Eng Han Property Sdn Bhd v Salamon Raj A/L Adaickalam (BA-24NCvC-1821-08/2024)

A Sale and Purchase Agreement (SPA) was executed between the Plaintiff (as the Developer) and the Proprietor of the Land (who is not a party to this Suit), as the vendor, on one side, and the Defendant, as the purchaser, on the other. The Defendant required financing to purchase the property, and Public Bank Berhad issued a Letter of Undertaking (subject to certain conditions) to the Plaintiff. As is customary in SPAs between developers and purchasers, the title was transferred to the purchaser to enable the purchaser to charge the land to a financial institution. However, Public Bank Berhad later withdrew the Letter of Undertaking it had issued, leading the Plaintiff to terminate the SPA with the Defendant. Unlike typical cases in land transactions that involve a fraudster or wrongdoer, it appears that none of the parties here have committed any serious transgressions.

The overriding issue in the present matter is whether the Defendant (as the purchaser) has breached the SPA and thereby entitling the Plaintiff (as the vendor) to terminate the SPA.

In the event that the answer to the question canvassed above is in the affirmative, the ensuing issue is whether the Plaintiff is entitled for the consequential orders as prayed in the Originating Summons. S/N Lh4qRsaR0yilbtlgb0IxA **Note : Serial number will be used to verify the originality of this document via eFILING portal 3

The reliefs sought by the Plaintiff in its Originating Summons are as follows: • Satu (1) deklarasi bahawa Defendan telah mungkir Perjanjian Jual Beli bertarikh 15.12.2022 (Perjanjian Jual Beli tersebut) dan penamatan Perjanjian Jual Beli tersebut oleh Plaintif adalah sah; • Bahawa hakmilik Defendan dalam hartanah yang dipegang di bawah Hakmilik No. Pajakan Negeri 62471, Lot 57564, Mukim Bukit Raja, Daerah Petaling, Negeri Selangor ("Hartanah tersebut") hendaklah dibatalkan dan dikeluarkan daripada suratan hakmilik Hartanah tersebut oleh Pejabat Daerah dan Tanah yang berkenaan; • Bahawa Pejabat Daerah dan Tanah yang berkenaan hendaklah mendaftarkan kembali Green Hill Development Sd Bhd sebagai pemilik berdaftar di dalam suratan hakmilik Hartanah tersebut; • Bahawa Gadaian yang dimasukkan oleh Public Bank Berhad terhadap Hartanah tersebut hendaklah dibatalkan dan dikeluarkan daripada suratan hakmilik Hartanah tersebut dan Pejabat Daerah dan Tanah yang berkenaan hendaklah mendaftarkan dan/atau mengendorskan pembatalan Gadaian tersebut di dalam suratan hakmilik Hartanah tersebut; • Bahawa Pendaftar Hakmilik Negeri Selangor atau mana-mana pihak berkuasa yang berkenaan wajib mengambil langkah-langkah yang diperlukan untuk memberi kesan kepada Perintah ini. S/N Lh4qRsaR0yilbtlgb0IxA **Note : Serial number will be used to verify the originality of this document via eFILING portal 4

In other words, the Plaintiff through its Originating Summons is seeking a number of declaratory orders and these include a declaration that the SPA has been validity terminated, that the charge over the land be removed and that the title to the land is retransferred to Green Hill Development Sdn Bhd (the original Proprietor of the Land).

The Plaintiff’s primary contention is premised on the argument that since the Defendant has breached a number of the terms in the SPA, it was entitled to terminate the SPA and has indeed validly terminated the SPA. The consequential orders sought are the natural consequences that flow from the breach and termination of the SPA.

