Schedule
Schedule H of the Housing Developer (Control and Licensing) Regulations 1989. The plaintiffs’ claims were not premised on the Sale and Purchase Agreements. The plaintiffs’ claims were premised on the “representations” made to them by the defendant (as the developer) before the plaintiffs entered into the Sale and Agreement. [4] The plaintiffs averred that the defendant (or its agents(s), or its sales representative(ies) or its employee(ies)) had represented to them as follows: (i) Block C was intended to be a commercial centre having amenities, such as banks, shops, hotel and convention centre; (ii) The SOHO units could bring high rental yield because of one German-Malaysian Institute (GMI) had shown interest to rent some of the SOHO units for its students; (iii) The maintenance fees charges would be RM0.22 psf; (iv) There would be an eight-tier security service serving the project; (v) A “high-end” lobby as depicted in the sales brochures; and (vi) The project was a “high-end” development. Page 4 of 26 (the above representations have been paraphrased, and are hereafter collectively referred to as “the misrepresentation” or “the collateral contract”) [5] After the completion of the project, and upon delivery of vacant possession of the SOHO units, the plaintiffs discovered that Block C was no longer to be used as a commercial centre but was under renovation to become an international school, Kueen Lai Secondary International School (hereafter “the international school”). At present, Block C is occupied and operated by the international school. [6] The plaintiffs were unhappy that Block C has been turned into a school, instead of what was represented to them at the time they entered into the Sale and Purchase Agreements to purchase the SOHO units. The plaintiffs averred that they had been fraudulently misrepresented to by the defendant, or in the alternative, the defendant had breached the collateral contract. [7] The plaintiffs further averred that they purchased their respective SOHO units because of the representations made to them that Block C was to be developed as a commercial centre, as the SOHO units would be next to the commercial centre. This was the main enticement, or “major Page 5 of 26 inducement” as the plaintiffs’ counsel submitted, for the plaintiffs to purchase the SOHO units from the defendant. [8] The plaintiffs also complained, among other things, that the maintenance charges turned out to be RM0.39 psf, instead of RM0.22 psf as represented to them, that there are no eight-tier security services provided by the defendant, that the development was not a “high-end” project, nor was there a “luxury” lobby as depicted in the sale brochures, and that there were no amenities provided as represented by the defendant. The Findings of this Court [9] The issues to be tried, as agreed by the parties, are (i) whether the defendant had fraudulently misrepresented to the plaintiffs to induce the plaintiffs to purchase the SOHO units; (ii) whether there was a collateral contract between the plaintiffs and the defendant, and whether the defendant has breached the collateral contract, if there is one. The plaintiffs have withdrawn the complaint that the defendant was in breach of the Strata Management Act. Page 6 of 26 The First Issue: Did the Defendant Make a Fraudulent Misrepresentation to the Plaintiffs? [10] The relevant law pertaining to fraudulent misrepresentation is found in ss. 17 and 18 of the Contracts Act, 1950, which state as follows: Section 17 “Fraud” “Fraud” includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party [emphasis added] thereto or his agent, or to induce him [emphasis added] to enter into the contract: (a) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; (b) the active concealment of a fact by one having knowledge or belief of the fact; (c) a promise made without any intention of performing it; (d) any other act fitted to deceive; and (e) any such act or omission as the law specially declares to be fraudulent. Explanation - Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. Page 7 of 26 ILLUSTRATIONS (a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse's unsoundness. This is not fraud in A. (b) B is A's daughter and has just come of age. Here, the relation between the parties would make it A's duty to tell B if the horse is unsound. (c) B says to A, "If you do not deny it, I shall assume that the horse is sound." A says nothing. Here, A's silence is equivalent to speech. (d) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B's