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  • Writer's pictureGavin Jayapal

Implied terms in contracts: An analysis of the CA decision of Ling v Ding



Most would agree that molesting alligators is a bad idea.


This is unspoken and implied, with our limbic system advising us against such a course of conduct.


For the discerning few however, express signs are necessary.


The CA decision of Ling v Ding


In the recent CA decision of Ling Boon Huat v Ding Toh Biew [CIVIL APPEAL NO.: A-02(NCVC)(A)-312-03/2023], the CA revisited the issue of implied terms and set-out the law in an easy-to-digest fashion.


The facts


Ding was the landlord of a shophouse. Ling was the tenant. In 2006, Ding commenced a suit against Ling for breach of the tenancy agreement.


Ding was successful. In 2015 and on appeal, the parties recorded a Consent Order (“2015 CO”).


Under the terms of the CO, Ding was to buy the property. A valuer was appointed and in 2015, the valuer returned a price of RM600,000.


Ding’s failure to comply


Ling did not pay for the property. Ding commenced execution proceedings.


Parties attempted mediation. Here, they recorded another Consent Order dated 06.02.2017 (“2017 CO”).


The 2017 CO required parties to execute a S&P within 6 weeks and to perfect the same within 9 months.


Ling failed to execute the S&P.


The problem


Ding was in a bit of a bind. The running-around in Court had led to the value of the property increasing. However, by virtue of the 2015 CO, the value had been fixed at RM600k.


There was also further litigation between the parties' families. The upshot of this litigation was that the Ling family gained the upper-hand over the Ding family. They obtained judgment against the Dings, with the net effect that the Dings were to pay ~RM1.38m to the Lings.


Against the backdrop of owing ~RM1.38m to the Lings, the Dings needed to even the odds. They sought to do this by revisiting the valuation price of the property, so as to reduce the sums owing to the Lings (i.e., by increasing the valuation sum of RM600k, the sum owing of ~RM1.38m would be reduced accordingly).


The OS filed in the High Court


Ling filed an OS in the High Court, seeking an Order to compel a fresh valuation exercise to be conducted. Ling took the position that there was an implied term in the 2015 CO, wherein he would be entitled to carry out a fresh valuation exercise.


The HC allowed the OS and ordered a fresh valuation.


Appeal


On appeal, the CA held that this was wrongful.


Nantha Balan JCA first set-out the law. Having considered Sababumi v Datuk Yap [1998] 3 MLJ 151 (FC), His Lordship noted the 3 requirements for an implied term to come into existence:


Implied terms are of three types. The first and most important type is an implied term which the court infers from evidence that the parties to a contract must have intended to include it in the contract though it has not been expressly set out in the contact.
The second type of implied term is one by operation of law, and not based on the inference just explained.
The third kind of an implied term is one that is implied by custom or usage of any market or trade which is reasonable, and again it is not dependent on a court's inference explained above but by virtue of such a custom or usage from the market or trade

A rough gauge to determine whether a term would be implied would be to consider the “Oh, of course” test. If the parties to the agreement would have said “Oh, of course” to a term, it is generally to be implied. This would be based upon business efficacy.


Decision


The CA observed that in the 2017 CO, there was an express term that if the Defendant (Ling) failed to comply with the Consent Order, the Plaintiff (Ding) would be at liberty to execute:


[31] In the present case, it is pertinent to note that there was a term in the 2017 Consent Order that if the Defendant failed to comply with the Consent Order, then the Plaintiff is free to commence execution proceedings against the Defendant. More importantly, there was no express term in the Consent order that allowed for any sort of price adjustment whatsoever to cater for any delay or dilatoriness on the Defendant’s part and consequently for the Plaintiff to seek a re-valuation of the subject property to cater for any delay in the implementation of the Consent Order and any price appreciation.

The CA held that the HC has misdirected itself on the “efficacy” of the purported implied term. The CA held that the “fundamental rewriting” of the 2017 CO was wrongful, an afterthought and an abuse of the Court process.


The appeal was allowed and the valuation exercise was set-aside.


2 other interesting decisions



In both decisions, the respective CA Panels underscored the importance of Consent Judgments and Settlement Agreements. What the parties had determined to be their bargain ought to be upheld by the Courts. Only unconscionable conduct militates this, with the Courts emphasising that a misbehaving party ought not take advantage of its own wrongdoing.


GAVIN JAYAPAL

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