IN THE COURT OF APPEAL OF MALAYSIA IN PUTRAJAYA

APPELLATE JURISDCITION
CIVIL APPEAL NO :______________2015

BETWEEN

KANG ENG CHEW [Identification Registration No: 620617-08-5495]

(Berniaga atas nama dan gaya KLY FURNITURE
APPELLANT

[Co. Registration No: 001407086-M]

AND
GUZZI SDN. BHD.
(Company Registration No: 238629-W)

RESPONDENT

IN THE HIGH COURT OF MALAYA IN SHAH ALAM

IN THE STATE OF SELANGOR DARUL EHSAN, MALAYSIA
CIVIL SUIT NO: 22NCVC-431-08/2014

BETWEEN

KANG ENG CHEW [Identification Registration No: 620617-08-5495]

(Berniaga atas nama dan gaya KLY FURNITURE
[Co. Registration No: 001407086-M]

PLAINTIFF

AND
GUZZI SDN. BHD.
(Company Registration No: 238629-W)
1

DEFENDANT

-----------------------------------------------------------------------------------------------CORUM:
Y.A. DATO HAJI AKHTAR BIN TAHIR
JUDGE
HIGH COURT OF MALAYA
SHAH ALAM, SELANGOR DARUL EHSAN
-----------------------------------------------------------------------------------------------PLAINTIFFS COUNSEL

DEFENDANTS COUNSEL

Tetuan Valerie Chong & Co

Advocates & Solicitors
B-18-28, The Scott Garden
Kompleks Rimbun Scott
289 Jalan Klang Lama
58000 Kuala Lumpur
Tel. No: 03 7986 0828
Fax. No: 03 7983 0016
Email: vc2@valeriechong.com
Ruj: VAL/21051539/KLY

Tetuan Shearn Delamore & Co

Advocates & Solicitors
7th Floor, Wisma Hamzah-Kwong Hing
No.1, Leboh Ampang
50100 Kuala Lumpur
Tel. No: 03 2027 2727
Fax. No: 03 2078 5625 / 2078 2376
Ruj: SD(DR)3947835 (NAD/SME/TAY)

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GROUNDS OF JUDGMENT

Introduction

1)

The Claim by the Plaintiff against the Defendant in the present suit
has been disposed of by way of Order 14A of the Rules of Court
2012. Parties in this suit were directed by the court on its own
motion to submit on the following points of law:

a) Whether the factory which was the subject matter of the tenancy
agreement, was built on a land with the condition "agriculture";

b) Whether or not the plaintiff had failed to apply for a license from
MBPJ for conducting the business of manufacturing furniture.

Facts of the Case

2)

The Plaintiff rented a ready built factory from the Defendant at a

monthly rental of RM11,500.00 for a period of 3 years with an
option to extend the tenancy for another 2 years commencing from
15.8.2013 and to expire on 14.7.2016.

3)

The Plaintiff paid all the requisite rental deposits of RM 34,500.00

and RM 11,500.00 as utilities deposit, and in subsequent to that,
Tenancy Agreement for the said factory was executed by both
parties on 15.8.2013.

4)

On or about early March, 2014, Plaintiff received a notification

letter from the Majlis Perbandaran Subang Jaya (MPSJ)
informing the Plaintiff that the said factory was being built without
any approvals from the said MPSJ and to cease all activities on the
3

said factory and to rectify the land on which the said factory was
being built into its original status failing which penalty and jail
sentenced might be imposed.

5)

This situation had left the Plaintiff with no other choice but to
terminate the Tenancy Agreement.

Plaintiffs Claim

6)

The Plaintiff had agreed to the Tenancy Agreement solely based

on the representation by the Defendant that the said premise is fit
for the operation of a factory.

7)

As a result of the false representation from the Defendant, not only

that the Plaintiff has to rent a new place to run their business, the
Plaintiff had further suffered losses and damages as what they
have prayed as follows:
a) Costs on renovation of RM 557, 432.00 conducted on the said
factory;
b) Transportation costs of RM 24, 580.00;

c) Costs of RM 28,500.00 to rent a new business place; and

d) Damages of RM 500,000.00 for lost of profit.

