LIM Meow Khean & 32 Lagi v Pakatan Mawar (M) Sdn Bhd (in Liquidation) & 4 Lagi (W-02(NCC)(A)-2459-12/2018)

Content

1 of 86 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO.: W-02(NCC)(A)-2459-12/2018

Schedule

Schedule 1 of the OS Name of Purchasers Lot Date of Sale and Purchase Agreement Loan Agreement/ Deed of Assignment Purchase Price Paid 1 Lim Meow Khean T019 3.2.1996 Malaysia Building Society Berhad 115,000 2 Lim Meow Yin T006 3.2.1996 Malaysia Building Society Berhad 115,000 3 Wee Poi Chiow Wee Kee Po Wee Johnson T234 10.4.1996 CIMB Bank 188,632 4 Chong Woon Fong T240 3.2.1996 Public Bank 115,000 5 Faun Ah Foong T146 1.3.1996 Malaysia Building Society Berhad 115,000 6 Loy Hai See T147 1.3.1996 Malaysia Building Society Berhad 115,000 7 Liew Fook Heng Ong Bee Bee T170 12.3.1996 Hong Leong Bank Berhad 115,000 8 Chiew See Eng Liew Hock Soon T171 1.3.1996 Hong Leong Bank Berhad 115,000 9 Liew Siew Khoon Lim Chee Bing T172 1.3.1996 Hong Leong Bank Berhad 115,000 11 of 86 Name of Purchasers Lot Date of Sale and Purchase Agreement Loan Agreement/ Deed of Assignment Purchase Price Paid 10 Liew Siew Leng Kuan Teck Yoong T173 1.3.1996 Hong Leong Bank Berhad 115,000 11 Liew Yon Loy T174 1.3.1996 Hong Leong Bank Berhad 115,000 12 Wong Chee Yang T272 18.5.1996 - 104,736 13 Lim Choo Kiang T164 1.3.1996 CIMB Bank 94,263 14 Leu Ye Hen Leu Chin Sin Leu Ching Long T024 3.2.1996 - 80,500 15 Ong Sew Hua Lim Ah Kow @ Lim Kee Joo T073 3.2.1996 Public Bank 80,500 16 Yong Nam Chong Goh Ah Hing T199 1.3.1996 Malaysia Building Society Berhad 68,500 17 Lim Lian Teng TB064 18.6.1997 - 50,190 18 Lim Lian Teng TB065 18.6.1997 - 50,190 19 G.C.S Furnishing Sdn Bhd TB073 5.7.1997 - 47,500 20 Chong Chai Kai Pang Choon Foong TB009 21.7.1997 - 31,000 12 of 86 Name of Purchasers Lot Date of Sale and Purchase Agreement Loan Agreement/ Deed of Assignment Purchase Price Paid 21 Tan Eng Seng T025 & T026 12.3.1996 Hong Leong Bank Berhad 24,000 22 Irene Chew Geok Choo TA048 18.6.1997 Hong Leong Bank Berhad 23,757 23 Gabriel Joseph Dass Chew Jiok Kiak @ Chow Jiok Kiak TA050 18.6.1997 - 22,197 24 Lim Tai Fung TA233 19.7.1997 - 22,196 25 Lim Choo Keng TA052 18.6.1997 - 21,875 26 Tan Ser Kian T003 12.3.1996 - 20,070 27 Gerex Automation (M) Sdn Bhd TB074 5.7.1997 - 15,500 28 Lim Lian Hock Ong Geok Suat TB066 18.6.1997 - 15,500 At the High Court [15] The learned Judicial Commissioner (“JC”) at the High Court had on 31.10.2018 dismissed the whole of the Plaintiffs’ claim on the following grounds: 13 of 86 (1) That the Plaintiffs had no locus to sue as they had absolutely assigned all their rights, titles and interests in their respective buildings held on land not subdivided yet to their Banks in D2 to D5 and only D2 to D5 could sue for the losses which they have not; (2) That all the SPAs have, as a result of the winding up of the developer and the inaction of the Purchasers, become void after the lapse of a reasonable time and there is nothing enforceable save for a refund under s. 66 of the Contracts Act 1950 by the Developer in liquidation to the Purchasers when the debts have been proved; (3) That, in any event, the Purchasers who are cash Purchasers as do the other Purchasers who had obtained financing and assigned absolutely to their Banks their identified lots in the Master Titles not subdivided yet have only a right under contract and they should file their proof of debt against the Developer D1 in liquidation; (4) That the Purchasers cannot be said to have a beneficial interest in or are beneficial owners of their identified lots in the Master Titles not subdivided yet as they have not paid the full purchase price and hence the Developer D1 is not holding their identified lots as a trustee for the Plaintiffs/Purchasers; (5) That the undertaking given by the Master Chargee D2 as a bridging financier to the End Financiers to disclaim the Purchasers’/Borrowers’ identified lots in the Master Titles not 14 of 86 subdivided yet from any order for sale and to refund the monies received by it from the End Financiers is only enforceable by the End Financiers and not the Purchasers as Plaintiffs; (6) That D1 and D2 had not unjustly enriched themselves at the expense of the Plaintiffs as D2 was merely realising its charge over the Master Titles. [16] Much as the learned JC sympathised with the predicament of the Plaintiffs/Purchasers, she had dismissed their claim on ground of lack of locus to sue and that in any event their right is purely contractual for which they have to be contented with filing their proof of debt with the Liquidators for a refund of so much of the purchase price paid by them. The harsh reality was that there was nothing left to pay to any creditors after paying D2 as D1’s secured creditor. [17] The Plaintiffs/Purchasers who were dissatisfied with the decision of the High Court had appealed to the Court of Appeal and the parties shall be referred to as they were in the High Court. At the Court of Appeal [18] The grounds of appeal argued before us are as follows: (1) Whether the Plaintiffs have the locus to commence this action against D1 and D2; 15 of 86 (2) Whether the Plaintiffs may enforce the undertakings given by D2 to the end financiers of the Plaintiffs in D3-D5; (3) Whether the Plaintiffs are beneficial owners of their Properties, having put in place the financing with the various undertakings and cross-undertakings of the Developer D1, the Master Chargee D2 and the End Financiers; (4) Whether D1 is a trustee holding the various identified Properties in trust for the Plaintiffs under their respective SPAs; (5) Whether there had been an unjust enrichment of D1 and D2 of the amount paid by the Plaintiffs to D1 and D2 that had arisen from the construction of the factories on lands held under the various Master Titles; (6) Whether the SPAs had become void as D1 (in liquidation) was not able to complete the construction under the SPAs and that D1 had by its conduct repudiated the SPAs and (7) Whether the Plaintiffs’ claims are barred by limitation. The undisputed facts [19] The Plaintiffs were the Purchasers of their respective factory lots in a development known as Taman Perindustrian Air Keroh, Mukim of Bukit Katil, District of Melaka Central and State of Melaka (“Project”). 16 of 86 [20] D1 is the Developer of the Project and was wound up on 20.2.2002 and the initial liquidators who were appointed resigned and the Director General of Insolvency as the Official Liquidator was the Liquidator for a while after that. The current liquidators Mr Mak Kum Choon and Mr Ng Meng Kwai were appointed on 22.7.2010 by an order of the High Court. [21] D2 was the chargee over the Project pursuant to a Loan Agreement dated 22.2.1995, Debenture dated 22.2.1995 and Supplementary Agreement dated 5.7.1995 entered into between D1 and D2. [22] The loans granted by D2 to D1 was made up of RM16.8 million for term loan and RM10 million for bridging loan for D1 to develop the 18 pieces of lands held under separate titles into an industrial park. [23] D2-D5 were the End Financiers who provided loans to the Plaintiffs as Purchasers in financing their respective purchase of the identified industrial lots in the Project held under titles stated below. [24] The SPAs entered into between the Plaintiffs and D1 were for the Properties - 1 Storey, 1 ½ Storey and 2 Storey build-up factory which were built on the lands under Plots No. T006, T019, T025, T026, T003, T234, T240, TA048, TA050, T199, T146, T147, TA233, T164, TA052, TB009, T170, T171, T172, T173, T174, T024, TB073, T073, TB074, T272, TB064, TB065, TB066, Mukim of Bukit Katil, District of Melaka Central and State of Melaka (“the Project Lands”) held under various Master Titles. [25] Some of the purchasers applied for and obtained a loan from their respective banks and some are cash buyers. As security for the Loan 17 of 86 Facilities provided by the End Financier Banks to the Purchasers for the purchase of their respective lots, the Purchasers had absolutely assigned their rights, interest and title in their respective lots in the SPAs to their Banks represented in D2 to D5. In connection to this, the purchasers who had taken a loan to finance the purchase had also executed a Deed of Assignment (“DOA”) of their lots to their respective Banks. [26] It was only subsequent to the SPAs that the developer D1 was wound up. At all material times, the Properties that are the subject matter of the loan are absolutely vested with the respective Banks via the respective DOAs and the Banks continue to be the assignees of the Properties until the same are all fully redeemed. [27] Even after the winding-up of D1, the Purchasers who had taken their loans from the Banks continued to service their loans and some had fully repaid their loans with their respective Banks. [28] The Purchasers were horrified to have discovered that, without their consent nor that of D3 to D5, D1 through its Liquidators, had disposed of the Properties and indeed the whole of the Project Lands to a third party. [29] It is not disputed that the proceeds of sale of the whole of the Master Titles which included the said Properties was for the sum of RM20 million to settle D1’s indebtedness to D2 who is a secured creditor. 18 of 86 Whether the Plaintiffs have the locus to commence this action against the Developer D1 [30] The Plaintiffs as Purchasers had assigned their rights, interest and title in the SPAs to the various Banks as security for the loans taken to finance the purchase of their respective factory lots in the Properties. The question is whether these DOAs are in the nature of an absolute assignment or are they purporting to be in the nature of a charge only. [31] Section 4(3) of the Civil Law Act 1956 provides: “Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the rights of the assignee under the law as it existed in the State before the date of the coming into force of this Act, to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.” (emphasis added) [32] The learned JC was of the view that based on the decision of the apex Court in Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 1 CLJ (Rep) 41 and Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1985] CLJ (Rep) 231, the DOAs were in the nature of an absolute assignment. See also Veeriyah Gothandabani v Majestic Heights Sdn Bhd (In Liquidation) [2017] 1 LNS 1158. 19 of 86 [33] The learned JC in her grounds of judgment observed as follows: “23. In the Supreme Court case of Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 1 CLJ (Rep) 41, Gunn Chit Tuan SCJ held as follows at p. 44: “Looking at the document we agreed with the conclusion of the learned judge that the deed was an absolute assignment and not purporting to be by way of charge only within the meaning in s 4(3) of the Civil Law Act 1956. The deed clearly purports, and is intended in point from (sic) to be an absolute assignment because of the use of the word ‘absolutely’. The intention of the parties clearly was that it should be absolute in the sense that the assignee should have all the rights, title and interest of the assignor in the sale and purchase agreement…” 24. In the case of Veeriyah Gothandabani v Majestic Heights Sdn Bhd (In Liquidation) [2017] 1 LNS 1158, the Court struck out the case by a purchaser of property who claimed inter alia that he was the bona fide purchaser of the property on the ground that the plaintiff had absolutely assigned all his rights under the sale and purchase agreement to Malayan Banking Berhad. 25. Accordingly, I am of the view that those Plaintiffs who had assigned all their rights, title and interest in and to the sale and purchase agreements to the end financiers absolutely have no right to bring these proceedings against the Defendants since they have not obtained a re-assignment of their rights and interests in and to the sale and purchase agreements. This is despite the assignee not objecting to the purchasers suing the Defendants.” (emphasis added) [34] This approach of confining oneself to the four corners of the instrument was reiterated in Philioallied Bank (Malaysia) Bhd v Bupinder Singh Avatar Singh & Anor [2002] 2 CLJ 621 where the Federal Court held: 20 of 86 “It was held by the Federal Court (Wan Suleiman, Seah and Mohamed Azmi, FJJ) that whether or not an agreement is an absolute one, not purporting to be by way of charge only, within the meaning of s. 4(3) of the CLA, is to be gathered only from the four corners of the instrument itself and the document in this case was an absolute assignment not purporting to be a charge only within the meaning of that provision and therefore the appellant was not competent to maintain the action when it was filed. The relevant passage of the judgment delivered by Seah FJ is as follows: “It is plain that in every case of this kind, all the terms of the instrument must be considered; and whatever may be the phraseology adopted in some particular part of it, if, on consideration of the whole instrument, it is clear that the intention was to give a charge only, then the action must be in the name of the assignor. While, on the other hand, if it is clear from the instrument as whole that the intention was to pass all the rights of the assignor in the debt or chose in action to the assignee, then the case will come within section 25 and the action must be brought in the name of the assignee (Mathew LJ Hughes v. Pump House Hotel Co. Ltd. [1902] 2 KB 190). Having stated the preliminary and before we examine the terms of the document of assignment dated February 18, 1978 we would dispose of a short submission of learned counsel for the appellant. It was contended that since the assignment was entered into following the execution of a loan agreement between the appellant and the Public Bank, the said assignment should not be read in isolation but should be read in conjunction with the said loan agreement. With respect, we do not agree. In our judgment and it seems clear from the authorities above-mentioned, whether or not an assignment is an absolute one (not purporting to be by way of charge only) within the meaning of section 4(3) of the Civil law Act 1956 is to be gathered only from the four corners of the instrument itself.” [35] We have no quarrel with the above principle of interpretation of a legal document. However, where there are contemporaneous documents 21 of 86 executed with the DOAs such as the Loan Agreements and the DOAs do make specific reference to the Loan Agreements executed, then the parties are entitled to refer to both the documents to clarify the intention of the parties should any doubt arise. It stands to reason that one