A Msian bank forgot to pay a foreigner's house loan and tried to get away with it

Quick question: How many of us actually read through the fine print – whether signing up for a form, or installing a software – before clicking the agree button?

Probably no one, right? Because most of the time, we assume that we generally know the terms and conditions, and we just want to get it done as quickly as possible. We don’t even look at the fine prints, let alone read it.

But some T&C’s that you’ve glossed over, may come back to bite you when things go wrong under the contract.

Back in 2015, a foreigner lost his house because the bank forgot to pay his house loan. But when he wanted to bring them to court, he found out that he couldn’t sue them… because in the loan agreement he signed with them, there is a clause that said he couldn’t sue the bank for any mistake done by them.

This is the case of Anthony Lawrence Bourke v CIMB Bank Bhd.

The bank reminded itself to pay the loan...and still forgot to do it

In 2008, Anthony Lawrence Bourke, who was originally from the United Kingdom, wanted to buy a piece of property at Jalan Sultan Ismail. He and his wife were participants of the “Malaysia My Second Home” program, which allowed foreigners to stay in Malaysia for a period of 10 years. So, he took a loan of about RM700K from a Malaysian bank to finance the house that was still under development. Under the loan agreement, the bank would make several payments at different stages of completion to the developer on behalf of Anthony.

Later in 2014, the developer requested a payment due 25 March from the bank. But before the bank could pay, the branch was required to make a site visit first. It was not done. In fact, within 3 months, the bank’s disbursement department sent 5 internal emails to remind the branch. However even after 1 year, the bank still did not make the visit, and consequently, the payment couldn’t be released.

Neither Anthony nor the developer were informed about this site visit requirement. As a result of the bank’s failure to pay the loan for him, the developer terminated its sale and purchase agreement with Anthony, and Anthony lost his house in 2015.

Anthony tried to sue the bank for negligence. Under Tort law, negligence is the legal term for carelessness or mistakes, and in this context, it’s the bank’s failure to pay his loan.

[READ MORE: Did you know you can be taken to court for something that is NOT a crime?]

The bank said he can’t sue...even it’s their fault

The bank argued that according to the loan agreement, they could’t be sued for anything, even if it was their mistake. The bank pointed out a clause in the loan agreement. In Clause 12, it’s stated that:

Okay, we know it’s complicated, but if you are brave enough to read it, what it means is: You can’t sue the bank for anything, even if it’s their mistake. So, according to Clause 12, Anthony could not sue the bank for not paying the loan.

This clause is known as an exclusion clause. An exclusion clause is a term in a contract where one party can say they won’t be responsible for something, usually injuries or damages to your property. A more day-to-day example of it would be: 

Sounds familiar? You can almost always find such clauses in most parking lots. But this isn’t restricted to just parking lot signages. If you look deep enough, a lot of contracts have exclusion clauses too.

Did it matter that Anthony had no idea of this clause in the first place? The law says no. According to contract law, the moment someone signs an agreement, he accepts everything written in that agreement. So, every part of the T&C would apply to Anthony, including the part which prevented him from suing the bank.

But that did not deter Anthony from challenging the loan agreement. 

[READ MORE: If you get injured AFTER agreeing to terms and conditions in Malaysia, can you sue?] 

The bank had to pay for its mistake 

The case went to court 3 times, start at the high court, before it was finally settled at the Federal level. 

Anthony brought the case to the High Court. Here, the judge agreed that the bank was correct. They said Anthony had agreed to all the terms of the agreement, and therefore he can’t sue the bank.

Judge Noorin Badaruddin stated:

“...where a contractual clause has expressly excluded liability, parties are not allowed to claim an alternative cause of action under tort where the same would result in the circumvention of the agreed contractual provision.”

So a deal is a deal.

Round 1: The bank won.

And then, Anthony appealed this decision to the Court of Appeal. In that court, the judges actually reversed the decision of the High Court, and said that the clause did not need to be followed.

The Court of Appeal said that Clause 12 is against the law, because, in the Contracts Act 1950, there is this Section 29 which says:

Basically this section says that any part of a contract that prevents somebody from suing cannot be valid. It also says that the contract cannot give a time limit for which someone should sue, as this limits his legal rights.

So following Section 29, the judges decided that Clause 12 is invalid. This clause is against the law because it is an ‘absolute’ exclusion clause since it didn’t allow Anthony to sue or to claim any compensation whatsoever, so he had no way to seek justice if something went wrong.

Round 2: Anthony won.

The bank was of course not happy with this new judgement, and this time it was their turn to appeal this decision. The case then went up to the Federal Court, which is the final appeal court in Malaysia. Whatever happened here is the final judgement, which means the case could not be appealed anymore.

The Federal Court dismissed the bank’s appeal. It agreed with the decision of the Court of Appeal that the exclusion clause is against Section 29 of the Contracts Act. 

Judge Balia Yusof went on to say:

There is the patent unfairness and injustice to the plaintiffs had this clause 12 been allowed to deny their claim/rights against the defendant. It is unconscionable on the part of the bank to seek refuge behind the clause and an abuse of the freedom of contract.

Round 3: Anthony won. 

Such T&Cs are no longer valid

Clause 12 may typically be found in most banking agreements. One had to accept the contract as prepared by the bank. However, after this epic case, the so-called “bulletproof vest” of banks that prevented clients from suing on equal ground has now been removed.

And this will apply not just to banking agreements, but also any other contracts with such terms in situations where the contracting parties are not on equal levels. If there’s an exclusion clause in the T&C that says you can’t sue or get compensated for a breach of contract, it will no longer be valid. Thanks to Anthony, we don’t have to worry anymore.