Impress Eight (M) Sdn Bhd v Ultrabliss Sdn Bhd (BA-24NCC-97-08/2023)

(M) Sdn Bhd masing-masing dan surat-surat di antara peguamcara- peguamcara kedua-dua pihak tersebut mengenainya ANTARA IMPRESS EIGHT (M) SDN. BHD. (No Pendaftaran Syarikat: 199201021026/ No. Syarikat: 252530-T) ...PLAINTIF DAN ULTRABLISS SDN. BHD. (No. Pendaftaran Syarikat: 201401039818/ No. Syarikat: 1115964-A) …DEFENDAN JUDGMENT Introduction [1] The Plaintiff through its Originating Summons in Enclosure 1 is seeking the return of a deposit of RM1,147,500.00 together with interests from the Defendant. The Plaintiff’s case is premised on the ground that a contract for the sale and purchase of a piece of property that it had entered into with the Defendant had become void due to the non-fulfilment of a condition precedent. [2] While it is reasonable and expected of the Defendant in the present case to resist and challenge the Originating Summons that has been filed against it, it went on to file a separate Notice of Application in Enclosure 6 to have the Originating Summons struck out pursuant to Order 18 rule 19(1)(a), (b) and/or (d) of the Rules of Court 2012. [3] As the grounds relied by the parties in support of and in opposing both Enclosures 1 and 6 are indistinguishable, it is apposite that both these Enclosure are dealt together. The Overarching Issues [4] The predominant issue is whether the Plaintiff was entitled to terminate the contract on the ground that the Defendant was unable to fulfil the condition precedent stated in the Sale and Purchase Agreement, thereby entitling it to the return of the deposit with interests. [5] Based on the grounds raised by the Defendant in support of its striking out application and in opposing the main Originating Summons application, the following issues have arisen for determination, namely:

Whether the Plaintiff has commenced this action using the correct mode;

Whether the Plaintiff had prematurely terminated the contract;

