legal cauldron 1 of 2014

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Issue no. 1

of 2014

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GA

L C

AU

LD

RO

N Iss

ue N

o 1

of 2014

MELAKA

No.54-1, Jalan TU 2, Taman Tasik Utama, 75450 Ayer Keroh,

Melaka. T: 06-234 7330

F: 06-234 4800

LEGAL CAULDRON Jayadeep Hari & Jamil

Advocates and Solicitors

Our offices:

No KDN: PP 15706/02/2013

(032198)

KUALA LUMPUR

Suite 2.03 (2nd Floor) Block A, No 45, Medan Setia Satu, Plaza Damansara, Bukit Damansara,

50490 Kuala Lumpur. T: 03-2096 1478 | F: 03-2096 1480

www.jhj.com.my

“Forgive me Father, for I have

shopped (Online)!” An overview of Consumer Protec-

tion (Electronic Trade Transactions)

Regulations 2012

EDITOR:

Adeline Chin

DESIGN & LAYOUT:

Andrew Chee & Adeline Chin

CONTRIBUTORS:

Shobana Padmanathan

Eunice H.S. Ong

Adrian Low

Shahman Sangaran

Andrew Chee

The LAD Culture A dark world of expected delays

Rogue Directors Can an unauthorized act of a Direc-

tor bind a company

Do you have the Moolah to

purchase your Dream House?

In this Issue:

The Financial Services Act

2013 & the Islamic Financial

Services Act 2013

Progress is constantly taking place, and the core contrib-

uting factor is the movement towards liberalisation and

globalisation nearly everywhere in the world. Almost 80% of

the countries globally subscribe to the concept of capitalism,

and the mere mention of the word “money” is enough to

capture the attention an unassuming stranger. This medium

of exchange known as money has come to dictate what we

do and how we live.

Julius Henry “Groucho” Marx truly hit the nail on its head

when he said: “While money can’t buy happiness, it certainly

lets you choose your own form of misery.” And what better

way to have an upper hand by making an informed decision.

The year 2013 had been a whirlwind, leaving as fast as it

arrived (well, it had officially left by the time you read this).

The legal fraternity was shaken up by the implementation of

the Legal Professions Act 2013, whilst those primarily in the

finance, banking, insurance and development industry found

themselves swirled into a pool of new laws and regulations,

e.g. the introduction of the Financial Services Act 2013 and

the rate revision for Real Property Gains Tax (“RPGT”),

electricity tariffs and etc. Renowned legal advisory and taxa-

tion firms scrambled to digest, summarize and comment on

the train of legislative changes made throughout the year at

bullet speed for the consumption of interested individuals as

well as the corporate sphere.

However, these chockfull of information would generally

serve a lay person no better than wine to a teetotaller if it is

not presented in an easily comprehensible and relevant con-

text. We believe that knowledge is when one is able to ex-

tract data and reiterate it in a way that even my 80-year-old

grandmother would (somewhat) understand.

The featured articles selected for our publication this Issue

revolved around the centrepiece of dollars and cents, which

is unmistakeably the lord of all sins and success at equal. We

thought it essential for our dear readers to be aware of the

three important legislations that came into effect in 2013,

namely the Consumer Protection (Electronic Trade Transactions)

Regulations 2012, the Financial Services Act 2013 and the Is-

lamic Financial Services Act 2013 as the spirit and content of

these legislations are closely knitted with your rights and

financial wellbeing.

Further, the local corporate scene had been going through

drastic changes (e.g. the high profile employment transitions

amongst top ranking officers in the telecommunications and

banking industry of late); coupled with the hype in both the

construction and property industry, complex legal concepts

such as liquidated ascertained damages and ostensible au-

thority explained would prove to be of more value than just

conversation starters. In tandem with all these progression,

the purchase of a property, be it for residential or invest-

ment purposes, may have occurred to many as a timely mile-

stone of achievement. We thought the brief and simple

write-up on property purchase frankly titled “Do you have

the moolah to purchase your dream house?” made a suitable

fit as a cherry on the cake for this Legal Cauldron, Issue 1 of

2014.

On behalf of the firm, I would like to convey our best wish-

es to all you dear readers, may the new year be filled with

good health and joy in every sense of the word. And we

hope you enjoy the read as much as we have enjoyed writ-

ing them!

Legal Cauldron 1 of 2014 | 2

Sincerely,

Adeline Chin Knowledge Department

[email protected]

EDITOR’S NOTE


Photo Article PHUKET TRIP

PHUKET INTERNATION-AL AIRPORT

A SNAPSHOT OF EVERYONE MODERN TIMES TUK-TUK NEVER SKIP THE TOMYAM LUNCH. .

“ON THE ROAD AGAIN - LIKE A BAND OF GYPSIES WE GO DOWN THE HIGHWAY”

GAME IS ON.

“IN A GENTLE WAY, YOU CAN SHAKE THE WORLD.’ - GHANDI

RAT-U-THIT 200 YEARS ROAD.

PATONG BEACH, HKT.

MONKEY BEACH & PHI PHI ISLAND.

PHOTOS CREDIT OF BARVINA • SHOBANA • SYAJA

COPYRIGHT © 2014 • JAYADEEP HARI & JAMIL • ALL RIGHTS RESERVED

Ladies and (some of you) gentlemen, have you ever

wanted to buy an expensive item online from an ob-

scure local website but was discouraged for fear of be-

ing cheated? I know because I’m an avid online shopper.

