Be cautious in litigation

It is common for lawyers to encounter clients who want everything done yesterday. Clients are naturally concerned about their disputes, and hence oftentimes urge lawyers to quickly respond either to the clients themselves, or to the other side. In the rush to get things done, lawyers who are already flustered can easily overlook the bigger picture.

Consider the recent Court of Appeal case of Boo Are Ngor v Chua Mee Liang. In this case, Chua Mee Liang took out a suit against Boo Are Ngor, but the suit was struck out due to Chua Mee Liang's failure to comply with directions of the Court. Chua Mee Liang did not appeal, but instead started a second suit against the same party.

In response, Boo Are Ngor's lawyers defended the second suit, and it was not until nearly 4 years later that they applied to strike out the second suit for being an abuse of process of Court. The reason, it was asserted, was that since Chua Mee Liang's first suit was struck out for failure to comply with Court directions, Chua Mee Liang should not be granted the indulgence to commence a second suit.

Unfortunately for Boo Are Ngor, the Court of Appeal held that since he has taken action to defend the second suit, he is no longer entitled to strike out the suit for abuse of process of Court. One can only imagine what a difference it would have made for Boo Are Ngor if the application to strike out was made in the first instance. That, however, could only happen, if lawyers are allowed to do their jobs, sometimes a little slower than clients would like.

Lawyering remains that one unique profession where client service is not always the most important consideration, and the client is definitely not always right.

Contracts without good faith

Can a contract be entered into without good faith? One would think logically not, but apparently the Court of Appeal does not agree. In the case of Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor, the Court of Appeal was asked to read into the contract an implied term that parties are to act in good faith, with honesty, and in a reasonable manner. One would assume these are very self-evident implied terms. Unfortunately, the Court of Appeal held otherwise. According to the learned judges, a Court would not read any implied terms into the contract if the contractual terms are clear as of themselves. This is even so despite the terms sought to be read into the contract being so basic and fundamental.

This new decision shows all the more why it is so necessary to ensure contracts are properly drawn up in the first place. Otherwise, even very basic issues may be overlooked, causing much more substantial losses at the end of the day.

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If you have any questions or comments, email me at khenghoe@mycounsel.com.my.

Limitation Act does not apply to beneficiaries of insurance policies

It is an established principle of law that any claim should be made within the period prescribed under the Limitation Act. For contract and tort claims, the limitation period is 6 years. This means if a claim is made after 6 years, the person sued can in fact go to Court and say, "Yes, I am wrong as alleged, but so what? You cannot sue me!"

In the recent Court of Appeal decision of Anthony Kulanthai Marie Joseph v Malaysian Assurance Alliance Bhd [2008] 4 CLJ 205, the Court of Appeal was faced with the dilemma of a beneficiary under an insurance policy who claimed for the insurance monies after the expiry of more than 6 years of her husband's demise. The High Court earlier had dismissed the wife's claim on the basis that limitation has set in.

The Court of Appeal did justice in this case by declaring the wife as a beneficiary under trust, and declared the insurance company as a bare trustee. In this way, limitation periods prescribed under the Limitation Act would not apply, and therefore the wife is free to claim for the money without regard to delay in time.

The Court of Appeal should be applauded for this decision, as clearly if an insurance company has accepted premiums for a life insurance policy, it should not be permitted to rely on technicalities to deny any legitimate claim.

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Despite its shortcomings, I continue to keep faith in the Malaysian judiciary. E-mail me at khenghoe@mycounsel.com.my.

What kind of lawyer do you want?

When a client calls me and asks, "How much?", I immediately know that is not the correct client for me. Don't get me wrong. Of course, I am not the cheapest lawyer in town, but neither am I the most expensive. That is not the reason I conclude the client is not for me. The reason is because the client probably has (or thinks that he/she has) a case which requires only standard work. There is no dispute. There is no hiccup. Only some documentation to undergo. Routine stuff- fill up the forms, attend Court, and voila.

However, when the case involves a substantial dispute, "how much" would rarely be the first question on the client's mind. Oh yes, the question would eventually be asked, but not at the start. From the start, the client first wants to determine whether the lawyer is the suitable candidate to undertake the case.

