Can banks rely on exclusion clauses in loan agreements to exclude liability in all circumstances?
ANTHONY LAWRENCE BOURKE & ANOR V CIMB BANK BHD  1 MLJ 104
- Anthony Lawrence Bourke and another (“Anthony”) had entered into a sale and purchase agreement with a developer to purchase a property (“SPA”).
- The purchase of the property was financed by CIMB Bank Bhd (“CIMB”).
- As the property was under development, the payment for the purchase of the property was to be made progressively when progressive billings are issued by the developer depending on the certificate of completion issued at each stage of progress of the development.
- Under the loan agreement, CIMB was required to make progressive payments to the developer on behalf of Anthony whenever such sums become due.
- However, CIMB failed to make the progressive payment when such sums became due after the issuance of the progress billing by the developer.
- The developer then terminated the SPA.
- Anthony then sued CIMB for damages in the High Court.
- CIMB argued that the invoice issued had exceeded the drawdown expiry date as stipulated in the loan agreement (although Anthony argued that this was waived by the conduct of CIMB) and sought to rely on Clause 12 of the loan agreement which excluded its liability “for any loss of income or profit or savings, direct or indirect, incidental, consequential, exemplary, punitive or special damages”.
- The High Court dismissed Anthony’s claim as it found that Clause 12 of the loan agreement absolved any liability or claim against CIMB.
- Anthony appealed to the Court of Appeal.
COURT OF APPEAL DECISION – APPEAL ALLOWED!
The Court of Appeal allowed the appeal and found CIMB liable based on the following rationale:
- It is clearly stipulated in the loan agreement that it is CIMB’s contractual obligation to disburse the loan by paying the invoice issued by the developer and CIMB had breached its main obligation when it failed on its undertaking to pay the invoice issued.
- Clause 12 of the loan agreement which sought to exclude CIMB’s liability was void under section 29 of the Contracts Act 1950 as it was a clause that absolutely restrained legal proceedings. Section 29 provides: “Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.”