The plaintiff argued for the purchase price to be reduced to reflect the presence of these encumbrances. The defendant however stated that they had no knowledge of any land acquisition. The High Court held that the acts of defendant amounted to fraud within the meaning og Sec. 17. It was found that the defendant knew the condition of the land prior to the purchase agreement. It was found that there is an active concealment as the defendant’s agents had informed the plaintiff and those structures were not within the land.
There are other several elements in order to prove there is an existence of fraud in an agreement. The first element which requires to be fulfilled is to see whether there is a false representation by the party. In order to do so, there must be some positive conduct from which a statement can be applied but mere silence as to facts does not conduct to a false representation. According to Explanation of Sec. 17, the circumstances of the case are such that it is the duty of the person keeping silence to speak or his silence is in itself equivalent to speech. plus, another exception derived from Sec. 8 (b) is where silence in certain situations where there is a duty imposed to disclose may amount to misrepresentation. In this element, we could refer it to the case of Lau Hee Teah v Hargill Engineering Sdn. Bhd & Anor. [1 980] 1 MI_J 145. In this case, the appellant had entered into an agreement on August 14, 1968 to take a loader on hire-purchase as hirer, with the first respondent as dealer and the second espondent as owner. The first respondent (as seller) did not inform the hirer of the year of manufacture of the machine and the fact it has been previously been involved in an accident.
The Federal Court held that this did not amount to misrepresentation as there was no active duty on the part of the seller to inform the hirer of these matters. Moving on to the second element, the representation must induce the contract as in accordance to Explanation to Sec. 19. The representation must form real inducement to the representee to enter into the contract. Here we could refer to the case of Horsfall v Thomas 1862) 158 ER 813 where the claimant purchased a gun which had a concealed defect. His action for misrepresentation failed as he hadn’t inspected the gun before purchasing it.
Therefore the misrepresentation did not induce him to enter the contract as he was unaware of it. The third element that needs to be fulfilled is that the misled party must have exercised their ordinary diligence as they has the duty to do so. This can be further explained by virtue of Explanation 519 of the Contracts Act which stated that if a consent was caused by misrepresentation or by silence, fraudulent within he meaning of section 17, the contract would not be voidable, if the consented party had the means of discovering the truth with ordinary diligence.
Thus, in the said situations, the contract would not be held voidable if the innocent party was able to ascertain the validity of the matter by exercising his ordinary diligence. However, there are some cases in which Explanation to S19 would not be applicable. For instance, in the case of Weber v Brown, the appellant agreed to transfer to the respondent an option to purchase an estate comprising about 660 acres. Before the agreement was ntered, the appellant stated that he had counted the trees.
The respondent completed the purchase of the land and subseq uently discovered that there were fewer trees on the estate than the number stated by the appellant. In an action by the respondent for damages for fraudulent misrepresentation, the appellant attempted to rely on the Exception in s19. The Court held that the Exception in s 19 did not apply to cases where the misrepresentation is by a false and fraudulent assertion. The next element that needs to be fulfilled is that the representation must be one of fact. This simply means that the mere expression of opinion or a tatement of law is not a representation.
Hence, it would be impossible to argue such opinion is fraud as it requires the representation or acts by a party which has the intention to deceive other parties on entering into their contract. In order to grasp a better understanding on this element, we could refer to the case of Bisset v Wilkinson. In this case, the vendor Of a piece of land told a prospective purchaser that, in his opinion, the land would carry 2000 sheep. In fact, the land could carry only a number less than this. Held there was no misrepresentation as the statement was one of opinion which as honestly held.
Thus, it could be shown here that the mere opinion ofa party is not strong enough to constitute fraud. Lastly, such fraudulent statement should be addressed to the party which acted upon it. This means that the statement should be addressed from the deceiving party to the misled party directly without any intervention of third parties. The case of Peek v Gurney would be a good way in illustrating the said element. This is because, in the mentioned case, the plaintiff had bought shares from a third party, relying on the statements made in the prospectus issued when the company sold shares.