It is here that the client needs to ask, "what kind of lawyer" does he/she want? Mind you, just because you have a disputed case does not mean you necessarily want to engage a pitbull. A pitbull may charge all the time, but it could very well be creating much unnecessary collateral damage in the process.

There is so much more to lawyering than pit-bulling. A lawyer could be a principled defender- one who would vigorously defend your interest but only in a principled manner. Another lawyer could be a skilled negotiator- always able to broker a win-win situation out of any position. Yet another could be good with technicalities- tying up everybody in countless technical manouvres if that is what's required. Yet another can be a charismatic influencer- able to win his way by sheer charm.

Is any one type of lawyer the "right" type? Not at all. It depends on how well the lawyer's personality suits yours, and your particular case. So, what kind of lawyer do you want? Perhaps you should first ask, what kind of person you in fact are.

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Have thoughts on the above topic? Email me at khenghoe@mycounsel.com.my.

Right of bank to proceed against chargor/guarantor stayed

It has been taken for granted by Banks that when a debtor defaults his/her loan, the Bank may proceed in foreclosure proceedings against any land charged to the Bank, and simultaneously proceed against the chargor/guarantor for the full sum. The Bank therefore would be entitled to take all actions simultaneously until recovery of full sum owed. Arguments raised to the effect that Banks must proceed in foreclosure first, usually are not regarded well by the Courts.

Hence, the Supreme Court in Low Lee Lian v Ban Hin Lee Bank Bhd had established the principle that the Bank, barring any special circumstances, may proceed against the chargor/guarantor personally despite having obtained an order for sale of the land.

This same issue was ventilated recently in the High Court in the case of AmMerchant Bank Bhd v Totalhill Sdn Bhd [2008] 3 CLJ 845. In this case, it was argued by the chargor/guarantor that the fact that foreclosure proceedings have commenced (and likely to cover the full indebtedness) constitutes special circumstances for the claim against the chargor/guarantor to be stayed.

Incredibly, the High Court agreed. By doing so, the High Court is setting a precedent which may well turn out to be prejudicial to the financial interests of Banks generally. It potentially opens the floodgates for other debtors/guarantors to argue that recourse must be had against the principal debtor/security first before recourse is had against them for the balance. That of course goes against the tenets of the contract signed which places the chargor/guarantor as principal debtors and therefore liable for the principal sum.

This case also goes to show that as much as Banks seek to contract out every risk, Courts of law would remain vested with the discretion to administer justice as they deem fit. Banks would do well to focus more on credit risk rather than legal risks in its business operations.

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Disagree with my views? Drop me an email at khenghoe@mycounsel.com.my

Court of Appeal binds itself

It is a long-held tradition in the Courts of law that lower courts should be bound by superior courts. This is the doctrine of stare decisis, or binding precedent, and ensures a relatively uniform approach to the law despite cases coming before different judges.

That a superior Court would bind a lower court goes almost without saying. But would a court bind itself? I.e. would a High Court bind another High Court, or would a Court of Appeal bind another Court of Appeal?

The traditional position is that a court is not bound by its previous decisions, although it would rarely stray from it. This gives litigants the certainty that the law would be largely uniformly applied, yet gives the court the flexibility to stray from its previous findings if necessary.

The Court of Appeal in its latest reported decision of Dato Seri Dr Kok Mew Soon v Mustapha Mohamed however, had taken the position that it binds itself. This means that a later Court of Appeal would be bound by an earlier Court of Appeal decision.

At the Court of Appeal level, this issue is still very much manageable, because there are only a few Court of Appeal judges and mostly located at Putrajaya. But would this decision also translate into the High Court binding itself? Logically, there is no reason why that should not be the case. The problem is this: there are many more High Court judges and High Court locations as compared to the Court of Appeal. There are points of law in which High Court judges would honestly and with all sincerity differ.

The difference in opinion is not an issue. It allows room for the development of legal principles in more well-thought out scenarios. But would a High Court judge now consider himself/herself bound by an earlier High Court judge, merely because the other chap decided the issue first? Is the only way open to a High Court judge to differ from another decision by way of declaring that other decision per incuriam (i.e. erroneous from the start)? Surely that is too drastic and would not be easily resorted to by any judge of sound standing.

