Common law and rules of equity in Malaysian Legal System in relation to law of contract and tort.

The colonization of British in Malaya has brought together the English Law which later on became our country’s
source of law. Basically there are two main sources of law in Malaysia namely written laws and unwritten laws.

Written laws are the laws that are enacted by the parliament or State assembly members. Malaysian written
laws are contained in statutes known as Acts, Ordinances and Enactments. Other than that, the written laws can
also from the by laws and regulations passed by the minister[1].

Unwritten laws refer to the laws which are not enacted by the Legislature and which are not found in the
Federal and State constitutions. The unwritten law consists of case law which is decisions of the superior courts
which are binding on the lower courts, customary law comprise of local customs which have been accepted as
law by the courts and applicable principles of English common law and equity[2]. The rules of equity is not a
complete body of rules which can exist on its own. It merely filled the gaps in the common law and softened the
strict rules of common law[3]. In the event that there is a conflict between common laws and equity, the equity
should always prevail[4].

Just a year before independence of Malaya in 1957, the British had enacted an act called Civil Ordinance 1956
which enables the use of common law of England and rules of equity. The judges in our country are allowed to
make reference to the court case as administered in England on 7 April 1956 for Peninsular of Malaysia, as
administered and enforced in England on 1 December 1951 for Sabah and as administered and enforced in
England on 12 December 1949 for Sarawak as stipulated under Section 3, Civil Law Act 1956.[5]

Malaysian case law may apply in the circumstances where there is no governing for a particular situation. If
there is no Malaysian case law, English case law can be applied. In some cases, Australian, Indian, and
Singaporean cases can be used as persuasive authorities.

The statute for Law of Contract in Malaysia is Contract Act 1950 which originates from Indian Contracts Act
1872. There is no specific statute for law of tort except for Defamation Act 1957[6] which deals with defamation
torts. Both of the laws are also refers to common law and law of equity as their source.

There are several cases which the judges gave their support on the use of common law in contract matter. This
can be seen from the case of JM Wotherspoon Co Ltd v Henry Agency House[7], both Plaintiff and Defendant
were agents for multiple of goods. Plaintiff which is a firm from England sued the Defendant; a firm from
Malaysia for claim of loss due to non-received of payment from Malaysian buyers. The High Court found out
that there is a promise made by the Defendant to Plaintiff to pay for the losses but was not supported by
consideration which is essential for contract formation under the law. The issue raised up in this case is whether
the preliminary act by plaintiff which is the supply of goods was done voluntarily. This is due to Section 26(b) of
the Contract Act 1950 stated that an agreement made without consideration becomes a contract only if it is a
promise to compensate, wholly or in part, a person who has already voluntarily done something for the
promisor[8].

As such, the promise by Defendant and the payment of damages is unenforceable under the exception on
Section 26(b) of the Contract Act as the plaintiff action in supply of the goods was not done voluntarily but due
to the demand from the defendant.

In this JM Wotherspoon Co Ltd v Henry Agency House case, the reason of provision insufficient under the
Contract Act on the subject of del credere agency was being used by Suffian J to bring in the principle of English
common law by virtue of section 5(1) of the Civil Law Act 1956.

The case had referred to Thomas Gabriel & Sons v Churchill & Sim[9] which line down the duty and obligation of
a del credere agent as follows:

"The most important" -- that is, the most important of the duties and obligations of a del credere agent -- "in a
practical view, to be here taken notice of, is, the contract of guarantee by a factor, arising from the receipt of
what is commonly called a del credere commission ..., by which he, in effect, becomes liable, in the case of a sale
of goods, to pay to his principal the amount of the purchase money, if the buyer fails to pay it, when it becomes
due."

"A factor, with a del credere commission, is liable to the principal, if the buyer fails to pay, or is incapable of
paying."

The same view was raised up by Gill AG LP of Federal Court in the case of Royal Insurance Group v
David[10] where the Contract Act 1950 is silent on del credere and due to that matter the application of English
Law was used.

These two cases however needs to be differentiate with Tan Mooi Liang v Lim Soon Seng[11] case whereby
Suffian CJ has objected the use of English common law with regards to partnership due to many provision has
been spelled out under Contract Act.