willingness to proceed with the contract. A is not bound to inform B. Section 18 “Misrepresentation” “Misrepresentation” includes- (a) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; (b) any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; and Page 8 of 26 (c) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. [11] In the Federal Court decision in Kheng Chwee Lian v Wong Tak Thong [1983] CLJ (Rep) 195, 199, the apex court stated as follows: “In the case of Pertab Chunder Ghose v Mohendra Purkait [1888-89] 16 IA 233, Sir Richard Couch in giving the judgment of the Privy Council said at p. 237: Where one party induces the other to contract on the faith of representations made to him, anyone of which is untrue, the whole contract is, in a Court of Equity, considered as having been obtained fraudulently….” [12] In Balakrishnan Devaraj & Anor v Admiral Cove Development Sdn Bhd [2010] 7 CLJ 152, 160-1, the Court of Appeal stated as follows: “[17] It is quite common that in the course of the formation of a contract, one party may make representation to another party. Thus, a representation is a statement by one party (the representor) to the other party (the representee) which relates to an affirmation, a denial, a description of a certain fact, present or as to the future. And if the representation Page 9 of 26 is untrue it is termed as a misrepresentation [emphasis added]. [18] Put in another way, a misrepresentation must be a false statement of existing fact [emphasis added] which is normally made prior to, or during the preliminary stages of a contract and is made with the intention of and has the effect of inducing the party to whom it is made to enter into the contract with the representor.” [13] Misrepresentation or fraudulent misrepresentation goes to the element of consent to an agreement. If a party is able to prove that he has consented to enter into an agreement based on a misrepresentation or fraudulent misrepresentation, that agreement is a contract which is voidable at the option of the party whose consent was so caused (see s. 19 of the Contracts Act, 1950). [14] Based on the above legal propositions, the plaintiffs have to prove, on the balance of probabilities, that: (i) First, those “representations” (in paragraph 4 above) were untrue statements; (ii) secondly, that the plaintiffs had relied on those untrue statements; Page 10 of 26 (iii) thirdly, that the defendant had intent to deceive the plaintiffs or had intent to induce the plaintiffs to enter into the Sale and Purchase Agreements relying on the untrue statements or did not believe that those statements to be true in order to establish fraudulent misrepresentation. [15] This Court will deal with the “representations” (in paragraph 4 above) in seriatim to determine whether they could qualify as a “misrepresentation” and “fraudulent misrepresentation” in law. [16] In the plaintiffs’ case, three witnesses were called, namely Md Azrul Syaffiq (PW1 - the 9th plaintiff), Arulthas a/l Uvakaram (PW2 - the 129th plaintiff) and Hazman Bin Hasim (PW3 - the 69th plaintiff). They represented all the plaintiffs to give evidence before the Court. Defendant represented that Block C was proposed to be a commercial centre having amenities, such as banks, shops, hotel and convention centre; [17] PW1 stated in his witness statement (Q&A 5 and Q&A 15; PW1- WS) as follows: “…Defendan telah mengiklankan Blok C sebagai Pusat Komersial yang terdiri dari unit-unit kedai, bank, pusat konvensyen, hotel dan sebagainya. Saya tertarik dengan Page 11 of 26 adanya kemudahan-kemudahan asas seperti kedai-kedai dan bank begitu hampir dengan tempat kediaman, lebih-lebih lagi dengan adanya jambatan penghubung dari blok-blok kediaman ke Pusat Komersial tersebut.” “Perkara yang paling kami rasa tidak berpuashati dan rasa tertipu ialah perubahan Blok C dari pusat komersil ke KLISS. Perubahan tersebut telah mengubah seluruh sifat atau ”nature” Tiara Imperio. Blok C sebagai pusat komersil yang sepatutnya menjadi daya tarikan dan tambah nilai kepada unit unit kami telah ditukarkan menjadi KLISS yang menjadi daya penangkis minat dan menyebabkan susut nilai. Blok C yang sepatutnya menjadi “plus factor” kini menjadi “minus factor.” Saya sesungguhnya rasa tertipu dan terperangkap dalam keadaan yang dicipta oleh Defendan.” [18] PW2 stated in his witness statement (Q&A 5 and Q&A 16; PW2- WS) as follows: “Saya membeli unit tersebut sebagai pelaburan. Sebagai pelabur, saya berharap untuk mendapat