Sinar Mudah Sdn Bhd v Ramasamy A/L Muthusamy (W-02(NCVC)(W)-2324-12/2016)

TAN CHEANG HUAT … APPELLANTS

INDRA GHANDI A/P ELAYAPPAN … RESPONDENTS (In the Matter of High Court of Malaya at Kuala Lumpur Originating Summons No: 22NCVC – 461 – 08/2015 Between

Sinar Mudah Sdn Bhd

Tan Cheang Huat … Plaintiffs And

Ramasamy a/l Muthusamy

Indra Ghandi a/p Elayappan … Defendants) 2 CORAM: ABANG ISKANDAR ABANG HASHIM, JCA VERNON ONG LAM KIAT, JCA HARMINDAR SINGH DHALIWAL, JCA JUDGMENT OF THE COURT [1] This appeal from the Kuala Lumpur High Court is primarily concerned with the disputes that arose consequent to an agreement between the parties for the sale and purchase of a property in Negeri Sembilan. Both parties in the High Court sought for declarations in relation to the agreements between them in the claim and counterclaim. After a full trial, the High Court by an order dated 30 November 2016 allowed part of the plaintiffs’ claim and part of the defendants’ counter-claim. Being dissatisfied with the decision of the High Court, the appellants/plaintiffs filed this appeal. [2] The appeal was heard on 31 October 2018. After having read the written submissions as well as hearing oral arguments on the issues raised, we allowed the appeal and set aside part of the order of the High Court relating to the counterclaim. Our reasons for doing so now follow. For convenience, the parties will be referred to as they were in the High Court. 3 The Factual Background [3] The background facts leading to the filing of the action in the High Court are not disputed. They are well summarized in the written submissions of the parties and can be stated as follows. The 1st plaintiff was the registered owner of three (3) pieces of adjoining lands (hereinafter referred to as "the subject lands") in the State of Negeri Sembilan on which stood a hotel known as Hotel Cozzi. [4] The 1st plaintiff entered into a Sale and Purchase Agreement dated 11 April 2013 (“SPA”) with the defendants agreeing to sell the subject lands to the defendants. Disputes arose over the SPA. The defendants then filed Civil Suit No. 22NCVC-668-12/2013 on 6 January 2014 followed by an application for specific performance. On 21 February 2014, the High Court granted an order for specific performance (“Specific Performance Order”). [5] The 1st plaintiff being dissatisfied with the said order appealed to this Court. On 19 June 2014, the Court dismissed the appeal. The 1st plaintiff then filed an application for leave to appeal to the Federal Court but later withdrew the said application vide a notice of discontinuance dated 24 November 2014. 4 [6] Notwithstanding the grant for order of specific performance, the defendants failed to pay the balance purchase price and also failed to redeem the subject properties from both RHB Bank and Public Bank Berhad. Prior to the withdrawal of the 1st plaintiff's application for leave to appeal in the Federal Court, the defendants requested the 2nd plaintiff on behalf of the 1st plaintiff to re-negotiate the completion of the SPA. The parties then entered into an agreement dated 18 December 2014 to settle their obligations under the Specific Performance Order but the settlement proposed therein did not materialize. [7] The plaintiffs then filed a Notice of Application to set aside the Specific Performance Order and sought a further order to terminate the SPA. Prior to the hearing of the said application, the 1st plaintiff and the defendants entered into what is described as the "Final Settlement Agreement" on 23 April 2015 (“FSA”). Simultaneously with the execution of the said FSA, the 2nd plaintiff executed a letter of Guarantee to guarantee the performance by the 1st plaintiff of the terms of the said FSA. [8] However, matters did not proceed as planned. By a purported letter of termination dated 5 June 2015, the defendants alleged various breaches of the FSA. The plaintiffs responded through their conveyancing solicitors and insisted 5 that there were no breaches and that the 1st plaintiff was able and willing to complete its obligations under the FSA. As the dispute over the FSA could not be resolved, the plaintiffs filed the action which is the subject matter of the instant appeal. Decision of the High Court [9] The plaintiffs’ action in the High Court against the defendants was for specific performance of the FSA. Before the suit could be heard, the subject lands were transferred to the defendants on 29 October 2015. The plaintiffs then amended their claim to seek for declarations that the FSA had been duly performed by the parties and the defendants were estopped from making any claims contrary to the FSA and for a declaration that the notice of termination by the defendants had been waived by their conduct. [10] The defendants in turn, having accepted the transfer of the subject land to themselves, counterclaimed, among others, for a declaration that the FSA remains terminated and that the defendants were entitled to enforce the Specific Performance Order as well as a repayment of the sum of 6 RM1,176,000.00 being the difference of the consideration stated in the SPA and the FSA. [11] After a trial of 4 days, the High Court decided, firstly, that time had ceased to be of the essence and the defendants were not entitled to terminate the FSA. As such, the defendants were estopped from making claims that were contrary to the FSA. Secondly, the learned Judge found that since the plaintiffs had committed several breaches of the FSA, clause 9 of the FSA would be applicable and the defendants were entitled to the refund of the sum of RM1,176,000.00 which was over and above the initial purchase price in the SPA. It is the second order that is now the subject matter of the present appeal. The Instant Appeal [12] In the instant appeal, the crux of the appellants/plaintiffs’ complaint was that the defendants cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, they had given notice of their intention to do so as provided under s. 56(3) of the Contracts Act 1950. As time was no more of the essence, the 7 1st plaintiff had performed the obligations within a reasonable time. It was argued that the defendants, in allowing time to pass, had waived their rights and therefore in law could not take advantage of any of the provisions in the FSA arising from any delay. [13] Be that as it may, the learned Judge and the defendants took the position that the right of refund arose from rights which accrued from clause 9 of the FSA. Clause 9 states as follows: "9. Alternatively, in the event of default by SM and/or Tan (the Appellants) under any of the terms of this Agreement including failure to deliver vacant possession stipulated under Clause 3(e) of this Agreement, any amount of monies that is paid by TSR (the Respondents) which is over and above the purchase price as stated in the SPA shall be refunded with interest to TSR upon the Transfer of the Properties forthwith as mentioned in this paragraph." [14] It was contended by the defendants that clause 9 was applicable as there were breaches of the FSA which did not relate to time being essence of the FSA. These breaches were the failure of the plaintiffs in obtaining letters of undertaking from RHB Bank and Public Bank and the entering into a settlement arrangement with RHB Bank without consent from the defendants. 8 [15] So, the issue then, as contended by the defendants, boils down to this. Although time was no longer the essence of the FSA, could the defendants still obtain compensation for breaches of the FSA. It was common ground that the RM1,176,000.00 was a settlement sum agreed as payment by the defendants to the 1st plaintiff for the previous delay in payment of the purchase price and completion of the transaction as well as to arrest the complaints connected with the application to set aside the Specific Performance Order. [16] Now, the FSA was signed on 23 April 2015 and the transfer was to be completed within two months with an extension of one month, that is, by 23 July 2015. However, the termination notice was issued much earlier on 5 June

