Loke Wei Feng, Universiti Utara Malaysia
The case of Sim Kon Sang Peter (Administrator of the estate of Chong Yu Tai, decd) v Datin Shim Tok Keng addresses the sufficiency and voidability regarding the contracts entered into by individuals of unsound mind. The plaintiff, Sim Kon Sang Peter, is asserting his capacity as the administrator of the deceased, Chong Yu Tai, against the defendant, Datin Shim Tok Keng. The plaintiff claimed that Chong Yu Tai had transferred two parcels of land to the defendant when she was of unsound mind, and at that time, the defendant was already aware of the deceased’s mental incapacity and that she could not understand the meaning of the transfer. The plaintiff claimed that the contract should be void and have no legal effect.
The court dismissed the plaintiff's claim because the transfer happened before the Contracts Act 1950 came into force in Sabah. Therefore, the English law was applied at that time. According to the VG Ramchandran on The Law of Contract in India (1983) at p401, English Law provides that the contract with a person of unsound mind is not void but voidable at his option if the other party had knowledge of the insanity at the time of making the contract. The Contracts Act 1950 could not apply retrospectively if the transfer had already been completed, the defendant's name registered, and her rights acquired. It was alleged that the person claiming lunacy needed to prove evidence, but the plaintiff failed to do so in this case. Additionally, under English common law, the plaintiff needed to prove that Chong Yu Tai was of unsound mind at the time and that the defendant had knowledge of this incapacity, but the plaintiff failed to provide sufficient evidence. The court also held that the transfer was not statute-barred because Chong Yu Tai had passed away in a lunatic condition.
In this case, the issues that had arisen included the mentality of Chong Yu Tai at the time, whether the defendant knew that Chong Yu Tai was mentally incapacitated during the land transfers, whether the plaintiff's claim was barred by the statute of limitations, and whether the plaintiff had the qualifications to request relief if the defendant did not have knowledge of Chong Yu Tai’s unsound mind.
Chong Yu Tai had transferred two parcels of land to the defendant on 6 September 1973 and 20 June 1974. The plaintiff argued that Chong Yu Tai was of unsound mind at that time and incapable of understanding the transfers. Thus, the plaintiff claimed the transfers should be void due to Chong Yu Tai’s incapacity at the time of the transfers. The plaintiff also claimed that the defendant had knowledge of Chong Yu Tai’s unsound mind when the transfers were executed.
The defendant denied that Chong Yu Tai was mentally incapacitated at that time the transfers were made. She also claimed that she had no knowledge of Chong Yu Tai’s incapacity when the transfers occurred. The defendant further argued, citing Section 3 of the Limitation Ordinance (Cap 72), that the plaintiff’s claim was statute-barred. The applicable law in this case is English common law because the transfers occurred before the Contracts Act 1950 came into force in Sabah. According to the English common law, a contract entered into by a mentally incapacitated person is not void but voidable if the other party was unaware of the incapacity.
The plaintiff supported his claims with witnesses, including Chong Yu Tai's workmate, daughter-in-law, daughter and others. The witnesses testified that Chong Yu Tai was “crazy” and exhibited signs of mental incapacity, including abnormal behaviour such as undressing herself in public. They also stated that the defendant and her husband often visited Chong Yu Tai's house when she was of unsound mind. The plaintiff further provided evidence from two medical experts who testified Chong Yu Tai was a lunatic and schizophrenic.
One of the issues concerns the statute of limitations; the court held that the plaintiff’s claim was not statute-barred. The statutory limitation period is typically six years, but Chong Yu Tai was an exception because she passed away in a lunatic condition. Therefore, the limitation period should be calculated from the date of Chong Yu Tai’s death.
The plaintiff’s counsel, Mr. Simon Shim, argued that the two land transfers were void rather than merely voidable, regardless of whether the defendant had knowledge of Chong Yu Tai’s mental incapacity. The counsel for the defendant, Mr. Ho Kin Kong, countered this argument by citing the case Asia Commercial Finance (M) Bhd v Yap Bee Lee & Ors, a decision of Peh Swee Chin J, and referred to Lopes LJ in Imperial Loan Co v Stone. It was stated that a contract made by a person of unsound mind is voidable, not void, if the defendant believed the contract was made with a person of unsound mind, with the burden of proof resting on the defendant. Mr. Ho further argued that English common law should apply at that time because the Contracts Act 1950 had not yet come into force in Sabah, making references to the Indian Contracts Act inapplicable.
Mr. Shim invoked the phrase inter alia, asserting that the Act should be applied because the action commenced on 15 September 1988. He referred to Section 11, which mentioned that competency to contract includes both the age of majority and being of sound mind, and argued that these principles are closely related. Therefore, according to the decision in Tan Hee Juan v Teh Boon Keat & Anor, a contract made by a person of unsound mind should be void rather than voidable if the Act applied in this case. Mr. Shim attempted to argue that the contract was void by referencing Molyneux v Natal Land and Colonization Co Ltd, but his argument failed because that case was decided under Roman-Dutch law. This is due to the fact that the law applied in Malaysia is Contracts Act 1950. Before the Contracts Act 1950 was introduced in Malaysia, the Contract Enactment 1899 that was applied came from India Contract Acts 1872 with a minor amendments. The India Contract Acts 1872 was the act that modified English common law relating to the contract. Therefore, although the case of Molyneux v Natal Land and Colonization Co Ltd may have similar facts with the instance case, since it was decided under Roman-Dutch law , it cannot be applied as a reference.
Finally, Mr. Shim, the counsel for the plaintiff, referred to the Re Walker case, which held that a person found to be in a lunatic condition is unable to execute a valid transfer or dispose of property. Mr. Shim argued that the contract was void rather than voidable because Chong Yu Tai was found to be a lunatic under the Lunatics Ordinance. However, in this case, there was no evidence provided by the plaintiff to prove that Chong Yu Tai was a lunatic at that timé. She had been released from the hospital, which at least indicated that she was no longer certified as incapacitated at that time. The plaintiff also failed to prove that the defendant had knowledge of Chong Yu Tai’s unsound mind during the transfers. Thus, the transaction is voidable rather than void.
The court’s decision in this case highlights the need to ensure which law should be applied in the case. Besides, in this case the plaintiff needs to prove the mental incapacity of Chong Yu Tai and prove that the defendant was aware of Chong Yu Tai’s mental incapacity. Further, the case applied English common law as it was the appropriate law at the time the transactions occurred. However, in its conclusion, the court set a high standard for the evidence required from the plaintiff. This standard may create greater challenges for mentally incapacitated individuals when they seek to claim their rights, as they must provide sufficient and strong evidence to support their case. The plaintiff also needed to prepare more effective and strong evidence, including related statutes or precedents, to influence the court’s decision. For instance, the medical report provided by the plaintiff proves that Chong Yu Tai had been released from the hospital, which at least indicated that she was no longer certified as incapacitated at that time. Besides, the testimony by the plaintiff’s witness testified that Chong Yu Tai was of unsound mind, but the experience had already passed 46 years. Thus, the evidence had become hardly reliable. This shows that the plaintiff needed to prepare evidence that was trustable and undeniable to influence the court’s decision. Moreover, the case also addressed the statute-barred period and the lunatic condition of a deceased person, and it will serve as a judicial precedent for similar cases in the future.
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