The Court of Appeal has made its decision. It is arguably obiter (side comment) rather than ratio (binding principle), but as a trial judge once remarked to me when I tried to make that distinction: It is still an obiter of the Court of Appeal.

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Kheng Hoe tries to keep a lively countenance in the face of disputes. Try it sometimes- you may just live longer (khenghoe@mycounsel.com.my).

Be careful when negotiating with squatters

Malaysia adopts the Torrens system in land administration, which is a much more efficient and simple system as compared to the British deeds system. Under the Torrens system, a registered landowner's right in the land is indefeasible, and no extended occupation of land by squatters would ever create any legitimate expectation giving rise to equitable relief.

However, in the Court of Appeal decision of Rabiah Lip v Bukit Lenang Development Sdn Bhd, the Court of Appeal left open the possibility that a landowner who has made representations to squatters (who relied on those representations to expend money on the land) may be subject to a claim in proprietary estoppel against the landowner. In other words, the registered landowner's interest is indefeasible provided he has not made any representation in word or deed to the squatters which would allow them a claim in equity.

So, in dealing with squatters, and especially in any negotiations for them to leave the land, be careful, lest by word or deed you as the landowner are held liable in equity to permit a continued occupation of the land, even if the possibility of adverse possession is highly unlikely.

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If you have any questions or comments, drop me an email at khenghoe@mycounsel.com.my.

Court of Appeal passed up opportunity to make landmark decision

In a usual housing project, a purchaser buys a house from the developer, then takes a loan to finance the purchase. The bank pays the developer periodic payments based on architect's certificate. Problem is, sometimes the architect's certificate may not be reflective of actual development on site. Of course, the architect owes a duty of care as a professional, but money would have been released to the developer already by then.

In Cheah Swee Fah v BBMB, the purchaser sued by the bank argued that the bank has paid improperly as the architect's certificate was not reflective of the status of development on site. The Court of Appeal held (correctly) that the bank ought to continue releasing the payments because the bank is neither obligated nor capable of ascertaining actual status of development on site.

Whilst there is nothing technically wrong with such a ruling, this ruling has failed to consider the reality that many times, when projects are abandoned, purchasers actually know about the abandonment and do write in to the banks to request for there to be no further payments authorised. Under such circumstances, how can the bank feign ignorance of the development on-site?

The grim reality is that banks who receive such letters from purchasers nevertheless would advise them that they are obligated to continue releasing payment to the delinquent developer. It seems that the banks are more concerned about their liability based on documents, rather than on actual liability in the event a disgruntled purchaser decides to sue the bank for its refusal to honour the communication made.

In this, like many other circumstances, the man in the street falls afoul on the wrong side of the law. Revolutions start when justice through law (the motto of the Bar Council) fail to achieve justice in fact. The superior courts would do well to seek to administer justice beyond the written word alone.

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I write because I have not given up on courts of law to administer justice, even this side of Eternity. E-mail me at khenghoe@mycounsel.com.my.

Directors of multiple companies beware

It is quite common in Malaysia for individuals to hold directorships in multiple private companies. Usually, these companies would be somehow related, or in a related industry. However, unless one company is a wholly-owned subsidiary of the other, or that the sets of directors-shareholders in the different companies are identical, such individuals expose themselves to the risk of being held liable for breach of fiduciary duty.

Like it or not, the law considers each and every company as a separate legal entity. As separate legal entities, the law expects the directors of each company to owe a fiduciary duty to the company concerned. This means that the directors must ALWAYS act in the best interests of the company. So, if a director comes across some opportunity or information which may be of use to the company, the director is compelled in law to offer that to the company and not keep it to himself.

What then happens when one is a director of multiple companies? To whom does one offer the opportunity? Herein lies a potential conflict of interest. The law expects the director to owe a separate fiduciary duty to each individual company, which clearly puts the director in an untenable position. If a director affords the opportunity to 1 company only, the other companies can hold the director liable for its loss.

How then can a director overcome this? One possible way is to recognise the potential conflict situations before they occur, and to come to an agreement with all other directors and shareholders concerning such conflict situations and how they would be resolved. A simple directors and shareholders agreement entered into during incorporation (and definitely whilst parties remain on friendly terms) would be most helpful. Towards this end, it is frightening to note how few companies actually take the trouble to draft terms of a directors and shareholders agreement from the start. Failing to plan is, of course, planning to fail.

