News & Views - Juen, Jeat, Nic & Nair

April 18, 2023

Insurable Interest in Life Insurance – Yes, but When?

Insurable interest is one of the most fundamental concepts in insurance law and is not without its share of criticism and discombobulation. For the uninitiated, in the realm of life insurance, insurable interest in simple terms (if there is such a thing) is the interest one person has in another person’s life in that it would prejudice that first person financially or emotionally if that other person were to come to harm or death. Cue the discombobulation.

On the surface, the concept of insurable interest can appear to be straightforward although there are pundits who would disagree. Malaysian legislation does not definitively define the term “insurable interest”, but the Financial Services Act 2013 (and the Insurance Act 1996 and the Insurance Act 1963 before that) does enumerate the categories of persons in whose lives one is deemed to have insurable interest. The focus of discussion in this article, however, relates to the timing requirement of insurable interest.

Before delving into the Malaysian position, the origins of the concept, i.e., the English law on insurance, ought to be considered briefly to shed some light on the importance of insurable interest. In the nascent years of English insurance, anyone could effect insurance on anything or anyone. With no parameters or safeguards of any sort, it is not difficult to see how this form of insurance can be abused. One could effect insurance on the life of a debilitated stranger and claim monetary benefit upon the demise of said stranger and, in the early days of insurance, this sort of practice mutated insurance contracts into gambling or wagering contracts. One bets with an insurer on the chances of an event occurring (e.g., death of a stranger) and then later claims the amount wagered upon occurrence of said event; in some cases, said event would even be deliberately brought about for financial gain.

English legislators, in an endeavour to curb such depravity, introduced the concept of insurable interest in the Life Assurance Act 1774 (“LAA 1774”). The LAA 1774 provided that the person benefitting from an insurance must have insurable interest in the life or event insured and, if insurable interest is absent, the insurance is void. Additionally, the insured can recover no more under an insurance policy than the value of the insurable interest.

This meant that A, for example, who intends to effect insurance on the life of B, must have insurable interest in B’s life, otherwise the insurance would be void; also, the amount of moneys payable to A under the insurance must be no more than the value of A’s interest in B’s life.

However, the LAA 1774 stopped short of prescribing how long the insurable interest had to last or whether the insurable interest had to subsist after insurance had been effected. There was room for interpretation and some English Courts took the position that all that was required was for insurable interest to exist at the point the insurance was effected so that A could still go on to receive the insurance proceeds upon B’s demise despite A no longer having any insurable interest in B’s life at any time after the inception of the insurance.

Two prominent cases in which the English Courts tussled with whether this ought to be the case are Godsall v Boldero (1807) 9 East 72 and Dalby v India and London Line Assurance [1843-60] All ER Rep 1040.

In the case of Godsall v Boldero, a creditor effected insurance on the life of his debtor for the amount of the debt. After the debtor died, his executors settled the entire debt. Nevertheless, the creditor made a claim for moneys under the insurance. The insurer denied the creditor’s claim, reasoning that there was no more debt (i.e. no prejudice against the creditor and in essence, no insurable interest). The Court found in favour of the insurer and ruled that the insurance was substantially a contract of indemnity insuring against the loss of the debt. The Courts in Godsall v Boldero concluded that insurable interest should exist at time of the insured event and that the insurance was a contract of indemnity.

This decision was overruled by the Court in Dalby v India and London Line Assurance. In the case of Dalby, an insurance policy was effected on the life of the Duke of Cambridge with insurance company Anchor Life Assurance Co which subsequently applied for reinsurance with the defendant reinsurers for said insurance policy. Sometime before the Duke died, the insurance policy effected on his life was cancelled. Anchor Life, however, continued to pay premium for the reinsurance and went on to make a claim for the reinsured sum from the defendant when the Duke eventually died. The defendant rejected the claim on the basis of the absence of insurable interest at the time of death; sure enough, Anchor Life itself did not pay anything upon the death of the Duke as there was no insurance. Despite this, the Court found in favour of Anchor Life, stating that:

the requirements of the LAA 1774 insofar as insurable interest was concerned would be satisfied if the person effecting the insurance policy had an insurable interest in the life assured at the time of entering into the policy; it was not necessary that such insurable interest continue until the death of the life assured; and
life insurance was not indemnity insurance, but simply a contract for the insurer to pay the sum insured upon occurrence of the insured event in consideration of premium which had been continuously paid by the insured.

This decision is not without its critics and one could offer several reasons for this. After cancellation of the policy on the Duke’s life, Anchor Life stopped receiving premium and was no longer bearing the risk of insuring the Duke. How the Court could think it correct that Anchor Life should be paid the reinsurance moneys when the very basis of the reinsurance had ceased (or, in other words, Anchor Life no longer had any insurable interest) simply because Anchor Life had continued to pay premium is anyone’s guess. Some critics even take the view that this decision in fact legitimizes the wagering and gambling the law had sought to curb.