The Plaintiff made references to a number of what it regards as the salient terms in the SPA. The Clauses highlighted by the Plaintiff are as follows: • Clause 4 of the SPA: Purchase Price is RM948,000.00; • Clause 5(1) of the SPA: Purchase Price shall be paid by the Defendant / Purchaser to the Plaintiff / Developer by instalments and at the time and in the manner as prescribed in the Third Schedule; • Clause 5(2) of the SPA: Every notice referred to in the Third Schedule requesting for payment shall be supported by a certificate signed by the Plaintiff / Developer’s architect or engineer in charge of the housing development and every such certificate so signed shall be the proof of fact that the works therein referred to have been completed; S/N Lh4qRsaR0yilbtlgb0IxA **Note : Serial number will be used to verify the originality of this document via eFILING portal 5 • Clause 6(4) of the SPA: If the Defendant / Purchaser fails to accept the Financial Facility or defaults in complying with the necessary requirements for the application or is disqualified as a result of which the Financial Facility is withdrawn by the Defendant / Purchaser’s Financier, as the case may be, the Defendant / Purchaser shall then be liable to pay to the Plaintiff / Developer the whole of the purchase price of such part thereof as shall then remain outstanding; • Clause 11(1)(a) of the SPA: If the Defendant / Purchaser fails to pay any instalment payable in accordance with the Third Schedule or any part thereof and any late payment charges payable under clause 10 for any period in excess of thirty (30) days after the due date of the instalment or late payment charges, the Plaintiff / Developer may subject to subclause (2), annul the sale of the said Property and forthwith terminate this Agreement and in such an event: -

The Plaintiff / Developer shall be entitled to deal with or otherwise dispose of the said Property in such manner as the Plaintiff / Developer shall see fit if this Agreement had not been entered into;

(ii) The instalments previously paid by the Defendant / Purchaser to the Plaintiff / Developer, excluding any late payment charges paid, shall be dealt with and disposed as follows: S/N Lh4qRsaR0yilbtlgb0IxA A. Firstly, all late payment charges calculated in accordance with clause 10 owing and unpaid shall be paid to the Plaintiff / Developer; B. Secondly, a sum equal to ten per centum (10%) of the purchase price thereof shall be forfeited by the Plaintiff / Developer; C. Lastly, the residue thereof shall be refunded to the Defendant / Purchaser. [8] The Plaintiff proceeded to point out that the Defendant has made payments of RM47,400.00 to the Plaintiff, which consists of the following:

RM5,000.00 as booking deposit upon the signing of the SPA on 15.12.2022.

RM30,000.00 on 7.3.2023 as part of the instalment payment for stage 2(a) in the Third Schedule of the SPA; and