document cannot be interpreted in isolation of the other for if that had been the intention of the parties then there should be no reference at all to the other document. [36] Looking at a typical DOA at page 1643-1650 of RR Enclosure 41 Appellant’s Core Bundle the following references to the Loan Agreements would provide the context of the contracts entered into. [37] In Recital 1 to the DOA dated 7.5.1997 between the First Plaintiff P1 and D2 is stated the SPA entered into between P1 and the Developer D1 dated 3.2.1996. The factory unit is identified as Provisional Plot No. T 019 held under a Master Title Lot No. 893, Pajakan Mukim No. LM 59, Mukim Bukit Katil, Taman Perindustrian Ayer Keroh, Daerah Melaka Tengah, Melaka (“the Said Property”). [38] In Recital 2 is stated that the subsidiary title to the Said Property has not been issued by the relevant authorities. Very importantly it is stated in Recital 3 the following: “3. By a Loan Agreement made the date and year stated in ....between the Assignor of the one part and MBSB of the other part ......MBSB agreed to grant a loan of the amount specified in the Loan Agreement ....and more particularly described .....as “the loan” to the Assignor on the terms and conditions therein contained and upon the security of this assignment by the Assignor of the Said Property to MBSB.” (emphasis added) 22 of 86 [39] For continuity and context Recital 4 then went on to state that: “4. This Assignment is executed pursuant to the Loan Agreement.” [40] There is merit in the Plaintiffs’ argument that the assignment between the different Plaintiffs who took a loan to finance the purchase of their respective Properties from D2 to D5 are not absolute but only as a security by way of a charge or a mere equitable mortgage since the individual separate title has not been issued. [41] It cannot be more clearly stated than in Clause 1 of the DOA at page 1644 Enclosure 41 Appellant’s Core Bundle that it was in consideration of D2 having agreed to grant the Assignor the Loan upon the terms and conditions contained in the Loan Agreement that the Assignor “as beneficial owner hereby ASSIGNS absolutely to MBSB all the assignor’s rights title and interests in and to the Sale Property.....” (emphasis added) [42] Consistent with the assignment being in essence a security by way of a charge only can be seen in Clause 2(b) where pending the issuance of the individual title the Assignor as the proprietor of the Said Property is to “execute simultaneously with this Assignment a Charge-in-Escrow ....over the Said Property in favour of MBSB to secure the repayment to MBSB of the Loan due and owing ....such Charge-in-Escrow to be held by or on behalf of MBSB pending the issue of the individual.... title.....and MBSB is hereby expressly authorised after the issue of the said individual ....title to complete the Charge-in-Escrow by filling in all the relevant particulars and to present the same for registration at the cost and expense of the Assignor.” (emphasis added) 23 of 86 [43] It becomes crystal clear that consistent with the assignment being a security for the loan, it is not a Transfer that is being executed but a Charge instead in favour of MBSB as D2 who is also the Bridging Financier here for D1 which Charge is to be registered in favour of MBSB when the individual title to the factory unit bought by the P1 is issued. [44] The transfer of course would be in favour of P1 and the Charge registered in favour of MBSB such that the loan is secured and the purchaser having paid the difference between the loan and the purchase price, the end financier in this case MBSB would undertake to pay the bridging financier who also in the case of P1 happened to be MBSB as well starting with the redemption sum stipulated by MBSB and the undertaking to pay the balance purchase price against the progressive completion of the various stages of construction. [45] Little wonder that Clause 2(c) expressly states that “upon the said Charge-in-Escrow and transfer being registered with the relevant authorities this Assignment shall have no further force or effect.” [46] The whole of the DOA reverberates with repeated references to the fact that the assignment is for the purpose of a security for the loan. Clause 5 of the DOA further provides that “The securities created under this Agreement .....pertaining to the Loan are expressly intended to be and shall be a continuing security for the repayment and payment of all principal sum, interests thereof ....” (emphasis added) [47] Clause 8 of the DOA addresses how the Assignment is to be discharged on “....payment by the Assignor of not only all monies secured 24 of 86 hereby but also all monies secured by any other charges or security documents ...created by the Assignor in favour of or vested in MBSB.” [48] In the light of the foregoing clauses contained within the DOA as highlighted, it would be a skewed and strange interpretation to state that the assignment created was an absolute assignment and not by way of a charge only. [49] We do not have the benefit of knowing if there are similar clauses that reflect the purchaser/borrower and the financier’s intention in entering into the Deed of Assignment as a security for the loans taken there in the cases of Hipparion (M) Sdn Bhd (supra) and Nouvau Mont Dor (supra); the findings of the apex Court there on the fact that the Assignments were absolute and not by way of a charge only must be confined to the facts of the particular case. [50] The Federal Court in subsequent cases has no problem holding that an absolute assignment in the context of a loan taken was for the purpose of security of the loan and in Chuah Eng Khong v. Malayan Banking Bhd [1999] 2 CLJ 917, 926 explained the legal position as follows: “At common law and under the relevant rules of equity, the said loan agreement would amount to an equitable mortgage because the assignment of the right, title and interest in the said land was expressly or obviously for the purpose of securing the loan given to the borrower to purchase the said land. The said loan agreement is not an out-and-out purchase of the said land. This view is reinforced by the promise that when the document of title of the said land was available after the completion of the subdivision aforesaid, the borrower would execute a charge in favour of the lender according to the 25 of 86 provisions of the National Land Code (hereinafter called "the Code''). It is true that nowhere in the said loan agreement has the word "mortgage" been used, but it is a security transaction in connection with the loan given by the lender with a provision for repayment after which, the borrower "shall be entitled ... to obtain a discharge and release of the said lot from the Lender, (see cl. 27 of the said loan agreement). Thus, we have the loan, the contractual right to repay or to redeem the said land and the assignment of all "right title and interest" in the said land pending the exercise of such contractual right to redeem. The said loan agreement therefore, at common law, will be a mortgage. It would be an equitable mortgage (and not a legal mortgage) because the borrower at the time of signing the said loan agreement had no legal estate (or registered proprietorship of a grant of land etc.) but only an equitable interest as a purchaser by contract from a housing developer, pending the issuance of a separate document of title aforesaid. In other words, it is a mortgage in equity for which the actual form of words is immaterial provided the meaning is plain when interpreting a document as a mortgage or equitable mortgage, see William Brandt's Sons and Co. v Dunlop Rubber Co. Ltd [1905] AC 454, 462.” (emphasis added) [51] Later in Philioallied Bank (Malaysia) Bhd v Bupinder Singh Avatar Singh & Anor (supra) and in Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1 the Federal Court had no compunction in holding that a loan agreement would amount to an equitable mortgage because the assignment of the right, title and interest in the property was expressly or obviously for the purpose of securing the loan. In Samuel Naik Siang Ting (supra) the Federal Court observed as follows: “[42] The effect of an absolute assignment was explained at length by the Federal Court in Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97l [1999] 2 CLJ 917 at p 920...... ....... 26 of 86 [43] As the loan agreement with the appellant is in law an equitable mortgage, it follows that the respondent in the present case became an equitable mortgagee. In the Law of Real Property (5th Ed) by Sir Robert Megarry and HWR Wade at p 914, the learned authors state that ‘a mortgage is a conveyance of property legal or equitable subject to a right of redemption’. This concept of equitable mortgage has been recognised by the Federal Court in Phileoallied Bank (M) Bhd v Bupinder Singh a/l Avatar Singh & Anor [2002] 2 MLJ 513, where it was held: All things considered, we were more inclined to agree with learned counsel for the Appellant, in particular with his submission that in the absence of any statutory provisions or common law requiring the equitable mortgagee to obtain a court order to realise its security under an absolute assignment of rights to land, the court should give effect to and recognise the contractual rights as determined between the vendor and the purchaser.” [Emphasis added.]” [52] Such has been the conveyancing practice in Malaysia subsisting alongside a system of registration of title and interest in the land under the National Land Code where there is a title issued. Until and unless Parliament prohibits the sale and transfer as well as an equitable charge being created by way of an assignment of the sale and purchase agreement, the Court would recognise the equitable interest created in so far and for so long as they do not adversely affect the rights of a third party who had purchased the land represented in the Master Title with no knowledge of the equitable interest in the master title being brought to the notice of the third party. [53] Many cases have come before the Courts in the context of the plaintiff’s/purchaser’s right to sue the developer even after a so-called absolute assignment to his banker for the loan taken for the purchase. 27 of 86 [54] In Pak Ki Yau & Anor v Kumpulan Promista Sdn Bhd [1999] 6 MLJ 220, the respondent argued that as the appellants had effectively assigned all their rights, title and interest in the sale agreement to the bank, the appellants had no locus standi to bring the action, and therefore should have either joined the bank as co-plaintiff or co-defendant. The Court distinguished the case from the Nouvau Mont Dor (supra) based on the assignment clauses in both cases and held that the assignment is not absolute. The Court observed at pp 226-227 as follows: “Having addressed myself on the law and the approach a court should take in deciding the issue at hand, I will deal with the submission of learned counsel for the respondent that because certain clauses found in our loan cum assignment were considered in Nouvau Mont Dor, this court should follow that decision. I wish to say that whilst I gratefully accept the principles stated in that case and have no hesitation in applying them to reach a decision here, the facts of that case are distinguishable on at least two important aspects, namely, the assignment clause is not in pari materia with the assignment clause in our case and the deed of assignment there formed a separate and distinct document from the loan agreement. In our case, the assignment forms but one clause in a loan document. I therefore regret I am unable to accede to the submission of counsel. A proper reading of Nouvau Mont Dor shows that in every case of this kind, whether the assignment is absolute or by way of charge only is a question to be decided by considering all the relevant terms and looking at the whole language in the instrument creating the assignment.” [55] In Max-Benefit Sdn Bhd v Phuah Thean An & Anor [2001] 1 MLJ 553 the recital to the Deed of Assignment refers to the fact that the assignors-purchasers had applied for a loan and that the bank had agreed to grant to the assignors a loan “in the principal sum of Ringgit Malaysia two hundred thousand RM200,000 only ('the Loan') ....upon the security of the said property and upon the terms and conditions contained in the 28 of 86 bank's letter(s) of offer to the assignor(s) dated 28 September 1994 and upon the terms and conditions of a loan agreement of even date.” There was also reference to the fact that the separate document of title to the property that was purchased had yet to be issued by the relevant authorities. [56] The assignment was in the following terms: “IN CONSIDERATION of the Bank agreeing to grant, granting and/or continuing to grant to the Assignor(s) the Loan upon the terms and conditions more particularly set out in the Loan Agreement, the Assignor(s) hereby ASSIGN absolutely unto the bank all the Assignor(s)'s rights title and interests in and to the said Property by and under the Principal Sale Agreement and all other whatsoever deed(s) and agreement(s) (if any) mentioned herein and the full benefit and entire advantage thereof and of all stipulations therein contained and all remedies for enforcing the same which the bank hereby accepts. AND PROVIDED ALWAYS that notwithstanding the Assignment herein contained or any other provision of this Assignment the Assignor (s) shall and hereby undertake to continue to observe perform and be bound by all whatsoever conditions, covenants and stipulations therein on the part of the assignor(s) expressed and contained in the principal sale agreement and all whatsoever deed(s) and agreement(s) (if any) mentioned herein.” [57] The Court noted that at the tail end of the assignment deed appears the consent by the developer to the assignment and there was expressed by the developer an undertaking to transfer the document of title of the strata title upon issuance of the title to the purchasers after seeking the bank's consent. The Court observed as follows: 29 of 86 “Although the assignment is stated to be absolute in effect it is not. The assignment was purely for the purpose of securing the loan. What I have adverted to shows that there was a loan which the assignors-purchasers had taken from the bank and that the loan had to be repaid over a period of time and that the rights and interests over the property were assigned as surety to ensure that the loan will be repaid. The loan or any balance or part of it was given 'upon the security of the same property.' The implication is that the assignment of the equitable chose in action would come to an end, it would revert back to the assignors on one of the two events taking place, whichever comes earlier. The first event is where the loan is fully repaid. The second event is where the developer has obtained the legal title to the property and the property is then transferred to the assignors-purchasers with the consent of the assignee bank. Thus, it is quite obvious that the assignment of the equitable estate in the property was conditional and was merely to secure the loan and was not an absolute assignment (see Durham Brothers v Robertson [1898] 1 QB 765). The assignment to the bank was by way of charge only. There was no absolute assignment in this case and the bank has no locus standi in this case. I therefore hold the purchasers as plaintiffs have locus standi to sue the developer-defendant.” (emphasis added) [58] In Sakinas Sdn Bhd v Siew Yik Hau & Anor [2002] 2 AMR 1953 the High Court held that the so-called absolute assignment is more in the nature of a charge or security only for had a separate title been issued, the Financier would have taken a charge over the Property under the National Land Code. The Court went on to hold that the Purchaser could sue the Developer for damages for late delivery even though the rights under the Sale and Purchase Agreement had been absolutely assigned to the Financier. 