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Letter of Intent vs Letter of Undertaking

  • A letter of intent is generally not legally binding unless both parties intended that it should be enforceable and it does not refer to a resulting future contract. On the other hand, the law imposes an obligation to pay a reasonably price for work done pursuant to a request under the principle of quantum meruit. A letter of undertaking is contractual in nature and failure to comply with it will result in a breach of obligation.




  • A letter of intent (LOI) is a document which expresses the intention of a party to enter into a contract at a future date by outlining the terms which are intended to be included in a finalised agreement. As a general principle, a LOI is not legally binding save in exceptional circumstances. However, many LOIs contain provisions that are binding such as non-disclosure agreements, a covenant to negotiate in good faith, or a “stand-still” or “no-shop” provision which promises exclusive rights to negotiate.


  • The Supreme Court in Ayer Itam Tin Dredging Malaysia Berhad v. YC Chin Enterprise Sdn. Bhd. [1994] 2 AMR 32:1631 held that generally, an arrangement made “subject to contract” or “subject to the preparation and approval of a formal contract”, and similar expressions, would be construed to mean that the parties were still in a state of negotiation and did not intend to be bound unless and until a formal contract was exchanged.



  • However, having said that, there are still exceptional circumstances which can cause a LOI to be legally binding despite having a “subject to contract clause”. In determining whether any liability shall attach to the person who issues the LOI, the Court will scrutinise the terms of the document and the circumstances in which it came to be written (See Turriff Construction Ltd. and Turriff Ltd. v. Regalia Knitting Mills Ltd. [1971] 9 BLR 20 (QBD)). Where the LOI indicates that both parties intend that it should be enforceable and it does not refer to the execution of a formal contract in the future, the LOI can constitute an agreement between the parties.


  • On the other hand, it is to be noted that even if both parties expect a formal contract to eventuate, but one party requests the other to commence work, the work done is treated as having been done under the expected contract, and if no contract is entered into, the party carrying out the work at the request of the other, can claim payment under the principle of quantum meruit, i.e. a reasonable price for work done pursuant the said request.



  • An undertaking from a bank is similar in effect as that of a bank guarantee, performance bond or standby letter of credit. The definition of a valid undertaking adopted in Public Bank Bhd v Perwira Affin Bank Bhd (2001) 7 CLJ 447 HC was “a pledge, a promise and a guarantee”.


  • The construction to be given to an undertaking is similar to that applied to an ordinary contract (See Michael C Solle v. United Malayan Banking Corporation [1984] 1 CLJ 151). Thus, a breach of an undertaking attracts damages in the same manner as a breach of contract.


The law that governs Franchising in Malaysia is the Franchise Act 1998. According to Section 4(f) Franchise Act 1998 :


the franchisee operates the business separately from the franchisor, and the relationship of the franchisee with the franchisor shall not at anytime be regarded as a partnership, service contract or agency


franchise agreement” means a contract or an agreement made between a franchisor and a franchisee in respect of a franchise in return for any form of consideration but does not include any contract or agreement made for the purpose of direct selling as provided by the Direct Sales Act 1993.


A Franchise agreement should be in writing (Section 18(1) Franchise Act 1998) and would only require the franchisee to pay a fee or other form of consideration for the rights granted by the franchisor.


The Franchisor has the responsibility to provide assistance to the franchisee to operate the business including such assistance as the provision or supply of materials and services, training, marketing, and business or technical assistance ( Section 4(d) Franchise Act 1998).


The Franchisor grants to the franchisee the right to operate a business according to the franchise system as determined by the franchisor ( Section 4(a) Franchise Act 1998)


The Franchisor grants to the franchisee the right to use a mark, or a trade secret, or any confidential information or intellectual property, owned by the franchisor or relating to the franchisor, and includes a situation where the franchisor, who is the registered user of, or is licensed by another person to use, any intellectual property, grants such right that he possesses to permit the franchisee to use the intellectual property ( Section 4(b) Franchise Act 1998).


The Franchisor possesses the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the franchise system ( Section 4(c) Franchise Act 1998).


  1. The Franchise Act 1998 would not apply if the business is operated through the joint venture company itself without any franchise being involved. Another possibility is through an agency or distribution where it would have the advantage of less initial cost investment and generally there will be lower financial rewards than if an ownership share was taken in the local operation. There will also be less control over the way in which a product is marketed.


It is possible for a joint venture company to obtain appropriate licences from proprietors of certain intellectual property rights or if the property are to become the property of the joint venture, to obtain assignments of them. In this case, the joint venture company may set up a licensing agreement with a third party or the party providing the rights though normally the ability to grant these rights will be within the power of participants in the joint venture.


For a licensor, the arrangement offers a guaranteed return with little or no investment risk or start up cost, where he is uncertain of the market and do not wish to get involved in the day to day problems of the licensee’s business or in the direct aspects of production and marketing.


Licences may also be used for the purpose where one of the joint venture parties particularly a foreign party would provide the necessary skills and technology and the local party would be providing land, manpower, and/or market access as in this case.


Licensing agreements will enable the retention of royalty by the licensor which will enable some participation in ongoing business success. Again, though there will be little effective direct control over the licensee’s activities and no direct assurance that the licensee will be fully committed to the development of the business.


