FRAUD AND

MISREPRESENTATION
LAW 436- SEPT15-JAN16
FRAUD
 s.17 CA 1950
Fraud includes any of the following acts committed by
a party to a contract, or with his connivance, or by his
agent, with intent to deceive another party thereto or
his agent, or to induce him to enter into the contract:

(a) the suggestion, as to a fact, of that which is not true

by one who does not believe it to be true;
(b) the active concealment of a fact by one having
knowledge
or belief of the fact;
(c) a promise made without any intention of performing
it;
(d) any other act fitted to deceive; and
(e) any such act or omission as the law specially
declares to be
fraudulent.
Elements
s.17(a)
1. A suggestion to a fact,

2. The fact suggested is not true

3. The suggestion was made by a person

who does not believe it to be true

Intention to deceive
Illustration
A, intending to deceive B, falsely represents that
five hundred gantangs of indigo are made
annually at As factory, and thereby induces B to
buy the factory. The contract is voidable at the
option of B.
(illustration (a) s.19
Kheng Chwee Lian v Wong Tak Thong [1983] @
MLJ 320 FC
TJ found that the resp had been misled into
signing an agreement which resulted in him
getting a smaller portion of land than what was
earlier agreed
s.17(b)-Active concealment
i. Active concealment of fact and
ii. The concealment was made by a person
who has knowledge of it
Ilustrations:
B, having discovered a vein of ore on the
estate of A, adopts means to conceal, and
does conceal, the existence of the ore from
A. Through As ignorance B is enabled to
buy the estate at an undervalue. The
contract is voidable at the option of A.
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A is entitled to succeed to an estate at the death
of B; B dies; C, having received intelligence of
Bs death, prevents the intelligence reaching A,
and thus induces A to sell him his interest in the
estate. The sale is voidable at the option of A.
Tay Tho Bok v Segar Oil Palm Estate Sdn Bhd
[1996] 3 MLJ 181
HC found that there was an active concealment
by the defs about the utilities for water
pipelines and transmission cables on the land
when the sold the lands to the pls and this
amounted to fraud.
 s.17(c)- no intention to perform
promise
i. A promise was made
ii. There was no intention to perform the
promise
Datuk Jagindar Singh v Tara Rajaratnam
[1983] 2 MLJ 127
HC held that fraud was proved because the
def did not have the intention to
perform the promises made to the plf.
*Note Abd Razak Js judgment about the
statement of intention.
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Jong Chuk v Chong Tung Sang [1999] 2 AMR
2381
HC found from the conduct of the parties tt
they had no intention to be bound by the
terms and conditions of the said
agreement from the very beginning.
Magnum Finance Bhd v Tan Ah Poi [1997] 4
CLJ Supp 44 contract of hire purchase of
a car that was never registered with the
RTD forged registration
s.17(d) and (e)act fitted to
deceive and act or omission
declared to be fraudulent
s.17(d) is said to be a broad scope of fraud
inserted for the sake of abundant
caution. This was applied in the Kheng
Chwee Lian and Jong Chuk cases.
s.17(e) applies where the law specifically
declares an act or omission to be
fraudulent; also applies where a
disclosure of certain kinds of act is
expressly required by law.
Does Silence Amount to
Fraud?
As a general rule no, except in two
circumstances:
1. There exist a duty for a person to speak

2. The silence in itself amount to speech

See illustrations under s. 17

Burden of Proof
Lies on the parties asserting fraud.
Datin Zainun bt Ismail v Tuan Minah bt Syed
Abd Rahman [1980] 1 MLJ 100
- A high standard of proof is required on the

party who seeks to impeach the validity of

the agreement
- The standard is set at between the lower

requirement of proof on the balance of

probabilities to the higher requirement of
proof beyond reasonable doubt in different
cases. Different thresholds.
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Is it proof of fraud in civil or criminal
proceedings?
Lau Hee Teah v Hargill Engineering [1980]
- Abdoolcader J: proof of fraud in civil cases is

on a balance of probab., but the degree will

vary from case to case
- The courts have applied varying degrees of

probability.
In Datuk Jagindar Singh, the FC applied proof
beyond reasonable doubt in civil proceedings
and this has been followed in several cases.
MISREPRESENTATION
S.18 CA 1950
(a) the positive assertion, in a manner not
warranted by the information of the person
making it, of that which is not true, though he
believes it to be true;
(b) any breach of duty which, without an intent to
deceive, gives an advantage to the person
committing it, or anyone claiming under him,
by misleading another to his prejudice, or to
the prejudice of anyone claiming under him;
and
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(c) causing, however innocently, a party to
an agreement to make a mistake as to the
substance of the thing which is the subject
of the agreement.
There are 3 types of misrep:
a. Fraudulent