30 of 86 [59] The Court also referred to the following cases in support of the above proposition: Max-Benefit Sdn Bhd v Phuah Thean An & Anor [2001] 2 CLJ 71, Pak Ki Yau & Anor v Kumpulan Promista Sdn Bhd [1999] 4 CLJ 205, Loh Hoon Loi & Ors v Viewpoint Properties (Sabah) Sdn Bhd [1995] 4 MLJ 804 and Tan Yang Long & Anor v Newacres Sdn Bhd [1992] 1 CLJ 211. [60] The learned author Ng Kok Wai in his book Conveyancing in Malaysia Law and Practice, Sweet & Maxwell Asia, 2010 at page 53-54 has this helpful distinction between a Sale Assignment and a Security Assignment as follows: “An absolute assignment which has the effect of transferring the rights in a property from the assignor to the assignee has to be distinguished from that of an assignment as security for credit facility granted to the assignor and whee the assignee is not a purchaser but the grantor of the credit facility. Such an assignment for security has however been held to be also an absolute assignment and an “equitable mortgage” which has the effect of a conveyance. A security assignment may therefore be construed nevertheless as having the effect of a sale assignment. Whether or not an assignment is an absolute one, not purporting to be by way of charge only, within the meaning of s 4(3) of the Civil Law Act 1956, can be gathered only from the four corners of the instrument itself. The outcome, whether the wording or intention creates a sale assignment or a security assignment, can give rise to important consequences. For example: (1) an assignor in a sale agreement (as in an absolute assignment within the meaning of s 4(3) of the Civil Law Act) has divested himself of all his rights and interests and does not retain any residual rights. He will therefore have no more legal standing to sue on the principal SPA. However, an assignor in a security assignment can still sue on the principal SPA without the 31 of 86 consent or assistance of the security assignee, in relation to housing properties, by virtue of s 22C of the HDA and, in relation to non-housing properties, if the assignment is not construed as an absolute assignment; (2) a sale assignment is an absolute transfer of the assignor’s rights and interests to the property together with the obligations - he is therefore not entitled to call on the assignee for reassignment save as provided in the SPA. In contrast, the assignor in a security assignment retains the right to call on the security assignee to assign his rights and interests upon full repayment of the loan granted; and (3) a sale assignment attracts a higher stamp duty rate than a security assignment. [See item 27 and 32 of the First Schedule to the Stamp Act 1949].” (emphasis added) [61] Even the Housing Development (Control and Licensing) Act 1966 was amended to clarify and thus statutorily recognise the right of a purchaser to maintain an action against the developer or any other person with respect to matters arising from the sale and purchase agreement entered into irrespective of the fact that there is an absolute assignment of the sale and purchase agreement as provided for in s. 22C as follows: “22C. Right to initiate and maintain actions Notwithstanding anything contained in any written law or any rule of law, agreement, assignment or charge lawfully entered into between a homebuyer as defined in section 16a and his financier, a homebuyer shall be entitled on his own volition and in his own name to initiate, commence, institute and maintain in any court or tribunal any action, suit or proceeding against a housing developer or any other person in respect of any matter arising out of the sale and purchase agreement entered into between the homebuyer and the housing developer provided the homebuyer's financier 32 of 86 under a deed of absolute assignment is notified in writing either before or within fourteen days after the action, suit or proceeding against the housing developer has been filed before any court or tribunal.” (emphasis added) [62] In Mammoth Empire Land Sdn Bhd v Ng Wai Heng [2018] 1 LNS 1578, the Court found that the defendant’s averment that the plaintiff did not have locus standi to bring the action is a non-issue pursuant to Section 22C Housing Development (Control and Licensing) Act 1966 (“HDA”). [63] Granted the SPAs here are not covered under the HDA but the HDA vide s. 22C merely declared what was the position under contract law and common law as well as under s. 4(3) of the Civil Law Act 1956. [64] We agree with learned counsel of the Plaintiffs that had the learned JC considered the relevant clauses highlighted above that negate if not militate against any argument that the assignment is an absolute assignment and not by way of a charge only she would not have concluded thus in her Grounds of Judgment as follows: “25. Accordingly, I am of the view that those Plaintiffs who had assigned all their rights, title and interest in and to the sale and purchase agreements to the end financiers absolutely have no right to bring these proceedings against the Defendants since they have not obtained a re-assignment of their rights and interests in and to the sale and purchase agreements. This is despite the assignee not objecting to the purchasers suing the Defendants.” [65] At any rate the Plaintiffs/Purchasers as Assignors had joined their Assignee Banks as co-defendants and that would overcome the impediment to sue if there was one to begin with. 33 of 86 [66] In Chan Min Swee v Melawangi Sdn Bhd [2000] 7 CLJ 1 at page 21 the High Court referred to the various irreconcilable cases on the real status of an absolute assignment in the context of a loan taken by a borrower to purchase a property and concluded as follows in a case where the assignment is not absolute: “The common law position would be clearer. It can broadly be stated as follows. If the assignment was not absolute, then the assignee bank cannot sue without joining the assignor: Khaw Poh Chhuan v. Ng Gaik Peng & Ors (supra); Durham Brothers v. Robertson (supra); Hughes v. Pump House Hotel Co Ltd (supra); and William Brandt’s Sons & Co. v. Dunlop Rubber Company, Limited [1905] AC 454. In similar vein, the converse would also be true. The assignor cannot sue without joining the assignee bank: Walter & Sullivan, Ltd v. J. Murphy & Sons Ltd. Same v. Same (supra); and the Three Rivers District Council And Others v. Governor And Company Of The Bank Of England (supra); together with the textbook writers referred to earlier. The following salient reasons may be advanced for these broad minded approaches: (i) Both the parties – namely, the assignor and the assignee bank have equal rights in an assignment and that kind of assignment was not absolute. The court would be placed in a dilemma; not knowing the exact rights of each party unless both parties were before the court. (ii) In a situation where the court makes a decision in the absence of the other party, be it the assignor or the assignee bank, then the decision cannot bind the other party who was absent and who was not cited as a party. (iii) This meant that the absent party who was not involved nor cited as a party may sue again and may even set aside the order of the court which affected him. This would give rise to conflicting decisions and the debtor will be placed in double jeopardy. 34 of 86 (iv) The above reasons would be vigorously applied notwithstanding whether the assignor or the assignee bank was suing. In short, the other party must always be made a party to the legal action.” (emphasis added) [67] Further in Osaka Resources Sdn Bhd & Ors v Foo Holdings Sdn Bhd and another appeal [2014] 1 MLJ 461 it was observed as follows: “[15] In addition it must be noted that the assignment is not like an assignment in relation to a facility to obtain a loan from the bank, where the assignor may have a right to redeem the property, and in consequence may have some locus to sue based on the underlying contract with the consent of the bank or if no consent is given to include the bank as a co-defendant and seek suitable declarations or orders or directions from the court against the bank to avoid any challenge as to the issue of locus (see Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1984] 2 MLJ 268; Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 2 MLJ 149).” [68] The end financier in D4 had filed a submission in support of the Plaintiffs and the end financiers D3 and D5 had taken a neutral stand and had certainly not objected to being joined as co-defendants. [69] We have no doubt that the Plaintiffs did have the locus to commence this action against the Developer D1. 35 of 86 Whether the Plaintiffs have the locus to commence this action against the Master Chargee D2 as the undertakings given by D2 to D2 to D5 as End Financiers were in their capacities as agents for the Plaintiffs [70] As stated some of the Plaintiffs as Purchasers had obtained financing from the same Bank as the Master Chargee D2. Other Plaintiffs as Purchasers had obtained their loans from the various Banks in D3 to D5. [71] The common denominator is the undertaking which D1 as the Developer and D2 as the Master Chargee had given to the End Financiers. [72] The DOA is a tripartite agreement for not only is the Plaintiff as Assignor/Borrower assigning his rights, interest and title in the SPA to the Assignee End Financiers Banks, the Developer D1 had not only consented to the DOA but had also undertaken and agreed to deliver to the Assignee (which is MBSB in the case of P1) the individual/strata title of the Property together with the registrable Transfer executed in favour of the Assignor upon the issuance of the individual/strata title. See an example of such an undertaking at page 1648 of Enclosure 41 Appellant’s Core Bundle. [73] Where as here MBSB D2 itself had consented to the transfer of the Master Titles to a third party purchaser, it had disabled itself from enabling the transfer of the individual title, when issued, to P1 and the charge to D2 to the loss of P1 and to the other Plaintiffs similarly circumstanced. 36 of 86 [74] There are also separate undertakings issued by the Developer D1 to the End Financiers D2-D5 to essentially refund all monies released by the End Financiers to the Developer in the event that: (1) The Memorandum of Transfer in favour of the Purchaser(s)/Borrower(s) and the Loan Agreement cum Deed of Assignment or Deed of Assignment in favour of the End Financier cannot be registered for any reason whatsoever; (2) The Certificate of Fitness for Occupation is respect of the Property is not issued by the appropriate authorities; (3) Non-completion of the building on which the above Property is to be erected is not completed within a reasonable time as stipulated in the Sale and Purchase Agreement. [75] See a typical Letter of Undertaking from the Developer D1 at 1917 Enclosure 41 Appellant’s Core Bundle. [76] On top of the undertaking from the Developer D1 to the End Financiers in the DOAs and the separate undertaking issued by the Developer to the End Financiers, there are also the various undertakings from the Master Chargee Bank D2 to the various End Financiers from D2 to D5 to refund the redemption sum by the End Financiers to the Master Chargee and to exclude or exempt the identified factory units from an order for sale or foreclosure. 37 of 86 [77] A typical undertaking from the Master Chargee D2 to an End Financier is found at page 2131 in Enclosure 16 RR Jilid 2 where the letter of undertaking from D2 to D4 dated 25.3.1997 reads: “In consideration of you agreeing to remit to us progressively the redemption sum of RM13,500.00 against the architect’s certificate in respect of the above lot, we, Malaysia Building Society Berhad, hereby undertake to refund to you the progressive payment received by us from you in the event that we commence any legal proceedings for an order for sale of the above lot before the receipt of the full redemption sum. Upon receipt of the full redemption sum of RM13,500.00 from you, we further undertake the following: 1. That we shall have no charge, claim, title, rights and interest whatsoever over the said lot. 2. To exclude and exempt the said lot from any foreclosure proceedings and legal action that may be taken against the developer. 3. To deliver the relevant sub-divided title when issued together with the Discharge of Charge to you provided we are still the chargee and the title is in our possession. 4. To refund the redemption sum to you in the event that the Discharge of Charge cannot be registered for any reason whatsoever.” (emphasis added) [78] The undertaking to exclude and exempt the factory units bought by the Purchasers from an order of sale or foreclosure was given to the End Financiers as agents for their borrowers, the Purchasers. The redemption sum was paid on by the End Financiers to the Master Chargee D2 on behalf of their borrowers. 