In this instance, a licensing agreement between the party providing the skills and the joint venture company must be put in writing and its essential purpose will be set out in the legal rights and obligations relating to everything to be provided such as one’s involvement in developing the business plan for the joint venture company, to have equal representation on the Board of the company, in decisions of the company, nominates the CEO and will also be involved in the restaurant development and fit out, menu development and staff decisions.


The Franchise Act 1998 does not regulate licences and is only concerned with franchises. Therefore it would be possible to enter into a licence agreement without being regulated by the Franchise Act 1998.

Duties of an Internet Service Provider in Malaysia

Communications and Multimedia Act 1998

 The relevant legislation in Malaysia regulating the communications and multimedia industry is the Communications and Multimedia Act 1998 (“the Act”). The Act has been enacted to promote national policy objectives for the communications and multimedia industry and to establish a licensing and regulatory framework in support of national policy objectives for the communications and multimedia industry.

The Malaysian Communications and Multimedia Commission (“MCMC”) was established by the Act as regulator for the converging communications and multimedia industry and charged with overseeing the new regulatory framework for the converging industries of telecommunications, broadcasting and on-line activities.


The Act requires various activities to be licensed and one of the roles of MCMC is to issues licences. Under the Act, there are four categories of licensable activities :


(1)               Network Facilities Providers – who are the owners of facilities such as satellite earth stations, broadband fibre optic cables, telecommunications lines and exchanges, radiocommunications transmission equipment, mobile communications base stations, and broadcasting transmission towers and equipment. They are the fundamental building block of the convergence model upon which network, applications and content services are provided.


(2)               Network Services Providers – who provide the basic connectivity and bandwidth to support a variety of applications. Network services enable connectivity or transport between different networks. A network service provider is typically also the owner of the network facilities. However, a connectivity service may be provided by a person using network facilities owned by another.


(3)               Applications Service Providers – who provide particular functions such as voice services, data services, content-based services, electronic commerce and other transmission services. Applications services are essentially the functions or capabilities, which are delivered to end-users.


(4)               Content Applications Service Providers – who are special subset of applications service providers including traditional broadcast services and newer services such as online publishing and information services.


According to the MCMC website at, Time dotcom Berhad is one of the licensed service providers for Applications Service Provider.

As the Act seeks to establish a regime of self-regulation by providing for the creation of industry forums, an industry body may be designated or appointed as an industry forum if the MCMC is satisfied that the criteria stipulated in Section 94 of the Act 1998 has been fulfilled.

The primary function of a designated industry forum would be to formulate and implement voluntary industry codes, which would serve as a guide for the industry to operate. The relevant codes may be developed on the forum’s own initiative or upon request by the MCMC.

In March 2001, the MCMC designated the Communications and Multimedia Content Forum of Malaysia (“CMCF”) as the Content Forum.

The CMCF governs content by self regulation in line with the Malaysian Communications and Multimedia Content Code (“Code”). The Code is a set of industry guidelines on the usage and/or dissemination of content for public consumption. The Code has now been officially registered with the MCMC with effect from 1 September 2004.

The Code can be downloaded at MCMC’s website at

The Constitution of the CMCF states that a Complaints Bureau be established under Article 8 of the Code to deal with complaints. The Bureau is empowered by the Council to impose sanctions on any member who is considered to have breached the Content Code.

However, the Bureau is not permitted to consider complaints if they concern matters that are the subject of legal proceedings, or if the Bureau decides it would be inappropriate.


Application of the Code

 The Code applies to all content made available in the content industry in the networked medium and as defined the Code and under the Act.

This Code also applies to all persons who provide a content applications service (“Content Application Service Providers”) and in particular but is not limited to:


(1)        Each member of the industry forum;

(2)        Each person who has submitted their agreement to the Forum that they will be bound by this Code; and

(3)       Each person whom the Commission has directed in accordance with Section 99 of the Act.


Under Section 100 of the Communications and Multimedia Act 1998 (“the Act”), a person who fails to comply with a direction of MCMC that the for person complies with any provision of a voluntary industry code shall be liable to pay to the MCMC a fine not exceeding two hundred thousand (200,000) ringgit.


The Code

The relevant part of the Code for the parties who provide online Content or those who provide access to online content through present and future technology is Part 5 of the Code. These parties include, but are not limited to:


(1)               Internet Access Service Providers;

(2)               Internet Content Hosts;

(3)               Online Content Developers;

(4)               Online Content Aggregators; and

(5)               Link Providers


(collectively referred as “Content Subject”)


Internet Service Provider falls under the definition of Internet Access Service Providers which is defined in paragraph 12.1 of Part 5 of the Code as a service provider who provides users with access to the Internet including (but not limited to) the World Wide Web.

The Code has provided that no Content Subjects shall knowingly provide prohibited content. The Code has classified ‘prohibited content’ into 9 categories namely:

(1)               Indecent Content

(2)               Obscene Content

(3)               Violence

(4)               Menacing Content

(5)               Bad language

(6)               False Content

(7)               Children’s Content

(8)               Family Values

(9)               People with Disabilities


Content is defined as any sound, text, still picture, moving picture or other audio-visual representation, tactile representation or any combination of the preceding which is capable of being created, manipulated, stored, retrieved or communicated electronically but does not include for the purpose of the Part 5 of the Code:

(1)        ordinary private and/or personal electronic mail other than bulk or spammed electronic mail;

(2)        content transmitted solely by facsimile, voice telephony, VOIP and which is intended for private consumption; or

(3)        content which is not accessible to the public whether freely, by payment of a fee or by registration, including (but not limited to) content made available by way of a closed Content Application Service or a limited Content Applications Service under Sections 207 and 209 of the Act respectively;


Appendix 2 of the Code provides that, apart from the Act, licensees under the Act may need to be aware of the following Acts of Parliament and are advised to have sufficient resources and expertise to ensure compliance where necessary.