Nevertheless, this progress of insurable interest in English law has been reflected in Malaysian legislation as well; first in the Insurance Act 1963, then in the Insurance Act 1996 and, finally and currently, in the Financial Services Act 2013.

Section 40 of the Insurance Act 1963 most closely mirrored the position in the LAA 1774 and the position taken in Dalby. Section 40 provided that a life policy shall be void unless the person effecting the policy has an insurable interest in the life of the insured at the time the insurance is effected, and the moneys to be paid under the policy shall not exceed the amount of insurable interest at the time the insurance is effected.

This section was later amended and rephrased in the Insurance Act 1996 and renumbered as section 152. The effect of the amendment was that, not only was there a requirement that insurable interest must exist at the time the insurance was effected, but the policy moneys payable upon the insured event, or where the policy moneys were payable in instalments, the discounted value of all future instalments under the life policy, could not exceed the amount of insurable interest at the time of such insured event. For illustration’s sake, using the A & B scenario used earlier, if after A effects a policy on B’s life, A loses its insurable interest in B’s life or has a diminished insurable interest in B’s life, A would not receive anything or receive an amount not more than that diminished interest in B’s life respectively when B dies.

The section 152 provision on insurable interest, with reference to policy moneys payable in instalments specifically, made sense especially for the creditor-debtor category of insurances. A creditor has insurable interest in the life of its debtor; the debtor owes the creditor money and therefore the debtor’s being alive and able to pay the debt is in the interest of the creditor. A creditor can then effect a life insurance policy on the life of the debtor and the amount can be ascertained as well – the insured sum would be the sum the debtor owes the creditor.

Say, for example, the debtor owed the creditor RM12,000 and an arrangement is made whereby the debtor pays RM1,000 each month to the creditor. The creditor effects insurance on the debtor’s life with the total sum insured of RM12,000 and, in sync with the creditor and debtor’s payment arrangement, the sum insured of RM12,000 decreases by RM1,000 every month in correspondence with the decreasing value of the debtor’s debt. However, during the 7^th month, the debtor manages to pay off the entire debt and then dies in the 8^th month. The fact is, with the debt fully settled, there is no more money due to the creditor and therefore no more insurable interest, but based on the agreement between creditor and insurer, RM5,000 is the sum insured in the 8^th month.

Under section 40 of the Insurance Act 1963, the creditor would be entitled to be paid the sum of RM5,000 because it does not matter that there was no insurable interest at the point of death of the debtor; the insurance policy was valid because there was insurable interest at the inception of the policy and therefore the insurer would simply pay the sum insured. Therein lies the disconnect – the creditor, although effecting the insurance to safeguard his interest in the debt of RM12,000 in the first place, stands to receive a windfall of RM5,000 having already been paid the entire debt in the 7^th month.

However, under section 152 of the Insurance Act 1996, the moneys payable under the policy must not exceed the amount of insurable interest at the time the insured event occurs; the insurable interest at the point of death of the debtor in the 8^th month being 0, the moneys payable not exceeding the amount of insurable interest at that point would also be 0.

Against the backgrounds of moral hazard considerations and general public policy frowning on wagering, one would have thought of section 152 as being a statutory override to the principles laid down in Dalby and that insurers would have legislative support for not paying out at all or in full to a creditor policy owner whenever the value of the insurable interest was extinguished or lessened as at the point of death of a debtor life assured. Oddly enough, particularly in regard to Mortgage Reducing or Decreasing Term Assurance, Malaysian insurers have been known to want to pay in full, i.e., the sum assured as at the point of death, despite the debt having been settled in full or reduced due to pre-payment of instalments. Perhaps because of the one-time payment of premium for the entire term of cover right at the commencement of cover, Malaysian insurers have adopted the stance that, the risk having been paid for in full in advance, they should honour what they agreed to pay when the agreement was first entered into.

There have, of course, been issues as to who the proceeds ought to be paid to; the creditor policy owner, not being owed any more debt by the deceased debtor life assured, and not wanting to be accused of unjust enrichment, declines acceptance of the moneys by proclaiming it no longer has any interest in the insurance; due to the privity of contract rule, payment to the estate of the deceased is also not possible as the insurer would not receive a valid discharge in law thereby. However. these issues can provide fodder for a separate article altogether; in any event, they purport to have been dealt with by the Financial Services Act 2013.

