​​CIMB Bank Bhd v Anthony Lawrence Bourke & Anor [2019] 2 MLJ 1

Federal Court Putrajaya

Exclusion Clause in Contract between Bank and Borrower

1. The Respondents, Anthony Lawrence Bourke and his wife, who are living in the United Kingdom entered into a Sale and Purchase Agreement (SPA) to purchase a property in Malaysia that was still under construction. To finance this purchase, they obtained a housing loan from CIMB Bank (the Appellant), which included an agreement for the bank to make progressive payments to the developer upon receiving invoices as the construction progressed.
2. However, the Appellant failed to pay one of the invoices for about a year. As a result of the Appellant’s failure to make timely payment, the developer terminated the SPA. This caused the Respondents to lose the property they intended to purchase and suffer financial losses.
3. Following this, the Respondents filed a suit against the Appellant, seeking general, special, aggravated and exemplary damages on grounds of breach of contract, negligence, and breach of fiduciary duty. In response, the Appellant relied on Clause 12 of the loan agreement, which stated that the bank would not be liable for “any loss or damage” suffered by the customer, arguing that this clause excluded its liability entirely.

1. Whether exclusion clause in the contract effectively prevent borrower from suing Bank to enforce their rights.

1. Whether exclusion clause in the contract effectively prevent borrower from suing Bank to enforce their rights

1. The Federal Court examined whether Clause 12 of CIMB’s loan agreement, which excluded the bank’s liability for all types of damages including loss of income, profit, and consequential damages, was valid under section 29 of the Contracts Act 1950. The Federal Court held that while freedom of contract is a fundamental principle, section 29 invalidates any contractual clause that absolutely restricts a party’s right to enforce their contractual rights through legal proceedings. Since Clause 12 completely barred the plaintiffs from claiming any damages, it effectively ousted their right to seek judicial remedies despite the bank’s breach, rendering it void under section 29.
2. The court referred to the case of  New Zealand Insurance Co Ltd v Ong Choon Lin [1992] 1 MLJ 185, where a 12-month limitation clause in a fire insurance policy was held void under section 29 as it restricted the insured’s right to enforce claims under the policy. The Court explained that in Malaysian law, rights and remedies are not separable, and restricting remedies effectively restricts rights, unlike the Indian approach, which treats rights and remedies as separate.
3. The court contrasted this with the case of Pacific Bank Bhd v Kerajaan Negeri Sarawak [2014] 6 MLJ 153 , where a guarantee’s requirement to make claims within a set period was upheld as it only limited the time for the accrual of a cause of action, not the enforcement of rights. The Federal Court clarified that Pacific Bank was distinguishable because it involved time limitation clauses, whereas this case  involved a clause that entirely excluded the borrower’s right to claim damages, which falls under the prohibition in section 29.
4. The judgment also discussed the case of Hock Hua Bank Bhd v Leong Yew Chin [1987] 1 MLJ 230, where the Court held that remedies are integral to a cause of action and cannot be separated, reinforcing that any restriction on remedies is effectively a restriction on rights under Malaysian law. Additionally, the Court cited the case of Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1966] 2 AII ER 61, emphasising that freedom of contract does not allow a party to completely avoid liability in a way that denies another party access to justice, particularly where there is unequal bargaining power between parties, as seen in standard banking agreements.
5. Further, the Court noted the case MBf Insurans Sdn Bhd v FELCRA [2008] 2 MLJ 398, which followed New Zealand Insurance, affirming that clauses limiting enforcement rights are void under section 29. The Court highlighted public policy concerns, noting that exclusion clauses like Clause 12, found in standard bank agreements, are often imposed on customers who have no real bargaining power, making it unconscionable for banks to rely on such clauses to deny liability completely.
6. The Federal Court dismissed CIMB’s appeal, affirming that Clause 12 was void under section 29 of the Contracts Act 1950 as it imposed an absolute restriction on the plaintiffs’ rights to seek remedies in court, violating public policy and denying access to justice.