(1)               Accountants Act 1967 (revised 1972)

(2)               Children & Young Persons (Employment) Act 1966 (Revised 1988)

(3)               Consumer Protection Act 1999

(4)               Copyright Act 1969

(5)               Defamation Act 1957

(6)               Dental Act 1971

(7)               Film (Censorship) Act 1952

(8)               Geneva Conventions Act 1962

(9)               Indecent Advertisements Act 1953

(10)           Internal Security Act 1960

(11)           Medicine (Advertisement and Sale) Act 1956

(12)           National Anthem Act 1968

(13)           Penal Code

(14)           Pesticides Act 1974

(15)           Poisons Ordinance 1952

(16)           Poisons (Sodium Arsenite) Ordinance 1949

(17)           Printing Presses and Publications Act 1984

(18)           Private Higher Educational Institutions Act 1996

(19)           Private Hospitals Act 1971

(20)           Sale of Drugs Act 1952 (Revised 1989)

(21)           Sale of Food Act 1983

(22)           Food Regulations 1985

(23)           Securities Industry Act 1983

(24)           Sedition Act 1948

(25)           Trade Description Act 1972

(26)           Trade Marks Act 1976

(27)           Women and Girls Protection Act 1973


Compliance of the Code as a legal defence

Section 98 of the Act provides that compliance with the Code is a legal defence. Section 98(2) of the Act provides that ‘compliance with a registered voluntary industry code shall be a defence against any prosecution, action or proceeding of any nature, whether in a court or otherwise, taken against a person (who is subject to the voluntary industry code) regarding a matter dealt with in that code’.

Notwithstanding the above, paragraph 6.4 of Part 2 of the Code states that all applicable Malaysian Laws including but not limited to sedition, pornography, defamation, protection of intellectual property and other related legislation are to be complied with.


Duties of Internet Access Service Provider under the Code

The Code has set out the guidelines to be followed by an Internet Access Service Provider (“IASP”) in Part 5 of the Code.

An IASP shall comply with and incorporate terms and conditions in the contracts and legal notices as to terms of use with subscribers of their services. This shall include the following terms:

(1)        Subscribers will comply with the requirements of Malaysian law including, but not limited to, the Code and shall not provide prohibited Content nor any Content in contravention of Malaysian law;

(2)        The IASP will have the right to withdraw access where a subscriber contravenes the above; and

(3)        The IASP shall have the right to block access to or remove such prohibited Content provided such blocking or removal is carried out in accordance with the complaints procedure contained in the Code.

The existence of the above-mentioned terms and conditions will be displayed on the IASP’s website in a manner and form easily accessible by its subscribers by way of a link or other similar methods.

The Code recognises the concept of innocent carrier. Code Subjects providing access to any Content but have neither control over the composition of such Content nor any knowledge of such Content is deemed an innocent carrier for the purposes of the Code. An innocent carrier is not responsible for the Content provided. Further, it is also a defence that access providers had adhered to the general measures provided by the Code.

However, once an IASP is notified by the Complaints Bureau that its user or subscriber is providing prohibited Content and the IASP is able to identify such subscriber the IASP will take the following steps:


(1)        Within a period of 2 working days from the time of notification, inform its subscriber to take down the prohibited Content.


(2)        Prescribe a period within which its subscriber is to remove the prohibited Content, ranging from 1 to 24 hours from the time of notification.


(3)        If the subscriber does not remove such prohibited Content within the prescribed period, the IASP shall be entitled to suspend or terminate the subscribers’ access account.


(collectively referred as “Notice and Take Down Procedure”)


However, paragraph 11 of Part 5 of the Code provides that IASPs are not required to undertake any of the following:


(1)        Provide rating systems for Online Content;

(2)       Block access by their users or subscribers to any material unless directed to do so by the Complaints Bureau acting in accordance with the complaints procedure set out in the Code;

(3)       Monitor the activities of users and subscribers; or

(4)       Retain data for investigation unless such retention of data is rightfully requested by the relevant authorities in accordance with Malaysian law.


Notwithstanding the above, the definition of ‘prohibited content’ does not include content which infringes other parties’ intellectual property or contains element of fraud. As such, the Notice and Take down procedure may not apply to such matters. We are of the view that the types of remedies available to the aggrieved party limited to the traditional remedies specified under their specific legislation.


Liability of Internet Application Service Provider in general

So far there have not been any reported cases on the liability of an IASP in Malaysia as a conduit that who passively allowed for the transmission of data. However, we may refer to the position in United Kingdom and the United States of America.


United Kingdom

We refer to the case of Godfrey v Demon Internet Ltd, QBD, [1999] 4 All ER 342. In the said case, Demon Internet Ltd, an Internet service provider offered a Usenet facility, enabling authors to publish material to readers worldwide. An unknown person made a posting in that newsgroup on an American service provider, and it reached Demon Internet Ltd’s server in England. The posting, which purported to be written by Godfrey, was a forgery and defamatory of Godfrey. Godfrey subsequently informed Demon Internet Ltd that the posting was a forgery, and asked it to remove the posting from its Usenet news server. However, Demon Internet Ltd failed to do so, and the posting remain on the server until its expiry. Godfrey brought proceedings for libel against Demon Internet Ltd.