Online shopping is convenient as it allows me to browse

and buy dresses without leaving my desk, even as I

write this article! But just like you, I too have apprehen-

sions when coming across websites and blogs that are

not well known, or do not have a physical retail store.

Statistics show that around 1.1 million Malaysians carry

out online transactions at the time this article was writ-

ten and this number is expected to double by the end of

2014. In fact, there were almost 20,000 online shopping

companies and businesses registered with SSM last year

alone. Unfortunately, the booming e-Commerce indus-

try in Malaysia is moving in parallel with the rise in scam

and fraud cases carried out by some unscrupulous indi-

viduals and syndicates.

The Consumer Protection Act 1999 was amended in

2007 to include electronic trading. However, despite

the amendment, we still lack a comprehensive set of

rules for the online business operators. There was a

proposal in 2011 to amend the Electronic Commerce

Act 2006 which was initially intended for the regulation

of the booming online marketplace, but the said pro-

posal did not materialize. Despite all the available legal

provisions afforded for consumer protection, such as

the Electronic Commerce Act 2006, the Communica-

tions and Multimedia Act 1998, the Contracts Act 1950,

the Trade Descriptions Act 1972 and the Penal Code,

consumer protection remains inadequate for consumers

transacting with online business suppliers and online

marketplace operators.

In July 2013, the Ministry of Domestic Trade, Co-

operatives and Consumerism (“the Ministry”) have in-

troduced the Consumer Protection (Electronic

Trade Transactions) Regulations 2012 (“the Regu-

lations”) as a response to the recent spike in online

frauds being reported and heard in Consumer Claims

Tribunal.

THE LAW

The new Regulations apply to (i) individual persons and

businesses that supply goods and services through their

own websites, blogs, social media network accounts and

online marketplace, (the “Online Business Suppliers”)

and (ii) websites where goods and services are market-

ed by third parties for the purpose of trade such as

Zalora, Groupon and eBay (the “Online Marketplace

Operator”)

The Regulations made it mandatory for all Online Busi-

ness Suppliers and Online Marketplace Operators

(collectively known as “e-Traders”) to comply with cer-

tain requirements:

1. Provide full disclosure of information

E-Traders will now have to disclose, on the website

where the business is conducted and on the online mar-

ketplace, the following information:

The name of the person who operates the business

The name of the business or company

The registration number of the business or company

The email address and telephone number and/or ad-

dress of the business operator

A description of the main characteristics of the goods

and/or services

The full price of the goods and/or services including

transportation costs, taxes and any other costs


Featured Article

FFF

Retail & Consumer Industry

About The Author:

SHOBANA PADMANATHAN

graduated from the Multimedia

University Malacca and had since

joined JHJ as an associate, han-

dling various civil matters.

[email protected]

orgive Me Father, for I have shopped (ONLINE)!

An overview of

Consumer

Protection

(Electronic Trade

Transactions )

Regulations 2012

‘What if it was a scam? What if the

order never arrives? What if the item

does not match the advertised

description?’


The method(s) of payment

The terms and conditions

The estimated time of delivery of the goods or services

to the buyer

2. Rectify errors and acknowledge receipt of

orders

E-Traders must provide the appropriate means to ena-

ble the buyer to rectify all errors prior to the confirma-

tion of orders made by the buyer. A good example of

this would be by allowing instantaneous pop-up message

to appear on your browser seeking your confirmation

on the order placed when you proceed to checkout.

Another example would be confirmation via an order

note specifying the details of your order before pro-

ceeding with payment (i.e. the most common means

used in trades via social media network). Upon receiv-

ing payment, the e-Trader must acknowledge receipt of

the order without undue delay.

The order and acknowledgement of receipt would only

be deemed to have been received when both the buyer

and the e-Trader are able to access the order and the

acknowledgment of receipt.

3. Maintenance of record

Online Marketplace Operators are now under an obliga-

tion to keep and maintain a two-year worth record of

the business suppliers’ names and contact details whose

goods and/or services were showcased or provided in

the online marketplace.

This record maintenance system helps business suppliers

to be readily identifiable should the consumer suffer any

loss or fraud. It would also facilitate the ease of lodging

a complaint against an alleged perpetrator.

EFFECT OF NON-COMPLIANCE

Failure of an e-Trader to comply with the Regulations

would be deemed an offence. The disclosure of false and

misleading information on the electronic platform is sim-

ilarly a violation of law. Individual offenders will be liable

to a fine up to RM50,000.00 or imprisonment up to 3

years or both. The punishment for a second offence is

RM100,000.00 or imprisonment up to 5 years or both.

Any company that disregards this law will be fined up to

RM100,000.00 and RM200,000.00 for a subsequent of-

fence.

REDRESS AVAILABLE TO AGGRIEVED CON-

SUMERS

A civil remedy available is that an aggrieved consumer

may also file a claim with the Tribunal for Consumer

Complaints.

Apart from that, if a consumer has been cheated by an e

-Trader or have knowledge that there is occurrence of

non-compliance with the Regulation, the consumer may

lodge a complaint to the Ministry, the Royal Malaysian

Police Department for Commercial Crime Investigation

or Cyber999 Help Centre.

CONCLUSION

These mandatory requirements have received mixed

reactions from the SMEs (small and medium enterprises)

as now there would be an increase in the start-up costs

of a business. E-Traders will have to ensure that they

have a set of customized terms and conditions for their

business. Online Marketplace Operators will only allow

e-Traders who provide all the necessary information to

trade or market on their site.

