Contemporary common law developments in contract law: The implications for reform in Malaysia — Mary Lim

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DECEMBER 9 — There is an appointment by His Majesty the King of a person known as the Commissioner of Law Revision.  This appointment is made pursuant to a little-known Act called the Revision of Laws Act of 1968 or Act 1.  

The Commissioner of Law Revision has the principal power and function of revising and reprinting all laws passed by Parliament and that includes all pre-Merdeka laws. 

Revision in essence is an exercise of updating our laws and keeping in our treasury only those laws which are still in force with language in tandem with current legislation.  

One would have thought that that exercise should be done by Parliament or the respective State Legislative Assemblies since all laws are enacted by Parliament.  Under Act 1, that function of revising our laws is left in the hands of the Commissioner of Law Revision.  

This is a sample of what the powers of the Commissioner are. The Commissioner may omit from any revised law, for instance:

* Any provision which has ceased to have effect; 

* Any preamble or part of the preamble to a law;

* Any enacting clause; 

* Any part of a law which can be more conveniently included as subsidiary legislation. 

In that exercise of revision, the Commissioner may even add a long or short title or alter an existing title; supply or alter tables of contents, consolidate or divide into one or more laws; transfer any provision in one law to any other law to which that provision more properly belongs; alter, insert or omit any punctuation marks.

There is more; a total of around 24 powers.  But, there is a stringent prescript to all those powers.  

The Commissioner is expressly told that the powers given “shall not be taken to imply any power to make any alteration or amendment in the substance of any law.”

In 2006, I was appointed Commissioner of Law Revision or CLR as the post is more commonly known.  But, I wasn’t just the CLR.  

Four years earlier, the CLR had taken on an additional portfolio and had come to be known as the Commissioner of Law Revision and Law Reform.  The Research Unit of the Attorney General’s Chambers came under the watch of the CLR.  

So, the task of law reform came under the auspices of the CLR.  However, till this date, Act 1 and the appointment of the CLR remains unamended; and I understand there is yet another Research Unit at the AGC.

Why am I referring to the office of the CLR and the powers granted under Act 1 to the CLR when we are here this morning on the business of the Contracts Act 1950 and more particularly, the development of contemporary common law in Malaysia? 

Perhaps its relevance will become clearer when we understand the larger intent of this series of talks.

English commercial law was first introduced to the Straits Settlements through the Civil Law Ordinance of 1878.  In 1899, the Contracts Enactment modelled after the Indian Contracts Act of 1872 was then enacted.  

It applied to the four Federated Malay States. This Enactment was subsequently extended to the Un-Federated Malay States through the Contracts Ordinance of 1950.  

The Contracts Ordinance was then revised under the powers that I had explained a moment ago.  With effect from July 1, 1974, the Contracts Ordinance became the Contracts Act 1950 and stands as Act 137 in the series of the Laws of Malaysia.

The Contracts Act of India is said to be in effect “a code of English law.” Our Contracts Act should be viewed no differently. As a Code, one should be able to find all answers within its pages.  

Yet, as you will hear, contracting parties have invited our Courts time and time again to the Common Law for assistance, for development.  For instance, our provisions on coercion [section 15 of the Contracts Act] are said to be archaic, not accommodating of commercial realities and pressures, that the economic duress must be properly recognised.  

In the recent decision of Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40, [2021] 3 WLR 727, the English Courts have even recognised the concept of lawful act of economic duress. 

Similarly, concepts or at least arguments of unconscionability and unequal bargaining have been left out in the cold, that our existing section 16 on “undue influence” is said to be simply inept to deal with modern day boardroom tussles.  

So, in Saas Marwi v Chan Hwan Hua [2001] 3 CLJ 98, the Court of Appeal suggested that “ we should recognise the wider doctrine of inequality of bargaining power We may adopt the English doctrine of unconscionability in toto.”  The Court of Appeal felt that it was a choice available under section 3 of the Civil Law Act 1956 [Act 67].  

What about the treatment of illegality as approached by the Supreme Court in Patel v Mirza [2016] UKSC 42 – is that within our scope of section 24?  What about the law of restitution, unjust enrichment?  

Does it reside within the Act or have we strain its terms beyond its limits? Has the Federal Court’s recent decision in Cubic Electronics Sdn Bhd v Mars Telecommunications Sdn Bhd [2019] 6 MLJ 15 satisfactorily put to rest the position of liquidated damages; is it in tandem with the rest of the other Common Law jurisdictions.  

Contracting parties have invited our Courts time and time again to the Common Law for assistance, for development. — Picture by Yusof Mat Isa
Contracting parties have invited our Courts time and time again to the Common Law for assistance, for development. — Picture by Yusof Mat Isa

Electronic transactions is yet another example. If one were to turn to the requirements in the Act on the formation of a valid and concluded agreement, and by the time one gets there, it is more likely than not that the numerous parties involved in an electronic transaction or a web contract may have already clicked on and sent over a response through the impossible algorithms.  

How many of us have truly scrolled through and read the innumerable terms and conditions before clicking on the “I agree” or “I accept” or even “Pay” button?  The fear is that this Act from the last century may not be able to resolve disputes that arise from these e-commerce transactions.  

There is definitely more.  

It is clear and obvious that the Contracts Act requires revisit, and fast. And the revisit of the Contracts Act, an Act which actually regulates and underpins so many fundamental aspects of our everyday lives, business, industry, government and more; cannot be left to the Court. The observations of the Courts may be challenged as obiter or worse, per incuriam. There is only so much that the Courts can mould to the facts in order to do justice.  

The revisit of our law on contractual obligations to take into account and to accommodate the developments of the Common Law must be undertaken responsibly, through accord and discourse; extensive, in-depth and refine deliberations by suitable experts; many of whom are already here at this webinar and the ones to come in the next few days. 

This task falls neatly within the additional function of the CLR, that of reform.  But, as I had pointed out at the outset, that task may, with respect be beyond the powers of the CLR; certainly not as an exercise in revision but truly a project for reform.  

In the United Kingdom, the business of reform falls, by statute, on the Commissioner of Law Reform. A sitting judge of the Court of Appeal helms that appointment. Sir Nicholas Green is assisted by an independent and permanent secretariat

In fact, just last week, the Law Commission “confirmed that the existing law of England and Wales is able to accommodate and apply to smart legal contracts, without the need for statutory law reform. The Law Commission notes that, in some contexts, an incremental development of the common law is all that is required to facilitate the use of smart legal contracts within the existing legal framework.”

We need that. We need to have an independent Law Commission to undertake all reform.  

Its urgent work can then take on board all the studies and recommendations that hopefully will arise from this series so that there is greater confidence in the development of our law of contractual obligations; that statute and Common Law can truly be ad idem.

* Datuk Mary Lim Thiam Suan is a Judge of the Federal Court of Malaysia and these are her remarks delivered at the Faculty of Law, University of Malaya on December 4.

**This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.

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