Contracts induced by undue influence are voidable; however, the burden of proof lies on the party alleging undue influence.

[1] The plaintiff, RHB Bank Berhad (the "bank"), sued the 1st defendant, Singlefine (M) Sdn Bhd (the "borrower"), under a Restructuring Agreement entered into between them pursuant to a consent judgment. The 2nd and 3rd defendants were guarantors of Singlefine's obligations to the bank (although on a true construction of the Personal Guarantee executed by them, they had agreed to be liable as principal debtors and not merely as surety).

Material Background Facts

[2] The borrower was a subcontractor that had been awarded, in December 2005, a contract to undertake electrical works in connection with the construction of a building owned by Bank Negara, known as Sasana Kijang. The contract was awarded to the borrower by the main contractor, H&I Niaga Sdn Bhd.

[3] On 8 January 2007, the borrower entered into a Facilities Agreement with the bank. The Facilities Agreement was secured by, among others, the Personal Guarantee executed by the 2nd and 3rd defendants and a Deed of Assignment of Contract Proceeds. Under this deed, the borrower assigned all present and future proceeds under the contract that had been awarded to it by H&I Niaga Sdn Bhd.

[4] In 2009, H&I Niaga Sdn Bhd was terminated as the main contractor for the construction project.

[5] In 2013, the bank commenced a writ action against the defendants, seeking to recover amounts that it claimed were owing under the Facilities Agreement. On 13 December 2013, a consent judgment was entered into between the parties. This consent judgment incorporated the terms of a letter dated 12 December 2013. Under this letter, the amounts due under the Facilities Agreement together with accrued interest (which were capitalised) were converted into what was termed as a Restructure Term Loan Facility ("RTL Facility"). The RTL Facility was repayable over a period of seven years.

[6] The letter of 12 December 2013 required the borrower to execute formal legal documentation. On 21 March 2014, a Restructuring Agreement was entered into between the bank and the borrower for this purpose. Both the 12 December 2013 letter and the Restructuring Agreement preserved all rights under the security documents previously executed pursuant to the Facilities Agreement.

[7] In May 2018, the plaintiff bank issued demands to the defendants for amounts outstanding under the RTL Facility. The bank commenced this suit after the defendants failed to pay the sums demanded.