keuntungan. Saya tertarik dengan Tiara Imperio kerana iklan-iklan dan bahan-bahan promosi telah menggambarkan Tiara Imperio sebagai suatu pembangunan yang unik dan berbeza dari pembangunan-pembangunan yang lain di sekitar Bangi. Antara keistimewaan Tiara Imperio yang dijanjikan ialah Page 12 of 26 bahawa Blok C akan dijadikan Pusat Komersial yang terdiri dari unit-unit kedai, bank, pusat konvensyen, hotel dan sebagainya. Lebih menarik lagi, suatu jambatan penghubung (connecting bridge) akan dibina dari Blok A dan B ke Pusat Komersial tersebut untuk kemudahan akses penduduk ke Pusat Komersial tersebut.” “Melihat kepada rentetan peristiwa yang berlaku saya yakin Defendan telah berhasrat dari awal untuk menjadikan Blok C sebagai sekolah antarabangsa dan telah memperuntukkan sebahagian unit-unit di Blok A dan B yang tidak ditawarkan untuk jualan dan dikekalkan dalam milikan Defendan untuk tujuan penyewaan kepada penuntut-penuntut, sepertimana yang dinyatakan oleh Defendan sendiri dalam perenggan 16 Pembelaan. Keyakinan saya ini dikuatkan lagi kerana tiadanya iklan oleh Defendan untuk menjual atau menyewakan unit-unit komersil tersebut. Representasi Blok C sebagai blok komersil hanya lah merupakan suatu tipu daya Defendan untuk mendorong orang untuk membeli unit-unit di Tiara Imperio. Kami Plaintif-Plaintif semua rasa tertipu dan mengalami kesusahan dan kerugian besar atas salah nyata fraud ini.” [19] PW3 stated in his witness statement (Q&A 5 and Q&A 15; PW3- WS) as follows: Page 13 of 26 “Saya membeli unit tersebut untuk saya duduki sendiri. Saya tertarik dengan Tiara Imperio kerana iklan-iklan dan bahan-bahan promosi yang telah menggambarkan Tiara Imperio sebagai suatu pembangunan yang bermutu tinggi, selesa, selamat dan berhampiran dengan kemudahan-kemudahan di mana Defendan telah mengiklankan Blok C sebagai Pusat Komersial yang terdiri dari unit-unit kedai, bank, pusat konvensyen, hotel dan sebagainya. Saya tertarik dengan adanya kemudahan-kemudahan asas seperti kedai-kedai dan bank begitu hampir dengan tempat kediaman lebih-lebih lagi dengan adanya jambatan penghubung dari blok-blok kediaman ke Pusat Komersial tersebut. Adanya hotel bermakna saudara-mara yang datang berkunjung ada tempat penginapan berhampiran.” “Perubahan Blok C dari pusat komersil ke KLISS betul-betul telah menyusahkan kami yang membeli unit-unit di Tiara Imperio dengan bersangka baik dan percaya kepada janji-janji Defendan. Saya yakin representasi Blok C sebagai blok komersil hanya lah merupakan suatu tipu daya Defendan untuk mendorong orang untuk membeli unit-unit di Tiara Imperio. Kami Plaintif-Plaintif semua rasa tertipu dan mengalami kesusahan dan kerugian besar atas salah nyata fraud ini.” Page 14 of 26 [20] The plaintiffs had relied on the sale brochures and advertisements depicting that Block C as a commercial centre with the amenities, such as retail shops, bank and hotel. The question is whether those representations in the sale brochures and advertisements are untrue statements. [21] This Court observes that the sale brochures represented that the concept of the development is that of “a mix-development comprises contemporary SOHO towers, hotel, convention hall and lifestyle retail shop” (see p. 51, Bahagian B (Jilid 1), Enclosure 15). At that point of time, the development concept was indeed intended to be a commercial centre. The mock-up model of the buildings (see p. 36, Bahagian B (Jilid 1), Enclosure 15) did show Block C was intended to be a commercial centre. In the approval of the building plan by the Majlis Perbandaran Kajang dated 28.5.2015, approval was given to the defendant for, inter alia, the development of 34-units, 5 storey commercial centre (see p. 53, Bahagian B (Jilid 1), Enclosure 15). The statement or the representation made by the defendant to the plaintiffs that Block C was intended to be a commercial centre at that material time was indeed true and correct. Page 15 of 26 [22] This Court could not find that the defendant had made any misrepresentation to the plaintiffs at the material time before the Sale and Purchase Agreements were executed by the plaintiffs. [23] A misrepresentation has to be a positive assertion which is not true. The plaintiffs had to be induced to enter into the Sale and Purchase Agreements believing in and relying on an untrue statement. The plaintiffs failed to prove that there was in fact any “untrue statement” made by the defendant at the material time to the plaintiffs. [24] Ms. Lau Suit Ching (DW2), the defendant’s second witness and