Defendants Defence

8)

Around March 2013, the Defendant was approached and

informed by Mr Eric Lee Wee Kong (Mr Lee) a real
estate agent, that he had a potential tenant who was
interested to rent the Defendants premises and this
potential tenant was in the business of ma nufacturing
furniture. Mr Chan expressly informed Mr Lee that the
category of use of the Demised Premises was only for
general plantations and any potential tenant ought to be
made aware of the same.

9)

Subsequently, Mr Lee informed the Defendant that the

Plaintiff desired to rent the Demised Premises which led
to the signing of the said Tenancy Agreement.

10) At all material times prior to the execution of the Tenancy

Agreement,

the

Defendant
5

had

never

met

with

the

Plaintiff. The Defendant had only been informe d of the

Plaintiffs communication through Mr Lee.

11) On 4.4.2014, the Plaintiff issued its letter of demand and

indicated

his

intention

to

terminate

the

Tenancy

Agreement pursuant to the MPSJs Notice. This situation

further had led to the suit filed befor e the present court.

Findings

The factory building erected on the Demised Premises which is

an agricultural land

12.

The Principle with regards to express condition and restriction in

interest on land has been clearly emphasized under Section 120
and Section 125 of the National Land Code 1965 (NLC)
which reads as follows:

Section 120 of the NLC:

Imposition of express conditions and restrictions in interest on

alienation under this Act
6

(1)

Subject to the provisions of this section, the State Authority

may alienate land under this Act subject to such express conditions
and restrictions in interest conformable to law as it may think fit.
(2) The conditions and restrictions in interest to be imposed under
this section in the case of any land shall be determined by the
State Authority at the time when the land is approved for
alienation.
(3)

Section 125 of the NLC:

(1) A breach of a condition requiring continuous performance

shall arise so soon, and continue so long, as the condition is not
complied with.
(2)

A breach of a condition subject to a fixed term shall arise(a)

in the case of a condition requiring the doing of any act

within any time (being the time specified therein, or that

time as extended under section 107) upon the expiry of that
time without the act having been done;
7

(b)

in the case of a condition requiring any act to be

refrained from until any time, upon the doing of that act
before that time.

13.

By allowing the land to be used for industrial purposes while in

fact, clearly that the land is designated to be an agricultural land
would violate and defeat the law imposed on the land by the State
Authority.

14.

As such, could a contract that is going against the provision of the

law, specifically Section 120 and Section 125 of the NLC be made
enforceable and valid as prescribed under the Contracts Act 1950?

15.

To answer the said question, I referred to Section 24 of the

Contracts Act 1950 which clearly reads read as follows:

24. What considerations and objects are lawful, and what

not.

The consideration or object of an agreement is lawful, unless:

(a)

it is forbidden by a law;

(b)

it is of such a nature that, if permitted, it would defeat

any law;

(e)

the court regards it as immoral, or opposed to public

policy.
In each of the above cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the
object or consideration is unlawful is void.

16.

I further referred to the case of Singma Sawmill Co. Sdn Bhd v.

Asian Holdings (Industrialised Buildings) Sdn Bhd (1980) 1
MLJ 21. The Federal Court in this case has held at page 22 to 23
that the tenancy agreement was void and unenforceable as the
use of land under the tenancy agreement was in breach of the
NLC.

The applicants have let the land together with a factory building on
it to the respondents solely for the purposes of operating a factory.
For this purpose the respondents have erected machinery on the
9

land. It is clear that the land is being let out in breach of the
conditions under section 120 of the National Land Code. In my
opinion the use of the land is therefore unlawful and the letting out
of the land for the unlawful purpose would be illegal.

