Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Similarly, [](https://supremetoday.ai/doc/judgement/MYS00000121774) notes: The guarantee, in the absence of fraud and misrepresentation, is still valid. and discusses that guarantees are standalone and can be challenged if obtained through misrepresentation.
Misrepresentation as Grounds for Voidability
["LA KAFFA INTERNATIONAL CO LTD vs LOOB HOLDINGS SDN BHD & ANOTHER CASE - High Court"] notes: a guarantee may be set aside if it was obtained through misrepresentation.
Cases of Fraud and Forgery
["MCC OVERSEAS (M) SDN BHD vs DAMAI CITY SDN BHD - High Court"] also refers to allegations of fraud and misrepresentation affecting enforceability.
Legal Principles from Malaysian Courts
References:
In the realm of contract law, guarantees serve as critical safeguards, promising repayment or performance if a principal debtor defaults. However, what happens when a guarantor claims they were misled into signing? A pressing legal question arises: Provide cases, preferably Malaysian cases, where guarantees are declared void due to misrepresentation by any party.
This issue is particularly relevant for businesses, lenders, and individuals entering loan or commercial agreements in Malaysia. Misrepresentation—whether fraudulent, negligent, or innocent—can unravel these instruments if proven material and inducive. This blog post delves into Malaysian case law, drawing from established precedents under the Contracts Act 1950, to outline when guarantees may be voided. Note: This is general information, not specific legal advice; consult a qualified lawyer for your circumstances.
Malaysian courts recognize that guarantees can be declared void if misrepresentation is material and induces the guarantor to enter the agreement. As established in key case law, the misstatement must relate to a factual matter significant enough to influence the decision, regardless of the representor's intent unless fraud is involved. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138
The Contracts Act 1950 underpins these principles, particularly Sections 18 and 19 on misrepresentation. For a guarantee to be void:- It must pertain to an existing fact.- The guarantor must have relied on it without knowledge of its falsity.- It must have been a material factor in deciding to guarantee. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138
Courts scrutinize the circumstances: The misrepresentation must relate to a material fact and induce the party to enter the guarantee. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138
In a pivotal Malaysian decision, the court held that false representations about property features—such as access rights or condition—induced the plaintiffs to provide guarantees tied to a transaction. These were deemed actionable because they were material and directly influenced the agreement's formation. The judgment emphasized: A misrepresentation relating to a factual matter—such as property features—can be sufficient if it is significant enough to influence the guarantor’s decision. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138 (Paras 16, 18, 24).
The guarantors successfully rescinded the guarantee, as the misstatements met the threshold of inducement: The plaintiffs relied on false representations regarding property features, which were material to their decision to proceed with the transaction. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138 (Paras 43, 54, 58).
Distinguishing between types is crucial. Fraudulent misrepresentation carries a higher burden of proof but more readily voids guarantees. Innocent misstatements, if material, may still lead to rescission. The court clarified: Both innocent and fraudulent misrepresentations can render a guarantee void if they are material and induce the party to act. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138 (Paras 16, 18, 24).
Lack of due diligence by the guarantor does not absolve the representor: The absence of due diligence by the representee does not absolve the representor from responsibility if the misrepresentation was material. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138 (Paras 12, 22).