a manager in the defendant company, testified that “the defendant was not able to sell Block C or to secure any banks or reputable retailers to come into Block C (see Q&As 7(d) and 9(a), (b), DW2-WS). She then further explained that “since the defendant was not able to attract any prominent tenant to Block C, the defendant felt that the only viable business is to rent Block C to a school as the area is an education centre with various learning institution(s), such as German-Malaysian Institute and Universiti Kebangsaan Malaysia (are) situated hereby.” (see Q&A 9(d), DW2-WS) [25] It was the unforeseen circumstances that led to the defendant to change its business plan. The defendant made an application to the Page 16 of 26 Majlis Perbandaran Kajang for the approval to change the purpose of Block C from a commercial centre to a private education institution, and the approval was obtained on 28.2.2020. [26] Mr. Lim Kong Min (DW1), the first defendant’s witness who is a director of the Kueen Lai International Secondary School, testified that it was in 2019 that they found out Block C was available and a suitable location to set-up its school. The school has spent approximately RM10,000,000.00 for renovation of Block C after taking up the tenancy of the entire block from the defendant. DW1 also testified that in fact some of the students have rented the SOHO units as their boarding. [27] This Court, after having examined the evidence before the Court and the testimonies of the defendants’ witnesses, is satisfied that there was no misrepresentation, let alone any fraudulent misrepresentation, made by the defendant to the plaintiffs before the plaintiffs signed the Sale and Purchase Agreements. [28] The change of purpose from a commercial centre to an education institution in Block C occurred only after the completion of Block C and sometime after the signing of the Sale and Purchase Agreements between the plaintiffs and the defendant. What was related to the plaintiffs Page 17 of 26 about the commercial centre at that material time was true and that was the defendant’s plan. Unfortunately, the defendant’s plan did not turn out as planned. [29] When a person relies on another person’s representation to form an expectation, and that expectation turns out not as expected, that does not mean the other person has made a misrepresentation. A misrepresentation has to be an untrue statement of existing fact. On the present facts, there was no untrue representation made to the plaintiffs. The plaintiffs’ expectation did not turn out as expected not because of any untrue representation. The SOHO units could bring high rental yield because of one German-Malaysian Institute (GMI) had shown interest to rent some of the SOHO units for its students [30] The plaintiffs averred that they were represented to by the defendant that the SOHO units would expect to have high demand for rent because the German-Malaysian Institute had shown interest to rent the SOHO units. [31] With regard to the letter by the German-Malaysian Institute purportedly showing interest to rent the SOHO units, that letter was not Page 18 of 26 proved to be untrue, or to be a forged document. There was in fact a letter from the German-Malaysian Institute showing its interest, but that letter could not be construed as an “inducement” for the plaintiffs to purchase the SOHO units. There was no guarantee given by the defendant that the German-Malaysian Institute would take up the SOHO units. The letter was merely a letter of interest. The plaintiffs failed to prove the defendant had made an untrue statement about the interest of the German-Malaysian Institute to rent some SOHO units. [32] This Court is of the considered view that the plaintiffs were making a presupposition that if Block C were to become a commercial centre and if the students from the German-Malaysian Institute were willing to rent the SOHO units, then the SOHO units would be a good investment with high-yield returns. Unfortunately, both expectations did not materialize. Representations that (i) the maintenance fees charges would be RM0.22 psf; (ii) there would be an eight-tier security service serving the project; (iii) A “high-end” lobby as depicted in the sales brochures; and (iv) The project was a “high-end” development. [33] With regard to the above representations, this Court will deal with them together. The above representations were merely ancillary to the plaintiffs’ main complaint. The plaintiffs’ main complaint was that Block C was supposed