IJM CONSTRUCTION SDN BHD v LINGKARAN LUAR BUTTERWORTH (PENANG) SDN BHD & ANOR IJM CONSTRUCTION SDN BHD v LINGKARAN LUAR BUTTERWORTH (PENANG) SDN BHD & ANOR [2024]
Many people assume that when one party makes a promise during business negotiations and the deal later falls through, it automatically means there was deception. In reality, the law is not that simple.
This case arose from a major infrastructure project involving the construction of a highway. The plaintiff had carried out construction works and also assisted with financing. When payment and share redemption were not made as agreed, legal proceedings were commenced.
While the case was still ongoing, both parties entered into discussions to resolve the dispute commercially. As a result of those discussions, a document setting out the “salient terms” was signed and subsequently recorded in court as a consent judgment. The plaintiff agreed to grant a moratorium, in the hope that a full settlement would be achieved.
Problems arose when the negotiations failed after a prolonged period. The defendant then alleged that it had been induced by false representations and applied to set aside the consent judgment on the grounds of misrepresentation.
When the matter reached the Court of Appeal, the court focused on the real issue —
Were the promises and statements made during negotiations false representations of fact, or merely expressions of hope and future intention?
The court explained that under Section 18 of the Contracts Act 1950, misrepresentation must involve a false statement of fact, not merely a promise, proposal, or future intention that remains subject to further negotiations and internal corporate approvals.
In this case, the court found that the statements made by the plaintiff were conditional, heavily qualified, and clearly subject to further discussions and board approval. They were neither empty promises nor fraudulent.
The court also rejected the defendant’s claim that it had been “influenced” or pressured into signing the consent judgment. In fact, the agreed moratorium conferred a significant advantage on the defendant by delaying the risk of judgment being entered against it.
Ultimately, the Court of Appeal held that no misrepresentation had occurred, the consent judgment was valid, and the High Court’s decision to set it aside was overturned. The plaintiff’s appeal was allowed in full.
No monetary damages were awarded to either party. This case was not about compensation, but about upholding contractual and commercial agreements that had been recorded in court.
This case is more than just a construction project dispute. It is a warning to business owners, directors, and founders.
Lesson learned: If you sign any business agreement — especially one recorded as a consent judgment — fully understand its implications. When conflicts arise, the issue is no longer about emotions or “who promised what,” but about what can be proven in law.
