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FRAUD, MAGNUM FINANCE BERHAD V TAN AH POI & ANOR [1997], Tay Tho Bok…

- - - - S.17(a) has similar requirements as S.18(a) in that there must be a false representation of fact addressed to the party misled.
      - The only difference is the state of mind of the maker of the statement.Under17(a) maker of statement does not believe it to be true.
      - See illustration (a) to S.19
      - Case : Kheng Chwee Lian v Wong Tak Thong [1983] 2 MLJ 322 pg 259 Alsagoff
        
        The appeal was from the decision of the High Court declaring the respondent to be the owner of one-half of land in Kuala Terengganu so that the respondent would retain one-half and the appellant and her five sons the other half.
        
        In 1954, the appellants and the respondent executed a document called “Surat Perjanjian”, (“the first agreement”), following which the respondent went into occupation of the front portion of the land and erected a biscuit factory on it.
        
        In 1957, the parties executed another agreement (“the second agreement”), sub-dividing the land, the respondent being given the front portion, which area was stated to be sufficient to accommodate the building on it. In fact it was less than the area already occupied by the biscuit factory.
        
        In 1973, the respondent lodged a caveat against one-half share of the land. He took out a writ against the appellant.
        
        Held:
        The second agreement was voidable at the option of the respondent and had been lawfully repudiated. The respondent was induced into signing the second agreement by the misrepresentation regarding the area granted to him, which misrepresentation was fraudulent within the meaning of s. 17(a) & (d), Contracts Act, 1950.
      - Where one party induces the other to contract on the faith of representations made to him, anyone of which is untrue, the whole contract is considered as having been obtained fraudulently.
    - - Where a party to a contract actively conceals or prevents certain material information from reaching the other party to the contract, this active concealment amount to fraud .
      - See illustration (c ) and (d) to S.19 to show the operation of S. 17(b)
      - Question : What is the relation between active concealment (S.17(b) ) and caveat emptor?
      - A : The situation under S. 17(b) + Illust. (c) & (d) must not be confused with the general rule of caveat emptor that silence does not amount to misrepresentation or fraud, ie a party to contract is not bound to disclose material facts to the other party. Under the general rule, the alleged party does not do anything active to hide the information.
      - Passive concealment
        
        Refer to the Explanation & illustration (a) & (d) to S.17
        
        Based on the illustrations , there was only passive concealment of material facts by A. A did not do anything active to conceal from B the horse’s unsoundness and the change in prices .This is not amount to fraud
    - - Where a promise is made without any intention of performing it , it is an act of fraud under S.17(c) .Either the promisor knows that when he makes the promise he cannot perform it or he makes a promise that he intends to break.
    - - S. 17(d) is a catch-all clause to prevent any fraud escaping the net of the law .
    - - Where any law specially declares certain acts or omissions to be fraudulent, such act or omission amounts to fraud under S.17 (e)
      - SILENCE OR NON-DISCLOSURE
        
        General rule: Mere silence or Non-disclosure would not constitute fraud
        
        General rule: no duty on parties to disclose material facts or silence does not constitute fraud. However dishonest non disclosure amounts to fraud.
        
        However, there are certain circumstances whereby silence or non-disclosure may constitute fraud as provided under the Explanation to S.17
- - - - A PERSON IS NOT INDUCED TO ENTER INTO A CONTRACT BY A REPRESENTATION THAT ALTHOUGH FALSE , DID NOT INFLUENCE HIM OR AFFECT HIS MIND AT THE TIME OF ENTERING INTO THE CONTRACT . IT CAN ARISE IN THE FOLLOWING MANNER.
      - 1.If a person never knew the existence of the false representation made to him
      - 2 Even though he knew he did not allow it to affect his judgment in entering into the contract.
      - If a person is aware of the untruthness of the representation made to him.
    - - 1.A contracting party at the time of making the contract must, if he has the means, to exercise “ordinary diligence ” to discover the truth for himself for otherwise he can be said to have failed to fulfil his duty to exercise ordinary diligence.
      - 2.This corresponds to the doctrine of “Caveat Emptor” that although as a general rule vendor must deliver the property corresponding to the description contained in the contract, an error in the particular of the description of the property is not a ground of objection if it is readily corrected upon inspection thereby making the contract not voidable.
      - Therefore the misled party has a duty to exercise ordinary diligence when making the contract as provided for under the Exception to S.19 of the Act