to be a commercial centre and that the German-Malaysian Page 19 of 26 Institute’s letter of interest had induced them to enter into the Sale and Purchase Agreements. [34] With regard to the representation that the maintenance fees charges would be RM0.22 psf, the eight-tier security services, high-end lobby and high-end development, the plaintiffs did not satisfy this Court that all these statements were untrue and that the defendant had intended to deceive or induce the plaintiffs to enter into the Sale and Purchase Agreements. [35] As for the maintenance fees/charges, the rate mentioned by the defendant to the plaintiffs was an estimation, it was not a representation to deceive or to induce the plaintiffs to enter into the Sale and Purchase Agreement. As explained by DW2 that “the calculation is prescribed in the statute, the Strata Management Act 2013 (Act 757)”. There was no evidence that the defendant had guaranteed that the maintenance fees charges would be fixed at RM0.22 psf. There was no false statement. [36] With regard to the eight-tier security services, DW2 explained that the eight-tier security services included the parameter fencing, guard house, patrolling guard, security card parking system, CCTV, panic buttons and alarms and 24 hours on call security (on duty). The defendant had provided all these in the development. Page 20 of 26 [37] With regard to the “high-end” lobby and development, what is “high end” is very subjective. What was depicted in the brochures is rather an impression, and not to be taken as “misrepresentation” when the end result is not exactly the same as the impression. DW2 stated that “the lobby is properly constructed to the specification approved by the appropriate authorities and it is perfectly fine and functional”, and DW2 further stated that “there are some sofa sets and plants at the lobby area.” (see Q&A 18, WD2-WS). [37] This Court, after having examined the alleged “misrepresentation” by the defendant to the plaintiffs, finds none of the statements could be said to be untrue or false at the time they were represented to the plaintiffs. Hence, all the alleged mis-statements could not qualify as “misrepresentation” in law. It follows that the plaintiffs have failed to discharge the burden to prove there was fraudulent misrepresentation. [38] Based on the above reasoning, this Court answers the first issue in the negative. Page 21 of 26 Second Issue: Was there a collateral contract? (Plaintiffs’ alternative claim) [39] In Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Constructions Sdn Bhd [1993] 3 MLJ, 433, 444, the High Court stated that “a collateral contract, by its very nature, exists side by side with the main contract. It does not have the effect of substituting the main contract. A collateral contract merely confers certain other rights which are not incorporated in the main contract. But such rights must be related to the rights and obligations of the parties under the main contract.” [40] As early as in the 1980s, the Malaysian courts have recognized a collateral contract could exist side by side with the main agreement. In Tan Swee Hoe Co Ltd v Ali Hussain Bros [1980] 2 MLJ 16, 18, the then Federal Court stated as follows: “Although it is trite law that parol evidence is not admissible to add to, vary or contradict a written agreement, a technical way of overcoming the rule is by invoking the doctrine of collateral contract or collateral warranty. Chitty on Contracts (24th edition) (paragraph 674) put it this way: “An assurance given in the course of negotiation may therefore give rise to a contractual obligation, provided that an intention to be bound can be shown. The rules of evidence, however, Page 22 of 26 frequently prevent such an assurance from being incorporated as part of a subsequent written agreement, since extrinsic evidence is as a general rule not admissible to vary or add to the terms of a written contract. As a result, the courts have been prepared in some circumstances to treat the assurance as a separate contract, collateral to the main transaction. In particular, they will do so where one party refuses to enter into the contract unless the other gives him an assurance on a certain point.” ” [41] In Sinnadurai Law of Contract (4th edition), LexisNexis, 2011, p. 260, it stated that the test to determine the existence of a collateral contract can be found in the Australian High Court decision in JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435, HC. There are three elements