Question 1

Everfresh Ltd was incorporated by Ramli and Rizan to export fresh vegetables and fruits. Ramli

and Rizan are the directors of the company. The articles of the company names Ramli and Rizan

as directors. Rizan and his wife Farah each hold 40% of the shares. They are major shareholders

in this company, while Ramli holds the remaining 20%. Everfresh’s constitution provides that

Sara who is Ramli’s wife is to be the company’s solicitor for life. Rizan and Farah propose that

the constitution be amended to provide for the importation of fruits to Malaysia. However, Ramli

and Sara object to this proposal.

Rizan and Farah later informed Ramli that he has been removed from his office as the director

while Sara receives a letter from Everfresh Ltd informing her that her services as a solicitor are

no longer needed.

a) Advise Ramli whether he can prevent the alteration of the constitution by Rizan and

Farah.

Starting up a business in Malaysia is not a big deal to the investors or promoters as being

concern with Malaysian Company Act 1965. First of all the promoters of an organization is

needed to decide the type of business entity. There are three different types of business entities in

Malaysia. They are sole proprietorship, partnership business entity and Limited companies.

Limited company is can be Sendirian Berhad (SDN. BHD.) or Berhad (BHD). There are three

types of limited companies in Malaysia. Limited companies in Malaysia are also can be

categories as limited by shares, limited by guarantee and unlimited company with/without share

capital. In the case above, we can see that Everfresh is a limited company by shares.

According to Malaysian law not everyone can become the directors of a company. There are

some of the requirements of Malaysian Company Act 1965 need to be satisfied by a person that

wants to become a director. Some of the basic requirements are he or she is a normal person,

must a teenager or at least reaches 18 years old, must not a person that has been disqualified

from being a director and a person that wants to become a director does not reach the age of 70 1.

Even a person aged 70 years can become a director by fulfilling some of the requirement. He or

1 Act 125, Companies Act 1965 (Revised - 1973), Part V - Management And Administration, Division 2 - Directors And Officers.

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she can become a director by getting approval from at least seventy five percent (75%) of

shareholders at general meeting.

In “Malaysia” company must have at least two directors and one company secretary as

mentioned in Section 4, Act 125 of the Malaysia Company Act 1965. Usually a person elected to

become a director to the board of a company by the members of the company. Section 4, Act 125

of the Malaysia Company Act 1965, states that a director “includes any person occupying the

position of director of corporation by whatever name called and includes a person in accordance

with whose instructions the directors of a corporation are accustomed to act and an alternate or

substitute director”2. This mean a person who is elected to be the board is not necessarily called

as the director. He or she also can be known as “governors", "trustees", "chief executive officer"

or "managing director".

Everfresh Ltd incorporated by Ramli and Rizan. The company was established to export

fresh vegetables and fruits. According to section 122 (1) of Company Act 1965, Everfresh Ltd

has fill the requirement of having two directors in the company which are Ramli and Rizan.

Other than that the directors are also the residence from Malaysia to actively run the business in

Malaysia. “Section 122 (1) indicates every company shall have at least two directors, who each

has his principal or only place of residence within Malaysia”3. In short, Everfresh Ltd is already

fulfilled the basic requirement to actively run the business in market.

Generally, the Malaysian Companies Act 1965 (“MCA”) provides for the statutory duties

and liabilities of company directors. Further, the common law principles on directors’ duties

supplement the provisions of the MCA. Directors are considered as “officers” or “agents” of a

company and have the capacity to enter into contracts on behalf of the company, subject to

limitations on their authority to do so as imposed either by law, the company’s articles of

association or other legal instruments. At present, the MCA does not make a distinction between

an executive and non executive director. Accordingly, the duties and liabilities of a director

apply to both an executive and non-executive director. As with most jurisdictions, the business

and affairs of a company are managed by a Board of Directors.

2 Act 125, Companies Act 1965 (Revised - 1973), Part V - Management And Administration, Division 2 - Directors And Officers.

3 Act 125, Companies Act 1965 (Revised - 1973), Part V - Management And Administration, Division 2 - Directors And Officers.

2

A company's constitution can be altered. The default rule in the replaceable rules is that a

company can vary its constitution via a special resolution. Where any change or alteration is

made in the charter, statute, memorandum or article of a foreign, company or other instrument

constituting or defining its constitution, a certified copy of the instrument effecting the change or

alteration or of the charter, statute memorandum, articles or other instrument as changed or

altered4.