In its defence, Demon Internet Ltd sought to rely, inter alia, on the defence provided by s 1(1) of the Defamation Act 1996, namely (a) that it was not the publisher of the statement complained of, (b) that it had taken reasonable care in relation to its publication, and (c) that it had not known, and had no reason to believe, that its action had caused or contributed to the publication of a defamatory statement. On Godfrey’s application to strike out that part of the defence, Demon Internet Ltd contended it had not published the defamatory posting and that there had been no publication within the meaning of s 1(1)(b) of the Act. Although s 1(2) and (3) provided a special definition of the word ‘publisher’ as used in s 1(1)(a), s 17 provided that the words ‘publication’ and ‘publish’ had the same meaning as in the general law of defamation. The issue therefore arose whether Demon Internet Ltd had published the posting within the common law meaning of the term.

The Court, in allowing Godfrey’s application, held that Demon Internet Ltd’s defence under Section 1 of the Defamation Act is hopeless and struck out Demon Internet Ltd’s defence.

However, recently in Bunt v Tilley and others [2006] 3 All ER 336, the Court struck out a claim by a Plaintiff against a number of internet service providers for defamation. The Plaintiff claimed that the said internet service provider published the defamatory words of the other defendant ‘via the services provided’ by the said internet service providers. The Court held, distinguishing the case of Godfrey v Demon Internet Ltd (Supra), that an internet service provider which performed no more than a passive role in facilitating postings on the internet could not be deemed to be a publisher at common law.  It was essential to demonstrate a degree of awareness or at least an assumption of general responsibility, such as had long been recognised in the context of editorial responsibility, in order to impose legal responsibility under the common law for the publication of words. Although it was not always necessary to be aware of defamatory content to be liable for defamatory publication, there had to be knowing involvement in the process of publication of the relevant words. It was not enough that a person had played merely a passive instrumental role in the process.


United States

In the United States of America, IASP has relied on 47 USC 230 of the American Telecommunications Act of 1996 as their defence. 47 USC 230 of the American Telecommunications Act of 1996 provides that:




(1)        TREATMENT OF PUBLISHER OR SPEAKER- No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.


 (2)       CIVIL LIABILITY- No provider or user of an interactive computer service shall be held liable on account of–


(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or


(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1).

47 USC 230 of the American Telecommunications Act of 1996 was applied in the cases ofKenneth M. Zeran v. America Online, Inc.; U.S. District Court, E.D. Virginia, 958 F.Supp. (1997).


In the American case of Kenneth M. Zeran v. America Online, Inc.; U.S. District Court, E.D. Virginia, 958 F.Supp. (1997), the Plaintiff initiated proceedings for defamation after an unknown America Online, Inc (AOL) subscriber made posting that the Plaintiff had for sale tasteless t-shirts regarding the bombing of the Alfred P.Murrah Building in Oklahoma City, and listed the contact details of the Plaintiff. In response, the Plaintiff received telephone complaints and death threats. The issue was whether an online service, website, or other interactive computer service, can be held liable for defamation made by third parties, where the defamed party has been injured by defamatory speech made by persons who post in an interactive computer service. The Supreme Court ruled against the Plaintiff and held that, applying 47 USC 230 of the American Telecommunications Act of 1996, held that no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. Applying this case to the position in Malaysia, the same may not apply to Malaysia as Malaysia does not have such provision to protect IASP.


However, the above 47 USC 230 of the American Telecommunications Act of 1996 has no effect on intellectual property law.


Liability of Internet Application Service Provider for Copyright infringement

As for the liability of IASP for the wrongdoings of a third party i.e. infringing materials, at the present, there has not been any explicit attempt by the legislators to clarify this position. In the United States of America, the Digital Millennium Copyright Act 1998 was enacted to exempt IASP from copyright liability if they take measures to take down the infringing materials from the internet. In the United Kingdom, the Copyright and Related Rights Regulations 2003 allow the grant of an injunction against a service provider, only in instances where the service provider has ‘actual knowledge’ of another person using their service to infringe copyright.

In this regard, in order to ascertain whether copyright subsists in the works, one must determine whether the works fall within one of the categories of works protected under the Copyright Act 1987 (“Copyright Act”). Section 7(1) of the Copyright Act sets out the categories of works which are eligible for copyright protection and it is worded in this way:


    7. Works eligible for copyright

   (1)     Subject to this section, the following works shall be eligible for copyright:

(a)        literary works;

(b)        musical works;

(c)        artistic works;

(d)        films;

(e)        sound recordings; and

(f)         broadcasts.


Upon determination whether the work in question is eligible for copyright, in order to determine whether there has been an infringement of copyright, we are of the view that we refer to Section 36 of the Copyright Act which provides:
36.  Infringements.


(1) Copyright is infringed by any person who does, or causes any other person to do, without the licence of the owner of the copyright, an act the doing of which is controlled by copyright under this Act.


  1. Section 13 of the Copyright Act provides for the following acts that is controlled by copyright,


(1)                           the reproduction in any material form;

(2)                           the communication to the public;

(3)                           the performance, showing or playing to the public;

(4)                           the distribution of copies to the public by sale or other transfer of ownership; and

(5)                           the commercial rental to the public,


of the whole work or a substantial part thereof, either in its original or derivative form.


