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POLYGRAM RECORDS SDN BHD v THE SEARCH & ANOR [1994] 3 MLJ 127] (FACTS…

- - - - In cases of presumed undue influence, his Lordship pointed out, there were two ways in which a confidential relationship may be established (at p 423):
      - Class 2A. Certain relationships (for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue influence has been exercised.
      - Class 2B. Even if there is no relationship falling within class 2A, if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence. In a class 2B case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned.
    - - Visu Sinnadurai J ruled that the first contract was invalid but the second was valid rejecting defendants claims of false misrepresentation and undue influence but accepted that a clause in the second contract was void in respect of restraint of trade. As follow:
      - • As the first contract was rescinded and substituted by the second contract in June 1985, the first contract entered into between Polygram and the group in 1984 was not binding on both the parties when the group began recording for Go-Search in 1987.
      - • Alternatively, even if the first contract was valid and binding, the first contract expired on 6 October 1986, with no extension of its duration, as there is no evidence to indicate that the plaintiffs did exercise their option to extend it for further periods of one year each. Therefore, even on this ground, the defendants were not bound by the first contract when they recorded for Go-Search in 1987.
      - • As for the second contract entered into between the parties on 12 June 1985, I hold that it was a valid and legally binding contract.
      - • The defendants' challenge to set aside the second contract as being voidable on the grounds of undue influence is unsuccessful. Similarly, this court finds that the second contract, as a whole, is not voidable