Detik Ria Sdn Bhd v Prudential Corp Holdings Ltd & Anor [2025] 3 MLJ 22

Federal Court (Putrajaya)

Contract — Agreements — Call/put option agreement and supplemental call/put option agreement

1. Detik Ria Sdn Bhd (the Appellant) held a 49% shareholding in Sri Han Suria Sdn Bhd (SHS), the holding company of Prudential Assurance Malaysia Bhd (PAMB), while Prudential Assurance (the 1st Respondent) held the remaining 51%. In 2002, both parties entered into a Call and Put Option Agreement (CPOA), under which Prudential could acquire, and Detik Ria could sell, its shares in SHS. The CPOA expressly stated that it was conditional upon obtaining approval from the Minister of Finance (MOF), the Foreign Investment Committee (FIC), Bank Negara Malaysia (BNM), and any other relevant authorities. Clause 2.3 provided that if MOF approval was not obtained, the agreement would become null and void.
2. In 2008, Detik Ria exercised the put option, requiring Prudential to purchase its shares. Prudential then made part-payments amounting to over RM109 million in anticipation of completing the acquisition, although the required MOF approval had not yet been secured. In 2009, both parties entered into a Supplemental CPOA (SCPOA), which amended several key provisions of the original agreement. The amendments allowed Prudential to defer completion indefinitely and provided mechanisms for Prudential to direct the exercise of Detik Ria’s rights over its shares, effectively giving Prudential substantial control despite the absence of statutory approval.
3. Over the following decade, between 2009 and 2019, Prudential received more than RM4.2 billion in dividends as preference shareholder of SHS and PAMB. Detik Ria, however, received no dividends during this period and continued to wait for Prudential to obtain the necessary regulatory approval to complete the acquisition of its shares. In 2018, Prudential applied for approval solely from Bank Negara Malaysia, rather than the Minister of Finance as required under the Insurance Act 1996 [Act 553]. Prudential also treated the repeal of the IA and its replacement by the Financial Services Act 2013 [Act 758] as meaning that MOF approval was no longer required.
4. In 2023, the Ministry of Finance confirmed that no approval had ever been granted under section 67 of Act 553 for the disposal or acquisition of the shares in question. Detik Ria contended that the agreements of both the CPOA and the SCPOA were illegal in their performance and had become void under section 33 of the Contracts Act 1950 [Act 136] due to the non-occurrence of the required condition precedent. Prudential, meanwhile, sought to enforce the agreements and obtain specific performance compelling Detik Ria to transfer its shares.
5. The High Court and Court of Appeal both upheld the validity and enforceability of the agreements, finding that MOF approval was unnecessary under Act 553 framework. Detik Ria appealed to the Federal Court, which focused on whether the contract had been illegally performed or had become void due to the absence of mandatory statutory approval.

1. Whether the Call and Put Option Agreement (CPOA) and its Supplemental Agreement (SCPOA) were enforceable in the absence of approval from the Minister of Finance, as required under section 67 of Act 553?

(1)  Whether the Call and Put Option Agreement (CPOA) and its Supplemental Agreement (SCPOA) were enforceable in the absence of approval from the Minister of Finance, as required under section 67 of Act 553?

(a) The Court answered this question in the negative and held that the agreements, though valid at inception, subsequently became void because the condition precedent Ministerial approval was never fulfilled.

(b) The Federal Court held that section 67 of Act 553 imposed a mandatory statutory requirement, and by virtue of section 272 of Act 758, the relevant law governing the approval process remained Act 553, not Act 758.

(c)  The Court emphasised the purposive interpretation mandated under section 17A of the Interpretation Acts, stating that the object of section 67 of the Act 553 was to prohibit the effective performance of agreements dealing with shares in an insurer unless the Minister’s approval is obtained (para [79]).

(d) Thus, although parties are allowed to enter into such conditional agreements, they cannot perform or implement them without prior approval.

(e)  The Federal Court stated that the mere entry into a conditional agreement subject to regulatory approval does not contravene section 67 of Act 553, as no dealing in shares occurs unless and until the condition precedent is satisfied.

(f)   The Federal Court held that although the agreements were valid at inception, they were illegally performed when the parties acted upon them without obtaining Ministerial approval, including by amending the SCPOA, making substantial part-payments, and conferring effective control over the shares (paras [111]–[118]).

(g) The Court explained that although the contract was valid at entry, its legal character changed when the condition precedent failed. Under section 33 of the Contracts Act 1950, a contingent contract becomes void when the event (here, MOF approval) becomes impossible. The Court stated that “the CPOA and SCPOA became void when the requisite approval was never obtained” (para [140]).

(h)  The Federal Court rejected the argument that Ministerial approval could be obtained retrospectively after the agreements had been substantively performed, holding that approval under section 67 must precede any effective acquisition or disposal. (para [143]).

(i)    The Federal Court concluded that because the agreements had become void, section 66 of the Contracts Act applied. Therefore, the parties were obliged to restore the benefits they had received.

(j)    The Federal Court ordered the parties to make necessary applications to the High Court to resolve their dispute on the nature and quantum of advantage or benefit to be restored (para [225]).

(k)  Thus, the Federal Court held that the CPOA and SCPOA were unenforceable due to illegal performance, had become void, and triggered the restitutionary obligations under section 66 CA. The Court emphasised that enforcing such agreements in the absence of statutory approval would defeat the very purpose of section 67 of Act 553, which was enacted to protect the national interest in the financial sector.

1. The Federal Court allowed the appeal and held that the CPOA and SCPOA were void because the parties performed them without obtaining the required approval from the Minister of Finance under section 67 of Act 553. As the condition precedent was never fulfilled, the agreements became void, and pursuant to section 66 of the Contracts Act 1950, the parties were to be restored to their original positions by returning the benefits received.

1. Conditional contracts requiring regulatory approval remain valid at entry but become void if approval is never obtained.
2. Effective performance without statutory approval amounts to illegal performance, making the agreement unenforceable.
3. Section 66 Contracts Act ensures restitution so neither party obtains an unfair windfall when a contract “becomes void”.