Technically speaking, when an internet user posts a message through the internet, the said message will be transmitted through the IASP who will then in turn reproduce the said message to the intended recipient.

As such, passive IASP who is merely a conduit that who passively allowed for the transmission of data, may reproduce files and documents belonging to third parties that is controlled by copyright. In this regard, on the issue whether there is copyright infringement, we may refer to the definition of ‘causes any other person’ of Section 36 of the Copyright Act. The word ‘causes’ is not defined nor has been defined in the Malaysian Court.

Professor Dr. Khaw Lake Tee in her book “Copyright Law in Malaysia” (2nd Ed, 2001, Malayan Law Journal) at page 182 to 183, in defining ‘causes’ referred to the case of Dunia Muzik WEA Sdn Bhd v Koh Tay Eng [1989] 2 MLJ 356. Professor Dr. Khaw Lake Tee summarised Dunia Muzik WEA Sdn Bhd v Koh Tay Eng, at page 182 to 183 of “Copyright Law in Malaysia” (2ndEd, 2001, Malayan Law Journal) to the following:


In that case, the plaintiffs who were engaged in the making, production and publication of musical works and sound recordings, used the defendant for infringement of their copyright. It was alleged that the defendant had sold infringing copies of the plaintiffs’ sounds recordings and had therefore, inter alia, caused, enabled or assisted others to reproduce and to dispose off unlawfully the plaintiff’s works. Gunn J (as he then was) held that the plaintiffs have proved all the allegations made and were therefore entitled to an injunction, damages as well as delivery of the infringing copies. But although evidence was adduced to show that the defendant had sold infringing copies, there was nothing from the facts of the case to suggest that the defendant had made the infringing copies himself. The court could have thus meant that the defendant had ‘caused’ other to reproduce the infringing copies. There was also nothing in the facts to indicate the person involved in the actual reproduction were the servants or agents of the defendant. The court would seem to suggest that a person selling infringing copies could be held to have ‘caused’ copying of the work even though the act was done by a third party who was acting neither on the person’s behalf nor his instructions. In other words, the word ‘cause’ seemed to be used in the sense of ‘bringing about an effect or results’.


Further, in Saleha Hussin lwn. AB Wahid Nasir & Yang Lain [2004] 2 CLJ 204, the Court held that a television broadcasting company was liable for copyright infringement although they had no knowledge that the infringing work, a television program, had infringed the copyright of the Plaintiff. In the said case, the learned Judge, Abdul Hamid Mohamad HMP in his judgement, relied on the English case of Mansell v. Valley Printing Co.[1908] 2 Ch. 441 where the Court held that a person who infringed another person’s copyright is liable to the owner of the copyright although he is not guilty or had knowledge of the infringement.


Liability of Internet Application Service Provider for Fraud

To date, there have not been any reported cases on the liability of internet service providers for fraud in Malaysia. We have made extensive research on the position in the United Kingdom and the United States of America but our research did not yield any results.


  1. Fraud is defined in Clerk & Lindsell at page 1012 as “The tort involves a false representation made by the defendant, who knows it to be untrue, or who has no belief in its truth, or who is reckless as to its truth. If the defendant intended that the claimant should act in reliance on such representation and the claimant in fact does so, the defendant will be liable in deceit for the damage caused”

In order to prove fraud, the other party will have to show that there is a representation of a past or existing fact. The representation may be either express or implied from conduct. Representation implied by conduct is whereby a party conducts himself in a particular way with the purpose of fraudulently inducing another to believe in the existence of certain things which is contrary to the facts and to act upon the basis of its existence which causes the other party to suffer damages. Thus, there must be a deliberate concealment with the intention to defraud.

In the leading case of Derry v Peek (1889) 14 Appl. Cas.337, Lord Herschell laid down the essentials of fraud in the following proposition:


“First, in order to sustain an action of deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation as been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth”.

 In order to establish fraud, the state of mind of the Defendant as regards to his knowledge of the falsity or belief in the truth is essential in proving fraud. The representation must be untrue to the Defendant’s knowledge and made with the intent to deceive which is acted upon by the Plaintiff. Therefore, the Defendant may still be liable for fraud even if they did not obtain knowledge of the untruth of his statement until after it has been made and becomes aware of it before the Plaintiff acted upon it. For IASP, if their role is merely as a conduit to transmit information, we are of the view that they may not be liable for fraud if they do not know of such fraudulent statements.

However, if the IASP is aware of such statements and did not act accordingly when receiving a complaint of the same, the IASP may be subjected to legal action by aggrieved parties.



 Although the general legal duty of an IASP in Malaysia has been lined up in the Code, the Code does not provide for matters which are contentious. The Malaysian parliament has not enacted specific legislations to address the legal liability of an IASP unlike the United States of America.

In view of the uncertainty, certain IASP in Malaysia had taken steps to include exclusion clauses and also indemnity clauses against their subscribers in their service agreements.

New rules for property buyers

PETALING JAYA: Property buyers will no longer have the option to take loans for longer than 35 years. Anyone taking a personal loan can now only do so for a period of up to 10 years.

These are new rules set by Bank Negara with the aim of helping to reduce household debt in the country.

Before the new caps, property buyers could take loans for up to 45 years, while personal loans could be paid back over a period of up to 25 years.

Bank Negara is acting because Malaysia’s household-debt-to-Gross Domestic Product (GDP) ratio is a high 83%. It is the highest in emerging Asia.