Since the intent of this law is to ensure transparency, it

is the author’s opinion that Online Business Suppliers

and Online Marketplace Operators use this as an ad-

vantage to create and expand business opportunities for

themselves. After all, while the transparency of details,

a system of good record maintenance, certainty of de-

scription and the presence of unequivocal terms and

conditions to the full knowledge of both consumers and

e-Traders will help minimize legal disputes and ensure

better consumer protection. Creating and encouraging

good business ethics will doubtlessly enhance customer

satisfaction and confidence. All in all, this Regulation is

in fact a good tool for serious e-Traders to succeed.

Featured Article Retail & Consumer Industry

‘A civil remedy available is that an

aggrieved consumer may also file a

claim with the Tribunal for Consumer

Complaints.’

“Time is of the essence” is a term commonly used in many

contracts to signify that time wasted is actually money

thrown away. This cannot be any more true in a building

and civil engineering contract, where the term “liquidated

ascertained damages” (more affectionately known as LAD)

is no stranger nor a friend to any contractor. You can actu-

ally even impose the LAD clause on your local contractor

renovating your house (although in Malaysia this does not

quite happen).

Before I go any further, let me firstly explain that LAD is in

simple terms, compensation payable by the contractor to its

employer for each day a project is delayed. And an employ-

er here means the party who had engaged the contractor to

undertake a particular project.

Lawyers and legal advisors will tell you that the inclusion of

such a term in building contracts is a great thing and at the

outset, it would make sense because everyone will know

the exact sum to be paid and allow the contractor to alleg-

edly expect or foresee the consequences of their delay.

Nonetheless, we can only imagine the dread in any contrac-

tor’s mind when LAD is imposed. But really, you would ask,

as the employer, can I really impose LAD for sum desirous

of an employer against the Contractor? And if really I can

impose, when can I do so lawfully in Malaysia?

Nothing comes close in best explaining this point, except

through a story. So, let me tell you a story of when this

contractor, Cron Track Tar Sdn Bhd (“the Contractor”)

who was engaged by Siamese Darby Bhd (“the Employer”)

to undertake a project to build four retail units in Serem-

ban:

Phase I was to build the actual retail units;

Phase II to undertake external works and 100 space car

park; and

Phase III was to complete the construction of an ex-

tended car park of 250 spaces.

Clause 2.2 of the contract states that LAD clause imposed

on the Contractor would be the sum of RM100,000.00 per

week. And lo and behold, what happened as expected was

that there was a 15 weeks delay on the delivery of the com-

pleted project to the Employer, and this is after an exten-

sion of time of 12 weeks given to the Contractor.

Here is where the problem starts. The Contractor now gets

whacked with RM100,000.00 per week as LAD which totals

up to a whopping RM300,000.00. Since this amounts to a

breach on the part of the Contractor, can the Employer

claim for this LAD of RM300,000.00?

Now before you answer the question, I must inform you

that an LAD clause disguised as a penalty clause against the

contractor will not be enforced in our courts. This is be-

cause if a clause is included for the intention to punish, then

it is not fair to the Contractor. [see Selvakumar a/l Murugiah

v Thiagarajah a/l Retnasamy [1995] 1 MLJ 817].

Pursuant to several local cases and section 75 of the Con-

tracts Act 1950, the person claiming for LAD must still

prove that they have suffered actual loss or that the Courts

may assess a reasonable amount for compensation. There-

fore, in Malaysia, if an Employer is claiming for actual losses


‘But really, you would ask, as the

employer, can I really impose LAD…

against the Contractor?’

Featured Article Building & Construction Industry

TheTheThe LADLADLAD CultureCultureCulture A dark world of expected delays

About The Author:

EUNICE ONG graduated from

the University of the West of

England and is a member of the

Honourable Society of Lincoln’s

Inn (UK) and the Malaysian Bar.

‘An LAD clause disguised as a penalty

clause against the contractor will not

be enforced in our Courts.’

[email protected]


in an action for breach of contract, he must still prove the

actual damages. In cases where the Courts find it difficult to

assess such losses (i.e. when there is no known measure of

damages employable) and yet the evidence clearly shows

some real loss which can be expected, the courts must then

give substantial damages in accordance to the Court’s dis-

cretion.

So again, you may ask, what are all this but some legal jar-

gon blahs? To put this simply, what the Employer has to do

to get their RM300,000.00 would be to show this sum is

compensation for direct costs incurred, which means that as

a result of the Contractor’s delay, the Employer had to in-

cur losses. This could be by way of incurred interest by the

bank which the Employer had to bear as a result of the de-

lay.

Or the Employer could show the possible loss of profits or

revenue as a result of the delay, by producing an executed

tenancy agreement between the Employer and a third party

to rent the premises and as a result of the delay of the Con-

tractor, that the Employer loses out on the rental.

Or The Employer could possibly show that as a result of the

Contractor’s delay, that the Employer had to now pay LAD

to the main contractor (e.g. maybe the retail company who

had in the first engaged the Employer to construct the retail

outlets). If the Employer is unable to produce any document

or even proof to support any of the above, then the blanket

imposition of LAD will not stand in our Courts and will not

be enforced.

