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Malayan Law Journal Articles/2005/Volume 4/A Malaysian Doctrine of Ineuality of !argaining
Power an" #nconsciona$ility After %aa" Marwi&
[2005] 4 MLJ i
Malayan Law Journal Articles
2005
A Malaysian Doctrine of Inequality of Bargaining Power an
!nconsciona"ility After #aa Marwi$
%
Cheong May Fong
LLB (Hons) (Malaya), LLM (NUS), PhD (Sydney) Diploma in Shariah Law & Pra!ie (""UM)
#d$oa!e & Solii!or (Non%Pra!ising) #ssoia!e Pro&essor Fa'l!y o& Law, Uni$ersi!y o& Malaya
(he do!rine o& 'nonsiona)ili!y has )een inreasingly 'sed !o o$erome on!ra!'al 'n&airness
in #'s!ralia, Canada and !he Uni!ed *ingdom+ (he Co'r! o& #ppeal,s deision in Saad Marwi $
Chan Hwan H'a & #nor -.//01 2 CL3 45 has )ro'gh! Malaysia nearer !o !his &ron! in i!s
reogni!ion o& a 6wider do!rine o& ine7'ali!y o& )argaining power6 and !he adop!ion o& 6!he
8nglish do!rine -o& 'nonsiona)ili!y1 )'! apply i! in a )road and li)eral way as in Canada6+ (his
paper will e9amine !he Co'r!,s deision in Saad Marwi and onsider i!s impa! on Malaysian
on!ra! law+ (he do!rine o& 'nonsiona)ili!y is a 'se&'l do!rine and !he main hallenge is !he
inremen!al de$elopmen! o& !his do!rine+ "n doing so, !he Malaysian o'r!s as well as !he law
pra!i!ioners sho'ld no! s!op a! onsidering !he 8nglish and Canadian approahes )'! sho'ld
also onsider !he de$elopmen!s in #'s!ralia+
Introuction
'In my (u"gment) t*e time *as arri+e" w*en we s*oul" recognise t*e wi"er "octrine of ineuality of
$argaining ,ower- An" we *a+e a fairly wi"e c*oice on t*e route t*at we may ta.e in our attem,t to
crystallise t*e law u,on t*e su$(ect --- /*at is t*erefore calle" for is a fairly fle0i$le a,,roac* aime" at
"oing (ustice accor"ing to t*e ,articular facts of a case- 1istorically) t*at is w*at euity is all a$out- 2*at
$rings me to t*e t*ir"
: ML3 i a! ii
alternati+e- 2*is is to a"o,t t*e 3nglis* "octrine 4of unconsciona$ility5 $ut a,,ly it in a $roa" an" li$eral
way as in 6ana"a'-per 7o,al %ri 8am J6A in Saad Marwi $ Chan Hwan H'a & #nor 420015 9 6LJ :; at
,, 114 an" 115 <6ourt of A,,eal=-
/it* t*is) t*e soun"ing $ells *a" rung for Malaysian law to a"o,t a more li$eral a,,roac* in t*e
matter of contractual unfairness- Malaysia *as come a long way as earlier cases s*ow t*e courts
gra,,ling wit* arguments $ase" on ineuality of $argaining ,ower ami"st t*e statutory ,ro+ision
on un"ue influence in t*e Con!ra!s #! 04;/-
2
In Saad Marwi,s case) t*e 6ourt of A,,eal *a"
a"o,te" a "ifferent a,,roac*- 7o,al %ri 8am J6A starte" *is (u"gment as follows> '2*is is an
im,ortant case- It *as to "o wit* w*et*er our (uris,ru"ence recognises a "octrine of ineuality of
$argaining ,ower in"e,en"ent of t*e well?esta$lis*e" "octrine of un"ue influence- 2*is is t*e first
time) at least as far as I am aware) t*at t*is issue *as come u, for "ecision at t*e a,,ellate
le+el-'
9

Page 9
&'e (acts InSaad Marwi's)ase
2*e a,,ellant) a farmer) *a" rente" some lan" from t*e res,on"ents <@t*e lease" lan"@= from
w*ic* *e *ar+este" coconuts- 2*e a,,ellant also *el" two ,ieces of lan" <@t*e ,ro,erty@= $y
,rescri,ti+e rig*ts un"er t*e lan" law in force in Penang at t*e material time- 2*is meant t*at t*e
a,,ellant@s title was "efeasi$le an" t*is "efeasi$ility was confirme" $y an in"orsement on t*e title-
An 11 Bo+em$er 1:C5) t*e a,,ellant entere" into an agreement wit* t*e res,on"ents to sell t*e
,ro,erty to t*e res,on"ents for 8M42)000- 2*e written agreement was in t*e 3nglis* language
an" merely state" t*at a "e,osit of 8M4)200 was ,ai" $ut "i" not s,ecify t*at it was to $e offset
$y
: ML3 i a! iii
way of t*e rental ,aya$le $y t*e a,,ellant to t*e res,on"ents for t*e lease" lan"- It also
reuire" t*e a,,ellant to ma.e goo" t*e title wit*in 12 mont*s of t*e agreement an" o$tain a
court or"er esta$lis*ing *is owners*i,- 2*e a,,ellant o$taine" a cancellation of t*e in"orsement
on 22 January 1:;1 $ut faile" to o$tain t*e court or"er- Meanw*ile) ,en"ing *is a,,lication for
t*e cancellation of t*e in"orsement) t*e a,,ellant) $y a letter "ate" 24 Acto$er 1:C: ,ur,orte" to
terminate t*e agreement wit* t*e res,on"ents- 2*e res,on"ents refuse" to acce,t t*e
termination $ut t*ey "i" not $ring ,rocee"ings until 25 May 1:;1-
2*e a,,ellant "efen"e" t*e action on two groun"sD first) t*at t*e agreement was +itiate" $y
un"ue influence an" secon"ly) t*at t*e res,on"ents were $arre" $y lac*es from see.ing relief-
4

2*e trial (u"ge re(ecte" t*e "efence of un"ue influence $ut "ecline" to grant s,ecific
,erformance
5
an" awar"e" t*e res,on"ents "amages of 8M1-2 million re,resenting *alf t*e
current mar.et +alue of t*e ,ro,erty- 2*e a,,ellant a,,eale" against t*e or"er of t*e trial (u"ge-
&'e )ourt of A**eal+s Decision
An a,,eal) t*e a,,ellant argue" t*at w*ile t*e trial (u"ge was entitle" to re(ect t*e "efence of
un"ue influence) *e oug*t to *a+e *el" t*at t*e a,,ellant *a" esta$lis*e" a case of 'unfair
a"+antage' un"er section 21<2=<a= of t*e Spei&i <elie& #! 04;/+
E
2*e uestion was ,ose" to
t*e 6ourt w*et*er a ,arty to a contract may altoget*er a+oi" its conseuences on t*is groun"-
Accor"ing to t*e 6ourt) t*is $roug*t to focus t*e "octrine of ineuality of $argaining ,ower falling
s*ort of t*e ,roof of un"ue influence un"er section 1E of t*e Con!ra!s #!