38 of 86 [79] The loan sum disbursed even towards payment of the designated redemption sum to MBSB D2, pursuant to the SPA constitutes part of the purchase price of the SPA. This trite principle was affirmed by the Federal Court in Soon Yee Ling & Anor v. Lim Ah Hun [2011] 1 MLJ 735, which held as follows: “[15] .....For that reason, we agree with learned counsel for the appellants that it is erroneous to treat the redemption sum as separate from the balance purchase price. In fact, it constitutes the bulk of the balance purchase price. For the above reason, we hold that the redemption sum forms part of the balance purchase price.” [80] The End Financiers have no need to sue the Master Chargee for so long as their borrowers are servicing the loan and interest incurred. In fact, some of the Plaintiffs/Purchasers have even completely repaid their End Financiers the loans taken to purchase their factory units. [81] The end result is that D2 had proceeded to allow the Master Titles to be transferred to a third party in total disregard of the undertaking that D2 had given the various End Financiers including D2 itself in cases where it is also the End Financier. [82] It is very clear that not only was the undertaking given by D2 to the End Financiers as agents for the borrowers but also for the benefit of the borrowers who are the Plaintiffs/Purchasers here. [83] The Federal Court in See Leong Chye & Anor v. United Overseas Bank Bhd & Another Appeal [2018] 10 CLJ 1 saw no difficulty 39 of 86 in the purchaser/borrower suing the chargee UOB to whom it had paid the redemption sum from its loan from Public Bank Bhd as follows: “[88] We agree with the finding of the Court of Appeal that the redemption money was released by Public Bank Bhd to UOB and that the money paid originated from the loan account of Kum Hoi. Hence Public Bank Bhd was nothing but a conduit for the payment of the redemption amount by Kum Hoi. The Court of Appeal had rightly reached the conclusion after adopting the Manks and Whiteley principle and reading it with all contemporaneously executed documents together and thus recognising Kum Hoi as a proper party to sue UOB.” (emphasis added) [84] Under s. 179 of the Contracts Act 1950 the principal can always sue in the event that the agents are reluctant to do so. It provides as follows: “Enforcement and consequences of agent’s contracts 179. Contracts entered into through an agent and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.” [85] Even if the End Financiers are the ones to sue the Master Chargee D2 for breach of D2’s undertaking, their refusal to sue would not deprive the Plaintiffs of their remedies in that they could always join, as in this case, the End Financiers as the co-defendants. 40 of 86 [86] In James Edward Buxton & Anor v Supreme Finance (M) Sdn Bhd [1992] 2 MLJ 481 the respondent Master Chargee who is also the end financiers for some of the purchasers of the apartment built on the Master Title, proceeded with an application for an order for sale under s. 256 of the National Land Code when the Chargor/Developer defaulted in its repayment to the Respondent. However, the Respondent excluded the units for which it had received the redemption sum from the sale as stated: “Four other purchasers obtained end-financing from Supreme Finance Bhd (who by then had succeeded Keng Soon Finance Bhd) in respect of the purchases of Apartments 5A, 5B, 8A and 8B. ...... In the application for the order for sale, the respondent excluded Apartments 5A, 5B, 8A and 8B......” [87] That was both right and a most decent thing to do as the Respondent there having received the redemption, cannot both have the cake and eat it. Otherwise no one would dare to trust the undertakings given by Banks and Financial Institutions. [88] The Plaintiffs who are the borrowers have a cause of action against D2 for all those cases where D2 had given its undertaking to the End Financiers in D2 to D5 as agents for them and also for their benefit. [89] The breach of the undertaking by D2 is patent in that having agreed and consented to the sale of the Master Titles to a third party D2 had refused to recognise the interest of the Plaintiffs/Borrowers that D2 had agreed to exclude and exempt from foreclosure. 41 of 86 [90] Worse still, there is with the discharge of the Master Titles given to the third party purchasers, a deliberate disabling of its obligation to obtain a separate individual subdivided title with the Discharge of Charge executed which would pave the way for the transfer of the Project Lands to be registered in PDG Development Sdn Bhd. [91] D2 had self-frustrated its obligation to deliver the separate individual title to the Plaintiffs and the Master Titles having been transferred to the third party purchaser and a full discharge of the Master Charges having been effected, there is no way of waiting and hoping against hope for the event to happen. [92] We find it difficult to follow the reasoning of the learned JC when at paragraph 63 she opined as follows: “63 No actual breach of undertaking has happened yet. The undertaking by D1 is to deliver the issue document of title to the property upon issuance of the same. It is not in dispute that the issue document of title to the units purchased by the Plaintiffs has not been issued. D1 sold the Master Title.....” [93] Precisely because D1 had sold the Master Titles with the consent and approval of D2 that D1 and D2 are both not able to comply with their respective undertakings to deliver the individual subdivided titles to the Plaintiffs/Purchasers. 42 of 86 [94] D2 cannot escape liability arising out of the undertaking that it has given to the End Financiers as agents for the Plaintiffs and for the benefit of the Plaintiffs and for which the Plaintiffs are entitled to sue to recover their benefits in the event the End Financiers are not interested and this the Plaintiffs had done by joining the End Financiers as co-defendants. [95] If authority is needed one can refer to the case of Hoo See Sen & Anor v Public Bank Bhd & Anor [1988] 2 MLJ 170 where it was held as follows: “We also observe that clause 4 of the deed of assignment clearly spells out what has been assigned and what has not been assigned. For the sake of clarity, we set out below the wording of this clause, which is as follows: "4. For the consideration aforesaid the borrowers as beneficial owners hereby absolutely assign to the bank the said property and the full and entire benefit of the sale agreement together with all rights title and interests of the borrowers therein. Provided always that notwithstanding the assignment hereinbefore contained or any other provision of this agreement the borrowers shall and hereby undertake to continue to observe perform and be bound by all whatsoever conditions covenants and stipulations therein on the part of the borrowers expressed and contained in the sale agreement." It is clear from this clause that the appellants assigned to the first respondent only the rights regarding the property and the appellants' rights under the sale and purchase agreement. Because of this, the appellants are still bound and continued to be bound to observe and perform all the duties and liabilities under the sale and purchase agreement. Payment of the balance of the purchase price, which is purportedly due from the appellants, is such liability, which is not the liability of the first respondent, but the liability of the appellants. Thus, under no circumstances was the first respondent bound or even authorized to make such payment and indeed the position of 43 of 86 the first respondent in the matter of disbursing the loan is in the capacity of an agent to the appellants. The first respondent is holding the loan sum on behalf of the appellants and is bound to release the money only when authorized to do so, and this must be for the benefit of the appellants. In view of what we have set out earlier, we think that this appeal should be allowed and the interim injunction prayed for by the appellants' summons-in-chambers dated 8 May 1987 should be issued. We order also that the costs of this appeal and the proceedings in the court below should be paid by both the respondents and we direct that the deposit of this appeal be refunded to the appellants.” (emphasis added) [96] The payment by the End Financiers D2 to D5 to the Master Chargee for the redemption sum is payment on behalf of their borrowers and not for themselves. Without getting the individual subdivided titles and the Discharge of Charge to the End Financiers as undertaken by the Master Chargee D2, the Purchasers/Borrowers would not be able to get a transfer of the subdivided titles in their names with a charge created in favour of their End Financiers. [97] The fact that D2 had to consent to the sale of the Master Titles was precisely because it remained the Master Chargee until the sale by the Liquidators to a third party the whole of the development in Project Lands under the various Master Titles. [98] That is a loss to the Plaintiffs/Purchasers for which they are entitled to compensation and damages and if the End Financiers are not interested to sue because presumably the Purchasers/Borrowers would have no choice but to still service their Bank loans, they are entitled to join the End Financiers as co-defendants. 44 of 86 [99] D2 as a financial institution cannot give its undertaking so glibly or to regard its breach so lightly when weighing the risks of no sale of the Master Titles to a sale subject to its recognising the losses that it could foresee coming as the Purchasers are kept out of what they had purchased and for which D2 had expressly agreed to exclude or exempt and indeed the Purchasers have now lost everything! [100] The individual units for which D2 was aware and had even attached a sum for its redemption of units bought by the Plaintiffs/Purchasers with loans from the End Financiers and the Plaintiffs/Purchasers who had received D2’s undertaking addressed to their agents as their Banks would certainly have the right to sue D2. [101] If reassignment of that right to sue is required from the End Financiers, they had already given that impliedly by their non-objection to being joined as co-defendants and they had not applied to have the action against them struck out. [102] Indeed their stand had been neutral as they appreciate why the Purchasers/Borrowers had to sue for they had lost everything with the sale of the Project Lands in the Master Titles to a third party. Credit must be given to D4 CIMB for filing a submission in favour of the Plaintiffs. 45 of 86 Whether the Plaintiffs are beneficial owners of the factory units bought from the Developer where the relevant financings are in place and where payments by cash Purchasers would be made against certification of the stages of completion of the factory lots [103] It is important to note that the relevant undertakings by the End Financiers to pay the Developer had been put in place with the Memorandum of Transfer being signed by the Developer for the Transfer to the Purchasers and Charge to the End Financiers to be registered as soon as the individual subdivided titles are issued. [104] The learned JC also held that since the Plaintiffs have not settled the full purchase price they are not beneficial owners of the units purchased by them. Whilst that may hold true in cases where the purchaser has defaulted in payment of the purchase price, here the situation is quite different. [105] It is a case where the Developer had failed to build up to the last progress payment when the whole building and infrastructure is completed. Clause 3 of the SPAs stipulates that: Payment of Balance of the Purchase Price The balance of the purchase price shall be paid by the Purchaser to the Vendor by such amounts and at such times as are set out in Section 3 of the SECOND SCHEDULE hereto. [106] Section 3 of the SECOND SCHEDULE of a typical SPA for a purchase price of say RM115,000.00 would provide for the following percentages of progress payments based on different stages of completion of the factory units as follows: 46 of 86 Schedule of Payment of Purchase Price 1 Upon acceptance of offer by the purchaser 10% RM11,500-00 2 Upon execution of this agreement 10% RM11,500-00 3 Completion of clearing and earth work 10% RM11,500-00 4 Completion of foundation works 10% RM11,500-00 5 Completion of reinforce concrete framework 10% RM11,500-00 6 Completion of walls with door and window frames in position 10% RM11,500-00 7 Completion of roofing 10% RM11,500-00 8 Completion of electrical wiring of plumbing works (without fittings) 10% RM11,500-00 9 Completion of internal and external plastering 10% RM11,500-00 10 Completion of roads and drains serving the said building 5% RM5,750-00 11 Upon delivery of vacant possession 5% RM5,750-000 Total RM115,000-00 47 of 86 [107] Some have paid the redemption sum either through themselves or via their End Financiers and undertakings are in place for the End Financiers to pay the Developer against the architect’s certification of the various progress payments. [108] In fact had the subdivided titles being in place, a transfer and charge would have been effected with the transfer to the Plaintiffs/Purchasers and a charge in favour of the End Financier. [109] The Developer would have no problem with this arrangement because it would have worked out the costs of the land to be transferred and the amount for the various stages of progress billings in accordance with the completion of the construction works. [110] That of course would have been ideal under our Torrens System of title by registration. However, as the government and the law have allowed a sale of houses, condominiums, offices and factories lots without individual subdivided or strata titles being issued first, parties fall back on common law and contract to do the best they can to secure their interests via a system of cross-undertakings and assignments. [111] Such a parallel system has run alongside the Torrens System of title by registration with no difficulties. Problems come when Developers are unable to complete the building and the project is abandoned and the problem is aggravated when a Master Chargee refused to honour the undertakings that it had given. The party who stands to lose everything would be the purchasers who might not be aware of how best to protect their interests. 