Whether interests claimed is excessive penalty; and

Whether the condition precedent in the contract was for a fixed or a flexible period. The Parties and Background Facts [6] The Defendant, Ultrabliss Sdn Bhd, is at all material times the registered proprietor of all that piece of land held under H.S.(D) 293625 PT12630, Pekan Baru Sungai Buloh, Daerah Petaling and Negeri Selangor (“the Title to the Property”) measuring approximately 3,695 square metres in area together with a three storey detached industrial building erected thereon and bearing the postal address of No. 3 (PT12630), Jalan Teknologi, T.S.S.1, Kota Damansara PJU 5, 47810 Petaling Jaya, Selangor Darul Ehsan (“the said Property”). [7] The Plaintiff, Impress Eight (M) Sdn Bhd, has entered into a Sale and Purchase Agreement with the Defendant, Ultrabliss Sdn Bhd, on 2 September, 2022 whereby it was agreed that the Defendant will sell the said Property to the Plaintiff. [8] A pertinent fact is that the sale and purchase of the said Property is subject to the State Authority’s consent having been obtained as there was a restriction in interest endorsed on the Title to the Property in that the prior written consent of the State Authority is required for the transfer, lease or charge of the said Property in favour of the Plaintiff. [9] The key terms of the Sale and Purchase Agreement are, inter alia, as follows: a) The said sale and purchase of the Property pursuant to the Sale Agreement shall be conditional as a condition precedent to the Sale Agreement upon the Defendant having secured the State Authority’s Consent at the Defendant’s own costs and expense within four (4) months from 2.9.2022 (Clause 3.1); b) Subject thereto, the purchase price for the Property was RM19,750,000.00 (Clause 4.1) that was payable in the following manner: i) The earnest deposit of RM395,000.00 that had already been paid prior to the date of the Sale Agreement to the estate agent CID Realtors Sdn Bhd (Clause 4.2.1); ii) Simultaneously with the execution of the Sale Agreement, the Plaintiff shall pay to Messrs Fairuz Ali & Co (hereinafter referred to as follows as “FAAC”) - who were identified and defined in the Sale Agreement as the vendor’s solicitors – as stakeholders a sum of RM592,500.00 (being the RPGT retention sum) (Clause 4.2.2) iii) Upon the execution of the Sale Agreement, the Plaintiff shall pay to the Defendant the sum of RM987,500.00 whereby the receipt of the Balance Deposit was expressly admitted by the Defendant and whereby the Balance Deposit is regarded as part payment towards the Purchase Price in the event of the completion of the sale and purchase under the Sale Agreement (Clause 4.2.3); c) The total of the Earnest Deposit Sum, the RPGT Sum and the Balance Deposit was defined in the Sale Agreement as “the Deposit” (Clause 1.1); d) The date on which the Sale Agreement became unconditional was defined and stipulated by the Sale Agreement to be the date on which the Condition Precedent has been fulfilled (Clauses 1.1 and 3.4) and therefore the completion period for the Sale Agreement did not start running until after the Condition Precedent was fulfilled; and e) In the event that the Condition Precedent cannot be satisfied upon the expiration of the Initial Period, the Defendant was allowed an automatic extension of time of another two (2) months to fulfil the Condition Precedent. In the event the Condition Precedent cannot be satisfied upon expiration of the Extended Period, either an extension of time to satisfy the Condition Precedent or the termination of the Sale Agreement must be mutually agreed by the parties thereto within fourteen (14) days on the date following the expiry of the Extended Period, failing which the Sale Agreement shall automatically terminate whereupon the Deposit and any monies paid under the Sale Agreement shall be refunded to the Plaintiff free of interest within fourteen (14) days from the date of termination failing which the Defendant shall pay to the Plaintiff interest at a rate equivalent to 8% per annum on the sum to be refunded or the balance thereof outstanding calculated on a daily basis shall accrue thereon from the date the said sum is due for refund until the date of receipt of the same by the Plaintiff and upon such refund