Whether Kasih would be personally liable for the contract with Shady Bhd?

At common law, the privately appointed receiver or manager acts as agent for the
company, and he is not personally liable to outsiders for any contracts made during the course of
the receivership.
The bank has appointed Kasih as receiver and manager of the assets of Shady Bhd under
an express power contained in a debenture secured by a floating charge. Thus, at common law,
Kasih is a privately appointed receiver and manager, not court appointed receiver and manager.
She acts as agent for Shady Bhd and she may not personally liable to the purchasers for the
defective clothes which was sole by her during the course of the receivership.
In Isito Electronics Sdn Bhd v Teh Ah Kiam & Anor [2004] 7 MLJ 513, the plaintiff
brought this action claiming that the liability of the defendant as receiver and manager to a
company is a kin to a simple contract regarding purchase of the goods belonging to company
under receivership. The plaintiff contended that there was a binding contract between the
plaintiff and the defendant, and when certain items of the goods were missing, the defendant had
breached the contract and was liable for damages. The plaintiff also argued that the defendant, as
a receiver and manager of the company, owes a duty of care in contract or in tort to ensure that
the goods which were bought by the plaintiff are ready and available for collection by the
plaintiff. The plaintiff further contended that the defendant in the present case is a bailee in
respect of those goods. Even though there are exclusion clauses in the contract, the plaintiff
submitted that the defendant in this case cannot exclude liability. The defendant on the other
hand submitted that it merely acted as an agent to the company.
The court held that was no contract between the plaintiff and the defendant personally in
respect of the said goods purchased by the plaintiff. There was no breach of contract or any duty
of care by the defendant. Therefore, the question relating to the defendant's liability for any loss
of the goods and to compensate the plaintiff did not arise. If at all the defendant was negligent in
performing his duties as a receiver and manager, the cause of action would belong to the
company (as principal) and to the debenture holder but not to the plaintiff to whom no general
duty is owed by the defendant.

In the present case, Kasih as a receiver and manager of the assets of Shady Bhd merely
acted as an agent to the company. There was no contract between the purchasers and Kasih
personally in respect of the cloth purchased by the purchasers. Thus, there was no breach of
contract or any duty of care by the Kasih. Therefore, the question relating to the Kasih's liability
for any defective cloth sold and to compensate the purchasers did not arise. If at all the Kasih
was negligent for selling defective cloth, the cause of action would belong to Shady Bhd (as
principal) and to the debenture holder of the company but not to the purchasers to whom no
general duty is owed by the Kasih.
However, where a tort is brought on by privately appointed receiver or manager, he may
be held liable. In Re Botibol (deceased) [1974] 1 All ER 26, Evershed J stated that:
There is a further ground that, even if the receiver could not be sued ex contractu, it
would not follow that he could not be sued in tort if he had taken steps which effectively
prohibited the completion of the contract
In Kasihs case, even if Kasih as privately appointed receiver or manager could not be
sued for breach of contract, she could be sued in tort and may be held liable as selling severely
defective cloth was effectively prohibited the completion of the contract.
Meanwhile, in Malaysian perspective, courts in Re Sama Corporation [1992] 2 MLJ 251
and Zeno Ltd v Prefabricated Construction Co (M) Ltd [1967] 2 MLJ 104 followed the English
cases. The morgagee (the company) would be liable for any damage caused by his agent.
Hence, Shady Bhd as the principal would be liable for severely defective cloth sole by its
agent, Kasih.
In conclusion, under law of contract, Kasih as a privately appointed receiver and manager
may not personally liable to the purchasers for the defective clothes which was sole by her
during the course of the receivership as there was no contract between the purchasers and Kasih
personally in respect of the cloth. As a receiver and manager of the assets of Shady Bhd, Kasih
merely acted as an agent to the company. Despite, Shady Bhd as the principal is the one who
would be liable for Kasihs act. If Kasih to be sued, she could only be sued in tort provided that
purchasers can prove that Kasihs act effectively prohibited the completion of the contract.