Corporate and Commercial Litigation

Injunction – The Principles

In the event that you are considering to apply for an injunction restraining an individual or company from, among others, competing with your company or business, infringing your trademarks or copyrights, divulging confidential information or trade secrets belonging to your company, selling the shares of a company and dealing with the assets of that company including creating charges and so forth, it is instructive to refer to the principles of injunction as stated below:

The cases of American Cynamid v Ethicon and Keet Gerald Noel John v Mohd Noor have laid down the following principle in order for an injunction to be granted:-

a)      There must be a serious question to be tried

b)      Whether damages would be adequately compensated the Plaintiff

c)      On which side does the balance of convenience lie

d)     If all factors above are evenly balanced; should the status quo be maintained

The facts of a case at hand must be fitted into the above-stated requirements.

For instance, an injunction could be applied in a given scenario as follows:

a)      There is indeed a serious question to be tried whereby the parties are disputing over the actual consideration that should be paid for the sale of the companies and matters relevant to the transaction;

b)      If the Defendant continues to mismanage and run the companies in a manner which is detrimental to your company; and the Court subsequently is to order the Defendant’s companies to be returned to the Plaintiff- no amount of damages could make up for the loss suffered;

c)      Balance of convenience lies in favour of the Plaintiff as the sale of the companies would cause injustice to the Plaintiff; and

d)     Status quo of the Plaintiff is difficult to be maintained when no amount of damages are adequate for the purpose of reinstating the original position of the Plaintiff.

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.

 

LETTER OF INTENT

 

  • 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.

 

LETTER OF UNDERTAKING

  • 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.

Corporate and Commercial Litigation

We offers a wide range of corporate and commercial law services with banking and finance, company incorporation, privatization, accounting, joint ventures, insurance, investment and real estate. 

Our area of practice extends to:-

  • Corporate Takeovers and Mergers
  • Corporate listings
  • Due diligence
  • Shareholders Agreements
  • Joint Venture Agreements
  • Securities Documentation
  • Foreign Investments
  • Share Financing Agreements
  • Acquisition of Shares Agreements
  • IT contracts and documentation
  • IP contracts and documentation
  • Maintenance and service Agreements
  • Distributorship Agreements
  • Agency Agreements / Franchise Agreements
  • Licensing rights
  • Partnership Agreements
  • Investment Agreements
  • Software-systems project Agreements
  • Building and construction contracts
  • Memorandums of Undertaking (MOUs)
  • Various business contracts and Commercial Agreements