Mohd Saari Yusoff JCA:

In the court below, the respondent (hereinafter referred to as "the plaintiff") applied and obtained order under O. 18 r. 19 RHC 1980 for striking out statement of defence. The present appeal is by the appellant (hereinafter referred to as "the defendant") against the said order.

The salient facts as disclosed in the affidavits are as follows:

Between 1 March 1979 and 27 April 1989, the plaintiff employed the defendant as a company secretary. During his tenure of office, it was alleged that the defendant had failed to account RM2,585,828.01 which formed the subject matter of dispute in the present action. The upshot of the said allegation was that the plaintiff lodged a police report and also instituted two civil suits against the defendant.

Later on 10 November 1989, both parties executed a deed of settlement (exh. W1) (hereinafter referred to as '"the deed"). Under the deed, the defendant agreed to pay the plaintiff RM1.2 millions by instalments on dates as stipulated in the deed. In consideration, the plaintiff agreed to withdraw the police report and two civil suits namely MR 48/89 and MR 49/89.

Pursuant to the terms of the deed, the plaintiff withdrew the police report and the two civil suits. In the case of the defendant, after paying a total sum of RM460,000, the defendant stopped payment of instalments, hence the plaintiff filed the present action.

Under the deed, the parties agreed as follows:

1. LCC shall pay to the Company the sum of Malaysian Ringgit One Million And Two Hundred Thousand (M$1,200,000.00) only as follows:

(a) The sum of Malaysian Ringgit Two Hundred Thousand (M$200,000) only on or before 30 November 1989;

(b) The balance sum of Malaysian Ringgit One Million (M$1,000,000) only shall be paid by LCC in five (5) equal monthly instalments of Malaysian Ringgit Two Hundred Thousand (M$200,000) only each and in this respect, LCC shall deposit five (5) postdated cheques (as particularised below) with Messrs. C.C. Lau & Co. advocates as stakeholders:

DateAmount

30 December 1989 M$ 200,000

30 January 1990 M$ 200,000

28 February 1990 M$ 200,000

30 March 1990 M$ 200,000

30 April 1990 M$ 200,000

___________

M$1,000,000

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2. (not applicable)

3. In consideration of the payment of M$1,200,000 under cl. 1 above, the company agree to do the following:

(a) to withdraw the said police report upon receipt of the sum of M$200,000 under cl. 1(a) above;

(b) to discontinue the said suits No. MR. 48/89 and MR. 49/89 against LCC upon receipt of the balance of M$1,000,000 under cl. 1(b) above;

(c) to release LCC from all obligations, liabilities and debts in respect of the operation of the company at all times.

4. It is mutually agreed by the parties as follows:

(a) that in the event of default of payment of any of the instalments or if any of the cheques particularised in cl. 1 above were dishonoured upon presentation for payment, then the company shall be entitled to sue LCC for the full sum of M$2,585,828.01 after deducting whatever money paid by LCC to the company under cl. 1 above.

(b) that upon full payment of M$1,200,000 under cl. 1 above, neither party shall have any claim whatsoever against the other party in respect of the operation of the company at all times.

In his pleading, it was averred by the defendant that the deed was illegal, void and unenforceable as being contrary to s. 24 and/or 25 of Contracts Act 1950. Reference was made to the case of Ooi Kiah Inn Charles v. Kukuh Maju Industries Sdn Bhd[1993] 3 CLJ 199. In that case, Peh Swee Chin SCJ (as he then was) at p. 203 observed:

Such contracts to stifle prosecution are unlawful because their consideration or object is against public policy and they are caught by the second limb of s. 24(e) of the Act.

En. Chong, learned counsel for the plaintiff, submitted that cl. 3(a) which was on withdrawal of the police report was independent of the rest of the deed. He contended that cl. 3(a) is severable.

Having regard to the word