JURUPRO SDN BHD v KKIBS SDN BHD

Case Significance

Confirms that contractual liability cannot be imposed on a party with whom no contract was formed, and that allowing funds to pass through one's account for a commission — without knowledge of another's fraud — creates no liability where the claim was pleaded only in contract and not in conspiracy or fraud.

This High Court decision at Kuala Lumpur, sitting in its commercial division, is an appeal that overturned a Sessions Court judgment holding a party liable for breach of a contract it was never shown to have made. The claim concerned the sale and purchase of 15,000 boxes of nitrile gloves. After a full trial the Sessions Court had allowed part of the plaintiff's claim, ordering the first defendant to pay RM902,250, and the second, third and fourth defendants to pay lesser sums, making a cumulative total of RM1,752,250. The second, third and fourth defendants were unrepresented, did not appear at trial and did not appeal. The first defendant appealed against the judgment entered against it.

The core issue was whether there was a valid contract between the plaintiff and the first defendant at all. The court found that the finding of a valid contract was contrary to the evidence: there was no evidence that the plaintiff had dealt with the first defendant regarding the sale and purchase of the gloves, the first defendant was not even in the business of selling nitrile gloves, and it had never made any offer to sell them. What the evidence showed was only that the first defendant had agreed, at the second defendant's request, to allow money to be channelled through its account in return for a commission. Critically, the plaintiff's claim against the first defendant was pleaded solely as a breach of contract, not as a conspiracy to defraud, and there was no evidence that the first defendant knew of the second defendant's dealings with the plaintiff or was party to the fraud the second defendant had perpetrated.

The court allowed the first defendant's appeal with costs. The judgment illustrates that liability in contract cannot be imposed on a party with whom no contract was formed, and that merely permitting funds to pass through one's account for a commission, without knowledge of another's fraud, does not convert into contractual liability where the claim was never pleaded in fraud or conspiracy.