no agreement
 for the plaintiff to lease the building.

2) HELD

a) Held, allowing the claim and dismissing the counterclaim and the claims of
D1’s associated companies:
b) The sub lease granted by D1 to the plaintiff was for a term of ten years with
an option to renew.Not only was there no contractual obligation on the
plaintiff ’s part to occupy the premises for a fixed duration of 40 years, but
even for the first ten year sublease the plaintiff had the right to terminate it at
any time by giving notice (see para 28).
c) The plaintiff was within its rights when it opted to terminate the sub-lease
and it was not in breach. It did not help the defendants if they chose to
interpret a ten year lease with options to renew for another three terms of ten
year lease to be a 40 year lease with no break or exit clause (see paras 63 &
65).
d) Nowhere in any of the letters between the parties was it expressed that there
was a binding collateral contract or an agreement/understanding that the
plaintiff would stay inWisma CY for 40 years or at least until D1 had fully
repaid the facilities (see para 116).
e) Evidence of the lease duration representation was rejected because the same
was not capable of coming within any exception to s 92 of the Evidence Act
1950 and, in fact, had the capacity to contradict, vary, add to or subtract from
the terms of the agreement to lease, the sublease and the other facility
documents that confirmed the duration of the sublease (see para 89).
f) The proposed second building was a project for D1’s own development and
not a second building for the plaintiff. Based on the terms and conditions of
the letters of offer, D1 was under a clear obligation to repay the facilities
whether or not the second building was constructed (see para 214).
g) Having accepted and declared that the plaintiff would not be liable for further
payments in respect of outgoings, the defendants’ claim for increased
outgoings could not be maintained as there had been accord and satisfaction
with respect to the claim. The defendants were also estopped from making
such a claim (see para 130).
h) No restructuring representation had been made that had been breached by the
plaintiff. The restructured loans with D1, D2 and the associated companies
were on terms mutually agreed upon and the defence of economic duress did
not avail the defendants and the associated companies