48 of 86 [112] The law fortunately would try its best to come to the aid of the party that has little negotiating power like the purchasers and who are often lured by the Developer to use the Developer’s solicitors for the SPAs. [113] For a Developer who had entered into an SPA with a purchaser for a unit of factory unit identified in a Master Title to later sell the same unit, or as in this case, even the whole piece of the Project Lands held under various Master Titles, would be fraud against the purchaser. The Developer might as well sell the same unit many times over if they are unscrupulous and nothing would be recoverable if the Developer goes into liquidation upon the discovery of the fraud. [114] Fraud has not been pleaded but a breach of contract and undertaking and a breach of trust arising from the fact that the purchasers are beneficial owners of the units bought under the SPAs. [115] Learned counsel for the Plaintiffs submitted that it is settled that upon entering into a sale and purchase agreement, the vendor becomes in equity the trustee of the property for the purchaser. In Wong Siew Choong Sdn Bhd vs Anvest Corporation Sdn Bhd [2002] 3 MLJ 143, the Court of Appeal referring the Federal Court’s decision in Temenggong Securities Ltd & Anor v Registrar of Titles, Johore & Ors [1974] 2 MLJ 45 held: “In our view there can be no doubt as to the position in law. As was said by Jessel MR in Lysaght v Edwards (1876) 2 ChD 499 at p 506: '… the effect of a contract for sale has been settled for more than two centuries; certainly it was completely settled before the time Lord Hardwicke, who speaks of the settled doctrine of the court as to it. What 49 of 86 is that doctrine? It is that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase money, a charge or lien on the estate for the security of that purchase money, and a right to retain possession of the estate until the purchase money is paid, in the absence of express contract as to the time of delivering possession.'” (emphasis added) [116] In Mercantile Bank Ltd v. The Official Assignee of The Property of How Han Teh [1969] 1 LNS 106; [1969] 2 MLJ 196, His Lordship Raja Azlan Shah J (as His Highness then was) said, "... independent of our land legislation, our courts have always recognised equitable and contractual interests in land". Further, the rules of equity recognise the creation of a beneficial interest in land under the National Land Code. [117] Learned counsel for D1 and D2 submitted that the Plaintiffs are not beneficial owners of the units they bought until they have paid the full purchase price. However here is a case where the Plaintiffs who had taken a loan with their End Financiers are able, ready and willing to pay the full purchase price and indeed their Banks had undertaken to pay the Developer the balance purchaser price represented in the loan sum against the architect’s certification of progress billing for the various stages of construction. [118] In fact the Developer was prepared and more than that, had agreed to have the individual titles, once issued, to be registered in the Purchasers’ name and charged to the various End Financiers who had given the loans towards the purchase of the various factory units from the Developer. 50 of 86 [119] Not only that, the Master Chargee in D2 had undertaken to hand over the individual subdivided titles to the End Financiers together with a Discharge of Charge for the units concerned. All these are to enable the transfer to be effected even before the full purchase price is paid so that the Banks as End Financiers have a proper security over the units purchased under the National Land Code. [120] As for the cash purchasers, in the absence of evidence to the contrary, they must be presumed to be able to pay the progressive billings of the purchase price. It does not make commercial sense to pay the Developer before they have built up to the stage of various progress payments. [121] As pointed out before, Clause 1 of the DOA at page 1644 Enclosure 41 Appellant’s Core Bundle declared that it was in consideration of D2 having agreed to grant the Assignor the Loan upon the terms and conditions contained in the Loan Agreement that the Assignor “as beneficial owner hereby ASSIGNS absolutely to MBSB all the assignor’s rights title ad interests in and to the Sale Property.....”(emphasis added). The Developer D1 had expressly consented to the Assignment and had not objected to the status of the Plaintiffs as beneficial owners. [122] In fact D1 before paying the balance purchase price for the Master Titles in the Second Schedule to its Loan Agreement with D2 had also described themselves as the beneficial owner of these various pieces of Master Tiles for the purpose of obtaining a loan to finance the purchase of these lands from the State Government of Malacca. 51 of 86 [123] In recital 1.2 of the Loan Agreement between D1 and D2, D1 is described as the beneficial owner of all of those lands described in the Second Schedule thereto - see page 625 of Enclosure 7. See Clause 3.2(1)(b) of the Loan Agreement at page 628 of Enclosure 7 where the Loan in Tranche II was for the purpose of financing and paying to the state Government part of the purchase price and/or acquisition price of the acquisition lands as described in the Second Schedule thereto. [124] D1 and D2 are estopped from objecting to that status of the Plaintiffs now as beneficial owners as it had undertaken to give the individual subdivided titles and a valid and registrable discharge of charge to the End Financier for so long as D2 is the registered Master Chargee of the various Master Titles and D2 remained the Master Chargee until the sale of the charged Master Titles with its consent to the third party purchaser in PDG Development Sdn Bhd. In fact, D2 would have to execute the various Discharges of Charge to allow the transfer of the Master Titles to the third party purchaser. [125] It is not open to D2 to say that it is only a trustee for the individual subdivided titles once they are issued and not before because D2 cannot deal with the titles other than to deliver them to the End Financiers in D3 to D5 for the benefit of the ultimate beneficiaries, the various Plaintiffs/Purchasers. [126] What was not expected of a Financial Institution like D2 was that it was prepared to and indeed did disregard the beneficial interest of the Plaintiffs/Purchasers and to frustrate any possible subdivision of the Master Titles by discharging its charge over them and transferring them to the third party purchaser in clear breach of the trust and undertaking 52 of 86 given to the End Financiers for the benefit of and as agents for the Purchasers/Borrowers. [127] Learned counsel for the Master Chargee D2 submitted that the redemption of the Project Lands which D2 had accepted from its sale and realised the sum of RM20 million towards full redemption, had nothing to do with the Plaintiffs/Purchasers. [128] That would be a case where D2 deliberately disregard the undertakings it had given the End Financiers in D3 to D5 in not only excluding and exempting the factory lots sold from any foreclosure or order for sale but also to deliver a valid and registrable discharge of charge and individual subdivided titles to D3 to D5. [129] No one is saying that D2 should not realise its charge over the Project Lands when its borrower in the Developer D1 as Chargor defaulted. All that the Plaintiffs/Purchasers are saying is that their interests be recognised in the sale. That is only proper and right under the law. [130] At the very least a constructive trust had arisen by operation of law as reflected in the undertaking of D2 to deliver the individual subdivided titles to the End Financiers for the benefit of the Purchasers who had paid the redemption sum via the Bank loans taken. [131] If D2 were to deliver the individual subdivided titles to someone else in breach of the undertaking it would be to deprive the Plaintiffs/Purchasers of their land altogether. 53 of 86 [132] D2 is now saying that the Plaintiffs/Purchasers had only themselves to blame for not having lodged a private caveat to protect their interests. D2 forgot for a moment that it would not suffer any caveats to be lodged on the Project Lands as it would impede the application for subdivision and its sale when the Developer D1 defaulted. [133] It therefore cannot be a trust only arising upon the issuance of the individual subdivided titles for the intention of the parties in D1 and D2 was to ensure that the factory lot identified be finally transferred to the Plaintiffs/Purchasers irrespective of at what stage of completion it may be such that even if the Developer were to fail in completing the construction as in this case, the Plaintiffs/Purchasers would still be able to get at least the benefit of the land and the uncompleted factory on the land which would be issued with an individual subdivided title which D1 had undertaken to apply for and obtain and which D2 had agreed to surrender to D3 to D5 for the benefit of and as an agent for the Plaintiffs/Borrowers. [134] Under Clause 4(a) of the SPA the Developer D1 agreed to sign the Memorandum of Transfer in escrow and to deposit the same with the Purchaser’s solicitors though there is no deemed transfer until the balance purchase price is paid. [135] However in cases of a loan being taken, Clause 5(a) of the SPA provides that the Purchaser’s solicitors are authorised to present the Memorandum of Transfer and Charge for registration as follows: “If the Purchaser is taking a loan from a bank, finance company or other lender(s) to finance the purchase of the said Property and subject to the purchaser paying the Vendor the difference between the purchase price and 54 of 86 the loan amount and irrevocably authorising the bank, finance company or other lender (s) as the case may be to pay the full amount of the loan to the Vendor when the same is released by it/them or if the Purchaser is not taking any loan then subject to the Purchaser paying the balance of purchase price to the Vendor, the said Purchaser’s Solicitors are hereby authorised to present the Memorandum of Transfer and Charge for registration in favour of the Purchaser and the lender respectively and thereafter to release the money to the Vendor upon receipt of the same from the bank or financial institution or the lender(s). The loan shall be disbursed and paid to the Vendor’s Solicitors on or before the Completion Date.” (emphasis added) [136] The intention of the parties was that the Purchasers were for all intents and purposes regarded and treated as the beneficial owners of the factory lots that they bought from the Developer with the financing in place and the undertaking and cross-undertaking of the Developer to D2 to D5 as End Financiers and that of D2 as Master Chargee to the End Financiers. [137] It was as good as a done deal and parties were awaiting the Developer to complete construction so that the full purchase price may be released but here, alas, the Developer itself that failed to deliver the completed factory units and the individual subdivided titles. [138] The Purchasers cannot default once they had paid the difference between the purchase price and the loan and the payment of the balance purchase price is backed by their End Financiers’ undertaking to pay the Developer and those who do default can have their purchase price paid dealt with in accordance with Clause 12 of the SPAs. 55 of 86 [139] It must not be forgotten that the culprit here was the Developer who failed to keep its part of the bargain in failing to complete the construction of the factory units and not that of the Purchasers who had their financing in place with some being cash buyers. [140] It is in that context that the Purchasers are regarded by the Developer as the beneficial owners of the units that they bought for which they were assigning their rights, interest and title to their Banks in D2 to D5 for financing. [141] The Federal Court case of Tan Ong Ban v Teoh Kim Heng [2016[ 3 CLJ 193 that decided that a purchaser could only have beneficial ownership in a property upon full payment of purchase price can thus be distinguished. There the developer had terminated the sale and purchase agreement with the plaintiff/and the developer had then sold the property to another purchaser who then sold it to the first defendant, who had paid the full purchase price. The second defendant, being the developer, went subsequently into liquidation. [142] As between the plaintiff who had paid part of the purchase price and the first defendant who had paid the full purchase price to the party who had bought the property from second defendant, the first defendant, having no notice of the plaintiff’s interest, would have a better equity. [143] It was in that context that the Federal Court observed as follows: “[36] The principle of beneficial ownership differentiate between the rights of a purchaser of a property who has fully settled the purchase price with one who has not. This principle clothes a purchaser who has settled the full 56 of 86 purchase price with a distinct privilege equivalent to a legal owner, although he or she has yet to be registered as the proprietor of the property. [37] Under this principle of beneficial ownership, the vendor becomes a bare trustee for the purchaser in respect of the transacted property, while the purchaser assumes the position of beneficial owner having right in rem over the property. The purchaser is commonly accepted as having a beneficial interest in the land on the execution of the contract and upon which specific performance may be granted by the court. This beneficial interest is also sufficient to entitle the purchaser to enter a caveat under the NLC. [38] On the other hand, a purchaser who has not settled the full purchase price does not enjoy such benefit. The right of such purchaser is contractual in nature and in personam. He or she does not have any beneficial interest in the property. In the event of dispute, such purchaser can only institute action against the vendor with whom he or she has contracted. In other words, such purchaser merely enjoys a contractual right or a right in personam. [39] In short, a beneficial or equitable owner of a property stands in the same position as the legal owner in terms of enforcing proprietorship rights against the world at large. The only difference is that a beneficial owner is yet to be vested with the legal title.” (emphasis added) [144] It also cannot be that just because some Purchasers are cash buyers, they then stand in a far worse position that those that had obtained financing. The cash buyers qualify as having beneficial interests in their factory lots, as in the absence of evidence to the contrary, they must be regarded as able and willing the pay the purchase price when the various stages fall due. [145] Granted that if the Developer were to sell the same units a few times over to different subsequent purchasers, the first purchaser may not have the remedy of specific performance if the individual subdivided title 57 of 86 is issued and then registered in the name of the subsequent purchaser who has no notice of the first purchaser’s interest but the first purchaser is surely entitled to pursue his remedy for damages for breach of contract and breach of trust. [146] The Federal Court in Hassan Kadir & Ors v. Mohamed Moideen Mohamed & Anor [2011] 5 CLJ 136 explained it as follows: “It is trite that the modified form of the Torrens System of registration of titles relating to alienated land as applied under the Code does not prevent the creation of beneficial interest in land whether under "express trust", "constructive trust" or "resulting trust" arising out of the operation of law. This is derived from the rules of equity which is applicable in this country by virtue of section 3 of the Civil Law Act 1956. And as was said by Syed Agil Barakbah SCJ in Lian Keow Sdn Bhd (in Liquidation) & Anor v. Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 1 LNS 44: ‘The Code restricts the kinds of interests in land which are capable of being registered, but at the same time it does not prevent or restrict the creation of beneficial interests in land by way of equitable trust.... Prior to the registration of the title, the statutory form of transfer under the Code gives a title in equity to the purchaser until registration. The vendor is said to hold his proprietary interest as constructive trustee.” [147] A constructive trust arises whenever the circumstances are such that it would be unconscionable of the owner of the legal title D1 to assert its own beneficial interest and deny the beneficial interest of the Plaintiffs/Purchasers. D1 and the Liquidators should have known that the factory units sold were not that of D1 to deal and dispose as its own. 58 of 86 [148] We are of the view that D1 is a constructive trustee vis-a-vis the Plaintiffs/Purchasers whose SPAs with D1 were still subsisting then. [149] It would therefore be unconscionable of D1 and the Liquidators as well as D2, to treat the Properties sold as unencumbered asset and deny the beneficial interest of the Plaintiffs and their End Financiers D2 to D5 and therefore, it gave rise to a constructive trust. [150] The Federal Court in Hassan Kadir & Ors v Mohamed Moideen Mohamed & Anor (supra) observed as follows: “[27] .....constructive trust came into existence upon the execution of the deed of sale. This is in line with the common law principle that the deed of sale would entitle the plaintiff to specific performance and this in turn activates the equitable principle that equity looks upon as done that which ought to have been done (See Walsh v. Lonsdale [1882] 21 Ch D 9, Attorney General for Hong Kong v. Reid[1994] 1 AC 324). If I may add, by definition we may say that constructive trust is a trust which is imposed by equity in order to satisfy the demands of justice and good conscience, without reference to any express or presumed intention of the parties. (See Edmund Davies LJ in Carl Zeiss Stiftung v. Herbert Smith & Co. (No. 2) [1969] 2 Ch. 276 at 301). In Beatty v. Guggenheim Exploration Co. 225 NY 380 at 389 (1919) it was observed that, "A constructive trust is a formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee." per Cardozo J.” (emphasis added) [151] D1 with the consent of D2, cannot transfer the Master Titles to the third party purchaser without a mutual restitution, such that D1 and its 59 of 86 Liquidators cannot still dispose of the Master Titles and refuse to refund the purchase price paid, in defiance of the undertakings given by D1 and D2 and in breach of the duty imposed by equity to account. [152] To allow D1 and D2 to keep the whole benefit of the purchase price paid by the third party purchaser PDG Development Sdn Bhd without accounting for the portion paid by the Plaintiffs/Purchasers whether direct to D1 or by way of redemption to D2 for the benefit of D1 would be to unjustly enrich D1 and D2. [153] The Federal Court in RHB Bank Bhd v Travelsight (M) Sdn Bhd & Ors and another appeal [2016] 1 MLJ 175 applied the principle of restitution and constructive trust against the developer in liquidation when it wanted to dispose of an office unit where strata titles had not been issued yet and where the end financing bank had been fully paid. [154] The Federal Court held as follows as summarised in the headnotes at page 176: “(1) Where it was the respondent’s election to rescind the purchase and the court was only moved to validate the antecedent act of rescission by the respondent, it was rescission at common law, where restitutio ad integrum was de riqueur. Where a transaction is rescinded there must be mutual restitution. Money must be repaid and the property returned. Atlas/liquidators must make restitution of the purchase price before counter-restitution of the property. In spite of the order of 15 November 2002, Atlas/liquidators refused to refund the purchase price but yet claimed the property. The property would not vest with Atlas/liquidators without restitution of the purchase price but with the respondent as purchaser and RHB as assignee (see para 13). 60 of 86 (2) When the full purchase price was paid in 1997, the property belonged to the respondent as purchaser and RHB as assignee and ceased to be an asset of Atlas. But with rescission, the property would revert to Atlas, only by way of mutual restitution. However, mutual restitution did not follow. Thus, the liquidators could not deal with the property as the beneficial property of Atlas, as without mutual restitution, the property would not revert to Atlas (see para 30). (3) A constructive trust arises whenever the circumstances are such that it would be unconscionable of the owner of the legal title to assert his own beneficial interest and deny the beneficial interest of another. Atlas and the liquidators should have known that the property was not that of Atlas to deal and dispose as its own. It would therefore be unconscionable of Atlas and the liquidators to treat the property as unencumbered asset and deny the beneficial interest of the respondent and RHB and therefore, it gave rise to a constructive trust. Upon failure of mutual restitution, a resulting trust arose as reversion of the property to Atlas was wholly reliant on mutual restitution. Atlas and the liquidators still disposed of the property and refused to refund the purchase price, in defiance of the order dated and in breach of the duty imposed by equity to account. Hence, Atlas should not be allowed to benefit from the rescission. The conduct was wholly unconscionable and therefore no order could be made in favour of Atlas and the liquidators. In the circumstances, the respondent and RHB had a proprietary right to the refund (see paras 30–32).” (emphasis added) [155] The Plaintiffs/Purchasers certainly did not expect the Master Chargee in D2 to ride roughshod over their interests particularly those that had paid the redemption sum to D2 through their End Financiers and for which D2 had undertaken to give a valid and registrable Discharge of Charge with the individual subdivided title. 61 of 86 [156] The Plaintiffs/Purchasers have a legal and legitimate expectation that as and when the individual subdivided titles are issued they would at least be able to register themselves as Purchasers and the Charge created in favour of their End Financiers. [157] Any sale to a third party purchaser to realise D2’s charge over the Master Titles can always be subject to the Third Party recognising the interest of these Purchasers. [158] At the very least the Developer and the Master Chargee should have informed the Purchasers so that they could decide on how to go about protecting their legal rights, interest and title over the identified factory units at different stages of completion. [159] In fact had the Master Chargee proceeded to realise their security by way of an order for sale application under the National Land Code, the Plaintiffs/Purchasers would in all probability be allowed to intervene to show “cause to the contrary” with respect to the sale by D2 to realise its security as was the case in Public Finance Bhd v Narayanasamy [1971] 2 MLJ 32 as decided by the Federal Court. [160] The facts of Narayasamy case (supra) were not too dissimilar with the present case where the business concept was concerned. It is succinctly summarised in the headnotes as follows: “The respondent had purchased a large piece of land with the view to reselling subdivided portions thereof. The respondent executed a charge over 187 acres of the land to secure the repayment of $440,000 to the appellants. The appellants knew as a fact that the charged land had been fragmented and 62 of 86 over 100 acres thereof resold to sub-purchasers who had gone into possession of their respective areas upon part-payment of approximately 4/7 of the purchase price. The appellants subsequently applied to court for an order for sale of the whole of the 187 acres charged to them to recover the principal and interest due to them. Three of the sub-purchasers applied to be added as respondents. The object of these sub-purchasers was to claim ownership of 45 acres in all and to have the same excluded from any order of sale made by the court. The appellants opposed the intervention of the sub-purchasers and contended that they need pay no regard whatsoever to the rights of the sub-purchasers. The learned trial judge found that the appellants were guilty of fraud and collusion and dismissed the application of the appellants. [161] On appeal, the Federal Court dismissed the appeal of the Chargee Finance Company and held that its insistence that the interveners had no rights whatsoever, except a right to damages against the respondent for breach of contract, was so plainly unconscionable that the learned judge was justified in holding that they were guilty of fraud and collusion. [162] Indeed upon knowing that the whole big piece of land would be fragmented and that some had already been sold to purchasers at different stages of payment of balance purchase price and that these purchasers had beneficial interest in their portion of the land, the Chargee cannot ride roughshod over the rights of the purchasers. [163] As observed by the Federal Court: “...the appellants for their own protection had required a written undertaking from the chargor that, upon receipt of such moneys, the same would be paid immediately into the clients' account of the chargor's solicitor with the Public Bank, Ipoh, and advice of such payments given to the appellants. The 63 of 86 respondent countersigned the undertaking so given in a letter by his solicitor dated December 30, 1968. This undertaking was doubtless a condition precedent to the execution of the charge on the following day. ..... At the time the charge herein was executed, the respondent was bound by contract to sell and give a good title to any sub-purchaser who had carried out his part of the contract. This obligation was a fact known to the appellants. They, nevertheless, by virtue of the charge, agreed with the respondent to ride roughshod over all the sub-purchasers, should the need arise to enforce the security. This conclusion is indisputable from the admitted facts. It was on these facts that the learned judge found fraud and collusion and in our opinion he was abundantly justified in his finding. He made this finding upon an application by 3 sub-purchasers to intervene and be joined as respondents, which the appellants strongly resisted.” (emphasis added) [164] In the instant case, Master Chargee D2 knew as a matter of fact that its bridging loan to D1 was for the purpose of financing the construction of the factory lots for sale to purchasers and indeed in the Loan Agreement that D1 had signed with D2, D1 as Developer was required to furnish regular reports on the status of the sale of the factory lots to purchasers. [165] In fact the Developer would have informed the cash Purchasers of the redemption sum they need to pay D2 and the Master Chargee would be receiving reports from D1 with respect to the units entered into under the SPAs as required under the loan documents signed between D1 and D2 for D1’s Bridging Loan so that D2 can exclude or exempt them from foreclosure or an order for sale. 64 of 86 [166] Under Clause 5.4 the Chargee D2 agreed that “the Chargor [D1] should be entitled to redeem each of the Seventy Seven (77) units of the vacant industrial lots in the said Project” by a schedule to be set out. See page 631 of Enclosure 7 of the Loan Agreement. [167] Under Clause 15.1(a) of the Loan Agreement D1 is to submit half yearly and yearly accounts not later than three (3) months after the end of the financial period as well as any other information in respect of the said Project as requested by MBSB from time to time. [168] This would be needed because under Clause 14.5 the Bridging Loan of RM10 million shall be released progressively based on 70% of works done as certified by the Consultant Architect/Engineer and confirmed by MBSB’s Technical Services Division and shall further be subject to D1 achieving a pre-sales level of 40% of the total sales revenue and that a first Legal Charge had been created and registered in favour of D2 of the entire said lands. See page 639 of Enclosure 7. [169] The Master Chargee D2 cannot turn a blind eye and take advantage of its wilful blindness in not wanting to know who are the purchasers to whom the Developer had sold the factory units. [170] Clause 5(b) of a typical SPA must be read mutatis mutandis in cases where the Purchasers are cash purchasers who did not take a loan to finance the purchase. The Developer D1 has an obligation to redeem the factory unit bought from MBSB D1 as the Chargee. 