LAW 486

VOID & ILLEGAL CONTRACT

A. Contracts which contravene statutory provisions

Sec 24 Contracts Act 1950

a) Object or consideration of the agreement must be lawful

i) Arumugam v Somasundram (1934)

ii) Aroomugam v Lim Ah Hang
iii) Hasmah bt Abdul Rahman v Kenny Chua [2006] 5 MLJ 236

b) Test applicable to determine the validity of the contract which has contravened
the statutory provisions

● Note:
Does the parties’ conduct fall within the provision of the statute / Act generally, &
the relevant sections specifically?

Brilliant Team Management Sdn Bhd v South East Pahang Oil Sdn Bhd [ 2007 ] 1
MLJ 536

Consider
ba.What is the intention of the Legislature? Is it for
i) Regulatory purpose?
ii) Revenue purpose?
iii)Prohibition of performance of contract

St John’s Shipping Corp v Joseph Rank ( 1957 ) 1 QB 267

Re Mahmoud & Ispahani ( 1921 ) 2 KB 716

bb. Is there any sufficient nexus between the requirement of statute and the
contract?
Case :Hopewell Construction v E & O Hotel ( 1988 ) MLJ 621

c) Cases

Application of S.24 (a) & (b)

i) Hee Cheng v Krishnan (1955) MLJ 103
ii) Murugesan v Krishnasamy (1958) MLJ 92
ii) Ahmad b. Udoh v Ng Aik Chong (1969) MLJ 116
iv) Menaka v Lum Kum Chum (1977) 1 MLJ 91
v) Chung Khiaw Bank Ltd. v Hotel Rasa Sayang Sdn. Bhd. (1990) 1 MLJ 356
(S.C.)
vi) Hopewell Construction v E & O Hotel [1988]
vii) Lim Kar Bee v Duofortis Properties (1992) 2 MLJ 281 (S.C.)
 vii) Sababumi (Sandakan) Sdn. Bhd v Datuk Yap Pak Leong (1998) 3 CLJ 503
(F.C.) ,(1997) 1 MLJ 587 (CA)

d) Examples of categories of contracts

1) Dealings in Malay Reserve Land

i) Foo Say Lee v Ooi Heng Wai

ii)Hj. Hamid b. Ariffin v Ahmad b. Mahmud
iii)T. Bariam Singh v Pentadbir Pesaka M’sia.(1983) 1 MLJ 232
iv) Mustafa b. Osman v Lee Chua (1996) 2 MLJ 141(C.A.)

Notes:

a) Why was the agreement in Foo Say Lee valid but in Hj. Hamid void abinitio?
b) Was there a sale of MR land to a non-Malay in T. Bariam Singh’s case ?
c) Who is a Malay? Definition ?

See : Zaleha bt Sahri v Pendaftar Hak Milik Tanah Johor [1996] 2 CLJ 147

2 ) Conveyance of property

i) Kim Nan Development v Khau DawYau (1984)

ii) Cheng Mun Siah v Tan Nam Sui [1980] 3 ML 449

3 ) Licencing / registration requirements

i) Govindji & Co. v Soon Hin Huat (1982) 1ML 255

ii) Theresa Chong v Kin Khoon & Co. (1976) 2 MLJ 253

Note

º What was the basis or distinguishing factors in Theresa Chong’s case?

º Why was the contract by an unlicensed remisier valid?
º What is the current position?

See : Securities Industry Act ,1983 & Am

iii) Brilliant Team Management Sdn Bhd v South East Pahang Oil Palm Sdn Bhd
& Ors [2007] 1 MLJ 536

4) Moneylending & licencing requirement

Cases :
i) Menaka (1977) – above
ii) Yeep Mooi v Chu Chin Chua (1981)1 MLJ 14 (F.C.)
iii) PICA v Lorraine Osman (1989) 3 MLJ 29

Note: ▫ Which statute /Act governs the moneylenders? Is it regulated by the Ministry
 of Finance?

Quare:
1.What is the difference between :a loan from a moneylender and a bridging loan
from a venture capitalist ?
2.Who is an ‘Ah Long’ ? What is the legal status of the transaction?