The stricter lending guidelines also saw the central bank prohibiting the offering of pre-approved personal financing products.

These new measures to tackle household debt will also be extended to all financial institutions and credit cooperatives regulated by Bank Negara, the Malaysia Co-operative Societies Commission, Malaysia Building Society Bhd, and Aeon Credit Service (M) Bhd.

All these institutions will also need to follow responsible lending limits. New borrowers, especially those with lower incomes, can only take on debt amounting to 60% of their monthly take home pay.

The new limits will not affect loan applications made before yesterday.

Bank Negara governor Tan Sri Zeti Akhtar Aziz, in a briefing yesterday, said the household debt was not yet at an alarming level, but based on present trends it would eventually be so.

Extremely long property loan periods “encourage excessive debt accumulation by households and increases the vulnerability of this (the household) sector,” she said.

Industry players said the measures would have a limited impact on the property market because the older generation of Malaysians had already bought into the property cycle.

They said the latest caps would mainly affect the younger generation.

“They are the ones who will need loans with the extra tenure, not the older generation who are mainly able to afford (higher monthly repayments),” said IOI Properties’ director Teh Chin Guan.

“In the short term, the level of affordability for the younger generation will be lower at today’s prices,” he added.

Elvin Fernandez, managing director at property consultant Khong & Jaafar, said these moves by the central bank should be applauded because property loans with a tenure of more than 40 years was not advisable.

Real Estate and Housing Developers’ Association of Malaysia president Datuk Seri Michael K.C. Yam believed the measures were a “good pre-emptive move because Malaysians are not very disciplined when it comes to these matters”.

“In other countries the maximum tenure is usually 25 years or until the person reaches the retirement age of 55,” he added.

Federation of Malaysian Consumers Associations president Datuk Marimuthu Nadason also supported the new measures.

“But I urge Bank Negara to work with civil societies like us on financial literacy education, which Malaysians sorely lack,” he said, pointing out that 51 people were declared bankrupt daily in the country.

Korisatan Karu­ppiah, Penang Consumers Protection Asso­ciation president, said borrowers should be allowed to repay their loans ahead of schedule, without penalty.

“The lenders argue that they have already made plans with your money over the tenure you agreed with, and that paying back the sum early affects their plans,” he said.

He said the penalty was a fine, of between RM10,000 and RM35,000, depending on the size of the loan.



Probe reveals returns promised are not from gold trading

KUALA LUMPUR: Investigations into the accounts of the recently-raided gold trading firms revealed that the amount of assets and monies held by these companies do not match the amount collected from their investors.

The schemes offered by the firms were, therefore, unsustainable.

A joint press statement issued by Bank Negara Malaysia, the Attorney-General’s Chambers and the police, said it was discovered that these companies are operating schemes that are believed to be not sustainable to provide the promised high monthly returns, nor would they be able to provide the buy back guarantee of gold.

“The returns promised are not funded through gold trading, but from the monies invested into such schemes,” it said.

It added that these companies were found to have delayed returning gold or money to the investors within the promised stipulated time.

“Such signs are early warning indications prior to the collapse of such schemes that would result in significant losses to investors.

“These raids were conducted in the interest of protecting the investors as well as the public at large from falling victim to illegal schemes,” the statement said

On Oct 1, the police, Bank Negara, Companies Commission of Malaysia and Domestic Trade, Cooperatives and Consumerism Ministry jointly raided Genneva Malaysia Sdn Bhd and its affiliates in the country over suspected offences.

Days later, three other companies, Pageantry Gold Bhd, Caesar Gold Sdn Bhd and Worldwide Far East Bhd, were also raided.

Meanwhile, consultants and clients of Genneva Malaysia have sought Umno Youth’s help.

The wing’s public complaints bureau chairman Datuk Khairun Aseh said they would send a letter to Bank Negara to urge it to lift the freeze on the gold trading firm’s accounts.

“We want them to give a clear timeline on when they can return the assets to the respective owners,” he said yesterday.

Khairun added that they would also propose that payment for this month proceed as usual.

“We have received complaints of parents having to ask their children to return from abroad because they cannot afford to pay for their expenses,” he said.

Khairun also called on Bank Negara to come up with proper regulations with regard to gold trading to prevent a repeat of such incidents.

A-G mulling MACC Act amendment to increase body’s effectiveness

KUALA LUMPUR: The Attorney-General’s Chambers is currently looking into amending the Malaysian Anti-Corruption Commission (MACC) Act 2009 to improve the body’s effectiveness in tackling bribery in the country.

Minister in the Prime Minister’s Department Datuk Paul Low Seng Kuan said among the suggestions made to improve the Act was the inclusion of a provision to hold companies liable if their employees were found guilty of corruption.

“The Government is ready to study and introduce improvements to existing laws to address weaknesses in the system,” he said in a written reply.

Low also revealed that 1,310 people were brought to court for corruption offences between 2009 and May 2013.

“Of this total, 888 people were found guilty of various corruption offences.

“As part of the Government Transformation Programme, the names of the offenders were uploaded into the database on the MACC’s website,” he said.

Low said as of May 2013, 36 people out of the total 106 accused of corruption were found guilty.

At a press conference in the Parliament lobby, Rafizi Ramli (PKR – Pandan) said Low faced a big challenge to boost MACC’s image in the eyes of the public.

Comparing the MACC with Hong Kong’s Independent Commission Against Corruption (ICAC), Rafizi said 68% of cases were successfully prosecuted by the MACC while ICAC’s success rate was 86%.