Cue the Financial Services Act 2013 and a reversion to the Insurance Act 1963: paragraph 3(1) of Schedule 8 to this Act repeats the requirement for insurable interest at the time the insurance is effected but makes no mention whatsoever as to whether insurable interest needs to subsist at the time of the event giving rise to a claim. The natural inference from the omission is that Dalby should apply so that it does not matter whether there is still insurable interest at the point of occurrence of the insured event. Whether this has been done to accord with what insurers were already practising despite section 152 of the 1996 Act is not something the legislators will readily admit to.

Spousal insurable interest is also affected by when insurable interest is required. Similar to the English position, in Malaysia, one is deemed to have insurable interest in the life of his or her spouse. But suppose one effects insurance on the life of his or her spouse and later divorces said spouse. Insurable interest no longer exists and suppose also that the marriage breaks down to a point that the person who effected the policy is convinced that it is only logical to do away with the former spouse. And suppose also that murder is arranged and cannot be traced back to the policy owner because, under public policy, one is not able to benefit from one’s own wrongdoing, especially that of the illegal and bloody kind. Under the current law, in this scenario, it would appear that the person who effected the policy would stand to receive the moneys payable under the insurance.

This is not to say that the law as it is currently is an incentive for former spouses with violent, vengeful intentions to carry out the deed, or that insurable interest alone is an effective deterrent against murder. Rather, the point of this discussion is really whether any policy owner should benefit from the death of an individual they no longer have any insurable interest in.

The overriding concern in the two scenarios mentioned, creditor-debtor and spouses, is moral hazard – where insurable interest has ceased, should a creditor be allowed to make a profit and should an individual be allowed to benefit monetarily from the death of a former spouse?

On the one hand, there is the argument that life insurance is not indemnity insurance and that the value of a human life or the benefit derived from human relationships cannot be quantified or limited, but what if creditor-debtor insurances, despite being effected on the life of a debtor, worked on an indemnity basis? After all, the purpose of the insurance on the debtor’s life is to ensure that the creditor is not left with an unpaid debt in case the debtor dies before settling the debt. Further, in this scenario, the amount of insurable interest is quantifiable and capable of being proven to a tee.

To take it a step further, one could also argue radically that life insurance should, perhaps, be contracts of indemnity. It is conceded that there cannot be a limit on the value of the insurable interest one places on their spouse, but when the insurable interest ceases to exist, when the policy owner is deemed to not suffer prejudice, emotional, monetary or otherwise, upon the death of that former spouse, it could be argued that the policy owner should not stand to benefit from said death.

Any concerns of premiums paid continuously since the inception of the policy with an expectation to receive the sum insured upon occurrence of insured event can be addressed by making it compulsory for policy owners to notify insurers of a divorce or other change in insurable interest. Alternatively, insurers could automatically be notified by the relevant authorities upon finalisation of the divorce, then premiums would no longer be collected and the policy should terminate immediately due to lack of insurable interest.

Certain insurers are not perturbed by this lack of requirement of insurable interest at the time of payout; having calculated and accepted the risk of insuring the life assured, insurers are generally ready to make that payout and their priority would be to do so correctly in accordance with the law. On the flipside, there are creditors, mostly institutional and for accounting reasons perhaps, that do not accept the surplus moneys payable under policies where debts have been settled, even when the insurer insists on paying. Therefore, it would be worthwhile for a change to legislation insofar as when insurable interest is required is concerned if it will mean a leaner, more efficient system of insurance. If nothing else, an ex-spouse bent on a quick kill for profit may rethink his or her strategy if there is nothing to be got from murder most foul.

Authors: Christopher Foo and Jessie Lim

Published by JJNN in Insurance, News & Views

Tags: insurable interest, insurance law, life insurance

March 1, 2023

JJNN Nominated as Finalist for “Rising Law Firm of the Year” Award

We are incredibly excited and honoured to announce that JJNN has been nominated as a finalist in the "Rising Law Firm of the Year" category at the upcoming Asian Legal Business (ALB) Malaysia Law Awards 2023.

As we passed the 1 year mark only a couple of months ago, this recognition is especially rewarding to us. We would be remiss not to record our thanks to all members of our JJNN family for their hard work and perseverance in helping us and for continuing to strive for excellence in all that we do. We also thank our clients and friends for their continuing support and trust.

Published by JJNN in News & Views

Tags: albmalaysialawawards2023

February 24, 2023

Representative Action against Professional Trustee Company Struck Out

On 22nd December 2022, the High Court struck out a class action suit seeking more than RM300 million against our client, a professional trustee company. Our Christopher Foo and Harish Nair acted for the client.

Factual Background

In 2010, a group of investors (including the plaintiffs in the suit under discussion) invested and took part in an oil palm plantation scheme set up and operated by a management company. Our client was appointed as the trustee of the scheme under a trust deed entered into between our client, the management company, and each investor of the scheme.