SAMAWORLD ASIA SDN BHD & ANOR V RHB BANK BHD ( 2008 ) 6 CLJ
44
1) FACTS

a) This is an appeal against the decision of the learned Judge High Court at
Kuala Lumpur given on 26/1/05 after a full trial.
b) The 1st appellant is SamaWorld Asia Sdn Bhd (hereinafter referred to as the
1st defendant). The 2nd appellant is Lim Kut Sheong @ Lim Tuck Fatt
(hereinafter referred to as the 2nd defendant). The respondent
is RHB Bank Berhad, previously known as DCB Berhad (hereinafter referred
to as the plaintiff).
c) The plaintiff bank claimed against the 1st and 2nd defendants:
i. The sum of RM3,645,154.48;
ii. Interest on the principal of RM3,000,000.00 at the rate of 2.0% per
annum above the plaintiff's costs of funds calculated on a daily basis
from 1.10.1996 to the date of full payment;
iii. Additional default interest on the outstanding interest charged on the
sum of RM3,000,000.00 at the rate of 3.0% per annum over and above
the plaintiff's costs of funds calculated on a daily basis with monthly
rests from 1.10.1996 to date of full payment.
d) The 1st defendant was at all material times a customer of Rakyat Merchant
Bankers Berhad (RMBB). On or about 4.11.1992 RMBB granted a RM3.0
million short term loan facility to the 1st defendant. Pursuant to the granting
of the said loan facility the 1st defendant executed a Short Term Loan
Facility Agreement with RMBB on or about 12.11.1992. By a memorandum
of deposit of shares, dated 12.11.1992, the 1st defendant deposited and
charged by way of a first fixed charge 10.0 million shares
of SamaWorld (Malaysia) Sdn Bhd in favour of RMBB to secure the
repayment by the 1st defendant to RMBB, on demand, of the debt
outstanding under the said loan facility, together with other charges arising
out of or incidental to the taking or realization of the said security for the said
loan facility.
e) The 2nd defendant was a director of the 1st defendant. By a written and
continuing guarantee dated 12.11.1992 executed between the 2nd defendant,
the 1st defendant and RMBB, the 2nd defendant unconditionally and
irrevocably guaranteed the repayment by the 1st defendant of the whole of
the said loan together with interest thereon and all costs charges and all other
sums payable by the 1st defendant under the provisions of the said loan
agreement.
f) The 1st defendant agreed, inter alia, under section 6.1 of the said loan
agreement, to repay to RMBB the amount of the principal and the prescribed
interest thereon by one lump sum on or before the expiry of the three months
from the date of the first drawdown of the said loan facility.
g) The said loan facility was, pursuant to a written notice of drawdown, released
on 16.11.1992 and became due for full settlement on 16.2.1993. On or about
13.6.1994 RMBB granted an extension of time for the repayment of the said
loan facility up to 31.5.1995.
h) Pursuant to the Banking and Financial Institutions Act, 1989 and by order of
court dated 7.11.1996 all interests, assets, rights remedies and liabilities of
RMBB (previously vested into BSN Merchant Bank Berhad vide the order
dated 22.7.1995) were further vested and transferred to the plaintiff as of
1.10.1996. It was also ordered that any accounts, agreements, contracts or
 instruments to which RMBB was a party shall have effect as from 1.10.1996
as if the plaintiff has been a party thereof instead of RMBB. As at 30.9.1996,
the 1st defendant remained indebted to BSN Merchant Bank Berhad in the
sum of RM3, 645,154.48 vide the said short term loan facility originally
granted by RMBB.
i) BSN Merchant Bank Berhad had on 22.8.1996 issued a letter, through its
solicitors, to the 1st defendant demanding payment of the sum of RM3,
576,277.83 being the outstanding amount due and payable as at 31.7.1996,
together with interest thereon, but the 1st defendant failed to make payment
thereof.
j) Pursuant to the provisions of section 14.1 of the said loan agreement, the
plaintiff, through its solicitors, by letter dated 10.10.1996 terminated the said
loan facility, and declared all outstanding sums owing under the said
agreement due and payable, immediately.
k) On 15.10 1996, the plaintiff, through its solicitors, issued a letter of demand
to the 2nd defendant demanding payment of RM3,576,277.83, being the
outstanding balance owing by the 1st defendant as at 31.7.1996, and interest
thereon. However, the 1st and 2nd defendants failed to repay the sums
claimed by the plaintiff.
l) The defence, in a nutshell, is that there is an oral collateral agreement
rendering the defendants not liable to repay the sums claimed by the plaintiff,
because the proceeds from the sale of the 10 million shares
in SamaWorld Malaysia charged to RMBB shall be the sole method of
repayment of the short term loan facility. It was pleaded in the defence that
there was a collateral contract to the short term loan facility agreement dated
12.11.1992 and the memorandum of deposit of shares dated 12.12.1992
between the plaintiff and the 1st defendant.
m) RMBB had made numerous efforts to sell the shares but could not find any
buyer. We pause at this juncture to observe that, irrespective of the existence
of such a collateral contract, the defendants surely cannot hope to escape
from liability for repayment of the loan if the shares could not be sold! There
can be no commercial practice or custom that would impute such a favorable
term in favour of a borrower for the repayment of such a large loan in a
written contract, let alone an alleged oral collateral contract. It is to be further
observed that the said shares are not of a public listed company and cannot
be readily sold in the open market.
n) By a letter dated 15.8.92(Record of Appeal, page 488) the 1st defendant had
given to RMBB as a merchant bank, a mandate to help sell 20 - 30 million
shares in the 1st defendant's subsidiary, SamaWorld Malaysia Sdn Bhd,
owned by the 1st defendant. The mandate was non exclusive and the 1st
defendant agreed to pay 2% commission to RMBB.
o) The letter of offer for the RM3.0 million short term loan dated 4.11.92
(Record of Appeal, page 493) and the short term loan facility agreement
dated 12.11.92 (Record of Appeal, page 417) discloses the following:-
i. The purpose of the facility is a bridging loan for the funding of the
project in Genting Highlands (called SamaWorld Theme Park) of the 1st
defendant's subsidiary SamaWorld Malaysia, before receipt of the
proceeds of sale of the 1st defendant's shares in SamaWorld Malaysia to
investors.
ii. The loan shall be repaid within three months from the drawdown.
 iii. The 1st defendant shall execute a memorandum of deposit of shares
whereby the 1st defendant charges 10 million of its shares
in SamaWorld Malaysia to RMBB.
p) On 12.11.92 the 1st defendant did execute the said memorandum of deposit
of shares (Record of Appeal page 466). The memorandum of deposit of
shares is over only a portion of the 20 - 30 million shares that the 1st
defendant had earlier mandated RMBB to sell vide letter dated 15.8.92.
q) The defendants allege that there was an oral collateral contract containing the
following terms:
i. The loan shall be utilized to settle the debt owed by a related company of
the 1st defendant known as SamaWorld Corporation Sdn Bhd to RMBB
under a separate facility granted to the
said SamaWorld Corporation Sdn Bhd.
ii. The proceeds from the sale of the 10 million shares
in SamaWorld Malaysia charged to RMBB shall be the sole method of
repayment of the loan facility.
r) The defendants also allege that the loan sum of RM3 million was paid to
Hwang DBS Securities Sdn Bhd at the instructions of Zarul Ahmad Zulkifli,
RMBB's former company secretary and Head of Corporate Affairs, and there
is a total failure of consideration as they do not know what happened to the
money. The defendants counterclaimed against the plaintiff on the alleged
oral collateral contract.
s) The existence of the alleged oral collateral contract by the defendants
whereby the plaintiff is to look solely to the proceeds from the intended sale
of shares in SamaWorld Malaysia for repayment of the loan is diametrically
contrary to and in complete disregard of the express terms of:
i. The short term facility agreement dated 12.11.92,
ii. The guarantee ( by the 2nd defendant) dated 12.11.92, and
iii. The memorandum of deposit of shares dated 12.11.92, which were all
standard loan documents that set out the liability of the 1st defendant and
2nd defendant as borrower and guarantor, respectively, for the RM3
million loan.
t) It is incredible that the plaintiff will have no recourse to the defendants for
repayment of the loan even if the plaintiff could find no buyer for the shares
in SamaWorld Malaysia and the shares are practically worthless!!
u) The main issue before the trial judge was whether there was the oral
collateral contract as alleged by the defendants, which is a question of fact.
The learned trial judge found, at the conclusion of the trial, that the
defendants had failed to prove on a balance of probabilities the existence and
the terms of the alleged oral collateral contract.
v) The defendants main ground of appeal before us is that the learned trial judge
failed to properly evaluate all the oral evidence before him, preferring instead
to rely purely on documents and to draw inferences therefrom. The
defendants allege that the learned trial judge failed to properly test or
examine the documents critically against the oral evidence in deciding there
was no collateral contract.
w) The law views with suspicion collateral contracts, the sole effect of which is
to vary or add to the terms of the principal contract. Collateral contracts must
be proved strictly. The terms of such contracts and the existence of a contrary
intention on the part of all the parties must be clearly shown.
 x) The parol evidence rule in section 92 of the Evidence Act, 1950 provides that
no evidence of any oral agreement shall be admitted for the purpose of
contradicting any terms of a written agreement. Nevertheless, under proviso
(b) thereof:
y) "the existence of any separate oral agreement, as to any matter on which a
document is silent and which is not inconsistent with its terms, may he
proved, and in considering whether or not this proviso applies, the court shall
have regard to the degree of formality of the document.'
z) (emphasis provided)
aa) We are unanimous that the learned trial judge's findings, that the collateral
agreement and terms as claimed by the defendants have not been proved,
should not be disturbed. His approach to the issue on the collateral contract
was correct in law and in fact. We are satisfied that he had judicially
appreciated all the evidence placed before him and had analysed the oral
evidence as against the indisputable documentary evidence. He set out in his
grounds, inter alia:
bb) "It must be observed firstly that since the fact of an oral contract is a fact
asserted by the Defendants, and is disputed by the other party, and the
defence, the onus is upon the Defendants to prove upon a balance of
probabilities the existence and the terms of the oral contract, in particular,
that the sale from the proceeds of the 10 million shares
in SamaWorld Malaysia charged to RMBB under the Memorandum of
Deposit shall be the sole method of repayment of the facility."
cc) Thereafter, after carefully considering the oral testimony of the witnesses as
well as the documentary evidence before him, he concluded:
dd) "It is evident that the Defendants have failed to prove on a balance of
probabilities the existence of an oral collateral contract that the sole source of
repayment of the facility is from the sale of the charged shares, and the
defence on this ground must fail."
ee) The learned trial judge further found:
ff) " Although it was averred by the 2nd defendant that he had only agreed to
guarantee up to a limit of Rml,000,000.00 and not Rm3,000,000.00 there is
no evidence advanced and no submissions made on this point. The Court
therefore considers the alternative averment in paragraph 12 of the 2nd
Defendant's defence as abandoned.
gg) In the upshot, we are unanimous that the 1st defendant's and the 2nd
defendant's appeal is without merits. The appeal is dismissed with costs. The
decision of the trial judge is affirmed.
hh) Deposit of this appeal to respondent on account of taxed costs.