In this case both appellant and respondents were business partners. The defendant was given a notice by
appellant for his intention "to dissolve the partnership" and subsequently applied for the order that the
partnership be wound up, the taking of accounts and the appointment of a receiver. The respondents pleaded
that the notice cannot dissolve the partnership and were a notice of intention to retire from the partnership.
The appellant applied for the appointment of a receiver and manager. The judge held that there is no provision
in the Contracts Act, 1950, which allow a partner to dissolve a partnership by giving notice of his intention to
dissolve it. Also, there are many provisions relating to partnership in the Contracts Act 1950 which constitute
"other provisions relating to partnership". As such, section 5(1) of the Civil Law Act, 1956 does not apply and
English law of partnership did not apply in this case. The learned trial judge dismissed the motion and the
appellant appealed to the Federal Court.

Federal court in this case has not discussed on the completeness of the Act; it is just enough if there are ‘many
provision’[12].

We also learned that the English Law can be used shall there is no provision made on the usage of some law
principle. For instance, the silent provision on the differences between an offer and invitation to treat and the
need for intention to legally bind element under Contract Act 1950.

This can be seen in the case of Eckhardt Marine Gmbh v Sheriff, High Court of Malaya, Seremban & Ors[13], the
sheriff of the Seremban High Court had arrested a motor vessel at Port Dickson and later on made an
advertisement to sell the vessel. The appellant has made an offer to the sheriff via a letter and a banker's draft
for 10% of the purchase price. The letter has stated that the offer was made on the sheriff's terms but subject to
two conditions. The first condition, no repairs required to be done to the vessel by the port authority and
secondly, the vessel could leave on its own power on the basis of a seaworthiness certificate issued by an
appointed surveyor of the underwriters.

Although the offer from the appellant is lower than advertised, the sheriff later on accepted the offer and took
out a summons seeking leave of the judge to conclude the sale. In order to ensure that the conditions attached
to the appellant's offer were satisfied, the sheriff made the relevant inquiry as directed by the judge. The
Marine Department at Port Klang replied and satisfied with the two conditions imposed by the appellant.

The judge then approved the sale and the appellant became obliged to pay the balance of the purchase price
within the time stipulated. However, the appellant failed to do so and its deposit was forfeited. It then applied
to the judge for the release of the deposit, alleging that no binding contract had been concluded between the
parties. The judge held against the appellant.

The court has dismiss the appeal by deciding that there was no doubt that the sheriff's advertisement amounted
to an invitation to treat by referring Gibbons v Proctor (1891) 64 LT 594 and Partridge v Crittenden [1968] 2 All
ER 421. It was the appellant who had made a conditional offer by way of its letter in question. The sheriff had
clearly accepted the appellant's offer by words and by conduct similar to what happened in Brogden v
Metropolitan Railway Co (1877).
In dealing with tort case, the courts in this country have always turned for guidance, as far as fundamental
principles are concerned, to English common law.[14] It was expressed by Woodward C.J. in the case of
Government of Perak v. A.R. Adams (1914) where the plaintiff had granted a piece of land to the defendant’s
predecessor in title. The Plaintiff’s road adjoined the land. The defendant had, in the course of cultivating the
land, caused silt from his land to be deposited on the road and the drains alongside of it. The defendant knew of
the damage being caused to the road but he took no step to remedy the situation. The court had found that the
defendant liable in damages.

The court held that the defendant cannot be said to have brought upon the land something which would not
naturally come upon it, which is in itself dangerous as held in a famous case of Rylands v Fletcher[15]. Rylands as
Plaintiff owned and operated a mine adjacent to which Defendant constructed an artificial pond. The latter
caused a mineshaft collapse, which resulted in a flood, and damaged Plaintiff’s operation. The court found that
there is no proof that neither the defendant nor the contractor have committed negligence and therefore
decided that both defendant and the contractor innocent in the case of negligence. However, Blackburn J in the
other hand insist that under the law, in whatsoever reason the person who for his own purposes brings on his
lands and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril, and, if he
does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.
During appeal, the court added, although there is no proof of negligence on the part of defendant, the
defendant is guilty due to his action in keeping that thing as the unusual way of land use. Since then this case
has established a Rylands v Fletcher Principles which has become a reference to many cases including our
country.