The scheme had been established, and subsequently opened for public subscription, under Division 5 of the Companies Act 1965. Upon the Act being repealed, the scheme then fell to be governed under the Interest Scheme Act 2016. Under the scheme, a certain number of “plots” were created and offered to the public for purchase. The scheme was planned to last for up to 23 years, with 2 phases envisaged. Under the trust deed, the management company was required to “repurchase” the plots during the second phase of the scheme if requests were made by the investors. Investors were also entitled to a return on their investment in the form of receipt of “net yield” from the oil palm plantation.

Around 2016, the scheme met various challenges, including an unexpectedly high volume of requests for repurchase of plots by investors. A meeting of the investors was then held pursuant to the provisions of the trust deed. A resolution was put forward to close the scheme with immediate effect, which was passed by a vast majority of the investors present and voting at the meeting.

Following this, a group of investors brought a representative action by way of an originating summons against the management company. This group of investors were asking the Court to order the management company to pay all monies due on the “net yield” and to repurchase all the plots in the second phase of the scheme. In this representative action, the investors heavily contended that the scheme was a “ponzi scheme” because the scheme was set up in such a way that investors could not request that the management company “repurchase” the plots in the first phase of the scheme (the first 6 years). Therefore, the investors contended that the scheme allowed the management company to swindle the investors during the first 6 years (i.e., the first phase) and subsequently close the scheme as soon as the scheme entered the second phase. The investors claimed that the provision in the trust deed that allowed the management company to call for a meeting of the investors to close the scheme was a convenient “exit clause”.

At the same time, the management company filed their own originating summons seeking to wind up the Scheme in light of the resolution passed at the investors’ meeting.

Round 1 - Suit against Manager

Both summonses were heard together by the High Court. The High Court found that the resolution passed (to close the scheme) at the investors’ meeting was null and void. The scheme was ordered to be wound up. In arriving at its decision, the High Court found that the investors’ contention that the scheme was a “ponzi scheme” was baseless and unsubstantiated.

On appeal, the Court of Appeal found that the resolution passed at the Growers’ Meeting was valid and the Scheme was wound up thereafter. The High Court’s order was varied accordingly (i.e. the remainder of the decision of the High Court was affirmed). The Court of Appeal did not disturb the High Court’s finding that the scheme was not a “ponzi scheme”.

Round 2 - Suit against Trustee

In 2022, the plaintiff, by way of a second representative action, filed a suit against our client, the trustee company. The plaintiff contended that the trustee knew or ought to have known that the scheme was a scam. The plaintiff’s reason for this was that the management company was able to invoke the so called “exit clause” under the trust deed to close the scheme when the scheme entered its 2nd phase. The plaintiff further contended that, by failing to warn the investors or to safeguard the investors’ interests, the trustee had breached its duties to the investors. The plaintiff also contended that the trustee had acted in conflict of interest and in concerted fraud with the management company to defraud the investors.

Submissions of the Parties

At the hearing, on behalf of our client, we contended that the principle of res judicata and issue estoppel barred the plaintiff from reventilating the issues which were raised or ought to have been raised in the previous suit against the management company (i.e. Round 1). Essentially, the thrust of the plaintiff’s case was the contention that the scheme was a “scam” and that the trustee had been in cahoots with the management company in an attempt to defraud the investors - the contention that the scheme was a scam had been considered and dismissed by the High Court in the previous suit. While there was a difference of semantics, i.e. the use of the word scam in Round 2 and “ponzi scheme” in Round 1, the plaintiff’s claim was still barred by the principles of res judicata and issue estoppel - simply utilising new nomenclature should not defeat these established principles. The principle of res judicata, and issue estoppel in particular, seeks to prevent there being different findings made by the Courts on the same issue, coming out of different suits or actions. In this case, if the scheme was found to be a scam, it would result in there being two contradicting decisions of the High Court – with the Court finding, during Round 1, that the scheme was not a “ponzi scheme”.

The plaintiff contended that the principle of res judicata did not apply on the basis that the trustee was not a party to previous suit. Further, the plaintiff argued that the causes of action in the present suit were different from the cause of action in the previous suit. In response, on behalf of the trust company, we argued that, regardless of the fact that the trustee was not a party to the previous summons and that the causes of action were different, issue estoppel would still apply to bar the plaintiff. In fact, there is a litany of prior decisions of the High Court in support of this point.