GEK LAU CHOON THEATRICAL COMPANY V HU KIANG YAN ( 1937 )

MLJ 25

1) FACTS
 a) When a separate collateral agreement not inconsistent with a written
agreement is alleged, the law views with suspicion such collateral contracts,
the sole effect of which is to vary or add to the terms of the principal
contract.
b) They must be proved strictly: not only the terms of such contracts but the
existence of an animus contrahendi on the part of all the parties must be
clearly shown.

MENTARI SEKITAR SDN BHD V HERITAGE PROPERTY SDN BHD

( 2016 )

1) FACTS
 a) The respondent, is the vendor and registered owner of a parcel of land
situated at Pekan Klebang, Malacca. By a sale and purchase agreement dated
24.2.2011, the respondent agreed to sell the land to the appellant for the
purchase price of RM9,634,517.86. The appellant paid a deposit in the sum
of RM963,451. 79 which was equivalent to 10% of the purchase price of the
land pursuant to the sale and purchase agreement.
b) Under the sale and purchase agreement, the appellant was required to pay the
balance purchase price within three months plus additional three months
from the unconditional date or date of the agreement. As events turned out
however, the appellant failed to make payment of the balance purchase price
within the period stipulated in the agreement. The respondent gave 4
extensions of time for the appellant to make the payment of the balance
purchase price each time stating that “time shall be of the essence.” In fact,
the sale and purchase agreement stipulated that “time shall be of the essence
of this Agreement.” Thereafter, when the appellant still failed to make the
payment of the balance purchase price, the respondent terminated the sale
and purchase agreement in accordance with the terms thereof. However, the
appellant refused to remove the private caveat it had lodged on the land and
to return the land title deed and other relevant documents to the respondent.
c) The respondent in their claim sought for inter alia -
d) a.a declaration that the sale and purchase agreement was rightly, validly and
lawfully terminated by the respondent;
i. A declaration that the deposit in the sum of RM963,421. 79 was
rightfully and lawfully forfeited by the respondent pursuant to Clause
13.2 of the Sale and Purchase Agreement;
ii. A declaration that the Power of Attorney, Transfer Form A, Letter for
Undertaking to Refund, Statutory Declaration for Non Winding-Up
executed by the respondent in the sale and purchase transaction were of
no legal effect and unenforceable;
iii. An order for return and delivery of the sale and purchase documents by
Messrs. Chris Koh & Chiew to the respondent;
iv. Damages to be assessed; and
v. Interest, costs and such further or other relief as the court deemed fit and
proper.
e) It is noteworthy that the second to fifth defendants were partners of a law
firm Messrs Chris Koh & Chew. The firm was appointed as the appellant’s
solicitors for the sale and purchase transactions of the land. However, the
claim against the second to fifth defendants were struck out as the respondent
and the second to fifth defendants had agreed to resolve the matter amicably
and the claims against the latter had been withdrawn by the former.

2) HELD

a) This appeal turns upon a pure question of fact. The learned trial Judge had
made a finding of fact that the appellant had failed to adduce sufficient
 evidence to satisfy the burden of proving the existence of the alleged oral
collateral contract.
b) His Lordship had also found that, as a matter of fact, the appellant had
breached the sale and purchase agreement in not making payment of the
balance purchase price within the extended time granted by the respondent
and that accordingly the termination of the agreement as well as the
forfeiture of the deposit sum pursuant to the letter dated 19.12.2011 were
valid and lawful.
c) For the reasons discussed above, we are satisfied that the learned trial Judge
had not fallen into error or fundamentally misdirected himself in law or on
the facts in coming to the conclusion as he did.
d) There are no reasons for this Court to interfere with the findings of fact
arrived at by the court of first instance. Based on the foregoing reasons and
discussion, we dismissed the appeal with costs. Our decision in this appeal
applies equally to Civil Appeal No. W-02(NCVC)(W)-1846-10/2014 which
is also dismissed with costs.
e) We fix costs at RM30,000.00 to be paid to the respondents in both the
appeals.
f) The deposits shall be returned to the appellant.

TAN CHONG AND SONS MOTOR COMPANY LTD V YANG CHIN LANG
( 1967 ) 1 MLJ 123

1) FACTS
 a) In this case, the plaintiffs sued the defendant on a letter of guarantee. The
facts were that one Yang Pin Joo was appointed the agent and authorized
dealer of the plaintiffs, who were the sole distributors of certain Japanese
cars. Credit facilities were given to Yang Pin Joo but he became heavily
indebted to the plaintiffs.
b) The plaintiffs threatened to cancel his agency and to sue him to recover the
debts unless he found a guarantor. Yang Pin Joo then spoke to his father the
defendant and the father agreed to guarantee Yang Pin Joo’s acccount to the
extent of RM100,000.
c) Later the defendant signed a letter of guarantee and it was on this that he was
sued, as Yang Pin Joo failed to clear his debts.
d) Evidence was given at the trial of the threat to cancel the agency and to sue.
e) It was contended for the defendant that such evidence was inadmissible as no
evidence could be given to add to, contradict or vary the contents of the letter
of guarantee.

2) HELD

a) When there is a contemporaneous or prior separate oral agreement as to a

matter on which a document is silent, proof of it may be given when such
agreement is not inconsistent with or does not contradict the terms of the
document and the evidence was admissible under provisoes (b) and (f) to s
92 of the Evidence Ordinance 1950
b) In this case, the defendant was liable on the guarantee to pay the amount for
which Yang Pin Joo was indebted to the plaintiffs up to the extent of
[dollar]100,000.

