Farlim Group (Malaysia) Berhad v Ayer Itam Properties Sdn Bhd (P-02(NCvC)(W)-376-03/2023)

P-02 (NCvC) (W)-376-03/2023 Kand. 37 16/07/2026 08:56:34 IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO.:P-02(NCVC)(W)-376-03/2023 BETWEEN FARLIM GROUP (MALAYSIA) BERHAD (COMPANY NO.:82275-A) ...APPELLANT AND AYER ITAM PROPERTIES SDN BHD (COMPANY NO:920876-X) [Formerly known as 1MDB RE (AYER ITAM) SDN BHD] ... RESPONDENT [In the High Court of Malaya In Pulau Pinang, Civil Court No: PA-22NCVC-116-04/2019 Between Ayer Itam Properties Sdn Bhd (Company No: 920876-X) [Formerly Known As 1MDB RE (Ayer Itam) Sdn Bhd] ... Plaintiff And ... Defendant CORAM: CHOO KAH SING, JCA LIM HOCK LENG, JCA AMARJEET SINGH SERJIT SINGH, JCA JUDGEMENT Farlim Group (Malaysia) Bhd v Ayer Itam Properties Sdn Bhd

1. The appeal is against the High Court's decision that the Appellant/Vendor was unjustly enriched in the sum of RM8,388,050.00,representing a portion of the purchase price for a 1/4 undivided share in a parcel of land known as Lot 1561.

2. On 23 September 2013, the Respondent/Purchaser and the Appellant/Vendor entered into a sale and purchase agreement ("SPA") for 3 parcels of land, including a $ \frac{1}{4} $ share of Lot 1561. The dispute only concerns Lot 1561 which comprises 2,629,372 square feet. The 1/4 share translates to 657,342.97 square feet.

3. Originally, Choong Lye Hock Estates ("CLHE") was the registered proprietor of the entire interest in Lot 1561. However, at the time of the SPA, the registered ownership of Lot 1561 was split between 3 parties:

(ii) Choong Lye Hock Estates ("CLHE") held a 1/7 undivided share; while

(iii) Gerak Indera Sdn Bhd held the remaining 17/28 undivided share.

4. The total purchase price for the 3 parcels of land was RM112,501,725.60. The purchase price was calculated at the rate of RM110 per square foot based on the land area. As concerns the 1/4 share in Lot 1561, that worked out at a price of RM72,307,726.70 for an area of 657,342.97 square feet. History of the 1/4 share in Lot 1561

5. CLHE sold specific portions of its 1/4 share to various individuals. These individuals paid for their land but did not yet have separate titles. So, they protected their interests by lodging private caveats on the master title.

6. The caveators' portions of the 1/4 share are as follows: No.CaveatorApproximate Area Claimed (square feet)Amount at RM110 per square foot1.Lam Ah Heng7,000RM770,000.002.Tay Lit Yang7,735RM850,850.003.Zantalite Enterprise (M) Sdn. Bhd.57,336RM6,306,960.004.Tan Guat Gee @ Tan Guat Ee1,784RM196,240.005.Ooi Yeow Hoe @ Ooi Eow Hoe2,400RM264,000.00Total76,255RM8,388,050.00

7. All 5 caveators derived their interests from CLHE.

8. Zentalite Enterprise (M) Sdn Bhd ("Zentalite") claimed its interest through a series of transfers originating from a 1944 agreement with CLHE, whereas Tan Guat Gee traces her interest back to a 1963 sale by CLHE and Ooi Yeow Hoe traces his interest back to a 1953 sale by CLHE. Lam Ah Heng and Tay Lit Yang are respectively the administrator and executor of estates of Lam Chong and Tay Hong Hoe who purchased their portions from CLHE.

9. On 9 June 2007, following legal disputes, CLHE entered into a Settlement Agreement with Farlim Properties Sdn Bhd ("FPSB"), a related company of the Appellant. Under this agreement, CLHE agreed to sell its 1/4 undivided share in 56 pieces of land, including Lot 1561, to FPSB.