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The above entry was inspired from the latest Federal Court decision of The Board of Trustees of the Sabah Foundation v Dato Syed Kechik Syed Mohamed, which held a director liable in breach of fiduciary duty even though he took the trouble of placing nominees in his stead. For any questions or comments, email me at khenghoe@mycounsel.com.my.

Buyers beware- pulling out can be costly

It used to be standard practice that when someone wants to buy a property, they would first pay 2% ernest deposit. After that, they would then sign the agreement and pay the balance 8% deposit upon signing. If the signing somehow doesn't take place, oftentimes the buyer loses his 2% deposit only.

That situation may have changed. In Invescor Sdn Bhd v Sobena Maju Sdn Bhd, one party paid RM200,000 earnest deposit for a RM15million joint venture. It then failed to proceed with the transaction.

The Court of Appeal held (on a majority decision) that a true deposit would constitute 10% of the transaction, and ordered the defaulting buyer to pay the balance of 10% deposit less the RM200,000 originally paid. In other words, the buyer who was willing to lose his RM200,000 deposit was not allowed to walk away from the deal at such a low cost. He had to top up RM1,300,000.

So, all the more it goes to show the necessity to get legal advice early in the process. Too often, parties think that documentation for transactions are "standard" and as a result, they fail to get advice until it is too late. The recent Court of Appeal decision shows that the loss can be more than even what is anticipated.

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2008 marks my 10th year in practice.

If you have questions or comments, email me at khenghoe@mycounsel.com.my

When would a professional be liable to you in negligence?

In the case of The Co-operative Central Bank Ltd v KGV & Associates Sdn Bhd, the Federal Court had occassion to consider the issue when would professionals be liable for negligence? The Federal Court held:

a. Whether a professional is in fact liable for negligence depends on the facts of the case;

b. If anybody relies on the advice of a professional without in fact engaging the professional concerned, the professional cannot be liable for negligence (i.e. if you act on the advice of a lawyer based on a dinner conversation, you bear your own risks. This also includes situations when you use documents prepared by a lawyer, but without actually consulting the lawyer beforehand).

c. If the professional has disclaimed his liability, then his disclaimer would be effective against you. (Valuers usually disclaim the right to rely on their valuation reports. Similarly, most websites would be subject to terms and conditions where they have disclaimed any liability for you to rely on its contents).

In short, a professional may be liable when he is in fact engaged by you, and where he has not disclaimed his liability. Be careful, therefore, when relying on advice offered off-the-cuff, or using documents that are ready-made. You do so at your own risk.

(In the case in question, a bank relied on a valuer's valuation report which was not prepared for the bank, and lost over RM400,000 due to the negligence of the valuer. The Court held the valuer not to be liable to the Bank).
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2008 marks our 10 years in practice. Thank you for your support.

We look forward to continue providing you with legally sound, trusted solutions, for years to come.

Can you recover goods sold which are unpaid from liquidated company?

You've sent your goods to a customer, and the company has not paid for it. You later find out the company has been liquidated. Can you recover the goods which are unpaid?

In Ong Kong Lai's case, some suppliers tried to recover goods (or monies for the goods) sold to Pasaraya Hiong Kong which were unpaid. The Court held:

a. Title to the goods sold pass immediately to the customer, and so cannot be recovered.

b. The exception would be if there is a clause in the supply contract preserving the supplier's title to the goods.

c. Even with such a clause, there must also be a provision stating that monies for goods sold are held in trust for the supplier.

d. Only with the above 2 provisions would a court allow suppliers to recover either the goods or monies for the goods sold in the event the company is liquidated.

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2008 marks my 10th year in practice. Thank you for your support.
If you have any questions or comments, drop me an email at khenghoe@mycounsel.com.my.

Questions are the answers

Why is it that a 5-year old would ask 100 questions a day, but a 50-year old would barely ask 10? It seems like our propensity to question decreases as our age increases.

