Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

ILLEGALITY AND CONTRACT – RM49 MILLION MISTAKE? ADW2 STRUCK DOWN FOR NO CONSIDERATION DIMENSI SDN BHD LEGALLY VALID?

1. Summary and Facts

In Kuala Dimensi Sdn Bhd v Port Kelang Authority [2025] 2 MLJ 238, the Federal Court considered whether the Supplemental Agreement for Additional Development Works (“ADW2”), executed on 26.4.2006, was legally valid despite allegedly lacking consideration.

Port Klang Authority (“PKA”) appointed Kuala Dimensi Sdn Bhd (“KDSB”) as the turnkey contractor for the Port Klang Free Zone (“PKFZ”) project. Among several agreements, ADW1 set the interest rate at 5% per annum. ADW2 was entered into later, increasing the interest rate to 7.5% p.a., resulting in an additional RM49.367 million in payment to KDSB.

KDSB argued that ADW2 was supported by consideration in the form of financial strain they undertook to fund both ADW1 and a newly signed agreement (“NADW”). PKA contended that ADW2 was void for want of consideration under Section 26 of the Contracts Act 1950 (“CA 1950”).

2. Legal issues

• Whether consideration must be found within the four corners of the agreement, or can extrinsic evidence be admitted?
• Whether the “practical benefit” test from Williams v Roffey applies in Malaysia?
• Whether an agreement variation be enforceable even without fresh consideration, simply because parties acted upon it?
• Whether doctrine of estoppel validate an agreement that lacks consideration?

3. Court Findings

• The Court held that ADW2 lacked valid consideration. It found no express or implied reference in ADW2 to NADW, nor was there any real financial burden proven by KDSB, as financing had been secured through SPVs (VVB and FZCB) well in advance.

• Extrinsic evidence was inadmissible, as KDSB did not satisfy the requirements of Sections 91 and 92 of the Evidence Act 1950. The letter KDSB relied upon (dated 19.4.2006) did not prove any link between ADW2 and NADW.

• The “practical benefit” test in Williams v Roffey Bros was explicitly rejected as applicable Malaysian law. The Court emphasised that it was inconsistent with long-established principles and had not been adopted in Malaysia.

• Variation of a contract must still meet the essential requirement of consideration. Since ADW2 was a separate agreement, it had to stand on its own. The Court held that even if ADW2 was a variation, it still required fresh consideration, which was absent.

• The Court held that estoppel cannot override statute. The payment made by PKA under ADW2 (in July 2011) was made under protest and after proceedings had commenced. Thus, it could not amount to a waiver or create enforceability under estoppel.

4. Practical Implications

This decision reinforces that contractual variations in Malaysia must be supported by clear and express consideration within the contract. The court’s refusal to apply the practical benefit doctrine confirms that traditional contract principles remain intact. Estoppel cannot be invoked to save an agreement that is void for illegality or lack of consideration.

Back to Latest Legal Updates

Recent Post

CIVIL PROCEDURE – STRIKE OUT UNDER ORDER 18 RULE 19(1)(A),(B) RULES OF COURT 2012 – EXTENSION OF TIME APPLICATION

In Badan Pengurusan Subang Parkhomes v Zen Estates Sdn Bhd [2025] MLJU 3591, the High Court reaffirmed that non-compliance with Order 37 Rule 1(5) of the Rules of Court 2012 does not automatically invalidate assessment of damages proceedings. The Court held that procedural rules must be read with the overriding objective of ensuring justice, and that the six-month time limit to file a Notice of Appointment is directory, not mandatory. Finding no prejudice to the defendant and noting active case management by the plaintiff, the Court dismissed the developer’s strike-out bid and allowed an extension of time for assessment to proceed. The decision underscores the judiciary’s commitment to substantive fairness over procedural rigidity in post-judgment proceedings.