RM12,400.00 on 8.3.2023 as part of the instalment payment for stage 2(a) in the Third Schedule of the SPA. [9] The Plaintiff further highlighted that in order to finance the purchase of the said Property, the Defendant has also obtained financing from Public Bank Berhad (“the Defendant’s Financier”) on 4 April, 2022. A pertinent fact relates to a Letter of Undertaking which the Plaintiff received from the Defendant’s Financier. This Letter of Undertaking, dated 17 May, S/N Lh4qRsaR0yilbtlgb0IxA 2023 is the Defendant’s Financier undertaking to release the Defendant’s loan in the sum of RM805,800.00 to the Plaintiff. [10] It was averred by the Plaintiff that it acted in accordance with Clauses 5(1), 5(2) and the Third Schedule of the SPA when it sent a notice to request payment from the Defendant and/or the Defendant’s Financier by attaching a certificate signed by the Plaintiff’s architect to prove that the work stage stated in the Third Schedule of the SPA has been executed. Despite obtaining financing from the Defendant’s Financier, the Plaintiff claimed that the Defendant has not settled the outstanding amount of RM545,100.00. [11] Therefore, vide the Plaintiff’s Notice of Intention to terminate the SPA dated 25 April, 2024, the Plaintiff has claimed for the Outstanding Amount of RM545,100.00 and late payment charges / interest accrued in the sum of RM27,323.17 (as at 4 April, 2024) from the Defendant. The Plaintiff also informed the Defendant that if the Defendant fails to make payment within 30 days from the date of the Notice of Intention, the SPA shall be treated as repudiated by the Defendant and be deemed as annulled and terminated whereby the Plaintiff has the right to dispose the said Property. The Plaintiff further submitted that after the expiration of 30 days from the date of the Plaintiff's Notice of Intention to terminate the SPA, there was still no reply from the Defendant. [12] According to the Plaintiff, following the non-compliance of the terms of the SPA, the Plaintiff issued another letter dated 27 May, 2024 to inform the Defendant that: (i) the SPA is deemed terminated; (ii) the Plaintiff shall deal with or dispose the said Property in such manner as they shall see fit as if the SPA has not been entered into; (iii) the instalments previously S/N Lh4qRsaR0yilbtlgb0IxA paid by the Defendant to the Plaintiff shall be dealt with and disposed of in accordance with Clause 11(1) of the SPA; and (iv) all outstanding sums under Clause 11(1) shall remain as a debt due from the Defendant to the Plaintiff. [13] In its submissions, the Plaintiff underscored the fact that the Defendant never disputed to the termination of the SPA by the Plaintiff. [14] Another pertinent fact is the discovery by the Plaintiff that bankruptcy proceedings had been initiated by AmBank (M) Berhad (at the Shah Alam High Court in Civil Suit No.: BA-29NCC-347-02/2024) against the Defendant and this was admitted by the Defendant. [15] In support of its case, the Plaintiff relied on a number of cases. The first is Ching Yik Development Sdn Bhd v Setapak Heights Development Sdn Bhd [1997] 1 AMR 89; [1997] 1 CLJ 287; [1996] 3 MLJ 675; [1996] 2 MLRA 69 (“Ching Yik Development”) for the proposition that an obligation to pay the purchase price is a fundamental term. This was a decision of the Court of Appeal. [16] The next authority relied by the Plaintiff is Koperasi Mahadaya Bhd v Koperasi Polis Diraja Malaysia Bhd & Anor and another appeal [2012] 1 CLJ 724; [2012] 2 MLJ 569; [2012] 1 MLRA 427 (“Koperasi Mahadaya”), also a decision of the Court of Appeal. The principle from this case being when a breach of the fundamental term has occurred, the innocent party is entitled to terminate the contract. [17] Other cases cited include Yeng Chong Realty Bhd v Tenaga Nasional Berhad & Ors [2015] 1 LNS 1339 and Dream Property Sdn Bhd S/N Lh4qRsaR0yilbtlgb0IxA v Atlas Housing Sdn Bhd [2013] 2 AMCR 814; [2013] 7 CLJ 969; [2013] 6 MLJ 836; [2013] 6 MLRA 650. [18] In view of the bankruptcy action by AmBank (M) Berhad against the Defendant, the Plaintiff moved this Court for (i) the Defendant’s ownership in the title deed of the said Property to be cancelled and removed by the relevant District and Land Office; (ii) to re-register the