The memorandum of a company may be altered to the extent and in the manner provided by

this Act but not otherwise. Notwithstanding subsection (1) and subject to section 33 and section

181, if a provision of the memorandum of a company could lawfully have been contained in the

articles of the company, the company may, by special resolution, alter the memorandum (a) by

altering; or (b) by deleting. Subject to this section a company may by special resolution alter the

provisions of its memorandum with respect to the objects of the company.

Where a company proposes to alter its memorandum, with respect to the objects of the

company it shall give by post twenty-one days' written notice specifying the intention to propose

the resolution as a special resolution and to submit it for passing to a meeting of the company to

be held on a day specified in the notice5.

The dispute involved competing interest such as minority shareholder v majority

shareholders. As being the majority shareholders, Rizan and Farah have rights to proposed

propose that the constitution be amended to provide for the importation of fruits to Malaysia.

While the constitution has the effect of a contract, the company may alter it by special resolution.

This was subject only the Act, any condition in the constitution and the duty to exercise this

power bona fide and the benefit of the company as a whole.

Ramli can prevent alteration of the constitution by Rizan and Farah. For Ramli, he thinks

that the only limitation to the power to alter the constitution is that it must be exercised bona fide

and for the benefit of the company as a whole is no longer correct. From the point of view of

Ramli, he assumed that the constitution have no need to amend because the company receiving

benefit for the current policy and the whole contract is valid. Besides that, Ramli reject the

proposal of the amendment because the company’s constitution is clear. According to the law, 4 Companies Act, 1965, Companies Regulations, 1966.

5 Act 125, Companies Act 1965 (Revised - 1973), Powers, Part Iii - Constitution of Companies Division 2. 3

the independence of the contract and the company’s constitution is less clear, the contract will

not always prevent an alteration of the constitution contemporaneously denying the parties’ right

under the contract.

b) Advise Sara whether she is entitled to be the company's solicitor for life.

A solicitor is a legal practitioner who traditionally deals with any legal matter in some

jurisdictions. A person must have legally-defined qualifications, which vary from one

jurisdiction to another, to be described as a solicitor and enabled to practice there as such. The

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Malaysian Bar is a professional body which regulates the profession of lawyers in peninsular

Malaysia. In Malaysia, there is no distinction between a barrister and a solicitor, in that, it is a

fused profession. Membership into the Bar is automatic and mandatory. The bar was created

under the Legal Profession Act 1976. Like other bar associations around the world, it has a wide

range of functions, including, protecting the reputation of the legal profession, to uphold the

cause of justice, to express its views on matters relating to legislations, and others6.

From Sara case, Rizan and Farah terminate Sara as their company’s solicitor. Before

termination Rizan and Farah should give Sara reasonable notice. They only can terminate Sara if

Sara fails to honor the term of the engagement as set forth or for any reason as required by

applicable ethical or legal restrictions. So, Sara still can be solicitor for Everfresh Ltd as she

never given any reasonable notice or she never implied any ethical or legal restrictions.

A solicitor may apply for an order declaring that that solicitor has ceased to be the

solicitor acting for (a) a party or (b) a children’s guardian. Where an application is made under

this rule (a) notice of the application must be given to the party, or children’s guardian, for whom

the solicitor is acting, unless the court directs otherwise and (b) the application must be

supported by evidence. Where the court makes an order declaring that a solicitor has ceased to

act, a court officer will serve a copy of the order on (a) every party to the proceedings and (b)

where applicable, a children’s guardian. That is to say, the ceasing to act must be preceded by a

conclusion as between solicitor and client that the solicitor’s retainer is at an end7.

Question 2

On 7 September 2009, Melody entered into a hire purchase agreement with Mudah Finance for a

used Toyota Camry at the price of RM 65,000. Explain the legal position of the following

situations, treating each part separately.

a) The pre-contractual information was not given until 13 October 2009.

6Wikipedia, Malaysian Bar,2015.

7 Dbfamilylaw, Termination Of Retainer: When Can A Solicitor Sack A Client, 2014.5

Hire purchases agreement are commonly known as H.P agreement in Malaysia and it is

used by financial institutions in Malaysia to fund the purchase of consumer goods, vehicles and

other business equipment and industrial machinery. In Malaysia, The legislation governing hire

purchase transactions is the Hire Purchase Act 1967, which came into force on 11 April 1968

after hire purchase, became popular in the acquisition of expensive consumer goods such as cars,

business equipment and industrial machinery8.