It was held he could not rely on the statements, which turned out to be untrue, because the prospectus was addressed only to the original purchasers of shares sold to the company. Hence, this further enforces the view in which the statement should be directly addressed to the misled party in order for such party to succeed in bringing up a claim against the deceiving party. By virtue of S19 (1 ) of the Contracts Act, when consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
In other ords, the effect of entering agreements due to coercion, fraud or misrepresentation is voidable at the option of the complaining parties. If the parties to the contract wishes to rescind the agreement, S66 of the Contracts Act shall be applied. In the provision, it stated that when an agreement is discovered to be void, or when a contact 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.
S66, basically, provides the remedy in which the complaining parties could ecover their money or properties that they’ve allocated for the purpose of entering into agreements with the defendants or be compensated by the defendants for the acts theyve committed in inducing such innocent parties in contracting with them. In the case of Abdul Razak bin Datuk Abu Samah v Shah Alam Properties Sdn Bhd, the Court of Appeal found that there had been fraudulent misrepresentation on the part of the defendant which had induced the plaintiff to enter into a sale and purchase agreement for an apartment.
The Court, then granted rescission of the contract. Hence, S66 ould be applied as it sets asides the contract and the parties were put in a position as if the agreement had never come into being. Plus, under Sec. 1 9(2), if a party still wishes to perform the contract despite whose consent was caused by fraud or misrepresentation shall be put in the position in which he would have been if the representation made had been true. In order to succeed in proving Maniam had committed a fraud by active concealment, he must fulfill all of the elements provided.
In arguing the matter of knowledge of the status of the land, according to the Electricity Act 946, as in accordance to the case of Tay Tho Bok v Segar Oil Palm Estate Sdn. Bhd, that in order to make any land acquisition, the owner should have been given the notice by the company and should lodge a rejection by the time given an if there is any objection, the company may inquiry to compensation. Referring to this authority, before the Tenaga Nasional Bhd’s action in installing the transmission cables, it is necessary to inform the owner of the land by notice and gave a period of time respond.
Therefore, Maniam should be able to acknowledge such acquisition by Tenaga Nasional Bhd in his property of land as he is the owner. However, he does not inform Mr. Cheong Fatt regarding this matter which constitutes the action Of active concealment. Moving on to the first element stated that there must be a false representation could be seen as Mr. Cheong Fatt relies on the statement made by Maniam. Based on the situation, Mr. Cheong Fatt was entirely induced to the contract as there a form of active concealment made by Maniam as in the case of Tay Tho Bok v Segar Oil palm Estate Sdn. Bhd.
Thus, there is an existence of a positive conduct. In the second element, the representation must induce the contract. Here, Mr Cheong Fatt relied on the tatements made by Maniam to made the agreement and the statement by Maniam seems to be convincing enough for him to enter the contract despite the fact that Maniam knew an important fact which could cause the contract not to be executed. Hence, there was an inducement made to cause the contract to occur. The third element stated that there is a duty Of the misled party, Mr Cheong Fatt to exercise his ordinary diligence by virtue of Explanation SIB (1 ).
From the given situation, we could see that Mr Cheong Fatt had not attempted to exercise his ordinary diligence in surveying or examining the land which he ntended to buy from Maniam. However, referring to the case of Weber v Brown, Explanation ofS19 (1 ) is not applicable if it was made by a false and fraudulent assertion. Thus, the fact that Maniam had concealed the facts on the surroundings of the purchased land, which he ought to know, from Mr Cheong Fatt, it constituted to fraud. As Explanation of S19 (1) is not applicable to fraudulent assertions, there is no need for Mr Cheong Fatt to exercise his ordinary diligence.
In the next element, it stated that such representation must be one of fact. Although Maniam had not made any clear epresentation to Mr Cheong Fatt regarding the land, he had actively concealed the fact on transmission cables being situated on the land with the intention to induce Mr Cheong Fatt on entering into the agreement. In addition to that, as Maniam and Mr Cheong Fatt were the only parties in the dispute over the land agreement, it could be seen that the fraudulent act committed by Maniam is directly addressed to Mr Cheong Fatt.