being made, the Sale Agreement shall be null and void and neither party shall be entitled to claims against the other save for any antecedent breach (Clauses 3.2 and 3.3). [10] The Plaintiff and Defendant had also entered into a Supplemental Agreement dated 2 August, 2022 where the Defendant agreed to sell and the Plaintiff agreed to buy all the mechanical and engineering items, fixtures and fittings which are comprised in the Property and more particularly set out in Annexure A of the Supplemental Agreement subject to the completion of the Sale Agreement and hereby the Supplemental Agreement was conditional upon the State Authority’s Consent having been obtained for the transfer of the Property in favour of the Plaintiff (Clause 7.1). [11] On this Supplemental Agreement, the Plaintiff had paid the following sums a) Prior to the date of the Supplemental Agreement, the sum of RM40,000.00 to the estate agent CID Realtors Sdn Bhd as Earnest Consideration Deposit (Clause 3.2.1); and b) Contemporaneously with the execution of the Sale Agreement and this Agreement, the sum of RM160,000.00 to the Defendant as the Balance Consideration Deposit, the receipt of which the Defendant acknowledged vide the Supplemental Agreement (Clause 3.2.2) In accordance with Clause 7.1, it was agreed that “in the event where the Sale Agreement shall be terminated for any reason whatsoever then the Defendant shall within fourteen (14) days of the Defendant’s receipt of the Plaintiff’s notice of termination of the Sale Agreement and this Agreement refund the Balance Consideration Deposit to the Plaintiff and procure the refund of the Earnest Consideration Deposit by CID Realtors Sdn Bhd free of interest to the Plaintiff failing which interest at 8% per annum on the sum to be refunded or the balance thereof outstanding calculated on a daily basis shall accrue thereon from the expiry of the said 14 days until the date of full payment thereof and the Supplemental Agreement shall forthwith also terminate and have no further effect whatsoever and neither party shall have any claims whatsoever against the other thereunder”. [12] An equally relevant fact is that CID Realtors Sdn Bhd had written to the Plaintiff and the Defendant to undertake to them that they shall “… retain the same until such time when all approvals and consents from the relevant authorities … have been obtained in order for the sale of the subject property to proceed accordingly… (and) further undertake to refund … to the Purchaser free of interest in the event any of the approvals or consents… cannot be obtained within the stipulated period resulting in the Vendor aborting the sale …” [13] The Plaintiff had on 2 September, 2022 duly made payment of the total sum of RM1,740,000.00 by way of the Plaintiff’s CIMB cheque no. 000018 to Messrs Fairuz Ali & Co (“FAAC”), the Defendant’s solicitors, by way of letter dated 2 September, 2022. The total sum of which comprises the Balance Deposit as defined under the Sale Agreement of RM987,500.00, the RPGT Sum as defined in the Sale Agreement of RM592,500.00 and the Balance Consideration Sum as defined in the Supplemental Agreement of RM160,000.00. [14] FAAC were also expressly only authorized by the stakeholder conditions to release the RPGT Sum to the Defendant in the event that there was receipt by them of a certificate or confirmation of clearance is issued by the Director General confirming that no real property gains tax is due for the disposal of the Property to the Plaintiff and that they simultaneously make available a copy of the aforesaid certificate or confirmation of clearance to the Plaintiff’s solicitors. [15] With the date of 2 January, 2023 set for obtaining the State Authority’s consent approaching, the Plaintiff received a letter from the Defendant’s solicitors dated 29 December, 2022 informing the former that an application for the State Authority’s consent had been lodged on 31 October, 2022. Since the Condition Precedent could not be satisfied by 2 January, 2023, the Defendant informed the Plaintiff that it was allowed an automatic extension of time of two months immediately following the expiration of the Initial Period being the Extended Period under the Sale and Purchase Agreement, with the new Extended Period expiring on 2 