Another case reinforces this in insurance guarantees: Misrepresentation must be proven to be material and inducive for a guarantee to be declared void. USAHASAMA SPNB-LTAT SDN BHD vs ENTRY CONSTRUCTION (M) SDN BHD & ORS - 2013 MarsdenLR 575
Malaysian courts extend these principles to contracts underpinning guarantees. For instance, a Contract of Affreightment (COA) was alleged void for misrepresentation and illegality, highlighting judicial reluctance to intervene without ample evidence but acknowledging misrepresentation's potential to void instruments. SABAH GAS INDUSTRIES SDN.BHD. vs TRANS SAMUDERA LINES (S) SDN.BHD.SABAH GAS INDUSTRIES SDN BHD vs TRANS SAMUDERA LINES (S) SDN BHD
In arbitration-linked guarantees, agreements may be null and void due to lack of consent from misrepresentation. This aligns with New York Convention interpretations applicable in Malaysia, where guarantees with arbitration clauses can be challenged similarly. N. N. Global Mercantile Private Limited VS Indo Unique Flame Ltd. - 2023 Supreme(SC) 414
Not all misrepresentations void guarantees:- Non-material statements: Mere puffs or opinions typically do not qualify.- No inducement: If the guarantor did not rely on the statement, the guarantee stands.- Incidental misstatements: Courts assess if it was a cause or merely incidental. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138
Additionally, unconscionability—requiring strong evidence of bad faith or improper conduct—can restrain calls on guarantees, often intertwined with misrepresentation claims. KNM Process Systems Sdn Bhd vs Lukoil Uzbekistan Operating Company LLC
Guarantees are common in banking, property, and construction. If induced by misstated financials, asset values, or debtor solvency, guarantors may seek rescission. Courts focus on: Whether the misrepresentation was significant enough to affect the guarantor’s decision-making process. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138
In one scenario involving construction guarantees, premature calls were deemed unconscionable due to contractual non-compliance, echoing misrepresentation's role in voiding enforcement. KNM Process Systems Sdn Bhd vs Lukoil Uzbekistan Operating Company LLC
To mitigate risks:- Full Disclosure: Lenders and principals must reveal all material facts. BALAKRISHNAN DEVARAJ & ANOR vs ADMIRAL COVE DEVELOPMENT SDN BHD - 2010 MarsdenLR 2138- Due Diligence: Guarantors should verify representations independently.- Evidence Gathering: In disputes, document reliance and materiality—e.g., emails, inspections.- Seek Interim Relief: Courts may grant injunctions pending arbitration if fraud or unconscionability is prima facie evident. KNM Process Systems Sdn Bhd vs Lukoil Uzbekistan Operating Company LLC
Understanding these nuances protects parties in Malaysia's dynamic commercial landscape. For tailored guidance, engage legal experts familiar with local precedents.
[Emphasis Added] [37] Further, our courts are now inundated with too many cases due to the Covid-19 pandemic. If a suitable case can be disposed of by way of a summary judgment application, I will do so as it will assist in clearing the backlog of cases. ... [15] Under cl 3.3 of the settlement agreement, the defendant's parent company KSK Group Berhad ("KSK"), is to provide and did provide a Corporate Guarantee No 1 dated 30 December 2022 ("CG1") in the amount of RM 71,400,000 to the plaintiff as secu....
[Emphasis Added] [37] Further, our courts are now inundated with too many cases due to the Covid-19 pandemic. If a suitable case can be disposed of by way of a summary judgment application, I will do so as it will assist in clearing the backlog of cases. ... [1992] 1 CLJ (Rep) 14 SC the Supreme Court said: "Under an O 14 application, the duty of a judge does not end as soon as a fact is asserted by one party, and denied or disputed by the other in an affidavit. ... No police report was ever lodged by the defendant agai....
It is asserted that the guarantee should be set aside or declared void on equitable grounds. ... While the Offer Letter may provide context, any alleged discrepancies do not affect the enforceability of the Guarantee. [42]Further, it is trite law that guarantees are generally construed independently of other documents unless expressly incorporated. ... The agreed terms provide for a compensation charge of 1% per annum on overdue amounts prior to maturity. ... It was only in March 2008 that he made a pol....
The third group consists of remedies designed to make sure that the award has the intended practical effect by causing one party to provide a fund to which recourse can be made by the other party if the first fails to honour an adverse award spontaneously. ... time”; this clause was similarly not triggered, again due to lack of notice from the respondent. ... If the Contractor refuses or avoids to refund the relevant amounts, the Customer, at its discretion will collect it at account of the guarantees f....
