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Case Update: Banks can no longer hide behind exclusion clause

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CONTRACT LAW
Contracts Act 1950 – Exclusion clause – Housing/Shop house Loan Agreement – Breach of Loan Agreement – Termination of Sale and Purchase Agreement – Whether an exclusion clause in an agreement entered into between two parties, a house buyer and a bank may be struck out by the provisions of Section 29 of the Contracts Act 1950

CIMB Bank Berhad v Anthony Lawrence Bourke and Anor
[2018] 1 LNS 1887, Federal Court
- see the grounds of judgment here

Facts The Respondents are husband and wife. They are foreigners and living in the United Kingdom. To finance their purchase of a property, they applied for and was granted a term loan by the Appellant bank. The loan was provided under the Housing/Shop house Loan Agreement (Loan Agreement). The property purchased was still under construction and payment was to be made progressively against the certificate of completion issued by the architect at each progress billing. Subsequently, the developer sent an invoice to the Appellant for payment. Eight days after receipt of the invoice, the disbursement department of the Appellant sent an email requesting its branch to conduct site visit inspection on the property. The Appellant did not notify either the developer or the Respondents on the need of a site visit inspection as an additional condition to disburse payment on the Invoice. The Appellant also had never made any request to the developer to extend the invoice Due Date in order for them to conduct the site visit. The sum remained unpaid which led to the termination of the Sale and Purchase Agreement (‘SPA’). The Respondents filed a claim against the Appellant seeking for damages suffered resulting from the termination of the SPA on the ground of breach of contract and/or negligence and breach of fiduciary duty. The learned Judicial Commissioner dismissed the claim as it was found that Clause 12[1] of the Loan Agreement absolved any liability against the Appellant. Dissatisfied with the decision of the High Court, the Respondents appeal to the Court of Appeal and the Court of Appeal concluded that the Appellant had breached its main obligation under the Loan Agreement when it failed to fulfil the terms to pay the invoice issued directly to it under the Loan Agreement. Hence, this appeal.

Issue Whether an exclusion clause in an agreement entered into between two parties, a house buyer and a bank may be struck out by the provisions of section 29 of the Contracts Act 1950[2].

Held In dismissing the appeal, the Federal Court found that mere limitations and/or some restrictions added into an exclusion clause is insufficient to invoke section 29 of the Act. However, Clause 12 of the Loan Agreement speaks of an absolute restriction to the Plaintiffs’ right to damages. As such, section 29 of the Act may be invoked and the exclusion clause rendered void.

 
 
[1] Liability: Notwithstanding anything to the contrary, in no event will the measure of damages payable by the Bank to the Borrower for any loss or damage incurred by the Borrower include, nor will the Bank be liable for, any amounts for loss of income or profit or savings, or any indirect, incidental consequential exemplary punitive or special damages of the Borrower, even if the Bank had been advised of the possibility of such loss or damages in advance, and all such loss and damages are expressly disclaimed.
[2] Agreements in restraint of legal proceedings void