March, 2023. [16] The Plaintiff was further informed by the Defendant’s solicitors through another letter dated 21 February, 2023 that despite the Extended Period expiring on 2 March, 2023, the Condition Precedent could still not be satisfied. According to that letter, the Defendant’s solicitors said that they had been informed by the officer of the Pejabat Daerah and Tanah Petaling that the Defendant’s application for the State Authority’s Consent had been rejected and that they were following up to obtain the official letter of rejection from the said Land Office and will be formally appealing against that decision to the State Authority. The Defendant’s solicitors had on behalf of the Defendant requested for a mutual extension of time of the Extended Period under the Sale Agreement of four (4) months from the date of 2 March, 2023 for the Defendant to comply with Clause 3 of the Sale Agreement, which was to satisfy the Condition Precedent. [17] The Plaintiff’s solicitors then vide a letter dated 28 February, 2023 replied to FAAC informing the latter that the Plaintiff was unable to agree to the Defendant’s request for an extension of time and that in view of the same and pursuant to the Sale Agreement and the Supplemental Agreement, the Sale Agreement and the Supplemental Agreement shall be terminated. The Plaintiff also required the Defendant to return to the Plaintiff in full the Deposit defined in the Sale Agreement together with the Earnest Consideration Deposit and the Balance Consideration Deposit defined in the Supplemental Agreement within fourteen (14) days from the date of the said letter. [18] FAAC then vide a letter dated 1 March, 2023 informed the Plaintiff’s solicitors that in their view, the Sale and Purchase Agreement allowed them another 14 days from 16 March 2023 or until 28 March, 2023 to refund the RPGT Sum and the Balance Deposit free of interest, but that having stated the same, the Defendant’s solicitors on the Defendant’s behalf then sought the Plaintiff’s indulgence to amicably settle the matter. [19] To the above was a reply by the Plaintiff’s solicitors dated 3 March, 2023, which in effect reiterated its request that the Deposit defined in the Sale Agreement together with the Earnest Consideration Deposit and the Balance Consideration Deposit defined in the Supplemental Agreement be retuned in full to the Plaintiff. [20] FAAC then later replied to the Plaintiff’s solicitors vide a letter dated 14 March, 2023 on behalf of the Defendant. The three relevant matters contained in this letter are, first, a request seeking the Plaintiff’s indulgence and consideration for extension of time of ninety (90) days from 14 March, 2023 to refund to the Plaintiff the total sum of RM1,740,000.00 comprising of the RPGT Sum of RM592,000.00, the Balance Deposit of RM987,500.00 and the Balance Consideration Deposit of RM160,000.00. Second, this same letter from FAAC also notified the Plaintiff’s solicitors that they shall notify CID Realtors Sdn Bhd, who were the real estate agent who had received the Earnest Deposit and the Earnest Consideration Deposit from the Plaintiff, to refund the same directly to the Plaintiff. Third, FACC also appealed for a total waiver or reduction of the interest that is payable by the Defendant to the Plaintiff on the aforesaid RM1,740,000.00 to be refunded under the Sale Agreement and under the Supplemental Agreement. [21] On the same day, by way of FAAC’s letter dated 14 March, 2023 to CID Realtors Sdn Bhd and copied to the Plaintiff’s solicitors, FAAC informed CID Realtors Sdn Bhd on behalf of the Defendant that the Defendant is unable to obtain the State Authority’s consent within the time as stipulated in the Sale Agreement and that the Plaintiff is not agreeable to any extension of time to secure the State Authority’s consent and FAAC thereby gave notice to CID Realtors Sdn Bhd to refund directly to the Plaintiff the total sum of RM435,000.00 comprising the Earnest Deposit amounting to RM395,000.00 and the Earnest Consideration Deposit amounting to RM40,000.00 as promised by CID Realtors’ Letter of Confirmation of Receipt and Undertaking to Refund. [22] The Plaintiff’s solicitors had then vide a letter dated 22 March, 2023 replied to FAAC’s letter to inform the Defendant that:

