The Right to Restitution When a Contract Becomes Void: Insights from the Detik Ria Decision

 Authored by Radhia Razali

The Federal Court’s decision in Detik Ria Sdn Bhd v Prudential Corporation Holdings Ltd [2025] MLJU 575 marks a significant turning point in Malaysian contract law. It clarifies the scope of restitution when a contract is declared void or rescinded, and examines how far the law will go to restore the parties to their original positions. The judgment is particularly relevant for contracts that are subject to regulatory conditions or involve options, where performance may occur before all approvals are obtained.

At the heart of the case lies the question of what happens when a contract, once thought valid, is later found to be void. The Federal Court reaffirmed the operation of Section 66 of the Contracts Act 1950, which provides that when an agreement becomes void, any person who has received an advantage under such an agreement must restore it or compensate the other party. The purpose of this provision is to place both parties back in the positions they occupied before the contract existed.

In Detik Ria, the contract was declared void because it had been performed without the necessary regulatory approval. The Court held that since the contract lacked legal effect from the outset, Section 66 required the return of all benefits received under it. Prudential was ordered to repay RM109 million to Detik Ria and to restore the dividends and other gains that had been derived from the invalid shareholding. The decision confirms that restitution under Malaysian law extends beyond money paid to include any form of benefit or advantage obtained through a void transaction.

The Court also emphasised that restitution is not a remedy without limits. Its availability depends on the circumstances of each case. The Federal Court explained that courts must consider the nature and seriousness of any illegality, the extent to which the illegality is central to the statute that has been breached, whether denying restitution would defeat the purpose of the law, how far the contract has been performed, and the relative fault or culpability of the parties. This measured approach ensures that restitution serves justice without undermining the public policies expressed in legislation.

The principle of unjust enrichment formed another central theme of the judgment. A party is unjustly enriched when it receives a benefit at another’s expense in circumstances where it would be inequitable to retain that benefit. The Court noted that the concept of “advantage” in Section 66 should not be restricted to money or tangible property. It also includes rights, privileges, and benefits that carry economic value, such as dividends or voting rights arising from a shareholding. These non-monetary advantages are capable of being the subject of restitution because they represent real gains obtained at another’s expense.

When dealing with non-monetary advantages, Malaysian courts have adopted a practical and equitable approach. If the advantage cannot be returned in its original form, the courts may order monetary restitution equivalent to its value. The aim is not to achieve a literal reversal of the transaction but to undo the unjust enrichment in substance. In this way, the courts ensure that neither party is allowed to profit from a contract that the law does not recognise as valid.

The Detik Ria decision also sends a clear message to businesses and contracting parties, particularly those involved in transactions subject to regulatory conditions. Option agreements and conditional contracts must not be performed until all necessary approvals have been obtained. Premature performance can render a contract void and expose parties to significant restitutionary liabilities. The Federal Court’s ruling underscores the importance of compliance, careful drafting, and legal due diligence before executing any conditional or regulated agreement.

This development aligns with earlier Malaysian cases that have shaped the law on restitution and unjust enrichment. In Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441, the Federal Court recognised restitution as a remedy aimed at reversing unjust enrichment, and held that the plaintiff must show that the defendant was enriched at the plaintiff’s expense, that the enrichment was unjust, and that no legal defence bars recovery. The Court of Appeal in Transnasional Express Sdn Bhd & Ors v Tan Chong Industrial Equipment [2020] 5 MLJ 746 reaffirmed that unjust enrichment cannot override express contractual terms unless the contract has first been invalidated or rescinded. Similarly, in Sofia binti Yusof v PV Power Engineering Sdn Bhd [2021] MLJU 2237, the High Court ordered the recovery of payments made under an illegal agreement that violated public policy. 

Viewed together, these authorities, along with Detik Ria, form a coherent and consistent framework. They affirm that restitution functions as a corrective mechanism designed to reverse unjust enrichment while maintaining respect for the sanctity of contract and the objectives of statutory law.

The Detik Ria decision therefore stands as a landmark in the modern evolution of Malaysian contract law. It expands the understanding of what constitutes an “advantage” under Section 66, clarifies the limits of restitution, and integrates the doctrine of unjust enrichment into statutory interpretation. More importantly, it reminds contracting parties that compliance with regulatory and statutory conditions is not a mere formality but a fundamental prerequisite to enforceability.

For legal practitioners, the decision provides much-needed guidance on how Malaysian courts approach restitution when a contract fails. For businesses, it serves as a cautionary tale of how easily performance in breach of regulatory requirements can lead to financial and legal consequences far beyond the intended deal. Ultimately, Detik Ria reaffirms that restitution is not about punishment or reward, but about fairness and the restoration of balance. It ensures that no party is allowed to keep a benefit that the law never intended them to have, thereby preserving both equity and the integrity of the contractual system.