Gagasan Warisan Sdn Bhd v Abdul Ghafar Bin Omar

Appellant(s): Gagasan Warisan Sdn Bhd

Respondent(s): Abdul Ghafar Bin Omar

• YA Datuk Azhahari Kamal bin Ramli
• YA Dato' Ahmad Kamal Bin Md. Shahid
• YA Datuk Dr Lim Hock Leng

• The respondent, a licensed logging entrepreneur, was approved by the state forestry department to extract timber from a logging block subject to payment of a premium, which was later reduced together with the logging area.
• In 2020, the parties executed an Agreement purporting to grant the appellant all "rights, interests and benefits" of the logging concession, accompanied by an irrevocable power of attorney authorising the appellant to manage and conduct logging operations in the respondent's name.
• After the appellant failed to pay a substantial outstanding premium for almost two years, the respondent issued a notice of cancellation; the appellant then sued for specific performance and/or damages, while the respondent's counterclaim (not the subject of this appeal) was dismissed at trial.

• Whether the respondent was entitled to unilaterally terminate the Agreement, or whether termination could only be effected by court order under the Agreement's termination clause.
• Whether the Agreement and accompanying power of attorney were, in substance, an unlawful transfer/assignment of logging rights contrary to section 23(1) of the National Forestry Act 1984, rendering them void under section 24 of the Contracts Act 1950 notwithstanding that illegality was not specifically pleaded.
• Whether the appellant, having failed to pay the outstanding premium, could claim specific performance despite its own fundamental breach and the equitable "clean hands" doctrine.

• The Court held that the appellant's prolonged failure to pay the outstanding premium was a repudiatory breach going to the root of the contract, entitling the respondent to terminate under section 40 of the Contracts Act 1950 notwithstanding the termination clause, as such a clause could not override the innocent party's common law right to treat the contract as discharged.
• The Court affirmed that courts must take notice of illegality whenever it appears, even if unpleaded, and found that the Agreement and power of attorney together constituted a colourable device/sham designed to circumvent the statutory prohibition on transfer of logging rights, rendering the transaction void ab initio.
• The Court held that specific performance was unavailable to a party in fundamental breach of an essential term (per section 23(b) of the Specific Relief Act 1950) and, applying the "clean hands" doctrine, denied restitution since the appellant had full knowledge of the illegal substance of the arrangement; the appeal was dismissed with costs affirming the High Court's decision.