Purchasing cars is the most common type of hire purchase agreement in Malaysia and the

repayment could served up to 9 years from the date of agreement been executed. There are two

types of car loans currently offered in Malaysia: variable rate and fixed rate car loans. Fixed rate

car loans are the most common type in the market, where there is no fluctuations in interest

during the loan tenure. The payments on this loan are fixed and interest amount is calculated up

front, thus additional payments do not reduce the principle or interest amount on the loan. The

variable rate car loan is linked to a current account, whereby the funds deposited in your current

account will reduce your payment on interest.

In hire purchase agreement, property in the goods does not pass at the time of the

agreement whilst in a contract of sale, property in the goods passes at the time of the agreement

or upon or at any time before delivery of the goods.

Where goods to be comprised in a hire-purchase agreement is a second-hand motor

vehicle, the person who intends to enter into the hire-purchase agreement in respect of such

second-hand motor vehicle shall declare in writing any defects of the second-hand motor vehicle

in accordance with the inspection report by the relevant authority determined by the Controller.

For the purpose of subsection above, “defect” includes defect to the mechanical or operational

system, construction, structure and build-up and fitting of the motor vehicle. According to Hire

Purchase Act 1967, Section 5 (Copy of documents to be served on hirer) within twenty-one days

after the making of a hire-purchase agreement, the owner shall serve or cause to be served on the

hirer and the guarantors a copy of the agreement each9.

At any time before the final payment has been made under a hire-purchase agreement the

owner shall, within twenty-one days after he has received a request in writing from the hirer,

8 Wikipedia,Hire purchase,2014.

9 Laws Of Malaysia, Hire-Purchase Act 1967, Act 2126

supply to the hirer a copy of any memorandum or note of the agreement (a) on payment by the

hirer of the prescribed fee or (b) where no fee is prescribed, one free copy, and there after a fee

as may be prescribed shall be charged for the supply of a second or subsequent copy thereof.

Thereof, pre contractual agreement needs to be given in writing form within twenty-one days and

the owner should be served on the copy of the agreement.

According to the Section 4 of the Hire Purchase, a hire-purchase agreement in respect of

any goods specified in the First Schedule shall be in writing and the agreement shall be in the

national language or English language. A hire-purchase agreement that does not comply with the

condition shall be void. Section 4 (1) provides that before any hire-purchase agreement is entered

into in respect of any goods (a) in a case where negotiations leading to the making of the hire

purchase agreement is carried out by any person who would be the owner under the hire

purchase agreement to be entered into, or any person, other than the dealer, action on his behalf,

such person shall serve on the intending hirer a written statement duly completed and signed by

him.

Section 5 (1) of the said Act provides that the owner must serve a copy of the hire-

purchase agreement on the hirer and the guarantors within fourteen days after the making of the

agreement. Failure to do so would render the hire purchase agreement unenforceable by the

owner. At any time before the final payment has been made under a hire purchase agreement the

owner shall, within fourteen days after he has received a request in writing from the hirer, supply

to the hirer a copy of any memorandum or note of the agreement.

b) The agreement expressly negated Mudah Finance's liability for fitness and

merchantable quality of the car.

A contract of hire-purchase is defined as a contract of hire with an option to purchase under

which the owner of the chattel undertakes to sell it to or that it shall become the property of the

hirer conditionally on his making a certain number of payments. However, no property in the

goods passes until the making of the last payment. From the foregoing, it is clear that a hire

purchase agreement is a contract whereby the owner of a chattel lets it out on hire for a periodic

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rent with the provision that on due compliance with the various terms of the agreement and the

completion of the agreed number of payments of rent, the hirer either becomes the owner of the

goods automatically or shall have the option of purchasing the chattel by the payment of a small

agreed sum10. 

In addition to the above duty or obligation, there are some conditions implied in the

contract. The first obvious condition is that the owner should possess a good title to the goods.  If

his title is successfully impeached, it will amount to a total failure of consideration as between

the purported owner and the hirer, entitling the latter to claim back all he had paid as damages. In

addition, there is an implied warranty of quiet enjoyment therefore, if the owner willfully

interferes with hirer’s possession, the hirer can sue. Another condition implied in a hire

purchase contract at common law is the fitness of the goods for the purpose for which they were

hired. It has been held that the implied condition as to fitness for purpose for which the goods are

made does not extend to a hidden defect.