C
rea" wit* section 111
of t*e 8$idene #! 1:50-
;
/it* t*is) t*e 6ourt went on to consi"er w*et*er Malaysian law
recognises a general "octrine of ineuality of $argaining ,ower an" ma"e a sur+ey of t*e euity
(uris,ru"ence of t*e 6ommonwealt* (uris"ictions-
: ML3 i a! i$
!eginning wit* 3nglan") t*e 6ourt referre" to Bourse LJ an" Millett LJ@s (u"gments in Credi!
Lyonnais Ban= Nederland N> $ B'rh
:
as aut*ority esta$lis*ing t*e wi"er "octrine of
unconsciona$le $argains $esi"es t*e tra"itional category of un"ue influence- In t*is case) a Mr
Pelosi *a" reueste" Miss !urc*) *is (unior em,loyee) to ,ut u, *er *ome as security for t*e
com,any@s o+er"raft wit* t*e $an.- Alt*oug* Mr Pelosi *a" e0,laine" to Miss !urc* t*at t*e
o+er"raft was increase" $y F20)000) *e "i" not tell *er t*at t*e current $orrowings were alrea"y
F1E9)000 an" t*at t*e o+er"raft facility was e0ten"e" from F250)000 to F2C0)000- 2*e rele+ant
,ortion of Bourse LJ@s (u"gment at , 151 cite" $y t*e 6ourt is as follows>
An t*at state of facts it must) I t*in.) *a+e $een +ery well argua$le t*at Miss !urc* coul") "irectly against
t*e $an.) *a+e *a" t*e legal c*arge set asi"e as an unconsciona$le $argain- 3uity@s (uris"iction to
relie+e against suc* transactions) alt*oug* more rarely e0ercise" in mo"ern times) is at least as
+enera$le as its (uris"iction to relie+e against t*ose ,rocure" $y un"ue influence ---
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2*e "ecision of Megarry J in Cresswell $ Po!!er --- w*ere *e suggeste" t*at t*e mo"ern eui+alent of
@,oor an" ignorant@ mig*t $e @a mem$er of t*e lower income grou, --- less *ig*ly e"ucate"@) "emonstrates
t*at t*e (uris"iction is in goo" *eart an" ca,a$le of a"a,tation to "ifferent transactions entere" into in
c*anging circumstances- %ee also t*e interesting (u"gment of !alcom$e J in Ba=ho'se $+
Ba=ho'se --- w*ere *e suggeste" t*at t*ese cases may come un"er t*e general *ea"ing w*ic* Lor"
Denning M8 referre" to in Lloyds Ban= L!d $ B'ndy --- as @ineuality of $argaining ,ower@-
10
An" t*e (u"gment $y Millet LJ at ,, 152?159 cite" $y t*e court is as follows>
In t*e ,resent case) t*e $an. "i" not o$tain t*e guarantee "irectly from Miss !urc*- It was
,ro+i"e" to t*e $an. $y Mr Pelosi) w*o o$taine" it from Miss !urc* $y t*e e0ercise of un"ue
influence- In suc* a conte0t) t*e two euita$le (uris"ictions to set asi"e *ars* an"
unconsciona$le $argains an" to set asi"e transactions o$taine" $y un"ue influence *a+e many
similarities- In eit*er case it is necessary to s*ow t*at t*e conscience of t*e ,arty w*o see.s to
u,*ol" t*e transaction was affecte" $y notice) actual or constructi+e) of t*e im,ro,riety $y w*ic*
it was o$taine" $y t*e interme"iary) an" in eit*er case t*e court may in a ,ro,er case infer t*e
,resence of t*e im,ro,riety from t*e terms of t*e transaction itself-
11
2*en t*e 6ourt consi"ere" t*e Australian ,osition commencing wit* t*e esta$lis*e" 1ig* 6ourt
"ecision of Commerial Ban= o& #'s!ralia L!d $ #madio-
12
In t*is case) Mr an" Mrs Ama"io age"
CE an" C1 years res,ecti+ely) were migrants wit* a limite" gras, of 3nglis*- 2*ey *a" e0ecute" a
guarantee w*ic*
: ML3 i a! $
was unlimite" in time an" amount to t*e $an.- 2*e guarantee was to secure an o+er"raft of a
com,any manage" $y t*eir son) VincenGo) w*o *a" informe" *is ,arents t*at t*e guarantee was
limite" to si0 mont*s an" to H50)000- 2*e $ranc* manager "i" inform t*e Ama"ios t*at it was not
limite" to si0 mont*s $ut t*ey recei+e" no in"e,en"ent a"+ice- /*en t*e com,any went into
liui"ation) it owe" t*e $an. H240)000- 2*e $an. "eman"e" t*e sum from t*e Ama"ios w*o