FA provide that a franchisee "shall" give written guarantees as provided in those statutory provisions to a franchisor (Guarantees). Sections 26 (1) and 27(1) FA , the Guarantees are not incorporated into RERA. In this case, Loob did not provide the Guarantees to La Kaffa. Accordingly, there is no serious question to be tried in respect of whether Loob has breached ss 26(1) and 27(1) FA . ... Nothing in this judgment shall affect the integrity of the Singapore Arbitral Proceedings; ....
[35] Based on the above construction of ss 26(1) and 27(1) FA, the Guarantees are not incorporated into RERA. In this case, Loob did not provide the Guarantees to La Kaffa. ... "shall" give written guarantees as provided in those statutory provisions to a franchisor (Guarantees). ... Nothing in this judgment shall affect the integrity of the Singapore Arbitral Proceedings; (3) the party applying for any interim measure in the two Suits, should generally provide th....
This was similarly provided in subsequent Addendums Thus, the terms stating that Malaysian law shall be applied to resolve any dispute will remain unaltered and the Court has jurisdiction to adjudicate on cases that are subject to Malaysian law. ... In short, the third party must be seen to have expressly agreed to arbitrate. A distinction is made between single party and two-party contractors. A much stricter test is applicable for two party contracts as is the case ....
I am of the opinion that the Malaysian Court can intervene but will do so and assume jurisdiction only in rare cases. Such power will be resorted to with great care and on ample evidence produced that the action abroad is really vexatious and useless. [See Cohen v. ... Plaintiffs then deny this and allege that the COA (which they signed in 1990) is (in 1992) void for uncertainty and fraught with misrepresentation and illegality. I do not propose to go into the reasons which Mr. Decena puts forth. ... (b) Whether the law....
[26] I am of the opinion that the Malaysian Court can intervene but will do so and assume jurisdiction only in rare cases. Such power will be resorted to with great care and on ample evidence produced that the action abroad is really vexatious and useless. ... Plaintiffs then deny this and allege that the COA (which they signed in 1990) is (in 1992) void for uncertainty and fraught with misrepresentation and illegality. I do not propose to go into the reasons which Mr Decena puts forth. ... (b) Whether the law of the F....
I am of the opinion that the Malaysian Court can intervene but will do so and assume jurisdiction only in rare cases. Such power will be resorted to with great care and on ample evidence produced that the action abroad is really vexatious and useless. [See Cohen v. ... Plaintiffs then deny this and allege that the COA (which they signed in 1990) is (in 1992) void for uncertainty and fraught with misrepresentation and illegality. I do not propose to go into the reasons which Mr. Decena puts forth. ... (b) Whether the law....
“The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence. The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into motion. The word ‘inoperative’ can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties.
Nothing herein contained shall affect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. The civil aspect of fraud is considered to be arbitrable in contemporary arbitration jurisprudence, with the only exception being where the allegation is that the arbitration agreement itself is vitiated by fraud or fraudulent inducement, or the fraud goes to the validity of the underlying contract, and impeaches the arbitration clause itself. ....
34. Albert Jan Van Den Berg in an article titled "The New York Convention, 1958—An Overview" published in the website of ICCA [www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of-1958_overview.pdf] referring to Article II(3) of the New York Convention, states:- The words "incapable of being performed" would seem to apply to those cases where the arbitration cannot be effectively set into motion. The word "inoperative" can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties. The words "null and ....
The words “incapable of being performed” would seem to apply to those cases where the arbitration cannot be effectively set into motion. “The words “null and void” may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence. The word “inoperative” can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties. 27. Albert Jan Van Den Berg in an article titl....
Such a transaction is voidable because the apparent State of affairs is the real State of affairs and a party who alleges otherwise, shall have to prove it. The third category may be the cases where an act or transaction is good unless declared to be void. For instance, if the document is forged and fabricated, a declaration to that effect is necessary for otherwise the document is legally effective.” For instance, transactions against a minor without being represented by a next friend may be voidable at the instance of the minor in appropriate proceedings in which case it ....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