High Court's Decision

The High Court held in our client’s favour and struck out the plaintiff’s claim. The High Court agreed with our submissions that:

the plaintiff’s case was premised on the contention that the scheme was a scam or fraud;
with the effect of the High Court’s decision in the previous suit, the plaintiff could not now relitigate the same core issues before the court;
the bar to relitigate of the same issue encompasses parties who had not been involved in the earlier case; and
the principle of res judicata applied and the Plaintiff’s claim was found to be unsustainable.

The plaintiff has filed an appeal to the Court of Appeal against the High Court’s decision.

Authors: Harish Nair and Casper Tey

Published by JJNN in Dispute Resolution, News & Views, Unit Trusts & Investment Funds

Tags: dispute resolution, investment scheme, issue estoppel, litigation, res judicata, striking out

February 23, 2023

Application to Set Aside Order Sanctioning Scheme of Arrangement Dismissed

On 16.02.2023, our Tai Wei Jeat and Maxine Lim successfully resisted an application by a creditor to set aside an order sanctioning a scheme of arrangement under Section 366 of the Companies Act 2016 (“Sanction Order”).

At the hearing, the arguments centered around whether the High Court had jurisdiction to set aside the Sanction Order that it had previously granted. The parties were in agreement that there appeared to be no reported decisions by the Malaysian Courts specifically dealing with this issue. Further, there is no express provision in the Companies Act 2016 dealing with the Court’s jurisdiction to set aside a sanction order.

On behalf of our client, we contended that there was no reason why the general principle enunciated by the Federal Court in Badiaddin Bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393 as well as Hock Hua Bank Bhd v Sahari bin Murid [1981] 1 MLJ 143, (i.e. a court may only vary or set aside a judgment and/or order regularly obtained in limited circumstances), should not apply to a sanction order pertaining to a scheme of arrangement. The position of the law in the United Kingdom, Australia and Singapore was also canvassed during the hearing.

After hearing submissions from counsel for both parties, the Court agreed with our contention that it lacked jurisdiction to set aside the Sanction Order. The Court accordingly dismissed the creditors’ application.

Published by JJNN in Banking & Finance, News & Views, Uncategorized

Tags: company law, scheme of arrangement

December 9, 2022

Claim by Life Insurer for Refund of Commissions and Bonuses

The JJNN team of Christopher Foo, Juen Chong and Emeline Khoo recently succeeded in a claim for a life insurance company client who brought an action in Court against its ex-agent and former agency manager for a refund of commissions and bonuses paid on 2 policies which were cancelled.

The KL High Court rejected the defence that cancellation of insurance policies could only be done during the statutory cooling-off period of 15 days.

The defence contention that the right to clawback did not survive the termination of the agency agreement was similarly rejected as the agreement in question had been drafted sufficiently widely to provide for survival.

A counter-claim by the defendants for loss of income allegedly suffered as a result of having been blacklisted with LIAM because of the moneys owing by them to our insurance company client was dismissed.

Published by JJNN in Insurance, News & Views

Tags: contract law, insurance law

November 11, 2022

Workshop: A Harassment-Free Workplace

On 4 November 2022, our Nicholas Mark Pereira and Harish Nair conducted a workshop at the International School of Kuala Lumpur ("ISKL") on A Harassment-Free Workplace (Tempat Kerja Bebas Gangguan).

Nicholas and Harish began by explaining the legal principles surrounding sexual harassment and harassment generally. The participants (i.e. ISKL staff) were then taken through several case studies before they were split into breakout groups to discuss different scenarios. Each group was invited to present their views on the various scenarios presented to them. The workshop also included an explanation on the different legal recourses available to victims.

This was one of the more interactive workshops JJNN has conducted, with the participants eager to learn and share their views. JJNN would like to thank ISKL for the invitation.

Published by JJNN in News & Views

Tags: criminal law, employment law, harassment, safe workplace, sexual harassment, tort law

May 26, 2022

Limitation Period for Claim for Total & Permanent Disability benefits

Our Christopher Foo, Chong Juen Quan and Emeline Khoo succeeded today in opposing an application for leave to appeal to the Federal Court.

The Plaintiff had sought leave to appeal against a judgment of the Court of Appeal affirming a decision of the High Court which struck out the Plaintiff’s claim on the basis that he was statutorily time-barred.

The Plaintiff commenced action in the High Court against our client, a life insurance company, for Total and Permanent Disability benefits under several policies after our client had rejected his claim. The primary issue before the High Court and the Court of Appeal was when the 6-year limitation period began to run.

Both the High Court and the Court of Appeal agreed with our submissions that the Plaintiff’s cause of action accrued on the date of his submission of his claim for Total and Permanent Disability benefits to the insurer and not when the insurer rejected his claim.

The Federal Court did not see it fit to grant the Plaintiff’s application as it was of the view that the questions posed by the Plaintiff did not meet the threshold of Section 96 of the Courts of Judicature Act 1964. In the circumstances, the decision of the Court of Appeal on this issue stands.