That really shouldn't be the case. Imagine a court trial, where the advocate asks the questions and the witness answers. Who is in charge of the situation- the advocate or the witness? Obviously it is the advocate.

Imagine a classroom setting. If a student raises a question, what would be the next topic of discussion in that class? Obviously the student's question. In other words, the question has set the topic (and in this way, a student can in fact direct the flow of the classroom content).

We are so tuned in to the idea that an expert sits in the front, answering all our questions, that we fail to realise it is in fact the questioner who takes charge of the proceedings. It is time for us to re-learn the art of questioning. Sometimes we don't ask because we are afraid of appearing foolish, but contrary to conventional wisdom, it is in fact the lack of questions which should seem foolish.

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2008 marks my 10th year in legal practice. Thank you for your support.
If you have any questions or comments, drop me an e-mail at khenghoe@mycounsel.com.my.

Rights of minority in takeover/privatisation arrangements

What can a minority shareholder do if shares in the company are targeted to be transferred to another entity ("NewCo"), especially if the minority thinks that the valuation offered is less than fair? Here is a summary of section 180 of the Companies Act:

1. The NewCo can within 4 months of receipt of 90% shareholder support give notice that it intends to compulsorily acquire the shares of the remaining 10% on the same terms as that accepted by the 90% (section 180(1)).

2. Upon receipt of notice mentioned in para 1 above, dissenting minority shareholders may within 1 month issue a notice to NewCo seeking names and addresses of all other dissenting shareholders (section 180(2)).

3. Within 1 month from date of notice in para 1 or 7 days from date details are furnished pursuant to para 2 above, dissenting minority shareholders may apply to Court to challenge the NewCo's right to compulsorily acquire their shares. Usually, the challenge goes towards the valuation of the shares, as opposed to qualitative objections.

4. Alternatively, if NewCo does not indicate its intention to compulsorily acquire the shares of the dissenting shareholders, the dissenting shareholder himself can give notice within 3 months of transfer of the 90% shares to the NewCo to compel the NewCo to acquire their shares either (a) on the same terms as the 90% shareholders; or (b) on any other agreed terms; or (c) on terms as the Court deems fit. Again, this implies that the Court will resolve valuation issues in such a scenario.

In view of the aforesaid, minority shareholders who receive a less-than-palatable offer need not be concerned that they would eventually be stuck as minority shareholders in a new entity where the value of their shares cannot be unlocked.

Dispute amongst directors does not entitle claim in minority oppression

Section 181 of the Companies Act allows any minority shareholder who alleges oppression in the conduct of the affairs of the company by the majority shareholder(s) to petition for the winding-up of the company.

Many times, the deterioration of the relationship starts with a removal of the minority shareholder as a director of the company.

In Dato Ting Check Sii v Datuk Hj Mohamad Tufail Mahmud & Ors, the petitioner who was removed as a managing director sued for minority oppression.

The Court held that a member of the company must show that the conduct of the majority shareholders have seriously diminished or jeopardised the value of his shareholding before he can succeed in a s181 petition. In other words, the shareholder must have suffered damage in his capacity as a shareholder.

Damage suffered in his other capacities (including in his capacity as a director) does not entitle him to a claim in oppression.

Of course, the reality is that once a member is removed from directorship, he loses access to much of the company's operations and management decisions, as a result of which he may be hard-pressed to show wrongdoing. It's a tough obstacle to overcome, but that may be necessarily so due to the drastic measures available to a Court of law, to effectively over-ride majority rule, if oppression is proven.

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If you have questions or comments, drop me an e-mail at khenghoe@mycounsel.com.my.

Also, do visit my other blog at malaysianmediation.blogspot.com.

High Court did well to restore certainty in Islamic loans

Islamic loans are intended to avoid the burden of riba, or interest commonly found in conventional loans. Instead of the riba, the Islamic loan instead relied on an agreed rate of profit to be earned by the financier.

Some controversies have arisen when Courts have refused to acknowledge the agreed rate of profit, on the basis that the profit turned out to be even more than the riba of conventional loans, thereby rendering Islamic loans to be even more burdensome. This has caused uncertainty to Islamic lenders as to whether the actual terms of their financing contract would be upheld. In fact, one High Court judge had previously opined that it is open for him to re-negotiate terms between the parties if he found them to be unconscionable. Of course, what is conscionable or otherwise would be a matter of opinion, and this would result in much uncertainty in the law.