sue" for a release from t*e guarantee- 2*e case was "eci"e" in fa+our of t*e Ama"ios an" t*e
1ig* 6ourt affirme" t*e euita$le (uris"iction to relie+e against unconsciona$le transactions
w*ere <1= a ,arty to a transaction was un"er a s,ecial "isa$ility in "ealing wit* t*e ot*er ,arty
resulting in an a$sence of any reasona$le "egree of euality $etween t*em an" <2= t*at "isa$ility
was sufficiently e+i"ent to t*e stronger ,arty to ma.e it ,rima facie unfair or unconscientious t*at
*e acce,ts t*e wea.er ,arty@s assent to it in t*e circumstances t*at *e acce,te" it-
2*e 6ourt cite" an" em,*asise" Mason J@s (u"gment at , 4E1 as follows>
!ut relief on t*e groun" of 'unconsciona$le con"uct' is usually ta.en to refer to t*e class of case in
w*ic* a ,arty ma.es unconscientious use of *is su,erior ,osition or $argaining ,ower to t*e "etriment of
a ,arty w*o suffers from some s,ecial "isa$ility or is ,lace" in some situation of "isa"+antage) eg) a
catc*ing $argain wit* an e0,ectant *eir or an unfair contract ma"e $y ta.ing a"+antage of a ,erson w*o
is seriously affecte" $y into0icating "rin.- #l!ho'gh 'nonsiona)le ond'! in !his narrow sense )ears
some resem)lane !o !he do!rine o& 'nd'e in&l'ene, !here is a di&&erene )e!ween !he !wo+ "n !he
la!!er, !he will o& !he innoen! par!y is no! independen! and $ol'n!ary )ea'se i! is o$er)orne+ "n !he
&ormer !he will o& !he innoen! par!y, e$en i& independen! and $ol'n!ary, is !he res'l! o& !he
disad$an!ageo's posi!ion in whih he is plaed and o& !he o!her par!y 'nonsien!io'sly !a=ing
ad$an!age o& !ha! posi!ion+ <em,*asis a""e"-=
19
2*e 6ourt t*en referre" to t*e %out* Australian case of /estwill Pty Lt" + 1eat*
14
w*ere Duggan
J state" t*e essential features of t*e "octrine of unconsciona$le $argains- Iirst is t*e e0istence of
circumstances w*ic* amount to a s,ecial "isa"+antage- %econ" is t*e con"uct of t*e stronger
,arty rat*er t*an t*e reality of t*e wea.er ,arty@s consent- 2*ir") mere e+i"ence of un"er+alue)
e0ce,t w*ere t*e un"er+alue is +ery gross will not lea" a court to interfere- Iourt*) t*e a$sence
of in"e,en"ent a"+ice to a ,arty ,lainly in nee" may lea" to t*e conclusion t*at t*e ,arty was
"isa"+antage"- Iift*) if t*e wea.er ,arty ,ro+es t*at *e was at a s,ecial "isa"+antage an" t*at
*is con"ition was sufficiently e+i"ent to t*e stronger ,arty at t*e time of t*e contract so as to
Page 5
ma.e it prima &aie unfair to acce,t t*e $enefit of t*e contract) t*e $ur"en of ,ro+ing t*at t*e
transaction was ne+ert*eless fair lies u,on t*e stronger ,arty-
: ML3 i a! $i
2*e Pri+y 6ouncil@s "ecision of Har! $ ?,Connor
15
on a,,eal from Bew Jealan" was consi"ere"
$efore t*e 6ourt turne" its attention to 6ana"a- 2*e 6ourt note" t*at t*e 6ana"ian courts
'a,,ear to fa+our a more general "octrine of unconsciona$ility in terms wi"er t*an t*at
entertaine" in 3nglan"'-
1E
2*e 6ourt cite" Paris $ Mahni=
1C
as a case "emonstrating t*e
fle0i$ility of 6ana"ian euity in t*e reme"ial fiel"- In t*is case) an illiterate farmer sol" *er farm
wort* H:000 for H2500- 1art J u,*el" t*e ,laintiff@s claim of unconsciona$ility on t*e groun" of
illiteracy- 1owe+er) *e or"ere" t*e ,ayment of a""itional com,ensation in lieu of rescission-
After referring to t*e 6ana"ian cases) t*e 6ourt also cite" t*e $oo. $y % M /a""ams t*at '4t5*e
factors *el" to in"icate t*e necessary ineuality inclu"e ol" age) emotional "istress) alco*olism
an" lac. of $usiness e0,erience- It a,,ears t*at any situation t*at results in t*e wea.er ,arty@s
$eing @o+ermatc*e" an" o+erreac*e"@ will ualify for relief if t*e stronger ,arty secures an
immo"erate gain-'
1;
Iinally) t*e 6ourt consi"ere" t*e In"ian cases
1:
as section 21 of t*e Malaysian Spei&i <elie& #!