must be present to show there is a collateral contract. First, the statement was intended to be relied on; secondly, there was reliance by the party alleging the existence of the contract; and lastly, there was an intention on the part of the maker of the statement to guarantee its truth. [42] In the present case, the plaintiffs averred that the statements or representations (see paragraph 4 above) was the assurance given by the defendant which formed the collateral contract. Hence, the burden lies with the plaintiffs to establish that those statements were intended by the defendant for the plaintiffs to rely on, and the plaintiff had relied on them, and that there was intention on the part of the defendant to guarantee the Page 23 of 26 truth of the statements or representations. It follows that the plaintiffs must show that those statements or representations created an obligation on the defendant, and that “assurance” or “guarantee” was given to the plaintiffs by the defendant, otherwise, they would not have entered into the main contract, i.e., the Sale and Purchase Agreement. [43] From the testimonies of the three plaintiff witnesses, this Courts could not find any cogent evidence to suggest that there was an assurance or a guarantee given to the plaintiffs that Block C would definitely be a commercial centre having all the amenities like retail shops, bank or hotel. What was represented by the defendant was merely the type of development that was proposed or planned by the defendant at that material time for Block C was commercial centre (with amenities). There was also no assurance or guarantee that a hotel would be operating at Block C. Those statements made by the defendant were mere proposals or plans, not assurance or guarantee. There was no evidence to suggest that if not for the assurance given by the defendant that Block C was a commercial centre the plaintiffs would not have entered into the Sale and Purchase Agreements. [44] Likewise, the representation that there was a demand for the SOHO units for rental was not an assurance or a guarantee. The representation Page 24 of 26 was merely a statement of possibility that there was a demand for SOHO units. A purchaser buying the SOHO unit as an investment, like PW2, as to take risk in his investment. The defendant did not give an assurance or a guarantee that there would be high-yield returns, but merely a speculation of good return if all plans turn out as planned. There was also no evidence to suggest that not for the assurance or guarantee of the high-yield returns made by the defendant, the plaintiffs, particularly PW2, would not have entered into the Sale and Purchase Agreements. [45] With regard to the eight-tier security services, as stated above, the defendant has provided eight-tier security services for the development. With regard to the “high-end” lobby and development, there was no assurance or guarantee by the defendant that the development and the lobby would be high-end. As explained earlier, what is “high end” is very subjective. With regard to the maintenance fees/charges, there was no assurance or guarantee by the defendant that the rate was fixed at RM0.22 psf. [46] This Court, after having examined the evidence adduced by the plaintiffs to prove the alleged collateral contract, could not find any cogent evidence that the defendant had provided an assurance to the plaintiffs about the matters mentioned in paragraph 4 above or that the defendant Page 25 of 26 had guaranteed the matters were true. There was also no evidence to suggest that the plaintiffs would not have entered into the Sale and Purchase Agreements if the defendant did not give those assurance or guarantee as alleged. [47] To surmise, this Court could not find that there existed a collateral contract between the plaintiffs and the defendant because all the alleged representation were not statements of assurance or guarantee, but rather a representation by the defendant to the plaintiffs of the defendant’s proposed plans at that material time. Conclusion [48] For the reasons stated above, this Court dismissed the plaintiffs’ claim and ordered that the plaintiffs (based on 213 units @ RM200.00 per unit) to pay costs of RM42,600.00 (subject to allocator fees) to the defendant. SGD ……………………………………………. (CHOO KAH SING) JUDGE HIGH COURT SHAH ALAM Page 26 of 26 Counsel for the plaintiffs: Nasar Khan Messrs. Mazwan Dee Nasar & Shima Counsel(s) for the defendant: Joseph Ting (Alan Tan Fu Seng with him) Messrs. Joseph Ting & Co.