“These numbers prove that the public still doubts the effectiveness and independence of the MACC in conducting probes.

“This is compounded by the fact that only one in every five MACC reports end up being investigated. A big portion of the cases end up being categorised as ‘no further action’,” he claimed

Bar against move to resurrect any law similar to Emergency Ordinance

PETALING JAYA: The Bar Council is against any move to resurrect any law similar to the Emergency Ordinance (EO), which was repealed two years ago.

Council president Christopher Leong said the current crime situation had nothing to do with the abolition of the EO.

“The EO was used to detain syndicated criminals.

“What we have now is an increase in snatch thefts, house burglaries, stabbings, and robberies at ATM machines and restaurants. These crimes are not as a result of the repealing of EO,” he said.

He said the EO was never about detaining such criminals and pointed out the police have sufficient investigative abilities to address the current crime situation.

“We are not in favour of the EO being resurrected in the shape or guise of some other laws,” he said.

Datuk Dr Wee Ka Siong (BN- Ayer Itam) said all angles and possibilities should be looked into to find a proper way to tackle crime.

“We must find the right mechanism. The enactment of a new law to replace EO can still be argued. Perhaps there can be other ways, including having more stringent policies, enforcement and manpower,” he said, disagreeing that the repeal had caused crime to spike.

Dr Mohd Hatta Ramli (PAS-Kuala Krai) said the problem did not lie with the repeal of the EO but the failure of the criminals’ rehabilitation process.

Criminologist Dr Geshina Ayu Mat Saat denied that there was a link between the abolishment of the EO to the recent spate of violent crimes.

“Factors in the spate of violent crimes include the level of moral decay, a higher threshold of violence tolerance through media portrayal, social desensitisation and individualisation of norms,” she said, adding that there was also not enough police personnel to cover a wide geographic area.

Society for the Promotion of Human Rights (Proham) secretary-general Datuk Dr Denison Jayasooria said serious police work was necessary, such as undercover operations, a better informer system, more professionals in investigation teams and better witness protection programmes.



Bloggers: Self-regulation better than Internet laws

KUALA LUMPUR: The Internet laws imposed in countries like China, Iran and Singapore are too harsh and should not be implemented in Malaysia, say bloggers and media analysts.

They felt that social media users should practise self-regulation and be prepared to face the music should their postings breach the accepted norms of the freedom of speech.

There were also those who felt that the formation of an independent body or institution to curb the emerging trend of social media users openly instigating and promoting hatred and chaos in cyberworld could assist in self-regulation.

Blog House Malaysia adviser Datuk Ahirudin Attan said calls for by certain quarters to monitor and impose Internet laws as practised by China and Iran would be akin to killing an ant with a hammer.

“It would be unfair to the majority of social media users, who use the platform wisely and they shouldn’t be punished for the recklessness of a handful few who don’t.”

Ahirudin, more popularly known as Rocky’s Bru, said emulating Singapore, which announced recently that news-based websites would be required to obtain a licence to operate, was also not the best option.

“We are far more advanced in terms of online freedom compared with Singapore and we shouldn’t fully follow the laws implemented by our neighbour.

“In the end, it boils down to the individuals themselves who should exercise control over their postings and be ready to face the authorities should they breach it.”

The Singapore Media Development Authority (MDA) had announced new rules stipulating that websites that had at least 50,000 unique visitors from the republic state every month and published at least one local news article per week over a period of two months must obtain an annual licence.

Websites granted a licence will have to remove “prohibited content” such as articles that undermine “racial or religious harmony” within 24 hours of being notified by the authorities

Licensed websites will also have to put up S$50,000 (RM123,000) as a “performance bond” that can be forfeited if the regulations are not followed.

This, however, has not gone down well with the online community, which raised, among others, the fear that bloggers would also be required to comply.

Ahirudin, a former journalist and editor, said Malaysia should mull the setting up of an independent body akin to the media council in the United Kingdom.

“The council should be formed with the help of the government and headed by a former media practitioner or someone of stature, like a judge or the head of a non-governmental organisation (NGO).

“It has to run independently and the council will decide on if an offence had been committed.”

Ahirudin said once this had been ascertained, it was up to the authorities to mete out the necessary action.

“Restricting the Internet will only make matters worse. The government has to adhere to its promise of not censoring the Internet but come up with other solutions.


“At the same time, we should educate the youngsters and remind the elders that posting such materials online will only put them in trouble.”

Universiti Kebangsaan Malaysia’s School of Media and Communication senior lecturer, Dr Sabariah Mohamed Salleh, said it was “too harsh” to block social media sites.

“Too many restrictions can make people retaliate. There should be rules and laws to curb this growing problem but, at the same time, I feel that one can never fully control the social media,”

Sabariah questioned how laws similar to those imposed in China, Iran and Singapore could be used to restrict Malaysians living abroad posting slanderous remarks.

“What about those living abroad? They’re not in the country, so how are you going to restrict the things they post?”

She, however, felt that Singapore’s Internet laws were a good example to follow but stressed that a thorough research had to be carried out to find out the best way to curb users from posting slanderous materials online.

Blogger Helen Ang echoed Ahirudin’s sentiment, saying that the onus of accountability fell on the social media user.

“This is becoming a social problem. Defamation will be there, but users must be able to back their postings and be ready to face punishment according to the law should they commit an offence.”