is "rawn from section 22 of t*e "ndian Spei&i <elie& #! 1;CC-
20
2*e 6ourt conclu"e" t*at t*e
In"ian aut*orities a,,ear to inter,ret t*e section as *ousing a "octrine of ineuality of $argaining
,ower $ut t*at t*ere must $e some o$(ecti+e unfairness in t*e $argain) some o,,ression or
+ictimisation t*at can $e garnere" from t*e circumstances e0isting at t*e time t*e agreement is
ma"e-
1a+ing com,lete" t*e sur+ey of t*e ,osition in ot*er (uris"ictions)
21
7o,al %ri 8am J6A ma"e t*e
lan"mar. statement t*at 't*e time *as arri+e"
: ML3 i a! $ii
w*en we s*oul" recognise t*e wi"er "octrine of ineuality of $argaining ,ower'-
22
2*e ne0t
uestion was t*e route t*e 6ourt s*oul" ta.e to crystallise t*e law u,on t*is su$(ect- 2wo
alternati+es were consi"ere"D first) $y a"o,ting t*e 3nglis* "octrine of unconsciona$ility in toto
an" secon"ly) $y rea"ing into t*e general euity (uris,ru"ence t*e ,rinci,les go+erning section 21
of t*e Spei&i <elie& #!- 1owe+er) $ot* were foun" to $e too narrow an" t*e 6ourt ,referre" t*e
t*ir" alternati+e) t*at is) 'to a"o,t t*e 3nglis* "octrine $ut a,,ly it in a $roa" an" li$eral way as in
6ana"a'
29
in or"er to ac*ie+e ,ractical (ustice wit*in a framewor. of ,rinci,le-
An t*e facts) t*e 6ourt note" t*at t*e "e,osit ,aya$le $y t*e res,on"ents was not ,ai" $ut was
set off against t*e rentals t*at t*e a,,ellant *a" to ,ay t*e res,on"ents for t*e lease" lan" an"
more im,ortantly) t*at t*is fact was not "isclose"- 2*is gi+es rise to a fair inference t*at t*e
res,on"ents were in a ,osition of a"+antage- %econ"ly) t*e a,,ellant *a" no se,arate legal
a"+ice as t*e solicitors w*o "rew u, t*e agreement were a,,ointe" $y t*e res,on"ents- 2*ir"ly)
t*e a,,ellant@s unwillingness to ,art wit* *is lan" was s*own $y *is let*argy in ma.ing goo" t*e
title- Iinally) t*e 6ourt note" t*at t*e a,,ellant "i" not s,ea. 3nglis* w*ereas t*e agreement is
in t*e 3nglis* language an" t*ere was no in"ication t*at t*e agreement *a" $een e0,laine" to
t*e a,,ellant in *is mot*er tongue-
2*e 6ourt *el" t*at a (u"icial tri$unal w*ic* *as ,ro,erly consi"ere" t*e law an" t*e e+i"ence
woul" *a+e conclu"e" t*at t*e agreement $etween t*e a,,ellant an" t*e res,on"ents was an
unconsciona$le $argain) resulting in t*e agreement $eing unenforcea$le eit*er $y common law or
$y a "ecree of s,ecific relief in euity- 2*e a,,ellant woul" *a+e $een entitle" to *a+e t*e suit
"ismisse" wit* costs- 2*us t*e 6ourt allowe" t*e a,,eal-
#ignificance ofSaad Marwi's)ase
2*e $ol" statements $y t*e 6ourt of A,,eal in %aa" Marwi@s case in recognising a "octrine of
ineuality of $argaining ,ower an" in a"o,ting t*e 3nglis* "octrine of unconsciona$ility an"
Page E
a,,lying it in a $roa" an" li$eral way as in 6ana"a) *as $roug*t Malaysian law nearer to t*e
common law (uris,ru"ence on t*e "octrine of unconsciona$ility-
24
: ML3 i a! $iii
/*ile t*e ,osition in t*e #nite" King"om *as $een less certain)
25
t*e "octrine of unconsciona$ility
is well "e+elo,e" in 6ana"a)
2E
an" ,articularly in Australia w*ere it *as $een use" in +arie"
situations-
2C
2*e 6ourt@s reference to $ot* t*e "octrine of ineuality of $argaining ,ower an" t*e "octrine of
unconsciona$ility in Saad Marwi,s case) rea" literally) woul" mean t*at t*e Malaysian ,osition is
wi"er t*an t*e 3nglis* ,osition w*ere Lor" Denning@s attem,t to in+o.e t*e ,rinci,le of ineuality
of $argaining ,ower to set asi"e transactions in Lloyds Ban= L!d $ B'ndy
2;
was clearly re(ecte" $y
t*e 1ouse of Lor"s in @es!mins!er Ban= Pl $ Morgan+
2:
1owe+er) in 6ana"a) Lor" Denning@s
,rinci,le of ineuality of $argaining ,ower *as remaine" an im,ortant element in t*e "e+elo,ment
of unconsciona$ility e+en after its re(ection in t*e #nite" King"om- 2*e 6ana"ian "e+elo,ment of
unconsciona$ility *as $een sai" to *a+e "e+elo,e" in t*ree stagesD
90
in t*e first stage) cases were
"eci"e" relying *ea+ily on tra"itional 3nglis* an" Iris* aut*orities) in t*e secon" stage) Lor"
Denning@s ,rinci,le of ineuality of $argaining ,ower was a,,lie" as well an" in t*e t*ir"
: ML3 i a! i9
stage) notions of community stan"ar"s of commercial morality were intro"uce"-
91
2*is *as
resulte" in t*e 6ana"ian "octrine $eing a flui" an" fle0i$le one) an" as "escri$e" $y 7o,al %ri
8am J6A in Saad Marwi,s case) one w*ic* ac*ie+es ',ractical (ustice'-
It is su$mitte" t*at alt*oug* t*e 6ourt in Saad Marwi,s case referre" to $ot* t*e "octrines of
ineuality of $argaining ,ower an" unconsciona$ility) in essence) t*e 6ourt was a"o,ting t*e
"octrine of unconsciona$ility to o+ercome situations of ineuality of $argaining ,ositions- 2*e
aut*orities cite" from t*e 6ommonwealt* (uris"ictions were cases of unconsciona$ility inclu"ing
t*e Malaysian case cite") F'i Lian Credi! & Leasing Sdn Bhd $ *im Leong (im)er Sdn Bhd &
?rs
92
w*ere 6*ong %iew Iai J <as *e t*en was= referre" to 3nglis* cases on unconsciona$ility-