Published by JJNN in Insurance, News & Views

February 7, 2022

Importance of Documentation

Medical Records – Contemporaneous Evidence

When doctors and hospitals are sued in Court for negligence, factual disputes often turn on the contents of the medical records pertaining to the patient.

Medical records contain all relevant medical information pertaining to a patient, including the doctors’ and nurses’ clinical notes, laboratory and imaging reports, and consent forms. These records are considered contemporaneous evidence; they are recorded as and when events occur (or shortly thereafter) and can be considered fairly accurate when compared to a witness testifying at trial who is attempting to recall exact details of events that took place years before.

It therefore follows that when a doctor’s or nurse’s documentation in a patient’s medical records is perfunctory, incomplete, or illegible, it is much more difficult for a doctor or a hospital to successfully contest a claim and succeed in their defence at trial.

It should also be said that poor medical record keeping can also work to a claimant’s disadvantage, making it difficult for a patient to succeed in a claim for medical negligence. This would be true in cases where a patient suffers an injury which should not have occurred but is in the dark as to how the injury transpired. The patient may then be hoping for the medical records to shed light on the actual sequence of events.

The importance of good documentation and record keeping on the part of doctors was recently underscored by the Court of Appeal in Dr Premitha Damodaran v Gurisha Taranjeet Kaur & Another (to date unreported). In the High Court, Gurisha Taranjeet Kaur and Baljeet Kaur Grewal (Gurisha’s mother) brought an action against Dr Premitha Damodaran and Pantai Hospital Kuala Lumpur. Following a full trial, the Court allowed the Plaintiffs claim against Dr Premitha but dismissed the Plaintiffs’ claim against the Hospital. The Plaintiffs and Dr Premitha appealed to the Court of Appeal against the High Court’s decision.


	*Brief Facts* Madam Baljeet gave birth to Gurisha on 14 May 2014 at Pantai Hospital Kuala Lumpur. As a result of complications during delivery, Gurisha suffered a brachial plexus injury to her left shoulder and Madam Baljeet suffered a tear to her perineum. Madam Baljeet had opted for a normal vaginal delivery. Unfortunately, during the delivery, Madam Baljeet was unable to deliver normally, and forceps were employed to deliver Gurisha. Following the use of the forceps, the umbilical cord was wound around Gurisha’s neck. After the umbilical cord was cut and separated, there was no further descent and the baby’s shoulders were stuck in a transverse lie. According to Dr Premitha, a “McRoberts manoeuvre” was initiated and Dr Premitha rotated the stuck baby using her hands and managed to deliver her. The Plaintiffs’ case was that Dr Premitha’s actions or omissions had caused the Plaintiffs’ injuries. Among the allegations against Dr Premitha was that there had been a failure to advise Madam Baljeet of the risks of a natural delivery, a failure to discuss the option of a Caesarean Section, and a failure to perform a complete and accurate McRoberts manoeuvre.

Decision of the Court

In the High Court, the trial Judge accepted the Plaintiffs’ claim that Dr Premitha had not discussed, and therefore did not offer, the option of a C- Section with Madam Baljeet.


	However, the Court of Appeal found that the contemporaneous documents, including the medical records pertaining to Madam Baljeet, demonstrated that Dr Premitha had in fact discussed this option with Madam Baljeet. In fact, even on the day before the delivery, Dr Premitha had noted that Madam Baljeet was “not in favour” of a C-Section and preferred a normal delivery.

The Court of Appeal observed that while Dr Premitha had testified that she had not discussed the option of a C-Section with Madam Baljeet on the day of the delivery, the trial Judge had wrongly taken that to be an admission that there had been no discussion at all. On the contrary, apart from the notations in the medical records, there was evidence of text messages between Dr Premitha and Madam Baljeet in which a C-Section was discussed.

An important factor at trial was Dr Premitha’s testimony that Madam Baljeet had informed her that her first child, who had been delivered via normal vaginal delivery, had weighed 4.54 kg at birth. As Gurisha’s weight in the womb was estimated to be between 3.8 kg and 4 kg, this was a primary consideration in Dr Premitha making a professional judgment that a natural birth was possible for Gurisha.

On this point, Dr Premitha testified at trial that, had she known that Madam Baljeet’s first child’s birth weight was only 3.8 kg, she would have insisted on a C-Section and would not have recommended a vaginal delivery. On the other hand, both Madam Baljeet and her husband testified that they had not told Dr Premitha that their first child’s weight at birth was 4.54 kg; instead, they testified that they had told her that it was “approximately 4kgs”.

