Risha Nabila & Associates

Advocates and Solicitors/ Syarie Counsel

Risha Nabila binti Mohammad
Hjh. Zakhirah binti Mohd Zabidi
Charles a/l Paneer Chelvam
59-3, Tingkat 3, Block E, Platinum Walk, 53300 Setapak, Kuala Lumpur.
Tel /Fax : 03-41428281

File Ref No. : 10

Date : 21 July 1995

Abdul Razak bin Abdul Hadi,

11, 2nd Floor,
Wisma Keladi,
Jalan 8/95B,
Taman Cheras Utama,
56100 Kuala Lumpur. By Fax

(Attn: Abdul Razak bin Abdul Hadi)

Dear Sir,

Re : Legal Opinion

Pursuant to our meeting on 13 July 1995, your letter Ref No. 10 dated 21 July 1995, we
have been instructed to advise you on the following matters:

1. Status of Sale and Purchase Agreement between you and Gombak Perdana Sdn Bhd
(GPS).

2. This opinion is prepared with the information furnished by client in support of cases as
follows :

2.1 Sales and Purchase of House Agreement dated 16 May 1995 between Mr. Abdul
Razak and Gombak Perdana Sdn Bhd (GPS).
2.2 Letter Ref No. 10 dated 21 July 1995.
3. In the course of preparing this opinion, we have referred to Contracts Act 1950 and
some relevant cases.

Facts

4. The facts of the case as understood by us are as follows:

4.1 In 1990, you have entered into a sale and purchase agreement with Gombak
Perdana Sdn Bhd (GPS) to purchase a house at Taman Harmonis, intending to let
it out to tenants.
4.2 Prior to the sale of the property, GPS represented to you that the house is new
and many expatriates working at the foreign embassies live in rented house
at Taman Harmonis.
4.3 You also took out a loan from Bank Muamalat to pay for the purchase price of
the house.
4.4 After the sale, you discovered the representation were untrue since the house
was built in 1980 and only one expatriate working at the Singapore High
Commission lives there with his Malaysian uncle.
4.5 You now want to return back the house and get back your money and claim for
the legal costs and other fees incurred for the sale and purchase of the house, the
loss of rental that you could have received from 1990 until the trial date, the
interest on the loan paid to Bank Muamalat as well as the sum of RM20,000
spent in renovating the house for the purpose of letting it out.
4.6 Meanwhile, GPS argued that you could have known that the statements were
false if you had only visited the house and took a look at the neighbourhood and
said that you could not claim for the losses.
 Issues

5. From the aforesaid facts, we are of the view that the issues in your case are as follows:

5.1 Whether you had been induced to enter into agreement with Gombak Perdana
Sdn Bhd (GPS)
5.2 Whether there is fraudulent misrepresentation done by GPS towards you.
5.3 Whether you can claim for the legal cost, other fees, loss of rental, the bank
interest and the sum of RM20,000 for renovating the house.
5.4 Whether you were on duty to inspect and visited the house after GPS represented
the false statement.

Opinion

6.1 For the first issue, to determine whether you have been induced to enter into
agreement with GPS, the condition of inducement must be fulfilled before
misrepresentation can be actionable. Misrepresentation is a false statement of
existing or past fact made by one party, before or at the time of making the
contract, address to the other party to the contract, and the maker of the
statement believes that what he said is true. The false statement must have
induced the representee to enter into the contract. The misrepresentation must be
material and it must have been relied on in the sense that it would have induced a
reasonable person to enter into the contract. In your case, the statement made by
GPS as the developer must deemed to be true and you as a buyer must have
relied on the statement. In such a way, the misrepresentation must be material
and it would have induced you as a reasonable buyer to enter into the contract.
Regarding to your issue, there is element of inducement as you relied on the
statement of GPS, saying the house was new and that many expatriate working at
the foreign embassies live in in rented houses at Taman Harmonis.

6.2 For the second issue, to determine whether there is element of fraudulent
misrepresentation done by GPS, there are three types of misrepresentation under
English Law which is also applicable in Malaysia. One of the types of the
misrepresentation is fraudulent misrepresentation which was defined by Lord
Herschell in Derry v Peek as a false statement that is made knowingly, or
without belief in its truth, or recklessly, careless as to whether it be true or false.
In your case, GPS surely knew the statement made by them was false. Therefore,
there is element of fraudulent misrepresentation done by GPS towards you.
 6.3 For the third issue, according to Section 19(1) of Contracts Act 1950, when
consent to an agreement is caused by coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent was so
caused, hence giving the innocent party the right to rescind the contract and/or
claim for damages. For your case, you can rescind the contract in order to put
you back in your original position, as though the contract had not been made.
Besides, an order of rescission may be accompanied by the court ordering an
indemnity. This is a money payment by the misrepresentor in respect of
expenses, necessarily created in complying with the terms of the contract and is
different from damages. For example, in any contract for the sales and purchase
of a house, the purchaser not only pays the purchase price of the property
but must also incur expenses that include legal fees, stamp fees and others.
Therefore, you can claim for the legal cost, other fees, loss of rental, the bank
interest and the sum of RM20,000 for renovating the house under indemnity.
Last but not least, you can also claim for damages as in cases of fraudulent
misrepresentation, as an injured party you may claim damages for fraudulent
misrepresentation in the tort of deceit. In the case of Abdul Razak bin Dato Abu
Samah v Shah Alam Properties Sdn Bhd, the court held that in the case of
fraud, the mislead party is entitled under section 19(1) of the act to a decree of
rescission and also to award of damages. Thus, you can rescind the contract, order
an indemnity from the court and also claim for damages.

6.4 For the fourth issue, generally silence is not a misrepresentation. The effect of
the maxim caveat emptor is that the other party has no duty to disclose problem
voluntarily thus if one party is labouring under a misapprehension there is no
duty on the other party to correct it. In the case Keates v Lord Cardogan, the
defendant kept silent without disclosing the fact to the plaintiff. It was held that
the principle of caveat emptor applies because the plaintiff should have inspected
the premise before renting it. However, in your case, GPS does not kept silent
instead they misrepresented and give false statement about the facts of the house
to you. So maxim caveat emptor does not apply in your case.
 Recapitulation & Recommendation

7. Recapitulation & Recommendation :

7.1 Therefore, the court may decide in your favour since fraudulent
misrepresentation has been established on GPSs side.

7.2 Therefore, it is advisable for you to proceed with your intention to bring this
action in court because based on the justifications mentioned above.

We hope that we have answered all your queries with regards to the above matter. Should
you need any further explanation and clarification, please do not hesitate to contact our
Ms Risha Nabila.

Thank you.

Yours sincerely,

RISHA NABILA
(Risha Nabila & Associates)