In conclusion, an Employer (in our case, would be The Em-

ployer) can lawfully impose LAD if they have the documents

to support such amounts claimed for in the contract. This

means that for an LAD to be lawfully enforced, thought

must be given when placing an amount in the LAD clause.

And the importance of such thought being given to the in-

clusion of such a clause is clearly stated in the Federal Court

case of Selvakumar, where monies paid as LAD which is lat-

er found to be unlawful, must be refunded with interest

imposed. So, although time money may be monies thrown

away, we have to still show how monies have been thrown

away.

Featured Article Building & Construction Industry

Gaby Bakker

As the semester for my second academic year was drawing

close to an end, I’ve decided to travel to Malaysia for my

attachment before returning to complete my final year of law

degree and my Master’s degree thereon.

The 4-month attachment period had been on every aspect,

albeit the linguistic and cultural differences, a great one to

say the least. JHJ’s structured 360˚Student Attachment Pro-

gramme allowed me valuable insights into the four key de-

partments in JHJ, namely Corporate, Conveyancing, Conflict

Resolution and Knowledge. Being able to indulge in first-

hand experience of the Malaysian legal practice provided the

essential element of realism for my comparative study on

distinct legal jurisdictions, which was part and parcel of my

University’s assignment.

My goal upon embarking on this internship was to gain an

understanding on the differences between the Malaysian le-

gal system and the Dutch legal system. With both the legal

systems readily varied in components: the former based on

Gaby is a law under-Gaby is a law under-

graduate from the graduate from the

University of Applied University of Applied

Sciences in Amsterdam, Sciences in Amsterdam,

the Netherlands and the Netherlands and

was a summer associate was a summer associate

in JHJ from September in JHJ from September

to December 2013.to December 2013.

common law whilst the latter civil, the attachment pro-

gramme gave me the opportunity to have a holistic over-

view.

JHJ lived up to their motto of “We Care”, and my colleagues

have demonstrated just that as they relentlessly assisted me

in my queries. I am thankful to JHJ for offering me such a

great time and experience, it is definitely one that will be

carved into my memories.

JHJ Summer Associate 2013

THE CONSEQUENCES

The supplier of the equipment will most likely insist on the

settlement of his payment and submit that the supply of the

equipment to the JV Co here is valid as (i) he dealt with the

company in good faith; (ii) the person whom he dealt with is

a director of the company and (iii) he has done his part by

delivering the equipment to the company.

Hence, the supplier will naturally argue for the application of

the doctrine of apparent authority to apply here. The doc-

trine of apparent authority basically enables an outsider (in

this case the equipment supplier) to enforce a contract en-

tered into by a company's agent (in this case - Mr X) who

appears to, but does not, have actual authority to bind the

JV Co.

THE LAW

In Malaysia, the application of the doctrine and law in rela-

tion to the above can be found in Section 20 of the Compa-

nies Act 1965, where it is provided that

“... no act or purported act of a company (including enter-

ing into of an agreement by the company and including

any act done on behalf of the company by an officer or

agent of the company under any purported authority

whether express or implied of the company) and no con-

veyance or transfer of property whether real or personal

to or by a company shall be invalid by reason only of the

fact that the company was without capacity or power to

do the act or to execute or take the conveyance or trans-

fer ...”

In a nutshell, this primarily means that the validity of a trans-

action between a company and a third party will remain re-


Featured Article Corporate & Commercial Industry

About The Author:

ADRIAN LOW is a senior associ-

ate in the corporate department

with extensive experience in local

and international corporate and

commercial transactions.

[email protected]

ROGUE

DIRECTORS Can an

unauthorized act

of a Director bind a

Company?

BACKGROUND

Imagine the following scenario – you have just executed a

joint venture agreement (“JVA”) and are now part of a joint

venture arrangement whereby you with your partners have

agreed to incorporate a special purpose joint venture com-

pany (“JV Co”) to carry out a building project. In the JVA,

you have also agreed for each of you and your partners to

have representations in the board of directors of the JV Co.

THE ULTRA VIRES TRANSACTION

Everything appears fine and well until one day, the JV Co

receives a written demand for payment purportedly due for

the purchase and delivery of a certain equipment worth

RM1,000,000.00. This equipment can be used for the pro-

ject. On investigation you subsequently discover that it was

one your partners who is also a director of the JV Co (lets

call him “Mr X”) who had proceeded to purchase this

equipment. You also discover that the purchase made by Mr

X here did not receive the approval of the board or the

shareholders of the JV Co. Further, you are informed that

the equipment can be acquired cheaply elsewhere and there

are many other similar equipment which have better func-

tion and built quality than the one purchased here.

THE ISSUE

Assuming that the said equipment has not been used and

you have the support of the rest of the board of directors

and shareholders of the JV Co, can you, under such circum-

stances, cause the JV Co to return the said equipment to

the equipment supplier and refuse payment for the same

since Mr X who purportedly bought it on behalf of the JV

Co had no authority to do so in the first place? All these

while knowing that the equipment supplier will not agree to

such proposition?

‘…outsiders dealing with a company

in good faith are entitled to assume

that acts within the company's

constitution and powers have been

properly performed…’


gardless whether the company had the necessary authority

to do so if the lack of authority is the only contentious fac-

tor in such transaction.

According to the English case of Royal British Bank v. Tur-

quand [1843-60] All ER Rep 435 which was accepted by the

Malaysian Federal Court in Pekan Nenas Industries Sdn Bhd v.