In her clinical notes of their 1st consultation, Dr Premitha had recorded Madam Baljeet as telling her that her first child’s weight at birth was 4.54 kg. However, the trial Judge rejected this evidence and instead accepted Madam Baljeet’s oral testimony that she had not informed Dr Premitha of this detail.


	The Court of Appeal observed that apart from the record of the initial consultation, this birth weight was also recorded in the insurance form which Dr Premitha had filled out for Madam Baljeet, which had been provided to Madam Baljeet at that time. Following Gurisha’s birth, Dr Premitha had also brought up the birth weight of Madam Baljeet’s first child on 2 occasions during a grievance meeting – neither Madam Baljeet nor her husband had corrected this detail at that time. The birth weight of Madam Baljeet’s first child was also stated as 4.54 kg in a medical report prepared by Dr Premitha in December 2014.

The Court of Appeal was moved to overturn the trial Judge’s finding on this issue on the strength of the “uncontested documentary evidence” that Dr Premitha had been misinformed of the birth weight of Madam Baljeet’s first child. The Court noted that the trial Judge ought to have tested the Plaintiffs’ oral testimony against the entirety of the evidence of the case:


	“there is a duty on the learned trial judge to consider all these pieces of credible documentary evidence instead of accepting inherently improbable and partial oral testimony”

The appellate Court went further to hold that while it is part of a doctor’s duty to take a patient’s medical history, this does not extend to explaining to the patient that providing an accurate and truthful history is important; the importance of the accuracy of the information provided to a doctor is implicit in the act of history taking itself.

Bearing this in mind, the Court of Appeal held that the law “cannot impose a burden on an attending physician to inform or warn the patient to give accurate answers to the questions posed during history taking, or for that matter to ensure that the patient’s answers are accurate and truthful.”. The Court also held that the duty to take a proper history cannot be expanded to require a doctor to reach out to a patient’s previous doctors to verify the history taken.

Given the above, the Court of Appeal was of the view that Dr Premitha had not breached her duty to advise Madam Baljeet of the risks of a natural delivery in the particular circumstances of this case. If she had not been misinformed of the birth weight of the first child, the advice given to Madam Baljeet would have been different.

With regard to the Plaintiff’s allegation that Dr Premitha had failed to utilise the “McRoberts manoeuvre” to help Gurisha’s shoulders to move through so that she could be delivered without injury, the Court of Appeal again turned to Dr Premitha’s documentation in the medical records.

In the High Court, the trial Judge found that that the McRoberts manoeuvre had not been carried out, based on the testimony of a nurse involved in the delivery. This was despite the contemporaneous notation by Dr Premitha that the manoeuvre was in fact carried out as well as her oral testimony at the trial, where she explained how the manoeuvre was carried out in this case.

The Court of Appeal noted that the trial Judge had accepted the nurse’s testimony even though the nurse appeared confused when testifying at the trial. The appellate Court was of the view that the trial Judge should not have placed too much emphasis on the nurse’s evidence without considering the totality of the evidence before the Court, especially given the contemporaneous evidence found in the medical records.

Take-home Points

It is clear from the decision of the Court of Appeal in Gurisha that there is great probative value attached to the contemporaneous nature of medical records. Medical professionals should therefore take care to ensure that their documentation is exhaustive and legible, allowing for easy recall and explanation of events that transpired.
In particular, proper regard should be given to the documentation of advice given to patients as to material risks relevant to a particular treatment or procedure.
It should also be stated that the Courts will not blindly accept notations in medical records over oral testimony – these notations can also be subject to error and bias. Instead, as the Court of Appeal repeatedly stated in Gurisha, any testimony, whether oral or documentary, must be tested against the totality of the evidence led in a given case to allow the Court to reach a proper decision on a balance of probabilities.

Disclaimer: The information contained herein is for general information and does not constitute legal advice rendered by the Firm. The Firm will not accept liability for any loss or damage in connection with the use of information contained in this article.

Feel free to consult us should you require any legal consultation.

Published by Harish Nair in News & Views

January 26, 2022

The Taxman’s Access To Your Account

The new section 106A of the Income Tax Act (“ITA”) came into operation on 1 January 2022. Section 106A of the ITA is reproduced in full at the end of this article.

Much has been said about the new section 106A of the ITA and there appears to be an impression that the enactment of the section will mean that the Inland Revenue Board (“IRB”) will have unlimited access to taxpayers’ bank accounts.

This, however, is not the case. It is clear from subsection 106A(1) of the ITA that the IRB’s power to require a taxpayer’s bank account information to be furnished is not unlimited – it can only be exercised in limited circumstances, namely where:

(i) civil proceedings have been instituted against the taxpayer under section 106 of the ITA (i.e. where a civil suit has been initiated against the taxpayer to recover taxes that remain unpaid); and

(ii) a judgment has been obtained against that taxpayer (i.e. the court has decided that the taxpayer must pay the taxes).