b. Negligent

c. Innocent

Abd Razak bin Datuk Abu Samah v Shah

Alam Properties Sdn Bhd [1999] 2 MLJ 500
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Gopal Sri Ram JCA- ..the state of mind of the
representor at the time he made the
representation to the representee varies
according to the circumstances of each case
Chuah Tong Yong v KL Golf & Country Club
[2003]
Abdul Wahab J: Elements of misrepresentation-
i. representation, ii. Plf was induced by it, iii.
The representation is untrue, iv.it is a suitable
case for rescission.
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Low Kon Fatt v Port Klang Golf Resort Sdn
Bhd [1998] 6 MLJ 448
Kamalananthan Ratnam J: mere
exaggeration cannot be held to be a
representation. A mere puffing and
gloating of ones goods ought to be taken
with a pinch of salt..but if the puffing and
gloating had both the object and result of
inducing the representee to enter into the
contract, then it forms a representation
Difference between s.17
and s.18
Main difference: Intention to deceive in s.17
Fraudulent misrep is covered by s.17(a)
s.18(a) untrue fact by one who believes it
to be true
s.18(c) misrep caused innocently
Double Acres Sdn Bhd v Tiarasetia Sdn Bhd
[2001] 1 AMR 111
Difference between fraud and misrep. (in
this case it was a innocent misrep)
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Negligent Misrep
Kluang Wood Products v Hong Leong
Finance Bhd. [1999] MLJ 193
The FC made out a case of negligent
misrep as to the principles in Hedley
Byrne. The resp had been negligent in
not providing a statement regarding the
end financing of a loan when he was
aware that he was entrusted to do so.
Effect and Relief for Fraud and
Misrep
s.19 CA 1950
(1) When consent to an agreement is caused by
coercion, fraud, or misrepresentation, the
agreement is a contract voidable at theoption
of the party whose consent was so caused.
(2) A party to a contract, whose consent was
caused by fraud or misrepresentation, may, if
he thinks fit, insist that the contract shall be
performed, and that he shall be put in the
position in which he would have been if the
representations made had been true.
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Note the explanation in s.19
ExplanationA fraud or misrepresentation
which did not cause the consent to a
contract of the party on whom the fraud
was practised, or to whom the
misrepresentation was made, does not
render a contract voidable.
(see illustration (b))
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In the Abdul Razak case, the court granted a
rescission of the contract; but the measure of
damages was in issue. The CA said that the
measure should not be assessed so as to place
the innocent party at the same position as if the
contract was never performed, but rather
damages shd be assessed on the footing that it
places the innocent party in the same position in
had it not relied on the fraudulent misrep. This
would include all expenses incurred in
consequence of and flowing directly from the
fraudulent misrep, whether after or before the
date of rescission.
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Sim Thong Realty v The Kim Dar [2003]
Remedy for innocent misrep- may sue for
rescission and consequent restitution but
he may not cover damages, for
negligent misrep, the court referred to
Hedley Byrne and stated that it lies in
damages for tort of negligence- must
prove special relationship and reliance
that gave rise to the duty of care.
Exceptions under s.19
ExceptionIf such consent was caused by
misrepresentation or by silence,
fraudulent within the meaning of section
17, the contract, nevertheless, is not
voidable, if the party whose consent was
so caused had the means of discovering
the truth with ordinary diligence
It has been established that this exception
only applies to: i. misrep under s.18 and
ii. Fraud by silence
Application of the exception
Tan Chye Chew v Eastern Mining and Metals [1965] 1
MLJ 201
Contract for the assignment of rights to prospect and
mine including an approved permit for mining. The
resp. claimed that damages and an alleged that
the appellant had knowingly and fraudulently
shown the resps geologist the wrong piece of land.
FC found insufficient evidence of fraud. The resp had
facilities to ascertain the position of the land but he
did not do so-the contract was not voidable for
misrep.
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What would constitute the means of
discovering the truth with ordinary
dillience would depend on the nature of
the particular contract.
Beca (Malaysia) v Tan Choong Kuang [1986]
1 MLJ 390
Contract between house buyers and
developer the house buyers are not
expected to know that the developers had
no license at that time.
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Gemakota Ent. V Public Bank Bhd.[1999]
HC held that for the plf to employ a
surveyor to find out the truth about the
property before the bidding was
requiring the plf to exercise
extraordinary dilligence.