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2014 MarsdenLR 52
HIGH COURT MALAYA SHAH ALAM
LEE MUN KEONG – Appellant
Versus
PRECISE AVENUE (M) SDN BHD & ANOR – Respondent
[Civil Suit No: 22NCVC-305-2011]
Agreements classified as champertous, which condition payments on success in legal actions, are void under public policy and the Legal Profession Act.
Headnote:(A) Legal Profession Act 1976 (Act 166) - Section 112 - Contracts Act (Revised 1974) (Act 136) - Definition of champerty - Agreement deemed void and unenforceable - Court finds the agreement constitutes champerty due to its nature of stipulating payment contingent on success - Section 66 mandates restoration of advantages received under void contracts. (Paras 10-22)
(B) Enforceability of contracts - Contracts that contravene public policy or statutory provisions are void ab initio. (Paras 20-21)
(C) Parties involved: First plaintiff, Second plaintiff, First defendant, Second defendant.
Findings of Court:
The court ruled that the agreement is champertous and therefore void ab initio, obligating the defendants to restore the RM700,000 received.
Issues: Whether the agreement constitutes a champerty agreement and its enforceability.
Ratio Decidendi: The court reaffirmed the principle that agreements involving contingent legal fees on success are prohibited under the Legal Profession Act and deemed void under public policy considerations.
Result: Plaintiff's counterclaim allowed with costs.
| Table of Content |
|---|
| 1. introduction of the parties involved in the case. (Para 1) |
| 2. plaintiffs seek declaration of void agreements. (Para 2) |
| 3. factual background leading to the counterclaims. (Para 3 , 4 , 5 , 6 , 7 , 8) |
[1] This is a counterclaim made by the Precise Avenue (M) Sdn Bhd (hereinafter referred to as the "1st plaintiff") and Piagamas Maju Sdn Bhd (hereinafter referred to as the "2nd plaintiff") against Lee Mun Keong (hereinafter referred to as the "1st defendant") and Lee Lim Huat (hereinafter referred to as the "2nd defendant").
The Plaintiffs' Counterclaims
[2] In essence, the plaintiffs in the present case sought for a declaration that the agreement dated 30 November 2010 entered into between the 1st plaintiff and the 2nd defendant (hereinafter referred to as the "agreement") and the guarantee and indemnity agreement dated also on 30 November 2010 entered into between the 2nd defendant and the 2nd plaintiff (hereinafter referred to as the "guarantee and indemnity agreement") are void and unenforceable. Both of which shall be explained later in this judgment. Consequently, the plaintiffs are also seeking for the return of RM700,000 in which the 2nd defendant had collected beforehand from the 1st plaintiff by virtue of the agreement.
Brief Facts
[3] Now, the brief facts of this case based on the evidence produced before me are as follows.
[4] In 2000, the 1st plaintiff had a dispute with its joint venture partner, Unisensa Sdn Bhd (hereinafter referred to as "Unisensa"), as a result of which legal proceedings were instituted. The 2nd defendant was appointed to represent the 1st plaintiff as its solicitor. The matter was then resolved somewhere in 2008. Messrs Ernst & Young was appointed as the independent party to prepare a report on the amount which Unisensa was to be held accountable to the 1st plaintiff. The report was duly prepared and accordingly some payments were made by Unisensa to the 1st plaintiff.
[5] Notwithstanding the receipt of payments from Unisensa, the 2nd defendant advised the director of the 1st plaintiff, namely one Zainol @ Zainol Abidin bin Mohamad (PW1), that the 1st plaintiff could still claim against Unisensa an additional sum of RM8 million. The 2nd defendant advised SP1 that the additional sum can be further claimed on a condition that the 2nd defendant is to be paid 30% of the success fee as legal fees in due course.
[6] Based on the aforesaid arrangement, somewhere in 2010, the 2nd defendant prepared the agreement signed by SP1 on behalf of the 1st plaintiff. At the same time, the 2nd defendant also prepared the guarantee and indemnity agreement which was also signed by SP1 on behalf of the 2nd plaintiff, which was purported to guarantee the performance of the agreement by the 1st plaintiff.
[7] The 2nd defendant then collected from the 1st plaintiff the amount of RM700,000 as part of the sum stipulated in the agreement. The receipt of such sum was also agreed by the 2nd defendant.
[8] The 2nd defendant never filed any suit on behalf of the 1st plaintiff to pursue the RM8 million claim against Unisensa. The 2nd defendant never and failed to produce any evidence to prove any work done for the 1st plaintiff in furtherance of the agreement even for the RM700,000 which was already paid in advance.
