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CBL Fraud

Fraud is defined under section 17 of the Contracts Act 1950 as including acts committed with the intent to induce another party to enter a contract. There are five acts that can constitute fraud: making a false statement of fact, concealment of fact, making a promise without intent to perform, deception, and any act declared fraudulent by law. The burden is on the plaintiff to prove fraud was committed knowingly and with intent to deceive. In one case, the defendant insurance company refused a claim by the plaintiff company, alleging fraudulent invoices and stock values in the claim. However, the court found no evidence the claims were exaggerated or that the plaintiff intended to defraud, so the plaintiff's claims were allowed.

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270 views2 pages

CBL Fraud

Fraud is defined under section 17 of the Contracts Act 1950 as including acts committed with the intent to induce another party to enter a contract. There are five acts that can constitute fraud: making a false statement of fact, concealment of fact, making a promise without intent to perform, deception, and any act declared fraudulent by law. The burden is on the plaintiff to prove fraud was committed knowingly and with intent to deceive. In one case, the defendant insurance company refused a claim by the plaintiff company, alleging fraudulent invoices and stock values in the claim. However, the court found no evidence the claims were exaggerated or that the plaintiff intended to defraud, so the plaintiff's claims were allowed.

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Fraud s.

17
Fraud is defined in section 17 of the Contract Acts 1950, to include certain acts which are
committed with intent to persuade another party to enter into the contract. Section 17 then lays
down five different acts which may constituted fraud. As a general rule, it may be stated that
wherever a person causes another act on a false representation which the maker himself does
not believe to be true, he is said to have committed a fraud. Five acts that would constitute
fraud are suggestion of fact that is not true, active concealment of fact under the Horsfall v.
Thomas [1862] 1 HC 90 case, promise made without intend to perform it, other act fitted to
deceive, and any acts the law declares to be fraudulent (Mahmood, 2014). The burden of proof
is on the plaintiff to prove that the fraud was made knowingly with the intention to deceive.
Wong Cheong Kong Sdn Bhd v. Prudential Assurance Sdn Bhd[1998] 3 MLJ 724
Facts: The plaintiff company, a shampoo manufacture, suffered loss when a fire
destroyed a portion of its building, furniture, electrical installations, plant and machinery stock
and other goods – all of which were covered under a fire insurance policy with the defendant
company by virtue of a policy transfer endorsement following the take-over of all the interests
of M/s Wong Wah Seng Trading Co Sdn Bhd ('M/s Wong Wah Seng') by the plaintiffs. The
plaintiffs made a claim under the policy. The defendants refused the claim upon the allegation
of and argued that the plaintiff had submitted a fraudulent claim on account of two invoices
which were not purchased by the plaintiffs and/or were not in the risk premises when
the fire occurred and a false statement on the value of stocks. The plaintiff instituted an
action against the defendant for damages arising from loss of plant and machinery and stocks.
Principle: Where the particulars of fraud in civil proceedings disclose fraud of the
criminal kind, it is the settled law that the burden of proof is the criminal standard of proof
beyond reasonable doubt, and not on the balance of probabilities. But, where the
fraud alleged is purely civil in nature or is entirely founded on a civil fraud, ad not based on a
criminal conduct or offence, the civil burden of proof would apply.
Since there was no evidence shows that the claims were
grossly or substantially exaggerated and the intention of the plaintiff to
defraud the defendant. The defendant had failed to meet the standard of
proof; therefore, the plaintiff claims is allowed.
Since there was no evidence shows that the claims were grossly or substantially exaggerated
and the intention of the plaintiff to defraud the defendant. The defendant had failed
to meet the standard of proof; therefore, the plaintiff claims is allowed.
United Asian Bank Bhd. v Tai Soon Heng Construction Sdn. Bhd
The respondent is appellant’s customer. Respondent’s account clerk forged several cheques
and drawn on the appellant’s bank. The money was later debited from the respondent’s bank
account. Later the respondent discovered the forgeries and brought an action against the
appellant.
The court held that his banker has honoured forged cheques drawn on his account need only
establish the charge of forgery on a balance of probabilities.
An established principle that the liability of the bank for making payment on
forged instruments if its customer is founded on the tort of conversion, which is a strict
liability. Therefore, a banker who pays out on such a forged instrument is absolutely liable to
make good the loss. There are only two duties on the customer in common law. There is no
duty on the customer to prevent forgeries on the part of the servant, nor is there a duty to inspect
his periodical bank statement.
The general rule is that mere silence or non- disclosure would not constitute fraud. As stated in
illustration (a), A sells, by auction, to B, a horse which A knows to be unsound. A says nothing
to B about the unsoundness of the horse. So, this is not fraud in A. However, there may be
certain circumstances under which silence or non- disclosure may constitute fraud. The
explanation to section 17 provides that the circumstances may be such that ‘it is the duty of the
person to keep silence (Illustration s.17 (b), or in other circumstances, silence may be
equivalent to speech (Illustration s.17 (c). As explain in illustration (b), A sells an unsound
horse to B, who is his daughter. Here, the relationship between the parties would make it A’s
duty to tell if the horse is unsound. While in illustration (c), B says to A, “if you do not deny
it, I assumed that the horse is sound.” A says nothing. Here, A’s silence is equivalent to his
speech.
WEBER V. BROWN (1908) 1 FMSLR 12
In this case, the respondent sued the appellant for false and fraudulent misrepresentation
relating to the number of rubber trees on an estate which the respondent purchased from the
appellant. The appellant relied on the Exception to Section 19 of the Contracts Enactment 1899.
The Court of Appeal held that the defense that the respondent had the means of discovering the
number of trees with ordinary diligence could not be set up because the Exception to Section
19 of the Enactment 1899 does not apply to cases where misrepresentation was made by a false
and fraudulent statement

Mahmood, K. (2014). Voidable contract. Retrieved from:


http://www.balohpedia.com/2014/02/voidable-contract.html

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