Where the hirer expressly or by implication makes known to the owner or the dealer or to

any servant or agent of the owner or the dealer the particular purpose for which the goods are

required, there shall be implied in the hire-purchase agreement a condition that the goods shall be

reasonably fit for that purpose, but such a condition shall not be implied if the goods are second

hand goods and the agreement contains a statement to the effect (a) that the goods are second-

hand and (b) that all conditions and warranties of fitness and suitability are expressly negatived,

and the owner proves that the hirer has acknowledged in writing that the statement was brought

to his notice. Nothing in this section shall prejudice the operation of any other written law or rule

of law whereby any condition or warranty is to be implied in any hire-purchase agreement.

Any relevant document published by the warranty or guarantee provider should also be

handed over to the consumer. The consumer should be advised of what type of warranty or

guarantee is being provided, for example, manufacturers, free extended manufacturers or

dealer’s, insurance backed or dealer’s own warranty or guarantee. The consumer should be

informed of the identity of the warranty or guarantee provider and the address to which claims

may be directed. The different types of warranty or guarantee and any significant differences

between them should be explained to consumers as appropriate.

10 Obligations of the Parties to a Hire Purchase Agreement, academia.edu, 2015.8

Mudah Finance should have an accessible, appropriate and user friendly after-sales

procedure to ensure that all consumer enquiries are dealt with in an honest, fair, professional and

reasonable manner. They should ensure that warranty work is carried out promptly and that your

estimated timescale for completion is made clear to the consumer before any work has

commenced. They should keep the consumer informed if it is subsequently discovered that the

work has to take longer, for example, because further problems have been discovered.

c) The agreement contained a clause stating that Mudah Finance would not be liable for

any misrepresentation or statement made by the dealer or his servant or agent.

According to the section 8 of the Hire purchase, every representation, warranty or statement

made to the hirer or prospective hirer, whether orally or in writing, by the owner or the dealer or

any person acting on behalf of the owner or the dealer in connection with or in the course of

negotiations leading to the entering into of a hire-purchase agreement shall confer on the hirer (a)

as against the owner, the same right to rescind the agreement as the hirer would have had if the

representation, warranty or statement had been by an agent of the owner and (b) as against the

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person who made the representation, warranty or statement, and any person on whose behalf the

person who made the representation, warranty or statement was acting in making it the same

right of action in damages as the hirer would have had against them or either of them if the hirer

had purchased the goods from the person who made the representation, warranty or statement or

the person on whose behalf the person who made the representation, warranty or statement was

acting (as the case may be) as a result of the negotiations11. Without prejudice to any other rights

or remedies to which an owner may be entitled, an owner shall be entitled to be indemnified by

the person who made the representation, warranty or statement, and by any person on whose

behalf the representation, warranty or statement was made against any damage suffered by the

owner as a result of any such representation, warranty or statement.

If the owner made a misrepresentation in the course of negotiations leading to the hire-

purchase agreement, the hirer has the right to rescind the agreement and sue for the damages

according Section 8 (1) (a), Hire Purchase Act. It is a breach of the law to mislead consumers by

failing to give them the information they need in order to make an informed decision before the

sale such as misleading omission. This might, for example, be by omitting or hiding important

information you are aware of or providing important information in an unclear, unintelligible,

ambiguous, or untimely manner, where this is likely to cause the average consumer to take a

different decision.

The key elements of a warranty or guarantee should be clearly drawn to the attention of

consumers prior to sale. This includes, for example details of what are covered and what is not

covered, claim limits, and conditions that need to be followed for the warranty/guarantee to

remain valid, the geographical scope of the warranty/guarantee and the claims procedure.

d) On 28 December 2009, Melody was transferred to a branch office in Thailand and she

took the car with her without informing Mudah Finance.

As the statement Melody has entered into a hire purchase agreement with Mudah Finance

on 7 September 2009 for a used Toyota Camry at the price of RM 65,000. On 28 December

2009, Melody was transferred to a branch office in Thailand and she took the car with her

without informing Mudah Finance. In a hire purchase agreement, property in the goods does not

pass at the time of the agreement whilst in a contract of sale, property in the goods passes at the

time of the agreement or upon at any time before delivery of the goods.