The Plaintiff had no objection to the Defendant’s request for an extension of time of ninety (90) days from 14 March, 2022 to enable the Defendant to refund the aforesaid sum of RM1,740,000.00 to the Plaintiff – which meant that the Plaintiff had mutually agreed with the Defendant to an extension of time until 12 June, 2023 for the Defendant to refund the said sum;

The Plaintiff was unable to agree to the Defendant’s request for a waiver or reduction of the interest charges that were due on the aforesaid sum of RM1,740,000.00 and instead the Plaintiff required the Defendant to pay interest on the aforesaid sum of RM1,740,000.00 that was to be refunded by the Defendant at the rate of 8% per annum as set out in Clause 3.3 of the Sale

In respect of the refund of RM435,000.00 by the estate agent CID Realtors Sdn Bhd, the Plaintiff’s solicitors informed FAAC of the details of the Plaintiff’s CIMB bank account into which the said sum was to be refunded and requested for the same to be expeditiously refunded and for a copy of the remittance advice for the said refund once the same was effected. [23] Following the above, CID Realtors Sdn Bhd duly refunded the RM435,000.00 to the Plaintiff’s CIMB bank account on or about 28 March, 2023 being the refund of the Earnest Deposit under the Sale Agreement and the Earnest Consideration Deposit under the Supplemental Agreement as agreed between the Plaintiff and the Defendant. [24] On 2 June, 2023, the Plaintiff’s solicitors sent an email to FAAC to inquire on the status of the said refund in view of the fact that the extension of time to refund the aforesaid sum of RM1,740,000.00 that was to be refunded by the Defendant to the Plaintiff was due to expire on 12 June, 2023 to which FAAC in a letter dated 13 June, 2023, conveyed to the Plaintiff’s solicitors on behalf of the Defendant of the Defendant’s humble request for the Plaintiff’s indulgence and consideration for another extension of time of six (6) months from 12 June, 2023 or until after the next purchaser is secured for the Property from the date of 12 June, 2023 to refund the total sum of RM1,740,000.00. [25] It is noteworthy that in the same letter FAAC again requested and appealed for a total waiver or reduction of the interest that is payable by the Defendant to the Plaintiff on the aforesaid RM1,740,000.00 to be refunded under the Sale Agreement and under the Supplemental Agreement. FAAC also made reference to the Defendant’s understanding that CID Realtors Sdn Bhd had already refunded the sum of RM435,000.00 to the Plaintiff being the Earnest Deposit of RM395,000.00 and the Earnest Consideration Deposit of RM40,000.00 under the Supplemental Agreement. [26] The Plaintiff’s solicitors replied to the said requests by way of a letter dated 26 June, 2023 informing the Defendant inter alia that the Plaintiff was not agreeable to the Defendant’s aforesaid requests, that is, that the Plaintiff was not agreeable to any further extension of time for the Defendant to refund the aforesaid sum of RM1,740,000.00 to the Plaintiff, and that the Plaintiff was also not agreeable to the Defendant’s request for a waiver or reduction of the interest charges that were due on the aforesaid sum of RM1,740,000.00. [27] The Plaintiff had made a formal demand on FAAC for the return and refund of the RPGT Sum of RM592,500.00 which was held by them as stakeholders pursuant to the Sale Agreement on 12 July, 2023 and on 27 July, 2023, the RPGT Sum was duly refunded to the Plaintiff. [28] With the RPGT sum having been refunded, what was still due, payable and outstanding from the Defendant to the Plaintiff was the total sum of RM1,147,500.00 comprising of the Balance Deposit of RM987,500.00 and the Balance Consideration Deposit of RM160,000.00. This is the sum, together with interests, claimed by the Plaintiff in its Originating Summons. The Parties’ Contentions [29] The Plaintiff’s position in that the correspondence between the partes and the contemporaneous documents support its Originating Summons in Enclosure 1 and rebut the attempt by the Defendant to have its Originating Summons struck out in Enclosure 6. [30] The Plaintiff highlighted a number of key events, one of these being that when FAAC on behalf of the Defendant directed CID Realtors Sdn Bhd to refund the Earnest Deposit and the Earnest Consideration Deposit, the Defendant had agreed that the sale of the property would not proceed and that the vendor was aborting the sale. [31] It was the Plaintiff’s contention that when Plaintiff did not agree to grant any more extension of time to the Defendant to comply with the Condition Precedent, the Sale Agreement and the Supplemental Agreement were terminated, that the sale and transfer of the said Property from the Defendant to the Plaintiff had been aborted and at that given time, the Defendant was liable and obligated to refund to the Plaintiff the total sum of RM1,740,000.00 comprising the RPGT Sum of RM592,000.00, the Balance Deposit of RM987,500.00 and the Balance Consideration Deposit of RM160,000.00. [32] The points and arguments raised by the Defendant in support of its application to strike out the Plaintiff’s Originating Summons in Enclosure 6 may be distilled into the following grounds. [33] First, that the condition precedent was beyond the control of either party. [34] Second, the “fixed term” for the fulfilment of the condition precedent was to all intents and purposes a “flexible term”. [35] The Defendant further contended that it had orally been granted an extension of time by the Plaintiff. [36] The fourth ground relied by the Defendant is that the action by the Plaintiff was premature and that there was legitimate expectation that the Defendant be permitted to fulfil the condition precedent, notwithstanding the period fixed. [37] It was also the Defendant’s submission that: Pembatalan yang dibuat oleh Plaintif secara unilateral dan pramatang adalah disebabkan kegagalan Plaintif untuk mendapatkan pinjaman dari institusi kewangan bagi tujuan pembiayaan hartanah tersebut. [38] The fifth ground advanced by the Defendant was that the imposition of the 8% interests amounts to “unjust enrichment” and is in breach of sections 74 and 75 of the Contracts Act 1950 as the interests sought is in effect a form of excessive penalty. [39] Last but not least, the Defendant argued that the Plaintiff has utilised the wrong mode in commencing this action. In this respect the Plaintiff relied on Order 5 rule 2 of the Rules of Court 2012 and the following authorities, namely, Husli @ Husly bin Mok v Jundar Realty Development Sdn Bhb & Anor [2014] AMEJ 0207; [2014] 2 CLJ 205; [2014] 3 MLJ 496 and Ting Ling Kiew & Anor v Tang Eng Iron Works Co Ltd [1992] 1 AMR 90; [1992] 1 CLJ Rep 331; [1992] 2 MLJ 217; [1992] 1 MLRA 336. [40] The Defendant also relied on Penang Port Commission v Kanawagi s/o Seperumaniam [2008] 6 MLJ 686 to support its argument that the Plaintiff has abused the process of the court by commencing this Originating Summons. [41] In opposing the Plaintiff’s Originating Summons in Enclosure 1, the Defendant raised identical grounds as per its contentions in Enclosure 6. The Law and Applicable Principles [42] To facilitate reference, the provisions of the Rules of Court 2012 and the Contracts Act 1950 invoked by the parties are reproduced below. [43] Order 18 rule 19(1) of the Rules of Court 2012 provides as follows: Striking out pleadings and endorsements (O. 18, r. 19)

19.