TAN CHONG & SONS MOTOR V ALAN MCKNIGHT ( 1983 ) 1 MLJ 220

1) FACTS
 a) In this case the respondent was a squadron leader in the Royal Australian Air
Force. He wanted to buy a car and get the benefit of exemption from duty in
Malaysia and Australia. He would have obtained the exemption if
the motor car was taken out of Malaysia and if it complied with the
Australian Design Regulations.
b) He agreed to buy a car from the appellants and signed a Buyer's Order which
contained a condition that no guarantee or warranty of any kind whatsoever
was given by the company. However the respondent only bought the car on
the representations of the appellant's salesman that the car conformed to the
Australian Design Regulations.
c) The car supplied did not comply with the Regulations and the respondent had
to sell the car for $6,500.00 thereby incurring a loss of $11,219.54
($17,719.54–$6,500.00). The respondent also lost the fiscal advantage of
importing the car to Australia duty free. The respondent claimed damages for
breach of warranty. The learned trial judge found that there had been a
warranty and this was breached by the appellants.
d) He awarded general damages of $10,500.00 with interest at 8% from the date
of the writ to the date of payment and costs of the suit at the Subordinate
Court's scale. No special damages were awarded as these were not pleaded
and an application for amendment of the pleadings was refused.
e) The appellants appealed to the Federal Court contending that they were not
liable or that the damages were too high while the respondents cross-
appealed on the ground that the damages were too low and that he was
entitled to interest from the date of accrual of the cost of action and to costs
of the suit at the High Court scale and to special damages. At the hearing of
the appeal, counsel for the appellants accepted the findings of facts by the
learned trial judge.
f) The appeal was therefore confined to legal issues on liability and quantum
only.

2) HELD

a) There can be no doubt that it was the representations by the salesman

expressed by words and conduct that led to the respondent to enter into the
agreement to purchase the car. There was abundance of evidence showing
that the representations were not innocent and on the contrary could even be
considered to be deceitful or plain lies;
b) There was clear evidence that had it not been for the promise of the salesman
to deliver him a car complying with the Australian Design Regulations, the
respondent would not have signed the Buyer's Order;
c) The representations made by the salesman was binding on the appellants. It
would lead to great mischief in the law and certainly, would not be in the
interest of business efficacy if representations made by a salesman in the
course of his employment could not be relied upon by an intending purchaser
whom he was dealing with;
d) The prohibition against admissibility of evidence under section 92 only
applies where all — as opposed to some only — of the terms of the contract
are written into the agreement. Thus where some terms are given orally and
some in writing oral evidence can be given to prove the terms agreed to
orally;
 e) Where the oral representations as in this case are in conflict with the printed
condition in the written contract, the representations must be given an
overriding effect and the printed condition must therefore be rejected;
f) It made no difference in this case whether the English Sale of Goods Act
1893 or the English Sale of Goods Act, 1979, applies in Penang. It was not
necessary or relevant to decide the question as to which of the two English
Sale of Goods Act is applicable;
g) The amount of damages which should be awarded in this case should be the
financial loss directly suffered by the respondent as a result of the dealing
with the appellants i.e. $11,219.54;
h) It was just and proper in this case that the learned trial judge should allow the
amendment of the pleading to enable special damages to be awarded. On the
basis of the evidence, special damages of $2,341.35 should be awarded;
i) The costs in this case should be fixed at High Court scales as the case
involved difficult questions of law, especially on the question of warranty
and measure of damages;
j) Interest is a matter of discretion and on the facts of the case the learned trial
judge was not in error to order interest to run from the date of the writ.

TINDOK BESAR ESTATE V TINJAR CO ( 1979 ) 2 MLJ 229

1) FACTS

a) In this case the appellant had been employed as a contractor by

 a company for the extraction of timber. The appellant agreed to furnish the
necessary vehicles and to provide the buildings for the accommodation of the
workers and for other necessary purposes and also to build a road leading to
and from the timber area.
b) It bought vehicles on hire-purchase and applied for and obtained a
Temporary Occupation Licence of land on which was constructed the road.
Subsequently the appellant agreed to withdraw and agreements were made
whereby the respondent undertook the work of extracting the timber and the
appellant's agreement with the company was cancelled.
c) The respondent thereupon entered into an agreement with the appellant
whereby the respondent agreed to buy over from the appellant the vehicles at
an agreed price subject to the payment of the remaining instalments of the
hire-purchase to the hiror and paying an agreed sum for the appellant's
infrastructure and the road.
d) The respondents paid the amount due to the appellants under the agreements
by instalments which were paid by post-dated cheques, the last of which for
$45,000 was dishonoured. The appellant brought the action to claim the sum
of $45,000 and interest.
e) The respondents admitted giving the post-dated cheques but it challenged the
validity of the agreement on the ground inter alia of illegality, fraud and
misrepresentation. It counterclaimed for the sum of $90,000 which had been
paid by it under the agreement to the appellant.
f) At the trial in the High Court the learned trial judge dismissed the claim and
allowed the counterclaim for the refund of $90,000 with interest and
damages.
g) He held that the entire agreement was tainted with illegality and it was not
severable, that the respondent was not in pari delicto because its partners
were in ignorance of the law and had acted under strong pressure and
because of the fraudulent misrepresentations of the appellant.
h) The learned Judge decided to admit parol evidence to prove the implied
undertakings in construing the agreement and he then considered and found
fraud and deceit on the part of the appellant. The appellant appealed.

2) HELD

a) Held, allowing the appeal:

b) The parol evidence was wrongly admitted by the trial judge as the evidence
did not fall within either proviso (b) or proviso (c) of section 92 of the
Evidence Act but was evidence adding a new term or terms to the agreement;
c) On the facts the charges of fraud and misrepresentation against the appellant
could not be sustained;
d) The evidence sought to be adduced to show misrepresentation, deceit and
fraud ranged far beyond the confines of the respondent's pleadings. The
respondent's application to amend the pleadings must be disallowed, as it was
made at the appellate stage and there was no good and strong justification for
it;
e) Although the Temporary Occupation Licence is not transferable the statute
does not prohibit the giving of permission to use the rights under it. In this
case all the appellant did was to permit the respondent to use his rights under
the Temporary Occupation Licence and there was nothing illegal about such
 an arrangement;
f) The appellant could not be held liable for damages arising from the
cancellation of the Temporary Occupation Licence as Clause 9 of the
agreement clearly provided that the respondent was not entitled to such
damages.