Hence, fulfilling the last element. As all of the elements of fraud had been fulfilled by Maniam, the contract is proven voidable by virtue of 519 (1) as Maniam had ommitted fraud by active concealment in accordance to sl 7 (b). Hence, Mr Cheong Fatt could rescind the contract entered by him with reference to 566 which would make Maniam bound to restore the deposit of RM 95000 paid by Mr Cheong Fatt. The second issue in this case is whether the agreement between Mr Cheong Fatt and Summit Golf Resort is voidable by virtue of Section 1 8 of Contract Act 1950.
In addressing the above issue, the law and principle of Misrepresentation should be discussed. Misrepresentation can be defined as a false statement of existing or past fact made by one party before or at the ime of making the contract, which addressed to other party and induces the other party to enter into the contract without any intention to deceive. Section 18 of the Contract Act 1950 defines misrepresentation as (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 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 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. It can be conclude that section 1 8(a) and (c) appear to cover the subject of innocent misrepresentation and section 18(b) to cover negligent misrepresentation.
Section 10(1) of Contracts Act stated that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Both Mr Cheong Fatt and the golf club consented to the greement made with the valid considerations for the membership and the fees paid. Section 13 defines consent as two or more persons are said to consent when they agree upon the same thing in the same sense.
And Section 14(d) defines free consent when it is not caused by misrepresentation, as defined in section 18 above. In order to establish misrepresentation, all the elements must be fulfill to prove. Firstly, to constitute misrepresentation, there must be a false representation and some positive statement Or conduct from which statement can be implied. In the case of Lau Hee Teah v Hargill Engineering sdn bhd & Anor as the facts of the ase was discussed in the first issue.
However, in the case of Low Kon Fatt v Port Klang Golf Resort (M) SDN BHD, although the defendant argues that they would provide the facilities in the future, they had failed to prove that the facilities can be provided in the future. The court held that the defendant liable to refund the membership as by the time the brochure was made, the defendant should have check it first and make the enquiries with the Port Klang Authority for the facilities. In applying the first element, there is a false representation and some positive statement from Summit Golf Resort to Mr
Cheong Fatt when the publish the brochure which promoted all facilities which they promised to be high standard where in fact, there is only single story club house instead the promised three and sea sport facilities were not available. Based on the case above, the brochure was made in present time, implied that all the facilities were available. Besides, the continuous assured of the General Manager of Summit Golf Resort cannot be proof that the facilities can be provided in future. Hence, there are false representation by Summit Golf Resort, thus the first element is fulfilled.
Secondly, the epresentation must induce the contract. The explanation of section 19 Contract Act provided that a misrepresentation which did not cause the consent to a contract of the party to whom the misrepresentation was made does not render a contract voidable. Hence, the representation must form a real inducement to the representee to enter into contract. In the case of Chuah Tong Yeong v Kuala Lumpur Golf & Country’ Club, the developer and the manager of the Kuala Lumpur Golf & Country Club, issued a brochure and prospectus listing the facilities and features of the club such as library, ymnasium and health center.
The plaintiff paid a sum of RM 90, 000 to become a member. However, he found out that some of the listed facilities did not exist and eventually sought rescission of the membership agreement and damages based on misrepresentation. The High Court held that the defendant had breached its representation to provide the library although the plaintiff had suffered no real loss or damage. Further, although there were misrepresentations on some other facilities, they were not matters of major decisive consideration to the plaintiff in his decision to purchase a membership in the club.
In applying to the case above, Mr Cheong Fatt is induced to sign up for the membership of the golf club because of the high standard facilities promised in the brochure itself. In this case, the defendant promised to have three storey golf resort complex with convention halls, a golf course, a swimming pool, tennis courts, sea sport facilities, and the most alluring sea sport facilities. It is clear that these statements were only made to attract buyers. Thus, there is inducement on behalf of the defendant in the brochure which later believed by Mr Cheong Fatt.