Nevertheless, it was conceded by the defendants that they accepted the transfer of the subject property without protest and without reservation despite having issued the termination notice. It was also not disputed that all the outstanding sums owed to the Banks had been settled. The defendants had also proceeded to take vacant possession of the subject property as registered owners. [17] Notwithstanding this factual background, the defendants’ pleaded case was that time was of the essence and as the plaintiffs had failed to complete 9 the terms of the FSA on time, the agreement was duly terminated. By the counterclaim, the defendants relied on the terms of the SPA on which the Specific Performance Order was granted and claimed for loss and damage on that SPA and not the FSA. That is how the defendants then pleaded and sought a declaration that the FSA remains terminated and that the defendants were entitled to enforce the Specific Performance Order granted earlier. [18] In this respect, we agreed with the plaintiffs’ argument that once the learned Judge had rejected the defendants’ counterclaim on the issue of termination and also the right to rely on the Specific Performance Order, the defendants’ counterclaim ought to have been dismissed. [19] It was the defendants’ case that in view of the breaches committed by the plaintiffs in respect of the FSA, the termination remained valid and justified. The claim for refund of the sum of RM1,176,000.00 was premised on the termination of the FSA and not for separate breaches entitling the defendants to claim under clause 9 of the FSA. The defendants were then, in effect, trying to put forward a different case to the one pleaded. The learned Judge, with respect, had fallen into grave error when her Ladyship allowed the counterclaim on a different basis to the one pleaded. In our respectful 10 view, the issue of whether compensation can be ordered for other breaches of the FSA although the agreement itself was successfully performed was an afterthought and ought to have been rejected. [20] It is trite law that the Court will only grant relief on a party’s pleaded case. It is not open to the court to make out a case for the party which is different to what is pleaded. It is up to the parties as to how they wish to plead their case. The duty of the court is then confined to the pleas on which the parties are at variance (see Janagi v Ong Boon Kiat [1971] 2 MLJ 196 and Yew Wan Leong v Lai Kok Chye [1990] 2 MLJ 152). [21] It is also trite that a judgment will not be allowed to stand if it is based on a case which is different from the pleadings and the appellate court will either dismiss the action or in an appropriate case order a retrial (Lam Eng Rubber Factory (MJ) Sdn Bhd v Lim Beng Yew & Ors [1994] 3 MLJ 405). Conclusion [22] In the circumstances, and for the reasons stated, we were constrained to hold that the High Court was plainly wrong in allowing the counterclaim. 11 The appeal was therefore allowed. The order of the High Court in relation to the counterclaim was accordingly set aside. We also ordered the respondents to pay the appellants a sum of RM50,000.00 as costs here and below subject to the payment of allocator. The deposit is to be refunded. Dated: 05 June 2019 Signed (HARMINDAR SINGH DHALIWAL) Judge Court of Appeal Malaysia Counsel: For the Appellants: Datuk Seri Gopal Sri Ram (with him Dato’ Harpal Singh Grewal, Reny Rao, Magita Hari Mogan, Ng Jun Wei and How Li Nee) (M/s AJ Ariffin, Yeo & Harpal) For the Respondents: Lim Kian Leong (with him Chris Lim Su Heng, Trisha Alaga, Joshua Kong and Colin Liew) (M/s Chris Lim Su Heng)