In Insuflex Corporation Sdn Bhd v Adwize Sdn Bhd, Ideal Standard Sdn Bhd and Kwan Teck Hian (Originating Summons No. WA-24NCC-232-05/2018), the High Court held that a term in a consent judgment requiring a party to withdraw police reports is void.
 
In this case, several suits were filed as a result of a shareholders’ dispute. The parties then reached an amicable settlement and a consent judgment was entered containing various terms including one whereby a party named in the consent judgment was to immediately withdraw all police reports lodged by him against the petitioner in a related civil suit (‘impugned clause’).
 
The plaintiff sought to set aside the entire consent judgment on the ground that the main consideration for the consent judgment was the withdrawal of the police reports.
 
The High Court, citing the Supreme Court decision in Charles Ooi Kiah Inn & Anor v Kukuh Maju Industries Sdn Bhd (formerly known as Pembinaan Muncul Hebat Sdn Bhd) [1993] 3 CLJ 199, held that it is settled law that the stifling of prosecution as the main consideration for an agreement is contrary to public policy and therefore void under section 24(e) of the Contracts Act 1950.  The Judge was satisfied that the impugned clause was such a clause and was therefore void.
 
The Court added that the complainant in a police report can merely request that no further action be taken in respect of the report, but the prerogative remains with the authorities.
 
The Court then considered whether the impugned clause could be severed from the consent judgment.  It referred to Lau Chee Ching v Niah Native Logging Sdn Bhd [2002] 4 MLJ 8 where the Court of Appeal held that “if several distinct promises are made for one and the same lawful consideration, and one or more of them be such that the law will not enforce, that will not of itself prevent the rest from being enforceable. The test is whether a distinct consideration which is wholly lawful can be found in the promise called in question. The general rule is that, where you cannot severe the illegal from the legal part of a covenant, the contract is altogether void.” The Court was of the view that the impugned clause could be severed from the consent judgment as it was clearly an independent clause and severing it from the consent judgment would not impair the judgment.
 
The learned Judge opined that the impugned clause was merely an ancillary clause, and not the main consideration for the consent judgment. The terms of the consent judgment could still be performed without the existence of the impugned clause, as the main objective of the consent judgment was to end the third defendant’s participation in the companies concerned for a price to be determined.
 
Accordingly, whilst the impugned clause was held to be null and void, the Court ordered the clause be severed from the consent judgment, leaving the rest of the terms of the consent judgment intact.
 
While the judgment in Insuflex does not break new legal ground, it is a timely reminder that a contract may be held void if the main consideration for the performance of a contract is the withdrawal of a police report.