Chang Ching Chuen & Ors [1998] 1 Mil 465, outsiders dealing

with a company in good faith are entitled to assume that

acts within the company's constitution and powers have

been properly performed, and these outsiders are not

bound to inquire whether acts of internal management have

been regular.

The reason and principle of the ostensible and apparent

authority was explained by the Federal Court in the case of

Chew Hock San & Ors v. Connaught Housing Development Sdn

Bhd [1985] CLJ 64 (Rep); [1985] 1 CLJ 533; [1985] 1 MLJ

350. Delivering the decision of the Federal Court, Syed Agil

Barakbah F.J., (as he then was) said that:

‘… The legal position of a company or a corporation is that

being a fictitious person it can only do any act which in-

cludes making a representation through its agents or serv-

ants. The capacity of such a company is limited by its mem-

orandum and articles of association. In other words, it can

act within the ambit of the powers or provisions expressly

provided in the memorandum and articles of association. In

the ordinary course of business, a third party when entering

into a contract with a company normally relies on the au-

thority of an agent of the company.

Now, the difference between an actual and an apparent or

ostensible authority and the principles applicable thereto

are adequately explained by Diplock L.J. in Freeman &

Lockyer v. Buckhurst Park Properties (Mangal) Ltd [1964]

2 QB 480, 502-504 from page 502 to page 504 as fol-

lows:

"It is necessary at the outset to distinguish between an

"actual" authority of an agent on the one hand, and an

"apparent" or "ostensible" authority on the other.”

Actual authority and apparent authority are quite independ-

ent of one another. Generally they co-exist and coincide, but

either may exist without the other and their respective

scopes may be different. As I shall endeavor to show, it is

upon the apparent authority of the agent that the contrac-

tor normally relies in the ordinary course of business when

entering into contracts.

An "actual" authority is a legal relationship between princi-

pal and agent created by a consensual agreement to which

they alone are parties. Its scope is to be ascertained by

applying ordinary principles of construction of contracts,

including any proper implications from the express words

used, the usages of the trade, or the course of business

between the parties. To this agreement the contractor is a

stranger,. he may be totally ignorant of the existence of any

authority on the part of the agent. Nevertheless, if the agent

does enter into a contract pursuant to the "actual" authori-

ty, it does create contractual rights and liabilities between

the principal and the contractor…

An "apparent" or "ostensible" authority, on the other hand,

is a legal relationship between the principal and the contrac-

tor created by a representation, made by the principal to

the contractor, intended to be and in fact acted upon by the

contractor, that the agent has authority to enter on behalf

of the principal into a contract of a kind within the scope of

the "apparent" authority, so as to render the principal liable

to perform any obligations imposed upon him by such con-

tract. To the relationship so created the agent is a stranger.

He need not be (although he generally is) aware of the

existence of the representation but he must not purport to

make the agreement as principal himself. The representa-

tion, when acted upon by the contractor by entering into a

contract with the agent, operates as an estoppel, preventing

the principal from asserting that he is not bound by the

contract. It is irrelevant whether the agent had actual au-

thority to enter into the contract.

In ordinary business dealings the contractor at the time of

entering into the contract can in the nature of things hardly

ever rely on the "actual" authority of the agent. His infor-

mation as to the authority must be derived either from the

principal or from the agent or from both, for they alone

know what the agent's actual authority is. All that the con-

tractor can know is what they tell him, which may or may

not be true. In the ultimate analysis he relies either upon

the representation of the principal, that is, appar-

ent authority, or upon the representation of the agent, that

is, warranty of authority.’

However, the principle cannot be relied upon by the equip-

ment supplier if the circumstances warrants the equipment

supplier to enquire about the authority of the director in

question. This approach can be seen in the case of United

Asia (S) Pte Ltd. vs Metaltex Intl. Sdn Bhd and Ors. [2013] 1


‘…outsiders are not bound to inquire

whether acts of internal management

have been regular. ‘

‘An "apparent" or "ostensible"

authority … is a legal relationship

between the principal and the

contractor created by a

representation…’



LNS 450 which referred to the decision of Morris v. Kanssen

[1946] AC 459, where Lord Simonds made it clear that an

outsider cannot invoke the benefit of the principle of osten-

sible and apparent authority if he is put upon inquiry. Here

is what his Lordship said on this point (at p.475):

‘…He cannot presume in his own favour that things are

rightly done if an inquiry that he ought to have made would

tell him that they were wrongly done…’

Hence, where it can be shown that Mr X had not acted in

the manner as he should in the usual course of business (e.g.

where no business card was exchanged or only aliases were

used to identify himself) then the equipment supplier cannot

wholly rely on Section 20 of the Companies Act 1965 or the

principle of ostensible or apparent authority to succeed in

his claim.

Further, the equipment supplier will also be prevented from

relying on the same doctrine if it can be shown that there

was an element of forgery involved in the director’s action

(i.e. where he purports to sign a document on behalf of a

company or affixes its seal to it with intent to defraud - this

is illustrated in the case Augusto Pospeo Romei and Anor vs

Singaravelu Ratnavelu and Ors, High Court (2011) 1 LNS 949)

or where acceptance of the equipment was evidenced by a

false company stamp or a company stamp not belonging to

the company as in the case of Naj Global Network Sdn Bhd vs

Universiti Malaya [2011] 8 CLJ 658.