The principle has also being quoted in Ang Hock Hai v Tan Sum Lee and Ors[16] where the plaintiff rented the
upper floor of the shop house and the ground floor was rented to the defendant who owned business of tyre
repairers and tyre dealers. Instead keeping a stock of tyres, the defendant was also keeping petrol on the same
place. In the early hours of the morning, a fire broke out on the premises which completely gutted it and the
adjoining houses and in consequence of which the plaintiff's wife and one of his sons were burnt to death. At
the time the fire started there was no one in the defendants' premises. The proprietor who was the first
defendant and his employee had gone for the night after locking up the premises which were entirely deserted.
The court held that the defendant have brought upon premises a dangerous materials which would not
naturally be upon the premises and they were under an obligation to keep those materials under control so as
not to cause mischief to their neighbours.

In defamation case, besides the Defamation Act 1957[17] being used as the prime source in a trial, common law
has always being a reference. In the case of Institute of Commercial Management United Kingdom v News
Straits Times Press Berhad[18], the Defendant had published an article with regards to plaintiff business
activities in which offering diploma course in Malaysia. The article has given a wrong picture to the readers by
stating the institute as a ‘diploma mills’. The court has agreed with the plaintiff claim that the article has
destroyed the public trust to plaintiff’s company. The case had made a reference to several common law cases
as a test subject and one of it is Hough v London Express[19] in order for court to look at whether it was
necessary to show actual damage to a reputation in a defamation case.

In negligence cases, we may refer to the case of Av Tucker v Ang Oon Hue[20] where the defendant was a
building contractor for the construction of a few houses. His subcontractor had left a considerable quantity of
lime for the works. It was freely and frequently used by members of the public and that a number of children
were in the habit of playing all over this area. The defendant took no steps to prevent injury to children
occurring while work was not going on at the site. The plaintiff, a boy aged five years, received a handful of lime
in his right eye which had been dropped by one of the boys whose being playing with the dump. As a result,
plaintiff lost the sight of his right eye. The court held that the defendant was negligent in his action and the
plaintiff was entitled to damages. In order to identify the degree of care needed in this case, the judge referred
to case Glasgow Corporation v Taylor[21]. The kid aged seven was playing in the public playground. He later ate
a poisonous berry which he picked from the trees nearby. It has resulted to the death of the kid. The court held
that the defendant is guilty by not fencing the trees as the trees will surely alluring the children to come over
and pick up the poisonous berries.

There are also tort cases where the common law case no longer suitable to be used in the current situation in
Malaysia. This can be seen on Eu Sim Chuan v Kris Angsana Sdn Bhd[22]. In this case the defendant was
constructing 20 storey of condominium besides plaintiff’s bungalow. The defendant had excavated the soil for
the construction of carpark basement of the building. This had caused a ground movement and resulted damage
to the structure of the bungalow and surrounding area. The decision has to be made by the court either the
defendant has acted negligently during the construction of the condominium and causing severe damage to the
bungalow owned by plaintiff.

The defendant has brought the court interest to the case of Acton v Blundell[23]in which in this case the court
has decided that a person have rights to use the water source under his land although his action may result in
the abstraction of water percolating under the land of his neighbour and, thereby, cause injury to him. By using
this case, the defendant contended that Kris Angsana cannot be liable on the damage happened to the
bungalow. This principle was rejected by the Singaporean court in the case of Loh Siew Keng v Seng Huat
Construction Pte Ltd[24]. In this case, the defendant carried out certain sewerage works which included
replacement of an underground sewer line adjacent to the plaintiffs' house. The plaintiff brought an action for
negligence and nuisance arising from the defendant's excavation of the trench next to the plaintiffs' house as
cracks penetrated the walls on the first and second floor of the plaintiffs' house as well as a continuous crack
line on the external floor and at other parts of the house. The court has decided that the principle in Acton v
Blundell was outdated and no longer applicable in the current.

The judge in Eu Sim Chuan v Kris Angsana Sdn Bhd agreed with the court opinion in Loh Siew Keng case.
Whoever person that execute a construction works must ensure the safety of the neighborhood property before
the construction commenced. Failure in taking safety measures may consider a person as negligence.