5) Evasion of revenue laws

i) Amalgamated Steel Mills Bhd. v Ingeback (1990) 2 MLJ 374

ii) Harun b. Taib v Khor Peng Song (1991) 3 CLJ 248
iii) Patriot Pte. Ltd v Lam Hong Commercial Co. (1980) 1 MLJ 135
iv) Dimpex Gems (Spore) Pte Ltd v Yusoof Diamonds Pte Ltd (1988) 1 MLJ
- See: (1988) Mal. LR 424
v) Thong Foo Ching v Shigenori (1998) 4 CLJ 674 (CA)
vi) Lim Kar Bee ( above )

B : Agreements which are immoral or against public policy –S.24(e)

i)Scope of ‘public policy’ in UK & Malaysia

Quare: Is it similar to the English common law position?

Are the categories closed?

Cases:
a. Theresa Chong v Kin Khoon & Co. (1976) 2 MLJ 253
b. Hopewell Constr. Ltd v E& O Hotel (1988)
c. Sinyium Anak Mutit v Datuk Ong Kee Hui (1983) 1 MLJ 36 (F.C.)
d. Hamzah b. Musa v Fatimah Zaharah (1982) 1 MLJ 361
e. Amalgamated Steel Mills v Ingeback (1990) – (Supra)
f. Harun b. Taib (see above)
g. Nafsiah v. Abd Majid (1989) 2 MLJ 175
h. Berenger v Rozario (1953) MLJ 239
i. Tunku Kamariah v Dato James Ling (1989) 2 MLJ 249
j. Hasmah bt Abd Rahman v Kenny Chua [ supra]

ii) Articles:

a)Sharifah Suhana : The doctrine illegality under S.24 (1991) Jumal Undang –
Undang 89
b)V. Sinnadurai : Public Policy Under the Contracts Act (1981) 8 JCML 1

C Consequences of illegal or void contracts

a) Scope of S.66 : Restitutionary reliefs

*Note: Where the contract is void ab initio and one of the parties or both parties to
 the contract is/ are not in pari delicto , the Court may grant restitution under S66.

i) Menaka v Lum Kum Chum (1933) MLJ 228 [ PC]

ii) Apex Pharmacy Holdings Sdn. Bhd. v Chee HIn (1984) 2 MLJ 287 [ FC]

But S66 is not applicable where both parties knew of the contravention at the time
of contract.

iii) Singma Sawmills Co. Asian Holdings (1980) MLJ 21

v) Mustafa b. Osman v Lee Chua (1998) 2 MLJ 141 [ CA]

b) Recovery of Property Rights

■ Where property rights was transferred to another party under a void contract, no
party has the right to recover it (get it back)

■ But plaintiff can recover rights over properties if the course of action is
independent of the void contract.

i) Sajan Singh v Sardara Ali (1960) MLJ 52

ii) Daniel s/o D. Williams v Luhat Wan & Ors (1990) 2 MLJ 48
iii) Mustafa b. Osman (Supra)
iv) Berenger v Rozario (1953)

c) Repudiation of illegal purpose

● Note: Where the contract is executory

i) Abd. Shukor v Hood Mohamed (1968) 1 MLJ 258

d) Severance of the illegal part from the legal part of the contract

i) Carney v Herbet &Ors (1985) 1 All ER 438

C Restraint of marriage agreements : S27

Cases
i.) Shaw Brothers Ltd v Kesatuan Kebangsaan Pekerja Wayang Gambar and Taman
Industrial Court, Award No. 17 (1968)
ii). Sharikat Kenderaan Bersatu Sdn Bhd v Transport Workers’ Union, Industrial Court
Award No 50 (1972
D Restraint of trade, business & employment agreements : Section 28

a) Common law / Singapore position

b) Malaysian position : Sec 28
c) Test applied for validity

Cases

i. Nordenfelt v Maxim Nordenfelt

ii. Framroz v Mistri
iii. Thomas Cowan v
iv.Wriggleworth v Wilson Anthony [1964] MLJ 269
v. Polygram Records Sdn Bhd v The Search [1994] 3 MLJ 127

D. Wagering / Gaming contracts : Sec 31

Case:
i. Jupiter Ltd ( trading as Conrad International Treasury Casino v Gan Kok Beng &
Anor [ 2007] 7 MLJ 228
ii. Aspinall Curzon Ltd v Khoo Teng Hock [ 1991] 2 MLJ 484
iii. Ritz Hotel Casino Ltd v Datu Seri Osu Sukam[2005] 6 MLJ 760

RAMLAH MOHD NOH

FUU, UiTM
July 2008