99

It is regretta$le t*at in $ot* Saad Marwi,s case an" F'i Lian Credi!,s case) no reference was
ma"e to t*e Ie"eral 6ourt "ecision in Loi Hieng Chiong $ *on (e= Shin-
94
In t*is case) t*e
res,on"ent) an ol" illiterate farmer w*o owne" a ,iece of lan" of ;-5E acres in Kuc*ing *a"
e0c*ange" *is lan" wit* t*e a,,ellant) a lan" $ro.er w*o owne" a ,iece of lan" of :-4 acres in
%i$u- 2*e a,,ellant claime" to *a+e ,urc*ase" *is lan" in %i$u for 8M55)000 an" t*e
res,on"ent signe" a transfer form w*ere$y t*e consi"eration was state" at 8M55)000- 2*e trial
(u"ge acce,te" a sur+eyor@s re,ort t*at t*e lan" in %i$u was wort* only 8M1);;0- 2*e Ie"eral
6ourt acce,te" t*e trial (u"ge@s fin"ings an" *el" t*at t*e a,,ellant *a" ,er,etuate" frau" in t*e
e0c*ange of t*e lan" titles- 8eferring to 8arl o& #yles&ord $ Morris)
95
%ye" At*man IJ state" t*at
'4w5*ere t*e relati+e ,osition of t*e ,arties is suc* as raises t*e ,resum,tion of an
unconscientious use of ,ower arising out of circumstances an" con"itions) t*e transaction cannot
stan" unless t*e ,erson claiming t*e $enefit of it is a$le to re,el t*e ,resum,tion $y contrary
e+i"ence ,ro+ing to *a+e $een in ,oint of fact) (ust an" reasona$le'-
9E
2*e facts in Loi Hieng
Chiong,s case is a goo" e0am,le of *ow a "octrine of unconsciona$ility can $e well use" to grant
relief
: ML3 i a! 9
in suc* cases- 2*e Ie"eral 6ourt@s reference to suc* an unconscientious use of ,ower) alt*oug*
$rief) s*oul" $e ta.en u, to furt*er "e+elo, t*e "octrine-
9C
2*e attem,ts to use t*e "octrine of unconsciona$ility to o+ercome contractual unfairness is
un"erstan"a$le in t*e lig*t of t*e ,osition ta.en against a general ,rinci,le of ineuality of
$argaining ,ower in Malaysia- In t*e early case of CM Naes!ed $ (he S!a!e o& Pera=)
9;
t*e 6ourt
recognise" t*e uneual $argaining ,osition $etween t*e "efen"ant) t*e 7o+ernment of a state
an" t*e ,laintiffs) w*o were a ,ri+ate in"i+i"ual an" *is mercantile agent claiming for refun" of
t*eir monies ,ai" to t*e "efen"ant w*o *a" t*e ,ower w*et*er to grant or not to grant t*e
,laintiff@s a,,lication for lan"- In t*is case) it was *el" t*at t*e money was reco+era$le as it was
,ai" in+oluntarily- !esi"es t*is early case) ineuality of $argaining ,ower *as $een referre" to
Page C
mainly as a factor to +itiate consent $ase" on un"ue influence rat*er t*an as a groun" of relief on
its own- It was referre" to in Da!'= 3agindar Singh & ?rs $ (ara <aAara!nam
9:
w*ere t*e Ie"eral
6ourt allu"e" to t*e "iffering ,ositions $etween t*e a,,ellants w*o were solicitors of t*e
res,on"ent an" *a" use" t*eir ,rofessional ,osition an" social status to e0ercise un"ue influence
o+er t*e res,on"ent- In Polygram <eords Sdn Bhd $ (he Searh & #nor)
40
t*e 1ig* 6ourt
re(ecte" arguments $ase" on ineuality of $argaining ,ower $etween a grou, of young artistes
an" t*eir recor"ing com,any on t*e groun" t*at t*ere was little (u"icial su,,ort for t*is "octrine)
$ot* in t*e #nite" King"om an" in Malaysia-
41
&'e After,at' ofSaad Marwi's)ase
2*e 6ourt of A,,eal@s "ecision in Saad Marwi,s case is surely seen $y ,ro,onents arguing for fair
contracts to $e one of t*e foremost "e+elo,ments in Malaysian contract law- 1owe+er) t*e
o,,osing interest for certainty in t*e law *as always $een an im,ortant concern as well- 2*e
tension an" t*e ,ro,er $alance to $e struc. in relation to t*ese two conflicting interests in contract
law can $e seen in anot*er 6ourt of A,,eal "ecision in #merian "n!erna!ional #ss'rane Co L!d
$ *oh Ben Bee (&)
42
w*ere A$"ul 1ami" Mo*ama" J6A state">
/e "o not wis* to enter into an argument w*et*er t*e "octrine of ineuality of $argaining ,ower or
unconsciona$le contract may $e im,orte" to $e ,art of our law- 1owe+er) we must say t*at we *a+e
some "ou$ts a$out it for t*e following reasons- Iirst is t*e s,ecific ,ro+ision of s 14 of t*e 6ontracts Act
: ML3 i a! 9i
1:50 w*ic* only recogniGes coercion) un"ue influence) frau") misre,resentation an" mista.e as factors
t*at affect free consent- %econ"ly) t*e restricti+e wor"ing of s 9<1= of t*e 6i+il Law Act 1:5E) in ,articular)
t*e o,ening wor"s of t*at su$section) t*e cut?off "ate an" t*e ,ro+iso t*ereto- 2*ir"ly) t*e fact t*at t*e
court $y intro"ucing suc* ,rinci,les is in effect @legislating@ on su$stanti+e law wit* retros,ecti+e effect-
Iourt*ly) t*e 'ner!ain!y o& !he law !ha! i! may a'se-
49
1owe+er) it is ,ertinent t*at *a+ing e0,resse" t*e a$o+e "ou$ts) A$"ul 1ami" Mo*ama" J6A
continue" as follows>
!e t*at as it may) t*ere is a lot to $e sai" for t*e "ecision of t*is court in Saad in +iew of t*e facts t*erein
an" t*e (ustice t*at t*e court s*oul" "o- %aa" is a +ery clear case w*ere a farmer --- 4t*e facts of t*e
case was summariGe"5
2*e facts of t*at case clearly su,,orts suc* a "ecision if (ustice were to ,re+ail-