SEVEN SEAS INDUSTRIES SDN BHD V PHILIPS ELECTRONIC SUPPLIES

( M ) SDN BHD & ANOR ( 2008 ) 5 MLJ 157

1) FACTS

a) The principal business of the first respondent included the production of

 loaders, which formed integral components of compact disc based
equipment. The second respondent had shareholding in the first respondent
company. In late 1992, the second respondent appointed the appellant as its
subcontractor to assemble the loaders.
b) Prior to 10 January 1996, there was no written relationship between the
parties. On 10 January 1996, the appellant and the first respondent executed a
‘subcontractor contract’ to formalise their relationship. Eventually, on 14
February 1998, the first respondent served on the appellant a six months
notice under Article X1 of the contract of its intention to terminate the same.
The appellant filed a claim in the High Court seeking damages and other
declaratory relief for breach of contract arising out of the said termination
and for wrongful appropriation and use by the respondents of confidential
information belonging to the appellant.
c) The High Court dismissed the appellant’s claim with costs. The appellant
appealed to the Court of Appeal.
d) The issues that arose for determination were:
(1) Whether there existed an implied term of the contract or a collateral agreement as
to a minimum of 50,000 loaders to be assembled per day for the duration of the
contract;
(2) Whether the contract was validly terminated; and
(3) Whether the appellant had any proprietary or other right to the system of
assembly, and if so, whether the respondents had appropriated that right wrongfully.

2) HELD

a) Held, dismissing the appeal with costs:

b) The doctrine of collateral contract or agreement is recognised by virtue of
proviso (b) to s 92 of the Evidence Act 1950 which allowed to be admitted in
evidence any separate oral agreement as to any matter on which a document
was silent and which was not inconsistent with its terms. Unless the
additional evidence sought to be introduced fell within the scope of any of
the provisos, it should not be allowed to be introduced as it would be to
contradict, vary, add or subtract from the terms of the agreement. Such
collateral contract must be viewed strictly. Thus, based on the facts, the
learned judge had rightly considered all the relevant factors in coming to his
finding on the non-existence of the alleged oral representation or collateral
agreement (see paras 11 & 16).
c) The essence of a fiduciary relationship is one of trust and confidence
between the fiduciary and the beneficiary where the latter undertook or
agreed to act for, on behalf or in the interest of, the beneficiary, being a
person in a position of vulnerability. On the facts, there was no element of
trust and confidence in the relationship between the parties, and no party was
put in a position of vulnerability under the contract. It was true that there was
a close relationship between the parties in the carrying out of their respective
functions and obligations under the contract but it was not such giving rise to
a fiduciary relationship. Their close relationship could be attributed to the
nature of the contract and their respective obligations thereunder. It was a
mere principal-contractor relationship
d) The existence of an implied obligation of good faith and honesty and duty to
act reasonably would depend on the expressed intention of the parties which
 was to be ascertained from the terms of the contract, and on the nature of the
relationship between the parties. It is a well established principle that where
the terms of a contract are clear and free from ambiguity the court will not
impose any implied terms. In the circumstances, the contract was validly
terminated in accordance with the clear terms thereof. Further, the internal
problems experienced by the appellant constituted reasonable grounds for the
respondents to terminate the contract by giving the requisite six months
notice. The appellant had in fact acquiesced in the termination when it asked
the respondents to leave its premises before the expiry of the said six months
period
e) The information on the system of assembly was not confidential in nature.
The system of assembly was opened to the respondents’ representatives with
the consent of the appellant. It was also clear from the contract that the
manufacturing process was regulated and monitored by the respondents to
ensure quality control set by them. Under the contract, the respondents were
also given access to the appellant’s factory to provide training opportunities
for the appellant’s personnel. Thus, the appellant also failed to show that the
system of assembly was unique when judged in the light of usage and
practice of similar trade and industry.
f) The evidence clearly showed that the key features of the system had been
used in the assembly industry long before the setting up of the appellant’s
assembly plant

TAN SWEE HOE CO LTD V ALI HUSSAIN BROS ( 1980 ) 2 MLJ 16

1) FACTS

a) In this case on the facts found by the learned trial judge the appellants had
orally agreed to allow the respondents to occupy the premises for as long as
they wished on payment of $14,000 as tea money.
 b) Two written agreements of tenancy were later executed but they did not refer
to the appellants' promise.
c) A dispute arose as to payment of rent and the appellants eventually sued for
vacant possession, arrears of rent, mesne profits and damages.
d) In their defence the respondents claimed that under the oral agreement they
were entitled to stay in the premises as long as they wished and so long as
they paid the rent regularly.
e) The learned trial judge dismissed the appellant's claim and ordered the
appellants to register a lease in favour of the respondents for 28 years. He
assessed the rent at $293.40 per month in the light of the increase of
assessment.
f) The appellants appealed and the question that arose was whether the
evidence of the oral promise could be given in view of sections 91 and 92 of
the Evidence Act.

HOYTS PTY LTD V SPENCER

1) FACTS

a) A landlord has promised orally not to exercise the right to termination in the
principal contract if tenant signed the contract; landlord ended up terminating
the main contract, whereas tenant's appeal was dismissed by the Court.
 SHANKLIN PIER LTD V DETEL PRODUCTS LTD ( 1951 ) 2 KB 854

1) FACTS

a) The Plaintiffs were owners of a pier in Shanklin on the Isle of Wight. 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.
 b) The Defendant company director approached the Plaintiffs with a new
painting product for the pier.
c) After much persuasion, the Plaintiffs amended their contract with the
Contractors to allow for the paint in the renovation. After several months, the
paint flaked off and did not last. 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 renovation ?

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. The Plaintiff
was entitled to recover damages.

GILLESPIE BROTHERS & CO V CHENEY , EGGAR & CO ( 1896 ) 2 QB 59

1) FACTS

a) Lord Rusell said in “Gillespie Bros. & Co v. Cheney, Eggar & Co (1896) 2
Q.B. 59” ,  “…although when the parties arrive at a definite written contract
the implication or presumption is very strong that such contract is intended to
 contain all the terms of their bargain, it is a presumption only, and it is open
to either of the parties to allege that there was, in addition to what appears in
the written agreement, an antecedent express stipulation not intended by the
parties to be excluded, but intended to continue in force with the express
written agreement.”.