In the case of Bank Kerjasama Rakyat Malaysia Bhd v PSC Naval Dockyard Sdn Bhd, the Court restored some certainty in Islamic loans when the High Court judge refused to entertain arguments of unconscionability of the terms.

The Court instead stated unequivocally that certainty is a basic requirement in any contract, regardless whether the contract was made under the Contracts Act 1950 or under Islamic law. As long as factually, the certainty can be ascertained, then there is no reason for a contract not to be upheld.

This is clearly a very sensible and sound reason propagated by the Court. Without certainty in law, what would result would be chaos, a breakdown in social order, and opportunities for corruption (not that there is any hint of corruption in any of the cases before this).

Well done to the learned Judge concerned.

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If you have comments or questions, please e-mail me at khenghoe@mycounsel.com.my.

Federal Court creates anomaly in re appointment of judges

With regret, the Federal Court had decided that when the Federal Constitution requires a person to be at least an advocate of 10 years before being appointed as a High Court judge, the Federal Constitution does not in fact mean an advocate in active practice. This stance is clearly contradictory to the Federal Court's own decision that when the Industrial Relations Act requires a person to be at least an advocate of 7 years before being appointed an Industrial Court chairman, that person has to be an advocate in active practice.

The effect of this decision is that a person can be qualified to be appointed as a High Court judge (a superior tribunal) even though that person is not qualified to be an Industrial Court chairman (an inferior tribunal). This cannot make sense.

The majority decision in the Federal Court deciding in this manner justified their decision by saying that a Constitution must be liberally interpreted. It is quite unthinkable that the Federal Court would choose to be liberal in interpreting this provision, but has consistently displayed a conservative streak when interpreting fundamental liberties including right to life, freedom of expression, freedom of association and religious freedom.

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If you have any questions or comments, e-mail me at khenghoe@mycounsel.com.my.

Injunctions against winding-up must be made before they are filed

The law as it now stands allows a creditor to issue a statutory demand under section 218 of the Companies Act to claim for an undisputed debt. After 21 days, the debtor company is deemed unable to pay its debts, and a winding-up petition can be filed.

Once a winding-up petition is filed, the creditor may advertise and gazette the petition, which would ordinarily result in the debtor's accounts being frozen by its banks. Even if the debtor disputes the debt, the dispute may be raised too late in the day because once its accounts are frozen, the debtor can effectively be driven out of business.

This method has caused many a debtor to pay up even on disputed debts, for fear of having its accounts frozen.

Of course, one possibility is to injunct the winding-up proceedings. By the latest decision of People Realty Sdn Bhd v Red Rock Construction Sdn Bhd, the Court of Appeal held that the Court has no power to injunct the advertisement and gazetting of the petition. This means that once a winding-up petition is filed, there is virtually no way for the debtor who disputes the debt to stop the advertisement, effectively rendering it virtually impossible for the debtor to stop the banks from freezing its accounts.

The only remedy, therefore, is to injunct the proceedings before the winding-up proceedings are commenced. This means that any debtor who receives a section 218 notice and who intends to dispute the debt must commence injunction proceedings immediately. Otherwise, justice may be delayed, and effectively denied.

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If you have any questions or comments, or to subscribe to my free e-newsletter, drop me an e-mail at khenghoe@mycounsel.com.my.

Choice of law and forum clauses held invalid

What happens when two parties from different countries decide to enter into a contract? Commonly, the contract would contain a choice of law and choice of forum clause. The choice of law clause stipulates which country's laws would apply, and the choice of forum clause stipulates which Courts would determine the dispute.

That's a simple and clear concept, right? Well, not anymore.

In ISC Technology Sdn Bhd v Premium Systems Technology Pte Ltd, a Malaysian company sued in Malaysia against a Singaporean counterpart although the contract between them stipulated that any disputes would be determined in accordance to Singaporean laws in a Singaporean court.

The Singaporean company sought to strike out the suit on the basis of the contractual provision.

The High Court disagreed. It held instead:

(1) A contractual provision in respect of choice of law and choice of forum does not oust the jurisdiction of the Court.

