Kabaz Sdn. Bhd. v Sarawak Consolidated Industries Berhad (BA-12A-44-08/2024)

The Appellant, the Plaintiff in the court below, successfully obtained judgment for four months’ unpaid rental of RM320,000.00 against the Respondent, who was the Defendant in the lower court. Notably, there is neither an appeal nor a cross-appeal against this aspect of the Sessions Court’s decision. However, the Sessions Court also ruled in favour of the Respondent’s counterclaim, ordering the return of an earnest deposit of RM450,000.00 paid by the Respondent under a Letter of Offer to Purchase. S/N JclavAN7/UaTDwBaps2niw **Note : Serial number will be used to verify the originality of this document via eFILING portal 2

Both the claim and counterclaim were determined through Order 14A and/or Order 33 of the Rules of Court 2012, reflecting the court’s reliance on the summary disposal of legal issues without a full trial.

The only matter before this Court is the Appellant’s challenge against the Sessions Court’s decision to allow the Respondent’s counterclaim.

This appeal, therefore, turns on a singular but pivotal issue: Did the learned Sessions Court Judge err in law and/or in fact in allowing the Respondent’s counterclaim?

The facts of this case that was before the Sessions Court can be gleaned from the learned Session Court Judge’s Grounds of Judgment at paras [7] to [11].

In summary, the pertinent background facts were that the Appellant and the Respondent had signed a Letter of Offer to Purchase a property in early 2020, with the Respondent paying an earnest deposit of RM450,000. However, the purchase did not proceed, and they instead entered into a tenancy agreement in October 2020 for the same said property.

The tenancy was extended twice, with the rental increasing from RM67,500 to RM80,000 per month. The Respondent failed to pay rent S/N JclavAN7/UaTDwBaps2niw **Note : Serial number will be used to verify the originality of this document via eFILING portal 3 from December 2022 to March 2023 and proposed offsetting it against the earnest deposit, but the Appellant refused. This resulted in the Appellant filing a suit in the Sessions Court claiming RM320,000 in unpaid rent, while the Respondent has counterclaimed for a refund of the earnest deposit or for it to be deducted from the outstanding rental.

The Sessions Court has allowed the Respondent’s counterclaim on the basis that the Letter of Offer to Purchase was void. The learned Sessions Court Judge invoked section 66 of the Contracts Act 1950 and ordered the earnest deposit to be returned to the Respondent.

To provide the necessary context to the above, it must be remembered that in the course of determining the (claim and) counterclaim, the issue that had arisen was whether the Appellant was required to obtain permission from the Small and Medium Enterprise Development Bank of Malaysia (SME Bank) before renting or selling the premises?

The Sessions Court held as follows:

Berdasarkan Surat Ikatan Hak antara Plaintif dan SME Bank, Plaintif telah menyerahkan hak dan kepentingannya kepada SME Bank. Berdasarkan Klausa (d) Surat Ikatan Hak, Plaintif tidak boleh menyewakan atau menjual atau melupuskan haknya tanpa mendapat keizinan bertulis dari SME Bank. S/N JclavAN7/UaTDwBaps2niw **Note : Serial number will be used to verify the originality of this document via eFILING portal 4

Plaintif juga tidak menafikan fakta keperluan mendapatkan keizinan bertulis dari SME Bank. Namun begitu, Peguam plaintif yang bijaksana menghujahkan walaupun keizinan secara bertulis tidak diberikan, melalui surat bertarikh 26.8.2020, Plaintif ada memaklumkan kepada SME Bank, bahawa Plaintif telah berjaya melupuskan sebahagian unit tersebut dan telah menerima bayaran pendahuluan sebanyak RM450,000.00. Menurut peguam Plaintif, jika tindakan ini tidak mendapatkan restu SME Bank, tentulah SME Bank telah menamatkan perjanjian dengan Plaintif.

Adalah diperhatikan terdapat perbezaan terma ‘memaklumkan’, ‘memberitahu’ dan ‘mengizinkan’. Saya berpendapat, adalah tidak mencukupi hanya semata-mata pemakluman kepada SME Bank melalui surat 26.8.2020 sahaja. Keizinan secara bertulis adalah kuasa, otoriti yang mana dengannya plaintif diizinkan oleh SME Bank yang mempunyai otoriti atas Premis untuk melupuskan Premis tersebut.

Selanjutnya, Plaintif menghujahkan, Defendan bukanlah pihak (privy) dalam perjanjian antara Plaintif dan SME Bank, maka Defendan tidak berhak membangkitkan apa jua pelanggaran perjanjian antara Plaintif dan SME Bank.

Mahkamah berpendapat, secara zahir isu ini adalah urusan Plaintif dan SME Bank, yang mana defendan bukan pihak kepada Perjanjian tersebut. peguam Defendan yang bijaksana sebaliknya berhujah, isu kebenaran bertulis dari SME Bank menyentuh isu kapasiti. Tanpa keizinan bertulis dari SME Bank, Plaintif tidak mempunyai kapasiti untuk memasuki apa-apa perjanjian dengan sesiapa; dan dalam kes ini perjanjian menyewa atau menjual atu melupuskan. S/N JclavAN7/UaTDwBaps2niw **Note : Serial number will be used to verify the originality of this document via eFILING portal 5

Peguam Defendan yang bijaksana juga menggunapakai maxim nemo dat quod non habet yang bermaksud, tiada orang boleh memindah milik apa yang dia tiada. Mahkamah bersetuju dengan hujahan ini.