CONCLUSION

Ultimately and barring any issue of fraud or dishonesty on

the part of the equipment supplier, the question here is

whether there was any representation made by Mr X that

lead the equipment supplier to believe that Mr X is an officer

of the company and that he is authorized to enter into the

transaction for the supply of the equipment. If so, then it all

likelihood the company will be bound by the transaction and

pay the RM1,000,000.00 and it would not matter if there

were cheaper or better equipment of the like elsewhere.

ACROSS

2. Islamic insurance concept

4. An initial period of new employment

7. Synonym of apparent, visible, or exhibited

9. An individual who purchases and uses

product and services

12. To surrender possession or occupancy

14. An order issued by the court directing a

person to do or refrain from certain action

16. What you get from parking on the yellow

line

17. Latin for “in fact” or “in reality”

18. To convey a property as loan security

19. Wrongful or criminal deception

DOWN

1. Generally to admit receipt of something

2. A civil wrong in French

3. Alternative word for “lawyer”

5. The conditional release of a prisoner be-fore expiry of jail term

6. A court decision that is cited as an exam-

ple or analogy

8. Written evidence of debt issued by a com-

pany

10. A specific law, expressed in writing

11. Basic asset for a business

13. An agreement between two or more per-

sons

15. A judge’s office

8

3

6

15

ACROSS: 2. Takaful; 4. Probation; 7. Ostensible; 9. Consumer; 12. Vacate; 14. Injunction;

16. Summons; 17. Defacto; 18. Mortgage; 19. Fraud

DOWN: 1.Acknowledge; 2. Tort; 3. Counsel; 5. Parole; 6. Precedent; 8. Bond; 10. Statute;

11. Capital; 13. Contract; 15. Chambers


Photo Article inFRAME 2013

FAMILY DAY & STATION GAMES.

BURPS AND GIGGLES ALL THE WAY WITH HOMECOOKED SPECIALTIES.

LAWYER CUM CHEF. PROUD SMILES FROM THE WINNING TEAM

LICENSED TO ARGUE: PUPILS BEING CALLED TO THE BAR.

HARI RAYA POTLUCK IN OFFICE.

"The best of all gifts around any Christmas tree: the presence of a happy family all wrapped up in each other." - Bill Vaughan a.k.a Burton Hillis

“GIVE A HOME A LIBRARY”

CHRISTMAS KRINGLE 2013

PHOTOS CONTRIBUTED BY MEMBERS OF JHJ

MANISAH’S WEDDING

COPYRIGHT © 2014 • JAYADEEP HARI & JAMIL • ALL RIGHTS RESERVED


Owning one’s dream house can represent the ultimate

dream for just about anyone. However, with soaring

and escalating house prices, buying one’s dream house is

not just a matter of saying “I want it” and then signing

on the dotted line. One should always consider whether

he/she is financially ready and the financial implications

involved before buying a property.

Unless you have the financial muscle to buy a property

with cash up front, you’ll first need to secure a loan

from the banks. In deciding the rates on your home

loan, banks will normally look at two things, your credit

worthiness and the level of your income. If it’s your

first property, banks will usually readily give you 80-90%

of the required amount, so long as the installments

come up to no more than one-third of your total in-

come (after taking into account your commitment for

your car loan, personal loan and etc.). If you have a rel-

atively good credit score, the installment may even

come up to half of your net income.

The Government also provides for a “My First Home”

scheme. The scheme allows young working adults not

more than 35 years old, to obtain 100% financing from

banks to purchase their first home selling price ranging

from RM100,000 (minimum) to RM400,000 (maximum).

For individual applicants, their income must be up to

RM5,000 per month and for joint applicants, their in-

come must be up to RM10,000 per month (subject to

individual borrower income not exceeding RM5,000 per

month).

If you receive a home loan of 90%, you will need the

remaining 10% from your savings as deposit to pay for

the rest of the property's price. For example, if your

dream house is RM400,000, you must have at least a

minimum of RM40,000 to pay as deposit.

However, buying and financing your dream house takes

more than just the deposit and the loan, it also involves

miscellaneous fees and other charges.

One of them to look out for is the stamp duties. Stamp

duty is levied on the document of transfer (i.e. the

memorandum of transfer if the title has been issued, or

the deed of assignment if the title has not been issued).

The stamp duty is 1% for the first RM100,000, 2% on

the next RM400,000, and 3% on the subsequent amount

based on the Stamp Act 1949. So, your RM400,000

dream house would attract RM7,000 stamp duty.

Another thing to watch out for is the legal fees. Legal

fees to draft and handle a Sale and Purchase Agreement

and Loan Facility Agreement are regulated by the Solici-

tors Remuneration Order.

For the Sale and Purchase Agreement, legal fees are cal-

culated based on the value of the property. The legal

fees is 1% for the first RM150,000, 0.7% for the next

RM850,000, 0.6% for the next RM2,000,000, 0.5% for

the next RM2,000,000, 0.4% for the next RM2,000,000

and where the consideration or adjudicated value of the

property is in excess of RM7,500,000, it is negotiable on

the excess but the legal fees shall not exceed 0.4% of

such excess. Based on the above, your RM400,000

dream house will command legal fees of RM3,250.

Featured Article Real Estate & Property Industry

About The Author:

SHAHMAN SANGARAN is a law

graduate from the University of

London (External) and read in the

chambers of JHJ under the guid-

ance of Mr Jayadeep Bhanudevan.