By allowing the land to be used for industrial purposes would

defeat the law in that it would defeat the conditions imposed on the
land by the State Authority. Since the consideration for the contract
is illegal the contract itself would be void or voidable. A contract
cannot be enforced if the promise by one party is illegal. In other
words a void contract cannot be enforced.
.
We would like to refer to three cases which we think are also
relevant. In Arumugam v Somasundram [1933-34] FMSLR 322,
the driver and the owner of a private motor car used it for hire
purposes

contravening

section

44 of

the

Motor

Vehicles

Enactment, 1928. It was held that both the parties were in pari
delicto and that the driver could not claim any wages from the
owner. There was nothing illegal in agreeing to drive a car for hire,
but if the object of the agreement was to drive an unlicensed
10

car for hire, then the agreement was unlawful as being

forbidden by law, or of such a nature that if permitted it would
defeat the provisions of the law.

17.

Thus, from the clear provision of Section 24 of the Contracts Act

1950 and the decided case of Sigma Sawmill v Asian Holdings,
it is clear that a contract that is tainted with illegality due the fact
that it is forbidden and going against the law cannot be made
enforceable. In fact, it is void at the first place and both parties
could not benefit from the said void Agreement.

18.

Due to the above principles, I am also of the view that regardless

whether or not either party have the knowledge of the said
illegality, the contract remains unenforceable and void ab initio.

19.

I further refer to the case of THONG FOO CHING & ORS v

SHIGENORI ONO [1998] 4 MLJ 585, it was held by the Judge
allowing the Appeal as follows:
(Per Ahmad Fairuz JCA) The respondent was aware that
both the agreements were actions to avoid paying higher
taxes which should have been paid to the government. The
11

respondent's action was clearly contrary to public policy. The

considerations in the agreements were unlawful and as such,
the agreements were void and unenforceable. What the
parties did had the effect of defeating revenue laws and the
court cannot knowingly enforce a void agreement.
.
Moreover, as the defence is that of illegality, my attention
was drawn to the Privy Council case of Keng Soon Finance
Bhd v MK Retnam Holdings Sdn Bhd & Anor [1989] 1 MLJ
4571998 4 MLJ 585 at 598 where it held that 'the illegality of
an agreement sued upon is a matter of which the court is
obliged, once it is apprised of facts tending to support the
suggestion, to take notice ex proprio motu and even though
not pleaded (see eg Edler v Auerbach [1950] 1 KB 359) for
clearly, no court could knowingly be party to the enforcement
of an unlawful agreement.

The Plaintiffs unlicensed operation at the Demised Premises

20. The Plaintiff had never denied the fact that the operation of the
furniture business on the demised premise is without a valid license.

12

21.

On the other hand, the Plaintiff had only contended that whether or
not the Plaintiff has any valid license to operate on the said factory
has no consequences to the Plaintiffs claim as the Plaintiff would
not have been able to obtain any approval from the MPSJ for a
business license as the said factory itself did not have any prior
approval from the said MPSJ.

22. In my view, in any way the stand taken by the Plaintiff could not
prevail. Not only that the industrial activity is conducted on an
agricultural land, the operation of the business itself is without a
valid license. An illegal act cannot prevail over another illegal act.

23.

I further agree with the Submission by the Plaintiffs counsel that

the act of the Plaintiff in not obtaining any valid license to operate
and conduct the business has violated the LICENCING OF
TRADES, BUSINESS AND INDUSTRIES (SUBANG JAYA
MUNICIPAL COUNCIL) BY-LAWS 2007 which reads as follows:

3. No person shall operate any activity of trade, business

and industry or use any place or premise in the local area of

13

the Council for any activity of trade, business and industry

without a licence issued by the Licencing Authority.

24. It clearly signifies that the Plaintiffs operation to manufacture

furniture frame at the Demised Premises contravenes the written
law which again, renders the Tenancy Agreement void and
unenforceable under Section 24 of the Contract Act 1950.

25.