INDUSTRIAL & AGRICULTURAL DISTRIBUTION SDN BHD V GOLDEN

SANDS CONSTRUCTION SDN BHD ( 1993 ) 3 MLJ 433

1) FACTS

a) The defendant purchased two units of excavators from the plaintiff and used
them on its worksite.
 b) After two months, the defendant requested the plaintiff to take back the
excavators, on the ground that they were not suitable for the purpose for
which were bought.
c) The defendant sought to rely on an 'oral collateral warranty' given by the
plaintiff to the effect that if the excavators were found to be unsuitable, they
could be returned to the plaintiff without incurring any financial liability.
d) There was a dispute as to whether such a collateral condition actually existed,
and the plaintiff brought an action for damages for, inter alia, the
depreciation in value of the excavators as a result of the defendant's use of
the excavators during the two-month period.

2) HELD

a) Held, granting only nominal damages to the plaintiff:

b) Here, the defendant was not suing for damages based on the oral statement
allegedly made by the plaintiff but was seeking the right to terminate the
contract. Therefore, the term could not be interpreted to mean a collateral
warranty but should be taken to mean a collateral contract. An oral collateral
warranty is merely a term of a contract, the breach of which only entitles the
party to sue for damages, and does not give the party the right to repudiate
the contract. Similarly, the breach of a collateral contract only gives rise to an
action for damages and not a right to repudiate the main contract.
c) A cautious approach is adopted by the courts in recognizing the existence of
a collateral contract, especially in cases where it contradicts the terms of a
written contract. The burden of proving the existence of a collateral contract
is on the party alleging its existence and the mere fact that the defendant
deemed it rightful for him to return the two excavators to the plaintiff did not
establish the existence of such a collateral contract.
d) Moreover, a collateral contract, by its very nature exists side by side with the
main contract. It does not have the effect of substituting the main contract. A
collateral contract merely confers other rights which are not incorporated in
the main contract, but such rights must be related to the rights and
obligations of the parties under the main contract. Therefore, any
representation made by a party to the contract which has the effect of
destroying the main contract, cannot become a collateral contract. Here, there
was clearly an agreement between the parties for the sale and purchase of the
two excavators. However, if the defendant's contention was accepted, the
effect of the alleged collateral contract would be to obliterate the main
contract of sale or to convert it into a conditional contract. There cannot be a
collateral contract without the main contract being in existence. If the
defendant was allowed to return the excavators without incurring any
financial obligation to the plaintiff, the main contract becomes meaningless
as the defendant would no longer be under any obligation to buy the
excavators under the main contract.
e) There was insufficient evidence to establish that the excavators which were
supplied by the plaintiff were unsuitable for the defendant's purpose. The
defendant had not established any other evidence, other than his own bare
assertion that it was unsuitable. The defendant knew the nature and capability
of the excavators that were ordered by it. What in fact was supplied to him
was the exact model of the excavators as ordered.
 f) The action of the defendant when it indicated to the plaintiff that it did not
wish to proceed with the purchase of the two excavators and requesting the
plaintiff to take them back, clearly went to the root of the contract of sale and
amounted to a repudiation of the contract as it evinced an intention not to
proceed with the contract for sale. The act of the defendant clearly amounted
to one which the plaintiff could treat as an anticipatory breach of the
contract.
g) There was no proof of any actual depreciation of the machines and therefore,
the court was unable to grant any damages except by way of nominal
damages.

TAN SRI ABDUL KHALID BIN IBRAHIM V BANK ISLAM MALAYSIA

BHD ( 2009 ) 6 MLJ 423

1) FACTS

a) The relationship between the parties begun when the bank ('the defendant')

provided two murabaha facilities to the plaintiff, to redeem and acquire more
shares in a company called 'Kumpulan Guthrie Berhad'. The plaintiff
 defaulted under the agreements and sought deferment of payment of the
outstanding (exhs MR3 and MR5).
b) Due to repeated breaches by the plaintiff, the bank offered to restructure the
murabaha facilities to assist him in meeting his outstanding obligations to
the bank and the two murabaha facilities were restructured into a revolving
al-Bai Bithaman Ajil facility ('BBA facility agreement').
c) However the plaintiff defaulted in the first instalment under the BBA facility
agreement and hence, this suit in encl 5 by the bank to enter a summary
judgment under O 14 of the Rules of the High Court 1980 for a sum of
USD18,521,806.13 or its equivalent in Ringgit Malaysia.
d) The plaintiff, did not dispute the default or the amount outstanding, instead
alleged an existence of collateral agreement and attempted to challenge the
validity of the BBA facility agreement on various grounds, inter alia, for
want of compliance with the principles of Shariah.

2) HELD

a) Held, allowing the application with costs:

b) The terms of the alleged collateral agreement were directly in contradiction
with the terms under the BBA facility agreement. The allegation of an
existence of a collateral agreement by the plaintiff also seemed implausible
in view of the two letters in MR3 and MR5 seeking indulgence from
the bank for deferment of payment. The two letters could not be anything
less than admission by the plaintiff of his liabilities under the murabaha
agreements, which had been restructured. The evidence of negotiations, if
any, prior to the restructuring of the BBA facility agreement were not
evidence that the court could admit in view of ss 91 and 92 of the Evidence
Act 1950, as they directly contradicted the express written provisions of the
BBA facility agreement (see para 9).
c) Questioning of the validity of an agreement after benefiting from it and upon
default, in itself lacks bona fide as the plaintiff was in the position to obtain
any Shariah or legal advice at the time he entered into the agreements with
the bank. To turn around and challenge the validity of an agreement entered
voluntarily after reaping the benefit under it appeared to be a mere
afterthought (see para 13).
d) Since there were differences in Shariah views, parties may generally enter
into an agreement based on any particular view or opinion and they are
bound by the contracting terms based on that particular Shariah position. In
this case, the plaintiff had agreed with the bank to be bound by the BBA
terms as per the written terms between them and it was not open to him to
now say that the BBA terms should have been interpreted and implemented
differently. Whilst there is a whole host of Shariah rule that must be
complied with in this transaction, it must be pointed out that there is another
side to fulfilling contractual obligations in the eyes of the Shariah. The
demand on a person to fulfill contractual obligations in Shariah is an onerous
one (see paras 19 & 22);Bank Kerjasama Rakyat Malaysia Berhad v PSC
Naval Dockyard Sdn Bhd [2008] 1 CLJ 745 followed.
e) There was no clause in the agreement that required the bank to seek the
plaintiff's consent to sell the pledged shares neither was there any clause that
the parties were entering into the agreement based on the principle of ar-
 Rahnu. What was clear was that the documents were drawn to grant custody
to hold the pledged shares where the bank had full access and authority to
sell them to cover outstanding due by the plaintiff