Mahkamah memutuskan, tanpa keizinan bertulis dari SME Bank, Plaintif tiada kapasiti untuk memasuki perjanjian sewaan dan/atau penjualan dan apa cara melupuskan premis tersebut. Maka, Mahkamah seterusnya memutuskan, perjanjian sewaan dan/atau penjualan yang telah dimasuki oleh Plaintif adalah tidak sah dan terbatal kerana Plaintif memasuki perjanjian tanpa kapasiti.

In short, the Sessions Court ruled that the Appellant did not have the legal capacity to enter into any lease, sale, or disposal of the premises without obtaining written consent from SME Bank, as required under the Deed of Assignment. According to the learned Sessions Court Judge, simply notifying SME Bank was insufficient, as written authorization was necessary. Since no such consent was given, the Sessions Court concluded that the Appellant lacked the authority to proceed with the transactions. Applying the legal principle nemo dat quod non habet (one cannot transfer what one does not own), the Sessions Court declared the Appellant’s agreements for lease and/or sale invalid and void.

The Appellant has raised seven grounds in this appeal:

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau membuat dapatan fakta bahawa Perayu tidak mempunyai kapasiti untuk menyewa atau S/N JclavAN7/UaTDwBaps2niw melupuskan premis tanpa keizinan bertulis daripada Small Medium Enterprise Development Bank Malaysia (“SME Bank”), berdasarkan Surat Ikatan Hak bertarikh 19.01.2015 (“Surat Ikatan Hak tersebut”).

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau gagal mengambil kira dan/atau memberikan pertimbangan yang sewajarnya bahawa Perayu telah memaklumkan kepada SME Bank melalui surat bertarikh 26.08.2020 mengenai pelupusan sebahagian unit tersebut dan bayaran pendahuluan yang telah diterima oleh Perayu daripada Responden berjumlah RM450,000.000.

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau gagal mengambil kira dan/atau memberikan pertimbangan yang sewajarnya bahawa SME Bank tidak mengambil sebarang tindakan terhadap Perayu berhubung dengan pelupusan tersebut, yang boleh ditafsirkan sebagai keizinan tersirat oleh SME Bank.

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang apabila beliau mentafsirkan Seksyen 66 Akta Kontrak 1950 berkaitan dengan kewajipan untuk memulangkan bayaran pendahuluan yang telah diterima oleh Perayu daripada Responden berjumlah RM450,000.000.

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau gagal mengambil kira dan/atau memberikan pertimbangan yang sewajarnya bahawa S/N JclavAN7/UaTDwBaps2niw Responden telah mendapat faedah daripada premis yang disewa.

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau membuat dapatan fakta bahawa Perayu tidak berhak menuntut tunggakan sewa atas alasan bahawa Perjanjian-perjanjian Penyewaan yang ditandatangani pihak-pihak adalah tidak sah.

