This case illustrates that an exchange of mutual promises although it is executory consideration, is a good consideration.
Facts of the Case
The appellant was one of the directors and shareholder of Wealth Sdn Bhd ('the company') which owned 3 lots of land in Kajang ('the land'). When the company acquired the land, it was classified as an agricultural land. As the company wanted to develop the land into a housing estate, it is necessary to convert its use from agricultural to housing. Therefore, the company made an application to the land administrator for the district of Ulu Langat ('the land administrator') for conversion and sub-division of the land. There is also a problem of access to the land. The appellant considered the gaining of right of way through the adjoining land as a matter of importance because it can enhance the land’s value. Thus, the company engaged a firm of surveyors to prepare the documents for submission to the land administrator for conversion and sub-division. The documents were submitted on 26 January 1991 to the land administrator for consideration.
About at this time, appellant was introduced to the respondent. According to the appellant, the respondent told him that he knew the Menteri Besar of Selangor and other senior state government officers. The appellant sought the assistance of the respondent for the conversion and sub-division of the land. The respondent was prepared to assist in the matter but he is expected to be paid RM 268,888.00 for his services. The appellant agreed on his personal capacity to pay for the services.
On 28 January 1991, the respondent wrote a letter using the appellant company's letterhead to the Menteri Besar, asking for assistance for an early approval of the application. The appellant later paid RM100,000 to the respondent when he produced the letter with the handwritten word 'Disokong' addressed to the land administrator and signed by the Menteri Besar.
By a letter dated 16 September 1992, the land administrator informed the company that its application had been approved. At this stage, the question regarding of access had not been addressed. On 17 December 1991, the respondent wrote to the appellant to confirm the agreement between them whereby he was to receive an additional fee of RM100,000 if he assisted in resolving the problem of access to the land through a piece of adjoining land. The required right of way was eventually obtained. The appellant however, denies any agreement to pay the additional fee.
The respondent brought summary proceedings against the appellant in the High Court for breach of contract as he had refused to pay the remaining fee of RM168,888 and the additional fee of RM100,000. The appellant argued in his defence that:
there was no consideration for the alleged agreement;
the respondent did nothing to earn his fee; and
the agreement was void for illegality as the approval had already been granted at that point in time and the money was in fact a bribe.
The judge rejected all the appellant's defences for not amounting to bona fide (in good faith) triable issues, entered judgment for the sum of RM168,888, and granted unconditional leave to the appellant to defend in respect of the additional fee of RM100,000. The appellant has appealed to the Court of Appeal but there is no cross-appeal by the respondent in respect of the additional sum of RM100,000.
Issues of the Case
Whether there was any consideration for the alleged agreement?
Whether the respondent did nothing to earn his fee?
Whether the agreement was void for illegality?
Judgment of the Court
1st issue: Whether there was any consideration for the alleged agreement?
It is settled law that consideration may be executory or executed. Section 2(e) of the Contracts Act 1950 states that:
“(e) every promise and every set of promises, forming the consideration for each other, is an agreement;”
The Court also illustrated this point as follows: “If A agrees to mow B's lawn for RM10 and B agrees to pay him RM10 in exchange for this service, there is, in the eyes of the law, a valid and binding agreement between A and B.” The consideration in such a case is said to be executory, namely the exchange of the mutual promises.
The facts show that respondent had promise to assist in obtaining the approval for conversion and sub-division of the land of the company. The appellant had promised to pay the respondent RM268,888.00 for the service in return. Thus, the Court are in the view that there is consideration.
2nd issue: Whether the respondent did nothing to earn his fee?
The Court held that this argument put forward by the appellant is without any merit. The appellant had not raised any dispute on the facts that the respondent did help the appellant to secure the Selangor Menteri Besar’s support for the company’s application. The approval for the application was later obtained. Under section 2(d) of the Contracts Act 1950, when the respondent has obtained the Menteri Besar’s support at the appellant’s request, the act is called a consideration for the promise. Thus, the appellant’s argument is baseless.
3rd issue: Whether the agreement was void for illegality?
First, Appellant argued that he was deceived into believing that approval would be granted when in fact in had already been granted. Secondly, appellant submitted that money paid to the respondent and the money due to him were in fact a bribe to obtain the support of the Menteri Besar and other state officials for their company.
On the allegation of cheating, the court held there is no means of false representation. The respondent was asked to help and he had done his part.
For the charge of bribery, the court view it as a serious allegation which suggested the appellant was prepared to bribe public officials to achieve his purpose. The court held that there is little independent evidence to support this charge. The appellant did not lodge a police report about the demand of a bribe. Appellant lodged a police report only after it was pointed out by the learned High Court judge. The learned judge warned the appellant that if he raises this defence in court, then the appellant must have admitted to corruption. Nonetheless, the appellant proceeded to lodge the police report during the adjournment of the case. The Court of Appeal held that the appellant’s conduct was an afterthought and it was a plan of a desperate litigant to escape judgment being entered against him.
The Court of Appeal held that the appellant failed to show the learned judge had erred in any way. Thus, the issues raised are mala fide (in bad faith). The orders made by the High Court were affirmed.
Principle of the Case
An exchange of mutual promises is executory consideration. It is a good consideration in law to form a valid and binding contract.