5 February, 2019
The Federal Court in dismissing CIMB bank's appeal held that clause 12 of the loan agreement, which absolutely restricts the borrowers from enforcing any of their rights against the bank and precludes the borrowers from claiming any loss or damage from the bank, was not enforceable for two reasons.
Firstly, section 29 of the Contracts Act 1950 (“CA 1950”) prohibits an absolute restriction of a party’s right to enforce his rights by the usual legal proceedings.
This is to be distinguished from clauses limitation the time within which rights may be enforced. Secondly, as a matter of public policy, an absolute exemption clause such as clause 12 of the loan agreement was patently unfair and unjust to the borrowers.
The Courts recognized that the bargaining powers of the borrowers and the bank are different and not equal and reasoned that it is therefore unconscionable for the bank to seek refuge behind such clause and abuse the freedom of contract.
For further information, please contact:
Sivabalah Nadarajah, Partner, Shearn Delamore & Co
sivabalah@shearndelamore.com