Proprietor as the registered owner in the land title; and (iii) that the charge created by Public Bank Berhad in the said Property to be cancelled and removed from the title deed of the said Property by the relevant District and Land Office. [19] The Intitulement in the Originating Summons also made references to sections 56(1), 74(1), 75 and 76 of the Contracts Act 1950. The Defendant’s Assertation [20] The Defendant’s case is premised primarily on the ground that since Public Bank Berhad was the one that had issued the Letter of Undertaking, the Plaintiff ought to have pursued the matter with Public Bank Berhad and not the Defendant. [21] It was asserted by the Defendant that since the Undertaking given by Public Bank Berhad is still effective, “so do the registration of the dealings in the Land Registry affecting the property”. According to the Defendant’s line of argument, the Plaintiff “cannot simply ignore the Undertaking given and also the registration of the dealings and turn around to demand from the Defendant to pay the balance purchase price when the property purchased has been encumbered by registration at the Land Office”. S/N Lh4qRsaR0yilbtlgb0IxA [22] On the case of Ching Yik Development, the Defendant argued that it could be distinguished as unlike that case, the obligation to pay the balance purchase price was on the Defendant's financier following the registration of the instrument of Transfer and Charge at the Land Office. [23] To rebut Koperasi Mahadaya as cited by the Plaintiff, the Defendant again distinguished that case from the present case, pointing out that in that case, the court had decided that the transfer was fraudulent as the balance purchase price was not paid. However, in the present case, it was the Defendant’s contention that there was no fraudulent transfer occasioned by the Defendant but the Transfer and Charge was done by the Plaintiff and the Financier's Solicitors. [24] The Defendant also asserted that “the act to register the two dealings”, that is, the Transfer and the Charge, “cannot be labelled as unfortunate” and it was attributed to the “negligence on the part of the Plaintiff and Public Bank Berhad for which they should be fully responsible”. [25] ln regard to the termination of the SPA by the Plaintiff, the Defendant took the position that it was unlawful in view of the fact that the failure to pay the balance purchase price is by Public Bank Berhad and not by the Defendant. The Defendant went on to argue that while there was a contract by way of an existing loan between the Bank and the Defendant, which was duty executed, stamped and registered, nevertheless the Plaintiff “cannot simply ignore this fact and still seek payment from the Defendant”. S/N Lh4qRsaR0yilbtlgb0IxA [26] On the provisions of the Contracts Act 1950, the Defendant submitted that he was not in breach section 56(1) of the Contracts Act 1950 since the failure to pay as and when required under the terms of the SPA had shifted to Public Bank Berhad by virtue of the Letter of Undertaking and the loan documentation being perfected. [27] In addition, the Defendant alluded to section 74 of the Contracts Act 1950 and argued that that section allows an innocent party to claim damages from the party in breach in respect of all breaches of contract and based on the facts of this case there was no breach of any of the terms of the SPA by the Defendant. [28] The Defendant also argued that sections 75 and 76 of the Contracts Act 1950 cannot be invoked against him in the present case as first, the Defendant did not breach the compensation clause in the SPA and second, it is Public Bank Berhad that has taken over the responsibility to pay the balance purchase price to the Plaintiff. [29] The Defendant also raised the point pertaining to the failure by the Plaintiff to name the Land Office/Land Administrator, in addition to Public Bank Berhad, as Defendants. The Relevant Provisions of the Contracts Act 1950 [30] For convenience, the provisions of the Contracts Act 1950 as invoked in this suit are reproduced. The relevant provisions in sections 56(1), 74(1), 75 and 76 provide as follows: S/N Lh4qRsaR0yilbtlgb0IxA Effect of failure to perform at fixed time, in contract in which time is essential