[email protected]

“My dream house has ten bedrooms, a four car garage

and walk-in closets. My dream house has a swimming

pool and even sports facilities like a basketball court

and a tennis court. My dream house has a big garden

full of flowers and trees.”

Do you have the Moolah

to purchase your Dream House?

‘If you have a relatively good credit

score, the installment may even come

up to half of your net income.’

http://www.starproperty.my/index.php/articles/investment/are-you-financially-ready-to-buy-a-house-in-malaysia/?search=imoney

Featured Article Real Estate & Property Industry

If you are buying your

dream house directly

from a developer, many

developers may offer

you “free legal ser-

vices” where the Sale

and Purchase Agree-

ment had already been

drafted out for you by the developer’s lawyers. Howev-

er, always bear in mind that they are acting in the best

interests of the developer who is paying their fees and

not you.

For the Loan Facility Agreement, legal fees are calculat-

ed similar to the legal fees for Sales and Purchase

Agreement but with one exception, it is based on the

loan amount and not the value of the property. There-

fore, your RM400,000 dream house with a home loan of

90% will command legal fees of RM2,970.

Usually the bank will also ask your lawyer to register a

charge in its favour. The legal fees for the registration of

the charge will be 10% of the legal fees for the Loan

Facility Agreement which will need to be borne by you.

Please take note however, that there is a minimum cap

of RM300. Therefore, for your RM400,000 dream

house, you must pay RM300 and not RM297. The banks

will usually also asks the lawyer to register a caveat in

its favour. The legal fee for the registration of the cave-

at is RM350.

After considering the deposit, the fees and the charges,

the next question to ask is whether you can afford the

monthly installments contained in the Loan Facility

Agreement. The current market rate is 4.2% to 4.4%

p.a. interest for a standard home loan. As such, you will

need to pay a minimum of RM1,760 per month over the

next 30 years in order to finance your RM400,000

dream house with a home loan of 90%. To quickly calcu-

late the monthly installments charged for a home loan

of any other values, you can use the online calculators

which can usually be found on the bank’s website.

Most financial books and magazines would advise to on-

ly use one-third of your total income to pay off your

home loan. In other words, following their advise, you

or your household should have an income of at least

RM5,280 per month to afford your RM400,000 dream

house. Always be mindful of the fact that interest rates may

increase in the coming years, so don’t calculate monthly

loan installments which are too high a proportion of your

monthly income.

In conclusion, a great deal of sense and thought must be

put before purchasing one’s dream house. Owning your

dream house is always nice but one should always con-

sider his/her financial positions first before making this

dream a reality.


American International Assurance Co Ltd v

Nadarajan a/l Subramaniam [2013] 5 MLJ 195 The correct estimation of income is essential in determining in-

surance coverage. The estimation of income may affect the insur-

ance company’s decision on whether to accept the coverage risk

and to determine the premium to be applied on the said insur-

ance policy.

Karn Woon Lin & Anor v Cheah Chor Bok

[2013] 4 MLRA 135 For a will to be valid, a testator must have testamentary capacity.

Mere bodily ill-health (i.e. brain cancer) or imperfect memory is

insufficient to vitiate testamentary capacity. Hence, the testator

being in a confused or depressed state when the will was drafted

does not invalidate a will.

Krishnaveni a/p Munusamy & Anor v Bawanes-

wary a/p R Chinniah & Ors [2013] 10 MLJ 106 Where a nomination under the Employees Provident Fund Act

1991 was made, it would not operate as a will. Hence, there

would be no valid claim under a 1st EPF nomination if a 2nd EPF

nomination was done thereafter, even if the 1st EPF nomination

was not expressly revoked.

Dato' Seri Kong Cho Ha (as Secretary General

and claiming for Malaysia Chinese Association

(MCA)) v Kajang Municipal Council (MPKJ)

[2013] 10 MLJ 56 Even if the land on which a building was erected belonged to the

state government, so long as the building was within the state

municipal council’s knowledge for a reasonable period of time

without any negative reaction from the state authority as land-

lord, a reasonable expectation to occupy is created.

Abdul Razak bin Datuk Abu Samah (claimed as

a widower to Fatimah @ Rohani bt Zainal, on

behalf of the deceased) v Raja Badrul Hisham

bin Raja Zezeman Shah & Ors [2013] 10 MLJ 34 A consulting doctor should counsel the patient on material infor-

mation such as inherent dangers and increased risk of complica-

tions or death arising from related anticipated complexities prior

to a pre-surgical or a surgical decision. The doctor also had a

duty to inform the patient’s next of kin regarding the nature of

surgery and its risks.

http://www.starproperty.my/index.php/articles/investment/the-myth-about-conflict-of-interest-in-property-matters-a-k-a-why-it-is-a-good-idea-to-be-represented-in-all-legal-matters/

http://www.starproperty.my/index.php/articles/investment/the-myth-about-conflict-of-interest-in-property-matters-a-k-a-why-it-is-a-good-idea-to-be-represented-in-all-legal-matters/

ernance is to be considered. Under the FSA, BNM’s over-

sight powers now extend to companies that own more

than 50% of the shareholding or are in “de-facto” control

of the financial institution.

This is arguably necessary for more effective governance

if ever required to stem or pre-empt an impending crisis.

We have learnt from recent experience that not having

the necessary authority at law at a time when needed

means that the government can only look forward to

cleaning up after the fact; the question is how big a mess

has already been made when the time has passed.