2*e facts of t*is case is now*ere similar to t*e facts in Saad+ 1ere t*e res,on"ent was an
insurance agent- 2*e contract was ,erfectly un"erstoo" $y *er- It was not a one?off contract) $ut
was su$sisting for a$out ten years an" t*ere was no com,laint $y *er of t*e terms t*ereof- 2*e
clause w*ic* is now c*allenge" is a,,lica$le to $ot* ,arties- If it is not unconsciona$le to t*e
a,,ellant if s*e e0ercises t*at rig*t) w*y s*oul" it $e unconsciona$le to *er w*en t*e a,,ellant
e0ercises t*at same rig*t&
In t*is .in" of case) we t*in. t*at t*e court s*oul" $e slow to interfere wit* t*e free"om of t*e
,arties to contract unless it is contrary to t*e clear ,ro+isions of t*e law) in t*is case) in ,articular
t*e 6ontracts Act 1:50-
44
It is su$mitte" t*at "es,ite t*e earlier "ou$ts e0,resse") #merian "n!erna!ional #ss'rane Co
L!d $ *oh Ben Bee <f= *as not totally re(ecte" t*e "ecision in Saad Marwi,s case- 2*e 6ourt@s
effort to "istinguis* t*e facts of t*e case from Saad Marwi,s case s*ows t*e 6ourt@s awareness
t*at certain fact situations may well reuire (ustice to $e "is,ense" t*at can $e su,,lie" $y a
"octrine of unconsciona$ility-
: ML3 i a! 9ii
Page ;
/*ile t*e 6ourt of A,,eal@s "ecision in Saad Marwi,s case is in"ee" timely to o+ercome ,ro$lems
of contractual unfairness w*ic* *as lac.e" statutory attention t*us far)
45
it is su$mitte" t*at an
incremental a,,roac* towar"s a more systemic "e+elo,ment of t*e "octrine of unconsciona$ility
,oses t*e main c*allenge- 2*e conce,t of unconsciona$ility is not new in Malaysia an" t*e term
'unconsciona$le' *as $een use" in Malaysian cases- 1owe+er) it *as $een a,,lie" in a general
sense wit*out muc* analysis of t*e necessary elements for its a,,lication-
4E
2*e conce,t of
unconsciona$ility is also statutorily ,ro+i"e" in t*e Moneylenders #! 1:51
4C
an" t*e Hire%
P'rhase #! 1:EC
4;
w*ic* ,ro+i"e for reo,ening of transactions w*ic* are *ars* an"
unconsciona$le- %ection 21<2= of t*e Moneylen"ers Act em,owers t*e court to reo,en a
transaction w*ere t*e interest c*arge" is e0cessi+e an" t*e transaction is *ars* or
unconsciona$le or su$stantially unfair- %ection 99<1= of t*e 1ire?Purc*ase Act ,ro+i"e for t*e
court to reo,en a *ire?,urc*ase transaction w*ic* is *ars* an" unconsciona$le or is ot*erwise
suc* t*at it will $e (ust to gi+e relief- #nfortunately) t*ese ,ro+isions *a+e not $een well utilise"
"ue mainly to a lac. of legislati+e gui"ance an" t*e conser+atism of $ot* t*e courts an" legal
,rofession-
2*e 6ourt in Saad Marwi,s case *as s,ecifically single" out t*e 3nglis* an" 6ana"ian "octrines
in "e+elo,ing t*e "octrine of unconsciona$ility in Malaysia- It is su$mitte" t*at t*e "e+elo,ment
of a Malaysian "octrine of unconsciona$ility nee" not $e limite" to t*ese two (uris"ictions) an" t*e
courts as well as t*e legal ,rofession s*oul" also consi"er t*e "e+elo,ments in Australia- 2*e
careful analysis in t*e 1ig* 6ourt@s (u"gment in #madio,s case in restating t*e ,rinci,les relating
to unconsciona$le contracts an" t*e "ecisions t*ereafter in a,,lying t*e "octrine in a creati+e
manner
4:
can $e usefully e0amine" for t*e future "e+elo,ment of t*e "octrine of unconsciona$ility
in Malaysia-
: ML3 i a! 9iii
1 2*is e"ite" ,a,er was originally "eli+ere" at t*e Bational #ni+ersity of %inga,ore <B#%= ? #ni+ersity of Malaya
<#M= 6entennial Law %ym,osia 'De+elo,ments in %inga,ore an" Malaysian Law' *el" in %inga,ore on 1E A,ril
2005- 2*is ,a,er will also form ,art of t*e ,rocee"ings of ,a,ers "eli+ere" $y t*e aca"emic staff of t*e Iaculty of
Law) #ni+ersity of Malaya to $e ,u$lis*e" $y t*e Iaculty-
2 Act 19E <8e+ise" 1:C4=- %ection 1E<1= ,ro+i"es w*en a contract is sai" to $e in"uce" $y un"ue influenceD s
1E<2= ,ro+i"es w*en a ,erson is "eeme" to $e in a ,osition to "ominateD s 1E<9= "eals wit* t*e $ur"en of ,roof)
t*at is) '<a= w*en a ,erson w*o is in a ,osition to "ominate t*e will of anot*er) enters into a contract wit* *im) an"
t*e transaction a,,ears) on t*e face of it or on t*e e+i"ence a""uce") to $e 'nonsiona)le) t*e $ur"en of
,ro+ing t*at t*e contract was not in"uce" $y un"ue influence s*all lie u,on t*e ,erson in a ,osition to "ominate
t*e will of t*e ot*er' <em,*asis a""e"=- 2*e reference to ''nonsiona)le' in s 1E<9=<a= *as raise" an issue
w*et*er a se,arate "octrine of unconsciona$ility can arise $y +irtue of t*is section- Alt*oug* t*e early case of
Chai! Singh $ B'din Bin #)d'llah <1:22= 1 IML%8 94; a,,ears to suggest t*is ,ossi$ility) t*e $etter +iew is t*at
unconsciona$ility wit*in s 1E<9=<a= is a limite" conce,t for ,roce"ural an" e+i"ential ,ur,oses only- %ee An"rew
P*ang !oon Leong) Cheshire, Fi&oo! and F'rms!on,s Law o& Con!ra!) %econ" %inga,ore an" Malaysian 3"ition
<%inga,ore) Malaysia) 1ong Kong> !utterwort*s Asia) 1::;= at , 599D %*ai. Mo*" Boor Alam %M1) 'Pre?