KLUANG WOOD PRODUCTS V HONG LEONG FINANCE ( 1994 ) 4 CLJ

141

1) FACTS

a) The first appellant ('Kluang Wood') was a licensed housing developer and the
registered proprietor of a piece of land in Johor ('the land'). The second
appellant ('Chew') was a director of the first appellant. Chew was introduced
 to one WP Pang ('Pang') who was the southern regional manager of the first
respondent ('Hong Leong').
b) In early 1983, the appellants negotiated with Hong Leong for banking
facilities to enable them to develop the land into a housing estate. A formal
application was made, seeking RM4.5m as a bridging loan and RM21m as
end-finance.
c) According to Chew, during the negotiation between him and Pang, Pang
agreed that Hong Leong would furnish Kluang Wood with a bridging loan
and a syndicated end-finance.Pang had represented to him in the course of
their negotiation that for a finance company of Hong Leong's repute, the
amounts of the end-finance and the bridging loan would not be a problem.
On 26 October 1983, the first respondent approved the application vide a
letter of approval.
d) By that letter, Hong Leong had expressly or impliedly represented
to Kluang Wood that a bridging loan of RM3.5m and an end-finance facility
of RM26m had been approved, with Hong Leong's share of the end-
finance being RM5m. 
e) Kluang Wood pleaded that Hong Leong had further represented that the
initial drawdown of the said end- finance facility would be in the first quarter
of 1984. As security for the bridging loan, Kluang Wood created a charge
over the land in Hong Leong's favour, and Chew and the other directors
executed a letter of guarantee. In January 1984, Hong Leong prepared a
placement memorandum for syndication of the end-finance of RM26m.
f) However, no end-finance at all, including Hong Leong's RM5m, was made
available to Kluang Wood though the bridging loan of RM3.5m had been
fully utilized by Kluang Wood. Hong Leong then took out a writ against the
guarantors including Chew for recovery of the bridging loan ('the Johor
Bahru suit'). A final judgment under O 14 of the Rules of the High
Court 1980 was obtained against Chew and other guarantors. 
g) Hong Leong was also granted an order for sale of the land, which was later
sold to the second respondent, a wholly owned subsidiary of Hong Leong.
On this, the appellants alleged that Hong Leong had acted in bad faith and/or
fraudulently in the exercise of its power of sale in that it had at all times
formed the intention to purchase the land by itself or through the agency of
another. However, the part of the appeal was abandoned by the appellants.
h) The appellants claimed that Hong Leong's failure to provide the
end- finance of RM26m as represented in its letter of 26 October 1983
caused the failure of the project and also disabled Kluang Wood from
servicing the interest on the bridging loan. They further alleged
that Hong Leong was negligent and acted in breach of its duty when it
represented to Kluang Wood that the end-finance of RM26m would be made
available to house buyers and that the first drawdown would be in the first
quarter of 1984. They also pleaded that the representations
of Hong Leong constituted a collateral warranty and in breach of the said
warranty, Hong Leong had caused them loss and damage. The respondents
argued that they owed no duty of care to the appellants on the alleged
representation. They contended that the appellants were estopped from
litigating the principal cause of action in the suit on the ground of res
judicata, as the issues raised by the appellants have already been litigated
by Hong Leong in the Johor Bahru suit.
 i) The trial judge had found that Hong Leong had represented
to Kluang Wood that availability of the end-finance was certain, that the first
drawdown thereof would be in the first quarter of 1984, and that Pang had
been negligent in making the representations.
j) Pang's oral representations were held to constitute a collateral warranty
which was breached when no part of the end-finance came
from Hong Leong. The trial judge also held that Hong Leong's plea of res
judicata succeeded in that the claims of Kluang Wood and Chew in this
action on negligent misrepresentations and alternatively for breach of
collateral warranty could not be litigated upon because there was privity of
interest between Kluang Wood and Chew in the Johor Bahru suit, Chew
being a director and agent of Kluang Wood.
k) The trial judge dismissed the appellants' action, against which the appellants
appealed. Hong Leong cross-appealed against the trial judge's findings
that Kluang Wood's inability to service the interest on the bridging loan was
due to Hong Leong's failure to secure and provide the end-finance; the
agreement between Hong Leong and Kluang Wood contained in the letter
placed upon Hong Leong an obligation to secure and provide the
end- finance; Pang had represented the provision of end-finance and that it
would be a certainty; and the representations were negligently made and/or
were capable in law of giving rise to a collateral warranty.

