KUALA LUMPUR, Feb 25 ― The exclusion of liability clauses in agreements signed by banks with their customers cannot absolve them from legal liabilities, the Court of Appeal ruled yesterday in a landmark ruling.
In a ruling in favour of a British couple’s suit against CIMB Bank Berhad, a three-member panel led by Justice Datuk Rohana Yusuf decided that the bank is liable for their actions of not paying an invoice issued by a developer of a property bought by the couple.
According to a lawyer representing the couple, the decision indicated that banks “may” still be sued for acts of negligence despite the presence of such clauses.
Anthony Lawrence Bourke and Alison Deborah Essex Bourke took a loan from CIMB to purchase a property in Kuala Lumpur in 2008, but CIMB’s non-payment of an invoice issued by the developer caused the Sales and Purchase Agreement to be terminated by the developer.
The subsequently sued CIMB in a case filed in 2015.
The bank had relied on Clause 12 of the agreement signed with the couple which would exclude the bank from liability in contract or tort, and a High Court ruling against the plaintiffs in September last year had referred to the clause.
“The exclusion of liability clause of the agreement cannot be sustained and cannot absolve the bank from liability in contract or tort,” the court ruled, in allowing the appeal and overturning the High Court ruling.
The Apellants’ lawyers Ong Yu Jian and Jowe Ninoy Almeida had argued that the exclusion liability clause was against “public policy” and also contravenes Section 29 of the Contracts Act 1950, which was meant to protect public interest.
Ong said Malaysian common law should recognise patent unfairness in such clauses and give protection to the public who have no choice but to agree to such clauses when dealing with banks.
“This is a very important decision as previously, all such liability exclusion clauses were able to protect banks from liability, damages and claims in Malaysia,” Ong said in a statement.
“I believe this decision would improve the standards of the banking industry as a whole, as it would make banks more careful and accountable to their customers in their day-to-day dealings, as they now know that there is no longer an all-encompassing safety net inside their agreements to protect them from negligence,” he added.
Justice Datuk Vernon Ong Lam Kiat and Justice Datuk Hasnah Mohammed Hashim were the other two judges on the panel, while CIMB was represented by lawyers Wong Hock Mun and Sharifah Alliana Idid.