10. By Clause 5.1 of the Settlement Agreement, the portions already sold to the caveators were excluded from the sale of CLHE's $ \frac{1}{4} $ share in 56 pieces of land - including Lot 1561 - to FPSB.

11. Clause 5.1 reads: "It is hereby expressly agreed that portions of Holding No. 1561, Section 3, Town of Air Itam, North East District, Penang forming part of the Lands which have been previously sold to Tay Hong Hoe, Lam Chong, Tan Theng Lye and Chan Sai Choo does not form part of the property and is excluded from the sale herein and shall be transferred to the respective purchasers or their successors in title upon the issue of separate titles to such portions (emphasis added)."

12. We digress momentarily to mention that although Clause 5.1 only mentioned 4 names, it was established at the trial that all 5 caveators in question acquired their interests from the original owner, CLHE. We would also mention that there were 2 other caveators over the $ \frac{1}{4} $ share in Lot 1561, namely, Ng Peng Wah who lodged a caveat on 31 October 2011 and Chong Sie Cheong who lodged a caveat on 23 November 2011. These 2 caveats were for areas outside the $ \frac{1}{4} $ of Lot 1561. Both these facts were confirmed by the Appellant's own witness, Ms Yeap (DW1) who prepared the SPA for the Appellant.

13. Following the agreement, CLHE transferred the 1/4 undivided share in Lot 1561 to the Appellant Farlim Group (Malaysia) Berhad which was the nominated transferee of FPSB on the express agreement, as captured in Clause 5.1, that any portions CLHE had already sold to third parties "do not form part of the property" and were excluded from the sale to the Appellant. Competing Arguments and Our Analysis

14. We propose to begin with what, in our view, is the central issue in this appeal, namely, whether the Appellant in fact owned and was entitled to sell the whole of the 1/4 undivided share in Lot 1561 which formed the basis of the purchase price calculation.

15. Recital A of the SPA expressly provides that the lands were sold to the Respondent "free from all encumbrances save for the lodged caveats and the Caveators' rights and interests". Recital C similarly states: "The Vendor is desirous of selling and the Purchaser is desirous of purchasing from the Vendor its portion of undivided share in and to the Lands, free from all encumbrances save for the Lodged Caveats, on an as-is where-is basis, subject to the conditions and restriction-in-interest (whether express or implied) endorsed on the issue document of title in respect of the Lands and upon the terms and conditions contained in this Agreement"

16. The Appellant nevertheless maintained that it had sold to the Respondent the whole of its 1/4 undivided share in Lot 1561. It further argued that, since the caveators' claims were lodged against an undivided title, the 76,255 square feet attributable to the caveators should be treated as falling within CLHE's remaining 1/7 undivided share and not the Appellant's 1/4 undivided share.

17. We are unable to accept that submission.

18. Clause 5.1 of the Settlement Agreement dated 9 June 2007 expressly provided that portions of Lot 1561 which had previously been sold by CLHE to third parties did not form part of the property sold by CLHE to FPSB and were excluded from the transaction.

19. Pursuant to that arrangement, CLHE subsequently transferred the 1/4 undivided share in Lot 1561 to the Appellant as nominated transferee of FPSB, subject to the same exclusion.

20. The evidence at trial was equally clear. Ms Yeap, the solicitor who represented the Appellant in the preparation and execution of the SPA (DW1), confirmed that all five caveators derived their interests from CLHE and that their respective portions fell within the specific 1/4 undivided share transferred to the Appellant. DW1 further accepted that, under Clause 5.1 of the Settlement Agreement, those portions had to be excluded from any subsequent transfer.

21. Significantly, DW1 admitted that had the Settlement Agreement been disclosed in 2013, it would have been obvious that the caveated portions ought to have been excluded from the purchase price calculation.

22. Mr Lim, the Appellant's General Manager (DW2), likewise admitted that the purchase price for Lot 1561 was calculated at RM110 per square foot based on the entire area of 657,342.97 square feet without excluding the caveators' portions measuring 76,255 square feet, notwithstanding that those third-party interests were expressly recognised.

23. The inevitable conclusion is that, by reason of the exclusions contained in the Settlement Agreement, the Appellant effectively owned only 581,087.97 square feet of Lot 1561 although the transfer was described as a transfer of a 1/4 undivided share.