The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement, on the ground that —

it discloses no reasonable cause of action or defence, as the case may be;

it is scandalous, frivolous or vexatious;

it may prejudice, embarrass or delay the fair trial of the action; or

it is otherwise an abuse of the process of the Court, and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be. [44] Crucially, for purposes of the present case, Order 18 rule 19(3) states that Order 18 rule 19 “shall, as far as applicable, apply to an originating summons as if it were a pleading”. [45] Order 5 rules 2 and 4 of the Rules of Court 2012 read as follows: Proceedings which shall be begun by writ (O. 5, r. 2)

Proceedings in which a substantial dispute of fact is likely to arise shall be begun by writ. Proceedings which may be begun by writ or originating summons (O. 5, r. 4)

4.

Proceedings —

in which the sole or principal question at issue is or is likely to be one of the construction of any written law or of any instrument made under any written law, or of any deed, will, contract or other document, or any other question of law; or

in which there is unlikely to be any substantial dispute of fact, are appropriate to be begun by originating summons unless the plaintiff intends in those proceedings to apply for judgment under Order 14 or Order 81 or for any other reason considers the proceedings are more appropriate to be begun by writ. [46] Section 36(1) of the Contracts Act 1950 reads: When contracts become void which are contingent on happening of specified event within fixed time

36.

Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, the event has not happened, or if, before the time fixed, the event becomes impossible. [47] The Defendant had made reference and relied on section 74 of the Contracts Act 1950 which states as follows: Compensation for loss or damage caused by breach of contract

74.

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.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract

When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default as if the person had contracted to discharge it and had broken his contract. [48] On penalty, the relevant provision in the Contracts Act 1950 is section 75, which provides as follows: 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 reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. The Decision of this Court [49] The principles governing the striking out of a writ or pleading or an originating summons are well-established and require no reiteration. [50] On the assertation by the Defendant that that the condition precedent was beyond the control of either party, that is indeed true. However, the parties were fully aware of the risks involved and the contingent nature of the said Sale and Purchase Agreement. This point does not in any way alter the nature and validity of the Sale and Purchase Agreement nor annul the condition precedent agreed by the parties. [51] As for the argument by the Defendant that the “fixed period” for the fulfilment of the condition precedent was to all intents and purposes a “flexible period”, this is an ingenuous argument that is not supported by any evidence nor authority. [52] Likewise, the Defendant’s claim that it had orally been granted an extension of time by the Plaintiff is not supported by any evidence. [53] In relation to the legitimate expectation argument relied on by the Defendant, this Court in Fused Project Sdn Bhd v Bina Tetap Tiara Sdn Bhd [2023] 5 AMR 771; [2023] 1 LNS 842; [2023] MLJU 980 had explicated the principle of legitimate expectation in the following terms. [34] It is well established that the doctrine of legitimate expectation applies in the sphere of administrative law and public law. According to this principle, private individuals have a legitimate right to expect that public authorities will act in a certain way, based on their past actions or representations. The underlying basis of this doctrine to is ensure that public authorities act in a consistent and fair manner, and that individuals are not unfairly disadvantaged by sudden changes in policy or procedure. Its operation is between individuals and public authorities rather than between private individuals. [35] Jamin Trading and Mohd Nasrul were relied by the defendant to support its contention that the doctrine of legitimate expectation does not apply under a private contract. [36] There was indeed a point made to this effect in Jamin Trading. In that case, Vernon Ong J (as his Lordship then was) acknowledged that the doctrine of legitimate expectation “may arise in situations other than in the realm of public law”. However, the exception mentioned was in relation to “questions of a shareholder’s rights in a private company”. The High Court did not accept the application of the doctrine “to a party’s rights under a private contract situation”. (see para. [40]). [37] Mohd Nasrul, also a decision of the High Court, had referred to the Supreme Court of Seychelles in Allen Jean & Anor v. Wellington Felix & Anor, (Civil Side No:15 of 2008) (2013) SLR 205; [2013] SCSC 63 (“Jean v. Felix”). At para [10](f)(ii) and (iii) of the judgment, the following paragraphs (a) - (e) were quoted as purportedly the rulings by the Supreme Court. These paragraphs read as follows:

This doctrine of legitimate expectation cannot be applied in a contractual field of law, particularly when the Contract is concluded.