65 of 86 [171] Clause 5(b) of the SPA reads: “The Purchaser and/or Financier, upon the express authority if (sic) the Purchaser, shall release part or all of the loan to redeem the Said Property from the Chargee, MBSB, for the account of the Vendor so that the Said Property can be eventually transferred to the Purchaser and charged to the Financier when the document of title of the Said Property is issued.” (emphasis added) [172] The arrangement between D1 and D2 was clearly that whatever factory units that had been sold would be carved out from the Master Title, as it were, excluded and exempted from foreclosure or an order for sale such that D2 could only sell to realise its security from what was still belonging to the Developer D1. [173] In Narayasamy case (supra) the purchasers did not pay the agreed purchase price to the Chargee appellant but to the respondent instead. The Federal Court had no problem recognising the interest of the cash purchasers and it asked the rhetorical question: “In that event, should the respondent, nevertheless, be unable or unwilling to repay the debt, can the appellants in all good conscience apply to the court for an order of sale to include property over which the respondent, to their knowledge, has no power of disposal? What the respondent himself cannot lawfully do the court cannot authorise to be done, if the result would be to condone or enable a fraud on third parties.” [174] It cannot include what the Developer had sold to the various cash purchasers. The Developer D1 cannot sell through its Liquidators what it does not have for it had already received so much of the purchase price 66 of 86 as up to the stage of construction of the factories and correspondingly the Master Chargee D2 having agreed to the arrangement as above-stated with D1, cannot now feign ignorance and be unjustly enriched in refusing to recognise what its borrower in the Developer had gained by refusing now to acknowledge what the Purchasers had paid for. [175] With respect to D2, it cannot shut its eyes to the fact that the payments made by the Purchasers for the various stages of completion of their units have gone towards improving the lands held under the Master Titles. The Consultant Architect/Engineer of the Project was required to work closely with D2’s Technical Services Division with respect to verifying the percentage of works completed for the progressive release of the Bridging Loan. [176] D2 now had sold to a third party through the Liquidators to realise its security and thus D2 had benefited from this. It is a benefit gained at the expense of the Purchasers who had paid the purchase price to D1 direct or for its benefit by redeeming their factory lots from D2 by paying the redemption sum for the works done at the various stages of completion. [177] There is merit in the Plaintiffs/Purchasers’ claim for unjust enrichment against D2 to be assessed. [178] The Federal Court in the case of Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 CLJ 453 held that a cause of action in unjust enrichment can give rise to a right to restitution where it can be established that: 67 of 86 (i) The defendant must have been enriched; (ii) The enrichment must be gained at the plaintiff’s expense; (iii) That the retention of the benefit by the plaintiff was unjust; and (iv) There must be no defence available by legislation or contract to extinguish or reduce the defendant’s liability to make restitution. [179] In the present case, without the knowledge or consent of the Plaintiffs and the End Financiers D3 - D5, the Liquidators of the Developer D1 on 29.7.2015 disposed of the Project Lands represented in the various Master Titles to PDG Development Sdn Bhd. [180] The Master Chargee is now dissociating itself from the sale as if it was wholly the action of the Liquidators and that the proceeds it received as actually a haircut for the loans that the developer D1 had defaulted in payment. However, it is only too plain that no sale of the Project Lands to PDG Development Sdn Bhd could have been effected without D2 agreeing to it for an agreed purchase price for D2 would have to sign the Discharge of Charge before the transfer of the Project Lands could be effected. [181] The proceeds of sale of the Project Lands for the sum of RM20 million were used to settle the indebtedness of D1 to D2 without giving due credit for the amount paid by the Purchasers to redeem their factory lots from D2 when in fact D2 had excluded these lots from any foreclosure action. 68 of 86 [182] Having been paid the redemption sum D2 cannot now act as if nothing had been sold and then agreed to the sale of the Project Lands without excluding or exempting the factory lots that had been redeemed. The Purchasers cannot be left high and dry as they still have to continue to service the interest on the loan taken from their End Financiers but now there is no security whatsoever for the redemption and loan sum released. [183] If that is allowed to happen then no banks would dare to lend to purchasers to purchase any properties until the titles, whether individual subdivided titles or strata titles, as the case may be, are issued. [184] It would also send the wrong message that banks can give their undertaking without the need to honour it because its interest as a secured creditor would have priority and so even the undertaking to exclude or exempt the factory lots for which redemption has been paid and the undertaking to give a valid and registrable discharge for the redemption sum paid are subordinated to its rights as a secured Chargee. [185] Whilst it is true that D2 was realising its security as a secured Chargee, it cannot do so at the expense of the Purchasers/Borrowers. It is not for D2 to say that it was taking a hair cut in realising RM20 million from the private sale when its loan given to D1 was about RM26.8 million. The issue is D2 would not have been able to keep the whole of the RM20 million for itself if it had recognised the interest of the purchasers and had negotiated with the third party purchaser PDG Development Sdn Bhd to recognise the purchasers’ interest in the lands sold for which D2 had undertaken to exclude or exempt from an order for sale. 69 of 86 [186] Another way of looking at the issue is that the Master Titles sold to the third party purchaser would have fetched a much lower price had it not been for the improvement in the lands resulting from the factories built at various stages of completion. [187] This is true with respect to the factory lots sold for which financing had been obtained from the End Financiers as well as those that are cash purchasers. The purchase price is paid progressively against the Project Architect’s certification of completion which goes towards enhancing the value of the factory lots that stand on the Project Lands held under the Master Titles. [188] The Plaintiffs/Purchasers, including the cash Purchasers, did not pay for the construction of the factory on their lots purchased from the Developer D1 only for D1 and D2 the Master Chargee to realise their full benefit in the originally vacant lots now having factories at various stages of completion on the Project Lands and taking a windfall gratuitously without making the necessary compensation to the Plaintiffs/Purchasers. [189] S. 71 of the Contracts Act 1950 also provides the basis for a restitutionary claim as folllows: “Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect thereof, or to restore, the thing so done or delivered.” [190] The Privy Council in the leading case of Siow Wong Fatt v Susur Rotan Mining Ltd & Anor [1967] 1 MLRA 53, held that for a claim under 70 of 86 section 71 to succeed, it must be shown that the doing of the act or the delivery of the thing: (i) must be lawful; (ii) must be done for another person; (iii) must not be intended to be done gratuitously; and (iv) must be such that the other person enjoys the benefit of the act or the delivery. [191] See also the cases of Tanjung terms Sdn Bhd v Government of Malaysia [2014] CLJ 129, GDP Architects Sdn Bhd v Universiti Teknologi MARA [2016] MLJU 943 and Aneka Melor Sdn BHd v Seri Sabco (M) Sdn Bhd & Another Appeal [2016] 2 CLJ 563. [192] It has not escaped the notice of this Court that the common solicitors for the Developer D1 and MBSB D2 for the Loan Agreement are Messrs Thakurta, Low & Amir Ismail who are reflected in Clause 3.2(ii) as MBSB’s appointed Solicitors. See Enclosure 7 page125/215 of pages 121 to 142/215. [193] The same solicitors are also the common solicitors for the Developer D1 and the Purchasers and for good optics are reflected as solicitors for the Purchasers in Clause 4(a) of a typical SPA at Enclosure 16 at page 2138. It would be stretching incredulity to its limits for us to believe that all the Purchasers here had decided and happened to have appointed the same solicitors. 71 of 86 [194] It is a reasonable inference to be drawn that D2 would have been kept in the loop with respect to the Purchasers who had entered into the SPAs with the Developer D1 or at the very least that D2 could always find out where the cash purchasers are concerned for that was the business model approved by the Master Chargee D2. [195] To lend credibility to D1 and D2’s arguments would be tantamount to a case of “rewarding the guilty and punishing the innocent” - para [7] of Travelsight’s case (supra). [196] The Liquidators said they were merely carrying our their statutory duties to liquidate the assets of D1 in liquidation. No one is stopping them from doing so; all the Plaintiffs/Purchasers are asking is that their interests that D1 had acknowledged and which D2 had excluded and exempted from foreclosure be honoured. [197] We find merits in learned counsel’s submission for D4 that the Liquidators had failed to verify the actual position of the assets of the wound up company including Plot T234 and Plot T164 financed by D4 as required by the Court Order dated 22.7.2010 appointing them as liquidators. [198] The Court of Appeal in Angkutera Sdn Bhd v Jurimba Sdn Bhd & Anor [2016] 5 MLJ 242 observed as follows in a case where the liquidator had failed to recognise the interests of a purchaser of a property from the wound up developer as follows: “It was untenable for the liquidator to claim that he filed the application to obtain the said vesting order based on information within his knowledge at that 72 of 86 point of time and surrounding circumstances; when all that he did was to write only one single letter to the official receiver. No thorough investigation was done by the liquidator when the Act confers on a liquidator enough powers to gather relevant information. Therefore, the liquidator had acted utterly unreasonably and that he had failed to take into considerations which he ought to have taken into account. As the Cineplex was on the rooftop, it was part of the property purchased by the appellant. Thus, in the present appeal, there were merits for appellate intervention.” (emphasis added) [199] At any rate D2 would know of the factory lots for which it had received the redemption sum from the End Financiers and the Developer D1 would know of the SPAs that it had signed with respect to all Purchasers including the cash Purchasers. [200] As Liquidators they have the powers available to them under ss. 234(3), 236(2)(a), 237(1), 252 and 300 of the Companies Act 1965 to assist them to retrieve the documents and information of the wound up Developer D1. However, there does not appear to be any explanation given by the Liquidator on this point except their averment that the Project had not been completed and their bare denial on the interest of the Plaintiffs/Purchasers and their End Financiers. [201] As this action was not against the Liquidators but against the Developer D1 in liquidation, we shall not say more on the conduct of the Liquidators which could well be the subject matter of another suit. [202] Even those who are cash purchasers had paid towards the improvement to their factory lots which benefit now D2 seeks to reap wholesale and realise its full benefits by disregarding the interests of these purchasers. 73 of 86 [203] In the light of the above, D1 and D2 shall jointly and severally be liable to the Plaintiffs/Purchasers for the purchase price that they paid to D1 and D2 whether directly or for the benefit or on behalf of D1 as the case may be and for the loss and damage caused to them thereby which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract and gave their undertakings, to be likely to result from the breach of it under s.74(1) of the Contracts Act 1950. [204] With respect to all the Purchasers, D2 are also liable for restitution for unjust enrichment even if D2 had not given any undertaking to the End Financiers or to exclude or exempt their factory units from foreclosure or an order for sale, in cases of cash Purchasers. It cannot be denied that under the business plan of D1 accepted by D2, the purchase price paid had gone towards improving the value of the Project Lands held under the Master Titles which lands were sold by D1 with the consent of D2. [205] Judging from the facts of the case, the damages whether under contract and breach of undertaking or breach of trust or unjust enrichment would be such that it would be co-extensive between D1 (in liquidation) and D2 as payments made by the Plaintiffs/Purchasers to the Developer D1 is against the Architect’s certification of the construction on the Master Titles, all charged to D2, and which payments went towards enhancing the value of the Project Lands redeemed and sold. 74 of 86 Whether the SPAs between the Plaintiffs and the Developer D1 had become void as a result of D1 going into liquidation and in any event the Developer had repudiated the SPAs and the Plaintiffs had accepted the repudiation by their conduct [206] Learned counsel for the Plaintiffs submitted that the learned JC erred in law and/or in fact in declaring that the SPAs between the Plaintiffs/Purchasers and the Developer D1 becomes void pursuant to s.57 (2) of the Contracts Act 1950. [207] S. 57 of the Contracts Act 1950 reads as follows: 57. “Agreement to do impossible act (1) An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful (2) A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful (3) Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, the promisor must make compensation to the promisee for any loss which the promisee sustains through the non-performance of the promise.” (emphasis added) 75 of 86 [208] We agree with learned counsel for the Plaintiffs that merely because the Developer had gone into liquidation, it does not automatically mean that the SPAs had become void. Surely the Court must take cognisance of the fact that where a housing or commercial development project is abandoned, a rescue and rehabilitation scheme pursuant to the old Section 176 of the Companies Act 1965 (now section 366 of the Companies Act 2016) is not uncommon for affected and interested parties to engage all the stakeholders especially the aggrieved purchasers for a consensus. See the case of Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56. [209] The learned author of McPherson's The Law of Company - Liquidation, 4th Edition, at page 235 states that: “Liquidation may have no effect at all upon the existence of the contracts made with the company or it may give rise to a state of affairs which terminates the contract. If the former, the contract continues until repudiated or disclaimed by the liquidator. If the latter, then the winding up operates to discharge the contract in one of two ways; either by frustration in which case the obligations of both parties are at an end, or by breach, in which case the other party will be entitled to prove for damages in the winding up.” (emphasis added) [210] These SPAs are not in the nature of contracts for personal or professional service which would be terminated unless affirmed by the Liquidators. These SPAs are in the nature of onerous contracts with obligations and if the Developer is terminating, then the Plaintiffs/ Purchasers can take steps to secure their beneficial interests and to ensure that they are excluded from any foreclosure or order for sale. 76 of 86 [211] In some cases a white knight or investor might be able to inject fresh capital and funding to complete the project provided the purchasers and their assignee banks agree not to claim for damages for late delivery and in some cases, weighing the consequences, the purchasers may even agree to pay additional purchase price to have the building completed as the building costs of materials would have increased especially after the lapse of some time. [212] The Plaintiffs/Purchasers had not terminated the SPAs and as there is a clause of late delivery, they are entitled to wait for the Developer to complete the construction at a much later date and claim the agreed liquidated damages for late delivery provided for in Clause 11(D) of the SPA. [213] The Developer too had not terminated or rescinded the SPAs for if they had minded to then they would need to do a mutual restitution of their interest in that the Plaintiffs/Purchasers would receive what they had paid for against the reality that the Developer would not be in a position to complete the construction and any losses would be a case where the Plaintiffs/Purchasers would have to file their proof of debts. [214] Both the Developer D1 and the Master Chargee D2 cannot dispose of the Master Titles to the third party purchaser PDG Development Sdn Bhd on the ground that as D2 is a secured creditor, there is no need for them to recognise the rights, title and interest which they had agreed to recognise and especially the undertaking of D2 to exclude and exempt the Purchasers’ units from a foreclosure action. 