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2024 MarsdenLR 163
COURT OF APPEAL PUTRAJAYA
ZURAIDA KAMARUDDIN – Appellant
Versus
SAIFUDDIN NASUTION ISMAIL (SAMAN SEBAGAI SETIAUSAHA AGUNG PARTI KEADILAN RAKY.... – Respondent
[Civil Appeal No: W-02(NCVC)(W)-1094-07-2023]
The court determined that while a breach of the Bond occurred, the stipulated RM10 million was unreasonable and varied the compensation to RM100,000 based on principles of legitimate interest and proportionality.
Headnote:(A) Contracts Act 1950 - Section 71 and 75 - Breach of Bond - The Appellant, a former party candidate, contested the enforceability of a RM10 million Bond for disloyalty, arguing it was unconscionable and invalid - The High Court found the Bond valid and enforceable, but the appellate court varied the amount to RM100,000 due to unreasonableness and lack of proportionality. (Paras 8, 24, 50, 64)
(B) Reasonableness of Damages - To determine reasonable compensation for breach, the court must consider legitimate interest and proportionality; the RM10 million was deemed excessive compared to the Appellant’s actual contributions and the nature of the breach. (Paras 26, 50, 62)
Facts of the case:
The Appellant resigned from the party, leading to a claim for RM10 million under the Bond, which was contested as invalid and excessive. (Paras 3-5)
Findings of Court:
The appellate court found the RM10 million to be unreasonable and varied it to RM100,000, recognizing a breach occurred but that the original claim was excessive. (Paras 50, 64)
Issues: The court addressed the validity of the Bond, the reasonableness of the RM10 million amount, and the occurrence of the trigger event for the Bond. (Paras 6, 11, 25)
Ratio Decidendi: The court ruled that while a breach occurred, the stipulated RM10 million was disproportionate and thus not reasonable compensation under the Contracts Act 1950. (Paras 50, 62)
Result: Appeal partly allowed; the amount payable varied to RM100,000. (Para 64)
JUDGMENT
Introduction
[1] What is the price of loyalty, and conversely, disloyalty? For the Appellant, it was RM10 million, which was the amount stated in the Bond by Parti Keadilan Rakyat (PKR/party) dated 25 April 2018 (the Bond) signed by her, in the event of breach of the Bond. This then is one of the issues before us, as to the reasonableness or otherwise, of the RM10 million Bond.
Parties
[2] The Appellant was the Defendant and had contested in the 14th General Election (GE-14) in the Ampang Parliamentary seat as a PKR candidate and won with a majority vote of 41,956. The Respondent is the Plaintiff in his capacity as the Secretary General of PKR.
Background Facts And Issues
[3] According to the Respondent, on or about 24 February 2020, the Appellant along with 10 other members of parliament announced their resignation from the party without resigning as members of parliament for their respective constituencies. The Respondent sued the Appellant for the payment of RM10 million under the Bond and in the alternative for RM12,049,459.20 under s 71 of the Contracts Act 1950 .
[4] At the HC, the Appellant had resisted the claim inter alia, on the basis the Bond was an invalid document and not enforceable against her; she had not signed the Bond and therefore had not consented to it; the Bond was invalid for restricting her constitutional right of freedom of association; and that the RM10 million was an unconscionable amount.
[5] The claim was allowed by the High Court (HC) and this is the appeal by the Appellant.
[6] Before us, the Appellant raised 3 main issues and therefore these grounds including our reference to the grounds of judgment of the HC will only deal with these 3 issues. These issues were:
i. the reasonableness of the RM10 million amount vis-a-viss 75 of the Contracts Act 1950 ;
ii. the trigger event of the Bond had not occurred; and
iii. past consideration.
Decision Of The HC
[7] The grounds of judgment of the HC Judge (GOJ) can be seen in encl 22/13-28.
[8] Essentially the HC found the Bond to be an agreement which fulfilled all the requirements of a valid contract under s 2 of the Contracts Act 1950 (paras 6 to 10) and the purpose of the Bond was not to restrict the Appellant's right of association but to instil the importance of loyalty to the party as well as the awareness that the party had made many sacrifices since its formation (para 15). This was after the HC had considered the evidence in Q&A 6 of the Respondent's witness statement as to why the Bond had been executed.
[9] The HC further found the signature on the Bond was that of the Appellant (paras 18 to 19) and there was no evidence that the Appellant had signed the Bond unwillingly (paras 22 to 24).
[10] The HC dealt with the issue of unconscionable amount as follows:
"25. The defendant also alleges that the sum of RM10 million quoted in the bond is excessive and there is no proof that such a money was spent on her for the purpose of being chosen as a candidate.
26. This allegation of the defendant flies in her own face by the express admission by her in the bond that the plaintiff has spent a sum in excess of RM10 million on her. The third recital in the bond states:
"WHEREAS I acknowledge that Parti Keadilan Rakyat by its letter of appointment to me to be a candidate of Parti Keadilan Rakyat and grant me use of the Parti Keadilan Rakyat logo, insignia and Party flag as a candidate of Parti Keadilan Rakyat has provided me substantial value which exceeds Ringgit Malaysia Ten Million (RM10,000,000.00).
27. The defendant is bound by her own admission as provided under s 21 of the Evidence Act 1950 :
"Admissions are relevant and may be proved as against the person who makes them or his representative in interest: but they cannot be proved by or on behalf of the person who makes them or by his representative in interest except in the following cases:....
[Emphasis Mine]
28. Apart from the defendant's admissions, it is the Court 's view that the whole
