Mahadev Shankar J:

In this case I had granted conditional leave to defend to the third defendant in an O. 14 application. The third defendant is a guarantor to a leasing agreement.

He applied for further arguments in open Court.

The total rental payable under the leasing agreement was RM229,759.84. This was payable in thirty-six instalments. The first defendant, the principal debtor under the leasing agreement, defaulted in making the first payment from 9 May 1984. The first defendant continued in default. On 17 November 1984 the first defendant went into receivership under a debenture. On 27 November 1984 the plaintiffs repossessed. But they did not succeed in selling the equipment until 27 March 1986.

After repossession they sued for the thirty-five remaining instalments unpaid, interest charges on these unpaid amounts up to the sale i.e., on 27 March 1986 and they claimed for various other charges.

Mr. Philip Nainan of Counsel took the following points as to why unconditional leave should be granted.

Firstly it was submitted that under s. 226 of the Companies Act, leave of the Court should have been obtained before this suit was filed. Since it was not, the entire action was said to be bad. With this submission I do not agree. Leave under s. 226 of the Act would only be required if the company had been wound up or a provisional liquidator appointed by the Court.

The second point which he made was that by virtue of the receivership on 17 November title to the equipment had passed to the receivers. Therefore the repossession on 26 November was said to be bad. With this submission also I do not agree. We are not concerned here with a hire purchase agreement where there is an option to purchase or some other kind of agreement where some title to the goods is vested in the hirer. In this case it was a leasing agreement pure and simple and the hirers had no title to the goods whatsoever, only a licence to use the equipment whilst the agreement was enforced. Consequently the second point also fails.

The third point raised by Mr. Philip Nainan is on s. 75 of the Contracts Act and the cases of Wearne Brothers (M) Ltd. v. Jackson and Lombard North Central plc v. Butterworth [1987] 1 All ER 267. The submission was that Clause 8 of the agreement which purportedly gave the plaintiff a right to sue for all that they have sued for in this case was in fact a penalty clause which was oppressive and unconscionable. So he submitted that there was an issue to be tried on the question of what reasonable compensation the plaintiffs were entitled to by way of damages.

With this submission I entirely agree. I drew the attention of Counsel to the Australian High Court's case of O'Dea & Ors. v. Allstates Leasing System (WA. Proprietary Limited & Ors. [1982-83] 152 CLR 359. That case is right on point. Mr. Chang of Counsel for the plaintiffs was unable to distinguish it and on this ground alone unconditional leave to defend followed as a matter of course.