When a contract becomes concluded, the expectation, if any, ends, whereafter the parties will be bound only by the terms thereof.

Applying this doctrine in contracts would result in absurdity as the specific performance of the same is impossible.

In its observation, it held that the doctrine of fairness is developed in administrative law to ensure the Rule of Law and prevent failure of justice where the action is administrative. Just as principles of natural justice ensure fair decisions where the function is quasi-judicial, the doctrine of fairness is evolved to provide appropriate action where the function is administrative.

It cannot be invoked to amend, alter or vary the express terms of the Contract between the parties.

The reason for not accepting this doctrine of Legitimate Expectation in the realm of contracts may be because the Contract Act 1872 clearly defines what consensus ad idem is. Once concluded, the Contract is reached. Contract terms are reduced to writing, and the contracting parties are bound by the terms of the Contract and nothing more. [38] Curiously, a reading of the judgment of the Supreme Court of Seychelles in Jean v. Felix does not quite support the “conclusions” reached as forming the ruling in that case. In Jean v. Felix, the Supreme Court did imply that it was willing to reject the doctrine of legitimate expectation if there were express terms in a contract. However, the Supreme Court in no uncertain terms held as follows: [28] Therefore, it goes without saying that in our jurisdiction it is lawful for a party to have legitimate expectation that in the absence of expressed terms in a contract, fairness would come in rescue, in respect of all the consequences and give rise to the necessary implied terms in the contract in accordance with its nature, and so I hold. [39] Leaving aside the decision of the Supreme Court of Seychelles for a moment, my own research led me to the following three High Court decisions that had considered the immediate issue of whether the doctrine of legitimate expectation may be invoked in a private contract. The cases are Universal Trustee (Malaysia) Berhad v. Lambang Pertama Sdn Bhd & Anor [2014] 3 AMR 751; [2014] 1 LNS 1437; [2015] 7 MLJ 305 (“Universal Trustee”), WTWT Sdn Bhd v Chew Bros (M) Sdn Bhd & Ors [2015] AMEJ 211; [2015] 5 CLJ 426; [2015] 2 MLRH 248 (“WTWT”) and Orix Credit Malaysia Sdn Bhd v. Raub Australian Gold Mining Sdn Bhd [2015] AMEJ 1712; [2015] 1 LNS 1065; [2015] MLJU 943 (“Orix Credit”). [40] In Universal Trustee, Wong Kian Kheong JC (as his Lordship then was) noted that the doctrine of legitimate expectation “is not applicable in the realm of private law which is governed by contracts”. (see para. [65]). His Lordship reiterated this point in WTWT and expressed reservations on the application of the concept of legitimate expectation in interpreting a company’s Articles of Association. (see paras. [46] and [47]). In Orix Credit, his Lordship further observed that there has been “a growing trend in private commercial cases for parties to raise the public law concept of “legitimate expectation”. (see para. [32). [54] This legitimate expectation argument therefore cannot assist the Defendant in the present case. [55] As noted, the Defendant had also submitted that the Plaintiff had unilaterally and prematurely terminated the contract because the Plaintiff was unable to secure a loan to finance the purchase of the property. This Court is of the considered view that not only is this assertion unsupported by evidence, but such an argument is also a non sequitur from the start. If at all that allegation is indeed true, then it is the Plaintiff’s good fortune that the Defendant was unable to fulfil the condition precedent. It does not disentitle the Plaintiff from terminating the said Sale and Purchase Agreement. [56] The contention that the interests of 8% per annum amounts to an excessive penalty requires due deliberation. [57] On this issue, suffice that reference be made to the landmark case of Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 1 AMR 737; [2019] 2 CLJ 723; [2019] 6 MLJ 15; [2019] 2 MLRA 83 (“Cubic Electronics”) whereby the Federal Court clarified the law of penalties. The