From all those cases involving law of contract and torts, we may conclude that the common law and rules of
equity is applicable shall there is no provision made on certain field or the application of law principle. Even if
there is a provision under Malaysian law but the provision is insufficient, the reference can still be made.
However, shall the provision is sufficient, the use of common law no longer applicable since the provision under
the statute can be applied. The common law can be used to interpret or to define certain terminology or
provision which needs to be defined under the statute. The cases also show that the judge may reject the
common laws cases which may no longer suit the current situation in this country.

It is also interesting to note that although Section 3, Civil Law Act 1956 allowed the use of common law and
rules of equity which being administered in England until 7 April 1956 and other dates for Sabah and Sarawak,
the judges are still allowing the use of common law cases which being developed after 7 April 1956 to be used
as reference in Malaysian court.

After 57 years of independence, it would be hard and uneasy for us especially all the lawyers and judges who
have been well trained in English Law to migrate into the other sources of law. Nowadays, more and more
people have raise up their voices demanding the implementation of Islamic laws replacing the existing laws
which are based on English common law and rules of equity.

Professor Abdul Basir Mohamadin, a prolific writer who has published a number of books such as Tort Law a
Comparison, Islamic Law of Tort and Malaysian Tort Law are of the opinion that the tort law was now ready for
the shift from English common law to Islamic common law as resource. The Islamic civil law is also compatible
with existing laws in terms of dispensing justice. There is no reason why we need to refer to cases that were
decided in England, a different society that have different sets of beliefs and way of life which are clearly
incompatible with Malaysians.[25]

Former Chief Justice of Malaysia, Tun Dato’ Abdul Hamid bin Haji Mohamad however have another view which
in his opinion the civil law and sharia law shall be harmonized since both of it are likely similar to each other in
most of the way. The first thing which need to be done is for both sharia and civil law practitioners to sit
together and identify which are the issue in civil law that is incompliance with Islamic laws in order to make it
Islamic. It is important to have a clear picture of what we want to abolish and what we want to establish.[26]

Process of harmonization here refers to the implementation of common law and rules of equity which are not
contrary to the Islamic law. It means the existing laws such as common law principles in the law of contract or
tort including any other existing law that in line with the sharia principles could be integrated to strengthen the
legal infrastructure.

In conclusion, we should continue with the application of English common law and rules of equity in our legal
system specifically to law of contract and tort since it has become the Malaysian legal system’s ‘flesh and blood’.
Having said that, we shall also find a way to harmonize it with Islamic Laws which hopefully will become our very
own unique legal system which is much fairer, suit with this country’s customs and beliefs as a legacy to future
generation of our nation.

[1] http://en.wikipedia.org/wiki/Law_of_Malaysia

[2] http://www.lawteacher.net/free-law-essays/constitutional-law/explain-the-sources-of-malaysian-legal-
system-constitutional-law-essay.php

[3] http://www.lawteacher.net/free-law-essays/constitutional-law/english-common-law-law-essays.php

[4] Section 3(2) Civil Law Act 1956

[5] Section 3(1) Civil Law Act 1956

[6] Applicable in Sabah and Sarawak only

[7] [1962] MLJ 86

[8] Section 26(b), Contract Act 1950

[9] [1914] 1 KB 449

[10] [1976] 1 MLJ 128

[11][1974] 2 MLJ 60

[12]Shaik Mohd Noor Alam S.M. Hussain, Kontrak dan Kewajipan Undang-undang di Beberapa Negara Asean
yang dipilih, DBP, 1998, hlm 9.

[13][2001] 4 MLJ 49

[14] Woodward J.C. ‘Government of Perak v. A.R. Adams’, 1914

[15][1868] UKHL 1

[16][1957] 1 MLJ 135

[17] Only applicable in Sabah and Sarawak

[18][1993] 1 MLJ 408

[19] [1940] 2 KB 507

[20][1959] 1 MLJ 115

[21] [1922] IQB 540

[22] [2007] 7 CLJ 89

[23] [1843] 152 ER 1223

[24] [1998] SGHC 197

[25]Shahfizal Musa, Malaysian Civil Law Need To Revert To Islamic Civil

Law, http://www.ukm.my/news/index.php/en/research-news/1616-malaysian-civil-law-need-to-revert-to-
islamic-civil-law.html, 2013

[26]Dato’ Abdul Hamid bin Haji Mohamad, Harmonization of shari’ah and civil law in Malaysia: Present reality
and future actions, 2003