77 of 86 [215] The Learned JC appeared to be perturbed by the fact that the Plaintiffs had not been named or joined PDG Development Sdn Bhd and that since the purchase price of RM20 million has been paid to D2 to obtain a full discharge of the various charges, PDG Development Sdn Bhd has now obtained an indefeasible title to the master title or titles. [216] All that the absence of PDG Development Sdn Bhd means is that the Court would not make any order affecting a non-party PDG Development Sdn Bhd. [217] That however does not prevent the Court from making an order for assessment of damages arising from breach of contract and breach of the undertakings given by D1 and D2 considering that the Plaintiffs stand in the position as beneficial owners of their units which both D1 and D2 were legally obliged to obtain individual subdivided titles representing the units bought by the Plaintiffs/Purchasers and to deliver them to their solicitors free from all encumbrances together with a valid and registrable Memorandum of Transfer in the case of D1 and a valid and registrable Discharge of Charge in the case of D2. [218] The Plaintiffs had no choice but to wait patiently for the Liquidators to come up with some proposals to move the Project forward for they had already paid the purchase price to the Developer D1 up to the various stages of completion and they are stuck; if they accept what is said to be repudiation by the Developer through its inaction for the lack of funds since the winding up they would not be able to get back anything in return. 78 of 86 [219] For so long as D2 remain the Master Chargee the Plaintiffs/ Purchasers have no good reason not to believe that D2 would honour its undertaking given to its End Financiers chiefly in D3 to D5. Any sale of charged Master Titles would have to take into consideration their interest carved out in the assignment of their units to their End Financiers for which D1 had consented. [220] Even for those Plaintiffs/Purchasers who are cash purchasers, the Master Chargee D2 having agreed to the arrangement where its borrower Developer in D1 is allowed to dispose of the undivided factory units identified in the Master Titles to be submitted for issuance subdivided titles and thereafter to have D2’s charge registered against the individual subdivided titles with a Discharge of Charge delivered for purchasers who have paid the purchase price up to the stage of construction, D2 is estopped from refusing to recognise the interest of these cash purchasers unless there is no evidence that they have entered into an SPA with the Developer. [221] Here the cash purchasers have exhibited their SPA and there is no evidence that D1 had terminated the SPAs. In fact, there is no termination clause in the SPAs where the Purchasers may terminate the SPAs but instead there is a termination clause only for the Developer to exercise in Clause 7 at page 2140 Enclosure 6 and at page 12 for the events of default of the Purchaser. [222] In the absence of steps taken by D1 to terminate the SPA, the SPA remains subsisting and valid. 79 of 86 Whether the Plaintiffs’ claims are barred by limitation [223] Whether or not a reasonable time is said to have lapsed with respect to repudiation of an SPA would be fact-sensitive and fact-centric. [224] The cases of Chin Kim & Anor v Loh Boon Siew [1970] 1 MLJ 197 and Nasir v Mesah [1971] 1 MLJ 32 can be distinguished from cases where the purchaser is buying from a developer of a building to be constructed and that the contract itself provides for a Liquidated and Ascertained Damages clause in the event of the developer’s failure to complete within the contractual period of 36 months from the date of the SPA. See Clause 11(D) of the SPA at page 1320 Enclosure 11 of the Record of Appeal. [225] In this regard, we are also guided by Clause 11(A) of the SPA, whereby Pakatan Mawar (M) Sdn Bhd as the Developer D1 was required to complete and deliver vacant possession within 36 months from the date of the SPA. [226] Learned counsel for D1 submitted that based on the Federal Court’s case of Nasri v Mesah [1971] 1 MLJ 32, time begins to run for the purposes of limitation from the date of any infringement or threat of infringement. [227] Learned counsel for D1 explained that the Plaintiffs/Purchasers had entered into the SPAs with D1 between 1.2.1996 to 21.7.1997, and pursuant to Clause 11(A) of the SPA, D1 was supposed to complete and deliver vacant possession of the Factory Lots on or before between 31.1.1999 to 20.7.2000. 80 of 86 [228] The Project was abandoned in year 1998 and remained uncompleted and abandoned post liquidation of D1. Therefore, it was submitted, D1 had breached the SPAs between 1.2.1999 to 21.7.2000. [229] It was argued that pursuant to s. 6 of Limitation Act 1953, the Purchasers' cause of action for refund of the amount of purchase price against. D1 had commenced between 1.2.1999 to 21.7.2000 and expired between 1.2.2005 to 21.7.2006. [230] However, this is not a case where the Plaintiffs/Purchasers are suing for damages for late delivery. The Plaintiffs/Purchasers are affirming the SPAs and not terminating or repudiating it. When the Plaintiffs/ Purchasers are affirming the SPAs there is no need for them to sue. [231] This is more so when the financing of the factory building in this case had been finalised with undertakings and cross-undertakings from all affected parties in the developer, the Master Chargee and the End Financiers. [232] The Plaintiffs/Purchasers had done no wrong in patiently waiting for the Developer or its Liquidators to revive the Project or if the Master Titles are sold, for the sale to be subject to their interests so that they may at least get the subdivided titles in their names. [233] The law must lean in favour of the party with little negotiating power who is the purchaser here whereas the developer can always decide when they want to terminate the SPA. In the event that the Developer D1 should want to terminate and had terminated, the Purchases then can 81 of 86 come to Court by filing an action for the necessary reliefs seeing that they had paid various portions of the full purchase price and that various undertakings had been given by the Developer and the Master Chargee D2 to their End Financiers for their benefit to secure the payments of their loan sum. [234] In short, the inter-connected rights and obligations would need a sorting out and certainly what had happened here in the form of a direct private treaty sale to a third party by D1 with the consent of D2 would not have happened. [235] Therefore it is clear that the cause of action of the Plaintiffs/ Purchasers arose when D1 and D2 evinced an intention not to be bound by their various undertakings given when the Master Titles were transferred to a third party in PDG Development Sdn Bhd sometime on 29.7.2015. [236] It was then that D1 and D2 had manifested irrevocably their intention not to be bound by the SPAs and the various undertakings that they had given to the Plaintiffs or the Plaintiffs’ End Financiers as agents for the Plaintiffs. The Plaintiffs’ losses kicked in irrevocably and crystallised and their right to sue for their losses commenced then when the Master Titles, on which their factory units were to be built stand, were transferred to PDG Development Sdn Bhd. [237] The Plaintiffs/Purchases’ action here is therefore not barred by limitation as the cause of action arose in July 2015 and this action was filed in June 2018. 82 of 86 [238] In any event the Plaintiffs/Purchasers’ cause of action is also founded on unjust enrichment against D1 and D2. Based on the report by the Liquidators they only received the sum of RM20 million from PDG Development Sdn Bhd on 29.7.2015. [239] It was then that D1 was enriched in that it realised the sum of RM20 million towards reduction of its debts with D2 if not to cancel it altogether without having to give credit for the various portions of the purchase price paid by the Plaintiffs/Purchasers and/or their End Financiers. [240] D2 on the other hand received for its benefits the whole of the proceeds of sale of the Project Lands substantially improved with the development built on it which sum went towards payment of D1’s loan with D2 without even having to give credit for the redemption sums to D2 by the End Financiers of the Plaintiffs/Purchasers. [241] As was observed by the Federal Court in Dream Property’s case (supra): “Restitution simply means that a party who has received a benefit must restore the benefit received by him. The theoretical foundation of the right to restitution remedy as it is understood today is that it is founded on the law of unjust enrichment which fall outside the domains of contract and tort. The law of contract/tort and the law of unjust enrichment are conceptually distinct. Unjust enrichment describes a cause of action. On the other hand, restitution describes a remedy. Restitution as a response to wrongdoing is therefore a different topic from restitution as a response to unjust enrichment (see Goff & Jones on The Law of Unjust Enrichment para 1-04). The courts have found it necessary to make available, independent of the law of contract and civil 83 of 86 wrongs, for the restoration of benefits on the grounds of unjust enrichment.” (emphasis added) Pronouncement [242] We are mindful of the fact that as an appellate Court we should not lightly disturbed the finding of the trial judge but this is a case that eminently comes within the permitted ground of interference as alluded to by the Court of Appeal in the case of Lee lng Ching @ Lee Teck Seng & Ors v. Gan Yook Chin & Anor [2003] 2 MLJ 97 at page 116 E-F which the decision was affirmed by the Federal Court: "......Suffice to say that we re-affirm the proposition that an appellate Court will not, generally speaking, intervene unless the Trial Court is shown to be plainly wrong in arriving at its decision. But appellate interference will take place in cases where there has been no or insufficient judicial appreciation of the evidence." [243] Further the Court of Appeal held at page 120 as follows: “In our considered judgment, the authorities discussed thus far, apart from explaining what judicial appreciation of evidence involves, illustrate a principle central to appellate interference. The principle is that a decision arrived at by a trial court without judicial appreciation of the evidence may be set aside on appeal…” [244] Applying the law to the facts of the case which facts we had hardly disturbed, we had arrived at a different conclusion for the reasons given above. 84 of 86 [245] We had therefore allowed the appeal and we correspondingly set aside the whole of the decision of the High Court. [246] We granted an order in terms of prayers 1 and 2 in the Amended OS as only against D1 in liquidation as the parties had agreed that the leave granted to the Plaintiffs was only with respect to pursuing against D1 in liquidation and not against the Liquidators. [247] We also granted an order in terms of prayer 3 and 5 in the Amended OS against D1 (in liquidation) and D2 jointly and severally for the damages to be assessed with respect to the various sums received by D1 and D2 for breach of contract and breach of undertakings given and restitution for unjust enrichment. [248] Pursuant to prayer 5 the matter shall be remitted to the High Court for the Judge to assess the amount payable and due to the Plaintiffs from D1 and D2. [249] A case management date in 2 weeks on 17.8.2020 was fixed then before the High Court Judge. [250] We exercised our discretion not to grant interest in the circumstances of the case as D1 had long gone into liquidation and D2’s liability is co-extensive with D1. [251] As for costs we awarded RM20,000.00 payable by D1 to the Plaintiffs and another cost of RM20,000.00 payable by D2 to the Plaintiffs; all subject to allocatur.. 85 of 86 [252] As for the other Respondents, each party shall bear their own costs. Dated: 2 February 2021. Sgd. LEE SWEE SENG Judge Court of Appeal Malaysia For the Appellant: Rajvinder Singh and Emily Goh Messrs S Ravenesan For the 1st Respondent: Chin Tzi Song and Kuek Ian Huey Messrs Arifin & Partners For the 2nd Respondent: Shaikh Saleem and Pavithra Sangkar Messrs Shaikh David & Co For the 3rd Respondent: ML Chan Messrs Seow & Megat 86 of 86 For the 4th Respondent: Sim Kok Yew and Mohd Khairi Messrs KY Sim & Co For the 5th Respondent: Bryan Chan Messrs Shook Lin & Bok Date of Decision: 3 August 2020.