principle is that there is no necessity for a Plaintiff to adduce any proof of actual loss and damage where an innocent party seeks to enforce a penalty under section 75 of the Contracts Act 1950. The initial burden of proof lies on the party seeking to enforce a penalty under Section 75 of the Act to adduce evidence that there was a breach of contract and that the breach contains a clause specifying a sum to be paid upon breach. However, if there is a dispute as to what constitutes a reasonable compensation, the burden of proof falls on the defaulting party to show that the penalty clause is unreasonable or to demonstrate what comprises a reasonable compensation. [58] Based on the fact that the interests of 8% per annum is expressly stipulated in the contract and on the authority of the apex court decision in Cubic Electronics, the Plaintiff’s claim for this interest sum is just and not excessive. [59] With respect to the wrong mode of commencement ground, it is true that Order 5 rule 2 of the Rules of Court 2012 states that “Proceedings in which a substantial dispute of fact is likely to arise shall be begun by writ”. The question is whether the present case involved a substantial dispute of fact. Based on the evidence before this Court, the answer is in the negative. This means that the Plaintiff was at liberty to invoke the provision in Order 5 rule 4 and commence the action by way of Originating Summons. The Plaintiff was not wrong in considering that it is more appropriate for this present action to be commenced by Originating Summons instead of by way of a Writ action. Had the Plaintiff intended to apply for summary judgment under 14, it would be required to commence the action by Writ. By commencing this action by way of Originating Summons instead of by Writ has saved the parties and the Court considerable time and the Plaintiff should be commended. [60] The cases cited by the Defendant, namely, Husli @ Husly bin Mok v Jundar Realty Development Sdn Bhb & Anor and Ting Ling Kiew & Anor v Tang Eng Iron Works Co Ltd in fact support the conclusion reached by this Court. The following authorities also support this Court's conclusion on the issue of the mode of commencement. These cases are Pesurohjaya Ibu Kota Kuala Lumpur v Public Trustee & Ors [1971] CLJU 104; [1971] 2 MLJ 30 at 32; [1091] 1 MLRH 39, Bina Puri Properties Sdn Bhd v Chin Hing Ming [2022] AMEJ 1405; [2022] MLJU 2516; [2022] MLJU2516 and Amirthanayaki Kumarasamy v Lembaga Kelayakan Profesion Undang-Undang [2010] AMEJ 0355; [2010] 6 CLJ 593; [2010] 1 MLJ 656; [2010] 11 MLRH 544. [61] The chain of correspondence/exchanges outlined in paragraphs [12] – [26] are not disputed. The contemporaneous evidence/documents before this Court are compelling and they favour the Plaintiff. The allegation that this action is premature in unfounded. [62] The Defendant alleged that the Plaintiff has abuse the process of the court in commencing this Originating Summons application and that the Originating Summons ought to be struck out. This Court is of the considered view that it is the Defendant that has abused the process of the court in filing Enclosure 6. [63] The findings of this Court are that;

The Plaintiff was entitled to terminate the contract as the Defendant was unable to fulfil the condition precedent stated in the Sale and Purchase Agreement, thereby entitling the Plaintiff to have the deposit returned with interests;

The Plaintiff has commenced this action using the correct mode;

The Plaintiff did not prematurely terminate the contract; and

The interests claimed is not excessive penalty. The application in Enclosure 6 is dismissed with costs and the Plaintiff’s prayers in Enclosure 1 are allowed with costs. [64] In view of the superfluous application by the Defendant in the form of Enclosure 6, resulting in the parties having to file additional cause papers and the prolongation of this matter, the Defendant is hereby ordered to pay costs of RM40,000 to the Plaintiff, subject to allocator. Dated: 3 June, 2024 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: Goh Meng Yew with Chen Hui Ping for the Plaintiff (Messrs. Iza Ng Yeoh & Kit) Izwan Othman for the Defendant (Messrs. Fairuz Ali & Co.)