Hakim Mahkamah Sesyen telah terkhilaf dari segi undang-undang dan fakta apabila beliau gagal mengambil kira dan/atau memberikan pertimbangan yang sewajarnya bahawa Responden tidak mempunyai locus standi untuk mencabar keabsahan Surat Ikatan Hak antara Perayu dan SME Bank, memandangkan Responden bukan pihak kepada Surat Ikatan Hak tersebut. [13] These seven grounds may be summed up as (1) Error in Finding Lack of Capacity, (2) Failure to Consider Notification to SME Bank, (3) Failure to Consider Implied Consent, (4) Misinterpretation of Section 66 of the Contracts Act 1950, (5) Failure to Consider Respondent’s Benefit from the Premises, (6) Error in Denying Rental Arrears Claim and (7) Failure to Consider Respondent’s Lack of Locus Standi. [14] On the submission that the Respondent lacks locus standi, the Appellant referred this Court to the Court of Appeal cases of Bank Bumiputera Malaysia Bhd v Mohamed Salleh [2000] 2 CLJ 13; [2000] 2 MLJ 412 and Glomac Alliance Sdn Bhd v Nordin Md Zain [2023] AMEJ 0181; [2023] 3 CLJ 485; [2023] 3 MLJ 393; [2023] 3 MLRA 478 and the S/N JclavAN7/UaTDwBaps2niw Federal Court case of Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 AMR 1; [2007] 1 CLJ 123; [2008] 1 MLJ 743; [2007] 2 MLRA 667. Based on these authorities, the Appellant argued that the doctrine of privity of contract barred the Respondent, as a third party, “from relying on the Deed of Assignment to escape liability for settling the outstanding rent or seeking the refund of the Earnest Deposit”. [15] The Appellant further averred that “the Respondent’s rights and obligations arise solely from the Tenancy Agreement and the Letter of Offer to Purchase executed between the parties, and not from the Deed of Assignment between the Appellant and SME Bank”. In support of this assertation, the Appellant cited the Court of Appeal case of Antara Vista Sdn Bhd v Rumaya Properties Sdn Bhd [2019] 7 AMR 229; [2017] 1 LNS 1876; [2017] MLJU 1964; [2017] MLRAU 495. [16] The Respondent’s position is premised on the fact that the Appellant had assigned the property to SME Bank through a Deed of Assignment. This Deed expressly stipulates, among other things, that: (i) the Appellant transferred all benefits, rights, and title to SME Bank; and (ii) the Appellant, as the assignor, must obtain SME Bank’s prior written consent before leasing, renting, or selling the premises. [17] Based on this, the Respondent contended that the Sessions Court correctly held that the Appellant lacked the legal capacity to lease or sell the premises without SME Bank’s written consent, as required by the Deed of Assignment. [18] In support of this argument, the Respondent cited Sia Hiong Tee & Ors v Chong Su Kong & Ors [2015] 4 AMR 31; [2015] 8 CLJ 1173; [2015] S/N JclavAN7/UaTDwBaps2niw 4 MLJ 188; [2015] 3 MLRA 652 (“Sia Hiong Tee”), emphasizing the nemo dat quod non habet principle, which holds that one cannot transfer rights that one does not legally possess. [19] The Respondent acknowledged that the Sessions Court was correct in ruling that the Respondent remained liable to pay outstanding rental to the Appellant, not under the void Tenancy Agreement but as a statutory obligation under section 66 of the Contracts Act 1950. This position, according to the Respondent, aligns with this Court’s decision in Tetap Tiara Sdn Bhd v Hatching Education Group Sdn Bhd [2024] 4 AMR 189; [2024] 5 CLJ 322; [2024] 9 MLJ 380; [2024] 3 MLRH 388. Consequentially, the Respondent maintained that the Sessions Court had properly allowed the counterclaim under section 66 of the Contracts Act 1950, citing Rohaniah bt Mohd Nor (as representative of the estate of the late Mohd Nor bin Hassan) & Anor v Nazeri bin Mohd Nasir & Ors [2022] 1 LNS 235; [2022] MLJU 229 as authority. The Decision of this Court [20] Section 66 of the Contracts Act 1950 provides as follows: Obligation of person who has received advantage under void agreement, or contract that becomes void

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. S/N JclavAN7/UaTDwBaps2niw [21] In determining the crucial issue of whether the learned Sessions Court Judge had erred in law and/or in fact in allowing the Respondent’s counterclaim, the issue turns of the question of whether the Respondent was right in and entitled to rely on the Deed of Assignment to challenge the Appellant’s capacity to enter into the tenancy agreements and to dispose of the said property. [22] This Court finds merit in the Appellant’s submission that the Respondent’s reliance on the Deed of Assignment to challenge the Appellant’s capacity is misconceived. As a third party, the Respondent lacks locus standi to enforce or interpret obligations arising between the Appellant and SME Bank. The doctrine of privity, as established in Bank Bumiputera Malaysia Bhd v Mohamed Salleh, precludes such intervention. [23] The Respondent’s contention that the Offer to Purchase was void is without basis. The agreement was executed with clear terms, and the Respondent’s part performance — particularly the payment of RM450,000.00 — demonstrated an intention to be bound. This aligns with the legal principles established in Cipta Cermat Sdn Bhd v Perbandaran Kemajuan Negeri Kedah [2007] 2 AMR 258; [2007] 1 CLJ 498; [2007] 2 MLJ 746; [2007] 1 MLRA 1. [24] The Respondent’s failure to execute the sale and purchase agreement within the stipulated 30-day period constituted a breach of contract. The Federal Court in Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 AMR 3533; [1997] 1 CLJ 625; [1996] 3 MLJ 327; [1996] 2 MLRA 188 reaffirmed that the law favours the enforcement of contractual bargains, and parties must adhere to their agreed terms. S/N JclavAN7/UaTDwBaps2niw [25] The Earnest Deposit serves as a binding guarantee of contractual performance. In Sun Properties Sdn Bhd v Happy Shopping Plaza Sdn Bhd [1987] CLJ Rep 345; [1987] 2 MLJ 711; [1987] 1 MLRA 149, it was held that a deposit secures performance and may be forfeited in the event of withdrawal. Given the Respondent’s failure to complete the transaction, the forfeiture of the deposit is justified. [26] The invocation and application of section 66 of the Contracts Act 1960 by the Sessions Court to the counterclaim was misconceived. [27] In view of the above findings, this Court allows the Appellant’s appeal. [28] The decision of the Sessions Court in allowing the counterclaim is set aside. [29] The Respondent is to pay costs of RM15,000.00 to the Appellant. Dated: 15 April, 2025 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam S/N JclavAN7/UaTDwBaps2niw Counsel: Raja Saidatul Akhma binti Raja Lope and Nurul Fatihah binti Mohamad Arof for the Appellant (Messrs. Lope Maizura) Rodney Gan Pei Rong for the Defendant (Messrs. Sanjay Mohan)