6ontractual Iairness> %ections 15 an" 1E of t*e Malaysian 6ontracts Act 1:50' 41::95 2 MLJ c00i?c000-
9 At , 109-
4 2*is ,a,er will not "eal wit* t*is secon" groun"-
5 A,,arently on t*e groun" t*at '$ot* ,arties were eually to $lame for t*e ,re"icament in w*ic* t*ey foun"
t*emsel+es-' <t*e trial (u"ge@s wor"s as uote" in t*e 6ourt@s (u"gment) see , 104=-
E Act 19C <8e+ise" 1:C4=- %ection 21<1= ,ro+i"es t*at t*e (uris"iction to "ecree s,ecific ,erformance is
"iscretionary- %ection 21<2= ,ro+i"es t*at t*e court may ,ro,erly e0ercise a "iscretion not to "ecree s,ecific
,erformance in) in!er alia) '<a= w*ere t*e circumstances un"er w*ic* t*e contract is ma"e are suc* as to gi+e t*e
,laintiff an 'n&air ad$an!age o+er t*e "efen"ant) t*oug* t*ere may $e no frau" or misre,resentation on t*e
,laintiff@s ,artD an"' <em,*asis a""e"=-
Page :
C %ee Bote 2-
; Act 5E- %ection 111 ,ro+i"es for t*e ,roof of goo" fait* in transactions w*ere one ,arty is in a relation of acti+e
confi"ence-
: 41::C5 1 All 38 144-
10 At , 105-
11 At , 10E-
12 41:;95 151 6L8 44C-
19 At , 10C-
14 41:5:5 52 %A%8 4E-
15 41:;55 A6 1000- 2*e 6ourt referre" to Lor" !rig*tman@s (u"gment w*ere a "istinction was ma"e $etween
',roce"ural unfairness' <a contract is unfair $y reason on t*e unfair manner in w*ic* it was $roug*t into
e0istence= an" 'contractual im$alance' <unfairness $y reason of t*e fact t*at t*e terms of t*e contract are more
fa+oura$le to one ,arty t*an to t*e ot*er=- 2*e latter is also referre" to as 'su$stanti+e unfairness'-
1E At , 10;-
1C 41:C25 92 DL8 C29-
1; 2*e Law of 6ontracts <2oronto> 6ana"a Law !oo. Inc) 2n" e") 1:;4= at ,, 9;2?9;4-
1: 2*e 6ourt referre" to La=shminarayana $ Singara$el' AI8 41:E95 Ma" 24) <angasami Co'nder $ Periam'!h'
Co'nder 41:CC5 1 Ma" 291) Mana= Chand $ P'ran AI8 41:E05 Ma"* Pra" 295) Da$is $ Ma'ng Shwe Co 41:115
L8 9; IA 155-
20 2*e 1;CC Act *as $een re,eale" an" is now re,lace" $y t*e In"ian %,ecific 8elief Act 1:E9) see t*e ,resent s
20 for t*e eui+alent of t*e former s 22-
21 2*e 6ourt also $riefly consi"ere" t*e Malaysian case of F'i Lian Credi! & Leasing Sdn Bhd $ *im Leong
(im)er Sdn Bhd & ?rs 41::15 1 6LJ 522 an" t*e "issenting (u"gment of an American case) Uni!ed S!a!es $
Be!hlehem S!eel Corp 41:425 915 #% 2;:-
22 At , 114-
29 At , 115-
24 %ee generally) A 1 Angelo L 3 P 3llinger) '#nconsciona$le 6ontracts> A 6om,arati+e %tu"y' <1:C:= 4 ?!ago L
<e$ 901?99:D %te+en 8 3nman) 'Doctrines of #nconsciona$ility in 6ana"ian) 3nglis* an" 6ommonwealt*
6ontract Law' <1:;C= 1E #nglo%#m L< 1:1?21:-
25 /*ile cases li.e Bo's!any $ Pigo!! <1::9= E: P L 68 2:;) Credi! Lyonnais Ban= $ Nederland, Bote ;) Peter
Millett M6@s statements in #le Lo)) (Carges) L!d $ (o!al ?il Crea! Bri!ain L!d 41:;95 1 /L8 1C9 *as $een use"
to argue for a general "octrine of unconsciona$ility) some writers are more cautious- %ee for eg) J !eatson)
#nson,s Law o& Con!ra! <A0for"> A0for" #ni+ersity Press) 2;t* e"n) 2002= at , 2:;) Jo*n B A"ams L 8oger
!rownswor") Unders!anding Con!ra! Law <Lon"on> %weet L Ma0well) 9r" e"n) 2000= at , 10;- %ee also
generally) Chi!!y on Con!ra!s >ol'me 0 Ceneral Priniples <Lon"on> %weet L Ma0well) 2:t* e"n) 2004=) c* C
@Duress an" #n"ue Influence@) ,articularly ,, 5EC?5C5- Ior a local article on t*e 3nglis* ,osition) see Burretina
A*ma" %*ariff L Jainal Amin Ayu$) '#nconsciona$le 6ontracts> 2*e 6ourt@s A,,roac* 2owar"s %u$stanti+e
Iairness' 420095 4 MLJ cl0+?cl00+ii-
Page 10