Thirdly, duty of misled arty to exercise ordinary diligence. In this element, the representee has no means to discover the truth. The exception Of section 19 provided that if such consent was caused by misrepresentation or by silence, or fraudulent, had the means of discovering the truth with ordinary diligence, the contract is still valid. In the case of Tan Chye Chew v Eastern Mining and Metals Co Ltd the respondent had entered into F. vo separate contracts with the first and second appellants.
In the contract with first appellant, the first appellant assigned to the respondent rights to prospect certain mining land included in an pproved application for prospecting permit. In the contract with the second appellant, the respondent agreed to pay a commission to the second appellant in bringing about the first contract. The respondent alleged that the second appellant had shown to the respondent’s geologist some land which later discovered not to be included in the approval application.
The court held that there had been misrepresentation by the second appellant but concluded that the respondent company had the means discovering the truth with ordinary diligence They had entered into the contract without checking he true position of the mining land despite having facilities to do so and realized the risk that was involved in taking the unusual course of entering into contract without further check. Therefore, the contract was not voidable. In applying the above case, Mr Cheong Fatt had no means to discover the truth with ordinary diligence as he doesn’t have any facilities to do so.
He signed up for membership and paid RM 50 000 after reading the brochure, means the total reliance on the broch ure without getting an opportunity to discover the truth. Only after he signed, that he knows the facilities were not completed. Hence, the third element is fulfilled. The fourth requirement that is needed in order to prove misrepresentation is the representation must be one of fact. As the meaning of the misrepresentation itself means false statements of facts, this third element requires a person to prove that the representation made by another party is one of the crucial fact that inducing him to enter into the contract.
If the representation is merely assumptions or opinions, it cannot be taken as a misrepresentation because the representation made is not a representation of facts. For example is in the case of Bisset v Wilkinson, in this case, the laintiff and the defendant entered into a contract purchasing two adjoining blocks of land. During negotiations, the defendant stated “that with a good six horse team, the farm would carry 2000 sheep in the future”. After two years of unsuccessful farming, the plaintiff realized that the land could not hold 2000 sheep thus he claimed for a misrepresentation.
Court held that, what the defendant said is merely an opinion and Was not intended to be a serious representation, therefore no misrepresentation. Applying to the question given, the brochure made without any disclaimer and it basically promotes he Summit Golf Resort (M) Sdn. Bhd. It is not a norm for someone to merely put assumptions or opinions or any lies in a brochure as the brochure can induce and attract people to it. So, if the content of the brochure is not a fact and merely lies or exaggerating stuff, people will be deceived by it. Therefore, it can be said that the brochure made is a fact.
Thus, the representation (brochure) is one of fact. The last requirement is, the statement was addressed to the party which acted upon it. This requirement simply means that, the plaintiff must enter the contract because of the representation made to him. The plaintiff must rely on the representation solely and acted upon the representation, not because of something else. In the case of Peek v Gurney, the defendant claimed that there is a misrepresentation in the facts represented to him and it caused him a loss when he bought shares from a company who has high liabilities.
The plaintiff claims on the grounds of active concealment and misrepresentation. Court held that, there is no misrepresentation as the plaintiff entered the contract not because of the representation made to him and he did not rely on it since he bought the shares from market. Therefore, there is no misrepresentation in the case of Peek v Gurney. Applying to the question, Cheong Fatt is relying on the brochure and the representation from the brochure do attracts him to sign a membership with the Summit Golf Resort (M) bhd.
However, he did not enter into the membership because of the facilities and all the things that is promised to him. Back to the case Of Chuah Tong Yeong v Kuala Lumpur Golf & Country Club bhd. The court held that there is no misrepresentation because the plaintiff did not actually entered into the contract because of the facilities promised to him and the bsence of the facilities does not really bother him since it doesn’t cause him any loss or damage.
But, since Cheong Fatt signed the membership because of the brochure he saw, it can be said that he is acting upon the representation made to him which is the brochure itself. If Cheong Fatt brings this matter to the court and can prove that there is a misrepresentation, in accordance to section 19(1 when consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so cause.
