Hedd Industries (M) Sdn Bhd & Anor v Rahman Hydraulic Tin Sdn Bhd

Appellant(s):

• HEDD Industries (M) Sdn Bhd
• Smart Aladdin Sdn Bhd

Respondent(s): Rahman Hydraulic Tin Sdn Bhd

• YA Dato' Has Zanah Binti Mehat
• YA Datuk Ravinthran a/l Paramaguru
• YA Datuk Supang Lian

• The respondent, a tin mining company, entered into a series of "Tribute Agreements" with the appellants under which the appellants were to provide consultancy services to secure the renewal and extension of five mining leases in Perak, in exchange for substantial tribute payments totalling over RM128 million.
• The leases were renewed in December 2007 (three months after the agreements were signed) and extended in March 2012. Following a change in the respondent's board in 2016, tribute payments were halted and the agreements were rescinded in April 2017.
• The appellants sued for specific performance and damages; the respondent counterclaimed for a declaration that all Tribute Agreements were void, relying on total failure of consideration and illegality under s. 24(e) of the Contracts Act 1950 (influence peddling contrary to public policy).

• Whether the appellants had discharged their burden of proving that consultancy services were provided under the Tribute Agreements, such that there was no total failure of consideration.
• Whether the Tribute Agreements were void under s. 24(e) of the Contracts Act 1950 on the ground that the consideration was in the nature of influence peddling, contrary to public policy.
• Whether the High Court's concurrent findings of both total failure of consideration and influence peddling were legally compatible, and whether the doctrine of estoppel could apply to an illegal contract.

• The Court of Appeal upheld the finding of illegality under s. 24(e) of the Contracts Act 1950, affirming that the Tribute Agreements were void as their true object was for the first appellant's director to use his political connections and influence with State Authorities to procure the lease renewals — constituting influence peddling contrary to public policy, as established in Merong Mahawangsa Sdn Bhd & Anor v Dato' Shazryl Eskay bin Abdullah [2015] 5 MLJ 619.
• The Court held that the concurrent findings of total failure of consideration and influence peddling were legally incompatible: applying the test in Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 All ER 883 (adopted by the Federal Court in Berjaya Times Squares), a finding that the leases were procured through influence peddling necessarily meant the appellants had partially performed their contractual duties, negating a total failure of consideration. The High Court therefore erred on the total failure of consideration ground, though this did not affect the outcome.
• The appeal was dismissed with costs of RM50,000, as the finding of illegality alone was sufficient to void the Tribute Agreements; the doctrine of estoppel could not apply to save an illegal contract under s. 24(e), notwithstanding the respondent's ten years of tribute payments.