11 Section 8, Hire Purchase Act 1967,10

Both Mudah Finance and Melody need to sign off final agreement regarding the final

payment, insurance and other document. An owner shall be insured in the name of the hirer

against any risks he thinks fit in respect of the following (a) motor vehicle comprised in a hire

purchase agreement for the first year and (b) all other goods comprised in a hire purchase

agreement, for the duration of time that the goods remain under hire purchase according section

26(1), Hire Purchase Act, 1967.

It is the responsibility of Melody to inform Mudah Finance regarding the movement or

changes of current place of the vehicle. As the hirer, Melody needs to inform Mudah Finance

when she was transferred to a branch office in Thailand and she took along the car with her. It is

wrong if Melody did not inform the Mudah Finance.

Section 37 of Hire-Purchase Act states that the hirer is required to state where goods are.

Section 37 (1) states the owner of any goods comprised in a hire-purchase agreement may, at any

time by notice in writing served on the hirer thereof, require him to state in writing where the

goods are, or if the goods are not in his possession, to whom he delivered the goods or the

circumstances under which he lost possession of them, and any hirer who does not within

fourteen days after the receipt of such a notice give to the owner such a statement or who gives a

statement containing any information that is to the knowledge of the hirer false shall be guilty of

an offence under this Act12.

Section 37 (2) states where (a) a hirer removes the goods comprised in a hire-purchase

agreement from the address specified or (b) goods comprised in a hire-purchase agreement are

lost or are removed from or are taken out of the hirer’s possession, the hirer shall inform the

owner in writing or state in the presence of the owner (i) the new address where the goods are

kept or (ii) the date and circumstances in which the goods were lost or (iii) the date and

circumstances in which the goods were removed or taken out of his possession, and any hirer

who does not within fourteen days of the removal or loss comply with the provisions of this

subsection shall be guilty of an offence under this Act13.

As stated in section 37 of Hire-Purchase Act the hirer is responsible to reply the written

notice of owner regarding the position of the goods. In this case Melody is responsible to inform 12 Laws Of Malaysia, Act 212, Hire-Purchase Act 1967.

13 Laws Of Malaysia, Act 212, Hire-Purchase Act 1967.11

Mudah Finance the location of Toyota Camry. Section 37 (2) is stating if Melody is removing

the car from the address specified in the agreement, she is need to inform Mudah Finance the

new address of the vehicle in written form.

Section 11 of Hire-Purchase Act is regarding power of court to allow goods to be

removed. Section 11 states where, by virtue of a hire-purchase agreement, it is the duty of a hirer

to keep the goods comprised in the agreement in his possession or control at a particular place or

not to remove the goods from a particular place, a court of a Magistrate may, on the application

of the hirer, make an order approving the removal of the goods to some other place, which place

shall, for the purposes of the agreement, be substituted for the place mentioned in the

agreement14.

According to Section 11 of Hire-Purchase Act, Melody does not have the rights of

removing the vehicle from the actual place. Melody should keep the vehicle at the particular

place as stated in the agreement and does not deserve to bring the car to Thailand without

informing Mudah Finance. In term of removing the car from actual place to Thailand, Melody

can apply to the Court of magistrate. At the Court of magistrate Melody may make an order

approving the removal of Toyota Camry to Thailand.

In short, the way Melody took Toyota Camry to Thailand without informing Mudah

Finance is not allowed. Melody may refer to Section 11 of Hire-Purchase Act and section 37 of

Hire-Purchase Act in a way of moving the car from actual place to Thailand. This will avoid

Melody from violate the Hire-Purchase Act of Malaysia and avoid unnecessary offences.

14 Laws Of Malaysia, Act 212, Hire-Purchase Act 1967.12

REFERENCE

1) Powers, Part III - Constitution of Companies Division 2. (Act 125, Companies Act 1965)

(Revised - 1973).

2) Termination Of Retainer: When Can A Solicitor Sack A Client. (2014.). Dbfamilylaw.

3) Companies Act, 1965, Companies Regulations. (1966).

4) Hire purchase. (2014). Wikipedia.

5) Laws Of Malaysia, Hire-Purchase Act 1967, Act 212.

6) Malaysian Bar. (2015). Wikipedia.

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7) Obligations of the Parties to a Hire Purchase Agreement. ( 2015). academia.edu.

8) Part V - Management And Administration, Division 2 - Directors And Officers. (Act 125,

Companies Act 1965 (Revised - 1973).

9) Section 8, Hire Purchase Act 1967.

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