24. It follows that the Appellant did not possess 657,342.97 square feet capable of being sold to the Respondent.

25. In this regard, we agree with the LTJ that the principle of nemodat quod non habet applies.

26. The Appellant could not sell, nor pass title to, land which did not belong to it.

27. The LTJ was therefore entitled to rely on the decision of the Federal Court in Sia Hiong Tee & Ors v Chong Su Kong & Ors [2015] 8 CLJ 1173, in concluding that the Appellant could not convey to the Respondent the 76,255 square feet previously excluded from the Appellant's own acquisition.

28. Having disposed of the issue of ownership, we turn to the Appellant's principal alternative contention that the purchase price of RM112,501,725.60 was a negotiated global figure and not dependent upon the rate of RM110 per square foot stated in the SPA.

29. According to the Appellant, the RM110 per square foot figure was merely a reference point and was never intended to cater for any post-completion adjustment of the purchase price.

30. We find that contention to be inconsistent with the express terms of the SPA.

31. Clause 3.1 stipulates that the total purchase price for the Appellant's undivided shares in the lands was RM112,501,725.60 calculated at RM110 per square foot. Appendix 1 contains the detailed computation for Lot 1561 and reflects precisely the same pricing methodology.

32. Clause 21.1, being the entire agreement clause, precludes reliance upon prior oral discussions to contradict the clear written terms of the parties' bargain.

33. The LTJ was therefore correct in rejecting the contention that the RM110 per square foot rate was merely a reference figure and that the purchase price was intended to operate as a fixed global sum. See Master Strike Sdn Bhd v Sterling Heights Sdn Bhd [2005] 2 CLJ 596; [2005] 3 MLJ 585.

34. We next address the Appellant's contention that the SPA had been fully completed on 13 March 2014 and that the Respondent, having proceeded with completion and registration despite knowledge of the caveats, had affirmed the transaction and waived any right to complain thereafter.

35. The Appellant further relied upon sections 21 and 23 of the Contracts Act 1950 and submitted that there was no mistake capable of justifying any subsequent adjustment to the agreed purchase price. Section 21 provides that " (w)here both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void," while section 23 provides: "A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact."

36. The Respondent's answer was that it only discovered the true effect of the Settlement Agreement after the commencement of the Zentalite litigation in late 2016 or 2017.

37. We find no basis to disturb the LTJ's acceptance of that evidence.

38. The evidence showed that the Settlement Agreement was not disclosed to the Respondent during the SPA transaction. Indeed, DW1 acknowledged that the document had not been furnished because it was regarded as an agreement between FPSB and CLHE.

39. The Respondent's subsequent pleading of the Settlement Agreement in its Statement of Claim does not establish prior knowledge of the document at the time of the SPA in 2013. As the LTJ correctly found, the Respondent only became aware of its contents after investigations undertaken in the course of the Zentalite proceedings.

40. In these circumstances, the LTJ was entitled to reject the Appellant's arguments based on waiver, affirmation and mistake.

41. Having regard to the foregoing findings, we are satisfied that the LTJ correctly concluded that the Appellant had been enriched at the Respondent's expense by receiving payment for 76,255 square feet which the Appellant did not own and could not lawfully convey.

42. We further agree that the requirements for restitution identified by the Federal Court in Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 CLJ 453 were established and that no applicable defence was shown.

43. The LTJ therefore rightly ordered the Appellant to refund RM8,388,050.00,representing 76,255 square feet calculated at RM110 per square foot.

44. We find no basis to interfere with the decision of the LTJ. The appeal is accordingly dismissed with costs of RM50,000.00 subject to payment of the allocatur fee. Dated the 15th day of July 2026 Counsel for the Appellant

1. Robert Lazar

2. Farah Nabilah binti Shaharuddin

3. Habib Rahman bin Seeni

4. Nyon Mun Ci [Messrs Ezrilaw Firm] Counsel for the Respondent

1. Jeyasingam Balasingam

2. Kartikumar Seamreasan [Messrs Ghazi & Lim]