In the case of Lee Nyan Hon & Bros Sdn Bhd v Metro Charm
Sdn Bhd [2009] 6 MLJ 450, it was held at headnote [3],
paragraphs 67 and 68 that:

[67] It is quite apparent that the plaintiff is relying on

its illegal acts in not procuring the building plan and the
licence to operate the entertainment outlet in the
building to advance its claim against the defendant. I
have no hesitation in striking out the plaintiff's claim
based on the ex turpi causa non oritur actio principle. It
is a principle that is applicable to all causes of action
including claims in tort. Beldam LJ delivering the judgment of
the

court

in Clunis

14

Camden

and

Islington

Health

Authority [1998] QB 978 (CA) at p 987 had this to say about

the ex turpi causa non oritur actio principle:

But whether a claim brought is founded in contract or in tort,

public policy only requires the court to deny its assistance to
a plaintiff seeking to enforce a cause of action if he was
implicated in the illegality and in putting forward his case he
seeks to rely upon the illegal acts.

[68] And Lord Mansfield in Holman et al' v Johnson, alias

Newland (1775) 98 ER 1120 at p 1121; 1 Cowp 341 at p 343
explained the ex turpi causa non oritur actio principle in
broad terms in this way:

No court will lend its aid to a man who founds his cause of
action upon an immoral or an illegal act. If, from the plaintiff's
own stating or otherwise, the cause of action appears to
arise ex turpi causa, or the transgression of a positive law of
this country, there the court says he has no right to be
assisted. It is upon that ground the court goes; not for the

15

sake of the defendant, but because they will not lend their aid
to such a plaintiff.

26.

Further, equity cannot assist a party who does not come with clean
hands. In Teng Meow Ching v Chia Ngim Fong & Anor [1991] 3
MLJ 452, the High Court states at headnote [3] as follows:

Even if s 17(1) of the Act was not applicable, equity would

not assist the plaintiff. Equity cannot assist a party who has
been in breach and still continues to be in breach of the law.
He who comes into equity must come with clean hands. The
plaintiff was an experienced and successful businessman
who had the benefit of legal advice. The inference is that he
was aware of the requirements of the Act but did not comply
with them.

Plaintiffs Remedy as a result of the Illegal Agreement

27.

Section 66 of the Contracts Act 1950 provides as follows with

regards to remedy of a void agreement:

16

66. Obligation of person who has received advantage under void

agreement, or contract that becomes void.

When an agreement is discovered to be void, or when a

contract becomes void, any person who has received any
advantage under the agreement or contract is bound to
restore it, or to make compensation for it, to the person from
whom he received it.

28.

A clear explanation of the said provision with regards to remedy of

a void agreement had been emphasized in the case of Melatrans
Sdn Bhd v Lim Tian Huat (Carah Enterprise Sdn Bhd, third
party) [2011] MLJU 1184:

In law it is provided that where a contract becomes void any

person who has received any advantage under such contract
is bound to restore it (s 66 Contracts Act 1950). It is
irrelevant whether any party committed any breach of the
terms of the contract. Suffice it to say that any monies or
advantage received by a party must be restored to the other
party (Ted Bates (M) Sdn Bhd v Balbir Singh Jholl [1979] 2
MLJ 257 (FC)). Applying the principles above to the present
17

case, as the SPA has become void the defendant is bound to

make full restitution of the Deposit to the plaintiff.

29.

In my view, the only advantage that had been received by the

Defendant from the Plaintiff trough out the Tenancy Agreement as
what had been pleaded by parties are rental deposit of
RM 23, 000.00 and utilities deposit of RM 11, 500.00.

Conclusion

30.

After careful consideration of all the relevant facts and submissions

by parties, I therefore ordered that the Plaintiffs claim be
dismissed. Nonetheless, Defendant is to return to the Plaintiff any
advantage received from the Plaintiff to wit the rental and utility
deposits.

31.

I further ordered each party to bear its own costs.

18

Dated: 21 May 2015

(DATO HAJI AKHTAR BIN TAHIR)

Judge
High Court of Malaya
Shah Alam, Selangor Darul Ehsan
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COUNSELS

Valerie Chong Wei Chen

Tetuan Valerie Chong & Co

for the Appellant

Cik Soo Siew Mei

Tetuan Shearn Delamore & Co.

19

Respondent