2) HELD

a) Held, allowing Kluang Wood's appeal and dismissing Hong Leong's cross-

appeal:
b) (Per Lamin PCA) Since the management committee clearly approved both
the bridging loan and the end-financing, the clear wording of the approval
must be given effect to. The condition that stated that the 'total end-
financing facilities to be syndicated by HLFB' must be capable of conveying
the meaning that the first respondent undertook to organize and to make
available the said facilities. Pang's oral representation substantiated by the
certainty of availability of the end-finance conveyed by the letter of 26
October 1983 together with the undisputed fact that no end-finance at all was
available must constitute a fundamental breach by the first respondent that
went to the root of the contract
c) (PerChong Siew Fai CJ (Sabah & Sarawak)) Hong Leong's contractual
obligations could properly be ascertained from its letter of offer
which Kluang Wood had accepted. This letter showed Hong Leong's
commitment to the end-finance of RM26m as it stated that Hong Leong had
'approved' the end-finance of RM26m. There was nothing in the letter
indicating the approval being subject to any condition precedent or
to Hong Leong being able to get the syndicated loan. In the circumstance, all
such terms and conditions in the letter relating to the management of the end-
finance by Hong Leong, the total amount of the end-finance to be syndicated
and Hong Leong's participation therein reinforced the stipulation that the
end- finance would be furnished
d) (Per Chong Siew Fai CJ (Sabah & Sarawak)) The representations contended
to have been made by Pang to Chew were that for a financial institution
like Hong Leong to procure a syndicated end- finance of RM21m would
 present no problem and that the availability of the syndicated loan was not
qualified. Relying on the aforesaid representations, Kluang Wood applied for
and obtained approval of the facilities including the availability of the
syndicated end-finance. Since Chew was not challenged about Pang making
the representations and Pang did not give evidence, the learned trial judge
was justified in concluding that Pang had made the representations and that
they were 'unrebutted and unchallenged'
e) (Per Chong Siew Fai CJ (Sabah & Sarawak) and Mohamed Dzaiddin FCJ) It
was stipulated that the end-finance would be 'drawdown in proportion to the
work-in-progress as certified by the project's architect'. However, there was
no evidence to show that the architect's certificate required under the said
letter had been issued. On the evidence, the first drawdown might have been
furnished had the requisite certificate been issued. Therefore, no blame ought
to be attributed to Hong Leong.This, however, did not apply to Hong Leong's
total failure of making available the end-finance after the first quarter of
1984. In this respect, there had been a fundamental breach
by Hong Leong that went to the root of the contract. The trial judge rightly
found that failure of the project was not due to any poor planning and
mismanagement thereof. Hong Leong could not use the lack of architect's
certificates as an excuse for its own fundamental failure
f) (Per Chong Siew Fai CJ (Sabah& Sarawak)) Although the notes of evidence
did not show that Chew had used the word 'certainty' in his testimony, it was
not unfair or unreasonable for the trial judge to conclude that what Pang had
represented to Chew gave the latter the impression of certainty of the
availability of the end-finance. The facts and the circumstances and the
manner in which the trial judge treated the representations showed that she
was fully aware that a case of making statements negligently had to be made
out. The trial judge was right in finding that Pang had been negligent in
making the statements upon which Kluang Wood had acted (see pp 223A–C
and 225E); Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC
465 followed.
g) (Per Chong Siew Fai CJ (Sabah & Sarawak)) If additional evidence on the
collateral warranties fall within the scope of proviso (b) to s 92 of the
Evidence Act 1950, it may be admitted in evidence. In considering whether
the proviso applies, the nature of the written agreement and its surrounding
circumstances must be considered. The matters about certainty of the end-
finance and Pang's utterances giving rise to the impression of such certainty
are not in the letter. Further, the utterance about the timing of the first
drawdown was admissible as no time-frame about the first drawdown was
given in the said letter. As a result of breach of the collateral warranty
by Hong Leong, the trial judge rightly held that the failure of the project was
due to unavailability of the end-finance (see p 226D–H).
h) (Per Chong Siew Fai CJ (Sabah & Sarawak)) Hong Leong's plea was in fact
a plea of res judicata by way of estoppel to the two entire causes of actions.
In the face of such allegations by Hong Leong, the trial judge and this court
were entitled to look at the reasons for the decision and the notes of evidence
of the trial judge in the Johor Bahru suit to determine whether the two
questions constituting the causes of actions had been determined. However,
the grounds or reasons for the decision in the Johor Bahru suit were not
exhibited in this case. Hence, it had not been established that the two
 questions or causes of action had been adjudicated upon, the burden of which
lies on the party who alleges it, ie Hong Leong (see p 228D–G).
i) (Per Chong Siew Fai CJ (Sabah & Sarawak)) The point on
whether Kluang Wood and Chew were estopped from raising the second
claim of fraudulent or improper exercise of power of auction sale on the
ground that such claim could have been raised as a counterclaim in the
charge action commenced by Hong Leong against Kluang Wood need not be
dealt with. The auction sale under which the fraudulent or improper exercise
of the power of sale was alleged to have arisen took place after the making of
the sale order. Therefore, the allegations could not possibly be raised in the
charge action. Further, the trial judge had held that the allegations
constituting the second claim failed; and the appeal relating to this second
claim had been abandoned. Therefore, the contention had no merit and must
fail (see p 230D–G).
j) (Per Chong Siew Fai CJ (Sabah & Sarawak)) Whether there is sufficient
connection to constitute privity of interest would depend on an examination
of the interests of the parties and the fairness of binding them by a decision in
which they were not represented. With regards to Kluang Wood, there was
no valid ground for holding that Kluang Wood was in privity of interest with
Chew in the Johor Bahru suit or that they were so linked as to make the
doctrine of res judicata applicable (see p 232D–E).
k) (Per Chong Siew Fai CJ (Sabah & Sarawak)) An agent who has contracted
for a disclosed and named principal cannot sue on the contract. This is so
even if he is the real principal, unless the other party has affirmed the
contract with knowledge of that fact. In the instant case, Chew, to the
knowledge of Hong Leong, negotiated for Kluang Wood throughout. The
right of action to which the collateral warranty gives rise is personal as
between the two contracting parties concerned. As between them, breach of
the warranty may form the basis of an action for damages, but it does not
normally entitle a non- contracting party to sue thereon. Therefore, Chew
could not sue on the two causes of action .

HEILBUT SYMOONS & CO V BUCKLETON ( 1913 ) AC 30

1) FACTS

a) The defendants, Heilbut et al, were merchants during the rubber trade boom
of the 1910’s who claimed to underwrite shares in a rubber trading
corporation (‘Filisola Rubber and Produce Estates Ltd’).
b) The claimant, Buckleton, contacted this corporation to enquire about shares
 purchasing, to which a manager at Hilbut et al responded positively,
insinuating the creation of a new rubber company, which persuaded
Buckleton to make a sizable purchase for shares in the organization.
c) The subsequently formed rubber production company proved to have far
fewer available resources than anticipated and thus suffered greatly in its
initial performance, causing Buckleton to sue for breach of warranty as the
company’s original representation had implicated far greater resources.

2) ISSUE

a) Whether the defendant’s agent’s remarks as to the new rubber company’s

resource pool could be considered a simple representation or a binding
contractual promise ?

3) HELD

a) At first instance, the Court contended that Heilbut et al had made an innocent
misrepresentation, however, upon appeal it was determined that no
fraudulent misrepresentation had occurred as the defending party had not
been ‘reckless’ as to the truth of the statement regarding their resources pool
and further there was no clear intent that their remarks regarding their
resources should amount to a binding contractual promise to act in parallel to
their written agreement.