(2) If the Court is satisfied on the face of the suit that the Malaysian court had jurisdiction, then it would exercise jurisdiction notwithstanding the choice of law and choice of forum clauses.

(3) The relevant provision for the Court to consider when deciding on jurisdiction would be sec23 Courts of Judicature Act, and not any private contractual stipulation.

Who says the law is simple, eh?

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If you have any questions or comments, I would love to hear from you. Drop me an e-mail at khenghoe@mycounsel.com.my.

Court action necessary for removal of squatters from your land

The High Court held in Abdul Aziz Mohamed Ginan v Datuk Bandar Kuala Lumpur that if there are squatters on a land, the local authorities have no power to remove them unless these squatters are on State land. Coupled with the notion that the remedy of self-help is not available in Malaysia, this means that if there are squatters on your land, the only authority capable to remove the squatters would be the Court.

Frankly, this decision may not be the most friendly decision for land-owners in Malaysia. The Court process takes time and costs. At the end of the day, there is no one for land-owners to go against for damages, since the squatters would in most likelihood be without sufficient means. That means the land-owners would be prejudiced for matters which are basically not of their own doing.

A possibility that remains is for the police to take action against the squatters on the basis that they have committed criminal trespass. This legal possibility remains, although whether the police would actually take any action pursuant to a police report of this nature or otherwise seems sometimes to be arbitrarily decided.

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If you have any questions or comments, or to subscribe to my free e-newsletter, e-mail me at khenghoe@mycounsel.com.my

Arbitration Clause struck down by Court of Appeal

In many contracts, it is common to find both an arbitration clause and an exclusive jurisdiction clause. The arbitration clause would roughly state that any dispute should be referred to arbitration. The exclusive jurisdiction clause, on the other hand, would roughly state that parties submit to the exclusive jurisdiction of the High Court of Malaya which shall have the exclusive jurisdiction to hear and determine all actions and proceedings arising out of the contract.

In the case of TNB Engineering & Consultancy Sdn Bhd v Boccard Oil and Gas Sdn Bhd, the Court of Appeal made the incredible decision that the arbitration clause would be inconsistent with the exclusive jurisdiction clause, and therefore the arbitration clause would be a nullity.

This seems to be a decision that, with respect, could be deemed to be erroneous. Surely since the parties have included an arbitration clause, that would mean parties have agreed to arbitration as a dispute resolution process. That does not contradict with an exclusive jurisdiction clause because decisions of arbitrators may nevertheless be subject to review, and this review would be by the High Court.

To hold that the arbitration clause is void would be to negate the intention of the parties to resolve disputes by arbitration in the first place.

On the other hand, the clauses could be read together, by holding that parties must first resort to arbitration, subject to the High Court's powers of review.

Holding that the arbitration clause is inconsistent with the exclusive jurisdiction clause would, with respect, adversely affect the operation of a lot of contracts in Malaysia, and effectively curtail the development of arbitration as a form of dispute resolution.

At the end of the day, Courts should bear in mind that it is not the forum but the actual resolution of the dispute which is critical.

Appeals Court denies future earnings claim

In a landmark decision of Telekom Malaysia Bhd v Ramli Akim, the Court of Appeal re-instated some sense into the manner in which Industrial Courts would award compensation for dismissed employees.

Ramli Akim was dismissed by Telekom Malaysia Bhd, and thereafter ventured into business. However, he failed in his venture. In the Industrial Court, he sought not only backwages but also for the loss of future earnings due to his failed business venture.

The Court of Appeal held:

(1) Although the Industrial Court has the discretion to determine the quantum of backwages, it should do so in accordance with the principles of justice and fairness, which should ordinarily be limited to 24 months.

(2) Delay in the Industrial Court process, where it has not been caused by the employer, should not be held against the employer in any award for backwages.

(3) The employee's failed venture into business after his dismissal, and the unlikelihood for the employee to be employed in a similar position, were irrelevant considerations not to be taken into account by the Industrial Court.

(4) Future loss of earnings is not an established or recognised head for damages in the Industrial Court.
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If you have any questions or comments, drop me an e-mail at khenghoe@mycounsel.com.my.