Ang also disagreed with following the footsteps of China and Iran in imposing Internet laws.

Blogger Y.L. Chong said it was impossible to impose such rulings.

“It would not be right to benchmark us against China which still struggles to fully contain the materials posted online despite the power-house’s resources and manpower.

“Should we review the laws, we should benchmark against the likes of those imposed in the United States and UK so that we can aspire to higher standards,”

Chong also explained that in order to fully monitor and restrict the Internet, the country needed an immense amount of resource and manpower.

“If China can’t do it, how can we? Huge volumes are posted daily on social media sites. It will be unthinkable to monitor everything,”

He said social media users must be educated on what they could post and what they shouldn’t.

“The same rules and regulations imposed for the mainstream media should be used for the social media.”

Read more: Bloggers: Self-regulation better than Internet laws – General – New Straits Times

Netizens click on cyber law review

PREVENTING ABUSES: They also want govt to find balance when regulating World Wide Web

KUALA LUMPUR : NETIZENS are adding their voices to calls to address cyber  anarchy.

While they welcome the move to revamp the law on the use  of the Internet, they want the government to be tactful in  regulating the World Wide Web.

The Communication and Multimedia Ministry on Thursday  said it would study  Internet laws  in the United States, the  United Kingdom and Australia to prevents abuses on social  media.

The ministry, along with the  Malaysian Communications  and  Multimedia Commission, will review illegal downloading  of materials, pornography, commercial abuses and other  abuses.

Malaysians have become vocal in expressing their views  on   blogs, Facebook and Twitter. Some have posted allegedly  seditious remarks.

Recent examples include postings allegedly insulting the  Yang di-Pertuan Agong and blasphemous statements against  Islam and Prophet Muhammad.

Blogger Syed Akbar Ali said: “It’s good that the ministry is    studying laws in open and liberal countries, although  current  laws can be  maintained but tightened.”

Syed Akbar, who writes as OutSyed The Box, said specific  issues should be streamlined, but added that the ministry and   MCMC should be tactful in regulating the Internet.

“Some issues that should be streamlined are scams that   appear as advertisements and underhand tactics used to  promote businesses online.”

Social media user Jasbir Singh Gill, 27, an entrepreneur,  said if the new laws were carried out, they would provide a  win-win situation for  the  ministry and Internet users.

“The laws are vital as scams are being blatantly advertised  online. But with regulation, the freedom of  speech of Internet   users may be affected.”

However, he added, it would  be impossible to curb illegal  downloading.

“There are proxy servers to bypass censorship and IP-  changing software for people to download illegally.  When the  high demand for  illegal downloads increases, the supply of   software to tackle the  problem will be high.”

Musician Balamurugan Ramakrishnan, 33, said a  new law  should be carried out only after a study on  Internet trends  was  done.

“With the revamped  law, Malaysians can say bye-bye to  porn, illegal downloads and  fraudulent businesses, and  welcome a more affordable online content and a safer  cyberspace.”

Student Adrian Thomas said revamping the law would stop  troublemakers and cyber hooligans, but  added that the  implementation must be governed by an independent body to  ensure objectivity.

Lawyer Katrina Razif said the negative uses of social media  could be prevented  and many Netizens would benefit from  the tightening of cyber laws.  

“It is good that the government is taking the initiative to  stamp out the negative aspects of the Internet. At the same  time, it needs to  find  balance in terms of freedom of speech  for netizens.

“The key is to allow netizens to  browse through legitimate  content, while limiting access to  illegal and negative as pects.”

However, Amir  Sharipuddin, 26, said netizens should also  be educated on the ethics of Internet use to decide on what  was good and bad.

“There are always new materials to be discovered, but  once we start regulating them, there will be no end to it. The  moment you start regulating, there will be other regulations  to follow the earlier  ones.”

Read more: Netizens click on cyber law review – General – New Straits Times

Nod for MPPP to take legal action against landowner

GEORGE TOWN: THE Penang Island Municipal Council (MPPP) has received the green light from the deputy public prosecutor’s office to take legal action against the landowner of the illegally cleared land in Bukit Relau here.

MPPP president Datuk Patahiyah Ismail said that the court has, however, yet to give them a date for the hearing.
“We have got the go ahead to take legal action. This is concerning the earthworks plan that was not submitted,” she told reporters after a council meeting at Komtar here yesterday.
It was earlier reported that the landowner had been told to speed up its mitigation works and overcome any pollution issue at the site.
It was also reported that earthworks at the site had stopped, with only mitigation works going on.
The land, which was cleared earlier this year without council permit, was rezoned last year to allow for low-density housing development.
Located over 76m above sea level, the land was being cleared to make way for a high-end project, which included bungalows.
Meanwhile in an immediate response, environmental interest group Citizen Awareness Chant Group’s (Chant) steering committee member Peter Wong welcomed the move.
“This is a matter of public interest as illegal works without proper approval, haphazard construction without consultants’ advice may cause landslides, which may lead to the loss of lives.
“Also, the illegal works was an act which was blatant and a total disregard of authority and the law,” Wong said in a statement.
Wong further stated that in the interest of the public, the prosecution should seek a deterrent sentence to prevent future abuse of the process and the offender to merely pay a fine.
The illegal hill clearing, which had gone on since April, was brought up to the media early last month by Seri Delima assemblyman R.S.N. Rayer.

Read more: Nod for MPPP to take legal action against landowner – Central – New Straits Times