It is also clear from subsection 106A(1) of the ITA that the IRB’s power under section 106A of the ITA is only “for the purpose of making an application to court for a garnishee order”. This means that this power can only be exercised for the purpose of enforcing a judgment (via a garnishee order) obtained against the taxpayer for the payment of taxes and not for any other purpose. In essence, a garnishee order is a court order requiring a third party who owes money to the judgment debtor to pay the money to the judgment creditor instead. As example of this is as follows:

ABC Sdn Bhd (“ABC”) sued DEF Sdn Bhd (“DEF”) for RM 1 million and was successful in court. GHI Sdn Bhd (“GHI”) owes DEF RM 2 million. ABC can apply for a garnishee order from the court requiring GHI to pay RM 1 Million instead of DEF

There are therefore inherent safeguards for taxpayers set out in section 106A of the ITA itself. In fact, the IRB issue a media statement on 18 December 2021 titled “AKSES KE AKAUN BANK PEMBAYAR CUKAI ADA BATASNYA” (“ACCESS TO TAXPAYERS’ BANK ACCOUNTS HAS ITS LIMITS”) which reiterates that the IRB’s power under section 106A of the ITA can only be exercised in limited circumstances, namely for cases where the court has made a garnishee order.

That being said, it is understandable that some remain sceptical about this enlargement to the IRB’s already wide powers under the ITA. As Uncle Ben said, “with great power, comes great responsibility”. One question in some taxpayers’ minds is whether the bank account information obtained by the IRB for the purpose of garnishee proceedings could then be used as a basis for a new audit or investigation on the taxpayer on other issues.

Taxpayers have in the past successfully challenged the IRB’s use of their powers. 2 recent cases come to mind:

Genting Malaysia Berhad v Ketua Pengarah Hasil Dalam Negeri (WA-25-83-02/2020)
In this case, the taxpayer successfully challenged the IRB’s decision to request the taxpayer’s database of its customers’ personal data. The taxpayer took the position that since the IRB had not commenced any investigation, the IRB’s request contravened the Personal Data Protection Act 2010. The High Court ruled in favour of the taxpayer. The IRB appealed against the High Court’s decision and the matter is now pending before the Court of Appeal.
Ketua Pengarah Hasil Dalam Negeri v Bar Malaysia [2022] 1 CLJ 81
In this case, the Malaysian Bar successfully challenged the IRB’s view that the IRB is entitled to carry out raids on law firms and conduct audits on the firm’s client’s accounts, even insisting on having sight of accounting books and records pertaining to the accounts. The Malaysian Bar took the position that the documents and information sought by the IRB were protected by solicitor-client privilege. Both the High Court and the Court of Appeal ruled in favour of the Malaysian Bar. The matter is now pending before the Federal Court.

For now, it remains to be seen how this new power will be used by the IRB. Taxpayers can however rest assured that protection can be sought from our courts where there is any abuse or improper use of power.

Section 106A of the ITA - Power to call for bank account information for purpose of making garnishee order application

Where civil proceedings have been instituted against a person under section 106 and a judgement has been obtained against the person, the Director General may by notice under his hand require any financial institution to furnish within a time specified in the notice, the bank account information of that person, if any, for the purpose of making an application to court for a garnishee order.

Where a financial institution is required to furnish bank account information in accordance with subsection (1), that financial institution shall not disclose to any person that such request was made to the financial institution.

In this section, “financial institution” means –
- any person licensed under the Financial Services Act 2013 to carry on a banking business in Malaysia;
- any person licensed under the Islamic Financial Services Act 2013 to carry on an Islamic banking business in Malaysia; or
- any development financial institution prescribed under the Development Financial2 Institutions Act 2002 [Act 618]

Published by JJNN in News & Views

January 3, 2022

Celebrating Significant Milestones

Juen, Jeat, Nic & Nair celebrates 2 significant milestones today. Firstly, we congratulate our Managing Partner, Christopher Foo, on completing 41 years in legal practice yesterday. As he begins his 42nd year at the Bar today, showing no signs of slowing down, we salute his tenacity and perseverance and look forward to his continued leadership of the firm.

Secondly, we are happy to announce that Emeline Khoo has joined us as Juen, Jeat, Nic & Nair's first ever associate. Emeline's experience in practice ranges from employment and industrial relations matters to corporate investigations into fraudulent practices and regulatory non-compliance. She has also acted in shipping related matters as well as in various civil disputes.

We look forward to celebrating more milestones as we continue to grow as a firm.

Published by JJNN in News & Views