(1) When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Compensation for loss or damage caused by breach of contract

(1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Compensation for breach of contract where penalty stipulated for

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract S/N Lh4qRsaR0yilbtlgb0IxA reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Party rightfully rescinding contract entitled to compensation

A person who rightly rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract. The Decision of this Court [31] As far as the overriding issue of whether the Defendant (as the purchaser) has breached the SPA and thereby entitling the Plaintiff (as the vendor) to terminate the SPA, this Court has no difficulty in holding that the answer is in the affirmative. As noted in paragraph [13] above, the Defendant never disputed to the termination of the SPA by the Plaintiff. [32] Be that as it may, the Defendant vehemently contended that Public Bank Berhad should have been named as a defendant in this application. [33] While admitting that the SPA was between the Plaintiff and the Defendant, the Defendant pressed on with the argument that since Public Bank Berhad is the Financier of the Defendant, it has the legal responsibility or obligation “to ensure a smooth completion of the agreement” and that meant that Public Bank Berhad “has become an indirect party to the transaction requiring them to perform all their obligations under the loan agreement”. The Defendant also argued that the Plaintiff “has also accepted the role of the financier to pay to them the balance purchase price under Clause 7 of the SPA. S/N Lh4qRsaR0yilbtlgb0IxA [34] This Court is of the considered view that the above arguments are misplaced on a number of grounds. [35] First, the Letter of Offer was issued by Public Bank Berhad to the Defendant and the Facility Agreement was signed between Public Bank Berhad and the Defendant. Since the Plaintiff is not privy to the agreement between Public Bank Berhad and the Defendant, the Plaintiff has no obligation to include Public Bank Berhad as defendant in this application. [36] Second, the present suit pertains to the enforcement of the terms of the SPA and the subsequent termination of the SPA. Public Bank Berhad is not a party to the SPA. The SPA was signed by the Defendant and Clause 5(1) of the SPA clearly states that “the purchase price shall be paid by the Purchaser (the Defendant) to the Developer (the Plaintiff) ...”, there is nothing in the law to compel the Plaintiff to add Public Bank Berhad as a Defendant. [37] The Defendant’s argument that “the Plaintiff has not submitted anything justifying why they did not name Public Bank Berhad as a Defendant in this action knowing that the Bank has acquired a Charge over the property giving them all the rights and remedies in the event of default by the Defendant on the terms of the loan duly approved and registered as a Chargee against the title to the property” is once again flawed. The Plaintiff is under no obligation to make any such justification. The Plaintiff is under no legal obligation to pursue this claim against Public Bank Berhad. As a matter of fact, it is for the Defendant to pursue the matter with Public Bank Berhad by way of a Third party or an independent action. (See Simpang Maju Enterprises Sdn Bhd v Soh Yen Ling (representative to Chau Yau Seng, deceased) (Malayan Banking Bhd, S/N Lh4qRsaR0yilbtlgb0IxA third party) [2016] 2 AMCR 604; [2017] 1 CLJ 588; [2017] 10 MLJ 648; [2016] MLRHU 904. [38] Pursuant to Clause 6(4) of the SPA, it clearly states that in the event if the Defendant defaults in complying with the necessary requirements for the application or is disqualified as a result of which the financial facility is withdrawn by the Defendant’s financier, the Defendant shall then be liable to pay the Plaintiff the whole of the purchase price or such part thereof as shall then remain outstanding. [39] As for the consequential orders as prayed in the Originating Summons, this Court notes that Public Bank Berhad in a letter dated 5 September, 2024 has indicated that it has no objection for the charge to be removed from the title. [40] An additional point raised by the Defendant was that the Plaintiff lacks the locus standi in moving this Court to make an order to retransfer the title to Green Hill (the original proprietor of the land) and that the consequential order for the retransfer of the title should not be made considering that Green Hill is not a party in the present proceedings. The Defendant went on to assert that there are no evidence before this Court that the Plaintiff is authorised to act for Green Hill and the aggrieved party is Green Hill. [41] The short answer to the above contention is to be found in the SPA. As noted in the opening paragraph of this judgment, Green Hill, as the proprietor of the land, was a party to the SPA. Indeed, Green Hill is an aggrieved party. It is necessary that the consequential order for the S/N Lh4qRsaR0yilbtlgb0IxA retransfer of the title be made. There is no necessity for Green Hill to be made a party in the present proceedings. [42] The consequential orders as prayed in the Originating Summons are allowed. [43] As this Court has noted in the opening passage, it does not appear that the element of fraud or wrongdoing exists in the present case and the outcome appears to be unjust to the Defendant. This is purely a case involving the contractual terms and obligations between the Plaintiff and the Defendant as far as the SPA is concerned and between the Defendant and Public Bank Berhad, as far as the Letter of Offer and Loan Facility are concerned. The contracting parties are at liberty to pursue their claims against the other contracting party. [44] The Defendant is also hereby required to pay costs of RM10,000 to the Plaintiff, subject to allocatur. Dated: 3 January, 2025 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam S/N Lh4qRsaR0yilbtlgb0IxA Counsel: Bong Xin Wei for the Plaintiff (Messrs. Abraham Ooi & Partners) Kanesrau Appalanaidu for the Defendant (Messrs. Johnson Arokiasamy & Partners)