With powers given to BNM to remove directors and

CEOs who have shown themselves unfit and improper to

govern or lead any major financial institution, drastic

events may be averted without catastrophic consequenc-

es.

Enhanced Directors’ Duties

Taking cue from the reforms carried out in the UK, the

directors’ duties as contained in the FSA are almost a

carbon copy of the equivalent chapter in the UK’s Com-

panies Act 2006. Admittedly however, the UK reforms

have done an excellent job of clearly setting out the du-

ties of a directors, which will serve both the directors

and shareholders to know, in respect of the former, what



The Parliament has enacted the Financial Services Act

2013 (“FSA”) and the Islamic Financial Services Act

(“IFSA”) 2013 in March of this year which will have a

major impact on financial institutions here; but arguably

it will be a positive impact. In light of recent global eco-

nomic crises, the new Acts are intended to address and

prevent the lack of corporate governance that, most

would agree, could have prevented the crises.

The coming into force of the FSA consolidates (and

thereby repealing) the Banking and Financial Institutions

Act 1989 (BAFIA), the Insurance Act 1996, the Exchange

Control Act 1953 and the Payment Systems Act 2003.

Similarly in the case of the IFSA, it consolidates and re-

peals the Islamic Banking Act 1983 and Takaful Act 1984.

The consolidation is generally seen as a positive move

providing more efficacious and prudent regulation, but

both the FSA and IFSA are also expected to bridge the

gaps left under previous legislations. Regardless, the FSA/

IFSA is expected to have significant impact in various

industries:

Wider powers for Bank Negara Malaysia (BNM)

Previously, BNM only had supervisory powers over finan-

cial institutions but not over its holding companies; a fact

that needs to be addressed if any sort of effective gov-

About The Author:

ANDREW CHEE graduated with

honours from the University of

London (External) and had since

joined JHJ’s corporate team after

being called to the Bar in 2012.

[email protected]

‘Under the FSA, BNM’s oversight

powers now extend to companies

that own more than 50% of the

shareholding…’

the Financial Services ActFinancial Services Act 2013 and the

Islamic Financial Services ActIslamic Financial Services Act 2013

already holding composite licenses will be likely granted

both single licenses provided they are held (and the busi-

ness run by) separate entities although not expressly stat-

ed in the Acts. It is probable that the reasoning for

“single licenses only” policy may be due to the fact it

makes governance that much easier.

Enhanced Consumer Protection

Along with changes affecting the corporate structure and

overall governance, the FSA/IFSA includes increased pro-

tection for consumers and policy holders for insurance

and takaful certificates.

A misstatement of age henceforth shall not be grounds

for any of these providers to void any coverage on such

grounds alone. Instead, the new Acts require that the

providers still pay out the coverage/compensation re-

quired but merely adjusted or varied to reflect the policy

holder’s true age.

In group policies, a person insured in such a group who

has paid his premium to the group policy owner shall be

entitled to coverage even if the group policy owner has

not paid the said premium to the insurer.

Where a consumer has made a careless or reckless mis-

representation, his policy may not necessarily be void

based solely on such misrepresentation. The Acts provide

that in such instances, the remedies available to the con-

sumer would be the remedies available if there was no

misrepresentation and the consumer had stated the truth.

For example:

if the insurer would not have entered or renewed

the contract of insurance had the insurer been told

the truth, it may void the contract but must refund

all premiums paid thereunder; or

if the insurer would have entered or renewed the

contract on different terms, then the insurer shall pay

out to the consumer any of his entitlement in accord-

ance to those different terms.

The consumer is not remedy-less and entitled to nothing

based on a technicality or an honest mistake. Deliberate

and reckless misrepresentation however is a different

story.



exactly are the boundaries and extent of their responsi-

bilities and what rights a shareholder may have against an

errant director in respect of the latter.

Whereas previously one would have to resort to the

convoluted realm of common law and to examine a long

history of decided cases and precedents to only have an

inkling (without any assurance of certainty) of what the

foregoing entails, now directors’ duties clearly include

and are categorized as follows:

the duty to act in good faith and in the best interest

of the institution;

the duty to exercise reasonable care, skill and dili-

gence;

the duty to exercise powers only for its intended

purposes; and

the duty to exercise sound and independent judg-

ment (without fettering his discretion).

The Divestment and Separation of Business

Insurance and Takaful providers are now prohibited from

using one single entity to carry out both:

in the case of Takaful – family and general takaful

business;

in the case of Insurers – life insurance and general

insurance.

This is a major area of impact for composite license hold-

ers as they are required to convert into a single insur-

ance or takaful license only. Nevertheless all affected

players are given a grace period of five (5) years (from

the date of the coming into force of the Acts) to com-

plete the same and divest one arm of their business.

However, it is anticipated and speculated that players

‘A misstatement of age henceforth

shall not be grounds for any of these

providers to void any coverage on

such grounds alone.’

Kuala Lumpur . Petaling Jaya . Kota Bharu . Melaka

This is a publication produced by the JHJ Knowledge Department. For any inquiries, please do not hesitate to contact

us: T: 03-2096 1478 | F: 03-2096 1480 | E: [email protected] | W: www.jhj.com.my

Publisher: Messrs Jayadeep Hari & Jamil, Suite 2.03 (2nd Floor), Block A, Plaza Damansara, Bukit Damansara, 50490 KL.

Printers: Pressworks Enterprise, No 20, Jalan Usaha Satu 25/2A, 40400 Shah Alam.