Read More »
16 November ,2025 No Comments

TORT – PURE ECONOMIC LOSS BAR REAFFIRMED: MMC LIABLE FOR NEGLIGENCE BUT PROTECTED FROM LOST PROFIT CLAIMS

In Asia Pacific Higher Learning Sdn Bhd v Majlis Perubatan Malaysia & Anor [2025] MLJU 3144, the High Court awarded over RM2 million in damages against the Malaysian Medical Council (MMC) for negligence, breach of statutory duty, and misfeasance during its accreditation of Lincoln University College’s medical programmes. While the court allowed direct financial losses such as survey costs, it barred claims exceeding RM550 million for lost profits, reaffirming the Federal Court’s rulings in Steven Phoa and UDA Holdings that pure economic loss is not recoverable from public or statutory bodies. The second defendant was further ordered to pay RM100,000 in exemplary damages for acting with targeted malice, marking a rare personal liability finding against a regulatory officer.

Read More »
16 November ,2025 No Comments

ERINFORD INJUNCTION – COURT OF APPEAL CLARIFIES: EX-PARTE ERINFORD INJUNCTIONS ARE THE EXCEPTION, NOT THE RULE

In Edisijuta Parking Sdn Bhd v TH Universal Builders Sdn Bhd & Anor [2025] 5 MLJ 524, the Court of Appeal clarified that ex parte Erinford injunctions at the appellate stage should only be granted in truly exceptional circumstances where giving notice would defeat the purpose of the order. Wong Kian Kheong JCA held that, under rule 50 of the Rules of the Court of Appeal 1994, such applications should generally be heard inter partes to ensure fairness and prevent abuse. Exercising powers under section 44(1) of the Courts of Judicature Act 1964, the Court granted a conditional interim Erinford injunction pending appeal, fortified by a RM200,000 deposit and an undertaking to pay damages. The ruling provides clear guidance on balancing urgency, procedural fairness, and judicial efficiency in appellate injunctions.

Read More »
16 November ,2025 No Comments

TOTAL FAILURE CONSIDERATION – FEDERAL COURT OVERRULES BERJAYA TIMES SQUARE: TOTAL FAILURE OF CONSIDERATION REDEFINED

In Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong [2025] 6 MLJ 327, the Federal Court unanimously overruled Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd and clarified that the doctrine of total failure of consideration applies only to restitutionary relief, not to contractual termination. The Court held that the correct test is whether the promisor has performed any part of the contractual duties in respect of which payment is due, adopting Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574. Finding that the appellants had partly performed their obligations and the respondent had derived benefits, the Court rejected the respondent’s claim for restitution and restored the appellants’ contractual claim. The landmark decision restores clarity between contract and restitution, reinforcing commercial certainty in Malaysian law.

Read More »
16 November ,2025 No Comments

CONTRACT (BILL OF LADING) – NO DUTY TO DETECT FRAUD: COURT CLEARS MAERSK OF LIABILITY FOR FALSE CONTAINER WEIGHTS

In Stournaras Stylianos Monoprosopi EPE v Maersk A/S [2025] 2 Lloyd’s Rep 323, the English Commercial Court held that carriers are not liable for fraudulent misdeclarations by shippers where bills of lading are issued for sealed containers. The Court ruled that Maersk had no duty to verify or cross-check declared weights against Verified Gross Mass (VGM) data under the SOLAS Convention, as its obligation under the Hague Rules extended only to the apparent external condition of cargo. However, the judgment signals that a limited duty of care could arise in future where a carrier is put on notice of fraud. For now, carriers may rely on shipper declarations, but consignees must exercise commercial vigilance and due diligence when relying on bills for payment.

Read More »
16 November ,2025 No Comments

EXEMPLARY DAMAGES – STATUTORY BODY DUTY – DAMAGES – OBTAINING APPROVAL

In Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290, the Federal Court reinstated nearly RM3.56 million in special damages and awarded RM100,000 in exemplary damages against TNB for wrongfully disconnecting electricity to an ice factory. The Court ruled that “strict proof” of special damages does not mean a higher burden beyond the civil standard of proof and affirmed that TNB, as a statutory monopoly, breached its statutory duty by using disconnection as leverage to collect payment. The judgment underscores that public utilities cannot misuse statutory powers, and consumers wrongfully deprived of essential services may be entitled to punitive remedies in exceptional cases.

Read More »
16 November ,2025 No Comments
en_USEN
zh_TWZH ms_MYMY en_USEN
× Contact Us