YHS RESOURCES SDN BHD v DAMANSARA REALTY (PAHANG) SDN BHD

Case Significance

Illustrates that parts of a claim disclosing no reasonable cause of action and plainly inconsistent with binding contractual terms may be struck out under Order 18 rule 19 while the remaining claim and counterclaim proceed to full trial.

This High Court decision concerns an application to strike out part of a plaintiff's claim under Order 18 rule 19(1) of the Rules of Court 2012. The plaintiff had sued the defendant over a Term Sheet, seeking, among other things, a declaration that the Term Sheet had been wrongfully and unlawfully terminated, the refund of a deposit of RM5,000,000 with interest, and an account of that deposit said to be held in trust. The defendant applied to strike out specified paragraphs of the statement of claim — paragraph 40(a) and paragraphs 40(c) to (o) — on the grounds that they disclosed no reasonable cause of action, were scandalous, frivolous or vexatious, or constituted an abuse of the court's process, contending that the plaintiff had failed to perform its obligations under the Term Sheet despite several extensions of time, so that the Term Sheet lapsed. The court applied the settled principle that the power to strike out must be exercised with caution and only in plain and obvious cases, but that where pleadings disclose no reasonable cause of action and are plainly inconsistent with binding contractual terms, striking out is appropriate. It allowed the application in respect of the impugned paragraphs, striking them out, while making clear that this was not a ruling on the ultimate merits and did not preclude the parties from raising the issues at trial. It directed that the plaintiff's remaining claim under paragraph 40(b) and the defendant's counterclaim — which raised substantive factual issues requiring evidence — proceed to full trial, and awarded costs of RM3,000.00 to the defendant. The judgment illustrates that portions of a claim that are inconsistent with binding contractual terms and disclose no reasonable cause of action may be struck out while the balance of the dispute proceeds to trial. The court's approach reflects that striking out is a blunt instrument to be used sparingly, but that it remains available where discrete parts of a claim are unsustainable on their face against the backdrop of the parties' binding agreement, leaving the genuinely triable issues to be resolved at trial.