2E %ee cases cite" in % M /a""ams) '#nconsciona$ility in 6ontracts' <1:CE= 9: Mod L< 9E:?9:9-
2C %ee for eg) Ceorge ( Collings (#'s!) P!y L!d $ HF S!e$ens (#'s!) P!y L!d <1::1= A2P8 41?104 w*ere t*e
"octrine of unconsciona$ility was successfully a,,lie" to a stan"ar" contract- %ee also Lo'!h $ Diprose <1::2=
1C5 6L8 E21 at E9; w*ere a "isa"+antage "i" not arise out of ,ersonal "isa$ilities $ut from a relations*i, w*ere
one ,arty *a" $een emotionally +ulnera$le- In t*is case) a gift of a *ouse $y a male solicitor to a woman was set
asi"e on t*e groun" t*at a s,ecial "isa$ility arose from 't*e man@s e0traor"inary +ulnera$ility in t*e false
atmos,*ere of a crises in w*ic* *e $elie+e" t*at t*e woman wit* w*om *e was com,letely in lo+e an" u,on
w*om *e was emotionally "e,en"ent) was facing e+iction an" attem,ting suici"e unless *e ,ro+i"e" t*e money
for t*e ,urc*ase of t*e *ouse'-
2; 41:C45 9 All 38 C5C-
2: 41:;55 1 All 38 ;21-
90 %ee 3nman) Bote 24-
91 %ee for eg) Harry $ *re'!iDiger <1:C;= : !6L8 1EE <6A=- In t*is case) an In"ian commercial fis*erman) w*o
sol" *is $oat to anot*er fis*erman for un"er one t*ir" of its +alue $ecause *e "i" not un"erstan" t*at *is licence
was attac*e" to it) was allowe" to rescin" t*e contract- Accor"ing to Lam$ert J A <at , 241=) t*e single uestion
a,,lica$le to all unconsciona$ility cases is 'w*et*er t*e transaction) seen as a w*ole) is sufficiently "i+ergent
from community stan"ar"s of commercial morality t*at it s*oul" $e rescin"e"-' 2*is stan"ar" was later a,,lie"
$y t*e same court in D'si= $ New!on <1:;5= E2 !6L8 1 <6A=- %ee also Justice !e+erley M McLac*lin) 'A Bew
Morality in !usiness Law&' <1::0= 1E 6an !us LJ 91:?92C at , 922-
92 Bote 21-
99 2*e 6ourt referre" to M'l!iser$ie Boo=)inding L!d $ Marden 41:C:5 6* ;4) 1art + A@6onnor Bote 15) #le
Lo)) (Carages) L!d $ (o!al ?il (Crea! Bri!ain) L!d No!e .5-
94 41:;95 1 MLJ 91-
95 <1;C9= ; 6* A,, 4;4-
9E At , 95-
9C Ior a "fferent +iew) see 88 %et*u) '#nconsciona$ility 3ui+alent to Actual Irau"& Part 1' 41:;95 1 6LJ 1E5?
1E;-
9; <1:25= 5 IM%L8 1;5-
9: 41:;95 2 MLJ 1:E-
40 41::45 9 MLJ 12C-
41 %ee also earlier Malaysian cases)Soie!e De 8!ains De Bayas ('dA'h $ @oh Heng Mining *ongsi 41:C;5 2
MLJ 2EC at , 2E:) Bap Chee Meng $ #Ainomo!o (Malaysia) Bhd 41:C;5 2 MLJ 24: at , 251-
42 420025 4 MLJ 901-
49 At , 91: <em,*asis a""e"=-
44 At ,, 91:?920-
45 As a com,arati+e ,osition) consi"er 1ong Kong@ s 6ontrol of 30em,tion 6lauses Act 1::0 an" %inga,ore@s
Un&air Con!ra! (erms #! <6*a,ter 9:E=) $ot* of w*ic* are similar to t*e #nite" King"om@s Un&air Con!ra! (erms
Page 11
#! 1:CC to "eal wit* e0em,tion clauses- 1ong Kong *as also enacte" t*e Unonsiona)le Con!ra!s ?rdinane
1::4- In Australia) t*e 2ra"e Practices Act 1:C4 <6t*= an" t*e Bew %out* /ales Con!ra!s <e$iew #! 1:;0
im,act greatly at unconsciona$le con"uct an" at un(ust contract res,ecti+ely- In 3uro,e an" in t*e #nite"
King"om) t*e 3uro,ean 6ommunity@s Dire!i$e on Un&air (erms in Cons'mer Con!ra!s 1::9 an" conseuently
t*e #nite" King"om@s Un&air (erms in Con!ra!s <eg'la!ion 1::4 <now re,lace" $y t*e 1::: 8egulation= *a+e
im,acte" t*e law on unfair contracts-
4E %ee for eg) (an Ban Long & #nor $ Newares Sdn Bhd 41::25 1 MLJ 2;:) @ee @ood "nd's!ries Sdn Bhd $
C'anne9 Leasing Sdn Bhd 41::05 2 6LJ 10E0-
4C Act 400 <8e+ise" 1:;:=-
4; Act 212 <8e+ise" 1:C;=-
4: %ee generally) J / 6arter L D J 1arlan") Con!ra! Law in #'s!ralia <Australia> !utterwort*s) 4t* e"n) 2002=) c*
15 @#nconsciona$ility@) ,articularly ,, 52;?599-